Dueling Lawsuits Between Zion Williamson and His Former Agent May Implicate Duke, Krzyzewski, Nike

Boxed-Out

Despite the pandemic, the world of sports law continues to run the headlines and claimed former Duke star Zion Williamson as its latest victim this week. In new information obtained by The Athletic, it was found that Williamson’s ex-marketing agent filed a lawsuit against last year’s #1 overall pick claiming over $200 million in potential damages.

After declaring for the NBA draft, Williamson signed a five-year contract with Prime Sports Marketing on April 20, 2019. The contract language stated that Gina Ford, the PSM president, would represent Williamson and handle all endorsement negotiations. However, Williamson later broke this contract, electing to sign with Creative Artists Agency (CAA), and sued both Prime Sports as well as Ford. His team asserted that the contract was never enforceable because the agency did not follow North Carolina’s agent guidelines nor warn Williamson about potential eligibility issues.

The following week Ford and Prime Sports countersued on the grounds that Williamson “willfully and knowingly” breached the contract and that the North Carolina Uniform Athlete Agent Act does not apply because he had already declared for the NBA draft with no intention of returning to Duke.

Full Court Press

Despite the fact that these lawsuits were filed more than a year ago, the contents of some documents were just recently made public and could have some highly damaging ramifications for both Williamson and Duke basketball coach Mike Krzyzewski. Ford’s attorneys put forth a Request For Admission, asking that Williamson admit to certain claims made by Ford and her team. The full set of interrogatories can be found here, but the major implication is that Williamson received improper benefits while at Duke and potentially entangles Krzyzewski and CAA in what could start to look like another recruiting scandal.

While Williamson is not required to answer these allegations, the procedure sets up depositions which will undoubtedly include at least the former Blue Devil and could involve the likes of Krzyzewski as well as representatives from CAA, Nike, Adidas and potentially others.

Show Me The Money

So how exactly did Ford and her team arrive at the $200 million + figure that has been reported? Well, as mentioned, the contract signed by Williamson was for five years and awarded Ford a 15% commission on endorsement deals. Therefore, the number cited in the lawsuit represents 15% of the total amount Ford estimates she would have negotiated for Williamson over the life of the deal — $1.3 billion.

As crazy as that number may seem, it’s certainly not impossible to imagine. In the one month alone that Ford represented Williamson, she negotiated deals with Mercedes-Benz, EA Sports, 2K Sports, Burger King, Puma amongst many more. Though no deals were struck at that time, the impressive list of potential clients speaks to the extensive interest major brands had in partnering with this generational talent. Of course in turn, it speaks to the vast amount of money that Ford could have earned through commission.

However, those deals and the subsequent money instead went to CAA which negotiated the largest rookie sneaker deal with Nike’s Jordan Brand for seven years, $75 million. The agency also sealed deals with Gatorade, Mountain Dew, Panini, and 2K Sports though the terms of those agreements are not public.

Location, Location, Location

Though the basics of this case are fairly straightforward, the way in which it will play out is anything but. Beyond just the coronavirus courtroom complications, the largest wrench in these proceedings is the location in which both competing lawsuits were filed.

Team Zion

For Williamson, his biggest advantage resides in the fact that he sued Ford first, and in North Carolina. In such, Williamson’s attorneys kept the ball in their court by controlling the state and consequently the legal system under which the case will be ruled.

This locational aspect of the legal battle is crucial because each state operates under its own Athlete Agent Act (AAA). The language and interpretation of the AAA is essentially what the argument that Williamson breached the contract rests upon. North Carolina’s version has very strict definitions for what constitutes an athlete, agent, an agency contract, etc. This framework is what Williamson’s team is working within to establish that the contract he initially signed is unenforceable.

The argument is that Williamson was unethically manipulated into signing a contract with Ford on account that she met with Williamson’s parents while he was still in college. If true, this would constitute “indirect contact,” which, under North Carolina’s AAA, would nullify the terms of the agreed-upon contract, thereby exonerating Williamson.

Team Ford

As for Ford’s lawsuit, her team took the liberty of filing in Florida which operates under a very different AAA. It is undeniable that Williamson breached the contract, however the legitimacy of the contract’s initial signing is up for debate, which Florida’s AAA will determine. While this location benefits Ford’s attorneys, timing has not been on their side. Williamson’s team appealed the lawsuit and the closure of the courtrooms due to coronavirus have impeded any progress her side had hoped to achieve by this point.

Moreover, given that Williamson filed first, Ford is at a disadvantage in that her team must wait until the conclusion of that lawsuit before appealing in the event that her team loses. She also maintains that Williamson was never “manipulated”, rather that he signed both willingly and voluntarily. One of Ford’s attorneys wrote, “Williamson is an adult male of high intelligence with exceptional business acumen. He is acutely cognizant of his value as a basketball superstar and of his branding, marketability and earning potential.”

Postgame Analysis

Because both sides unsuccessfully attempted to have the other’s case thrown out, each lawsuit will proceed in its respective state. In a vacuum, the way the contract should have been written would have included an arbitration clause, in which case, this information would have likely been kept private. However, the potential endings for this dispute include everything from a quick settlement to a full-scale trial.

The language of each state’s AAA contains enough ambiguity that effective litigation will play a crucial role in hashing out the interpretation of the above issues. It is likely that when the North Carolina-based lawsuit does eventually play out it will favor Williamson given the state’s AAA structure. However, it is equally as likely that Ford’s lawsuit in Florida’s system will yield a positive result for her and her team.

Given the complexity of this case and the wide-ranging possibilities of its conclusion, a “fight-to the death,” so to speak, would probably be a zero-sum game. Beyond just lawyer’s fees, which will quickly run up the expenses on both sides, it is hard to imagine Williamson, Duke, Nike and whomever else may be involved allowing this story to drag out in the headlines. Expect this case, like many other litigations, to end in a quiet, albeit Zion Williamson-size settlement.

COVID-19’s Impact on Sports Broadcasting and Salaries

It’s been just over two weeks since the last live broadcast of a professional sporting event and the effects are rippling through the world of sports business. COVID-19’s arrival and subsequent spread across the United States prompted the suspensions of the NBA’s, NHL’s and XFL’s seasons, as well as the delay to the start of the MLB season and countless other disruptions throughout sports. Much like almost every other area of the U.S. economy, sports have taken an enormous hit and while fans and organizations alike are eager to see their favorite athletes return to competition, it is uncertain as to when they will be able to safely, and lucratively, do so.

Between the timing of COVID-19’s lockdown on U.S. sporting events and the ambiguous 2-to-6 month timeframe medical experts are forecasting for a full recovery, each league has tailored its own plan in response to sudden halt of play. Below is a quick summary of just a few of the major sporting organizations’ financial and/or scheduling proposals.

NBA: After announcing that players would receive full salaries on the April 1st due date, the NBA announced earlier this week that it would be reducing the pay of 100 of the leagues’ highest-paid executives by 20% for the duration of the coronavirus crisis. Moreover, the league has extended its credit limit to $1.2 billion for added flexibility in covering its coming expenses. While there is no set plan on when play for the current season will resume, league commissioner Adam Silver has insisted that regardless of timeline, the league would prefer to salvage some portion of the season and crown a champion for the 2019-2020 season. Among the avalanche of proposals of how to “save the season,” Atlanta Hawks CEO Steve Koonin, recommended permanently pushing back the start date of the NBA season to December and concluding with the NBA Finals in late summer, given the current season would optimistically end in August or September. Moreover, Brooklyn Nets point guard Spencer Dinwiddie tweeted out an interesting idea in which the NBA season would resume with a March-Madness style tournament involving all 30 teams.

MLB: The MLB reported this week that it had reached an agreement with the MLBPA on a loose framework of financial and scheduling logistics regarding the upcoming season. Perhaps the most shocking news was the revelation that IF the season is cancelled, players would receive the same amount of service time they received the season prior. This means that players with a year remaining on their contract, such as recently-acquired outfielder Mookie Betts, will hit free agency in 2021 without ever playing a game for the Los Angeles Dodgers who traded valuable assets for his services this year. Also, in the event that the season is cancelled, the MLB made it clear that players would not be able to sue for full salaries, however all players will be receiving a $170 million advance over the next two months. Despite these insurance measures, Commissioner Rob Manfred is hopeful that the MLB resumes play this summer, while he acknowledges that a full 162-game season is likely off the table. The reported contingency plan includes 1) beginning the season once there are no bans on mass gatherings that limit the ability to play in front of fans, 2) no travel restrictions, 3) medical experts determine that games will not pose a risk to the health of teams and fans. Moreover, if/when play resumes, the MLB noted that doubleheaders, a 14-team playoff format, and a neutral, warm-weather location for a November/December World Series are all in serious consideration.

NHL: While the NBA and MLB have quickly pivoted to rescuing their seasons, the NHL has not matched their optimism nor their speed in announcing contingency options. The league has not yet united around a financial agenda, yet both the Dallas Stars President and General Manager have taken voluntary 50% pay cuts. Meanwhile, the Boston Bruins and Montreal Canadiens announced layoffs as their own responses. While many see the cancellation of the rest of the season as the most realistic scenario, others have proposed a timeline similar to that of the NBA with the season picking back up in July/August and ending in August/September. Most notably, star players Alex Ovechkin and Sidney Crosby said that they would be “OK” with skipping straight to the playoffs if and when the season is able to resume, however they acknowledged the question of fair play and keeping the integrity of the sport.

XFL: I really feel for the XFL here. Riding a strong start in its inaugural season, the decision to not only suspend but cancel its remainder must have been decisively more difficult than those of other sporting leagues. The XFL was exactly at the midway point of its season having played through five weeks of its ten week schedule (excluding a two-week playoff in April). Though the eight-team football league had been dealing with declining ratings following its initial excitement, it immediately committed to paying its players’ full salaries and returning refunds or credit to its ticket holders. The XFL also announced that it will be back for a 2021 season and has great reason to do so. Ten former XFL players have already signed contracts with NFL teams for the upcoming season with more likely to follow in the coming days.

MLS: Major League Soccer was in the midst of only the second week of its season when it made the decision to postpone its season for 30 days. As updates of the spread across the U.S. have come in, the Commissioner Don Garber pushed the deadline back to May 10th, but will likely have to do so again under the current climate. Garber, however, is adamant that when soccer returns, the MLS will play a full season’s worth of games even if it means extending the calendar of the season. While there has not been an unanimous response to salary fulfillment across the MLS, one team came under scrutiny for sending an email to its game day staff suggesting they file for unemployment while naming corporate partners who might be hiring.

BIG3…?: I was hesitant to include the Big3 in this rundown of major sporting organizations, however its response to the coronavirus crisis may just elevate its status to that of the leagues listed above. For those who are not familiar with the Big3, it is a 3-on-3 basketball league composed of former NBA and college players such as Amar’e Stoudemire and Joe Johnson. The games are played half-court style with rule oddities that differentiate it from the NBA such as the addition of a 4-point shot and first team to score 60 points as the winner. As for the coronavirus’ impact on the BIG3, originally games were supposed to be played around the country in Memphis, New York and more. However, BIG3 co-founder Ice Cube announced yesterday that the organization will be partnering with the producers of reality TV show “Big Brother” in efforts to air a basketball tournament-reality TV show hybrid to fill the significant void in the sports world. It was reported that the tournament will feature 16-22 players, who be previously tested for COVID-19 and if selected, will be quarantined in a house together for the duration of the season with anyone who breaks quarantine being kicked from the house. It was also reported that some of those selected may even in former top women’s basketball players.

The idea is that the three-person teams would shuffle teams each round and once an individual player accumulates three losses they would be eliminated from contention. Then, the final three players would win cash prizes with the top prize being at least seven figures. The goal is to air the tournament starting in May and given the current sport’s climate, or lack thereof, the BIG3 will surely see a large opportunity to scoop up hungry sports fans across the country craving any form of live competition. There is no word yet on whether or not these fans will be able to bet on these contests, however given the nationwide craving to slowly restart the economy, it wouldn’t a surprise to see Las Vegas announce the lines once the details of the BIG3’s proposal are ironed out. In any event, every other aforementioned league is looking at June start/resume dates in their most optimistic scenarios, so at the very least the BIG3 has at least a month to show us all what it has to offer, and hopefully hold us sports fans over until our favorite teams are back in action.