Excel Sports Management has initiated a lawsuit against its former employee Eric Eways and Rich Paul’s Klutch Sports Group. The Complaint, filed in the Supreme Court of the State of New York, claims that Klutch Sports tortiously interfered with Eways’ employment agreement with Excel Sports and seeks to enjoin Klutch Sports from employing or otherwise engaging Eways for the full duration of a non-compete that was included in Eways’ contract with Excel Sports. It also seeks relief from Eways for breaching his Excel Sports employment contract as well as his fiduciary duty and duty of loyalty to his former employer.
Excel Sports and Klutch Sports are fierce competitors in the basketball representation industry. According to HoopsHype, Jeff Schwartz of Excel Sports is the top-ranked NBA agent with over $450 million in current NBA player salaries negotiated, which is immediately followed by Paul of Klutch Sports with roughly $400 million in contracts for current players. There is a big drop-off after those two agents.
The competition has been and will continue to be ferocious between Excel Sports and Klutch Sports. Thus, when Eways, who was hired by Excel Sports in January 2018 to lead the company’s efforts to secure off-court marketing opportunities for its clients, decided to abruptly leave for Klutch Sports, it was not something that Excel Sports was just going to let happen without a fight. And early in the Complaint, Excel Sports decided to take a slight jab at its competitor.
“Klutch has been in the sports management and marketing industry for only half as long as Excel,” states the Complaint. “While a competitor to Excel, its current roster of talent, suite of services, and operational capabilities are inferior to Excel’s in every respect.”
Setting that aside, this lawsuit is about Excel Sports being concerned that Klutch Sports will be able to benefit from the relationships that Eways developed and the confidential information Eways learned while at Excel Sports. It is also, importantly, a test of the strength of a non-competition restrictive covenant in a sports agency employment contract, specifically one where New York law governs.
Excel Sports claims that the non-compete clause was reasonable and narrowly tailored to protect its legitimate business interests and that Klutch Sports would not have hired Eways if it would not be benefitting from the confidential business information belonging to Excel Sports that Eways will be transferring to Klutch Sports, which also explains why Excel Sports is seeking injunctive relief to immediately restrict Eways from engaging with Klutch Sports and its clients.
Excel Sports is also currently fighting another major battle against a separate competitor. In September 2021, it filed suit against Endeavor Group Holdings and WME Sports for allegedly poaching former Excel Sports baseball agents James Murray IV and Michael Stival. The lawsuit was later withdrawn and re-filed within the Major League Baseball Players’ Association’s arbitral system.
Klutch Sports is also battling it out against its former client Nerlens Noel, who sued Klutch Sports and Paul in August 2021 for allegedly breaching their fiduciary duties to him, which he says led to a loss of $58 million in expected earnings. The case was since removed to federal court and there is currently a fight as to whether it should be dismissed and be subject to mandatory arbitration within the National Basketball Players’ Association’s rules.