By Stephen Bock
Introduction
Social Media has changed how athletes conduct their marketing and endorsement activities. Athletes sell products; however, gone are the days when Michael Jordan would just appear on a McDonald’s commercial.[26] Now, athletes have started to connect directly with fans through social media sites, such as Twitter and Facebook.[27] Most athletes have started accounts on these sites and at least “tweet” or “facebook” on occasion.
As these sites have grown in popularity, companies have started to explore how to exploit these resources for commercial gains. Recently, these companies have worked closely with the athlete’s marketing agent to sign commercial endorsement deals whereby an athlete will promote products through social media. As companies have invested more money in their internet advertising, these companies want a level of control over what gets said by athletes on their social media sites in order to ensure that the athlete is a positive reflection on their brand. Athlete’s marketing agents also want to protect the carefully crafted brand that they have created for the athlete. Therefore, marketing agents have started “tweeting” and “facebooking” for the athlete by posing as if they were athletes themselves in order to protect the brand.[28] However, fans might not be aware that the endorsement that they saw on Twitter or Facebook was written by someone other than the athlete. Therefore, this protection of brand has produced a result that has potential legal ramifications for the athlete and marketing agent to the fans. Ultimately, this comment will analyze a potential common law fraud claim.[29]
Common Law Fraud claim
A civil claim for common law fraud is actionable in every state. Under the common law, a claim for fraud required (1) a representation of fact; (2) falsity; (3) scienter; (4) reliance and (5) injury.[30] These elements are all generally universal throughout all states.[31]
To describe these elements of common law fraud more thoroughly, under New York law, a party would have to prove that an entity made (1) a representation of fact, (2) which is either untrue or recklessly made, and (3) which is offered with the intent to deceive the other party and (4) induces reliance upon the other party to act based on the untrue representation, (5) causing damages.[32] The reliance in fourth element of the test must be justified and reasonable.[33] Each of these elements has to be established by a higher standard, i.e. clear and convincing evidence.[34] Damages under a fraud claim in New York are considered “indemnity for the actual pecuniary loss sustained as the direct result of the wrong” or what is known as the “out-of-pocket” rule.[35] Therefore, damages under this “out-of-pocket” rule are “calculated to compensate plaintiffs for what they lost because of the fraud.[36]”
Here, we have a representation of fact. The player and the marketing agent are representing that this page is in fact the athlete’s page, and, therefore, any post made on the page is made by the athlete. They may try to argue that they are not necessarily representing that every post made is made by the athlete; however, this is contradicted by the fact that in order for it to be an effective endorsement, the marketing agent must imitate how the athlete communicates to his fans via social media. This is because fans follow athletes to be able to interact with the athletes. If the post sounds like it was fabricated by someone else, fans will stop following the athlete. Thus, a claim against the athlete and the marketing agent would likely satisfy the first element.
Turning to the second element, the representation of fact must be untrue or recklessly made. When a marketing agent poses as an athlete but posts as in the same way that the athlete does, that agent is creating an untrue impression to the fans that the athlete was responsible for the post directly. Again, the purpose of the endorsement is to reach the athlete’s fan base. In order for that to be effective, it has to appear like the athlete, and not his agent, is “tweeting” or “facebooking.” Therefore, the second element is likely satisfied with regards to the athlete and his marketing agent.
The third element requires “scienter” or the intent to deceive the other party. The marketing agent is posing as the athlete. The agent is mimicking the athlete’s speech on social media. This act of mimicking is carefully fashioned to make the fan believe that it is the athlete posting. This thoughtful process proves that there is intent to deceive the fan into believing that the athlete has posted the endorsement. Therefore, the third prong of the fraud test is satisfied.
The fourth element requires that the fan have a “reasonable reliance” which causes the fan to act based on the untrue representation. This element will be difficult to prove by clear and convincing evidence. First, there is a question of whether or not a fan can reasonably rely on the fact that the athlete is the only person who posts on his page. Most fans are reasonably aware that an athlete has an agent.[37] They are also aware that the agent’s job is to negotiate contracts and manage the business aspects of an athlete’s career. A court might find that it is not reasonable to think that an athlete would not permit an agent to manage his social media account on the athlete’s behalf given the fact that he is manages these business affairs.
Furthermore, if the fan acted because of a specific post, it would be really hard for the fan to prove that the athlete’s agent, and not the athlete, was the one that was responsible for that post. If the athlete was the one who posted it, then there is no untrue representation that the fan relied upon. With the heightened standard, this could be hard to prove by clear and convincing evidence.
Finally, the reliance must cause the fan to act. There are two possible actions that a fan could make because of a social media posting. One action would be to buy whatever product the athlete endorses. With regards to this scenario, the fan might not be able to prove reliance on the untrue representation of fact. There would be a question as to what representation the fan would be relying on, i.e. would the fan be relying on the athlete’s endorsement itself in making the purchase or the fact that it is the athlete endorsing the product(s). For example, LeBron James’ agent posing as James hypothetically tweets “Run out and cop my new kicks. They tight.” The fan then goes and buys James’ new shoes. The endorsement of his new shoes is not a misrepresentation of fact. It is James’ opinion that the shoes are “tight.[38]” If this is the case, then he would not satisfy this element of the fraud claim. The fan’s claim may still survive in the hypothetical if he says that he bought them because he thought James was the speaker. The material fact would not be what James said but that it was James who said it. Therefore, he would be relying on the untrue representation of fact; however, the fan would have to prove that he would not have made the purchase independent of the untrue representation. This could be hard to prove. It is unlikely that a fan could make a claim out for fraud under this hypothetical scenario. The other action a fan might be induced to do based on a social media page is to follow or friend the athlete on that social media site. The act of following or friending an athlete would be an inducement because the fan is choosing to follow or friend an athlete. The fan is under the impression that he is following or friending what that athlete is doing or saying at the time, and that any response to the fan’s post is from the athlete himself. Thus, the fan could satisfy the fourth prong of the test under this theory of reliance.
Finally, the fan would have to prove some injury caused by his reliance. There would be no injury caused by following or friending an athlete who in fact is having an agent post for him. The fan suffers no financial loss by just friending or following an athlete. “Emotional damages” would be too speculative, and it would be doubtful that a court would ever grant them. The only feasible way to prove injury would be to show some financial loss tied to the purchase of a product(s). As demonstrated in the hypothetical in the previous paragraph. This kind of reliance would be hard to prove. Assuming arguendo that a fan could make it past the fourth prong of the common law fraud test, he could recover damages for the product(s) he purchased based on his reliance on the untrue representation. However, for a claim to be financially beneficial to the fan, the value of the product(s) would have to be sufficient to merit the costs incurred by litigating the issue. This is probably unlikely. Therefore, the claim would either fail or not warrant the litigation costs.
Conclusion
In conclusion, this practice of having an agent interact with fans on behalf of fans unbeknownst to fans is still deceptive. These athletes get endorsement opportunities because they have fans whom will follow them. If this practice were to become publicized, fans might stop interacting with “athletes,” eliminating this revenue stream.
While a common law fraud claim would likely fail or not be financially beneficial, athletes and marketing agents must be careful not to open themselves up to liability when exploring new potential endorsement mediums. There is a simple way to avoid possible exposure in the endorsement scenario discussed above. Marketing agents should just draft the post with the player and have the player post it himself on the social media site. By doing endorsements this way, an agent and player can ensure that there is no untrue representation of fact. Another way to avoid liability is to post a disclaimer which says something like “[f]or the ease of athlete and to make certain the athlete can focus on and maximize his performance in the sport, an agent or representative of the player may occasionally post on this site on behalf of the athlete.” This disclaimer would neutralize several elements of a potential common law fraud claim. These protections would allow the athlete to market himself in a way that does not deceive his fans.
Stephen Bock is an attorney admitted to practice in the state of New York. He currently works as a freelance attorney for Martens Lawyers, an international sports law firm based in Munich, Germany. He recently graduated at the top of the first class from the International and Comparative Sports Law L.L.M. program at St. John’s University School of Law and the Instituto Superior de Derecho y Economia.
[26] For a personal favorite, see “The Showdown” — Bird vs. Jordan McDonald’s ad- 1993, http://www.youtube.com/watch?v=1shK-j_u6LI (last visited December 10, 2012).
[27] For an example of an athlete’s social media page, see LeBron James’ Twitter Page, http://twitter.com/kingjames; see also Cam Newton’s Official Facebook Page, http://www.facebook.com/CamJNewton2?fref=ts.
[28] This is often done with the player’s consent because the player wants to focus on his career and improving as an athlete. The athlete will occasionally use his own social media site but will allow access to his agent or marketing personnel as well.
[29] For purposes of this Comment, all of the analysis will be limited to potential liability for the athlete and the marketing agent.
[30] Kline v. Taukpoint Realty Corp., 302 A.D.2d 433, 433 (2nd Dept. 2003). See also, Lama Holding Co. v. Smith Barney, 88 N.Y.2d 413, 421 (1996); and Channel Master Corp. v. Aluminum Ltd. Sales, 4 N.Y.2d 403, 407 (1958).
[31] For purposes of this Comment, I will discuss the fraud claim based on principles of New York law; however, as stated above the elements of common law fraud are nearly universal in every jurisdiction.
[32] Jo Ann Homes at Bellmore, Inc. v. Dworetz, 250 N.E.2d 214, 217 (N.Y.1969)
[33] 802 F Realty Corp. v. American International Specialty Lines Ins. Co., 295 A.D.2d 398, 398 (2nd Dept.2002) (holding that the plaintiff unable to establish that reliance was reasonable and justified); Laurel Ridge, LLC v. A. Alfredo Nurseries, Inc., 286 A.D.2d 710, 711 (2nd Dept.2001) (holding that individual defendants were entitled to a judgment as a matter of law because plaintiff was unable to establish justified reliance. See also, 60A N.Y. Jur.2d Fraud and Deceit § 138.
[34] Jo Ann Homes at Bellmore, Inc., 250 N.E.2d at 217.
[35] See Reno v. Bull, 226 N.Y. 546, 553 (1919); Hanlon v. Macfadden Publ., 302 N.Y. 502, 511(1951).
[36] Lama Holding Co., 88 N.Y.2d at 421 (citing Cayuga Harvester v. Allis—Chalmers Corp., 95 A.D.2d 5, 22 (4th Dept. 1983)).
[37] This might not also apply to a marketing agent because not all players have marketing agents as well contract agents. That being said, some agencies also handle the marketing aspects of an athlete’s career in house.
[38] See Small, 252 A.D.2d at 15.
