Hockey Player’s Contract Terminated for “Material Breach”

The NHL’s Los Angeles Kings recently terminated the contract of former star Mike Richards. It has since been reported that the team did so due to an incident at the border involving Oxycodone.

This was a surprising move that is likely to be vigorously contested by Richards (who was still owed five years and $22 million under his contract) and his union representatives at the NHLPA.

How did the Kings terminate the contract?

The NHL has Standard Player Contracts which provide, at paragraph 12, that the team may terminate a player’s contract if the player shall:

(a) fail, refuse, or neglect to obey the Club’s rules governing training and conduct of Players, if such failure, refusal or neglect should constitute a material breach.

(b)   fail, refuse or neglect to render his services hereunder or in any other manner materially breach this SPC.

Richards and the NHLPA may now apply to have the termination considered by an independent arbitrator.

Why was this surprising?

Typically, an NHL team who wants to terminate the contract of a player must pay the remaining amount owed to the player and incur a penalty from the league limiting the amount the team can spend in future years under the league’s salary cap. The Kings have apparently dodged both consequences.

What will an arbitrator determine?

There does not appear to be any precedent for an NHL team to terminate a player’s contract on this basis and the Kings certainly face an uphill battle in proving their case.

The arbitrator’s decision will likely hinge on his/her interpretation of what constitutes a ‘material breach’. The Supreme Court of Canada has previously held that “a breach that is ‘substantial’ or ‘goes to the root of’ the contract is often also described as a material breach.” (Guarantee Co. of North America v. Gordon Capital Corp, [1999] 3 SCR 423).  

Do the Kings have evidence of an incident illustrating Richard’s failure to obey the team’s rules going to the ‘root of the contract’? Probably not.

This is especially so in light of the fact that the NHL has a comprehensive substance abuse policy geared towards rehabilitating players. The arbitrator may not be happy about the Kings’ apparent attempt to circumvent this policy if the termination did indeed stem from an incident involving Oxycodone.

Will this strategy be used by teams in the future?

Beyond the anticipated vigorous opposition by Richards and the NHLPA, this was the perfect storm. Richards was under-performing in relation to his contract, the Kings had reportedly been trying to get out from under his contract for quite some time, and he managed to get in trouble shortly before the NHL’s free agency period began.

This strategy is not likely to be used in the future. In fact, another Kings player was recently sentenced to 90 days in jail for domestic violence, but there are no reports that the Kings consider this to be a material breach.

This blog is for information only, and is not intended as legal advice. If you need legal help, please contact us.