Quick Results
Publications

Putting a Price Tag on Allegiance: NBA CBA's "Supermax" is Super Unpredictable

Share

Imagine $221 million in cash just sitting on a table. That incredible sum is the amount of the "supermax" deal the NBA's San Antonio Spurs offered their superstar wing Kawhi Leonard during his restricted free agency summer of 2018. Now imagine turning that money down for a substantially lesser contract – a preposterous proposition, right? Well, that's exactly what Leonard did – forcing a trade to Toronto and giving NBA fans on social media the best laugh meme currently gracing the Internet – and that's exactly what many believe other eligible franchise players (read: Anthony Davis) will do in the future. These developments have exposed problems with the supermax provision of the Collective Bargaining Agreement (CBA) that will continue to punish smaller market teams that seek to keep their star players in town and remain competitive in a league built for players that excel under the bright lights. This article will examine how a provision expected to benefit franchises in smaller markets has gone awry and offers some suggestions for possible improvement.

The Designated-Player Exception of the CBA

First, for background purposes, let's examine the supermax provision and related components of the CBA. What is a supermax contract, and what players are eligible to sign this brand of mega-deal? In short, it is a contract extension for players who achieve the highest-tier of NBA accolades.

The designated-player exception – or Designated Veteran rule1 – (also known as the "supermax") allows a team to offer its homegrown elite player, in the seventh or eighth year when he's rolling off his rookie extension, a contract priced at 35 percent of the team's salary cap, which is a max amount normally reserved for players with ten or more years in the league. According to the CBA, in order to be eligible for the supermax, the player must achieve one of the following:

  • The player was named to the All-NBA First, Second or Third team in the most recent season, or both of the two seasons that preceded the most recent season.
  • The player was named the Defensive Player of the Year in the most recent season, or both of the two seasons that preceded the most recent season.
  • The player was named the NBA Most Valuable Player in any of the three most recent seasons.

No other team can offer this sum after the players' seventh or eighth season in the NBA, creating a real financial incentive for superstars to re-sign with the team that developed them. In particular, it could help small market teams compete in free agency with larger markets – at least that was the idea in theory.

Putting a Price on Allegiance (and Other Byproducts)

Interestingly, the rule meant to incentivize superstars to stay put has caused certain teams to take a good hard look at the player and whether they're worth the whopping 35 percent hit on their cap space. In other words, under this exception, players can now earn substantially more money than ever before from the team that drafted them, but that doesn't mean owners will actually break open their piggy banks, nor that players will even want to accept the big pay day. The most problematic issue, however, is that such deals make it outrageously difficult to build a title-contending team around the "supermax" player. Even if the player miraculously never misses a game due to injury, his contract could eat up so much cap that the team would have little to no flexibility to engage in other deals.

Here's a recent case study of such an albatross. In June 2017, Jimmy Butler landed right into the murky area in which debating a traditional max deal or new supermax contract becomes extraordinarily difficult for teams. Given that he made another all-NBA team in 2017 – 2018, the Chicago Bulls could have given Jimmy "Buckets" a five-year, $220 million supermax – escalating to a salary equivalent to 35 percent of the salary cap. Butler was about to turn 28 and was a consensus top 15 player in the league, but the Bulls simply couldn't swallow the DPE pill. Opting for more cap space flexibility, Chicago dealt Butler – plus the 16th pick in the 2017 draft – for three unproven players and the chance to bottom out for a high pick in the 2018 draft (a pick that ultimately became Wendell Carter). We can certainly debate whether the tank-mode Bulls are in a better spot now than if they had a 30-year-old Butler on the roster playing hero ball and winning games on step-back threes, but the impact of the supermax (negative or otherwise) is clear – the cost can force a team to trade its best player when it otherwise probably wouldn't have. See also DeMarcus "Boogie" Cousins and the Sacramento Kings; Blake Griffin and the Los Angeles Clippers.2

On the other hand, supermax deals for James Harden, Steph Curry, Giannis Antetokounmpo, Kawhi Leonard, and Anthony Davis are pieces of cake, and really these are the caliber players for which the designated veteran player exception was created. While Harden and Curry acted as the CBA intended, becoming the franchise stars and team icons the Rockets and Warriors needed, Kawhi decided to put the Spurs – a team on which he won an NBA championship and Finals MVP – in the rear view and force a trade. With the specter of Kawhi lingering, and the Pelicans' Anthony Davis approaching his supermax extension in Summer 2019, the sharks are beginning to smell blood and circle in the water. If Davis informs New Orleans that he's lusting for greener pastures, teams like the Lakers and Celtics with copious young assets and draft picks are already foaming at the mouth to make a trade to land (and later re-sign) Davis. Sadly, it would constitute front office malpractice for the Pelicans to ignore these offers, retain Davis for his final year, and then let him walk in Summer 2020 for nothing. But the notion of trading perhaps the best player and future MVP of the league seems like equal or greater malpractice. These Catch-22 scenarios are maddening for small market teams and their fan bases.

Is There a Solution in Sight?

In sum, the supermax often seems to function in many ways except its intended purpose. Picture yourself in 2016 and imagine if someone told you that Jimmy Butler would be on the 76ers, Chris Paul would be on the Rockets, Kawhi Leonard would be in Toronto, Blake Griffin would be on the Pistons, DeMarcus Cousins would be on the Warriors, Kyrie Irving and Gordon Hayward would be on the Celtics, and Paul George3 would be on the Thunder – nearly all fallen soldiers at the hands of the supermax's sheer cap hit cost.

With Kawhi now in Canada, NBA front offices across the league are seeing that the price tag on allegiance may not be realistically obtainable. To a player with hundreds of millions in commercial endorsements, an extra 70MM in contract money simply is not enough to remain loyal. The supermax is truly super unpredictable.

Below are a few suggestions (some obvious, others perhaps impossible or too lofty) to make the supermax theoretically more effective.

  • Build a well-rounded roster. This may seem self-evident, but as reflected by recent examples, a team being able to offer the most money is not sufficient incentive to the modern era NBA superstar. Teams looking to maintain their elite talent must be careful to surround their all-star with other players to compete at a high-level – stock with roster with multiple stars (via draft or trading future picks) before you reach that crisis point. If the elite player even sniffs a front office's unwillingness to break the bank for other good players, no amount of money will compel the player to spend his prime years scratching and clawing for the eighth seed in the playoffs.
  • Lower the supermax qualification bar. With the qualifications currently in place, totally deserving players like Gordon Hayward and Paul George were not eligible for the supermax. With other borderline superstars (i.e., those all-stars narrowly missing the all-NBA team) re-signing with the teams that drafted them, there would theoretically be greater parity across the league and fewer desirable free agents leap frogging from team to team.
  • Lower the max and supermax cap hits across the board. Currently, the max contracts bump from 25 percent (0-6 years) to 30 percent (7-9) to 35 percent (10+). As detailed above, the supermax allows a player in their seventh, eighth or ninth year to get 35 percent of a team's salary cap. Lowering each tier by five percent (all while teams' cap space continues to grow) may allow each team to field more competitive teams around such player. This decrease obviously would not be well-received by star players who are probably already underpaid pursuant to their contributions to league and team profits.
  • Supermax cap-hit exception. Allow the team to pay the salary amount equating to 35 percent of the cap to the supermax-eligible player but only count that contract as 30 percent of the cap. This "cap-hit exception" would allow teams to avoid the luxury tax and potentially round out a more competitive roster.
  • Alter the extension timeline. Make the supermax an extension players can only trigger two to three years before players reach free agency (i.e., in the fifth or sixth year). Incentivize the player to decide to opt in to their supermax deal before more alluring team trade offers and roster destinations are waved in his face as he approaches his free agency summer in the seventh or eighth year.
  • Base contract extensions on cap numbers. Presently, contract extensions are based on the player's current contract. Given that the salary cap increases annually, extensions on current contracts based on older cap numbers restrict the player's ability to earn more as a free agent because of the higher cap. In other words, it makes no sense for a player to sign an extension because, as the cap keeps going up, the player can earn more in the free market, leading to more high-level free agents.

This article is meant to assist you with advising your clients, or any team/front office with contract structuring or roster adjustments. For further assistance, please contact the author, Sam Strantz, or any member of Baker Donelson's Copyright, Media and Entertainment Group.

1 This "veteran" nomenclature is in confusing contrast to the Designated Rookie rule, which allows teams to sign players finishing their rookie scale contracts to longer extensions, but does not provide for the higher maximum salary. The "supermax" discussed herein refers only to the Designated Veteran deals.

2 Notably, the Clippers signed Griffin to the supermax, then immediately regretted the contract and traded him to the Pistons.

3 Both Hayward and George did not satisfy (and were debatably snubbed from) the all-NBA requirement.

Email Disclaimer

NOTICE: The mailing of this email is not intended to create, and receipt of it does not constitute an attorney-client relationship. Anything that you send to anyone at our Firm will not be confidential or privileged unless we have agreed to represent you. If you send this email, you confirm that you have read and understand this notice.
Cancel Accept