By Jared Vasiliauskas and Michael Viverito, of Power & Cronin, Ltd.
The Sports & Entertainment Group, LLC (“TSEG”) and Kamau Stokes (“Stokes”) entered into two contracts – a National Basketball Players Association (“NBPA”) Standard Player Agent Contract (“SPAC”) and an Engagement Letter. Under the SPAC, TSEG agreed to reimburse Stokes for all expenses incurred with respect to each National Basketball Association (“NBA”) player contract negotiated. The SPAC contained an arbitration clause, whereby any disputes raised regarding the SPAC would be resolved through arbitration governed by the NBPA Regulations. Under the Engagement Letter, TSEG agreed to pay certain pre-draft expenses incurred by Stokes in connection with his preparation for the 2019 NBA Draft. The Engagement Letter stated that, if Stokes terminated his agent prior to the negotiation of a rookie NBA player contract, he would reimburse TSEG for all pre-draft expenses. The Engagement Letter did not include an arbitration clause.
Stokes terminated his relationship with his agent and TSEG in June 2019. He never commenced contract negotiations with an NBA team. TSEG alleged that Stokes had incurred pre-draft expenses and sought reimbursement. When he refused to pay, TSEG filed suit in the Circuit Court for Baltimore County against Stokes for breach of contract and unjust enrichment. Stokes filed a motion to compel arbitration and dismiss TSEG’s complaint with prejudice, arguing that the claim was governed by the arbitration clause of the SPAC and that an order compelling arbitration would necessarily dismiss the case with prejudice because TSEG failed to bring an arbitration claim within the 30 days required by NBPA Regulations. TSEG responded by arguing that its complaint alleged breach of the provisions contained in the Engagement Letter, rather than the SPAC, on account of TSEG never rendering services under the TSEG because Stokes did not enter contract negotiations with an NBA team. After a hearing, the circuit court entered an order granting the motion and staying the matter in the circuit court pending resolution of the arbitration, as opposed to dismissing TSEG’s complaint outright.
The case was submitted for arbitration to Judge Richard A. Levie for an NBPA arbitration. Judge Levie was noted to be a JAMS arbitrator and the sole arbitrator for NBPA disputes. TSEG requested that Judge Levie make a preliminary ruling regarding the arbitrability of the matter before considering the merits. Stokes challenged Judge Levie’s jurisdiction to conduct arbitration under JAMS regulations. In August 2022, Judge Levie issued a Final Arbitration Award.
Judge Levie first noted that NBPA arbitrations are not conducted pursuant to JAMS rules, but rather NBPA Regulations. Therefore, Judge Levie would not be bound by JAMS’ jurisdictional provisions when conducting arbitration proceedings of the NBPA. He next found that TSEG’s complaint was based on allegations of breach of the Engagement Letter, not the SPAC. TSEG sought reimbursement for pre-draft expenses, rather than expenses incurred while negotiating contracts with an NBA team. Therefore, the matter was not arbitrable. Lastly, Judge Levie awarded arbitration costs in favor of TSEG, citing Stokes’ frivolous conduct as the basis. Judge Levie noted that Stokes’ arguments offered at arbitration were a complete 180° reversal of the arguments made in the circuit court to bring the matter to arbitration in the first place.
Thereafter, Stokes filed a motion to vacate the arbitrator’s award and dismiss the TSEG complaint, arguing that Judge Levie lacked jurisdiction as a JAMS arbitrator to preside over the arbitration. Stokes further argued that Judge Levie erred in failing to hold a substantive evidentiary hearing and in awarding arbitration costs against him. Finally, Stokes argued that an alleged ex parte communication between Judge Levie and TSEG caused impartiality and bias. After a hearing on January 20, 2023, the circuit court issued an order denying Stokes’ motion to vacate the arbitrator’s award and dismiss TSEG’s complaint, declining to challenge the arbitrator’s findings.
Stokes continued to refuse payment of the arbitration fees owed to TSEG prompting TSEG to file a motion to enforce the arbitrator’s award. The circuit court granted the motion and issued an order on March 23, 2023, mandating that Stokes make payment of arbitration fees to TSEG.
On April 3, 2023, Stokes filed his notice of appeal with the Appellate Court of Maryland, presenting the issue of whether the circuit court erred in enforcing the arbitrator’s award for arbitration costs against Stokes. Stokes presented the same arguments as he did previously: lack of jurisdiction, lack of substantive arbitration hearing, and alleged impartiality.
The appellate court first held that Stokes waived any arguments that the circuit court erred in denying his motion to vacate the arbitrator’s award. The circuit court issued an order denying Stokes’ motion to vacate on January 20, 2023. Stokes had 30 days to file his notice of appeal regarding the circuit court’s decision. Instead, he filed his notice of appeal on April 3, 2023, appealing the circuit court’s March 23, 2023, order enforcing the arbitrator’s award. The appellate court noted that all substantive arguments raised by Stokes in its appeal addressed his denied motion to vacate. Stokes offered no legal basis for the appellate court to vacate the judgment of the circuit court enforcing the arbitrator’s award.
Assuming, arguendo, that Stokes did not waive his rights, the appellate court first noted that NBPA Regulations govern any and all NBPA arbitrations conducted by Judge Levie, meaning that he was not subject to jurisdictional provisions of the JAMS regulations. Next, the appellate court determined that no substantive arbitration hearing was needed prior to the Final Arbitration Award, as it simply concluded that the matter was not arbitrable and awarded arbitration costs. Judge Levie never reached the point of considering arguments on the merits of the dispute to warrant a substantive evidentiary hearing. Lastly, the appellate court did not view the alleged ex parte communication as discrediting Judge Levie’s impartiality because Judge Levie never replied to the email and the email was thereafter forwarded to Stokes’ counsel.
Both the circuit court and appellate court in this matter showed deference to the internal dispute resolution procedures of the NBPA. This case also demonstrates how the internal dispute resolution procedures of an organization, such as the NBPA, are not absolute and that the organization can properly refuse jurisdiction of disputes between its individual members. Practitioners representing parties to these types of agreements should be aware of ancillary or side agreements, such as the Engagement Letter, which may hold different dispute resolution terms. Careful negotiations of those terms can avoid a situation where various disputes have different forums in which a remedy can be sought.
The Power & Cronin, Ltd., Sports Law team is experienced in counseling athletes and agents on the complexities of their relationship, and disputes arising out of that relationship. If you have any questions about the terms of a representation agreement, or a potential dispute, please contact attorneys Jared P. Vasiliauskas or Michael V. Viverito.
