Ever wonder what goes on behind the scenes when players are signed or traded and what and how their agents get paid? A Colorado business litigation suit involving a few sports agencies and agents offers a glimpse into the complex world of the business of representing professional athletes in their employment contracts with various professional football teams, including the Denver Broncos.
In order to understand some of the specifics of the lawsuit, which includes everything from claims of non-payment of commissions and breach of fiduciary duties to the misappropriation of trade secrets, let's first begin with just how agents for football players are compensated for their services.
An agent representing a player in the National Football League can charge up to 3 percent on the total amount of a contract his or her client signs with a team. The NFL Players Association provides players with a form called a Standard Representation Agreement, which allows a player to designate his agent of record. Once a player receives funds per his contract, that player is then obligated to pay the agent of record.
When an agent works for a company and is designated as an agent of record, he or she will typically sign an employment contract which stipulates any funds received from SRAs where that agent is listed are to be deposited into a predetermined account. When an agent leaves a company, the actual value of these accounts can be disputed by one or both parties. That is the crux of the lawsuit filed by Denver-based All Pro Sports and Entertainment, Inc. against the founders of Authentic Athletix, LLC.
Both founders of the Authentic Athletix, LLC were previously employed as agents with All Pro Sports. According to a recent report by the Denver Business Journal, a judge has already ruled against the defendants stating that an Assignment of Contract Rights agreement is enforceable and thus required the defendants to pay a court appointed receiver almost $1 million. The court also found that one of the defendants was not "credible."
Tough business football, and that's just off the field.
Source: Forbes, "Legal Battle Between Denver-based Sports Agents Includes Big Commissions and Large Expenditures," Darren Heitner, May 21, 2012