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SBJ/June 4 - 10, 2001/No Topic Name
Steinberg sues former partner Dunn
Published June 4, 2001
In what could prove to be one of the nastiest breakups in the sports business, football agent Leigh Steinberg sued his long-time protégé, David Dunn, last week, seeking unspecified damages and a court order to stop Dunn from taking any of Steinberg, Moorad and Dunn's 86 NFL clients.
Dunn and Brian Murphy, a lawyer for the firm who left with Dunn and is also named in the suit, have "boasted" that as many as 80 percent of the firm's football clients have fired Steinberg, said Wayne Smith, attorney for Steinberg, Moorad and Dunn, which is owned by Assante Corp.
Smith maintains that Dunn is prohibited from representing former clients of the firm under a five-year employment agreement. Smith will seek an injunction to stop Dunn from soliciting clients of Steinberg, Moorad and Dunn or taking commissions that are due the firm, he said.
But Gerald Sauer, Dunn's attorney, said the employment agreement his client signed isn't binding. "Under the case law in [California], David Dunn has an absolute right to compete against Steinberg, Moorad and Dunn," he said. He denied that Dunn was taking any commissions due the firm.
"We have attempted for several weeks to resolve this dispute, and it is unfortunate that they have chosen to bring this matter into the public arena," Sauer said. "We are hopeful we will get this resolved quickly, once the emotions in this divorce have died down. In the event we don't, our side of the entire story is going to come out."
But Smith indicated that Steinberg, Moorad and Dunn is ready for a drawn-out battle, claiming that Dunn mistakenly thought that Steinberg, Moorad and Dunn wouldn't sue him because of the damage it would cause the firm. "His position is that nobody wants to air this publicly and ultimately he would win in a bluffing contest," he said.
Smith acknowledged that the lawsuit and defection of Dunn would likely cause the firm, which has been the most dominant NFL representation firm in the United States, to lose clients. "Other agents are licking their chops," he said.
Steinberg, Moorad and Dunn stated in a lawsuit that it had received "more than nine purported termination letters" from clients, including Drew Bledsoe, Corey Dillon, Darren Woodson, Jevon Kearse, Derrick Rodgers, Reggie McGrew and Amani Toomer.
Sauer would not say how many clients were going to sign with Dunn's firm, Athletes First, but said the number was "significant."
Steinberg, Moorad and Dunn sued Dunn after weeks of negotiations to keep him with the firm broke down, Smith said. The company had been negotiating with Dunn since he sent a termination notice in February, and at one point was going to send out a press release naming Dunn a co-director of Assante's football division.
Assante CEO Martin Weinberg told SportsBusiness Journal in March that reports that Dunn left the company and took a significant number of football clients with him were "not true" and "a fairy tale."
Assante spokeswoman Deanna Allen said that at the time Weinberg made those statements, Dunn had orally agreed to a re-negotiated employment contract to stay with Assante, but that he never signed that contract. Sauer disputed that Dunn ever agreed to stay.
Dunn in March denied that he had left or was leaving and attributed the reports to rival agents spreading rumors.
Sauer said Dunn made the comments "at a time when it was very tumultuous and he was operating under a threat of litigation."
Smith said the negotiations involved Dunn wanting more money, but Sauer disputed that. "At the heart of this dispute lies David Dunn's belief on the right way to handle your clients and take care of them," Sauer said.
Rival agents have said that Dunn in recent years has increasingly been involved in preparing contracts for Steinberg, Moorad and Dunn's clients.
But Smith said Dunn gained access to the clients through Steinberg's name and reputation and was paid to maintain relationships with NFL clients.
"He got a $2 million signing bonus and after signing that [employment] agreement he appears to been securing those relationships for himself," Smith said. "When he felt he was sufficiently attached to those athlete clients, he decided to bolt."
In addition to the lawsuits, Smith said Steinberg, Moorad and Dunn may file a grievance with the NFL Players Association accusing Dunn of tampering with the company's clients. Smith said some clients told Steinberg that they were asked by Dunn to sign resignation letters.
To prove a violation of NFLPA regulations prohibiting agents from soliciting other agents' clients, as a practical matter, the athlete involved must testify in a proceeding, according to Richard Berthelsen, NFLPA general counsel.
Smith said, "We don't want to trade off our athletes or put them in the middle." But he added, "This is a guy who worked for us who was paid to maintain relationships with 86 of our clients and delivered to us letters saying that a significant number have jumped ship. I don't think he can argue that all of those athletes called him."
Rival NFL agents said the breakup of the biggest NFL player firm was likely to cause an uproar in the business. One prominent rival agent likened the dozens of NFL clients to children in a divorce "who are going to be asked to choose between Mommy and Daddy."
But Berthelsen said players would not be harmed by the dispute. "These guys are not going to go unrepresented and it is not going to affect negotiations with NFL clubs," he said. "The club is going to negotiate with the party the player tells them to deal with. Any dispute about fees is between the agents."
Assante hoops chief Fegan hit with suit
BY LIZ MULLEN
A former assistant for Assante Corp. basketball head agent Dan Fegan is suing his former employer, claiming that Fegan reneged on promises to make him a partner and pay him $200,000.
Meanwhile, a National Basketball Players Association source told SportsBusiness Journal that Kenyon Martin, the No. 1 pick in the 2000 NBA draft, sent a notice to the union in late May that he had terminated his relationship with Fegan, who was his agent. Sources said that the assistant who filed the lawsuit, Brian Dyke, was involved in Fegan's signing of Martin.
Fegan denied that Martin had fired him and said Dyke's lawsuit against him and Assante Corp. is without merit. Another source indicated that Martin was expected to rescind the termination notice.
"Brian Dyke has solicited our clients, in direct violation of National Basketball Players Association rules and non-solicitation laws," Fegan said in a statement to SportsBusiness Journal. "I am hurt and I feel betrayed by his actions."
Jeffrey Winikow, Dyke's lawyer, said, "Players have a right to choose their own representatives, and if there are any players who would rather be represented by Brian Dyke than Dan Fegan, that is the players' choice."
The lawsuit, filed in May in Los Angeles Superior Court, states that Dyke personally recruited several first-round draft picks who signed with Fegan's agency, Fegan & Associates, before Fegan sold his firm to Assante in 2000.
The suit claims, among other things:
That despite his success in signing top NBA prospects, Dyke was paid a low salary, which at its peak reached $36,000 a year.
That Dyke complained to Fegan about the level of his compensation in 2000, about the same time that Fegan was approached by Assante with an offer to buy his business.
That Fegan promised to make Dyke a partner and pay him a lump sum of $200,000 at the close of the Assante merger because "Fegan needed Dyke to remain with his firm, and maintain his arsenal of players, in order to maximize the value of a buyout."
That Fegan never paid Dyke the promised $200,000 after the close of the merger and that Assante instructed Fegan not to pay Dyke any money unless he signed a noncompete agreement. The suit says Dyke did not sign the noncompete agreement and resigned when Fegan refused to pay him.
Fegan said, "I gave Brian Dyke an opportunity to work for me as an independent contractor when he was unemployed because I consider him a friend. Brian worked for me for approximately two years. I was shocked when he quit in January without notice."