Court Orders Sports Agents into Arbitration

Aug 28, 2009

A federal judge in the Eastern District of Michigan has granted part of a sports agency’s motion to compel arbitration in a case where a former employee claimed breach of an oral agreement, quantum meruit/unjust enrichment, and promissory estoppel.
The plaintiff, Kim Grillier, began working for defendant Henry Thomas in 2001 as a sports agent. Grillier was allegedly hired as a “consultant” with a salary of $500 a month and a percentage of the fees generated by the players Grillier recruited to Thomas Sports Management. In 2003, defendant CSMG Sports, Ltd. purchased Thomas Sports Management and Thomas became Vice President of Basketball Operations in Chicago. Grillier alleged that “Thomas, on behalf of CSMG, promised Grillier he would receive a minimum of 20 percent of the fees for any current clients that Grillier had brought in, 15 percent of the fees for new clients, and 3 percent of the marketing fees for all clients.” Grillier alleged that he was forced to leave in February 2007 CSMG because Thomas and CSMG did not fulfill any of their promises.
On October 1, 2002, Grillier and CSMG Sports, Ltd. signed a “Consulting Agreement” that set out Grillier’s compensation and status as an independent contractor. The contract contained a clause that read, “with the exception of an action by Company to enforce the restrictive covenants contained herein, any controversy or claims arising out of, or relating to, this Agreement, or the breach thereof, shall be settled by arbitration held in Cook County.” Grillier contended that the Consulting Agreement was no longer applicable because Grillier was hired as an employee of CSMG Sports, Ltd. on October 1, 2005. Grillier claimed that his employment was under an oral contract that was consistent with Thomas’s promises to fully compensate him and that the oral contract did not provide for arbitration. CSMG argued that the arbitration provision remained controlling even though Grillier became an employee in October 2005. Five of the ten athletes set out in Grillier’s complaint signed contracts with CSMG Sports, Ltd. before Grillier became an employee.
Employment contracts are governed by the Federal Arbitration Act (FAA), 9 USC § 2. The statute sets out “a number of threshold determinations before compelling arbitration.”
When considering a motion to stay proceedings and compel arbitration under the Act, a court has four tasks: first, it must determine whether the parties agreed to arbitrate; second, it must determine the scope of that agreement; third, if federal statutory claims are asserted, it must consider whether Congress intended those claims to be nonarbitrable; and fourth, if the court concludes that some, but not all, of the claims in the action are subject to arbitration, it must determine whether to stay the remainder of the proceedings pending arbitration.
Quoting § 2 of the FAA the court writes, written agreements to arbitrate “shall be valid, irrevocable, and enforceable, save upon such grounds as exist in law or in equity for the revocation of any contract.” The court cites cases that show a strong federal policy towards arbitration but that courts must be cautious against “forcing unwilling parties to arbitrate a matter they reasonably would have thought a judge, not an arbitrator, would decide.”
The court wrote that the Consulting Agreement applied to claims for compensation earned by Grillier while he operated as an independent contractor. The court did not accept Grillier’s argument that the arbitration provision lost its effect after Grillier became a CSMG employee. “The absence of a written or oral arbitration agreement with respect to Grillier’s employment, after he worked as an independent contractor, at best raises only a doubt as to whether the arbitration clause in the Consulting Agreement continued to apply with respect to athletes signed by CSMG while Grillier was working as an independent contractor. Under the FAA, this doubt is resolved in favor of arbitration.” The court granted as a matter of law the defendant’s motion to compel arbitration of Grillier’s claims based on contracts signed by athletes before Grillier became a CSMG employee on October 1, 2005. The court denied the motion to compel arbitration of Grillier’s claims based on contracts signed after Grillier became an employee of CSMG. The Consulting Agreement did not include language contemplating claims if Grillier became an employee. The court ruled that “Grillier could reasonably believe that a judge would decide the issues of what compensation he was entitled to for athletes that signed with CSMG after Grillier became a CSMG employee.”
Grillier v. CSMG Sports, Ltd.; E.D. Mich.; Slip Copy, 2009 WL 1689601; 6/19/09


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