(Editor’s Note: What follows is an excerpt from the book How to Play the Game — What Every Sports Attorney Need to Know. Written by Darren A. Heitner, a partner at Wolfe Law, the book can be purchased at Amazon at http://tinyurl.com/lp64ge6)
“I am on the phone with Dallas Cowboys defensive end Marcus Spears. I’m trying to persuade him to switch agents, and I’m telling him to come to L.A. I sense hesitation, so I put the phone out the window. ‘Do you hear that, Marcus? Do you hear it?’ I yell. ‘You know what that is? That’s Hollywood, baby. Hollywood’s calling. You gonna answer the call?’ A week later, Marcus was in my office signing a representation agreement.”
—Josh Luchs, former NFLPA contract advisor
The sports agent/athlete relationship is, at its core, an agent/principal relationship. As such, sports agents are obligated by law to serve in a fiduciary capacity on behalf of their athlete clients. Certain fiduciary duties are part and parcel of that relationship. The Restatement (Third) of Agency states, “An agent has a fiduciary duty to act loyally for the principal’s benefit in all matters connected with the agency relationship.” This particular duty to act loyally has been referenced as the most fundamental fiduciary obligation imposed on a sports agent in his or her representation of professional athletes.
Agents do not have a duty to disclose to their clients all affairs that touch or concern their lives. However, an agent does have a duty to discover and disclose any material information that is not clearly obvious and apparent and is reasonably obtainable. A failure to disclose such information could be deemed to constitute negligence.
Case Study
Roman Colon v. J. D. Smart and Hendricks
Sports Management, LP
On October 29, 2012, professional baseball player Roman Colon filed suit against his former baseball agent John David (J. D.) Smart and Hendricks Sports Management, LP (the agency that Smart worked for while representing Colon). Colon, a right-handed pitcher, listed as his first claim for relief a stated breach of fiduciary duty against Hendricks and Smart. The complaint alleged that Hendricks and Smart acted out of self-interest by mismanaging and failing to disclose a qualifying offer submitted to Colon from a Korean baseball team that had previously signed the pitcher. Colon claimed that he would have immediately signed with the Korean team had his agents informed him of the qualifying offer. Instead, Colon returned to the United States and signed a contract with the Los Angeles Dodgers for a monthly stipend of $12,500. The final paragraph of the breach of fiduciary duty claim for relief reads, “Hendricks and Smart breached their fiduciary responsibilities, obligations, and duties imposed on them by engaging in dishonest, disloyal, and immoral conduct.” On February 12, 2013, the court dismissed the complaint without prejudice because the agency contract that Colon signed with Hendricks included an arbitration provision, which required that the parties resolve the dispute through the final and binding arbitration procedures set forth in Section 7(a) of the Regulations Governing Player Agents of the Major League Baseball Players Association (MLBPA).
Team contract offers are among the most important items that sports agents should disclose to their clients because teams will largely respect the athlete/agent relationship and not go behind an agent’s back in an effort to present an offer directly to the player. Additionally, agents should notify their clients of what substances are permitted and banned by players’ associations and sport governing bodies. An agency should never be involved in assisting its client’s illicit use of non-approved performance-enhancing drugs.
Unless given specific permission by his or her client, a sports agent must not use his or her position or an athlete’s property for personal benefit or to benefit a third party. Veteran sports marketer and athlete marketing agent Bill Henkel secured a memorability deal for former National Football League (NFL) running back LaDanian Tomlinson while employed at global sports, fashion, and media company IMG Worldwide. Without Tomlinson’s knowledge or consent, Henkel structured a deal with the company that signed Tomlinson that contemplated the payment of a $25,000 kickback to Henkel for joining the parties in contract. It could be argued that Henkel’s withholding of said information from his client constituted a violation of his fiduciary duties to Tomlinson. The athlete marketing agent faced felony charges for commercial bribery and theft based on his actions.
Agents should also always take caution when asked to or voluntarily offer to provide services outside of their core competency. Former football agent Tank Black found himself in prison when he ventured off the path of providing contract negotiation services for high-profile athletes, including running back Fred Taylor and wide receivers Ike Hilliard and Rae Carruth, and began to manage his clients’ money. In 2000, Black was sued for money laundering, conspiracy, and criminal forfeiture and was accused of mismanaging roughly $15 million of his clients’ money. He spent eight years in jail as a result of his actions.
More recently, football agent Drew Rosenhaus was investigated by the National Football League Players Association (NFLPA) regarding his relationship with a financial planner who influenced athletes to invest in an Alabama bingo casino that cost said players somewhere in the range of $43 million. The NFLPA was reportedly looking into whether Rosenhaus had a duty to more fully look into the financial planner’s background and advise his clients to stay away from him. In August 2013, former National Football League (NFL) wide receiver and Rosenhaus client Terrell Owens sued Rosenhaus on the basis that he breached his fiduciary duty to Owens, among other causes of action. Owens’s attorney went on the record saying: “It is completely ridiculous that Rosenhaus would refer a five-time Pro Bowler to a financial advisor who has been accused of stealing from his clients in the past, whose college degree was in Exercise Science, and who was inexperienced. Rosenhaus should have steered Terrell away from Rubin, not toward him.”
Finally, an athlete should never feel forced to apologize for the actions of his advisor. Oakland Raiders quarterback Terrelle Pryor did just that after his agent Jerome Stanley demonized head coach Dennis Allen, saying that the coach was setting up his young quarterback client to fail. Pryor took it upon himself to Tweet an apology for his agent’s comments, thanked the Raiders organization for giving him an opportunity to perform and distanced himself from his agent’s words. Taking action without a client’s consent which has the consequence of tarnishing a client’s reputation is a huge gaffe, especially in an industry as competitive as sports agency and considering how common it is for players to change representation.
