Houston Rockets: Why the NBA was wrong in reversing Nene’s Contract

In a questionable decision, the NBA has decided to void Houston Rockets big man Nene’s contract.

The NBA has decided to reverse course on Nene’s contract and modify his outgoing trade value. The deal was originally set to include up to $7.435 million in bonuses which were tied to games played and team wins. The bigger caveat for the Rockets was that the brilliantly constructed deal was going to allow Nene to have an outgoing salary of up to $10 million if traded, which would have allowed the team to pursue any player making up to $12.6 million. The latter part of the contract is what the league voided, as they’ve ruled that any trade involving Nene will only count as the $2.6 million in outgoing salary.

The outcry has been interesting, as I’ve heard many people saying “well that’s what the Rockets get for trying to cheat.” But this is irresponsible to say, because cheating would imply breaking or bending the rules and there was no such rule in place at the time this contract was agreed upon. This is why it seems like selective enforcement for the league to modify the contract when they didn’t have any grounds or rules in place to do so. It’s not like Rockets general manager Daryl Morey was trying to get away with ignoring a policy already in place.

Sure, I understand the league didn’t want to establish a precedent and allow teams in the future to continue to exploit this loophole, but all they had to do was modify the Collective Bargaining Agreement to prevent such deals from being signed in the future.

It’s not the first time the league has reversed course on a contract, but it hasn’t happened since 1996 when the Miami Heat had former Rockets forward Juwan Howard‘s contract voided. Those were much different circumstances, as the league determined the Heat didn’t actually have the cap space to sign Howard to the seven-year, $100 million dollar contract they were trying to sign him to, as brilliantly outlined by Albert Nahmad of Heat Hoops. This is a much different situation, as Nene’s contract being voided obviously didn’t have anything to do with the Rockets not having enough cap room to pay him.

This decision seems like the league is penalizing the Rockets for knowing what is and isn’t written in the Collective Bargaining Agreement. It could also be perceived as the league expressing its frustration with Daryl Morey for knowing how to “game” the system, as many would put it. Personally I think Morey’s ability to get creative is more so him playing by the rules, and not gaming the system. This is why I think this was the wrong decision.

It also seems hypocritical to honor one segment of the contract (the potential bonuses) but not the other part of the contract (the outgoing trade salary).

Effects of the Decision

Nene’s $10.0M cap hit technically puts the Rockets $7.1M over the tax line (even though, in practical reality, they’re $353K under it), which: (i) could impact trade-matching scenarios and (ii) wipes out their ability to use the NT-MLE.

— Albert Nahmad (@AlbertNahmad) September 19, 2019

As Nahmad points out, this means the Rockets would currently be over the luxury tax line, which they’ve been trying to avoid.

The greater consequence of this is the fact that the Rockets won’t be able to add a legitimate contributor in a trade without including Danuel House, PJ Tucker, or Clint Capela, which isn’t the way to go for Houston. So essentially, the Rockets will have to settle for the veteran’s minimum from this point on if they want to bring in additional pieces, which is what they did by signing veteran forward Thabo Sefolosha. Fortunately, the Rockets are fairly deep as currently constructed, which is a good thing considering the league’s decision to tear up Nene’s contract.