One of the toughest tasks for a newly turned professional athlete is to select his or her business team, which often starts with the selection of an intermediary or a sports agent. Anecdotal evidences show that athletes in the professional sports world have been taken advantage of and therefore, it is very important for professional athletes to surround themselves with the right kind of people. In leagues like the National Basketball Association (NBA) and the National Football League (NFL), athletes draw seven figure salaries at a very young age. There have been instances where the athletes, after their playing career, could not manage their money and went bankrupt. This can be attributed to poor financial management skills. Many of these athletes are ‘one and done’ prospects i.e. turning professional after only one year of college. Hence, they are devoid of the college education which plays an essential role in gaining necessary financial and life skills.
Athletes hire intermediaries to represent themselves and ensure financial stability even when their professional career is over; these agents are expected to work in the best interest of the athlete. The traditional norm is that the athletes enter into a Standard Player Agent Contract (“SPAC”) with the intermediaries. This marks the outset of a player-agent relationship. Often regarded as a fiduciary relationship under common law, there is a principal and agent relationship in which the principal authorises the agent to work on his behalf. Once the principal agent relationship is established, the agent is duty-bound to represent the athlete and negotiate the best possible deal for the athlete.
There are certain duties vested on the agent towards the principal, which include good faith, loyalty, candour, transparency, using reasonable care, and applying proper skill to serve the best interest of the principle. In the NBA, there is a provision in the collective bargaining agreement between the National Basketball Player’s Association (NBPA) and the NBA which states that a player agent must be certified by the NBPA in accordance with Player Association’s Regulations governing player agents. If a contract between a team and a player is negotiated by a non-certified agent, then such contract will be considered void. It is the duty of the player association to submit a list of certified agents to the NBA office along with the list of players and their respective agents. Such list is updated every two weeks. The scope of a player agent’s activities is quite wide. It includes providing advice, information, counsel or assistance to players including rookies with respect to negotiating their employment contract with NBA teams on the behalf of an athlete. The duty of enforcing such contracts also lies on the agent.
In order to receive certification from NBPA as an intermediary, the first and foremost thing is to meet the eligibility criteria i.e. the applicant must hold a degree in a four year program from an accredited college or university. The NBPA, in its own discretion, may accept relevant negotiating experience to substitute for any year(s) of college education.
The next step is filling out the ‘Application for Certification of NBPA Player Agent’ and a non-refundable fee shall be paid at the time of filling out the application. While filling out the application, the applicant must follow the guidelines issued on the NBPA website. The application can only be filled out under individual capacity; no application on behalf of a corporation shall be entertained by NBPA. Further, the NBPA reviews the application and conducts a background investigation along with an informal meeting with the applicant. In addition to this, the applicant is required to pass a written exam conducted by NBPA. The subject matter of the examination essentially deals with the provisions of the Collective Bargaining Agreement and the NBPA rules and regulations. The NBPA provides a preparation course to the applicants.
The NBPA has set a threshold for the remuneration received by an intermediary depending on the type of contract negotiated by the agent. If an intermediary negotiates a minimum contract as per the NBA-NBPA collective bargaining agreement, the intermediary can charge a maximum fee of 2% of the player compensation for each season or a lesser percentage as agreed between the player and the intermediary. If the intermediary negotiates a contract in which the player earns more than the minimum compensation, then the intermediary can charge a maximum fee of 4% or a lesser percentage, as agreed between the player and the agent. The term ‘player compensation’ includes base salary, signing bonus or any performance bonus. The agent fee is only paid once the player receives the compensation on which the fee is based.
The NBA has seen tremendous success. The skyrocketing revenues and the players earning lucrative contracts have lured many new and young intermediaries to be a part of the NBA. The agents are always on the lookout to poach another agent’s client, thus making the competition cutthroat and creating a hostile environment among agents. An NBA player firing his agent has become a frequent practice in the league.
New York Knicks center Mitchell Robinson, who was drafted in 2018, has had five agents represent him before signing with Thad Foucher of the Wasserman group. Poaching of clients is another common practice in the NBA. There are some intermediaries who are so bothered by poaching that they try to keep their clients from attending certain events or training facilities where there is a risk of their client being poached by another intermediary. This usually happens when the player is in his contract year and about to sign a lucrative deal. A new agent approaches a player and makes him believe that he is worth more money and he can help him make more money.
Though a common phenomenon in the league, it is not necessary that it pans out as expected. There have been various instances where intermediaries have made big promises to the players but failed to fulfil them. Nerlens Noel, another New York Knicks center, had a similar experience with his then agent Rich Paul of Klutch Sports.
The Nerlens Noel and Rich Paul Saga Nerlens Noel, center for the New York Knicks sued his former agent Rich Paul and his firm Klutch sports for breach and misrepresentation of contract, negligence and gross negligence, breach fiduciary duty, breach of duty of good faith and fair dealing. Paul represented Noel from 2017-2020. In his law suits, Noel alleged that he lost approximately $58 million in relinquished salary due to Paul’s actions as his agent. Rich Paul is a marquee agent in the NBA; his clientele includes box office players like Lebron James, Anthony Davis, Draymond Green, Zach Lavine and John Wall, to name a few. A part from this, he has a long list of NBA players whom he represents. Nerlens Noel was a part of this long list. It all started when Noel met Paul at NBA player Ben Simmons’s birthday party in Los Angeles who is also represented by Paul and Klutch Sports.
Noel at the time was in his contract and was offered one worth $70 million over four years by the Dallas Mavericks, Paul advised Noel not to opt in to that contract and told him that “he was a $100 million man”. Noel thought that Paul could land a max deal for him and subsequently signed with Klutch Sports, firing Happy Walters of Catalyst Sports and Media. On his new agent’s advice, Noel declined the 4 year, $70 million contract and instead, inked a one year qualifying offer for $ 4.1 million. The contract was titled National Basketball Association Uniform Player Contracts (“the Dallas UPC”). Paul also recommended Noel to seek a max contract in the following year’s free agency market. At the time (2016) Noel was only averaging 8.5 points, 6.8 rebounds and 1.1 blocks per game. Paul charged 4% of the value of the contract as his compensation. In December 2017, Noel suffered a thumb injury and had to undergo surgery to repair the torn ligament in his thumb. As a result, Noel only played 30 games of the season and was forced to miss 42 games due to the injury. During those 30 games which he played, his statistics reached career lows in all categories and he finished the season with 4.5 points, 5.6 rebounds and 0.7 blocks per game playing only 15.7 minutes per game. Noel had a rough season dealing with his injury.
After the season, Noel did not receive any good offers and he alleged that there was no implementation of strategy to help Noel secure a long term by Paul or anyone from Klutch Sports. He also alleged that he ended up signing a two year minimum deal with a player option in the second year with Paul George and Russell Westbrook led Oklahoma City Thunder (OKC), only after both of them recruited Noel. There was no work done by Paul and Klutch Sports. Nevertheless, Paul went on to receive his 2% intermediary compensation for the deal. Noel played well in his limited role during the 2018-2019 season. As advised by Paul, Noel declined his player option for the next season and entered the free agency market where again no work was done by Paul and Noel ended up signing a one year league minimum deal with the OKC and Paul received his 2% intermediary compensation. Noel alleged that he received information regarding Paul’s breach of duty, as he did not receive calls from team representatives who were interested in signing Noel. In 2020-2021, the newly elected President of Basketball Operations for the New York Knicks, Mr Leon Rose, contacted Noel in aspiration of signing him. In November 2020, Noel signed a one year Uniform Player Contract with the Knicks worth $5 million. By the time Noel signed his contract with the Knicks, his relation with Paul was on the brink of despair. In December 2020, Noel terminated his relation with Paul and Klutch Sports and signed with George Langberg of the GSL Sports Agency. The 2021-2022 season turned out to be a great year for the Knicks organisation, as the team qualified for the playoffs for the first time in eight years. Noel was the defensive anchor of the team and signed a three-year deal with the Knicks worth $27.7 million.
In October 2021, Rich Paul filed a motion to dismiss the lawsuit at the Texan Northern District Federal Court, stating that the Dallas County District Court lacks jurisdiction over the matter and the matter should be adjudicated by the National Basketball Players Association arbitration as per the terms of Standard Player Agent Contract. Paul claimed that Noel was yet to pay his arrears of 4% for the New York Knicks deal negotiated by Paul in 2020. In the motion to dismiss, Paul also asked for removal of Klutch as a party to the suit. As per NBPA rules governing Player Agents, only individuals, and not corporations, can be certified as agents. Paul also filed a grievance complaint against Noel for non-payment of his intermediary compensation with the NBPA.
In response, Noel filed his grievance with the NBPA and initiated arbitration proceedings against Paul for breach of contract, breach of fiduciary duty, negligence and gross negligence. Currently, the arbitration proceedings are pending and shall be presided over by NBPA arbitrator and retired Judge Richard Levie.
The NBA has had numerous players who, after a decent season, bet on themselves and rejected a lucrative offer to sign a short term deal in hopes of landing a max deal the following season. This situation turns out well for a superstar calibre player such as Kevin Durant. He signed multiple one-year deals with Golden State Warriors to increase his chances of winning a championship which he was able to accomplish by winning two titles in his three year tenure with the team. Kawhi Leonard, small forward for the Los Angeles Clippers, tore his anterior cruciate ligament (ACL) and was still able to sign a max deal because of his superstar stature. When a non-superstar player bets on themselves after a decent season, it mostly goes against them. Dennis Schroeder, Nerlens Noel, Victor Oladipo and DeMarcus Cousins are prime examples of players who bet on themselves but ‘fumbled the bag’ due to injury or poor performance. In my opinion, non-superstar players, rather than betting on themselves, should try and secure a long term deal/ ‘secure the bag’ because as an athlete, you never know what the future holds for you. Athletes should not let injuries and poor performance of a single season hinder their contract situation. The prime of most athletes is relatively short and they should not miss out on the opportunity to secure the financial well-being of themselves and, depending on the contract, possibly their children and even grandchildren. From a poaching stand point, the league needs to set up new rules. In a situation where the rookie player has signed with an agent, the agent will not make any significant money until the rookie’s second contract and the rookie might fire his agent in the fourth year of his rookie contract (length of a rookie contract is typically four years) and sign with a new agent. The previous agent who has laid the groundwork for four years will not receive any intermediary compensation. A potential solution could be imposing a rule that states that if a player decides to fire an agent when he is about to hit the free agency market, there must be a spilt of intermediary compensation between the prior agent and the new agent. In order to sustain in this competitive business, one must work in the best interest of the client because at the end of the day, the bread and butter of intermediaries is in the hands of the athletes.
Article written by Nandan Malhotra, Master student in International Sports Law