The Luongo Rule and Brad Richards

Bruce Bennett/Getty Images

Bruce Bennett/Getty Images

One point of the new CBA that negatively affects the Rangers is the new “Luongo Rule.” This rule was designed to punish teams that circumvented the last CBA and signed players to back-diving deals. The Rangers have one of these deals in Brad Richards, who made $12 million in his two years of his nine-year deal, and sees his salary drop to $1 million by 2017-2018.

The rule states that for players retiring before the expiry of a contract longer than six years, a portion the cap savings from the deal will count against the team. In the Rangers case, Richards has a $6.66 million cap hit, but majority of the money ($57 million) will be paid in the first six years of the deal, with $3 million coming in the final three years.

Richards is signed until he is 39 years old, but his $1 million annual salary begins during his age-37 season. Now, it is unlikely that Richards would retire at age 37, but it is entirely possible that Richards retires with one or two years remaining on his deal. At this point, the Luongo Rule would kick in, and the Rangers would still have to deal with having a retired player on their payroll.

Let’s run the scenario of Richards retiring with two years remaining on his deal. The Rangers will have paid him $58 million over seven years (cap hit of $8.28 million), but only suffered a cap hit of $6.66 million ($46.62 million total). This total cap savings is $11.38 million over those seven years. The Rangers would be left with that savings of $11.38 million as a cap hit, spread out over the last two years of the deal. That’s a whopping $5.69 million in dead cap space for two years.

If Richards retires with one year remaining on his contract, then the Rangers will have paid him $59 million over eight years (cap hit of $7.375 million), but only suffered the  same $6.66 million cap hit ($53.28 million total). The total cap savings here is $5.72 million. Since there would only be one year remaining on his deal, the Rangers would have a $5.72 million cap hit.

If Richards gets traded, and retires before the contract expires, then the Rangers would still have a cap hit to deal with, but it would be significantly less. That’s unlikely though, as Richards has a no-move clause.

While the purpose of this rule is to penalize teams that circumvented the previous CBA, it’s unlikely that this will actually become a problem for the Rangers. Richards’ contract expires after his age-39 season, unlike a good number of these deals which go well into a players’ 40s. There is also a significant possibility that the Rangers just place Richards on LTIR to remove the cap hit entirely.

Naturally, the LTIR loophole was not addressed.

9 Responses to “The Luongo Rule and Brad Richards”

  1. MBN says:

    How does the rule work with Ilya’s deal with “Jersey”? Say he leaves 3 years early.

    Would love to get answers regarding Parisi also.

    Thanks.

    • Dave says:

      Kovi: They will have paid $92m over 12 years (cap hit of $7.6m), but suffered cap hit of only $6.6m (total: $79.2m). Total savings was $12.8m, divided over 3 years remaining on contract is $4.26m cap hit for 3 years.

      Parise: MIN will have paid $93m over 10 years (cap hit of $9.3m) but suffered cap hit of only $7.5m (rounded to $75m). Total savings is $15m divided by 3 years remaining is $5m cap hit.

      • MBN says:

        Thanks Dave. Seems like the Rangers won’t be the only ones to suffer if this happens. But those are large hits.

  2. Spozo says:

    I understand the point of this “Luongo” rule but I don’t necessarily agree with it. I don’t think anyone should be punished for putting together deals that did not break any rules in the previous CBA. Also, who’s idea was this rule? I doubt it was the owners idea since they were the ones who were circumventing the cap in order to save some cash ad I doubt the players felt te need to punish the NHL for paying them so much money. The NHL agreed to “make whole” in order to fulfill the contracts they signed on the previous CBA yet they make a rule in the new CBA that has a negative outcome of those previously signed contracts?

    • Dave says:

      It was the owners who put this in actually. Kind of funny considering Leipold signed Parise/Suter and now has to deal with the consequences if they retire early.

  3. Gary says:

    Could the NYR trade for a high priced player and buy them out this summer? Ex. To NY vinny lecavalier and prospects To Tampa Mike Rupp. Not the most economical deal but when money isn’t an issue why not if it is legal.

    • Dave says:

      Yea it’s possible, but I doubt it would happen with someone of Lecavalier’s stature. Assume it would be a mid-tier guy on a bad contract.

  4. rickyrants13 says:

    In fact ony a few of these teams will be hurt by such a rule IE the Rangers are one because many of these teams wont be near the cap every year. In Minny as soon as they find out that TWO players alone wont win them the cup. They will be looking to deal one of them anyway.

    • Dave says:

      Minny is far better off than you think. Their top six of Parise, Koivu, Granlund, Heatley, and Seto is phenomenal. They also have great depth for their bottom six.

      Their goaltending is great as well. It’s their defense that leaves something to be desired.