By Jared P. Vasiliauskas and Michael Viverito, of Power & Cronin, Ltd
Following Duke’s loss to Michigan State in the Elite 8 at the 2019 NCAA Division I Men’s Basketball Tournament, but before the 2019 NBA Draft, freshman sensation Zion Williamson (“Williamson”) signed a marketing contract with Gina Ford (“Ford”), President of Prime Sports Marketing (herinafter, “Prime”). Not long thereafter, Williamson provided written notice to Prime that he was terminating the contract and signed a marketing contract with Creative Artists Agency (“CAA”) the same day.
To avoid potential litigation, Williamson sent Prime a pre-emptive cease-and-desist letter noting that the contract between them violated two provisions of the North Carolina Uniform Athletes Agent Act.[1] First, an agent seeking to contract with a student-athlete must register as an agent with the state of North Carolina. If an agent fails to register, any agency contract entered into with a student-athlete is void. Williamson claimed that Ford never registered as an agent in North Carolina, making the agreement void. Second, there must be specific language near the signature line for a student-athlete contract that provides notice to the student-athlete warning of the risks he or she faces by signing the contract.[2] Williamson stated that the contract with Prime did not contain this notice.
Prime responded by stating that the Act did not apply to Williamson because he was not a “student-athlete” under the Act at the time he signed his contract. Williamson then sued Prime in the Middle District of North Carolina[3] seeking, notably, a declaratory judgment that the contract was void due to Prime’s violations of the Act. Prime counterclaimed with a breach of contract claim, among others. At hearing, Prime conceded that Ford was not registered as an agent with the state of North Carolina and that the contract did not contain the requisite warning. However, it argued that Williamson was not a “student-athlete” under the Act because he allegedly violated National Collegiate Athletic Association (“NCAA”) rules, making him “permanently ineligible” to play basketball. Under the Act, a player who is “permanently ineligible” to complete in his or her respective sport is not a “student-athlete” and, thus, not entitled to the Act’s protections.
The district court held that Williamson was a student-athlete at the time he signed the contract with Prime and entered judgment for Williamson. Prime then appealed to the Fourth Circuit U.S. Court of Appeals. The appeal centered on the question of who is a student-athlete[4] subject to the Act? As North Carolina law was silent on the question, the appellate court examined the plain language of the statute and, for good measure, reviewed the legislative history and the spirit of the Act. It found that “[s]o long as a student-athlete is ‘engage[d] in’ a particular sport…, he is a student-athlete under the Act for the purposes of that sport.[5]”
Prime next argued that the appellate court could analyze the NCAA rules to determine whether Williamson’s rule violations made him permanently ineligible to compete, even while he was engaged in an intercollegiate sport. As the Act pointed to a review of the NCAA rules regarding amateurism to determine whether a student-athlete is “permanently ineligible” to compete. However, per the Act, violation of eligibility rules was not automatic and only occurred following a determination being made by the NCAA. That did not occur here. The NCAA never reached a determination whether Williamson had violated any eligibility requirements, and never round him to be “permanently ineligible” while engaged in an intercollegiate sport. Without such a determination, the appellate court would not hypothesize that the NCAA would have elected to declare Williamson permanently ineligible.
After finding that the Act applied to the Williamson-Prime contract, it moved to decide whether the Act voided the contract. It pointed out that Ford never registered as an agent with North Carolina as she was required to when entering into a student-athlete contract; nor did the contract contain the requisite warnings. Therefore, the contract was void under the Act.
The Court’s findings in this matter should cause agents and practitioners to pay close attention to the formalities of a state’s law governing the relationship between Athletes and Agents. Here the Court strictly construed the registration requirements under the North Carolina statute to void the agreement between Williamson and Prime. The court demonstrated in this holding that the failure of an agent to adhere to the state’s requirements serve as an absolute bar to enforcement of any agreement with an Athlete.
In reviewing the Court’s opinion, the question that was not reached, and remains unsettled is; provided that Prime would have been registered, would the failure of Prime to include the mandatory notices in the agreement have still allowed Williamson to void the agreement. Given the Court’s strict interpretation of the registration requirement, it is likely that even if Prime had complied with the registration requirement, their contract would have been unenforceable for failure to include the statutorily required notice.
Agents and practitioners should be aware of requirements from a state to represent Athletes, and ensure that before entering any agreement the mandatory requirements are met. A failure to adhere to such requirements can lead to an unenforceable representation agreement, and a lack of recourse to recover contractual damages.
The sports law team at Power & Cronin, Ltd. regularly counsels agents on these matters. For specific questions please contact the authors at jared.vasiliauskas@powercronin.com or michael.viverito@powercronin.com
[1] N.C. Gen. Stat. § 78C-85 et seq. The North Carolina statute is modeled after the Uniform Athletes Agent Act.
[2] N.C. Gen. Stat. § 78C-94(c).
[3] Williamson v. Prime Sports Mktg., LLC, No. 1:19-cv-593, 2021 WL 201255 (M.D.N.C.) Jan 20, 2021.
[4] N.C. Gen. Stat. § 78C-86(11).
[5] Williamson v. Prime Sports Mktg., LLC, No. 22-1793, No. 22-19462024, U.S. App. LEXIS 10968 (4th Cir. May 6, 2024).
