National Basketball Association (“NBA”) player Nerlens Noel’s (“Noel”) lawsuit against high-powered sports agent Rich Paul (“Paul”)—who reps LeBron James and other NBA All-Stars—has shone a spotlight on the player-agent relationship. The lawsuit raised the question: what do agents owe their clients? No matter its outcome, the case could have long-lasting impacts on the player-agent landscape.
The Lawsuit – Nerlens Noel v. Richard Paul and Klutch Sports Group, LLC
Noel, a New York Knicks center, filed a lawsuit in late August against Paul, his former agent, and Paul’s firm, Klutch Sports Group, LLC. Noel claims he lost $58 million in forfeited salary while Paul represented him from 2017 to 2020 and is suing for breach of contract, breach of fiduciary duty, negligence, and breach of the duty of good faith and fair dealing.
Prior to contracting with Paul, Noel was represented by agent Happy Walters, who had negotiated a four-year, $70 million deal for him to stay with the Dallas Mavericks, where Noel was a restricted free agent. But after meeting Paul at a party, Noel fired Walters and then followed Paul’s advice to turn down the Mavericks’ offer in favor of a one-year contract, which would leave him open to pursue a potentially more lucrative deal the following summer. Noel signed with Dallas for $4.1 million and, after getting off to a strong start, tore ligaments in his thumb, missed 42 games and saw his value plummet. He played the next two seasons for the Oklahoma City Thunder, earning the league’s minimum salary ($3.7 million for the two seasons), before accepting a one-year $5 million deal from the Knicks for the 2019-2020 season. After Noel parted with Paul in 2020, his new agent, George Langberg, negotiated a three-year contract with the Knicks that guarantees Noel at least $27.7 million.
Among other allegations, Noel claims Paul did not make him a priority and was not responsive when other teams expressed interest in Noel.
Noel’s lawsuit was filed after Klutch filed a grievance with the National Basketball Players Association (NBPA), claiming Noel hadn’t paid him $200,000 in commission from his one-year Knicks contract.
What is a sports agent’s duty?
A sports agent does not need a law degree or any formal legal training to begin representing players, but as an advocate and representative for a player’s legal and business affairs, sports agents are bound by a duty of loyalty that arises from agency law.
Common law defines “agency” as a fiduciary relationship between a principal and an agent, in which the principal expressly or implicitly authorizes the agent to work on his or her behalf to bring him or her into contractual relationships with third parties.
Because of the fiduciary nature of the relationship, agents owe principals certain duties, including loyalty, good faith, candor, full disclosure, refraining from self-dealing, acting with strict integrity and using reasonable care and all proper skill to serve the interests of the principal. Agents who breach their fiduciary duty can be financially liable for all losses incurred by the principal as a result of the breach.
Rich Paul’s Contractual Duties to Nerlens Noel
While the existence of a fiduciary relationship is not contingent on a contractual arrangement, Paul was expressly appointed as a fiduciary to Noel under a Standard Player Agent Contract (“SPAC”). The SPAC is a standard form agreement that is used for all agent and NBA player contracts. The complaint states that Noel did not negotiate the terms and conditions of the SPAC with Paul, but the agreement is pursuant to and in accordance with the NBPA Regulations Governing Player Agents.
Noel alleges Paul breached his fiduciary duty in many ways. Paul allegedly induced Noel to terminate his relationship with his prior agent. According to the lawsuit, Paul did this by advising Noel that Paul could get Noel a “max deal” if he hired Paul and Klutch and stopped negotiating with the Mavericks. Noel also alleges that Paul and Klutch later made misrepresentations concerning alleged offers from other teams in order to prevent Noel from terminating their relationship. Noel also claims the agency failed to do any meaningful work on his behalf to secure contracts and endorsements and refused to take calls from teams interested in him, choosing to focus their attention on higher-profile clients.
It is fairly common practice for agents to poach the clients of other agents by boasting they can help them earn more money. Unlike NBA teams, which are subject to anti-tampering rules, the NBPA does not prohibit certified agents from contacting the clients of other certified agents. In fact, many of the larger agents seek to lure players away from their existing relationships shortly before their next big contract.
As for advising Noel to turn down the four-year contract in the hopes of scoring a potentially bigger payday the following summer, Paul cannot be blamed for lacking a crystal ball. If Noel did not injure his thumb, it is quite possible that he would have gotten a better deal the following year. Noel was also free to turn down Paul’s advice and take the four-year deal, just as he was free to stay with his existing agent.
Noel’s case will likely turn on whether he can prove that the agent breached his fiduciary duty by failing to apply his skill and attention to marketing him and responding to interest from other teams.
Potential Impacts of This Case
Noel’s lawsuit has called attention to the tactics used by high-power agents to poach players from other agents. The negative backlash may put pressure on the NBPA to try to curtail this practice. Saving one percent of the commission on the player’s next contract for the previous agent is one potential solution that has been discussed in the past.
If Noel succeeds in recovering monetary damages, it will significantly impact the agent-player dynamic. A finding of a breach of fiduciary duty against Paul will lead other players who are unhappy with their agents’ performance to question whether the services their agent has provided measure up to their contractual obligations.
The sports industry is complex, with mistakes substantially impacting revenue of athletes and organizations.
Consulting with an experienced attorney about sports contracts and related matters is crucial to protecting your interests. Contact the attorneys at Romano Law today.
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