Agency Law Chapter 4

Agency Law What is an agent? What is agency law? Any individual who represents a second individual or entity in negotiations with a third individual or entity. What is agency law? Type of law that specifically defines the rights and responsibilities of the agent and the principal, the authority of the agent, and the creation of the principal-agent relationship

History of Sports Agents First well-known occurrence of player hiring an agent to negotiate contract was Red Grange in 1925 Agents didn’t begin growing until Attorney Mark McCormack began representing Arnold Palmer in the 1960s In the early 1960s, Jim Ringo tried to use an agent to renegotiate his contract with Vince Lombardi…it didn’t work

History of Sports Agents Prior to 1970s, contracts held “reserve clauses” which minimized negotiations In the 1970s, professional sports leagues adopted free agency, opening the flood gates for sports agents Currently each major professional league has more than 100 registered agents – See Table 4.1 on pg. 75

Role of a Sports Agent May work on behalf of an athlete, team, coach, or organization/owner to: Negotiate contracts Negotiate concession agreements Negotiate with sponsors, media, and advertisers Negotiate with endorsers Enter into contracts with security, ushers, merchandisers, and others Manage the relationship with community boards, charitable foundations, etc. Conduct estate, tax, and financial planning for clients Secure investment and appearance opportunities

Concepts in Agency Law Examples of sport agency relationships include: Students selling university merchandise at a game Ticket sellers Sport managers promoting a facility for an event Health club workers trying to recruit clients

Agency Relationship Parties must enter into an agreement to establish agency relationship Agreement can be written or oral Must be consensual Must be between two parties who are able to enter into a contract What if the relationship is disputed? Courts focus on whether the principal did or said something that the agent could have reasonably interpreted as the principal’s intent to allow the agent to act on the principal’s behalf

Authority to Act If the agent does not have the authority to act on behalf of the principal or exceeds the authority she was given by the principal, the agent’s actions cannot bind the principal and the principal cannot be held liable for the acts of the agent. Authority can be described as: Actual (express or implied) Apparent

Actual Authority An agent acts with actual authority when the agent reasonably believes that his actions are within the scope of authority given to him by the principal. Express authority Any written or oral communication that grants the agent authority to perform an act Example – In NFL Players’ Association’s standard representation agreement, the agent’s express job is to “represent, advise, counsel, and assist Player in the negotiation, execution, and enforcement of his playing contract”

Actual Authority Implied Authority Refers to the agent’s authority and ability to perform incidental acts that are reasonably necessary to accomplish the agent’s express responsibilities as provided in the agency agreement Must be consistent with the express authority granted within the agency agreement When determining whether an agent acted with implied authority, courts will look at the agent’s reasonable understanding at the time the agent took action. If court finds the agent’s interpretation of the agency relationship was unreasonable and the agent lacked authority to perform an act, the improper act falls outside the scope of the agent’s authority

Apparent Authority Arises out of a situation where, because of the behavior of the principal, a third party may believe that the agent is acting with actual authority In other words, the principal created an appearance of authority through conduct or behavior that misled the third party into reasonably believing that the agent had the authority to act on behalf of the principal.

Ratification As a general rule, when an agent acts without authority, and the doctrine of apparent authority does not apply, then the principal is not legally bound by the agent’s acts. If, however, the principal would like to be bound by it, he may ratify the act by affirming the agent’s actions

Duties Duties owed by Agent to Principal Fiduciary duty duty to act for the benefit of someone else while subordinating one’s own personal interests Duty of Loyalty Duty under which the agent must act solely and completely for the benefit of the principal. Prohibits agent from competing with the principal in anything related to the subject matter of the agency unless the principal has expressly agreed Duty of Obedience duty to follow all reasonable instructions given by the principal Does not extend beyond agency relationship Includes responsibility to follow instructions that may have negative results, but does not include illegal actions Conflict of Interest

Duties Duties owed by Principal to Agent Duty of compensation Includes paying them for their work Includes reimbursement for expenses incurred on behalf of principal Includes compensation for any losses suffered Duty of good conduct Principal should not do anything to demean the agent or damage his reputation

Contract Liability If agent negotiates a contract and principal doesn’t perform, who is liable? Disclosed Principal 3rd Party knows agent is working on behalf of _________ (specific principal) Principal is fully liable Partially Disclosed Principal 3rd Party knows agent is working on behalf of principal, but doesn’t know who principal is Principal is liable – some states, agent is also liable Undisclosed Principal 3rd Party has no knowledge that agent is acting on behalf of anybody else Both principal and agent are liable, though agent may seek reimbursement compensation from principal

Tort Liability Principal may be liable for tort claim which arises out of agent actions occurring within the scope of his employment Doctrine of respondeat superior Holds people and organizations high in the chain of command (employers/principals) liable for the negligent acts of those lower in the chain of command (employees/agents) Liability depends on: Whether tortious act was authorized by principal The time, place, and purpose of act Whether act is part of normal scope of employment Whether principal benefited from act or furnished means to allow act to occur Whether principal had reason to know act would occur Whether act involved commission of a serious crime

Athlete Agents and Regulations Some agents work alone to represent athletes (Scott Boras or Drew Rosenhaus) Some agents are part of big companies (Octagon or IMG) Most have advanced degrees (primarily law and/or business) Many professional sports unions require certification of agent’s skills and registration State and federal regulations, as well as professional union regulations, exist to regulate agents who represent athletes.

Athlete Agents and Regulations Under NCAA rules, an eligible student-athlete cannot receive benefits from or enter into a verbal or written agreement with an agent even if the agreement is related to working with the athlete after his eligibility to participate has expired Who gets hurt when an agent and/or athlete violate this regulation? THE SCHOOL!!!

Athlete Agents and Regulations Prior to 2000, most regulations were created at the state level Became problematic for agents living in one state, working with players living in another state and playing all over – whose laws are to be followed In 2000, the Uniform Athletes Agent Act was developed – as of May, 2008, 35 states (plus D.C.) had adopted the act.

Athlete Agents and Regulations Uniform Athlete Agents Act Requires annual registration (application and fee are transferable to all states recognizing Act) Defines student-athlete as: “an individual who engages in, is eligible to engage in, or may be eligible in the future to engage in, any intercollegiate sport” Provides that athlete agents who sign contracts with student-athletes must provide notice to the particular university and must make clear to the student-athletes that the agency agreement may affect their eligibility to participate in athletics while in university Provides civil remedies for institutions when agents and athletes sign these contracts and the school eventually suffers NCAA sanctions

Athlete Agents and Regulations Federal Law Sports Agent Responsibility and Trust Act (SPARTA) was passed in 2004 Virtually mirrors Uniform Athlete Agents Act Requires student-athletes be provided with written disclosures, AD’s must be notified within 72 hours, and allows for civil remedies and fines in the event of violation Does not require any kind of registration How do you enforce????

Athlete Agents and Regulations Union Regulations All four major professional sports leagues have players’ associations which regulate agents In order to represent NFL Player, you must register $1,650 application fee Undergraduate and post-graduate degree – from an accredited university – required Background investigation Annual seminar attendance Written exam re: collective bargaining agreement, salary caps, NFLPA Regulations, etc.

Athlete Agents and Regulations Union Regulations (cont’d.) NFL Player Agents must Enter into only Standard Representation Agreement with Player Submit all contracts between player and team to union for review Submit itemized statement of all fees charged Allow for audits Comply with all applicable state and federal regulations “The maximum fee which may be charged or collected by a Contract Advisor shall be three percent (3%) of the ‘compensation’ . . . received by the player in each playing season covered by the contract negotiated by the Contract Advisor”