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LeBrun offers more CBA details, insight on ‘Luongo Rule’

ESPN's Pierre LeBrun has released a second set of nuts-and-bolts information about the new collective bargaining agreement, and there's a strange twist to what he's calling the "Luongo Rule"--a.k.a. punitive penalties retroactively imposed upon teams that issued "lifetime" contracts to retain their own players, especially if said players are eventually traded:

This is another rule from the league aimed at hammering current back-diving deals (front-loaded, "cheat deals." However, this has changed from its original form when the NHL first proposed it in October.

In the original formula, if a player like Roberto Luongo was traded and retired before the end of his deal, the Canucks (the team who signed him to the contract) would assume his remaining $5.33-million cap early hit in retirement. The new rule in this tentative agreement is different. Now, for any contract in excess of six years, both teams involved in a trade on a contract like Luongo’s would be penalized if he retired before the end of his deal.

To wit: let’s say the Canucks trade Luongo soon. Luongo has played two years of his 12-year contract, the Canucks paying him $16.716 million in salary but only absorbing a $5.33 million cap hit each year. That’s a cap savings of $6.056 million over two years so far for Vancouver. Under this new rule, should the Canucks trade him now and he retires with three years left on his contract, Vancouver would be charged that $6.056 million in cap savings over the final three years left on his deal from 2019 to 2022. However, let’s say for argument’s sake Luongo gets traded to Toronto, the Maple Leafs also would be subject to cap penalties if Luongo retires before the end of his deal.

To wit, part 2: If Luongo were to play the next seven years of his deal in Toronto before retiring, the Leafs would be paying him $43.666 million in salary but only counting $37.31 million against the cap over those seven years, a cap savings of $6.356 million. So if Luongo retires with three years left on his deal (because his salary falls to $1.618 million in the 10th year and then $1 million in the last two years of the deal), the Leafs would get charged that $6.356 million on their cap spread evenly over the remaining three years of his deal.

And obviously, if players under these back-diving deals are never traded, but retire before the end of their deals (Marian Hossa in Chicago), their current teams get charged the cap savings spread evenly over the remaining years of the deal.

Continued, and LeBrun reports that between the draft and June 30th, teams will be able to "interview" unrestricted free agents-to-be, too..

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Comments

NHLJeff's avatar

Interesting rule. I would hope that if the player retires early due to injury, the club would be exempt.

Posted by NHLJeff from Pens fan in Chicago, IL on 01/07/13 at 11:19 PM ET

redxblack's avatar

If there’s an injury exemption, every graybeard will publicize every nagging injury. I can’t imagine they’d offer one in such a co tact sport, even though they SHOULD. That’s why I’d oppose this rule. Also, it’s shady shit to propose such a change this late in negotiations on existing contracts.

Posted by redxblack from Akron Ohio on 01/07/13 at 11:45 PM ET

NHLJeff's avatar

I was thinking that too at first, but then I figured the player wouldn’t want it to seem like he’s complaining. Maybe it could be on a case-by-case basis?  Like a Promger or Savard (if his contract had been longer) situation.

Posted by NHLJeff from Pens fan in Chicago, IL on 01/07/13 at 11:51 PM ET

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I find it a fine irony that Burke wanted to punish those very same contracts and yet he is chasing Luongo, which would kick in this penalty if he retires early.

Posted by timbits on 01/08/13 at 12:18 AM ET

Paul From Cali's avatar

Where’s the punishment for the player for retiring early?  They signed the contract too.  And what if they get traded multiple times?  Do all teams who the guy plays for split the penalty after he retires? 

To witless, Luongo gets traded from Vancouver to Toronto.  Everyone knows he’ll play one year, maybe two in Toronto, and stink - because that’s what goalies do in Toronto - and then Burke trades him to Tampa Bay.  Does Tampa Bay also get to pay part of the penalty?

Posted by Paul From Cali on 01/08/13 at 06:31 AM ET

Nathan's avatar

I think this is unnecessarily complicated. The deal should just go with the player. That is a factor when you look for players on the trade market. Now, it will be much more complicated to pick trade targets, and especially more complicated for fans to enjoy the trade deadline because the pros/cons to certain players won’t be as obvious.

Posted by Nathan from the scoresheet! on 01/08/13 at 08:57 AM ET

Paul's avatar

from Elliotte Friedman,

One of the intricacies of the new yet-to-be-ratified CBA is the “cap-recapture system.” Basically, this affects players with long-term deals (minimum five or six years, I’m not 100 per cent certain).

Either way, Luongo’s counts because his is a 12-year deal. Therefore, there will be a penalty if he retires before the contract is completed.

How does it work?

more

Posted by Paul from Motown Area on 01/08/13 at 09:03 AM ET

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Now, it will be much more complicated to pick trade targets

I think that’s the point.  Vancouver didn’t re-sign Luongo with the thought that he’d be playing 12 years, they signed him with the thought that they can reduce the cap hit and he can retire whenever he wants without them being adversely affected.  Now they don’t have that luxury.

Does Tampa Bay also get to pay part of the penalty?

I would imagine that every team he plays for that gets a break on their cap hit will pay a penalty.

I would assume that, if he ends up in Long Island in 2018 and retires in 2020 they won’t be penalized because the cap hit would actually be more than they paid him.

Posted by Garth on 01/08/13 at 09:13 AM ET

creasemonkey's avatar

Stupid things like this imply that a kid’s bandage was placed over an eviscerated torso during this lockout. No real problem was fixed, all but guarenteeing one party will take the opt-out option and the fans will endure another work stoppage.

I’d rather the season be lost if the problems existing (not just financial, but as mentioned above, the safety issues and rule enforcement) were significantly solved with options for tweaks as needed. I still stick to my earlier claims of not giving the league any of my money any time soon. I’ll follow the Wings online, as I don’t have cable and am not putting up with the paysite’s BS this season.

To those expecting something from the league, I’d guess it’d be a 50% discount on Game Center
Live, with all the blackouts still in effect. The only time people got Center Ice free was during the DirectTV-Comcast dispute over Versus; the league only has control over GCL and will definitely be under the delusion of how much a gift that discount will be for its “world’s greatest fans”.

Posted by creasemonkey from sweet home san diego on 01/08/13 at 09:30 AM ET

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Interesting rule. I would hope that if the player retires early due to injury, the club would be exempt.

If I were a GM I’d just tell the player to not retire and keep him on IR until his deal expires.  Problem solved.

I think this is unnecessarily complicated. The deal should just go with the player.

It’s important to keep in mind that the purpose of this rule was to punish the teams who had signed players to long term deals.  Nothing else.  Future long-term deals are already explicitly banned.

The complication is a feature, not a bug.  It’s meant to make these contracts a gigantic headache and looming cap catastrophe for the teams who either sign them or trade for them.

Where’s the punishment for the player for retiring early?

Hey, you’re acting like anyone ever gives the players any responsibility for anything that happens, ever.  How dare you. smile

Does Tampa Bay also get to pay part of the penalty?

Now that’s an interesting question.  If a guy gets traded enough and that cap penalty gets split into enough parts… I think you just found Bettman’s latest loophole gaffe. 

Hell, a guy could get traded two or three times in one offseason if GMs really want to stick it in Bettman’s face, especially when they’re at the very end of their career.

Posted by HockeyinHD on 01/08/13 at 09:40 AM ET

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Hell, a guy could get traded two or three times in one offseason if GMs really want to stick it in Bettman’s face, especially when they’re at the very end of their career.

Why are people trying to make this more complicated than it clearly is?  If you paid out more than the player’s cap hit, you get penalized if he retires early.

Posted by Garth on 01/08/13 at 10:11 AM ET

redxblack's avatar

A bigger problem is that this changes the terms and conditions of a contract already negotiated. Retroactive rule changes might face some legal difficulties.

But I agree with Garth’s sentiment. Someone at NHL HQ will have to watch cap hits v. salary and keep a running count of who paid what vs. hit. It won’t be hard. Then when anyone retires while under a contract, the league will send an invoice to the teams that “cap cheated.” It’s almost like an unfunded escrow, but using that word too loudly might encourage the league to have teams put money up front for cap differences and have it refunded when the player fulfills the contract. Teams would never willingly do that to themselves. They make the players do it, but that’s a different story.

Posted by redxblack from Akron Ohio on 01/08/13 at 10:23 AM ET

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A bigger problem is that this changes the terms and conditions of a contract already negotiated. Retroactive rule changes might face some legal difficulties.

Yeah, understanding the rule as written is a different conversation than whether it is or is not complete and utter BS to retroactively punish teams who signed contracts that were completely within the rules of the time.

I could be wrong but I would guess that players who signed contracts as 35-year olds in 2004 weren’t subjected to the new 35+ rule…

Having said all that, since this doesn’t appear to adversely affect the players, I can see why they agreed to it, and everyone has agreed to it, I don’t have any objections…

Posted by Garth on 01/08/13 at 11:27 AM ET

J.J. from Kansas's avatar

If a player ratifies the CBA, they can make it affect contracts which were already on the books.  Heck, even if he doesn’t ratify it and his union does, they can do that.

I guess a player could sue both the union and the league over an issue like that. I’d be curious to see what that outcome would be.  I doubt him waiting until it actually affected him would go favorably for him.

I’m wondering if the cap hit recapture lowers in years when the salary is lower than the hit in non-trade scenarios.  Will Zetterberg’s recapture amount drop by the difference in hit vs. salary as he plays those years where there is less benefit?

Posted by J.J. from Kansas on 01/08/13 at 12:18 PM ET

redxblack's avatar

Correct. Any change to terms and conditions would have to be negotiated. I just think it’s extra dirty to put this provision up at the zero hour, after announcing the end of the lockout.

Posted by redxblack from Akron Ohio on 01/08/13 at 01:03 PM ET

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A bigger problem is that this changes the terms and conditions of a contract already negotiated.

Every SPC every player ever signs explicitly allows this to happen.

I just think it’s extra dirty to put this provision up at the zero hour, after announcing the end of the lockout.

Hasn’t some version of this been in the NHL’s proposals for months now?

Also, keep in mind that allegedly there is some kind of framework to allow teams to include cap money in transactions to some degree or another.  At least, that’s been in the last two or three NHL proposals and I haven’t heard that it was struck through at any subsequent point.

My guess is that teams in dire cap straits will be able to move a pick or a prospect to get ‘cap’ back from lower-spending teams.  Which is likely just fine with Bettman.  It means those teams are effectively being docked those traded picks for signing those ‘bad’ deals.

Posted by HockeyinHD on 01/08/13 at 01:36 PM ET

Bradley97's avatar

I’m wondering if the cap hit recapture lowers in years when the salary is lower than the hit in non-trade scenarios.  Will Zetterberg’s recapture amount drop by the difference in hit vs. salary as he plays those years where there is less benefit?

Posted by J.J. from Kansas on 01/08/13 at 12:18 PM ET

I just did the math.

If Z retires with 3 years remaining on his contract the Wings would face a recapture cap hit of $4,300,010 per season remaining.

If Z retires with two years left (those $1M dollar cap saving seasons that dropped the hit to $6,083,333 over 12 years) the Wings would face a recapture hit of $5,083,335 per season.

Based on the article by Friedman the recapture hit is distributed evenly across the remaining unplayed years of the contract.

Interestingly, if Z retires with 4 years left, the last $7M season would lower the recapture hit to $2,995,834 per season.

Basically this rule kills the point of these lower end cap saving deals, and if Z retires early the Wings are $%&#.

I’ll let someone else figure out what happens if Franzen retires early.

As for amnesty buyouts, it costs more dollars for the team, but there is no cap hit. That leaves the pro/con to be weighed by whether the team can afford the payout now over the “free” cap penalty later. A team like the Wings could decide not to take a chance and amnesty Franzen after next season if it’s decided he will not be able to finish his contract, or his play never returns to risk that.

The only way out of the penalty is LTIR if the player cannot complete the deal.

Regarding trade options, this makes these contracts untradeable (to smart managers). The back end drop makes the recapture penalty higher for the trading team, as the cap savings are based on the years played per team, so that’s why Vancouver takes a lower hit to their cap if they trade Luongo now, while the receiving team takes a higher hit, though not much higher.

Now I’d like to know how Leopold thinks he did with his 2 big signings over the summer. Does he actual cash to amnesty them after next season, or does he worry about the likely cap impact the team will feel should either player retire instead of go on LTIR if they cannot finish their contracts?

If I’m Suter and/or Parise, I might consider retiring early to stick to Leopold for negotiating in bad faith.  LOL

Posted by Bradley97 on 01/08/13 at 01:38 PM ET

Bradley97's avatar

My guess is that teams in dire cap straits will be able to move a pick or a prospect to get ‘cap’ back from lower-spending teams.  Which is likely just fine with Bettman.  It means those teams are effectively being docked those traded picks for signing those ‘bad’ deals.

Posted by HockeyinHD on 01/08/13 at 01:36 PM ET

I think cap space trades must have a player attached whose cap hit would be split between the teams.

Posted by Bradley97 on 01/08/13 at 01:45 PM ET

redxblack's avatar

Do you happen to have the SPC language that allows the league to arbitrarily change the players’ trade value by loading them with penalties and fees if they are traded and are on a long term contract? Because that is the change in the terms and conditions that need to be negotiated right now. When Luongo signed, that wasn’t the case.

The trouble comes in not grandfathering in the old agreements that were signed under the rules at that time. Changing the rules after the fact, or changing the new CBA to go after old contracts could create a situation where a player like Luongo could sue because they’ve affected his value on the trade market (which is what JJ said).

Posted by redxblack from Akron Ohio on 01/08/13 at 01:50 PM ET

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I’ll let someone else figure out what happens if Franzen retires early.

We all have to find a new scapegoat?

Posted by Garth on 01/08/13 at 04:16 PM ET

Bradley97's avatar

We all have to find a new scapegoat?

Posted by Garth on 01/08/13 at 04:16 PM ET

Who is scapegoating? Though I did forget to add in letting someone else figure Krownwall’s hit. However he only signed a 7 year deal. Sure his health could be a factor before it’s done because of his play style, but Mule isn’t exactly prone to good health either. The Wings have the LTIR to fall back on to avoid the penalty, and I expect them and every other team to use that successfully for contracts that expire before the CBA. The next CBA will likely require a neutral doctor to determine LTIR status for contracts that fall into the Luongo rule. Unfortunately I doubt that will include the ability to allow players with legitimate injuries to retire without cap penalty (hello Pronger).  rolleyes

Posted by Bradley97 on 01/08/13 at 05:39 PM ET

Bradley97's avatar

Oh, Kronwall with 37 at the end of his contract, younger than Mule and Z when their contracts end. I expect him to finish his contract. I have no idea if he’ll sign another. Kenny did good with this one.

Posted by Bradley97 on 01/08/13 at 05:47 PM ET

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Who is scapegoating?

Look at the post from a few days ago when someone asked the question of who the Wings could/should buy out and you’ll see what I mean.

hello Pronger

Speaking of this, does anyone know if there were any changes made to the 35+ rule?  I think I read that it was being discussed…

Posted by Garth on 01/08/13 at 06:53 PM ET

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Paul Kukla founded Kukla’s Korner in 2005 and the site has since become the must-read site on the ‘net for all the latest happenings around the NHL.

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