By Walter Champion
Many years ago, I wrote “Attorneys and Sports Agents: An Ethical Conundrum” (Marquette Sports L. Rev. 349 (Spr. 1997)), which looked at possible conflicts of interest between agents and potential clients. A standard “representation contract only calls for a good faith effort on the part of the agent; the agent’s efforts do not necessarily have to be successful. But the agent does have the obligation to make a full disclosure of possible conflicting commitments, and must receive prior consent from all potential conflicting interests (at 351; footnotes omitted). It is a legal truism that “agents should err on the side of a complete and detailed disclosure on any possible conflict of interest that might occur between agent and client” (Champion, Sports Law. Cases, Documents, and Materials 128 (Aspen, 2d ed., 2014). Sports agency in 1997, was “not merely an auxiliary sub-specialty to law, or accounting, or financial planning…it is no more a unit within the legal profession than portrait painting is to house painting…” (7 Marq. Sports L. Rev. 349, 359).
In Detroit Lions v. Argovitz, 580 F.Supp. 542(E.D. Mich 1984), the conflict of interest was real and permeated the very existence of the relationship between agent-owner and athlete. This is an egregious situation; other conflict-type scenarios are less blatant and may involve, for example, an agent’s attempt to represent a player and a coach from the same club or representing two competing quarterbacks. Agents should err on the side of a complete and detailed disclosure of any possible conflict of interest that might occur between agent and client.
The Argovitz case showed a breach of an agent’s fiduciary duty as demonstrated by the fact that Argovitz gave Jim Kelly a much better contract even though Kelly was an uncontested rookie. There were conflicting interests; Argovitz should have demanded the same clauses for
his client, Billy Sims, for example, Kelly’s escalator clause where he would always be paid in the top three at his position of USFL players. Argovitz was wearing two hats; he violated his duty of loyalty to his client. His personal interests conflicted with the principal’s interests. His behavior was “egregious conduct”—“no man can faithfully serve two masters whose interests are in conflict.” In re Henley, 478 S.E.2d 134 (Ga. 1998) stands for the proposition that a sports agent must inform the client of a possible financial interest, in this case a kickback. The State Bar filed a formal complaint against defendant’s lawyer charging him with violations of various professional standards under Bar Rule 4-102(a) including standard 30 (representing a client where the attorney has a financial interest, without fully disclosing that interest, and obtaining written consent or giving written notice), and Standard 40 (accepting compensation for legal service from one other than the client without the client’s consent after full disclosure).
An attorney is an attorney 24 hours a day and that he or she is always under oath. But the conundrum here is whether it is fair or even a violation of Equal Protection to treat non-attorney agents differently than attorney agents. Common law holds that an agent does not need any particular training or experiences to act as a sports agent; he or she could be a high school drop-out or a social misfit, a Rhodes Scholar or a law professor.
In the Model Rules of Professional Conduct, agents and attorneys representing clients in the sports field are no different than the attorneys who represent actors or actresses, corporate executives, factory workers, or an unemployed person. An attorney’s obligation under the Model Rules of Professional Conduct do not differ regardless of the industry or client.
Yet, the question still remains: when there is a problem, is it an agent regulation concern, an attorney-discipline matter, or some hybrid kind of situation? In addition, if the problems of the attorney-agent fall squarely into attorney discipline jurisdictions, can the general prohibitions of the Model Rules do real justice in policing the particular problems that occur in the sporting milieu?
As long as a lawyer is engaged in the practice of law, he is bound by ethical requirements off the profession, and he may not defend his actions by contending that he was engaged in some other kind of professional activity. In this way, full protection can be afforded to the public.
It may also be argued that the activities of a sports agent or an attorney may be indistinguishable, for which reason it is appropriate to adopt a policy which supports the application of the ethical code regardless of form. The better rule is that the ethical codes of any regulated profession should apply to the activities of that professional while acting in the capacity of a sports agent.
This is a plausible argument, but athletes are drawn to the track record of agents, and not their professional affiliations. Does anyone know, or care, whether Arliss is an attorney or not? No, Arliss is a sports agent! Also, if the ethical code of each regulated profession accompanied its licenses into the realm of sports agency, then there could conceivably be a myriad of different ethical codes gyrating around each agent. (One code for attorney-agents, a different code for accountant-agents, and yet another code for financial planner-agents, etc. A completely different code altogether would apply to “nobody-agents”). If this truly was the case, it could degenerate into an atmosphere that would breed “forum-shopping” at its worst; “Why should I choose agent X who is an attorney and must tow the line, when I can choose agent Y who is a nobody and will bend and break, every rule, with impunity, to get me the very best deal that we can swindle out of management, who are running dogs anyhow?” Certainly, a distressing scenario.
Ohio is the first state that has attempted to solve this conundrum by, in essence, using the argument of In re Dwight for attorneys qua planners and expanding it to cover attorneys qua sports agents. In Cuyahoga County Bar Association v. Glenn, the Cuyahoga County Bar Association of Ohio charged respondent, Everett Glenn, an Ohio-licensed attorney who resided in California, with professional misconduct involving violations of inter alia, DR 1-102 (A) (1) (violation of a Disciplinary Rule), 1-102 (A) (4) (conduct involving dishonesty, fraud, deceit, or misrepresentation), 1-102 (A) (6) (conduct adversely reflecting on fitness to practice law), 9-102 (A)(2) (failure to preserve identify of funds or property belonging to client), and 9-102 (B)(4) (failure to promptly return or deliver client’s property to client).
A panel of the Board of Commissioners on Grievances and Discipline of the Supreme Court found that Glenn had violated DR 1-102(A)(1), (4) and (6) because he requested and retained as $20,000 of proceeds from the renegotiation of certain terms in a NFL standard player’s contract between his client, Richard Dent, and the Chicago Bears Football Club, without his client’s consent. Glenn had represented Dent in negotiation for his 1984 contract and had also renegotiated his 1989 contract. In January 1992, after arranging for his client to be paid the present value of $200,000 in reporting bonuses anticipated for upcoming years, Glenn represented to the Bears’ treasurer that Dent had authorized his receipt of $20,000, or 10% of the undiscounted amount. The treasurer, who had a history of dealing with Glenn, wired this money with the understanding that he would subsequently return the signed authorization form faxed to Glenn at the same time of the wire.
But, Glenn never obtained Dent’s signature on the authorization form; moreover, he did not repay the $20,000 after objecting to the payment. Nor could Glenn explain why he did not immediately forward the promised authorization form for Dent’s signature. Thus, although Glenn claimed he was owed this money and more for past services and that Dent had agreed to the payment, the panel credited Dent’s testimony that he never authorized Glenn’s receipt of the $20,000. The Chicago Bears subsequently refunded to Dent the difference between the present value of his advanced reporting bonuses and the $20,000 wired to Glenn.
The panel also found that Glenn had violated DR 9-102 (A)(2) and (B)(4) because he negotiated a $10,000 settlement check for damages to an automobile that Dent allegedly owned. This misconduct occurred during the approximately three-year period that Dent was a client of the law firm of Benesch, Friedlander, Coplan and Aronoff. Dent, who Glenn brought with him as a client to the firm, purchased a Porsche as president of a company that he had formed with Derrick Crawford and had apparently guaranteed the loan for the car personally. Crawford was involved in a collision while driving the car with permission, and his insurance company wrote a check to Crawford and the Alabama lawyer that Glenn’s firm had retained to protect Dent’s interests. The Alabama attorney signed the settlement check and forwarded it to Glenn, who endorsed the check, apparently with Crawford’s authorization, and deposited it in his own account on December 1, 1990, as payment for professional services he claimed to have provided for Crawford, Glenn further claimed that he told Dent about having accepted the settlement check as payment for Crawford’s fees and that Dent did not object for over a year, until Glenn pursued arbitration proceedings before the NFLPA over a fee dispute between them.
However, Dent considered the settlement check as his, to be applied to the legal fees he paid for the Alabama attorney to represent Crawford and to the amount of the car loan. The panel agreed; it again credited Dent’s testimony that Glenn was at first evasive about having received the check and that Dent only suspected Glenn of having converted to check when he realized in 1992 that Glenn had paid himself $20,000 from the advanced reporting bonuses.
After deciding that Glenn was guilty of misconduct, the panel recommended that Glenn receive a one-year suspension from the practice of law, with the last six months stayed upon the condition that Glenn provides full restitution to either Dent or the Chicago Bears, as is necessary to completely reimburse them for the misappropriated funds. The Supreme Court of Ohio affirmed the decision of the panel and agreed that Glenn violated DR 1-102 (A)(1), (4) and (6), and 9-102 (A) and (B)(4). But, the Court deemed the panel’s recommended sanction to be insufficient to redress misconduct of this severity; accordingly, the court ordered that Glenn be suspended from the practice of law in Ohio for one year. Furthermore, the court ordered that Glenn may not be readmitted to the Ohio Bar without proof of having made full restitution to Dent and the Bears, with interest at the judgment rate; costs taxed to Glenn.
The problem with sports agents and potential conflicts these days are not as Draconian as the Argovitz scenario. Potential conflicts of interest mostly center on agents who have multiple athletes on the same team or at the same position. An interesting case is where a sports agent represents both coach and athlete, or in the case of Josh Pasternak, the agent represented both the coach and the athletic director. Josh Pasternak is the head basketball coach at Georgia Tech, he use to be coach at University of Memphis. Josh received an extremely lucrative contract extension at Memphis which was engineered by the athletic director Tom Bowlen, who shared agents with coach Pasternak. This contract would pay Josh Pasternak up to $10.6 million if he was fired. There is an appearance of a conflict of interest especially in this case, where the contract is so favorable to the coach.
It is the better route to fully disclose any potential or even possible conflicts of interest. The athlete then must consent and sign a waiver. With Pasternak, a full disclosure on the part of the athletic director, would have alleviated the appearance of impropriety. Another question in league sports is whether the existence of a hard salary creates the possibility of a conflict of interest when an agent has more than one player or any particular team?
Champion is a Professor of Law at Texas Southern University and the author of Sports Law in a Nutshell, Fundamentals of Sports Law, Sports Ethics for Sports Management Professionals, and Intellectual Property Law in the Sports and Entertainment Industries. He has written casebooks in Sports Law Amateur Sports, Baseball and the Law, and Recreational Injuries. He can be reached at wchampion@tmslaw.tsu.edu
