SBJ/August 20-26, 2012/Labor and Agents

Private equity firm returns fire, countersues agency LMM

Editor's note: This story is revised from the print edition.

Liz Mullen
A private equity firm that quietly acquired a 40 percent share in the NFL player representation firm run by agents Ethan Lock, Eric Metz and Vance Malinovic has asked an Arizona state court to place the agency in a receivership and return the $4 million the company invested in the agency, according to court documents.

The agency has been operating as LMM Sports Management.

Your Source Pacific Fund (YSP), which paid Lock, Metz and Malinovic $4 million in 2009 for a stake in the company, alleged in a court filing in June that LMM violated the terms of its operating agreement in a number of ways, including making loans to employees and others, including a $350,000 loan to LMM client and Dallas Cowboys tackle Tyron Smith.

YSP says LMM lent $350K to client Tyron Smith, violating their operating agreement.
Photo by: GETTY IMAGES
LMM sued YSP and its subsidiary, financial advisory firm Your Source Financial (YSF), in October 2011, alleging breach of contract and fraud, among other things, and asked for actual and punitive damages in excess of $900,000. LMM, YSP and YSF are all located in the Phoenix area.

Lock, an LMM principal and NFL player agent, declined to comment. Metz and Malinovic did not answer calls, and attorneys for LMM did not return phone calls.

An official at Your Source Financial did not return a phone call, nor did three attorneys representing YSP and YSF in the litigation.

Joe Panos, a representative for Smith, could not be reached at deadline. Panos recently left LMM and joined Athletes First. He is not named as a party in the ongoing litigation between LMM and the Your Source companies.

LMM has represented five first-round NFL draft picks in the last two years and has long been considered one of the more successful NFL player agencies in the business.

Founded in 1984, LMM had been 100 percent owned by the three agent partners until 2009. As part of the agreement with YSP, Lock, Metz and Malinovic each invested $100,000 for a 5 percent stake in YSF, the financial firm, according to court documents.

LMM, in its lawsuit against both entities, contends that YSP failed to make required capital contributions and otherwise fund ongoing expenses and growth of LMM, as required by the operating agreement. In that lawsuit, LMM asked that the court dissolve the agency as it then existed as part of its request for relief. “The members of the Company (LMM) are hopelessly deadlocked in the management of the company, causing irreparable injury to the company, lost profits and the inability to conduct the business of the Company,” LMM said in its filing last year.

In its countersuit, YSP contends that the LMM partners incorporated a new company, called LMM 2 in court documents, and moved the assets of the NFL player rep firm to that new company. Your Source is asking that both LMM and LMM 2 be placed in a receivership.

ARCHAMBEAU JOINS NFLPA: Former NFL player and agent Lester Archambeau has left Sportstars and joined the NFL Players Association as a regional director. Archambeau and NFLPA officials did not return calls for comment.
Sportstars founder Alan Herman, asked for comment, said via email, “Lester Archambeau has always been a players advocate. … His leadership ability and exceptional intelligence will be a huge asset to the NFLPA.”

Herman and other Sportstars agents will represent players Archambeau had been representing, including New York Jets rookie wide receiver Stephen Hill.

Liz Mullen can be reached at lmullen@sportsbusinessjournal.com. Follow her on Twitter at @SBJLizMullen.

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