By Jeff Birren, Senior Writer
CSE Talent, LLC is a sports and media talent representation company. In 2017 CSE began providing services to Ohio high school senior, Nick Northcut, to help Northcut prepare for baseball’s 2018 amateur draft. Northcut was drafted by the Boston Red Sox in June 2018 but did not use CSE as his agent to negotiate with the Red Sox.
CSE sent Northcut an invoice for over $55,000 for its services.
Northcut refused to pay and consequently, on August 6, 2020 CSE sued Northcut for $55,363.61. CSE alleged claims for breach of oral contract and unjust enrichment. Northcut responded with a motion to dismiss, and in October 2020 the Court dismissed the case, finding that the “alleged oral contract is void and unenforceable” because Ohio law requires that such contracts must be in writing and that CSE was not certified as required by Ohio law (CSE Talent, LLC v. Nick Northcut, Court of Common Please, State of Ohio, County of Warren, General Division (“CSE Talent”), CASE No:20- CV 93505, Magistrate Carolyn C. Besl, Decision Granting Defendant’s Motion to Dismiss at 1 (10-12-20)). Northcut was represented by Gregg Clifton and
Doriyon Glass, of Jackson Lewis.
Facts
CSE is a corporation registered in Georgia. The home office is in Atlanta and it has offices in Chicago, Miami, New York, Orlando and Richmond, VA. Nicholas Northcut is from Mason, Ohio and attended William Mason High School. At the start of his senior year, he entered into a relationship with CSE. This came approximately three months after Northcut turned eighteen years old. According to CSE, it provided Northcut with services related to Major League Baseball’s amateur draft, including advice related to college options and financial aid, MLB contract provisions, “health and medical scrutiny from MLB teams,” health and nutrition, MLB team workout expectations, MLB draft preparation and “signability,” and MLB draft tendencies. It also asserted that it paid for certain equipment for Northcut (Id.).
Prior to the draft, Northcut was ranked as either the 69th or 81st top prospect in the country. However, he was ultimately not drafted until the eleventh round. It was speculated that this was the result of his commitment to attend Vanderbilt University and it would be too expensive to pry him away. However, Northcut signed with the Red Sox and received a $565,000 signing bonus that “was right in line with where he should have been picked” (bosoxinjection.com, Damian Dydyn, “Ohio prep third baseman signs with the Red Sox for third round money” (6-17-18)).
Northcut was assigned to Lowell, a short season Single A level club. That year he also spent time at the Gulf Coast League Red Sox and was back in Lowell in 2019. The 2020 minor league season was cancelled to the virus pandemic. He has a .217 batting average with just three home runs.
Undoubtedly the fall from being a projected third round draft choice to an eleventh-round pick must have stung Northcut, and he parted ways with CSE at some point without paying CSE for its services. That led to CSE’s lawsuit, filed on August 6, 2020. Northcut responded by filing a motion to dismiss on September 4, 2020. CSE filed an opposition and Northcut replied.
In Court
Magistrate Besl began her analysis by stating the standards employed by the Court on a motion to dismiss. The motion “is procedural and tests the sufficiency of the complaint” (CSE Talent at 2, internal citation omitted). The motion will only be granted “where the party opposing the motion can prove no set of facts in support of its claim that would entitle it to relief.” The allegations are to be “taken as true” and “every reasonable inference is made” in (CSE’s) favor as the party opposing the motion. The complaint can only be dismissed “if the court finds the allegations do not entitle the pleading party to relief under any possible theory.” Legal “conclusions must be supported by sufficient factual allegations” and unsupported conclusions “are not sufficient to withstand a motion to dismiss.” Finally, the Court may only consider “statements and facts contained in the pleadings and may not consider or rely on evidence outside the complaint” (Id. at 2/3).
Conclusions of Law
The Court began with Northcut’s motion to dismiss the breach of oral contract claim. That “turns on the application of R.C. Chapter 4771 regarding ‘Athlete Agents.’” That statute requires “that all athlete agents be registered with the state of Ohio before being permitted to solicit an amateur athlete” (Id. at 3). Furthermore, “R.C. 4771.02(A)(1) bans all oral/athlete agent agreements.” Northcut asserted that “any alleged oral contract between Plaintiff and Defendant in this case is void and unenforceable” (Id.). The, question is thus whether CSE was in fact Northcut’s “agent.”
The Court turned to the definition of “athlete agent” found in the Ohio statute. R.C. 4771.01(B) defines “athlete agent” “as a person who, directly or indirectly, recruits or solicits any athlete to enter into an agent contract or professional sports services contract, or who for a fee, procures, offers, promises, or attempts to obtain employment for an athlete with a professional sports team, or as a professional athlete, or attempt to market an athlete’s reputation” (Id.).
Furthermore, no one may “serve as an ‘athlete agent’ in Ohio with first obtaining a valid certificate of registration as an athlete agent” (citing R.C. 4771.06). If the agent is properly registered, the agent and athlete may enter into an “agent contract” as defined by R.C. 4771.01(A). In such a contract, the athlete “authorizes, empowers, or agrees to authorize or empower at some later date the agent” to perform various services for the athlete, including soliciting or negotiating employment of the athlete by pro sports teams, solicit or negotiate an agreement on behalf of that athlete for the employment of the athlete, or enter into an agreement to market an athlete or an athlete’s reputation (Id.).
The written contract must be “in writing on a form approved by the Ohio athletic commission and includes all agreements between the parties.” It “must also include several, specific provisions as outlined by the statute.” An athlete agent is not “permitted to ‘commence or maintain an action in any court in this state on the basis of any agent contract entered into in this state unless the contract complies with [R.C. 4771.02]’ R.C. 4771.03” (Id. at 3/4).
Northcut asserted that CSE “and its employees were acting as uncertified ‘athlete agents’” in Ohio. Since CSE and its employees “were not in compliance with R.C. 4771.06 and R.C. 4771.01(A) at the time the alleged contract was entered into, Northcut “argues he cannot be held liable under a theory of breach of contract” (Id. at 4).
CSE denied that the statute applied because it was “not acting as ‘agents’ on behalf” of Northcut but was “hired to provide ‘draft advisory services’” to Northcut as permitted by NCAA by-law 12.3.1.1. Th critical question was whether CSE and its employees were acting as “athlete agent” as defined by R.C. 4771.01(B).
The Court “took the allegations of the complaint as true” and determined that CSE “and its agents, by their own admission, provided services” to Northcut “that fall within the definition of an ‘athlete agent’ pursuant to R.C. 4771.1(B).” The Court examined Exhibit 2 to the complaint that stated CSE had “entered into ‘draft discussions and contract negotiations’ with professional sports teams, ‘handled vision and optometrist requests made by’ professional sport team the Boston Red Sox and discussed” Northcut’s medication with the Red Sox’ doctor. “This type of conduct falls within the definition of procuring, offering, promising or attempting to obtain employment for an athlete with a professional sports team” (Id.).
As a result, “the agreement” between CSE and Northcut was an “agent contract” as defined by R.C. 4771.01(A) (Id. at 5). It therefore “was required to be ‘in writing,’ contain specific language provisions and occurred between an athlete and an athlete agent who is registered within the State of Ohio. Because the alleged agreement” was “not made in writing” it was “void and unenforceable, R.C. 4771.04.” Furthermore, because “the agreement does not comply with the provisions of R.C. 4771.02” CSE “is not permitted to commence an action in this state to enforce the void agreement, R.C. 4771.03.” Magistrate Besl therefore granted Northcut’s motion to dismiss the complaint (Id.), and without a separate analysis for the unjust enrichment claim.
Northcut had also filed a countermotion that sought attorney’s fees and costs due to CSE’s “alleged frivolous conduct in filing suit.” Ohio law allows a court to award fees and costs to a party “adversely affected by frivolous conduct and that includes filing of a civil lawsuit that is “not warranted under existing law.” However, Magistrate Besl did not find CSE’s “conduct to be of such a frivolous nature as to warrant an award of attorney fees and court costs.” Although the agreement was “found to be unenforceable,” there was nothing in the record to indicate that CSE “was not acting in good faith in arguing that its services were that of a ‘draft advisor” and not that of an ‘athlete agent’” so the motion was denied (Id.). Judge Robert Peeler adopted Magistrate Besl’s decision as the order of the Court on October 28, 2020. CSE had 30 thirty days from that date to file a notice of appeal with the Court of Common Pleas (Ohio App. R 4(A)(1). It did not do so.
Neither Side Is Covered in Glory
Northcut did not defend the lawsuit with a denial that he had accepted services from CSE, and it seems highly likely that CSE did expend time and money on his behalf. Instead Northcut argued that the claim was barred by Ohio law. Perhaps he left CSE when he fell from being a third-round draft choice to an eleventh-round pick. His abysmal career batting average with just three home runs suggests that he may not have a long career as a player. There is nothing in the Court’s decision to suggest that Northcut ever offered to repay any of the out-of-pocket funds spent by CSE on his behalf.
On the other side of the ledger, CSE was spending money on an athlete that had committed to Vanderbilt, and those expenditures could have made him ineligible to participate in NCAA sports. Furthermore, it knew that it was dealing with a high school senior, who may have been eighteen but just barely. No doubt it was just a coincidence that CSE asked for virtually ten percent of Northcut’s signing bonus in its complaint. CSE, as a national sports representation firm, either knew Ohio law and decided to ignore it, or did not know the law. It is hard to determine which option is worse.
Finally, these facts could mean much greater difficulty in Ohio for CSE. The statute requires agents to be registered with the state. What is not in the Court’s decision is that a failure to comply with the required registration statute, R.C. 4771.06, is a misdemeanor, R.C. 4771.99(A), that can lead to 180 days in jail, per Ohio Revised Code § 292924(A)(1). Furthermore, the contract between Northcut and CSE was not approved by the state as required by R.C. 4771.02. This is also a misdemeanor, R.C. 4771.99(B), and this violation could lead to another 180-day jail term in Ohio. CSE did not file a notice of appeal with the requisite 30 days so this case is over. Apparently the Northcut matter was not worth potential jail time.
Conclusion
Northcut may be legally correct in this matter but he is far from heroic, though his counsel can be congratulated for obtaining such a quick dismissal. As for CSE, the phrase “look (at the law) before you leap” seems to apply. CSE would be well-advised to become more familiar with the laws of the states where it intends to do business. One can only hope that counsel advised CSE of the potential legal risks before filing the complaint. This case should also serve as a warning to young lawyers and law students who wish to become sports agents. There are a lot of laws out there that must be followed or potential disaster, including jail time, may await those who forge ahead without complying with those laws.
