By Jeff Birren, Senior Writer
These pages previously discussed the case brought against NBA player Zion Williamson by his short-term marketing agent, Prime Sports Marketing (see, Sports Litigation Alert, “Fired Marketing Agent Sues Zion Williamson,” (2/12/2021)). The article briefly mentioned Williamson’s case against Prime Sports and its owner, Gina Ford, filed in North Carolina federal court, six days prior to Prime Sports’ lawsuit. On January 20, 2021 the North Carolina court granted Williamson partial judgment on the pleadings.
Facts
Williamson played one season of college basketball at Duke University in North Carolina. On April 20, 2019 he signed a marketing agreement with Prime Sports. At the end of May, Williamson repudiated the agreement. Prime Sports threatened to sue Williamson, so on June 13, 2019 Williamson sued Prime Sports and Ford in North Carolina federal court, seeking a judicial order that the contract was either void as a matter of North Carolina law, or was voidable, and that Williamson had voided the contract. The case was assigned to Judge Loretta C. Biggs (Zion Williamson v. Prime Sports Marketing, LLC and Gina Ford, U.S.D.C., M.D.N.C., Case No. 1:19-cv-593).
Prime Sports responded with a motion to dismiss, asserting that neither Prime Sports nor Ford were domiciled in North Carolina, that Williamson failed to join supposed necessary parties, his new agents, and on forum non conveniens grounds, insisting that Florida state court was the appropriate court. The motion was denied (Memorandum Opinion and Order, Doc. No. 31, (4-20-20)).
Prime Sports and Ford answered and counterclaimed on May 8, 2020 requesting, “among other things, a judicial declaration that the Agreement is valid” (Memorandum Opinion and Order (“Williamson”) at 2, (1-20-21)). Twelve days later, Williamson filed a Motion for Judgment on the Pleadings, (5-20-20). Ford struck back with fury. Prime Sports “filed an additional document in federal court that asserted they had sent a sum amounting to $100,000 to Zion’s stepfather” (clutchpoints.com, R.P. Salao, “Everything You Need to Know About the Zion Williamson, Duke Lawsuit” (6-24-20)). In the Florida case, Prime Sports served interrogatories on Williamson that also went to his NCAA eligibility. Here are some of those interrogatories as reported by The Sporting News and repeated bySalao:
“Fully state all facts that show how Sharonda Sampson and Lee Anderson (Williamson’s mother and step-father) … found and paid for the house in which they lived during the time that you attended Duke.”
“Before attending Duke University did you, or anyone acting on your behalf, including, but not limited to, Sharonda Sampson, Lee Anderson, Sharonda Sampson Consulting, or any other person or intermediary) directly or indirectly (through persons on your behalf) accept money, benefits, favors or other things of value to induce or incentivize you to select Duke University as your college for undergraduate study?”
“Before attending Duke University did you, or anyone acting on your behalf, … directly or indirectly (through persons on your behalf) accept money, benefits, favors or other things of value to induce or incentivize you to use and/or wear Nike tennis shoes and other products?”
Prime Sports asked the same question about Adidas shoes and products. Ford was determined to prove that Williamson (or his family) accepted benefits that violated NCAA rules and therefore he was ineligible to play. This meant that a North Carolina statute was not available to Williamson as a shield or sword in litigation with Ford.
Williamson went to the Florida seeking an order to stay discovery, but Judge David Miller ruled against him (thespun.com, David Lyons, “Judge Issues Ruling On Request by Zion Williamson” (6-2-20)). Williamson sought a full stay in the Florida Court of Appeal. Just fifteen days after Judge Miller’s order, the Court of Appeal reversed the order, ruling that the “trial court’s proceedings are hereby stayed” (Zion Williamson v. Prime Sports Marketing, LLC, Florida District Court of Appeal, Third District, Case No. 3D20-0197, (6-17-20)). Consequently, Williamson “will not have to testify about possibly receiving illegal benefits during his career at Duke” (at least for now) (Yahoo, Jack Baer, “Zion Williamson scores legal victory” (6-17-20)). The case then shifted to back to the North Carolina federal court.
The Court’s Analysis: “The Declaratory Judgement Act”
The Act states that in “a case of actual controversy within its jurisdiction” a federal court “may declare the rights and other legal relations of” a party seeking such a declaration (Id., citing 28 U.S.C. §2201(a)). The Fourth Circuit has stated that it is appropriate to hear such case when the judgment will serve a useful purpose (Williamson at 3, Centennial Life Ins. Co. v. Poston, 88 F.3d 255 (4th Cir 1996)). The Circuit identified four factors for a court to consider. Those are: (1) the strength of the state’s interest in having the issues raised decided in a state court; (2) whether it will be more efficient to resolve the issues in federal court than in the state court where the issues are also pending; (3) whether permitting the federal action to go forward would result in unnecessary entanglement of the state and federal court systems; and (4) whether the declaratory judgment action is a device for “procedural fencing” (Williamson at 4).
The Williamson Court could “easily dispense with factors one, two and four.” The federal action “was the first filed of the two actions.” Furthermore “the key events in the case—Defendants’ pre-contract communications with Plaintiff and the signing of the Agreement—took place in North Carolina.” Both cases “allege violations of a North Carolina statute” and “thus, North Carolina’s interest and the need for involvement of this Court to protect that interest is substantial.” “[T]he issue of whether the Agreement is void under North Carolina law is, or could be, an issue in the Florida Action.” There was also “no indication” that Williamson “engaged in procedural fencing” including “forum shopping and races to the courthouse,” nor did it appear that Williamson filed the federal case “in an effort to obtain a federal forum in a case not otherwise removable” (Id.).
The third factor, “whether permitting the federal action to go forward would result in unnecessary entanglement between state and federal court systems” required “greater consideration” (Id. at 5). There was the possibility of “inconsistent rulings related to the Agreement.” However, Williamson was “the first filed” case, the Florida Court was unable “to resolve the issue before this Court” and the connection of the issues to North Carolina law “outweigh any potential entanglement with Florida’s state court” so it was “appropriate to hear this case.” Finally, if the action did not go forward, Williamson “would suffer prejudice in being denied the opportunity to pursue relief based on the North Carolina statute that is the heart of the first count in his Complaint.” The Court “will exercise its discretion” to “address Plaintiff’s claim for Declaratory relief at this time” (Id.).
The Defendants’ Motion to Supplement Their Responsive Brief
After briefing on Williamson’s motion was completed, Prime Sports and Ford sought permission to supplement their opposition (Williamson at 2). They wanted to add “evidence they contend is ‘materially significant, relevant, dispositive, compelling and readily establishes’ that Plaintiff was not a student-athlete” when they had their initial contact with him (Id. at 6). The evidence came “from one Donald Kreiss” that indicated “that Plaintiff had committed” to having another group serve as his marketing agency, along with a copy of that “alleged agreement.” They also wanted to provide an alleged letter from Williamson “promising to repay a loan.” Prime Sports and Ford asserted that they obtained this information after briefing was completed.
The Court determined that “the proposed supplement is not proper for consideration” at a motion for judgment on the pleadings. This information was not “referenced anywhere in the Answer, affirmative defenses or counterclaims.” “[I]t appears that they are in fact attempting to make a backdoor amendment to their pleadings” (Id. at 6/7). Furthermore, even if permitted, “it would not alter the Court’s analysis.” On a motion for judgment on the pleadings, “the proper scope of materials a court is to consider does not include anything outside of the pleadings and documents attached to it or incorporated by reference” (Id. at 7). A court may consider such evidence if it “is integral to a pleading and there is not dispute over the document’s authenticity.” This “supplemental information” “is not referenced in the pleadings,” nor do the pleadings “rely upon this information.” It was therefore “not integral” to their pleadings. There was also a “meaningful dispute over the authenticity of the Kreiss Affidavit’s supporting evidence” (Id. at 8). The Court “concludes that the information Defendants seek to add to their response is immaterial” to Williamson’s motion and denied the motion.
Williamson’s “Motion for Partial Judgment on the Pleadings”
- The “Legal Standard”
Williamson “contends” that he was entitled to judgment on Count 1 of his complaint “because the pleadings establish as a matter of law that the Agreement was either void or was voidable and subsequently voided pursuant to North Carolina’s Uniform Athlete Agent Act (‘UAAA’).” The defendants insisted that the motion “is not appropriate because there is a genuine dispute of material fact as to whether Plaintiff was in fact a student-athlete during the relevant time period” and thus the UAAA “is not applicable” (Id. at 8/9).
The motion “should be granted if” on the undenied facts alleged in the complaint and assuming the material facts alleged in the answer are also true, the plaintiff “is entitled to judgment as a matter of law” (Id. at 9). A court uses the same standards as it would on a motion to dismiss. The court “must view the facts presented in the pleadings and the inferences drawn therefrom in the light most favorable to the non-moving party” (Id. at 10). It “considers the complaint, the answer, and any exhibits attached to the pleadings.” To consider other documents “converts the motion into one for summary judgment” and that is “not appropriate where the parties have not had an opportunity for reasonable discovery.” The motion may be granted if “the movant clearly establishes that no material issues of fact remain to be resolved” and the moving party “is entitled to judgment as a matter of law” (Id. at 11).
- The UAAA
The UAAA “provides requirements” of conduct for those “acting as athlete agents in North Carolina and for contracts entered between athlete agents and student-athletes” (Id. at 11). Such an agent “is required to register” with the state. The statute defines an agent as one who enters into a contract with a student-athlete, recruits or solicits a student-athlete to enter into such a contract or that represents that he or she is such an agent. The statute does not apply to North Carolina attorneys.
Those “seeking certification” “must submit an application” that includes a “description of their formal training, practical experience and educational background relating to agent activities.” A contract “resulting from conduct that violates” the UAAA “is void.” The contract between an agent and student-athlete requires a “’conspicuous’ warning to the potential client that his signature will result in a loss of intercollegiate eligibility” and the date of the contract (Id. at 12). An “agency contract that does not meet the express terms of the statute is voidable by the student-athlete” (Id.).
- “Discussion”
The defendants’ “primary argument…is that they have made sufficient allegations to call into question” Williamson’s “status as a student-athlete, which would mean that the UAA did not apply to” their relationship or the Agreement. This was raised as an affirmative defense and “within a counterclaim” based on their insistence that Williamson “’was not a ‘student-athlete’” when he entered Duke, because Williamson and “’third-parties acting on’” his “’behalf had violated one or more of the NCAA and/or UAAA rules’” and this “’rendered him ineligible to be a student athlete’” (Id.). The Court turned to the pleadings and attachments to determine if Williamson “was a student-athlete as defined by the UAAA” (Id. at 12/13).
1. “Plaintiff was a Student Athlete Under the UAAA”
The Court next dealt the defendants’ argument that it “must accept” their “allegations” that Williamson “was not a student-athlete at all relevant times” (Id. at 13). The Court disagreed. Merely “asserting a legal conclusion does not create an issue of act precluding judgment on the pleadings, especially in the face of contradicting facts and law.” Furthermore, the Court “need not accept as true ‘unwarranted inferences, unreasonable conclusions or arguments.’”
The UAAA defines “student-athlete” “broadly” as an “individual who engages in, is eligible to engage in, or may be eligible in the future” and is not “permanently ineligible.” The defendants insisted that Williamson’s contention that he was a student-athlete “just because he was playing basketball at Duke cannot defeat” their “allegations” that he was really ineligible to play (Id, at 14). The Court did not agree. Williamson was enrolled at Duke and played basketball there during the 2018-2019 season. Moreover, the defendants admitted this, and “attached exhibits to their pleadings” that referred to this. “Given that the UAAA merely requires that an individual ‘engages in’ an intercollegiate sport to be considered a student-athlete, it appears uncontested that Plaintiff meets this bar.”
The defendants countered by asserting affirmative defenses that Williamson had engaged in conduct that would make him permanently ineligible, and “thus would be precluded from any protections offered by the UAAA” (Id. at 15). They claimed that he had agreed to be represented by an individual other than an NCAA-certified agent, that he had accepted improper benefits, and made it clear that he was not returning to college basketball. The Court stated that “this list is merely a recitation of purported offenses that could have led to” permanent ineligibility. Williamson had not been “deemed permanently ineligible by the NCAA or under the UAAA at the time of the Agreement.”
These defenses and counterclaims were “a conclusion of law that flies in the face of their own pleadings.” They had admitted that Williamson “was actively engaging in” college basketball (Id. at 16). The Court need not “assume the truth of legal allegations or conclusions because they are packaged in the form of factual allegation”, nor could the defendants “raise a genuine issue by contradicting its own pleadings.” General denials and allegations are “insufficient to raise a genuine issue of material fact” as to whether Williamson was a student-athlete. They also did not provide “any facts to plausibly support their conclusory claims” that he was permanently ineligible to compete” when he signed the Agreement (Id. at 16/17.).
They also failed to provide any authority that it was for the Court “to adjudicate the details of a student-athlete’s eligibility under NCAA rules” (Id. at 17). The Court’s role was to determine if the appropriate governing body had done so and the defendants “have not alleged that this has occurred.” Consequently, “there was no genuine dispute” that Williamson had “engaged in intercollegiate sports at Duke” during the “relevant time period.” He was “a student-athlete under the UAAA during the time he entered into the Agreement with Defendants.”
2. “Neither Defendant Ford Nor the Agreement Complied with the UAAA”
The Court finally turned to the determinative issue. It was “undisputed that Defendant Ford holds herself out as an athlete agent yet neither she nor her agency are licensed agents in North Carolina, nor have the applied for such a designation.” The UAAA “expressly provides” “that any agency contract the individual entered into with a student-athlete ‘is void, and the athlete agent shall return any consideration received under the contract’” (Id. at 18).
The UAAA also “expressly sets for precise requirements for a wanted that must be included” in the contract. That includes language “in close proximity to the signature of the student-athlete” in a prominent, boldface type that states:
“WARNING TO STUDENT-ATHLETE IF YOU SIGN THIS CONTRACT: (1) YOU SHALL LOSE YOUR ELIGIBILITY TO COMPETE AS A STUDENT-ATHLETE IN YOUR SPORT; (2) IF YOU HAVE AN ATHLETIC DIRECTOR, WITHIN 72 HOURS AFTER ENTERING INTO THIS CONTRACT, BOTH YOU AND YOUR ATHLETE AGENT MUST NOTIFY YOUR ATHLETIC DIRECTOR; (3) YOU WAIVE YOUR ATTORNEY-CLIENT PRIVILEGE WITH RESPECT TO THIS CONTRACT AND CERTAIN INFORMATION RELATED TO IT; AND (4) YOU MAY CANCEL THIS CONTRACT WITHIN 14 DAYS AFTER SIGNING IT. CANCELLATION OF THIS CONTRACT SHALL NOT REINSTATE YOUR ELIGIBILITY” (Id.).
When a contract lacks this required disclosure, it is voidable by the student. It was “undisputed” that Williamson entered into a contract in North Carolina with the defendants without the required warnings and they were to act as his agents for the purposes of endorsements. They were empowered to “exclusively oversee all marketing opportunities brought before” Williamson (Id. at 19). It was also admitted that Williamson’s family “sent a letter to Defendants” “terminating and voiding the Agreement.”
The Court held that Williamson “is entitled to judgment as a matter of law” that “the Agreement is void”; that he was a student-athlete when the “parties engaged one another”; that he had “not been determined to be permanently ineligible” at the time of the Agreement; that Ford did not “hold the requisite athlete agent certification as required by North Carolina’s UAAA”; that the “parties entered into the Agreement”; the “Agreement permits Defendants to negotiate or solicit professional-sports-services or endorsement contracts” on Williamson’s behalf; the Agreement “did not have the statutorily required warning”; and Williamson’s family had “communicated to Defendants that they were terminating and voiding the agreement” (Id. at 19/20). “The Court hereby declares that the Agreement entered into by the parties is void as a matter of law under” the UAAA (Id. at 20). That stroke eviscerated much of Prime Sports’ Florida case.
Conclusion
Williamson’s remaining federal court claims can proceed, but in the trial court a major part of the case is now over. The Federal Court on January 29, 2021 filed a Notice of Initial Pretrial Conference Hearing for March 17, 2021.
Both parties have a lot of thinking to do about the cases between now and the March pretrial conference. Ford will get now get discovery of some kind and that may be highly embarrassing to Williamson and his family. Conversely, Ford faces continuing costs, court costs and more negative publicity. It may be time to see if a settlement can be brokered.
