May
10

Protections For Baseball Advisors

The NCAA permits its student-athletes and high schoolers (who are not yet “student-athletes” under the jurisdiction of the NCAA) to secure the services of an advisor and still maintain their current and/or future NCAA student-athlete eligibility.  As mentioned last week, advisors are valuable to players who have the talent to be drafted by a Major League organization.

The bulk of the advisor’s time is spent doing research – reviewing each team’s history in signing different types of players at various slots, understanding the rise of signing bonuses and salary increases at each slot over a period of time, gathering organizational depth charts to see team needs, etc.  The advisor must also spend quite a lot of time educating the player on how to handle negotiations with the scouts who are in the position to sign him.  The advisor should also educate the player on his various options, which include signing with the team or going to, or back to, school.

All of this work undoubtedly takes time, and as any businessman will tell you, time is money.  Technically, the NCAA allows a player to enter into an agreement with an individual to serve as his advisor so long as that person limits his activities to those that are permissible under NCAA legislation and so long as the terms of the agreement do not allow his advisor to act as an agent, but I have been advised by many compliance aficionados, that it is in the player’s and advisor’s best interests to refrain from a written, signed agreement, just in case the NCAA construes the agreement in the wrong way.

So what if you have this oral agreement, backed by email conversations that you are advising a player for the draft, and then either 1) The player tells you that he no longer desires that you serve as his advisor, after you have advised him for over a year, and just before the MLB First Year Player Draft, or 2) You advise the player through his signing with a professional organization, and then he refuses to pay you?  Let’s tackle each separately.

  1. So you have put in a lot of time into doing research for a player and educating that player regarding the draft and his options, and then he gives you the proverbial pink slip.  In the NCAA’s May 11, 2009 memorandum to baseball prospective student-athletes who are considering using an advisor in connection with the Major League Baseball First-Year Player Draft, the #2 (of 3) most common impermissible agent/advisor activity is: Agent/advisor provides free advice and counsel regarding the draft.  Yes, the NCAA requires that if a student-athlete has an advisor, the student-athlete actually pays that advisor.  In fact, Paragraph 10 of that same memo states: “The acceptance of free advice and counsel (among other activities that are provided at no cost) from an agent is considered a violation of the NCAA’s agent benefit legislation. If you receive assistance from an advisor, you must pay that advisor for such services.”  I didn’t even add the emphasis.  It shows that the NCAA is serious about this.  Obviously, the last thing any advisor wants to do is jeopardize the student-athlete eligibility for a player that he has been working hard for over however long he has been of service.  However, the advisor most likely makes a living off of providing these services.  If the player fires the advisor, he has to pay the advisor, or else the advisor may have to report it to the NCAA.  Whether the NCAA can enforce the payment of such fees is another unanswered question, but if the firing occurs during the player’s season of play, or if the player plans on performing for an NCAA institution in the future, it is likely that the player will take this Paragraph seriously.  In the NCAA’s April 13, 2009 memorandum to baseball student-athletes with remaining eligibility, Paragraph 7 includes a sentence that reads, “Finally, it is important to note that in order to maintain your eligibility at an NCAA school, if you receive assistance from an advisor, you will be required to pay that advisor at his or her normal rate for such services.”  This establishes the importance of having the player whom you are advising understand the fee structure at the beginning of the relationship.  If you are billing by the hour, keep track of the time spent on the player.  If you are billing based on a commission fee, make sure the player is aware of that.  Unfortunately, if you have been advising the player and he decides that he wants to make a switch after his student-athlete eligibility is used up or after he pretty much decides that he will not be returning back to school, there is probably little the NCAA can do to help your case.  I do not see how the NCAA could in any way enforce a player to pay an advisor his commission – the real threat is the removal of the player’s student-athlete eligibility.  In that case, you probably move on to #2, below.
  2. The player flat-out does not want to pay you your fee.  He may have switched to another advisor, or he may have used your services up to and through signing with a professional organization.  And then he says, “thanks friend, have a good life.”  What can you do?  While the NCAA may want to pretend that an agent who acts as an advisor for student-athletes does not really enter into a binding contract, no court of law is going to turn a blind eye to the fact that documentation exists that creates a legal relationship between player and advisor.  The offer is the proposal by the advisor to the player to offer his services up to and through, the player’s signing of a professional contract (it must include the cost of such services; however, if the parties have made NO provisions for the price, although clearly a charge was intended, the courts may imply a ‘reasonable’ price – usually the fair market value of the services involved).  The acceptance is the player’s manifestation of assent in the manner requested or authorized by the advisor (it could just be the player agreeing to the terms the advisor presents within the body of an email).  But what if the player claims that he truly never thought that he was bound by an agreement?  The advisor can look to Wheeler v. White – When terms of a contract are not spelled out in enough detail, the court may award reliance expenditures based on one party’s detrimental reliance, especially when specific assurances by the other party caused that reliance.  If the player, for a period of time, consulted with the advisor and acted as if the advisor was more than just a “friend”, a court will most likely take that into consideration.  There is also such a thing as silence as acceptance.  Perhaps the player wants to claim that he never truly accepted the person as his advisor, but still took the benefit of the offered services with reasonable opportunity to reject them and reason to know that the services were offered with the expectation of compensation.  Then the player is on the hook for the bill.  And last, if the preceding arguments don’t work for the advisor, he can always look to the case of Martin v. Little, Brown & Co., where the Court found that if services are provided under circumstances indicating that payment is expected, it may comprise a quasi-contract.  In advising a baseball player, the advisor is employed by the player in the profession in which he rendered services.  While the player may consider the advisor’s work to be merely a gratuitous effort, it could be considered a quasi-contract that raises the presumption of an expectation of payment.  But beyond that, when actual and constructive knowledge of the duty or service is provided in advance, it can create consideration as a contract implied in fact.  If the advisor explains to the player that the services are to be provided at the formation of the relationship and the fee structure attached, there is little ignorance that the player can claim when the bill comes.  Remedies for breach would most likely include expectancy damages (equal to what performance of the agreement would have provided), as this is what the NCAA lays out in its memorandum, which the student-athlete is assumed to have read.
  • Don

    Great article D, but I don’t think you can advise based on a commission fee. That would be the equivalent of working on a contingency fee based on whether or not the athlete gets drafted or awarded a k. I work for an attorney based agency and have created a engagement letter that calls for a small fee.

    • http://sportsagentblog.com Darren Heitner

      Well what happens when you work on a case with a contingency fee and you lose? You don’t get paid. Similarly, if the player doesn’t sign with a professional team and does not have a signing bonus, you would not get paid if you are working on a contingency fee basis. According to the NCAA, that wouldn’t be allowed, right? – Because student-athletes have to pay the advisor his regular rate. But again, at that point, the player would no longer have any student-athlete eligibility. How would the NCAA enforce anything?

      There are plenty of advisors who take a percentage of the player’s signing bonus. So it can be done. Whether it should be done is another topic.

  • Don

    The NCAA is notorious for all the hoops it forces the athlete to jump through, but i do see the reason. If an adviser/agent charges a contingency fee he/she is still conferring a substantial benefit to the athlete free of charge if or until the athlete makes some coin. Like you said in another post a good adviser will have definitely earned the 5% when he actually becomes the athletes agent given all the research, coaching, and educating he/she should do during the advising period. The NCAA does not have any sanctions for the agent, but will in turn screw the athlete if the athlete decides to move on to the next one after all the work has been done. But like you said I guess this would only affect an athlete that has eligibility remaining if the agent decide to report her. I guess that why we have a quantum meruit clause in our engagement letter.

    • http://sportsagentblog.com Darren Heitner

      Trying to make sense of the NCAA’s rules should be a class offered to Kindergarteners – and not because it is easy to understand the reasoning. The NCAA doesn’t have any sanctions for the agent only because it has no jurisdiction over the agent. Believe me, if the NCAA could discipline agents, it would. But remember, agents aren’t supposed to be a part of the picture in a student-athlete’s life – advisors are (yet agents act as advisors).

      Truthfully, the only way #1 works is if the advisor is charging an hourly/flat fee for the services and the athlete, who is currently a student, cuts the advisor off and refuses to pay. For everything else, skip to #2

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  • http://www.pentagonsports.com Van

    Nice article Darren! You cease to amaze me, which i admire. Keep it up and the tide will change to the “new school” way of business……

    • http://sportsagentblog.com Darren Heitner

      I surely hope you mean that I never cease to amaze you. :)

      Thanks.

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