Latest Hernandez indictment likely means cap relief for Patriots...just not anytime soon
As Miguel Benzen (the man behind PatsCap.com) notes in this very thorough column, there are several different payments owed to Hernandez which are currently up in the air through the grievance process: an $82,000 workout bonus from 2013, a $500,000 workout bonus for 2014, Hernandez's 2013/2014 guaranteed base salaries, and $7.5 million in signing bonus money.
That $7.5 million dead money charge is the Patriots primary interest, as it represents the third highest cap hit on the team's 2014 books. Hernandez's $12.5 million signing bonus was split into five separate $2.5 million cap charges, applying to the year's 2012-2016. Because the Patriots released Hernandez after June 1st last year, they were only charged for the guaranteed money Hernandez was owed last season on last year's cap: $2.55 million ($2.5 million in bonus money from his extension, and $50,000 in bonus money from his rookie deal). The bill for the rest of the guaranteed money from his deal comes this year, hence a cap charge of $7.5 million (the remaining three $2.5 million prorations of his signing bonus).
The timing of when that money was actually paid to the player will likely matter in the grievance process. Like most NFL contracts, Hernandez's guaranteed signing bonus was split into separate cap charges over multiple years. However, unlike most deals, the actual payment of the bonus was split into three increments: $6 million at signing, $3.25 million due in March of 2013, and $3.25 million that was due this past March. The $3.25 million that was due this year is the only money that has not already been paid to Hernandez.
Today's indictment dramatically strengthens the Patriots case to recoup some of that money because of two clauses buried deep within the fine print of Hernandez's seven year, $39.6 million contract. Through the first clause, Hernandez "represents and warrants" that there are no pre-existing circumstances that could prevent Hernandez from meeting the requirements of the deal; the second clause states that the Patriots would not enter the contract without the player's representation on that matter. I would certainly think that participation in a double murder should qualify as a circumstance that could adversely affect Hernandez's ability to honor his contract. The Patriots argument is essentially that Hernandez negotiated/signed the contract in bad faith by not disclosing his criminal activity, a failure which they hope will legally nullify the agreement.
While this could entitle the team to go after all $12.5 million of Hernandez's signing bonus, I wouldn't expect the team to be able to get cap credits for more than the $3.25 million that was withheld this March. As Benzan notes, NFL cap credits are issued for the actual cash recouped, and it's likely that Hernandez has already spent much of the $9.25 million in bonus money already paid to him to cover his mounting legal fees. With the tight end now facing three murder charges, he's likely to need and fight for every penny.
Past history with this kind of situation favors the Patriots, but not their odds of getting cap relief in enough time to make a difference this season. The Atlanta Falcons filed and won a grievance for $20 million of Michael Vick's bonus money in 2007 after the star quarterback was arrested for running a dogfighting ring. However, a US District Judge overturned the NFL special master's ruling, declaring that the Falcons were only entitled to a prorated $3.75 million portion of Vick's signing bonus. The Falcons eventually got a cap credit for $3 million of Vick's money...five years later. The Patriots themselves don't have to look back too far to remember waiting two years to receive any cap credits from the Jonathan Fanene fiasco.
As for the rest of the money the Patriots and Hernandez are fighting over, it appears that the Pats have a strong case to recoup the 2014 workout bonus ($500,000) and guaranteed salaries for 2013 and 2014 thanks to that same clause within his contract. The 2013 workout bonus could be a different story: the Patriots will argue that Hernandez was only present for 25 of the 33 workouts, and thus failed to reach the 90% participation rate specified in the contract, but Hernandez has contended that he missed those workouts as part of his rehab for a surgically repaired shoulder. The fact that his workout clause doesn't account for supervised rehabilitation could play into the Patriots favor, but that will be entirely in the hands of the arbitrator.
In short, the Patriots have a very strong case to get cap relief for the $3.25 million in bonus money owed to Hernandez, but the NFL doesn't have a history of getting these cases settled in a timely manor. If the process gets dragged out as expected, it could unfortunately be years before the Patriots see any meaningful cap relief from the situation.
