What Do Sports Agents Owe Their Clients?

City and state legislatures are taking on streaming giants like Netflix, Hulu, and Disney+ in an In the current case of Nerlens Noel v. Richard Paul and Klutch Sports, Nerlens Noel, an NBA player entering his 9^th season, alleges his former agent, Rich Paul, breached his fiduciary responsibility to Noel. Noel claims Paul’s conduct as his agent attributed to Noel signing contracts well below his market value throughout their professional relationship; missing out on $58 million.

The Plight of Nerlens Noel

The Philadelphia 76ers drafted Noel with the sixth pick of the 2013 NBA draft.¹[1]Compl. at 3, Nerlens Noel v. Richard Paul and Klutch Sports Group, LLC, No. DC-21-11373, 2021 WL 3772742 (N.D. Tex. Sept. 2021). In 2017 Noel was traded to the Dallas Mavericks.²[2]Id. Happy Walters represented Nerlens Noel as his agent as he headed into free agency. Walters negotiated with the Dallas Mavericks on behalf of Noel for an offer of four-years for $70 million.³[3]Compl. at 3, Nerlens Noel v. Richard Paul and Klutch Sports Group, LLC, No. DC-21-11373, 2021 WL 3772742 (N.D. Tex. Sept. 2021). In the summer of 2017, Ben Simmons, a Klutch Sports and Rich Paul client, introduced Noel to Rich Paul.⁴[4]Id. at 4. Noel asserts that Paul convinced Noel to leave Walters and join him by telling Noel that he could get him a maximum contract.⁵[5]Id. Convinced by Paul, Noel terminated his relationship with Walters and signed a Standard Player Agent Contract with Rich Paul.⁶[6]Id. Shortly after signing this contract, which officially made Paul Noel’s agent and created an express fiduciary on the part of Paul, Noel alleges Paul advised Noel that best next steps would be to end negotiations with the Mavericks and sign a qualifying offer for a one-year deal for $4.1 million with the Mavericks.⁷[7]Id.

After an unfortunate injury-plagued 2017-18 season, Noel entered free agency as an unrestricted free agent.⁸[8]Id. at 6. However, Noel alleges Paul and Klutch Sports did not present any potential opportunities for any long-term or significant contracts for the upcoming season.⁹[9]Id. Instead, Noel claims he found out on his own of interest in a potential contract from the Oklahoma City Thunder.¹⁰[10]Id. As a result, Noel connected with Russell Westbrook and Paul George on his own, who both played for the Thunder, and signed a two-year minimum contract for $3.75 million.¹¹[11]Id.

Noel played one year under the original Thunder contract and entered the next free agency period, when the same issues from the previous free agency period recurred.¹²[12]Id. News came out claiming Noel agreed to a multi-year contract with the Thunder, which resulted in the lack of other NBA teams pursuing Noel in their upcoming conversations. Noel alleges that this news was false.¹³[13]Id. Noel asserts he learned Paul was not returning calls from other teams about his availability.¹⁴[14]Id. Noel signed another one-year league minimum contract with the Thunder for the 2019-20 season.¹⁵[15]Id. Noel, concerned about Paul’s neglect towards his career, considered terminating his relationship with Klutch Sports.¹⁶[16]Id. at 8. Klutch Sports allegedly convinced Noel that Oklahoma City had a three-year deal valued between $7 and $10 million per year that the team was planning to offer.¹⁷[17]Id.

The 2019-20 season ended, and Noel did not receive any news of impending offers.¹⁸[18]Id. Noel alleges he found out again that teams were attempting to reach out to Paul about Noel’s availability, but Paul was again not taking those calls.¹⁹[19]Id. Leon Rose, the President of the New York Knicks, allegedly reached out to Noel’s friend and advisor to talk to Noel about joining the Knicks.²⁰[20]Id. Noel signed a one-year deal with the Knicks on his own, claiming, Paul, yet again, did not help in securing this deal.²¹[21]Id. These events led to the downfall of the Noel-Paul relationship, terminating around December 2020.²²[22]Id.

Fiduciary Duty: A Relationship Built on Trust

Agents owe their clients, or principals, a fiduciary duty. Principals are owed a duty of care, loyalty, good faith, and prudence under their contractual working relationship.²³[23]Restatement (Second) of Agency § 387 (1958). In short, agents must act in a way that will benefit their principals. Paul, as an NBA agent, is a fiduciary under the league’s Standard Player Agent Contract.²⁴[24]Compl. at 11, Nerlens Noel v. Richard Paul and Klutch Sports Group, LLC, No. DC-21-11373, 2021 WL 3772742 (N.D. Tex. Sept. 2021). Therefore, Paul’s advice and conduct needed to show good faith, reasonable efforts to advance Noel’s career. Principals are also entitled to damages when their agent breaches this fiduciary duty.²⁵[25]Restatement (Second) of Agency.: Liability for Breach of Contract § 400 (1958). The logic behind this strict standard is to protect the interests of the principal. The relationship fails if both parties do not fulfill their duties under this standard, and if there is a lack of trust in the other party’s expertise or professionalism. Players enter the relationship believing the agent is diligent in communicating with teams and negotiating their deals. This trust is essential in their relationship, especially the athlete’s trust in the agent’s judgment in career-altering decisions, such as the decision to walk away from a multi-year and millions of dollars’ worth of contracts, with the knowledge and ability to pursue a more significant contract the following offseason.

In this case, Noel claims Paul did not act in line with the fiduciary standard he is held to as Noel’s agent. Their relationship deteriorated due to Paul’s decisions, or negligent lack thereof, such as not returning calls of potential team offers, or irresponsible decisions during contract negotiations due to the failure to put the client’s best interest first. This resulted in distress to Noel’s career.

Despite the allegations of negligence against Klutch Sports and Rich Paul, it’s important to remember that decisions to forego the financial security of a current offer in anticipation of a better offer often occur in professional sports. Agents are responsible for advising their clients based on the information they have at hand, yet agents cannot be held accountable for not accurately predicting the future. As the market value for athletes fluctuates year-to-year, due to numerous factors, many of which are outside the agent’s or athlete’s control, a balance must be found between the athlete’s trust in their agent’s knowledge and expertise to make the best decision for their client, with the agent following their fiduciary duty of always putting the client first and to not act in a negligent manner.

Looking Ahead

Rich Paul filed a motion to dismiss the case in favor of private arbitration pursuant to Section 7 of the Standard Player Agent Contract.²⁶[26]Id. at 10. The amount that might be awarded through this process rests heavily on the willingness of NBA players, coaches, and team executives to corroborate Noel’s allegations. Furthermore, these allegations represent a strong message to the league, and professional athletes in general, on the importance of good faith in agency relationships. Athletes will continue to take risks, such as signing one-year contracts to prove their skills and land a significant contract the following season, but a case like this may make athletes take extra measures in their evaluation process and proceed with caution. The primary effect this case will hopefully result in is an increased focus on the part of the agents to avoid neglecting their clients.

Written by: Sedomo Agosa
Sedomo is a 2024 J.D. Candidate at Brooklyn Law School