SBJ/September 30 - October 6, 2002/This Weeks Issue
Trial could shake up industry
Published September 30, 2002
Agent Leigh Steinberg will ask a jury this week for more than $80 million in damages that he says he is owed by his former partner, David Dunn.
Barring a last-minute delay or settlement, the trial to decide who is responsible for the high-profile breakup of athlete representation agency Steinberg, Moorad and Dunn is set to begin Tuesday in Los Angeles federal court.
Check sportsbusinessjournal.com for trial updates starting Tuesday.
Sports industry experts say the case could have a major effect on the industry, including determining what is fair and legal competition among agents and whether buying a sports agency is a good business investment.
NFL players Drew Bledsoe, Kordell Stewart and Tony Gonzalez are among those expected to testify in person or by videotape during what is expected to be a star-studded trial.
Dunn left his former agency in February 2001, taking a half-dozen employees and more than half of the firm's 86 football clients to his new firm, Athletes First. Dunn's attorneys claim that he left because of intolerable working conditions at the firm and that the athlete clients joined Dunn because they were getting poor service.
Steinberg's attorneys claim Dunn and other former employees of Steinberg, Moorad and Dunn engaged in a complicated conspiracy to steal Steinberg's football practice. An economist will testify that the actual damage to the firm was about $80 million, and Steinberg will ask for punitive damages as well, said David Cornwell, general counsel for the sports division of Assante Corp., which owns Steinberg's firm, now known as Steinberg & Moorad.
"I think the athlete witnesses will provide evidence that supports our allegation that they were solicited improperly by Dunn and others," Cornwell said.
Dunn and other Athletes First employees deny any wrongdoing and assert that Steinberg & Moorad's allegations have painted the facts inaccurately, said Mark Humenik, general counsel for Athletes First.
"This is simply a case of people — both employees and athletes — freely choosing to leave a dysfunctional place and choosing a place that focuses on quality representation and service."
Sports industry experts say one of the reasons the case is important is that Assante, which bought Steinberg, Moorad and Dunn in 1999 for more than $100 million, lost millions when Dunn and the other employees defected.
"This case could have a very significant impact on the valuation of sports agencies and buyers determining whether it is just too difficult to acquire them," said Randy Vataha, president of Game Plan LLC, which has advised both buyers and sellers of sports agencies. "Anybody who has an athlete representation agency that has built it up over the years will watch this case closely and will hope that [Steinberg] will prevail. Anyone who is thinking of leaving an agency and starting their own will be on the other side of that issue."
Robert Berry, professor emeritus of sports law at Boston College, said the case could affect agent behavior.
"The practice of client stealing goes on all the time, and if Steinberg wins, a lot of agents will be looking over their shoulders and not liking what they see," Berry said. "If Dunn wins, it will be business as usual."