The following is a guest contribution from Andrew Harmes, a JD candidate of the Class of 2016 at Osgoode Hall Law School.
Jack Johnson, an assistant captain with the NHL’s Columbus Blue Jackets, is suing his business manager and real estate broker for allegedly orchestrating a lending arrangement where Johnson’s $30.5 million player contract was used as security on a series of fraudulent loans.
In a complaint filed in California superior court, covered by the Courthouse News Service, Johnson claims that beginning in 2011 and continuing through 2013, CYA Sports Management and National Mortgage Resources (NMR), acted both individually and collectively to arrange a “deliberate and predatory lending scheme” that was intended to “line their own pockets at the expense of Johnson.”
The complaint alleges that the defendants, unbeknownst to Johnson, brokered a number of loans to his mother Kristina, that were secured by Johnson’s contract, cash, and other property. It is asserted that the extraordinarily onerous lending scheme was designed “for no other purpose but to cause Johnson to default and to accrue incredibly high interest, late fees and other charges,” positioning NMR and its principal Steve Miller to benefit through a private sale or foreclosure auction of Johnson’s assets.
Johnson claims that he knew nothing of the transactions; a special power of attorney delegating all of his financial decisions to his mother had been arranged with respect to the purchase of a home for his parents near Manhattan Beach. Miller is said to have then disguised the loans as business loans so that he and NMR could issue them using this special power of attorney.
It is claimed that Miller immediately used this power of attorney to take out a $1,552,500 loan against Johnson’s contract. Additionally, Miller persuaded Johnson’s mother to execute a deed of trust on his Manhattan Beach home that transferred legal title to Miller, giving him the right to sell the house if she defaulted on the loan payments. Johnson further alleges that “without any authority or documentation,” the loan agreement was modified in February of 2013 to include a new $220,000 loan to CYA Sports Management.
This past April, it is stated that Miller and NMR, without notice foreclosed on Johnson’s Manhattan Beach home and interfered with his attempt to sell the property to a third-party. Johnson claims to have paid $1,535,031 on the loan arrangement, of which he says Miller only had $559,638 applied to the principal. Miller has sent Johnson a number of subsequent demands for payment. Of the loan documents which Miller has permitted Johnson to see, Johnson alleges that many were “not created in the usual course of business,” but fabricated in order to satisfy discovery requests made by his counsel.
Johnson’s claim lists a total of nine causes of action, including breach of fiduciary duty, breach of contract, and breach of faith. Among remedies sought, Johnson is requesting that damages – including damages that are punitive in nature – of $1.72 million be awarded.
Central to Johnson’s claim is that he was taken advantage of by the defendants when it became known that neither he nor his mother had much experience regarding financial planning. It should be noted that Johnson in the past has been rather vocal about his decision to move forward in his career without the assistance of an agent. Johnson’s seven-year $30.5 million contract that carries into the 2017-18 season and was originally signed with the Los Angeles Kings, was the result of negotiations between Kings management and Johnson himself. At the time Johnson stated that his willingness to arrive at a long-term deal allowed him to put the business side of hockey in the background and focus strictly on his on-ice performance.
Little information is available detailing CYA Sports Management, their business practice, the extent of their relationship with Johnson, or their connection to NMR and Miller. There are no current NHLPA Certified Player Agents that cite an association with CYA Sports Management.