Monday, December 31, 2012

1910 NHA Constitution

In the course of researching the history of the NHL's sponsorship system I came upon an interesting little bit of legal lore that may interest a few people out there.

You may or may not know that the National Hockey League was borne out of a legal dispute between the owners of a preceding hockey league named the National Hockey Association (NHA). The NHA was founded in 1909 by J. Ambrose O'Brien as an amalgam of teams he owned in Northern Ontario and the Montreal Wanderers, winners of the Stanley Cup in 1906, 1907 and 1908. The league quickly added teams in Montreal (Shamrocks, two-time winners of the Stanley Cup, and Canadiens, created to capture the attention of the city's francophone population), Ottawa (Senators, then five-time and defending Stanley Cup champions), Quebec City (Quebec HC, a.k.a. "Bulldogs") and Toronto (including Toronto HC, known as the "Blueshirts", from which the modern-day Maple Leafs are descended).

It was due to disputes between eventual Blueshirts owner Eddie Livingstone and the rest of the NHA owners that the rest formed another league, the NHL, in order to carry on their hockey business while excluding Livingstone. I won't get into the details—a cursory internet search will provide you with a breadth of information on the subject.

When the NHL was formed it carried over the rules (notably six-man hockey; most other leagues still played seven-man rules which included the now-deprecated rover), officials (including president and secretary-treasurer Frank Calder, who would remain in those positions with the NHL until he had a heart attack at a board meeting in 1943, dying 10 days later) and constitution of the NHA.

The NHA originally used the constitution of the Eastern Canada Hockey Association (ECHA, formerly known as the Eastern Canada Amateur Hockey Association [ECAHA]). After the NHA's first season of operation the Shamrocks left, rejoining 'amateur' ranks with the likes of the Montreal Victorias (Stanley Cup champions in the late 1890s) and Montreal HC (the hockey wing of the Amateur Athletic Association, inaugural Stanley Cup champions in 1893). Ambrose O'Brien chose to return his clubs in Northern Ontario (Cobalt & Haileybury) back to the Timiskaming Professional Hockey League from whence they came and sold the Montreal Canadiens to George Kennedy; he couldn't afford the salaries commanded by the top players in the country. Seeking to stabilize the league and to clarify the league's business rules a three-man committee comprised of league president Emmett Quinn, former secretary-treasurer Eddie McCafferty and Wanderers manager Dickie Boon wrote a new constitution, adopted at the annual board meeting held in November of 1910.

A draft version of the constitution was published November 9, 1910 in the Montreal Gazette. At the bottom of this post you will find a link to the Google News archive version of the page in The Gazette. I also took it upon myself to transcribe the articles of the constitution as presented in The Gazette and create a PDF for your viewing ease (and also to save me the trouble of html coding in order to reproduce it in an acceptable format to suit the blog's theme).

Click here to view the PDF at scribd.com.

Note that Section 21 set a salary cap of $5,000 per team. This was very contentious with the players of course. The Ottawa Senators players even contemplated starting their own league as many had their salaries halved. They ended up not being able to secure ice time in any of the big rinks and backed down from the threat. Interesting, considering the state of player relations as they relate to the salary cap today...

Also note that the number of teams in Section 12 was left blank. It appears blank on the newspaper page; it may have been a misprint or omission on their part. Given the context of the article and the talks between the clubs about admitting the Quebec Hockey Club and a club from Toronto I believe the number was meant to be six (Renfrew, Canadiens, Wanderers, Ottawa, Quebec, Toronto). Six sounds right given the context of the rest of the constitution too—see Section 16 regarding the expulsion of a member club. It calls for a vote by all of the clubs except the club facing expulsion and four votes are required to pass the motion. That means that there would be at least five clubs, and since it calls for four votes and not 'unanimous' I believe they left a margin of one dissenting vote (four assenting, one dissenting, one club facing expulsion; six total). In any case for the sake of accuracy I have left the space blank, as I do not wish to misrepresent what was printed at the time.


References:

"To Place Hockey on Better Basis; Draft of New Constitution for National Association Was Completed Yesterday; Salary Limit of $5,000; Severe Penalties Will Be Exacted for Violations of Rules by Players or Clubs." Montreal Gazette 9 Nov 1910, 10. Web. 24 Dec. 2012.

http://news.google.com/newspapers?id=vncuAAAAIBAJ&sjid=A4UFAAAAIBAJ&pg=6396%2C856888
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Monday, December 24, 2012

The Sponsorship System - The Pre-Expansion NHL's Monopsony on Players

The NHL's primary source of young, talented hockey players has always been the Canadian junior leagues. Prior to the 1960s scouting from U.S. colleges and European leagues was extremely rare and only a handful of players in the NHL were not Canadian. Before the implementation of the amateur draft the NHL clubs had created elaborate farm systems whereby they exercised complete control over the movement of almost all professional and high-level amateur players in North America. There is a lot of confusing information out there regarding how this recruitment system worked and I freely admit that I've certainly misspoken about it in the past because frankly I did not completely understand how the NHL's system worked. Inasmuch as I decided to write this to get the information out there I also wrote it because I wanted to research it for the sake of clearing things up for my own benefit and understanding.

The 1930s and early '40s dealt severe financial blows to the NHL. The combination of the effects of The Great Depression and the loss of talent to the war effort at the turn of the decade killed off four of the league's ten franchises. The Philadelphia Quakers né Pittsburgh Pirates were first to go, in 1931. In the span of only four years the (original) Ottawa Senators suspended operations, resumed operations, moved to St. Louis and folded in '35. Neither Montreal nor Manhattan could support two NHL franchises and the Maroons and ('Brooklyn') Americans were gone after '38 and '42, respectively.

The NHL was not alone in its plight. The Canadian Amateur Hockey Association (CAHA), the governing body of the amateur game in Canada, found that many of its constituent leagues' teams were experiencing similar difficulties. Of great concern to the CAHA was the way in which the NHL was poaching players off its Junior teams' rosters. The CAHA's position was that it had spent the money to 'develop' players from novices to juveniles and juniors and that the NHL, in signing these players, should compensate the CAHA for having provided the players with a hockey education in the first place.

The genesis of what became the sponsorship system was an agreement reached in 1936 between the NHL and CAHA, in which the two organizations decided:

  • to respect each other's players suspensions,
  • the CAHA would adopt NHL playing rules,
  • the NHL would not sign junior players from the CAHA without the junior club's consent,
  • the NHL would not sign any player from the CAHA while the player's amateur club was in competition

The agreement between the CAHA and NHL was amended every year that followed and little by little the NHL gained more of a foothold in the CAHA's operations. By the mid-1940s the NHL had begun direct, outright subsidy of Junior A clubs under the CAHA's control. In exchange for financially supporting the junior clubs the CAHA allowed the NHL control over their operations and exclusive professional playing rights to the boys who played for the sponsored teams.

Through sponsorship agreements the NHL clubs would be allowed to place up to 18 players on a given team on their "sponsorship list", giving the club exclusive negotiating rights with that player until after he turned 20 years old and his junior eligibility expired. Once within the club's sponsorship system the player no longer had any control over where he played. If he ran afoul of his Junior A coach he could be shipped off to a Junior B club in another town within the NHL club's system.

The Sponsorship System


The system I speak of was a hierarchy of minor pro and amateur affiliations. The CAHA-NHL agreement only allowed for the NHL clubs to each sponsor a pair of Junior A teams but it also allowed minor pro (WHL, AHL, CPHL/EPHL/QHL) teams to sponsor junior teams in their own right, and Junior A teams to sponsor a pair of Junior B, Juvenile or Midget teams in their own right. Through the Joint Affiliation Agreement between the NHL, AHL and WHL the NHL clubs would gain de facto control over their minor league affiliates' sponsors as well. This pyramid of affiliations and sponsorships would allow NHL clubs to retain exclusive playing rights of hundreds of boys and men.

Take the Montreal Canadiens as an example. In the 1965-66 season they sponsored the Montreal Junior Canadiens and Peterborough TPT Petes of the OHA Jr. A league. The Canadiens also had affiliation agreements with the AHL's Cleveland Barons, Providence Reds and Quebec Aces, and the WHL's Seattle Totems and CPHL's Houston Apollos. The Barons sponsored Jr. A teams in Kirkland and Verdun, the Reds sponsored its own pair of Jr. A teams, the Aces sponsored the Regina Pats, the Totems sponsored another pair of Junior teams, and the Apollos sponsored a couple Junior B teams. Several of these Junior A and B teams in turn sponsored other Junior B, Juvenile and Midget clubs. All in all the Montreal Canadiens had 21 Junior A, Junior B, Juvenile and Midget clubs under its control. The Canadiens could place up to 18 players from each of its sponsored clubs on a list of sponsored players, a list of players which no other professional team in North America (since the NHL exercised control over the other leagues) could touch. In effect the Canadiens could direct the careers of over 300 young players.

By virtue of the amateur and minor pro affiliation agreements the NHL had a monopsony (a monopoly is a single seller in a market of several buyers; a monopsony is a single buyer in a market of many sellers) on the supply of players. They lorded over the CAHA, USAHA, the AHL and WHL through these agreements and owned the CPHL outright. They had ultimate control over almost all hockey in North America. (Note that I have not made any mention of the International Hockey League. They had no agreement with the NHL and as such were considered an 'amateur' league.)

In addition to sponsorship lists the NHL used a few other instruments to obtain and retain control over the supply of players. One such instrument was the negotiation list, a list upon which four players over the age of 18 could be placed for the right of exclusive negotiations. The action of placing a player on a negotiation list was unilateral. The player did not have to provide his consent; in fact they didn't even have to be notified of being placed on a negotiation list. The exclusive negotiation rights could be renewed for an additional year without the player's consent if the NHL club could demonstrate to the NHL President (Clarence Campbell) that the club had made a concerted effort to sign the player.

Now when I say 'sign' I don't necessarily mean an actual player's contract. The NHL also had three 'option' contract documents to which they could sign players in order to retain their exclusive playing rights without having to actually pay them an ongoing salary: the now-notorious 'A', 'B' and 'C' forms. This area of NHL contract 'law' may be the most muddled and confusing nowadays. I began the research into the area of the sponsorship system by first asking myself “What the hell are 'A', 'B' and 'C' forms anyway?”

Try-Out Agreement “A”


If a player signed an 'A' form he would be bound by the agreement to show up to the club's training camp if they requested him to be there (and as consideration the club would pay for a hotel room, meals and travel expenses from his hometown to the training camp). If the club offered him a contract he was bound to sign a contract with them on terms to be mutually agreed upon at a later date.

If the player refused to appear to try-out he could be suspended from “all professional and amateur organizations” (WHL, AHL, CPHL, CAHA, USAHA, etc.) until he carried out the try-out. If it was signed before September 1 of any given calendar year it would expire at the end of October of the same calendar year. If it was signed after September 1 it would expire at the end of October of the following calendar year, thus guaranteeing the player would be bound to appear at the following season's training camp.

A player signed to an 'A' form could also play in up to five NHL regular season games, plus another three in the case of an emergency, without signing a Standard Player's Contract. The club could also trade or otherwise transfer the rights created by the agreement to another club.

The rescission of the agreement would occur if and only if the player attended a try-out and the club did not offer him a contract.

Option Agreement “B”


The 'B' form was very, very rarely used. It was similar to the 'A' form in that it bound the player to appear at training camp and he would sign a contract if the club offered him one (although he could negotiate the terms). The agreement also gave the player a measure of control which he did not have with an 'A' or 'C' form: he could demand a contract from the team at any time. It would have to be “at a rate of salary equal to the fair average salary of the League in which the Club is a member.” If the club did not offer him such a contract within 15 days of his notice to them then the option agreement was rescinded and he was free to sign with any other team.

Note that he did not have to agree to the terms of the contract offered by the club, but they had to offer him one at the average salary of the league at a minimum. If they low-balled him he could notify them in writing that they had failed to meet the requirements of the option agreement and the agreement would end unless they offered him an average salary.

Like the 'A' form this agreement could be transferred to another team. It would be in effect so long as the club extended the player the average salary offer whenever he demanded it. The only players I know of who signed a 'B' form were Jean Beliveau and Jacques Plante.

Option Agreement “C”


The 'C' form was the most restrictive to the player. Like the 'A' and 'B' forms it forced him to appear at the club's training camp. What was different about it was that it stipulated the terms to which he would sign a Standard Player's Contract at some point in future, including a signing bonus and the different salaries he would earn depending on whether he played in the NHL, AHL, WHL or QHL/CPHL. He couldn't negotiate the terms later: they were already agreed upon when he signed the 'C' form. There was also a clause which forced the player to “agree that he will play hockey only for such hockey team as may be designated by the Club”. In other words whether or not he actually signed a contract the team could dictate where he played, including as an amateur. As with the other forms the agreement could be traded or assigned to another club.

The final clause in the agreement was perhaps the most restrictive: the agreement would last only one year but the club could automatically renew it for another year, over and over in perpetuity, if they made the player a (negotiated) cash payment for every year's extension. In effect the restrictions on player movement and the rest of the agreement (the predetermined terms of a players contract, showing up to training camp) could be imposed on the player forever as long as the club kept paying the annual renewal fee.


Donald R. Ellis, the Director of the NHL Central Registry Bureau of Player Information from 1953 to 1983, wrote an article within the book Years of Glory edited by Dan Diamond entitled "Waivers, Drafts, and the Sponsorship List". A great deal of the information contained in this blog post was first gleaned from Ellis's work. Within it he wrote that the 'A', 'B' and 'C' forms could not be signed by players younger than 18 but I have found conflicting sources.

One such source is an article entitled "The Economics of the National Hockey League" published in The Canadian Journal of Economics in 1969 by Dr. J. C. H. (Colin) Jones of the University of Victoria Department of Economics. In it he cites two sources which say that the forms "attempt to bind amateurs to a particular professional club when they have reached sixteen years of age". The sources named were the CAHA Hockey Rules of 1954-1955 and the appendices of a U.S. congressional hearing on antitrust legislation as it should apply to professional team sports in 1957.


The amateur draft was instituted in 1963 but the sponsorship system did not begin breaking down until 1966, when the sponsorship lists were frozen. No new players could be added to any team's sponsorship list from that point on and by 1970 direct NHL control of junior clubs would end. As a point of trivia this is how Brad Park ended up with the Rangers: the Maple Leafs had sponsored him (he was a member of the Marlboros Jr. A team) but when the sponsorship lists were frozen in '66 Punch Imlach left Park off their ultimate sponsorship list and elected to keep another player instead. As he was no longer sponsored Park was eligible for the '66 amateur draft and the Rangers chose him second overall. What a steal!

No new 'A', 'B' and 'C' forms could be signed after May 1, 1968. By the beginning of the 1970-71 season the final vestiges of the sponsorship system disappeared as the last sponsored players turned 20 and lost their junior eligibility. Thereafter the NHL would rely on the amateur draft as its source of young talent.


References:

"Ruling Ice Groups Reach Agreement: C.A.H.A. and N.H.L. Repair Rift at Meeting Held in Toronto." Montreal Gazette 15 Aug 1938, 14. Web. 24 Dec. 2012. http://news.google.com/newspapers?id=bokxAAAAIBAJ&sjid=Z6gFAAAAIBAJ&pg=5094,1658569.

Barnes, James. The Law of Hockey. Markham, Ont.: LexisNexis Canada, 2010. 73-97. Print.

Ellis, Donald R. "Waivers, Drafts, and the Sponsorship List." Years of Glory, 1942-1967: The National Hockey League's Official Book of the Six-Team Era. Ed. Dan Diamond. Toronto: McClelland and Stewart, 1994. 88-97. Print.

Jones, J. C. H. "The Economics of the National Hockey League." The Canadian Journal of Economics. 2.1 (Feb. 1969): 1-20. Web. 24 Dec. 2012. http://www.jstor.org/stable/133568


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