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Kovalchuk's Contract with Devils Ruled Void

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When Ilya Kovalchuk signed a 17 year deal with the New Jersey Devils this summer, the NHL rejected the contract. That decision was appealed and went to an arbitrator who sided with the NHL today ruling that the contract was an attempt to circumvent the salary cap.

I think virtually everyone agrees that the contract was an obvious attempt to circumvent the cap. The contract stretches out until Kovalchuk is 44 years old and was worth $102 million. But in reality the first 10 years paid Kovalchuk $95 million and the final 7 years paid him just $7 million. The purpose of the contract was to pay Kovalchuk $9.5 million per season over the next ten years, but the contract would only count as $6 million in cap terms. Kovalchuk could retire after 10 years and the Devils would magically have created an extra $30.5 in cap space over the those ten years. This is why the contract was voided.

The problem is that other recent contracts signed by Marian Hossa and Chris Pronger also exploited the same loopholes, but not to the degree found in the Kovalchuk contract. This leaves open the question of where the boundary line between "cap circumvention" and "clever planning" rests. Until the next CBA defines this line with great clarity, it is likely to we will see other NHL contracts probe and test how far these life-time contracts can push the boundary of cap circumvention.