The Law of Agency and Athlete Agents Chapter 10

TERMS TO KNOW Fiduciary Fiduciary Relationship Principal Undisclosed (Agent/Principal) Agent Disclosed (Agent/Principal) Agency Unidentified (Agent/Principal) Express Agency Actual Authority Implied Agency UAAA Apparent Agency SPARTA Ratification of agency Estopped

Management Contexts, Relevant Laws, and Cases

THE DOTTED LINE

LAW CASES: REVIEW 1. Detroit Lions v. Argovitz (p. 237) 2.Jones v. Archibald (p.239) 3. Clark Advertising Agency, Inc. v. Tice (p. 241) 4. Alabama v. Goggins, p. 250 5. Bias v. Advantage Int.(p. 255) Assignment

Agency Defined The fiduciary relationship that arises when one person (a “principal”) manifests a desire to have another person (an “agent”) act on the principal’s behalf and remain subject to principal’s control, which the agent consents to do.--Restatement (Third) of Agency, §1.01 (2006) More simply: Agency describes a relationship between parties in which one party agrees to act as a representative of the other party.

Agency Relationships Types of relationships: Employee and employer relationship Principal and agency relationship Principal and independent contractor relationship Examples in the sport industry: Principal and agency: Pro athlete and athlete agent Principal and independent contractor: University and a general contractor building a new stadium Michael Carter Williams (76ers) & his Mom/Agent

Gabby’s agent is her mom

Creating an Agency Relationship Consensual Informal or formal agreements Agency agreement is a contract, and basic contract principles apply. Both parties must have legal capacity to enter into the agency agreement.

Creation of Agency Relationships Express agency-p. 235, Resource (www.nflpa.org) Standard Representation Agreement Implied agency-p. 235 Apparent agency-p. 235 Ratification of agency-p. 235

Fiduciary Relationship Fiduciary—Defined as a person who acts primarily for the benefit of another. Fiduciary Relationship-When one person entrusts his interests to another. The agent must act loyally for the principal’s benefit in all matters connected with the agency relationship Both agent and principal owe duties to the other as parties to fiduciary relationship. Fiduciary Relationship

Summary of Duties in an Agency Relationship Case: The Detroit Lions and Billy Simms v. Jerry Argovitz p. 237

SPORT AGENT

Contractual Liability of Principal and Agent How a principal is classified helps determine liability of both the principal and the agent. Principal is always liable for an agent’s authorized acts. The agent may not exceed the authority granted by the principal.

Case: Jones v. Archibald, p. 239 A principal can be: Disclosed- a third party is aware of the identity of the principal. Unidentified- the third party is aware that the agent is acting on behalf of another but does not know the identify the principal. Undisclosed- the third party is not aware that the agent is acting behalf of another. Case: Jones v. Archibald, p. 239 CLASSIFICATION OF THE PRINCIPAL AND THE LIABILITY OF THE PRINCIPAL AND AGENT. CLASSIFICATION PRINCIPAL AGENT Disclosed Liable Not Liable Unidentified Property Liable Undisclosed

SCOPE OF AGENT AUTHORITY Actual authority can be stipulated in the agency agreement entered in a Standard Player Representation Agreement. It empowers the agent to negotiate player’s compensation (salaries) Bonuses Roster bonuses Performance incentives Clark Advertising Agency, Inc. v. Trice p. 241

Legal Issues Related to Athletes and Athlete Agents Has an agent acted in the best interests of the principal? Has the principal interfered with the agent’s ability to perform? Athlete agents: Has the agent complied with existing laws and acted properly and truthfully so that the student-athlete has full knowledge how using an agent may affect his or her amateur status and eligibility?

Student-Athletes and Agents People who need to understand legal issues and laws affecting athlete agents: Athlete agents University Compliance Officers Student-athletes Professional athletes Employees of the NCAA enforcement staff Contract negotiators for a professional sports team

Uniform Athlete Agents Act (UAAA) Regulates the conduct of individuals who contact athletes in order to obtain agency contracts. Notifies educational institutions when an agency contract is signed by a student-athlete. Provides a remedy for an educational institution damaged by the conduct of an athlete agent or a student athlete. Establishes civil and criminal penalties. Case: Alabama v. Goggins, p. 250

UAAA Definitions

UAAA Requirements Registration Disclosures Notifications Penalties and remedies

Agent Registration Agents must register in each state in which they have established sufficient minimum contact that would normally make them subject to the jurisdiction of the state’s courts. Safe harbor is provided to unregistered individuals with whom a student-athlete initiates communication.

Disclosure All agency contracts must be in a recorded form and signed by the student- athlete. Agency contract must contain a warning: Amateur eligibility may be lost if student-athlete enters into an agency agreement Student-athlete can cancel contract within 14 days. Cancellation of the contract may not restore eligibility.

NCAA Eligibility Rules A student-athlete loses his or her eligibility if: He/she enters into an agreement with an agent or retains an agent He/she accepts transportation or other benefits from an agent He/she agrees orally or in writing to be represented by an agent for the purpose of marketing his or her athletic ability or reputation

Both the agent and the student-athlete must notify the athletic director that an agency agreement has been entered into. Notification protects institutions from sanctions/ penalties should an ineligible player be allowed to participate. Possible sanctions/penalties: Loss of scholarships Prohibition from championship events Probation Negative publicity Forfeiture of tournament winnings or other revenue Notification Rule

Prohibited Conduct for Athlete Agents

Sport Agent Responsibility and Trust Act (SPARTA) Supplements the UAAA and provides some protections to student- athletes in states with no form of athlete agent regulation. Not as comprehensive as UAAA. Sport Agent Responsibility and Trust Act (SPARTA)

SPARTA The Sports Agent Responsibility and Trust Act (15 U.S.C. §7801- 7807), commonly known as SPARTA [1], seeks to protects student-athletes by prohibiting sports agents [2] from signing athletes to an agency contract by: Providing false or misleading information, or making false or misleading promises or representations; Providing anything of value, such as gifts, cash or a loan to the student-athlete or anyone associated with the athlete; Failing to disclose in writing to the student-athlete that he or she may lose NCAA eligibility after signing an agency contract; or

SPARTA Predating or postdating contracts. SPARTA makes certain activities of sports agents come within the regulations of the Federal Trade Commission (FTC) and considers sports agents who entice student-athletes with misrepresentations and gifts to enter into agency contracts in violation of the FTC’s Regulations regarding the Federal Trade Commission Act. The Federal Trade Commission Act (FTCA) was passed by Congress to protect businesses and consumers from unfair competition and unfair or deceptive acts in the conduct of business. If a business engages in deceptive practices aimed at the average consumer, it may be in violation of FTCA regulations. - See more at: http://sportslaw.uslegal.com/the-sports-agent- responsibility-and-trust-act/#sthash.6SUIYhvL.dpuf

Professional Athletes and Agents Main job of a sport agent is contract negotiation Agent must possess the necessary training and expertise to be an effective negotiator. Type of agency relationship: Usually express agency Other types of relationship when the agent serves as financial consultant or endorsement representative

Agents for Professional Players Associations To protect athletes from a breach of agency agreement, breach of fiduciary duty, or fraud, most player associations: Have registration and certification procedures for agents. Impose limitations on agent fees. Work to ensure that the individual serving as an agent has necessary competence and skills. Rigor of certification process varies significantly among professional associations.

Perspective Imagine that you are the agent for a professional baseball player who is weighing two free agency options: One is for a lot of money playing for a small- market team. The other is for less money playing for a larger-market team, where he’ll get more exposure. What do you recommend, and why?

CLASS READ CASE STUDY: p. 255

REVIEW Review all terms Review application quiz

Application Quiz 1. A written contract is necessary to create a valid agency relationship. True False 2. An agency relationship is a fiduciary relationship. True False 3. A Standard Representation Agreement for a professional sport league would be considered an apparent agency agreement. True False 4. "Ratification occurs when an agent did not in fact have authority to act of behalf of the principal, but the principal accepts responsibility for the agent’s acts." True False 5. Most athlete agent acts such as the UAAA regulate dealings only between athlete agents and student athletes. True False 6. A written contract is necessary to create a valid agency relationship. True False 7. An agency relationship is a fiduciary relationship. True False 8. A Standard Representation Agreement for a professional sport league would be considered an apparent agency agreement. True False 9. "Ratification occurs when an agent did not in fact have authority to act of behalf of the principal, but the principal accepts responsibility for the agent’s acts." True False 10.Most athlete agent acts such as the UAAA regulate dealings only between athlete agents and student athletes. True False

Application quiz answers 1. B 2. A 3. B 4. A 5. A 6. B 7. A 8. B 9. A 10. A