By Christian Dennie
Mark Termini and his associated entity (collectively “Termini”) filed suit against Klutch Sports Group, LLC and Rich Paul (collectively “Klutch”) asserting that Termini is entitled to unpaid commissions for Termini’s assistance in negotiating NBA player contracts and marketing deals. Termini and Klutch entered into a written agreement whereby Termini agreed to “provide contract negotiation, business advisory and other administrative and support services” to Klutch. In exchange, Klutch agreed to pay twenty-five percent (25%) of Klutch’s gross fee collected for Klutch’s clients. In the lawsuit, Termini claims he was the lead negotiator for NBA player contract negotiations, but Klutch took public credit for agreements negotiated by Termini to enhance Klutch’s reputation and Klutch’s value. Termini further claims that Klutch refused to pay the full amounts owed under the terms of the written agreements. Termini filed suit asserting claims for breach of contract and an accounting. In response, Klutch filed a motion to compel arbitration and, alternatively, to dismiss under Rule 12(b)(6). This blog will focus only on the motion to compel arbitration.
Klutch argued that there is a valid arbitration clause and moved to compel arbitration under the terms of the Federal Arbitration Act. The parties agreed the written agreement executed by the parties does not contain an arbitration provision. However, Klutch pointed to the NBPA Regulations asserting that certified player agents agree to arbitrate disputes as outlined in the NBPA Regulations. Section 5 of the NBPA Regulations states as follows:
[I]t is the intention of the NBPA that the arbitration process shall be the exclusive method for resolving any and all disputes that may arise from denying certification to an applicant or from the interpretation, application or enforcement of these Regulations and the resulting [Standard Player Agent Contract (“SPAC”)] between Player Agents and individual Players.
This will ensure that those disputes—which involve essentially internal matters concerning the relationship between individual Players, the NBPA in its capacity as their exclusive bargaining representative, and Player Agents performing certain delegated representative functions relating particularly to individual Player compensation negotiations—will be handled and resolved expeditiously by the decision-maker established herein, without need to resort to costly and time- consuming formal adjudication.
The NBPA Regulations identify three types of disputes that are subject to arbitration and state as follows:
(1) “[t]he NBPA denies an Application and the applicant wishes to appeal from that action;”
(2) “[a] dispute arises with respect to the meaning, interpretation, or enforcement of a SPAC . . . entered into between a Player and the Player Agent;” and
(3) “[a] dispute arises between two or more Player Agents with respect to their individual entitlement to fees owed, whether paid or unpaid, by a Player who was jointly represented by such Player Agents. In such cases, at the Player’s option, any fees paid or payable by the Player after the dispute arises shall be placed in escrow pending final resolution of such dispute, and paid out of escrow in accordance with the Arbitrator’s decision.”
Klutch argued the dispute at issue falls within the scope of point 3 above. The Court, however, stated the claims asserted by Termini do not fall “within the substantive scope of claims subject to arbitration under the NBPA Regulations.” The Court noted that Termini’s claims do not raise any issue as to “their individual entitlement to fees owed, whether paid or unpaid, by a Player” as addressed in Section 5(3) of the NBPA Regulations. Further, the Court stated the claims at issue are not resulting from a dispute regarding the payment of fees from a player, but result from allegations of fees owed by Klutch to Termini for services allegedly rendered by Termini under the terms of the written agreement between the parties. The dispute addresses Termini seeking payment from Klutch for services rendered to Klutch. Accordingly, the Court denied Klutch’s motion to compel arbitration.
For any questions, contact Christian Dennie at cdennie@denniefirm.com.
