By Jack Ladgenski, 3L at Santa Clara Law
Issue
Whether the practice of “investing” in potential professional athletes’ future career earnings in exchange for a present, relatively marginal, cash sum is unconscionable and qualifies as unjust enrichment; especially when the majority of targeted athletes are non-English speakers from poor backgrounds who are not represented by competent counsel.
Background
It is no secret that athletes who play in a professional sport’s minor league system, particularly that of Major League Baseball, are among the most underpaid individuals in our American economy.[1] Courts have been reluctant to increase wage protections for Minor League Players, consistently ruling that players are “seasonal employees” and holding that baseball itself is a matter of amusement, not commerce.[2] Most players live below the poverty line, and it is not uncommon to see nine players sharing a two-bedroom apartment because they cannot afford housing in today’s market.[3]
As a “solution” to these problems, firms such as RockFence Capital and Big League Advantage[4] have emerged, presenting themselves as the saviors of Minor Leaguers with missions like “help[ing] Minor League players make it to the Major Leagues by providing economic security.”[5] But these firms are potentially more insidious than they seem at first glance. As an initial matter, these firms almost exclusively target non-English-speaking athletes from impoverished backgrounds who show high upside potential to earn significant money in their respective sports.[6] The firms claim that they operate like an investment fund, providing athletes with “capital” not loans, and athletes do not incur any repayment obligation unless they sign a Major League contract.[7] Top Cleveland Guardians prospect, Francisco Mejia entered a deal with Big League Advantage wherein the company provided him $360,000 in exchange for 10% of all his future earnings should he make it to the Major Leagues.[8] Mejia’s mother was very ill at the time he was approached by the firm, and the funds were necessary to support her medical bills. San Diego Padres megastar Fernando Tatis Jr. stands to owe Big League Advantage upwards of $30,000,000 on his current contract alone, as repayment for an “investment” estimated at $500,000.[9] This equates to a Return on Investment for Big League Advantage of approximately 1,194%. While the firms claim that they are simply “sharing in the success of the athletes”, many athletes feel that the firms took advantage of them in times of financial crisis and are expected to seek to have their contracts invalidated.[10]
Analysis
“Under California law, a contract term is unconscionable if it is both procedurally and substantively unconscionable; procedural unconscionability takes into consideration the parties’ relative bargaining strength and the extent to which a provision is hidden or unexpected, while substantive unconscionability requires terms that shock the conscience.”[11] The cause of action for unjust enrichment has emerged from the understanding that one should not be permitted to unjustly enrich himself at the expense of another, and restitution should be made where it is just and equitable.[12] The contracts entered by athletes such as Mejia and Tatis Jr. appear unconscionable on their faces.
Procedural Unconscionability
Mejia’s contract is particularly illustrative of the procedural unconscionability of terms. Representatives from Big League Advantage approached Mejia directly when they learned of his mother’s illness and the family’s struggle to pay her medical bills.[13] Mejia did not have an interpreter or lawyer present while Big League Advantage’s “runner” encouraged Mejia to enter into the contract.[14] Such tactics by Big League Advantage are common across most of the contracts they enter into with athletes and completely hinder the bargaining strength of the athletes, since they are approached during times of financial crisis, and most terms are hidden from the athlete since they frequently do not have interpreters or representatives present when approached by the “runners”. Accordingly, the terms of the contracts are likely procedurally unconscionable.
Substantive Unconscionability
Tatis Jr.’s contract is particularly illustrative of the substantive unconscionability of the terms. As previously mentioned, Big League Advantage’s contracts typically advance funds in exchange for 10% of an athlete’s future earnings.[15] This rate is comparable to the rates charged by credit cards in terms of Annual Percentage Rate (APR).[16] For an athlete with a contract the size of Tatis’s, Big League Advantage stands to make a return on investment close to 1,200% (nearly $30,000,000) for the current contract alone, not counting any future contracts Tatis may enter into. Such amounts almost certainly “shock the conscience”, especially in the context of the procedural unconscionability under which the contracts are initially entered into.
Unjust Enrichment
Finally, firms like Big League Advantage are almost certainly unjustly enriched by the contracts they enter. The firm fronts a relatively marginal cash sum to players in exchange for huge potential returns. Unlike typical venture capital firms who tend to enter their contracts with savvy business owners, Big League Advantage preys on poor, non-English speaking athletes desperate for funds. The principles of justice and equity almost certainly support the contention that Big League Advantage stands to be unjustly enriched by taking advantage of these athletes.
Recommendations
Athletes certainly face an uphill battle against firms such as Big League Advantage and RockFence Capital. The precise reason these athletes enter contracts with the firms present some of their greatest challenges to voiding the agreements, lack of funds. The “obvious” recommendation is for the leagues and team owners to pay their minor league athletes livable wages; but reality shows us this is unlikely to happen.
Another potentially viable solution is for teams to monitor their athletes more closely. These predatory firms almost exclusively target athletes who have already been drafted by professional organizations; therefore, these organizations can and should take a more active role in protecting their athletes. Teams could provide financial counseling services directly to their new draft-ees which would educate the players and provide awareness and caution them against dealing with predatory firms.
Additionally, teams could provide legal counsel for their athletes. Affected minor league athletes are trapped in a vicious cycle wherein they are already in questionable financial situations, so they cannot necessarily afford legal counsel to fight on their behalf against firms such as Rockfence and Big League Advantage. If teams were to assist with or directly provide, legal counsel to their minor league players, the players would be much better protected against predatory firms, and better armed to fight back should they still fall prey.
On a macro level, firms such as Rockfence and Big League Advantage are backed by a large number of wealthy investors. To fully protect players, the respective leagues should come together to challenge the contracts and practices of these predatory firms. Action on the part of the leagues has the potential to drive large scale change and either pressure these firms to draft friendlier provisions for the athletes they contract with, or push these predatory firms out of business all-together.
Conclusion
While there have not been a significant number of public challenges to these contracts, it is plain to see that the terms and practices are not especially friendly to athletes. After Mejia filed his lawsuit, an increasing number of athletes and agents have begun to speak out against these firms; MLB super-agent Scott Boras has been particularly vocal.[17] Regardless of how courts will hold when assessing these contracts in the future, there is a strong argument to be made that they are unconscionable. There are a number of solutions that can be taken on an individual player as well as a league level to better protect these athletes.
[1] See Plaintiff Class Second Consolidated Amended Complaint at 9, Senne et al v. Office of the Commissioner of Baseball 315 F.R.D. 523 (2016) (No. 3:14-cv-00608) (“Most minor leaguers earn between $3,000 and $7,500 for the entire year despite routinely working over 50 hours per week).
[2] Major League Baseball’s ‘Working Poor’: Minor Leaguers Sue Over Pay, NBCNews (Jul. 16, 2014), https://www.nbcnews.com/news/sports/major-league-baseballs-working-poor-minor-leaguers-sue-over-pay-n156051.
[3] Matt Moore, Baseball’s Predatory Loan Firms Give Us a New Lake Monster, The Rake Vermont (Sep. 8, 2021), https://www.rakevt.org/2021/09/08/baseballs-predatory-loan-firms-give-us-a-new-lake-monster/.
[4] Big League Advantage is also referred to as “Big League Advance”. For the sake of clarity, this paper will refer to them as they are named in Mejia’s complaint, “Big League Advantage”.
[5] Big League Advantage, https://bigleagueadvantage.com/.
[6] Moore, supra.
[7] Big League Advantage, https://bigleagueadvantage.com/.
[8] Danny Wild, Indians’ Mejia sues over financial deal, MiLB (Apr. 26, 2018), https://www.milb.com/news/indians-prospect-francisco-mejia-sues-bla-over-disputed-deal-272068894.
[9] Dave Hannigan, Big League Advance is a Major League Scam targeting the prodigious and vulnerable, The Irish Times (Jul. 21, 2021), https://www.irishtimes.com/sport/other-sports/big-league-advance-is-a-major-league-scam-targeting-the-prodigious-and-vulnerable-1.4625721.
[10] Wild, supra.
[11] Cal. Civ. Code § 1770(a)(19).
[12] See Melchior v. New Line Productions, Inc., 106 Cal. App. 4th 779, 793 (2003).
[13] See Plaintiff’s Complaint at 16, Mejia v. Big League Advance (No. 1:18-cv-00296-UNA).
[14] Id.
[15] Moore, supra
[16] Id.
[17] Julio Ricardo Varela, This Financial Decision Could Haunt Cincinnati Reds Rookie Elly de la Cruz, (Jun. 18, 2023), https://www.msnbc.com/opinion/msnbc-opinion/elly-de-la-cruz-big-league-rcna89603
