By Gary J. Chester
The sports agency field has long been regarded as the wild, wild west of professional sports. It took decades for the sports industry to address the myriad of issues presented by unscrupulous agents and when it did, the regulation came through players associations.
The NFLPA has been the most aggressive organization in regulating the conduct of sports agents. In 1983, it became the first U.S. players union to regulate agents and to require every agent to earn certification as a “contract advisor.” Once certified, an agent must adhere to all NFLPA regulations that apply to agents.
The regulations emphasize the legal and ethical duties that agents owe to their principals. They do not focus on agent versus agent disputes such as soliciting one another’s clients. A federal court decision issued on October 30, 2020 illustrates the competitive nature of the sports agency industry and some of the disadvantages of the NFLPA requirement to submit all disputes to binding arbitration.
France v. Bernstein, No. 1:20-cv-01443, U.S.D.C. Pa. (2020)[1] involved a dispute between two agents arising out of the competition to represent Kenny Golladay, a talented wide receiver for the Detroit Lions. Golladay signed with agent Jason Bernstein on December 23, 2016 after completing his collegiate career at Northern Illinois University. Bernstein negotiated a rookie contract for Golladay after the Lions drafted him in the third round in 2017. The agreement was worth $3.19 million over four years with a $718,824 signing bonus.
Golladay was hampered by an injury in 2017, but he eclipsed 1,000 receiving yards in his next two seasons and led the NFL with 11 touchdown receptions in 2019. This made Golladay a hot commodity, as well as a target for agents looking to lure him as a client when he becomes a free agent after this season.
Or did Golladay target the agents?
Golladay terminated Bernstein and signed with Todd France of the Creative Artists Agency (CAA). This came after Golladay and France either met each other by happenstance at a charity bowling event and an autograph-signing event or after France actively solicited Golladay – the accurate version being central to the legal action.
As required by NFLPA Regulations, Bernstein filed a grievance against France in the NFLPA arbitration forum on July 1, 2019, alleging a violation of Section 3.B. of NFLPA Regulations that prohibits agents from, among other things:
(2) Providing or offering money or any other thing of value to any player or prospective player to induce or encourage that player to utilize his/her services;(21)(a)Initiating any communication, directly or indirectly, with a player who has entered into a Standard Representation Agreement with another [agent] and such Standard Representation Agreement is on file with the NFLPA if the communication concerns a matter relating to: (i) Player’s current [agent]; (ii) Player’s current Standard Representation Agreement; (iii) Player’s contract status with any NFL club(s); or (iv) Services to be provided by [the] prospective [agent] either through a Standard Representation Agreement or otherwise.
The Regulations do, however, permit such communications between a player and a prospective agent if the player initiates communication with the agent.
Bernstein alleged that France poached Golladay by wrongfully inducing Golladay to fire him and hire France. He asserted that France initiated contact with Golladay at the bowling event and that he induced Golladay to switch agents by arranging for Golladay to attend a private autograph-signing event – a “thing of value” under the NFLPA Regulations.
Several witnesses testified at the arbitration, including Kenneth Saffold, an advisor to Golladay, who stated that he encouraged Golladay to attend the charity event in order to network and to build his brand. France also testified, asserting that Golladay initiated contact with him at the bowling event, asking if he was an agent and saying that he was planning to “make an agent move.” France also testified that he did not use the signing event as an opportunity to encourage Golladay to terminate his agency relationship with Bernstein.
Several witnesses, including Golladay, his mother, and Pennsylvania memorabilia dealers failed to appear at the arbitration hearing, despite subpoenas from the arbitrator. The U.S. District Court would later note that Bernstein never sought judicial enforcement of the subpoenas.
In March 2020, the arbitrator, Roger P. Kaplan, Esq., held for France. He found that Golladay initiated contact with France and that France had attended the bowling event because another player-client was involved with the event. He also found that Golladay had been considering a change in representation before he met France.
On April 24, 2020, France filed a petition to confirm the arbitrator’s award in the U.S. District Court for the Eastern District of Virginia. Bernstein then filed a motion to vacate the award. Venue was transferred to U.S. District Court for the Middle District of Pennsylvania.
Bernstein argued that: (1) the award was obtained through the fraudulent testimony of France and another witness; and (2) the arbitrator refused to consider material evidence by failing to compel Golladay to testify.
Bernstein relied heavily on a newly discovered text message between memorabilia dealers discussing their plan to pick up Golladay at the airport that stated: “Kenny/mom/Todd CAA” would be present at the airport. Bernstein argued that the text message and two emails that were not available to him at the arbitration were persuasive evidence that France and another witness perjured themselves at the hearing.
The court discussed the demanding evidentiary standard necessary to vacate an arbitration award that was based on fraud, noting the court’s role “is not to correct factual or legal errors made by an arbitrator.” Major League Umpires Assn. v. Am. League of Pro. Baseball Clubs, 357 F.3d 272, 279 (3d Cir. 2004). The court added that even if it were to find that France perjured himself, that would not necessarily require vacatur because one is required to “demonstrate that the fraud was not discoverable by due diligence before or during the arbitration hearing.” Int’l Bhd. Of Teamsters, Loc. 701 v. CBF Trucking, Inc., 440 F. App’x 76, 78 (3d Cir. 2011).
The court rejected Bernstein’s second argument regarding the alleged refusal to compel testimony from Golladay because it was a discovery issue and “nothing in the Federal Arbitration Act requires an arbitrator to allow any discovery.” Hyatt Franchising, LLC. V. Shen Zhen New World I, LLC, 876 F.3d 900, 902 (7th Cir. 2017).
In deferring to the arbitrator, the court discussed some of the pros and cons of arbitration as follows: “The benefits of arbitration, such as expedited resolution of claims, decreased fees, and the opportunity to have claims evaluated by industry experts, do not come without risk, [such as no] meaningful appellate review of the merits…”
The court emphasized that the arbitration procedure is one in which the parties agree to have their disputes resolved by a third-party arbitrator without getting “a second bite at the apple” from the federal courts.
France v. Bernstein accentuates the cutthroat nature of sports agency. A typical contract for a third-round draft pick in 2017 was $3.3 million over four years and Bernstein was able to fetch Golladay a deal worth nearly that even though he was the 96th pick in the draft.[2] Also, Golladay’s deal was in line with comparable rookie wide receivers.[3] Yet, Golladay selected another agent to represent him in free agency.
The case also illustrates an important shortcoming of arbitration. Discovery is more limited than in litigation, which accounts for much of the savings in legal fees and costs. One example is the questionable ability to subpoena third parties to produce discovery materials prior to an arbitration hearing. Courts are divided on this issue, as discussed in CVS Health Corp. v. Vividus, LLC, 878 F.3d 703, 708 (9th Cir. 2017) (held that section 7 of the Federal Arbitration Act, 9 U.S.C. Sec. 7, does not authorize a court to enforce an arbitrator’s order compelling pre-hearing document discovery from a non-party).[4]
In France, Bernstein alleged that CAA had existing relationships with the memorabilia companies that organized the autograph-signing. His ability to obtain evidence of those relationships was limited and he apparently was unable to obtain the relevant text message and emails until after the hearing.
In addition, it would have been easier to obtain pre-trial testimony from Golladay and to compel his attendance at the hearing if the matter had been litigated in court. While it is unknown whether Golladay’s testimony would have strengthened or weakened Bernstein’s case, Golladay’s credibility would have certainly influenced the arbitrator’s decision.
[1] Full text of decision at: https://casetext.com/case/france-v-bernstein
[2] https://www.businessinsider.com/nfl-draft-contract-values-2017-4
[3] Golladay, who was drafted 96th, signed a contract worth $3,898,000; comparable wide receivers drafted in the third round in 2017 included: Chris Godwin of Tampa Bay, drafted 84th and signed for about $4 million Chad Williams, drafted 94th and signed for about $3.17 million; and, Amara Darboh of Seattle, drafted 106th and signed for about $3.17 million.
[4] https://www.jdsupra.com/legalnews/third-party-discovery-subpoenas-in-18900/
