By Christopher Calnan
A legal dispute between a sports agent and the University of Cincinnati’s basketball coach has become surprisingly public, highlighting the importance of sports agents becoming more proactive in establishing such relationships.
The Legacy Agency (TLA) filed a lawsuit (The Legacy Agency Inc. f/k/a The Agency Sports Management v. Michael W. Cronin a/k/a Mick Cronin) on March 2 in New York Supreme Court, alleging coach Mick Cronin failed to pay $206,000 in management fees for services provided by TLA.
Cronin signed on with TLA in 2006, the same year he was hired at the university. His contract was updated nearly every year since then and extended through March 26, 2018. Now paid more than $2 million per year, Cronin is the second-highest paid public university official in the Cincinnati area, according to the Cincinnati Business Courier.
The 11-page complaint alleges breach of a management agreement by Cronin when he failed to pay a four percent management fee. He has received $9.4 million from the University of Cincinnati since March 2011 as a result of TLA’s services, the suit alleges.
“TLA was involved on behalf of Cronin in the discussions and negotiations resulting in the execution of the employment agreement and each subsequent amendment to the employment agreement, including the amended agreement, and otherwise advised Cronin with respect to the employment agreement and each of the amendments that change or update the notice provisions, including the amended agreement,” according to the court filing.
The lawsuit indicates that Cronin didn’t pay six invoices, each for $25,000, submitted from June 2014 to October 2016 totaling $150,000. The agency is seeking that amount plus interest.
“TLA has demanded payment of said past due management fees from Cronin and Cronin has failed and refused to pay the same,” the agency claims.
Agents Weigh In
Such disputes have traditionally been resolved in private. But the increasingly high stakes of big-time athletics coupled with greater attention by the media has started lifting the veil on such relationships, according to Fort Worth, Texas-based attorney Garrick Farria, an agent for Ohio-based Aspire Sports Management Inc.
Another contributing factor is that coaches, unlike players, do not belong to a union. They have little recourse except to file complaints with the courts and make the dispute public record.
This differs from an organization like the NFLPA, which “through its regulation of agents, provides an exclusive procedure for recovery of fees between NFL players and agents,” Edward J. Hitchcock of the St. Paul (MN)-based Hitchcock Law Firm told Sports Litigation Alert.
Farria told the Alert that “as a general rule, no representative, be they an agent or attorney, enjoys or wants to be in a position to sue their clients. The courts, in some cases, frown upon this reality, but it is almost always understood that folks should get paid for the work they have performed.”
Finding a Balance Between the Client and Agent’s Best Interest
The Cronin case highlights the importance of “air-tight” written agreements with agents. Contracts need to account for various types of hypothetical scenarios involving solicitation from other agents, teams, potential employers, potential corporate partners or sponsors, media outlets, and third parties such as public relations staff, social media staff, attorneys, accountants and financial planners, trainers, etc., Farria noted.
“Agents have to do everything they can to balance their duty to advocate on behalf of their clients while at the same time protecting their own interests,” he said. “And they can do this by adding clauses to the agreement which forbid clients from entertaining any offers for any services or appearances without first running it past the agent. Or clauses that allow the agent to recoup fees from any proceeds that the client received for work performed by the agent prior to separation.”
It’s not difficult for agents to take important steps to ensure they receive their rightful fees and avoid costly lawsuits with clients, Paul Sheehy, president of Colorado-based ProStar Sports Agency, told Sports Litigation Alert.
“I think it’s simply about setting and defining clear expectations at the start of the relationship, with what is and is not a billable event, both contractually, and relationally throughout an agent’s representation of a client.”
Hitchcock echoed that point.
“Be very clear in the representation agreement as to what the fees are, what they are applied to, and how they are applied,” he said. “For example, are the fees to be applied to base salary, guaranteed salary, and/or incentive bonuses? How is ‘incentive bonus’ defined? Does it include academic incentive bonuses or just performance incentive bonuses? Is the fee to be applied to licensing and broadcasting revenue which is oftentimes part of coaches’ contracts? Do the fees apply to off-season camps? Oftentimes, for example, college football coaches use summer camps to supplement the incomes of assistant coaches rather than retain the proceeds themselves. However, this is typically counted as compensation to the head coach.
“Make it clear that the fees are to be applied to any extension or amendment to the employment contract. In the event the agreement is terminated and the contract extension is negotiated by another agency, make it clear that the fees continue to apply to the compensation negotiated under the original contract. In the event the contract is terminated prior to the completion of negotiation, the agreement should provide that the agent will receive an hourly rate amount for the reasonable value of his or her services in negotiating the agreement. For this reason, agents should keep a log of their time.
“Be specific about when fees are earned and paid. In most cases, fees are earned when the compensation is received and paid sometime thereafter based upon a schedule. However, in many circumstances, the application of the fee to deferred compensation is negotiable and can be paid up front. This should be addressed in the representation agreement.
“Address all unique circumstances in your agreement. Consider every possible circumstance that could occur during the representation of the coach and be very specific about it. For example, if the agent who negotiates the contract leaves the firm, make sure it is clear that the fees continue to be paid to the firm. Make sure it is clear that the representation agreement is with the agency, not with the particular agent, and that that agent is subject to non-compete and confidentiality provisions. Make it clear that the representation agreement is fully assignable by the agency to allow for smooth transition in the event of the sale or merger of the agency.
“Be very clear about the scope of your representation. Define your relationship with the coach. Are you being hired just to negotiate the contract or to represent the coach in the enforcement of the employment agreement? Are these additional services included in the fee or extra charges? Enforcement proceeding can be long and drug out. Does “negotiation” include set off negotiation services? When a coach is fired without cause, compensation is still due the coach under the employment agreement. Set off provisions apply to any income the coach receives from the next coaching job (sometimes non-coaching work as well). Sounds simple but these negotiations can be extensive when you consider the application of a coach’s incentive bonuses that may or may not be earned and the timing of the receipt of the money. The bottom line is: be clear about what you are hired for.”