Earlier this year, NBA Center Nerlens Noel and his former agent, Rich Paul of Klutch Sports, settled their ongoing misrepresentation dispute that came to fruition in the summer of 2021.[1] In 2017, Noel, an established veteran and former sixth overall pick, considered signing a four-year, $70 million contract extension with the Dallas Mavericks. At the time, Noel was represented by Happy Walters.[2] However, Rich Paul told Noel to terminate his relationship with Walters, reject the deal, and instead seek a max contract the following season.[3] Noel took Paul’s advice and moved on from Walters, accepting a single-year qualifying offer in order to be in a position to sign a better contract the following offseason.[4]

The following season, Noel only played 30 games as he had surgery to repair a torn ligament in his left thumb. This injury, along with Noel’s play, impacted his value around the league. The subsequent offseason, he was only able to land a two-year, $3.75 million deal with the Oklahoma City Thunder, which included a second-year player option.[5] Noel then sued Paul and Klutch Sports for misrepresentation, seeking $58 million in damages as well as a declaratory judgment and monetary damages.[6] Noel argued that Paul breached obligations and duties owed to Noel that are explicit through the player-agent relationship created by the Standard Player Agent Contract (SPAC).[7] Specifically, Noel claimed breach of contract, breach of fiduciary duty, negligence, and breach of the duties of good faith and fair dealing.[8] This type of dispute may seem rare to the public, but poaching players and making promises to them in the agency world is quite common.[9] More uncommon, however, is filing a complaint and attempting to bring it to a courtroom.[10]

The National Basketball Players Association (NBPA) does not prohibit agents from contacting other agents’ clients.[11] Unlike the prohibition on tampering by league executives, agents can talk to players and attempt to sign them to their agency.[12] Unfortunately, the ability to do so can lead to situations where advice given by agents recruiting players does not come to fruition, resulting in players signing for less than what their value was the following season. Switching agents and receiving less money than expected has happened to several players over the years, with Victor Oladipo being the most prominent example.[13]

Noel attempted to bring the dispute into the courtroom but ultimately failed as the judge dismissed the case because of an arbitration clause in his contract with Klutch Sports.[14] This clause is part of the SPAC and is common in player-agent relationships.[15] Arbitration provisions are customary in many employee-employer relationships as these provisions are alternatives to litigation. The Federal Arbitration Act was established in 1925 to make arbitration agreements valid as contracts.[16] This is because arbitration is generally seen as more efficient, less complicated, and more private, making it appealing in disputes involving well-known figures like professional athletes. The SPAC’s arbitration clause has been a crucial part of contracts between players and agents as a way to strengthen the role of the player’s association in disputes of this matter.[17] That said, employment arbitration clauses do not come without scrutiny.

The arguments against arbitration are often that there is an inherent bias by the arbitrator depending on the relationship with both parties, limited discovery in the process, and unequal bargaining power between the parties.[18] That said, these arguments do not seem to apply to the arbitration clause in the SPAC. The SPAC is a standard contract that players and agents agree to which is “entered into pursuant to and in accordance with the NBPA Regulation’s Governing Player Agents.”[19] The NBPA maximizes player protection by giving players a voice in their contracts.[20] Both parties in the dispute are sophisticated, and they negotiate within the exact contract boundaries as do hundreds of players and agents throughout the NBA.

Furthermore, this is a unique situation where Noel is the one employing Paul but is bringing suit. Usually, employers have more protections than employees; it is rare for the employer to sue the employee.[21] However, this nuance is of little significance because both parties act within the confines of the NBA – a more powerful entity. Even though individual contract deals have been under greater scrutiny than collective bargaining deals because of the unequal bargaining power, there is so much influence in this contract by the NBA and NBPA that the bargaining power seems equal.[22]

Due to the settlement, Noel is responsible for paying Rich Paul full commission for the Knicks deal he signed in 2021 – which he refused to pay during the ongoing legal dispute – and must withdraw all legal proceedings.[23] Noel lost $57.3 million in potential earnings by rejecting the deal with the Mavericks.[24] He was bought out by the Detroit Pistons last season and recently signed a one-year, $3.1 million deal with the Sacramento Kings.

Ben Ruvo is a 2L at Penn Carey Law and the Vice President of the Penn Entertainment and Sports Law Society. He can be reached on Twitter @RuvoBen and by email at [email protected]. You can also find this article here: https://upennesls.com/blog/nerlensnoelrichpaul.

Sources:

[1] Nerlens Noel, Rich Paul, Klutch Sports Group Settle Pistons Center’s Legal Case, The Athletic, Shams Charania [2] CEO of Catalyst Sports & Media, LLC and representative of current NBA players such as Marcus Smart, Jerami Grant, Landry Shamet, and R.J. Hampton. [3] Nerlens Noel’s $58M Lawsuit Against Former Agent Rich Paul Dismissed by Judge, Bleacher Report, Timothy Rapp [4] Id. [5] $58M Lawsuit Against Former Agent Rich Paul, Rapp [6] Id. [7] Nerlens Noel’s Case Against Rich Paul Pushed To Arbitration, Sports Agent Blog, Darren Heitner [8] Id. [9] How Nerlens Noel-Rich Paul Lawsuit Could Change NBA Agent Landscape, Bleacher Report, Jake Fischer [10] Id. [11] Id. [12] Id. [13] Id. [14] Noel’s Case Against Rich Paul, Heitner [15] Id. [16] Mandatory Arbitration Clauses in Employement Contracts and the Need for Meaningful Judicial Review, Journal of Gender, Social Policy & The Law, Elizabeth Roma, 522 [17] Noel’s Case Against Rich Paul, Heitner [18] Mandatory Arbitration Clauses in Employement Contracts, Roma, 526 [19] Standard Player Agent Contract [20] What is the NBPA, Overview [21] Mandatory Arbitration Clauses in Employement Contracts, Roma, 529 [22]Id. [23] Settle Pistons Center’s Legal Case, Charania [24] $58M Lawsuit Against Former Agent Rich Paul, Rapp