[MUSIC] Thank you for being with us through lesson three. We've now been through the representation phase of the professional athletes career, and we're also going through the agency selection process here today in lesson three. I want to welcome back Ricky Valente to talk to us about a hypothetical. Thanks Ricky for being back with us. >> Thank you very much for having me. >> Let me give you a not so hypothetical. We see agents being fired, being rehired we see athletes moving on. We see them stay with the same agency forever. Let me give you a Johnny Manziel hypothetical. Let's say he started with RLMR then he wanted to start his own agency maybe with his dad for example what would happen if the rep k were properly drafted to the trailing commissions on those deals that had been executed during the term that Johnny was represented by RLMR? >> Well those deals, obviously depending on the agreements the commissions will still go to LRMR since they were substantially negotiated and completed by LRMR, regardless of whether or not Johnny left. >> Okay, supposing let's go with that tough case we talked about in negotiating the representation agreement. Material terms have been discussed, perhaps some agreed, others not. Now Johnny on that deal has decided to leave and start his own agency with his father, what would happen to those commissions are we talking about a quantum Mare-Wood kind of resolve? >> Well in that scenario you would obviously have LRMR claiming that they laid the groundwork, that they created the relationship necessary to put the deal in place. Whereas since it was not completed quite yet you would have Johnny and his father, who would be trying to finish the deal and therefore cut LRMR out of the agreement and the commissions. >> And perhaps just pay them some sort of hourly rate for their trouble, for sourcing the deal. Going back to the drafting of the rep k, the representation agreement, how important would it have been for LRMR to have an exclusivity provision and what would that mean? >> Well, if they had an exclusivity provision with appropriate wording in terms of extensions and modifications to the initial agreements Johnny and his father could be out of luck in terms of having to pay LRMR those commissions and continuing to pay those commissions in the future. Now, day one, when I'm just on my own with my dad Johnny amends, but not materially, his major deals. Who would commission that? Is that enough of a change, even if you had an exclusivity clause? >> Yeah, if it was not a material change, then if it were up to me, I would still say that LRMR has the rights to those commission payments. >> How important is the territory clause, as this agency split happened? Supposing Johnny had said, oh, you only have me, in the US, and now he and his dad want to start something extra territoriality in Europe or China with LeBron. >> Well, in that case that would be an extremely good way of getting around the red tape, because it would only apply to the US. So if the territory, and they were looking to expand internationally, isn't covered then it sounds to me as though they found an appropriate loophole to cut out LRMR. >> Would you recommend in drafting this clause based on what you've learned when you were the star student in my course an ADR clause, an alternative dispute resolution clause, rather than going to court to fight out any of these trailing commission issues. >> Yes I would always recommend an ADR clause in that sense, because if a case like this were to go public in court players other than Johnny might be hesitant to sign on with LRMR if they see the appropriate paths that are taken there, whether or not LRMR tries to then smear Johnny and things of that nature to maintain those commissions. I would think twice then about signing up to join up with that agency. >> You talk a lot about conflict of interest in lessons two and three. What if Johnny at the end of the day, hypothetically, were to say look, LeBron is a part owner of LRMR. I feel like there's been this conflict of interest. You haven't represented me so well as I leave to start my own agency with my Dad. What kind of a response could LeBron and LRMR make to that not-so-hypothetical charge? >> Well in that exact scenario it sounds to me like Johnny was on notice, and that he understood that Le, LeBron was a partial owner in LRMR to begin with. So in that case, it would, the onus would be on Johnny for not understanding the setup of the scenario. >> Is that why you would recommend as the best practice that Johnny have an attorney review his agreement, his representation agreement, before he signed it? >> I would say that I should, or that Johnny should have a attorney review everything, and not just that. >> Because it's efficient to disclose that kind of conflict of interest. LeBron owns part of the agency. Johnny knows coming in, each side has had its attorneys review. What if there's a failure to disclose a potential conflict of interest? Could that result in a voiding aganicio, voiding from the beginning, the agreement if there's a material failure to disclose a fact going in that creates a conflict of interest? >> Now, in that scenario, it would sound to me like Johnny has a much better case. And it would sound that the agreement could be voided in that sense. >> Thanks, Ricky, for playacting with us again. Thanks for being with us. We've now been through lessons two and three. We've had the professional athlete sign a representation agreement, select an agency, and now he's leaving the agency in this hypothetical. And we see what happens to those commission streams depending on whether the agreements were executed during the term, substantially negotiated, or only sourced. We've reinforced the importance of the exclusivity clause, we've reinforced the importance of the ADR, Alternative Dispute Resolution clause, and we've also really honed in on the fiduciary duties. And a duty to disclose any conflict of interest that an agency might have. And the importance having attorney review before the athlete were to sign an agreement to make sure it's enforceable from the agency's side. So, thanks for being with us through this hypothetical as we wrap up lesson three and move on to the remaining lessons in the course. [MUSIC]
