A recent report in The Buffalo News caught my eye regarding the possibility of the Sabres trading for another club’s potential amnesty buyout candidates.

As per John Vogl:

“A trade to watch for involves amnesty buyout candidates. Each team can get salary cap relief by buying out two players over the next two summers, and the Sabres may use owner Terry Pegula’s wealth on other teams’ unwanted players for a draft pick or prospect. 

“You can acquire a player and buy him out if somebody wants to pay you enough to do that, some other currency other than the dollars,” (Sabres GM) Regier said. “Whether it happens or not, it’s one of the options.” 

For example, if the Philadelphia Flyers were to package Daniel Briere (assuming he waived his no-movement clause) with a pick or prospect to the Sabres in return for a cheaper player, a draft pick, a prospect, or any combination of those three, the Sabres would then buy out the remainder of Briere’s contract, either with one of their own amnesty buyouts, or via the regular buyout process of two-thirds the remaining value of the contract spread over twice the remaining term.

Briere would then become an unrestricted free agent, and ineligible from re-signing with the Sabres for a full season following the buyout.

Another example could be Ryan Malone of the Tampa Bay Lightning (assuming he’d accept a trade), as the Bolts might prefer to trade him rather than go the buyout route.

Another is the NY Islanders’ Rick DiPietro, who lacks a trade clause. The Isles are still paying for their buyout of Alexei Yashin, and owner Charles Wang might prefer trading DiPietro’s contract (which expires in 2021) over a buyout.

It’s also possible the bought-out player subsequently signs a more affordable contract with his former team. In other words, the Flyers trade Briere to the Sabres, who buy out his contract, allowing him to sign a more affordable deal with the Flyers.

Such a move, however, raises the specter of salary cap circumvention.

The current collective bargaining agreement (CBA) has yet to be finalized and publicly released, but from reading the Memorandum of Understanding (MOU) between the NHL and NHLPA, there’s nothing preventing a team from acquiring a player via trade and then buying him out, or subsequently preventing that player from signing with the team which traded him.

Article 26 of the previous CBA, (specifically, 26-3) addressed salary cap circumvention and it’s a safe assumption that’ll be carried over (with updates) into the new agreement. As with the MOU, it doesn’t specifically prohibit the aforementioned scenarios.

“No Club or Club Actor, directly or indirectly, may: (i) enter into any agreements, promises, undertakings, representations, commitments, inducements, assurances of intent, or understandings of any kind, whether express, implied, oral or written, including without limitation, any SPC, Qualifying Offer, Offer Sheet or other transaction, or (ii) take or fail to take any action whatsoever, if either (i) or (ii) is intended to or has the effect of defeating or Circumventing the provisions of this Agreement or the intention of the parties as reflected by the provisions of this Agreement, including without limitation, provisions with respect to the financial and other reporting obligations of the Clubs and the League, Team Payroll Range, Player Compensation Cost Redistribution System, the Entry Level System and/or Free Agency.”

I sought the advice of TSN legal analyst Eric Macramalla. Here’s his response:

“The MOU provides as follows: 

“A Player that has been bought out under these Compliance Buy-Out provisions shall be prohibited from re-joining the Club that bought him out (via re-signing, Assignment, Waiver claim or otherwise) for the duration of the 2013/14 League Year”. 

This provision only precludes the buyout team from re-signing that player. Subject to the language in the new CBA (which is close to being done), the scenario you have described would not be expressly excluded. However, and as you noted, that’s where the legal principle of circumvention is worthy of consideration. This is a legal test open to interpretation and whatever ultimate determination is made is based upon the factual matrix, the surrounding circumstances and a key governing principle of the CBA, namely, promoting competitive balance. 

So let’s say the Canadiens trade Tomas Kaberle to the Bruins along with his $4.25 million cap hit in return for a 7th round pick (can’t do worse). Then the Bruins buy Kaberle out and the Habs resign him at minimum wage. While the Canadiens found a way to retain Kaberle with a minimal cap hit, they may not have circumvented the cap. They received consideration from the Bruins, and the Bruins knew full well they would not retain him. Still, the transaction is suspicious as it may suggest the Bruins had no intention of keeping Kaberle and further that the teams struck a deal. If it could be shown that the incentive was to gain an unfair competitive advantage, then circumvention talk may be warranted. Again, though, tough one. 

Perhaps a more contentious scenario is the Canadiens sending Kaberle and Rene Bourque to the Bruins and the Bruins buyout Bourque and the Habs re-sign him. In this scenario it does not strike me as unreasonable for other clubs to complain. 

So it’s not clear cut either way (again subject to the language in the CBA). However it shouldn’t be – circumvention is open to interpretation. Best argument wins – see Kovalchuk.”

In short, there doesn’t appear to be anything in the new CBA expressly prohibiting a player being dealt to another club, receiving a buy-out and re-signing with his former club, but it could result in a legal challenge, akin to the league’s rejection of the New Jersey Devils signing Ilya Kovalchuk to a heavily front-loaded, 17-year contract.

Proving intent of circumvention is the key, which might not be easy to do, as it would have to be determined both clubs made this deal with the understanding the traded player would be bought out in order to sign a cheaper deal with his former club. On the surface, it appears obvious, but as we saw with lengthy, front-loaded contracts under the previous CBA, it would take an extreme case to prompt the league into rejecting such a move.

If circumvention cannot be proven, this could become the first significant loophole in the new CBA, adding some potential intrigue into the first off-season under the new agreement.

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8 Responses to First Loophole in the New NHL CBA?

  1. William says:

    Better scenarios are players like Luongo and Lecavalier being traded to Buffalo to be bought out and resigned with their former team. Steeper the contract steeper the price to be paid to the team that buys them out. Bottom teams that need to reach the cap floor can also explore this option which the NHLPA may or may not object as their players are getting paid. Lecavalier for example gets traded to Buffalo who interns buys out his contract for 2/3 which equals $30 million dollars. The Lightning can then sign him for the remainding years of the original contract at the remaining $15 million dollars that was unpaid. Would that be considered circumventing the salary cap if they through in the 3rd overall pick for example? If assets are being traded on an economical level instead of “hiding money” like in the previous CBA I do not see teams objecting too much as to bring a lawsuit, but you never know. Makes you look at Shea Weber and Nashville’s situation in a new light though amongst others.

    • Also, as for Weber and Nashville’s situation, that won’t be relevant for this summer. Remember, the Predators can’t trade him until a full calendar year from the date they matched his offer sheet (July 24th). This summer’s amnesty buyout period will probably have expired by then. Maybe next year…

      • houston says:

        Assuming they could, why in heaven’s name would Nashville buy-out Weber?; they just paid him something like $27mil for his first season of that contract. That would seem to amount to the hockey GM equivalent of malpractice.

  2. Won’t happen with Luongo. He could be dealt to another team and then bought out, but he won’t return to the Canucks. Lecavalier is a possibility but he’d have to agree to the trade, and the heft of his contract might give rise to a legal challenge.

  3. Ned says:

    I guess it is a little underhanded. Do you think the legal challenge would come more from the ownership side? Would the flyers bother trading Pronger when they could just put him on LTIR? What about contracts like Kovalchuk’s?

    • Lyle Richardson says:

      I believe it’ll be the league to challenge it. After all, Brian Burke bitched about the front-loading of contracts throughout the previous CBA, but it was only the Kovalchuk contract which prompted action by the league. So, if it’s lighter contract like, say, Ryan Malone’s, there might be grumbling but I doubt the league would question it. If, however, it’s Lecavalier, given the size of his contract, the league might step in then. We’ll see…

  4. gameon63 says:

    interesting that you mention Luongo who’s made himself relevant again after some stellar play (albeit in a losing cause but those losses aren’t because of him). in Vancouver it’s widely assumed that Booth and Ballard (wily veteran GM talked Gillis into taking on 2 ridiculous contracts) will be bought out but what if Vancouver moved Luongo to Buffalo (all indications are they’ll need a goalie) along with one or both of those contracts for a draft pick or two as Ballard still has value as a dman (not sure why AV dislikes him so but he was one of Vancouver’s best dmen during the first part of the season) and if Buffalo has Sulzer in their lineup then Ballard is an upgrade. Booth on the other hand has pretty much given Vancouver nothing but ulcers over his 2 seasons there, perhaps a change of scenery would do him good and Buffalo could probably use some warm bodies after their recent purge of players.

  5. JDBiGC says:

    This is an interesting scenario. I think this could easily be detected by the league. We’ll use the Lightning scenario with Lecavalier. They trade him to Buffalo, Buffalo buys him out, and the Lightning re-sign Lecavalier for $2.5M per season.

    The problem will be the other teams. Somebody will offer him a contract closer to market value, and that will blow the whole thing up. Let’s say the Rangers offered him $5M per season. They’d file the protest and the league would kill Lecavalier’s contract with the Lightning.

    On the other hand, there may only be a handful of these situations, and the league may just let them go. Using Lecavalier as an example, if he did go back and sign for well below market with Tampa would that be so bad? He should finish his career with the Lightning. He’s there Sakic or Yzerman.

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