After DeAndre Debacle, NBA Must Revamp The July Moratorium

After DeAndre Debacle, NBA Must Revamp The July Moratorium

DeAndre Jordan’s stunning decision to pull an about-face on the Dallas Mavericks, with whom he originally agreed to sign a four-year, $80 million contract on July 3rd before reneging to rejoin the Los Angeles Clippers instead, should convince the NBA to drastically alter its July Moratorium process.

Under the current Collective Bargaining Agreement, the new salary cap year begins July 1st, which coincides with the beginning of free agency. While teams and free agents are permitted to meet beginning at midnight that evening, they aren’t allowed to reach signed agreements until more than a week later, the so-called “moratorium” period. During that time, the NBA’s accountants do an audit to assess the total amount of basketball related income (BRI) and total salaries and benefits from the preceding year. After the NBA and players’ association agree upon the terms of the audit, they can proceed to project the amount of revenue for the following season and set the new salary-cap and luxury-tax levels, which, ideally, occurs no later than the final day of the moratorium.

Any Mavericks fans clamoring for team owner Mark Cuban to sue the league over DeAndre’s flip-flop will be disappointed to know that the CBA specifically prohibits teams from entering binding agreements during the moratorium. It reads: “No player and Team may enter into any oral or written agreement concerning terms and conditions of the player’s employment, or reduce any such agreement to writing in the form of a Uniform Player Contract or amendment, during the Moratorium Period.” Instead, players and teams may only “negotiate over the terms and conditions of a Player Contract or Offer Sheet that may be entered into following the conclusion of the Moratorium Period.”

The sole agreements allowed during the moratorium are players who accept a required tender, qualifying offer or maximum qualifying offer; first-round picks agreeing to a rookie-scale contract; and players signing one- or two-year minimum contracts. Beyond that, no agreement between a player and a team during the moratorium is binding.

Later in the CBA, this point is emphasized:

(i) an Unrestricted Free Agent is free at any time beginning on the first day of the Moratorium Period to negotiate, and free at any time after the last day of the Moratorium Period to enter into, a Player Contract with any Team; and

(ii) a Restricted Free Agent is free at any time beginning on the first day of the Moratorium Period to negotiate a Player Contract with his Prior Team and to negotiate an Offer Sheet (as defined in Section 5(b) below) with any Team other than his Prior Team, and is free at any time after the last day of the Moratorium Period to enter into a Player Contract with his Prior Team or an Offer Sheet with any Team other than his Prior Team.

According to CBS Sports’ Ken Berger, the league is not planning on taking any action against the Clippers for their interference with Jordan because it “isn’t a violation of any league rule.” However, it sets a dangerous precedent, especially given the domino effect of one free-agent agreement during the moratorium leading to multiple others.

“It would undermine the whole premise of the system and the ability of parties to get together shake hands and rely on it,” one prominent agent told Berger. “It would be anarchy.”

An anonymous NBA executive expressed the same concern to Basketball Insiders’ Eric Pincus:

And apparently, as Bleacher Report’s Howard Beck tweeted, the Clippers’ wooing of a theoretically committed Jordan isn’t as unique as it otherwise may have seemed:

The length of the moratorium changes on a year-to-year basis under the current CBA. When the league year starts on a Wednesday, such as in 2015 (and again in 2020), the moratorium lasts for six business days. When the league year begins on any other day, it lasts for seven days. Next summer, the moratorium is set to be from July 1st-11th — in other words, that’s three additional days for any tomfoolery such as this DeAndrebacle to take place.

Jordan’s decision to go back on his verbal agreement now puts the Mavericks in an impossible spot. For the past five days, they’ve been operating under the assumption that they had $20 million of cap space locked up in their next franchise center. As Berger tweeted, the ripple effect from that assumption are profound:

Dallas has every right to be furious about how this whole situation unfolded. Now, instead of having Hibbert or Ropin Lopez as potential Plan Bs, the Mavericks must sort through the scraps of free agency, as even a number of unheralded backup centers — Alexis Ajinca, Aron Baynes and Kosta Koufos, to name a few — have already agreed to terms with other teams.

Then again, Cuban could also decide turnabout is fair play in regard to violating the unwritten rules of the moratorium, and he could start chasing after free agents who already reached verbal, non-binding agreements elsewhere. Like the Joker, Cuban could be so incensed by this situation that he just wants to watch the NBA’s world burn.

While the DeAndre mess was unfolding Wednesday, former Brooklyn Nets executive Bobby Marks, Basketball Insiders’ Alex Kennedy and BBALLBREAKDOWN’s own Ben Dowsett all suggested it should inspire the NBA to rethink its current moratorium policy. HoopsCritic’s Brian Geltzeiler went one step further, suggesting the moratorium should be eliminated outright.

The latter solution isn’t entirely feasible, as BBALLBREAKDOWN’s Mark Deeks explained:

However, Deeks brought up another point worth stressing: Because the cap and tax levels aren’t set when free agency commences, teams are left to make multi-million-dollar decisions without knowing how much money they have available.

Back in April, the league projected the cap to jump to $67.1 million for the 2015-16 season, per ESPN.com’s Marc Stein. At the beginning of the moratorium, Berger reported “the actual cap is expected to come in at least $1 million higher, and perhaps as much as $2 million higher.” In actuality, those projections still fell short, as the cap was set at a round $70.0 million and the tax came in at $84.7 million, a huge jump from the $81.6 million projected in April.

Would the Atlanta Hawks have fought harder to retain DeMarre Carroll if they knew they were operating under a $70 million cap rather than a $67.1 million one? Would the Sacramento Kings have agreed to their head-scratching salary dump with the Philadelphia 76ers had they known they had $3 million more of cap space with which to work? As ESPN.com’s Darren Rovell tweeted, teams committed upwards of $2.5 billion during the moratorium period despite not knowing how much the cap would be.

Between the Jordan debacle and the inherent nonsensicalness of entering free agency without a firmly established salary cap (and luxury tax), it’s clear the NBA needs to tweak the moratorium to some degree in the next CBA. The following three solutions, while imperfect, would represent a marked upgrade over the current system.

1. Shrink the Moratorium

Why does the moratorium exist (specifically for the purposes of free agency)? ESPN.com’s Ramona Shelburne explained:

If the NBA eliminated the moratorium entirely, allowing free agents to sign beginning on July 1st at 12:01 a.m. ET, free agents could feel pressured to put pen to paper during their first meeting with a team. As Berger wrote in his reaction to the Jordan situation, “In most cases, players having time to conduct meetings, weigh their options and make intelligent decisions without being pressured is probably better.”

Rather than eliminating the moratorium entirely, Berger suggested the league should shrink it from three to five days. Grantland’s Zach Lowe posited a similar solution, as “a flip-flop like Jordan’s wouldn’t prove so fatal to a team in the Mavs’ position.” After all, if the Mavs didn’t have Jordan theoretically tying up $20-plus million of their cap space for five days, they could have been more proactive about securing a Plan B.

Stu Jackson, the NBA’s former executive vice president of business operations, likewise suggested a shorter moratorium could be in store:

How feasible is this? Well, under the current CBA, the accountants are already required to submit a “draft audit report” to the NBA and the players’ association, “along with relevant supporting documentation, two weeks prior to the scheduled issuance of the final Audit Report.” In other words, it’s not as though the accountants are starting from scratch on July 1st; they already have a grand majority of the work done by the time the moratorium begins.

The accountants are required to submit the final audit report “on or before the last day of the moratorium period,” but the report “shall not be deemed final until the parties have confirmed in writing their agreement.” In other words, some of the hold-up during the moratorium could very well be the NBA and the players’ association bickering over minor details in the final audit report.

The CBA also already has a procedure in place in case the NBA and the players’ association have not yet reached an agreement on projected BRI by the final day of the moratorium. Rather than using projected BRI, BRI from the previous year and total salaries and benefits from the previous year, the league simply uses interim projections and estimated figures. Specifically:

…the Salary Cap for the Salary Cap Year that commenced on the immediately preceding July 1 shall, until such Interim Audit Report is completed, be an amount that would have been the Salary Cap for the preceding Salary Cap Year had Projected BRI or Interim Projected BRI, as the case may be, for such preceding Salary Cap Year included, with respect to the NBA’s national broadcast, national telecast or network cable television contracts, the rights fees or other non-contingent payments stated in such contracts for the Season following the Season covered by such preceding Salary Cap Year instead of for the Season covered by such preceding Salary Cap Year.

A slightly reduced moratorium would place additional pressure on the accountants, however, as proceeds from merchandise sold through June 30th must be included in BRI. Ending the moratorium on July 5th, for instance, would require increased cooperation among all parties — particularly the league and the players’ association — lest the league wants to operate under an interim cap for the first few days of free agency every year, only to see the cap change a few days into free agency. Imagine the chaos that would have unfolded had teams begun conducting official moves based on a projected $67.1 million cap, only to see it spike by $3 million. Worse yet, imagine a time in which the projections overshoot the actual cap figure.

Instead, the NBA could explore an alternative solution: ensuring the moratorium is over by June 30th.

Move Up The Start Of The Cap Year

SB Nation’s Tom Ziller floated this solution Thursday:

There is no law that requires the fiscal year to end on June 30. Different companies have different fiscal year-end dates. Pick a date sure to fall at least two days after the end of the NBA Finals. Like, say, June 21.

The only revenue-generating event that happens between the Finals and June 30 is the draft, and if we want to be technical, the draft is an event more closely tied to the subsequent season, not the preceding one. Leave the contract expiration date as June 30 on the uniform player contract, allow players and teams to sign contracts and make trades at the stroke of midnight on July 1 and get out of the way.

Some team executives appear to be on board with the idea of ensuring the audit is completed by June 30th, according to Lowe. However, the practicality of this solution, much like with the idea of a shrunken moratorium, remains in question.

Lowe highlighted one of the particular stumbling blocks:

It’s unclear whether the union and the league could actually finish the audit by June 30. Some executives have suggested they could start earlier, estimate the last few weeks of revenue, and spit out a pretty accurate projection by the end of June. The union has historically opposed any tweak that would include more murky projections, since the league houses most of the revenue data; the union has feared a scenario in which the league uses that data advantage to artificially deflate the cap number.

Given the inherent tension between the NBA and the players’ union over financial specifics, there’s no way this solution gets put into place before the two sides meet to discuss the next CBA. In other words, don’t expect to see a new start to the league year before the 2017-18 season at the very earliest.

Practically speaking, this solution also could complicate trades made in the days leading up to the draft. If the league year started on June 21st, teams wouldn’t be able to make any trades involving players until the moratorium lifted on July 1st. As it stands, however, teams can complete deals involving players so long as they’re legal under the current cap year. Some teams currently have to wait to complete draft-related trades until the new cap year, as they don’t have the cap space required to make the deals work during the current cap year, but that would be the case for all trades if the league year moved up to before the draft.

Is that hurdle for front-office executives worth scuttling the idea outright? Not necessarily. However, it’s an additional complication to consider, especially given the comparative ease of another proposed solution to the moratorium dilemma: simply pushing back free agency until the moratorium concludes.

Push Back Free Agency

To prevent any further DeAndre-esque debacles from unfolding in the future, the league could simply prohibit teams from engaging in contract negotiations with free agents until the moratorium concludes, as Lowe proposed Thursday:

One potential solution: Ban all talks until the end of the moratorium on July 9, so that when talks start, they can lead to enforceable, signed contracts right away. The NBA used a version of this system a long time ago, but the league ditched it because agents and teams talked anyway. They still do today. …

Do you notice that whenever a player declines an option for the following season, he always signs a deal that pays him more? That’s not an accident. That’s an agent canvassing teams ahead of time, searching for a fail-safe, and taking the appropriate next step depending on what he finds.

Beyond the significant inherent problem Lowe addressed — agents and teams ignoring the moratorium’s ban on negotiations — two other minor concerns come to mind. First, the end of the moratorium changes on a year-to-year basis. By consistently starting free agency on July 1st, the NBA makes that day a mark-your-calendar event for fans, continuing to build on the offseason momentum of the draft. Constantly switching the day free agency begins, meanwhile, runs the risk of casual fans tuning out, particularly since it would come two or more full weeks after the draft most years.

Additionally, if free agency doesn’t begin until roughly July 10th every year, the NBA would run the risk of dramatically decreasing the attention paid to summer league. As it stands, most top-tier free agents have already settled upon their destinations by the time Vegas Summer League kicks off, allowing fans, writers and executives to descend upon Vegas (or tune in on NBA TV) to watch promising young players flaunt their offseason development. If the big fish aren’t allowed to even begin negotiations until around the time Vegas Summer League begins, however, the NBA would be dividing attention between free agency and summer league. It’s obvious which one would command the most eyeballs.

Could the NBA tweak the current moratorium period to allow teams to enter into binding oral agreements? Stu Jackson explained why that “letter of intent” idea is a non-starter:

All of these proposed solutions contain warts, admittedly. However, the DeAndre mess underscored just how insane it is to rely upon non-binding oral agreements to set off a chain of free-agent dominoes. Based on the precedent the Clippers set with Jordan, next year’s moratorium could be absolute anarchy, with teams attempting to lure theoretically committed free agents through July 11th.

The NBA and the players’ association assuredly have larger topics to tackle in the next CBA, starting with the split of BRI between the owners and the players. Both sides would be wise to tweak the current structure of the July Moratorium, however, lest they want this Clippers/Mavericks debacle to become status quo.

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About The Author

Bryan Toporek is just talkin' about practice. He writes about the NBA at BBALLBREAKDOWN, FanRag Sports and The Step Back. He also helps curate NBAAsesets.com.

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