A California appeals court has sided with a sports agent and his defunct agency in a case involving a legal dispute between the agent and a more junior agent, who sued after he felt the defendants breached the contract.
Central to the appeals court’s finding was that an agreement between the plaintiff and the agency extended to the individual defendant, even though the agency went out of business.
Joshua Luchs was a sports agent who entered into a written contract in 2000 with Pro Tect Management Corp. The company’s principal was Gary Wichard, a highly respected sports agent. In agreeing to the contract, Wichard concluded Luchs’ success in recruiting football players in the Pacific and Mountain regions complemented Pro Tect’s needs.
Under the Agreement, Luchs was an independent contractor, receiving no salary or benefits. Rather, Luchs recruited football players for Pro Tect and received a portion of its 3 percent commission. In relevant part, the Agreement provided:
“Luchs shall receive 25 percent of the commissions received by Pro Tect from any new business generated from players who attend college in the Pacific and Mountain time zones, excluding the University of Utah and including the State of Nebraska (the ‘Players’). Luchs shall be entitled to his share of any amounts received by Pro Tect as a result of its representation of the Players. Nothing herein shall prohibit the parties from agreeing, in writing, to extend the agreements to players who do not attend college in the Pacific and Mountain time zones, which shall also be known as the ‘Players.’
“Under the Agreement, Luchs’ payments from Pro Tect were to be ‘reduced by 25 percent of the costs of recruitment, as well as by 25 percent of any unreimbursed expenses which [Pro Tect] incurs or advances on behalf of any of the Players.’
“Payments to Luchs were to be made within 10 business days of Pro Tect’s receipt of funds, at which time Pro Tect was required to provide Luchs an itemized list of expenses being deducted from the amounts paid.
“The Agreement could be terminated immediately for ‘cause.’ If Pro Tect terminated the Agreement for cause, a defined term, Luchs forfeited his right to his share of any future commissions. ‘Cause’ included ‘any act involving dishonesty, fraud, theft, embezzlement, misappropriation or breach of a duty of loyalty’ and ‘soliciting or attempting to solicit any client of the other party without the written permission of such party.’
“In the event this Agreement is terminated without cause by either party, Luchs and Pro Tect shall each be entitled to receive their respective shares of the commissions received pursuant to any player contract or endorsement agreement for the Players for as long as either [Pro Tect] or Luchs (or any other company with which Luchs becomes affiliated) continues to represent any of the Players. Luchs agrees to remit any amounts covered by the Agreement received directly by him from any of the Players, or otherwise, to Pro Tect, which agrees to make the appropriate distribution thereof pursuant to the terms of this Agreement.”
The court continued that “at the time Luchs signed the Agreement, he considered it important that he be entitled to receive funds after he left Pro Tect because the majority of money generated by a player would come from the player’s second or third contract. A rookie’s contract is typically much smaller than a contract for a player who has been in the league for some years.”
In the four years after the agreement, Luchs successfully recruited, or participated in the recruitment of, many football players for Pro Tect. One of them was Travis Johnson, a first round draft pick out of Florida State. Luchs claimed that he arranged for Johnson to come to Pro Tect’s offices to meet with Wichard and that on the day Luchs quit, he and Wichard discussed that if they were successful in recruiting Johnson, Luchs would get the same commission set forth in their agreement.
Luchs ultimately became dissatisfied with the agreement primarily because he was not receiving a salary or benefits. He also “felt handcuffed by Wichard who scrutinized Luchs’ every action and refused to allow Luchs any initiative. Wichard dismissed relationships with new players that Luchs had spent months cultivating. Although Luchs approached Wichard, his concerns were never addressed. Luchs concluded he could never advance professionally at Pro Tect, and his financial concerns were compounded when he and his wife had a baby. On August 18, 2004, Luchs terminated his relationship with Pro Tect without cause by tendering a letter of resignation.”
The court noted that Luchs and Wichard “understood that the Agreement required Pro Tect to continue paying Luchs his share of the commissions so long as the players were represented by either party. After giving notice, Luchs never received any payment from Pro Tect. Luchs repeatedly called Wichard regarding payment, but his calls were not taken or returned.”
In late 2004, Luchs retained an attorney who sent Pro Tect a letter demanding payment for all the players in which Luchs had a financial interest. Counsel for Pro Tect responded that Luchs’ decision to compete with Pro Tect constituted a breach of their Agreement and extinguished Pro Tect’s obligation to pay Luchs.
The court found it significant that Wichard had dissolved Pro Tect in 2002. Nevertheless, Wichard, the sole shareholder of Pro Tect, continued to operate the agency as if it existed. For example, “when Wichard prepared the standard representation agreements, he would interchangeably use his name and the company name even though he was the contract advisor.”
In April 2005, Luchs filed his first amended complaint asserting nine causes of action against Pro Tect and Wichard. The defendants filed a joint answer. The court sustained Luchs’ demurrer to Pro Tect’s answer without leave to amend, denied the defendants’ motion to reconsider and entered a default against Pro Tect “on the basis it was a forfeited corporation. The court refused to enter a default judgment against Pro Tect.”
Luchs proceeded to trial against Wichard on three counts: (1) breach of written contract; (2) breach of oral contract; and (3) fraud.
The court had instructed the jury that Wichard and Pro Tect were one and the same. The jury returned a defense verdict for Wichard, finding he had not breached the written or oral agreements with Luchs, nor made a misrepresentation, nor concealed a material fact from Luchs. The court denied Luchs’ motions for new trial and judgment notwithstanding the verdict and entered judgment for both Wichard and Pro Tect. Wichard filed a motion for attorney’s fees and received an award of $381,687.50.
Luchs appealed, claiming the court’s refusal to enter Pro Tect’s default judgment was error, the jury was erroneously instructed about the legal relationship between Pro Tect and Wichard, and the jury’s finding Wichard did not breach the contract was not supported by substantial evidence.
The appeals court concluded that Pro Tect’s liability was dependent upon the liability of Wichard, “and as such this case falls within the Adams (Adams Mfg. & Engineering Co. v. Coast Centerless Grinding Co., supra, 184 Cal.App.2d at p. 655.) rule.” Thus, Pro Tect was also entitled to have judgment entered in its favor, and the court properly did so.
As for Luchs’ contention that the court erroneously instructed the jury regarding the legal relationship between Pro Tect and Wichard, the appeals court faulted Luchs’ timing, noting that the plaintiff “did not raise this theory in the trial court. [W]e conclude allowing him to assert a new theory on appeal would be unfair to the trial court and opposing counsel, especially after a jury trial.”
Finally, the plaintiff’s argument that there was a breach failed because Luchs’ own breach terminated the contract prior to any obligation by Wichard to pay future commissions to Luchs, according to the appeals court.
Luchs v. Pro Tect Management Corp.; Cal. App. , 2009 WL 1364434, Cal.App. 2 Dist.,2009; 5/18/09
Attorneys of Record: (for plaintiff-appellant) Benedon & Serlin, Gerald M. Serlin and Douglas G. Benedon. (for defendants-Respondents) Howard F. Silber.
