First of all, thanks to u/Karvalegoff on r/canucks for inspiring this writeup. Cheers!

The Vancouver Canucks, among other teams, are facing potential future consequences for previously signing contracts that are now seen as salary cap circumventing. The contracts in question were those that had a decreasing salary over a lengthy term, in order to reduce the cap hit during a player’s prime years. For a detailed explanation of these penalties, check out:

http://spectorshockey.net/fun-with-the-nhls-cap-advantage-recapture-rule/.

For a detailed explanation of why the rule is absolute horse hockey, continue reading this article!

Luongo’s Contract, Its Precedents, and Competitive Advantage

The Canucks signed Robert Luongo to a 12-year contract extension in September of 2009, with a total salary of $64 million and a cap hit each year of $5.333 million, repeating of course. The deal would kick in as of the 2010-11 season and last until Luongo was 42 years old. The contract peaked with single-season salaries of $10 million, right down to $1 million in the final years.

For the Canucks, the appeal was simple. $5.333 million was a low cap-hit for a goalie of Luongo’s calibre, which allowed the team more cap flexibility to ice a stronger roster during Luongo’s prime. This would also mean that Luongo would have that same cap hit when his skills diminished in his final years, but due to his low-salary in those years, it was thought he could then easily be dealt to a team struggling to reach the cap floor, like Arizona always is. More on them, later.

It’s easy to see how the contract could be construed as “against the spirit” of the salary cap, but the league approved it nonetheless. Not only that, the league had already approved several similar contracts before Luongo’s, including Henrik Zetterberg’s very similar 12-year deal with Detroit, signed in January of 2009, and Marian Hossa’s own 12-year deal with Chicago, signed in July. At the time, both of these teams were conference rivals of the Canucks. Their deals were approved, and so the Canucks were faced with a choice of using the same loophole as the other clubs or refusing to, and losing a competitive advantage. Given the calibre of team the Canucks were building at the time, it is understandable why they chose to sign the deal.

The Kovalchuk Fiasco and Tacit Re-Approval

The league didn’t just approve the Luongo contract on one occasion. It also tacitly approved it when it chose to disapprove the contract of Ilya Kovalchuk with the New Jersey Devils. Lou Lamoriello and the Devils tried to sign Kovalchuk to a ridiculous 17-year, $102 million contract that would have ended when he was almost 44. The league not only rejected this contract, but they imposed harsh penalties on the Devils, too, forcing them to give up a first-round draft pick (although the penalties were later greatly reduced).

In doing this, the league also chose not to re-visit or impose penalties upon Vancouver, Detroit, Chicago, or any of the other teams that had signed similar contracts. They seemed to be a drawing a very clear line in the dirt; contracts like Luongo’s were the limit of what was acceptable, whereas Kovalchuk’s contract had gone too far. The league had established a specific standard.

This article explains exactly why Kovalchuk’s contract was rejected, while Luongo’s was not:

http://www.arcticicehockey.com/2010/7/21/1579736/why-ilya-kovalchuks-contract-was

This, of course, changed with the new CBA, which introduced the recapture penalty, retroactively punishing the Canucks and other teams. Most infuriatingly, these punishments came for contracts that had been approved not just once, after their initial signing, but a second time by the whole rigmarole surrounding Kovalchuk. The league deemed these contracts acceptable, and teams therefore took advantage of them, and now the league has changed their mind, yet it is the teams that must pay a penalty? Is it not the league that made a mistake in this situation?

The Arizona Double-Standard

Perhaps the greatest injustice of this, as mentioned in u/Karvalegoff’s post on r/canucks, is that the league continues to allow teams to circumvent the salary cap in a different way. Teams like the Arizona Coyotes are continually attempting to ice a roster that falls below the league’s salary cap floor. They do this by acquiring players, like Chris Pronger and Pavel Datsyuk, who no longer play in the NHL but have their full cap hits counted against the salary cap. The Coyotes, meanwhile, do not have to pay these players any actual salary, as Pronger’s is covered by insurance and Datsyuk has forfeited his paycheque. The league, so far, has done nothing to prevent this nor even spoke out against the practice.

In other words, the league is comfortable with a team circumventing the cap in order to ice a less-talented and less-entertaining team that league rules dictate, but feels the need to harshly punish teams that circumvent the cap in order to ice a more talented, competitive, and entertaining product. What sort of message does this send to the fans? Teams can circumvent the rules, but only when they’re doing so in order to create an inferior product for the paying customers.

Conclusions

It must be noted that some have suggested ways for the Canucks and other teams to avoid the recapture penalty. Whenever Luongo decides to retire, the Canucks could conceivably trade for him and place him on permanent LTIR, aka the Pronger Retirement Plan. Chances are good that Luongo’s body will prevent him from playing goal at some point in his future, so it might not even require too much of a stretch to get him on LTIR. However, if the Canucks are unable to pull that off, you can bet money that they will make a legal challenge of the rule before they face any actual penalties from it. Given the evidence presented here, it seems likely that the Canucks would win such a challenge. One would hope this is true, especially given the fact that while the Canucks current management team are not the ones who signed the Luongo contract, the league’s front office is largely unchanged from the group that approved the contract in multiple ways.