Agency Law

Chapter 4

Agency Law

What is an agent? 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”