NCAA REGULATIONS
The NCAA has promulgated rules to regulate agents and their relationship with student-athletes. The general rule states that "an individual shall be ineligible for participation in an intercollegiate sport if he or she ever has agreed (orally or in writing) to be represented by an agent for the purpose of marketing his or her athletic ability or reputation in that sport. Further, an agency contract not specifically limited in writing to a sport or particular sport shall be deemed applicable to all sports, and the individual shall be ineligible to participate in any sport." (NCAA Rule 12.3.1).
Obviously, the repercussions of violating an NCAA rule are serious. Without realizing it, an athlete can cost himself/herself eligibility and be prevented from competing in the future, simply by entering into an agreement with an agent.
There is no exception if the athlete enters into an agreement with an attorney to negotiate the student-athlete's professional contract. However, a student-athlete may secure advice from an attorney concerning a proposed professional sports contract if the attorney does not represent the student-athlete in negotiations for such contract. (NCAA Rule 12.3.2).
One purpose of the NCAA legislation is to protect student-athletes from unscrupulous agents while recognizing the need for legal advice to assist them in understanding and evaluating professional sports contract offers made to them while still having eligibility. An attorney or agent may provide advice to an individual regarding the merits of a proposed contract without jeopardizing the individual's amateur status, provided he or she has no contact with the professional sports organization and does not market the individual's athletic ability or reputation in a particular sport.
Despite the NCAA's efforts to monitor the participation of attorneys in advising student-athletes and not getting involved in negotiations of the professional contracts, attorney-agents have used the language of the rule to become actively involved in actual contract discussions with professional sports organizations. Some attorneys have asked professional sports organizations to communicate all contract offers to a particular student-athlete through them while at the same time insisting that they are not representing the student in contract negotiations. This is an obvious effort to circumvent NCAA rules and if caught, the attorney-agent risks punitive action against him/her, the student-athlete risks losing eligibility (or worse) and the member institution may face consequences as well (i.e. forfeit when an ineligible athlete competes in an intercollegiate athletic contest). An athlete's eligibility ends at the end of the last sports contest in the athlete's sport that is sanctioned by the member institution and as determined by the NCAA.
STATE LEGISLATION
Texas is one of several states that has enacted legislation to regulate athlete agents. Texas requires agents to register with the secretary of state's office. The secretary of state has the authority to monitor agents and enforce the legislation enacted to regulate athlete agents. Tex. Rev. Civ. Stat. Ann. art. 8871.
The Act defines an athlete agent "as a person that, for compensation directly or indirectly recruits or solicits an athlete to enter into an agent contract, professional sports services contract, or financial services contract with that person or that for a fee procures, offers, promises, or attempts to obtain employment for an athlete with a professional sports team." 1(a)(2).
An "athlete" is defined as an individual who:
"(A) is eligible to participate in intercollegiate sports contests as a member of a sports team of an institution of higher education located in this state that is a member of a national association for the promotion and regulation of intercollegiate athletics, or
(B) has participated as a member of such a sports team at an institution of higher education and who has never signed a contract of employment with a professional sports team." 1(a)(5)(A) and (B)
An athlete agent must register with the Secretary of State before the athlete agent may contact an athlete, either directly or indirectly, while the athlete is eligible. Further, a registered agent must make contact with athletes in accordance with the Act. An applicant must submit a written application with the Secretary of State and remit an annual registration fee. The application seeks information about the professional background of the individual, a description of the applicant's formal training, practical experience and educational background relating to the applicant's professional activities as an athlete agent, and the names and addresses of anyone with a financial interest in the operation of the business of the athlete agent. The exception as to attorneys states that an attorney is not required to state the names and addresses of persons who may be financially interested as members of a law firm or professional corporation but who do not become involved in the business of the athlete agent.
If the athlete agent enters into a financial services contract with an athlete, he/she must provide a surety bond in the amount of $100,000, payable to the state and deposited with the Secretary of State. The athlete agent must maintain the bond two years after the date on which the athlete agent ceases to engage in the provision of financial services for an athlete. Attorneys are not exempted from this requirement. There is no bond requirement for an athlete agent who enters into an agent contract only.
Agent contracts typically involve the negotiation of the player performance contract with the professional sports organization. The attorney agent has direct contact with the team and actually negotiates the terms of the contract. Fees for this specific service must also be set out in the contract.
The financial services contract provides that the agent will also invest the monies received by the athlete from the professional sports organization for signing the contract and playing for the sports organization. The agent seeks out investment opportunities and makes recommendations to the athlete. Often, the athlete has little knowledge of finance or investments and must rely on the agent for guidance and advice. The contract must also set out the fees for each financial service offered and performed by the attorney agent. Finally, an annual accounting must be provided to the athlete setting out all services rendered and investments made.
Agent contracts or financial services contracts used by a registered athlete agent must be on a form approved by the Secretary of State. Each contract must set out the fees and percentages to be paid by the athlete to the athlete-agent along with the services to be rendered. The contract must then be filed with the Secretary of State. Each agent contract or financial services contract must include the following statements printed in at least 10-point type, boldfaced, capitalized, underlined, or otherwise set out from the surrounding written material so as to be conspicuous:
NOTICE TO CLIENT
(1) THIS ATHLETE AGENT IS REGISTERED WITH THE SECRETARY OF STATE OF THE STATE OF TEXAS. REGISTRATION WITH THE SECRETARY OF STATE DOES NOT IMPLY APPROVAL OR ENDORSEMENT BY THE SECRETARY OF STATE OF THE COMPETENCE OF THE ATHLETE AGENT OR OF THE SPECIFIC TERMS AND CONDITIONS OF THIS CONTRACT.
(2) DO NOT SIGN THIS CONTRACT UNTIL YOU HAVE READ IT OR IF IT CONTAINS BLANK SPACES.
(3) IF YOU DECIDE THAT YOU DO NOT WISH TO PURCHASE THE SERVICES OF THE ATHLETE AGENT, YOU MAY CANCEL THIS CONTRACT BY NOTIFYING THE ATHLETE AGENT IN WRITING OF YOUR DESIRE TO CANCEL THE CONTRACT NOT LATER THAN THE 16TH DAY AFTER THE DATE ON WHICH YOU SIGN THIS CONTRACT.
The Act also provides for a penalty if a registered or unregistered athlete agent commits a violation. The secretary of state may assess a civil penalty of an amount not to exceed $25,000. In addition, if a student-athlete sues an athlete agent for a violation of the Act, the student-athlete may recover a refund of any consideration paid to the athlete agent on an athlete's behalf and reasonable attorney's fees and court costs incurred by the athlete in the litigation.
An institution of higher education that is adversely affected by the activities of an athlete agent who violates the Act may sue for damages. An institution may sue if, because of the illegal conduct of the athlete agent, it is disqualified or suspended from participation in intercollegiate sports contests by the NCAA and as a result the institution is damaged. The elements of damages include loss of revenue from media coverage of sports contests; loss of right to grant athletic scholarships in the sport affected; loss of right to recruit athletes; or other adverse financial impact. An institution that prevails may recover actual damages, exemplary damages, costs of court; and reasonable attorney's fees.
In Texas, member institutions of higher education provide an opportunity for agents to meet and interview student athletes on campus. Most institutions send out lists of student athletes eligible for the sport's draft to those agents registered with the secretary of state. The agent can then select which athletes he/she wishes to interview, the athlete is given the final approval, and the interview is set up on campus. Some institutions also provide information forms to be completed by the athlete agent and kept on file by the athletic department for use by student-athletes as they consider agent representation.
Member institutions have attempted to provide the student-athlete with as much information about the process as possible. Many larger colleges and universities have established professional sports counseling panels. Typically, the panels are made up of a member from the athletics department staff, a professor from the business college and if available, a law professor. The purpose of the panel is to assist the athlete in the draft process. The panel advises the student-athlete about a future professional career, provides guidance in securing a loan for the purpose of purchasing insurance against a disabling injury and reviews the proposed professional sports contract. Some panels have gone so far as to participate in agent interviews with the student-athlete and make recommendations on agent representation.
Most professional sports have players' associations that are the exclusive bargaining agent for its members. Also, most require agents to register with the association. Some require fees, others require player designation and certification by the agent. None of the associations have any minimum qualifications for an agent.
The NCAA and member institutions are concerned about the ethics of agents in all sports. Campuses are besieged with agents attempting to contact student-athletes. The horror stories of agents contacting athletes in their hotels while on the road, being in the dorms, following them into locker rooms or meeting them after games are not fiction. In addition, families play a role as recipients of gifts and money from agents trying to influence a student-athlete's decision to sign with the agent. Agents are contacting players at younger and younger ages. The NCAA is trying to resolve the problem of agents invading the amateur arena. Committees have been formed to discuss how unscrupulous agents can be discouraged from contacting student-athletes and how student-athletes can be educated to avoid situations that could cost them their eligibility.
Administrators, coaches and agents are currently involved in a dialogue to solve these problems. The NCAA and member institutions want to protect the student-athlete and the concept of amateurism, while agents want an opportunity to contact student-athletes and offer their professional services when the student-athlete advances to professional sports. The dialogue continues.
CONCLUSION
In the meantime, attorney-agents can set the proper example by remembering that a student-athlete is a potential client, entitled to competence and professionalism in his/her contact with the attorney-agent. The attorney-agent should approach the representation of a student-athlete in his/her professional career with the same care as any other client. Education by the attorney-agent is crucial for proper representation of a student-athlete. Working within the rules can protect a student-athlete and preserve an athletic career on the amateur level and reflect on the integrity of the athlete and the attorney-agent on the professional level.
In the course of our general practice, we sometimes learn that our clients are not as sophisticated as they might wish to believe. Certainly, a student-athlete is no different. In fact, they may be less sophisticated and look to the attorney-agent for more guidance and counseling than other clients. Often, the manner in which an attorney-agent negotiates a performance contract can have an effect on the way the sports organization views the athlete. The attorney-agent needs to understand the impact he/she can have on the client and the client's amateur and professional career. After all, if a student-athlete loses his/her eligibility in college sports, the scholarship is also lost. With it, the opportunity to obtain an college education is jeopardized. The professional career then becomes even more important. To the client, professional sports is his/her livelihood and that must be respected by the attorney-agent.
A good agent can help a player in many ways. An agent can assist in determining the value of a player's services, persuade a club to pay the player that value, design the package of compensation to suit the player's needs, protect the player's contractual rights and other rights under the sport's basic agreement and rules, locate a new club for a free agent or suggest a trade for a player under contract. The agent can aid his clients to identify opportunities to earn income from other sources; including endorsements, speeches and commercials. The scope of representation might include counseling the player about public image, the organization's perception of him/her and post-career security, both financial and occupational. In addition, issues may arise concerning medical care, worker's compensation matters and drug or alcohol treatment programs. Athlete representation truly lends itself to the "counselor" aspect of an attorney's practice.
Over the past eight years, Sherry Rasmus has developed a practice in Sports Law representing professional baseball players as an advisor and agent. She has also represented athletes in worker's's compensation matters and maters unrelated to their playing career. She is a Registered Athlete Agent. Additionally, she has represented clients in cases involving premises liability, personal injury, property damage and casualty, and insurance coverage issues.
Rasmus received her undergraduate degree from The University of Texas at El Paso in 1982, and her J.D. from Texas Tech School of Law in 1986.
In 1998 she opened her own firm, The Rasmus Firm, providing general legal services and representation in tort litigation and professional sports contracts.
Rasmus was Chair of the Greater Austin Sports Foundation in 1994 and worked actively to bring a minor league baseball team to Greater Austin. She has served on Organizing Committees for Texas Special Olympics Summer Games, is an alumnae of Leadership Austin and has served on boards of civil community organizations.
Endnotes
1. National Collegiate Athletic Association, Rules and Regulations: 12.3.1, 12.3.2.
2. Tex. Rev. Civ. Stat. Ann. art. 8871
3. Tex. Civ. Prac. & Rem. C. ch. 131 et. seq.
4. Robert H. Ruxin, An Athlete's Guide to Agents, Jones and Bartlett Publishers, 1993, Third Edition.