The Washington Capitals have gotten themselves into a pretty spectacular mess with Eric Belanger. James Mirtle has an excellent story in the Globe that you should all go read immediately. The gist of it is this:
The agent for veteran centre Eric Belanger is threatening legal action after he says the Washington Capitals backed out of an agreement made to sign his client five weeks after it was initially made.
Joe Tacopina, a high profile New York defence lawyer who has recently begun representing NHL players, told The Globe and Mail on Tuesday that the Capitals agreed over the phone to give Belanger a one-year, $1.85-million deal on July 16 that would be made official after general manager George McPhee completed a trade.
Tacopina said Capitals assistant GM Don Fishman then advised him five weeks later that the deal may fall through, after the team had already helped Belanger move and lease a home in Washington. His children were also registered for school in the area.
Belanger signed a one-year, $750,000 contract with the Phoenix Coyotes on Tuesday, taking a more than $1-million pay cut from the deal Tacopina says the Capitals offered.
This may sound more than a little familiar to Oilers fans – it’s sort of a mirror image of what happened with Michael Nylander in 2007, albeit with a couple of major distinctions. Longtime readers may remember that I didn’t think that the Oilers had a leg to stand on in 2007 and that their bluster about exploring their legal options would lead nowhere, which it did. I also liked this passage from that piece:
This whole thing strikes me as silly anyway. Two years from now, when Kevin Lowe is the VP of Remembering the Eighties and someone (competent?) is running the show, I’d suspect that the Oilers management will be happy not have Nylander around pulling down $4.75 or whatever he got from Washington. The only downside I can see is that I pretty much have to withdraw my comments about them seeming to have a plan. I think that they got lucky here. Maybe it’s for the best that their attention was diverted from spending money on UFA’s for the past few days – I’d hate to see what they could have done with that money.
Prescient! Except that they ended up spending that money on Sheldon Souray, so it was pissed away anyway and we didn’t end up with someone competent running the show. The lesson? I’m not cynical enough.
Anyway…I see this as being a different situation for a number of reasons. There’s a doctrine called promissory estoppel that I could see as providing the basis of a cause of action here. It arose out of a desire of the court to protect the reasonable expectations of parties in circumstnaces in which a formal contract did not exist. As an aside, my recollection is that you can’t found an action on a promissory estoppel on Canada but that the United States, or at least some jurisdictions, permit this. There’s a famous line from a court case that promissory estoppel is a shield, not a sword, although the Aussies have moved beyond that and, as I say, I believe the Americans have as well. I’ll leave that aside for the purposes of discussing this and just, for the sake of discussion, assume that it could be used as a sword in both jurisdictions:
I’m going to lift the definition from Wikipedia, which cites the American Restatement of Contracts:
A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.
So, roughly speaking, the elements to be made out are as follows:
1. A promise;
2. Which the promisor should reasonably expect to induce action or forbearance of action on the part of the promisee;
3. Which does induce such forebearance; and
4. Injustice that can be avoided only by enforcement of the promise.
It’s clear from the CBA that no contract is formed in these circumstances. That does not, however, end the story – there’s still the question of whether a court would protect the expectations of the wronged party. The Oilers/Nylander case was considerably different than the Capitals/Belanger case, in that I think the Oilers would have had considerable trouble in showing that they had suffered some loss as a result. The Nylander thing fell apart quickly and he was a second tier free agent – what, precisely, would they have lost by waiting for Nylander to sign a deal?
In Belanger’s case, it’s a bit different. I think that the first two elements are pretty clearly made out. Rajeev Ananda, a frequent commenter here and a very smart guy, vehemently disgarees with me on the second point – if I understand his argument correctly, he doesn’t think that the Capitals should be held to have expected that Belanger would rely on their promise of a contract. I vehemently disagree with him on that – I think advancing that argument is tantamount to saying “We never thought someone would be so foolish as to believe what we were telling them” but he’s a bright guy and there’s a point of dispute there.
Belanger has signed a $750,000 contract with the Coyotes after five weeks of getting strung along by the Capitals, if you accept his agent’s story at face value. James attaches a complete copy of the agent’s letter to the Capitals and it’s well worth reading. It includes this paragraph:
As a matter of fact on the August 17th call, Don said for the first time that while you were trying to get this done there was “no guarantee” that the trade would be made and therefore you might not be in the position to sign eric. In response to that I told Don that our agreement was never a matter of “if” the trade was done , it was a matter of “when” it got done. Don stated that that was “true, but the market changed.” I reminded him of the commitment he asked eric to give to washington by agreeing to the deal and not going back on that agreement once you made the trade (and thereby discontinuing conversations with the other teams) and the teams equal commitment to eric, a veteran of over 600 NHL games who has a reputation of doing whatever he has to for the good of the team. In light of all of the positive reinforcement that we were given throughout the weeks proceeding the August 17th call, the new “no guarantee” position was very upsetting and I believe very unfair. While Don has now taking to repeating “you can move on if your restless” I have repeatedly said to him that with training camp 2+ weeks away, there are no longer situations for us to move on to!
Leaving aside the disagreement between Rajeev and myself, where this case really diverges from the Oiler/Nylander case is with what happened after the purported promise. Things dragged on for five weeks. It seems reasonable to me to think that there was a real loss here – Belanger may well have lost more lucrative and desireable opportunities that were available to him as a result of the Capitals’ conduct. I don’t think that you can say that about the Oilers with respect to Nylander – they were able to find an equally stupid mistake to make shortly thereafter and I’ve never heard it said that they lost out on anyone because they thought that their deal with Nylander was done.
Two other points come out of James’ article that I want to touch on, both emerging from a quote from an agent:
“They don’t have a legal leg to stand on,” one agent said Wednesday. “The entire situation is governed by the CBA. An agent and the player are obligated under the CBA to take individual legal action or you can lose your certification to be an agent … The sole remedy would be a grievance.
Not every possible legal interaction between a player and the NHL is governed by the CBA. In order for something to be prevented by the CBA, it has to set out as being barred. 17.1 of the CBA says the following with respect to grievances:
17.1 Grievance. A “Grievance” is any dispute involving the interpretation or
application of, or compliance with, any provision of this Agreement, including any SPC.
All Grievances will be resolved exclusively in accordance with the procedure set forth in
this Article, except wherever another method of dispute resolution is set forth elsewhere
in this Agreement.
The potential cause of action that I’m describing has nothing to do with the CBA, so quite frankly, I’m not sure how an agent could say that the entire situation is governed by the CBA. Subject to Richard Bloch reading it, the CBA doesn’t deal with potential actions for promissory estoppel.
I also don’t entirely understand the statement that “…an agent and the player are obligated under the CBA to take individual legal action or you can lose your certification to be an agent.” To start with, the agent has no cause of action here. If anyone does, it’s Belanger. One might argue, I suppose, that his agent should be named as a defendant in the action along with the Capitals, which would be spectacularly messy.
Any action against the agent would be on the basis that it was negligent for him to advise Belanger to discontinue his efforts to go elsewhere and wait for the Capitals to finalize the deal, assuming that such advice was given. In effect, it’s an either/or thing – if it was unreasonable of him to take the Capitals at their word and his agent advised him to do so, the agent might have a problem. If, however, the agent said “Well, look, their request is all fine and well but it’s not a deal and you can’t rely on them to actually come through,” he’s probably fine.
Secondly, I don’t understand how a lawyer could be certified pursuant to a scheme that bars him from advising his client to pursue legal rights that might be available to him outside of the CBA. The Law Society of Upper Canada, at least, has pretty clear rules about who your owe your duty to – it’s your client, not to a scheme concocted by the NHL and NHLPA to ensure that things get arbitrated, as opposed to litigated. It strikes me as odd, if it actually were to apply to circumstances like this.
One other point – Tacopina takes a hammering in Mirtle’s article for his failure to get a signed deal. I have some difficulty with that. While we all know that there’s no deal under the CBA until one is signed, a lot of lawyers work on trust when it comes to their dealings with other lawyers. George McPhee is a lawyer. Don Fishman’s title is Director of Legal Affairs, so I assume he’s a lawyer as well. If you can’t trust the lawyer with whom you’re dealing, a lot of legal dealings become a lot more arduous. Lawyers will generally try to accomodate one another when they can and, where someone is told that a deal is done but that it won’t be formalized yet for other reasons, I can understand why Tacopina was inclined to let it go. You generally get to burn someone like Tacopina has been burned only once though, if it’s public enough, as this is.
In any event, regardless of the potential legal consequences, if there’s any truth to Tacopina’s account, the Capitals have acted in a pretty despicable manner, most likely to Belanger’s detriment. Doctrines like promissory estoppel arose as a response to shortfalls in contract law, as basically a way for courts to protect reasonable expectations that people form in circumstances where they’ve relied on the promises of others to their detriment. Even if there is no legal remedy here – and I’m not an American lawyer and this has been sort of stream of consciousness thinking, if you need legal advice, you should speak to a lawyer – the Capitals’ conduct is shameful. The Capitals can probably forget about ever getting the slightest indulgence again from a player, because there isn’t an agent in the world who would advise them to do so. That’s something that has a cost, even if they saved money by not signing Belanger.