We have talked before about the intersection of sports and allegedly unfair trade practices.
In 2011, Quinn switched sports agents. That switch prompted a lawsuit in federal court in Greensboro. Quinn’s former agent (Champion Pro Consulting Group) accused Quinn’s current agent (Impact Sports Football) of unfairly stealing Quinn as a client. The lawsuit features a claim under N.C. Gen. Stat. § 75-1.1.
In July of this year, Judge Osteen granted summary judgment against this 75-1.1 claim.
This post reviews the summary-judgment decision—a decision that considers, among other things, whether conduct that induces the termination of an at-will business relationship violates section 75-1.1.
Quinn signed an at-will contract with Champion Pro in December 2010, when he was still at UNC. The contract called for Champion Pro to help Quinn prepare for the NFL draft.
The Rams selected Quinn in the April 2011 draft. Just three months later, Quinn terminated his contract with Champion Pro and signed with Impact instead. As part of the deal, Impact gave Quinn a $100,000 advance. The change in agents followed several in-person meetings between Impact and Quinn.
Having lost a star client, Champion Pro sued Impact. Champion Pro asserted a section 75-1.1 claim based on three theories. Specifically, the complaint asserted that:
- Impact violated North Carolina’s Uniform Athlete Agent Act and the rules of the NFL Players’ Association by using intermediaries, called “runners,” to recruit Quinn while Quinn was at UNC;
- the $100,000 advance unfairly induced Quinn to switch agents; and
- Impact recruited Quinn in an effort to retaliate against Champion Pro for past conduct.
The Summary-Judgment Decision
Judge Osteen concluded that even if Champion Pro were right on the facts, those facts would not violate section 75-1.1. He reached this conclusion on all three of Champion Pro’s 75-1.1 theories.
The “Runner” Theory
Judge Osteen’s ruling about Champion Pro’s “runner” theory turned on timing:
- When Quinn signed with Champion Pro in December 2010, Quinn forfeited any remaining eligibility to play college football. If Impact used “runners” before December 2010, those “runners” had no effect: Quinn initially signed with Champion Pro, not Impact.
- If Impact used “runners” after Quinn signed with Champion Pro, those “runners” did not violate any North Carolina statute, because Quinn was no longer an amateur athlete. At that point, the Athlete Agent Act would not apply.
Whether Impact’s use of “runners” violated an NFL Players’ Association rule didn’t change the analysis: Judge Osteen held that the violation of a private standard (like a union rule) is not a per se violation of section 75-1.1. This ruling followed a 2011 decision of the North Carolina Court of Appeals to the same effect.
Finally, Judge Osteen concluded that, as a direct-unfairness claim, the “runner” theory does not violate any public policy, so it fails as a matter of law.
The Advance-Payment Theory
Judge Osteen next decided that Impact’s $100,000 advance to Quinn did not violate section 75-1.1. This decision rested on three reasons.
First, Judge Osteen considered whether the advance amounted to a “substantial aggravating circumstance” — the type of circumstance that can convert a breach of contract into a section 75-1.1 violation.
The opinion, however, does not say why the court viewed the alleged 75-1.1 violation through this lens. Champion Pro and Impact, after all, had no contractual relationship. Perhaps Judge Osteen was really asking whetherQuinn breached a contract with Champion, and, if so, whether Impact helped aggravate that breach. Quinn and Champion Pro, however, had only an at-will agreement; thus, the termination was allowed by, and not in breach of, that contract.
Second, Judge Osteen addressed the absence of any business relationship between Impact and Champion Pro. Section 75-1.1, the court wrote, is meant to maintain ethical standards between parties who transact business. This case involved the opposite scenario: Champion Pro and Impact were competing for business, not transacting business with each other. (Good thing for them from an antitrust perspective.)
Third, Judge Osteen pointed out that, because Impact had a business justification for paying the advance, Champion Pro could not sue Impact successfully for tortious interference. It would be bizarre for North Carolina public policy to praise the advance as lawful competition for tortious-interference purposes, yet condemn the same conduct as an unfair trade practice. (Even if Champion Pro had a tortious-interference claim, moreover, whether Impact’s conduct also violated section 75-1.1 would have depended on North Carolina public policy.)
The Retaliation Theory
Finally, Judge Osteen quickly dispensed of Champion Pro’s theory that Impact violated section 75-1.1 because Impact had a retaliatory motive. Judge Osteen noted that, even if Impact had such a motive, Impact’s actual conduct was justified as lawful competition. This reasoning stands in some tension with a recent decision of the U.S. District Court for the Eastern District of North Carolina.
Champion Pro’s Two-Minute Drill
Champion Pro has appealed to the Fourth Circuit; briefing there is about to begin. In view of the many section 75-1.1 issues that Judge Osteen addressed, the Fourth Circuit might have the opportunity to issue a significant decision about unfairness claims between business competitors. In particular, what transforms conduct from lawful competition into an unfair trade practice? Perhaps more importantly, what sources of law and policy inform that analysis?
The answers to these questions stand to affect many cases. As Champion Pro shows, after all, the success of a multi-faceted section 75-1.1 claim often turns on the analytical approach that a court applies to each facet.