Champion Pro Consulting Group, Inc. v. Impact Sports Football, LLC

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 15-1899
CHAMPION PRO CONSULTING GROUP, INC.; CARL E. CAREY, JR.,
PH.D.,
Plaintiffs - Appellants,
v.
IMPACT SPORTS FOOTBALL, LLC; MITCHELL FRANKEL; TONY FLEMING;
MARVIN AUSTIN,
Defendants - Appellees,
and
ROBERT QUINN; CHRISTINA WHITE,
Defendants,
and
NORTH CAROLINA DEPARTMENT SECRETARY OF STATE,
Third Party Defendant.
Appeal from the United States District Court for the Middle
District of North Carolina, at Greensboro. William L. Osteen,
Jr., Chief District Judge. (1:12-cv-00027-WO-LPA)
Argued: October 27, 2016 Decided: December 22, 2016
Before WILKINSON and TRAXLER, Circuit Judges, and Bruce H.
HENDRICKS, United States District Judge for the District of
South Carolina, sitting by designation.
Affirmed by published opinion. Judge Hendricks wrote the
opinion, in which Judge Wilkinson and Judge Traxler joined.
ARGUED: Kevin James Dolley, James Carter Keaney, LAW OFFICES OF
KEVIN J. DOLLEY, LLC, St. Louis, Missouri, for Appellants.
Peter Robert Ginsberg, PETER R. GINSBERG LAW, LLC, New York, New
York, for Appellees. ON BRIEF: Laura Spencer Garth, Mark J.
Obermeyer, LAW OFFICES OF KEVIN J. DOLLEY, LLC, St. Louis,
Missouri, for Appellants.
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HENDRICKS, District Judge:
In December 2010, while a student at the University of
North Carolina, Robert Quinn entered into a Standard
Representation Agreement with Carl E. Carey, founder of Champion
Pro Consulting Group, Inc. Carey thereby became Quinn’s sports
agent and maintained hopes to obtain lucrative opportunities for
Quinn with the National Football League (“NFL”). Eight months
later, Quinn terminated his Agreement with Carey and hired
Impact Sports Football to represent him instead. Shortly
thereafter, Quinn signed a contract with the St. Louis Rams for
$4,073,468 over his first four seasons, with a signing bonus of
$5,362,585.
After filing two related actions in other jurisdictions, 1
Plaintiffs filed the instant action against Impact Sports,
Mitchell Frankel, Tony Fleming, and Marvin Austin, 2 alleging
principally that Impact Sports engaged in deceptive and unfair
practices in violation of the North Carolina Unfair and
Deceptive Practices Act (“UDTPA”) by their recruitment of Quinn.
1 Plaintiffs filed suit in the United States District Court
for the Southern District of Texas on July 25, 2011, and the
Circuit Court of St. Charles County, State of Missouri on
November 14, 2011. Plaintiffs voluntarily dismissed the Texas
action and settled the Missouri action.
2 Robert Quinn and his wife, Christina Quinn, were also
originally named as Defendants, but were later dismissed from
the case.
3
Following discovery, Plaintiffs moved to sanction Defendants for
their alleged spoliation of evidence. After a hearing, the
district court denied in part Plaintiffs’ motion for sanctions
and granted Defendants’ motion for summary judgment on all of
Plaintiffs’ claims. Because the Court finds that Defendants’
actions fall outside the scope of the UDTPA, we affirm.
I.
A.
Carey is a full-time associate professor at Lonestar
College in Kingwood, Texas. He is also a National Football
League Players Association (“NFLPA”) Contract Advisor and the
founder of Champion Pro Consulting Group, located in Houston,
Texas. In November 2010, Quinn contacted Carey about serving as
his Contract Advisor, after being introduced to Carey by a
mutual friend. Carey eventually met with Quinn and his family
in North Carolina, and they signed a Standard Representation
Agreement (“SRA”) on December 4, 2010. At the time Carey
entered into the SRA with Quinn, he represented one other NFL
player; Quinn was the first rookie whom he represented.
In addition to the SRA, Quinn and his father also entered a
Financial Assistance Agreement (“FAA”) with Carey. The FAA
provided for Carey’s paying Quinn and/or his father $125,000 in
five (5) equal installments beginning December 4, 2010, and
4
ending on June 1, 2011. The initial payment was made in the
form of $5,000 in cash to Quinn and $20,000 in a check to his
father at the time of signing the SRA. The SRA did not mention
the FAA and a copy of the FAA was not filed with the NFLPA.
J.A. 180.
The NFL locked out its players from March 11 to July 25,
2011. During the lockout, the teams did not communicate with
players and were not negotiating NFL Player Contracts. In
addition, the NFLPA discontinued its agent regulation system,
making it possible for agents to contact and communicate with
players under existing contracts with other agents, something
that is normally prohibited by the NFLPA. Defendants admit that
they met with Quinn twice during the lockout, in mid-June and
mid-July of 2011, and that they had wanted to represent Quinn
since at least May of 2010.
The parties dispute the extent to which Defendants
interacted with Quinn through intermediaries, specifically, Todd
Stewart (“Stewart”), Marvin Austin (“Austin”), and Christina
Quinn (“Christina Quinn”). Defendants admit that Stewart worked
for Defendants on a trial basis from 2009 through 2011 and acted
as an intermediary between Quinn and Impact Sports beginning in
June 2011. However, they dispute the extent to which Stewart
was compensated for his efforts. While Stewart claims he does
not remember receiving money from Impact Sports, a former Impact
5
Sports employee, Sean Kiernan, testified in his deposition that
he recalls seeing advances paid to Stewart through Western Union
during 2011 and 2012, in amounts as high as $5,000 per month.
Defendants further deny that any interaction between Quinn
and Austin, or between Quinn and Christina Quinn, occurred at
Defendants’ behest. Austin plays in the NFL for the Denver
Broncos and previously played football with Quinn at the
University of North Carolina. Christina Quinn began dating
Quinn in 2011 and they are now married. Plaintiffs point to an
email Defendant Fleming sent on July 12, 2011, in which he
states that he and Austin “are making a hard push at Quinn
today.” J.A. 2516. They also cite a number of calls that
occurred between Fleming, Austin, Stewart, and Christina Quinn.
The calls between Fleming, Stewart, and Austin date back as
early as November 5, 2010, and the evidence shows Christina
Quinn being on calls with Fleming and Stewart starting June 6,
2011.
The NFL held a draft in April 2011, in which Quinn was
drafted fourteenth in the first round by the St. Louis Rams.
According to Carey, after the NFL draft, he negotiated various
promotional deals on Quinn’s behalf and arranged for Quinn to
travel to St. Louis to look for a home in July 2011. On July
22, 2011, Quinn terminated his SRA with Carey by fax. The NFL
lockout then ended, and on July 28, 2011, Quinn entered into an
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SRA with Tony Fleming, an NFLPA certified Contract Advisor who
is affiliated with Impact Sports Football based in Boca Raton,
Florida. Along with the SRA, Fleming and Quinn entered into a
Marketing Advance Agreement, wherein Fleming advanced Quinn
$100,000 to be repaid out of any future marketing income that
Fleming generated for him. According to Defendants, the advance
was disclosed to and accepted by the NFLPA. J.A. 75. On August
4, 2011, Quinn signed a contract with the St. Louis Rams for
$4,073,468 over his first four seasons with a signing bonus of
$5,362,585.
On January 13, 2012, Carey filed a grievance with the
NFLPA, alleging that Quinn breached their SRA and claiming he
was entitled to quantum meruit for the reasonable value of his
services. The Arbitrator found that Carey was entitled to an
award of $17,500, which compensated Carey for 70 hours of work
as a Contract Advisor at an hourly rate of $250.
Plaintiffs filed suit in federal court on January 9, 2012,
asserting five claims: (1) unfair methods of competition; (2)
tortious interference; (3) slander per se; (4) civil conspiracy;
and (5) unjust enrichment. The district court dismissed three
of the claims after Defendants moved to dismiss the complaint,
leaving only the claims for unfair methods of competition and
civil conspiracy. Following discovery, Defendants moved for
summary judgment on the remaining claims. Plaintiffs then filed
7
a motion for sanctions in the form of default judgment or an
adverse jury instruction directed against Defendants, alleging
that the Defendants lost or deleted critical electronically-
stored evidence, namely, text messages. On July 15, 2015, the
district court denied in part and granted in part Plaintiffs’
motion for sanctions and granted Defendants’ motion for summary
judgment on all remaining claims.
This appeal followed.
II.
A.
We review the district court’s grant of summary judgment de
novo, viewing the facts in the light most favorable to
Plaintiffs, the nonmovant. See Askew v. HRFC, LLC, 810 F.3d
263, 266 (4th Cir. 2016). We may affirm “on any legal ground
supported by the record and are not limited to the grounds
relied on by the district court.” Jackson v. Kimel, 992 F.2d
1318, 1322 (4th Cir. 1993). Summary judgment is warranted where
“there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” Fed. R.
Civ. P. 56(a). Because we are sitting in diversity and
addressing matters of North Carolina law, we apply governing
North Carolina law or, if necessary, predict how the Supreme
8
Court of North Carolina would rule on an unsettled issue. See
Askew, 810 F.3d at 266.
B.
Plaintiffs first argue that the district court erred in
granting summary judgment on their claim that Defendants
violated the UDTPA. The district court found that even if
Defendants acted in the manner alleged by Plaintiffs, such
conduct would not violate the UDTPA as a matter of law.
Plaintiffs disagree, arguing that Defendants committed unfair
and deceptive acts or practices by: (1) illegally using
“runners” to recruit Quinn as a client; (2) paying a large
amount of money to Quinn in the form of a “Marketing Advance” as
a means of inducing him to terminate his SRA with Plaintiffs;
and (3) committing these acts as a means of retaliating against
Plaintiffs. Defendants deny these allegations and assert that
there was nothing nefarious in giving Quinn a Marketing Advance,
a type of transaction typical in the industry. In Defendants’
view, the conduct alleged by Plaintiffs, even if taken to be
true, cannot establish any unfair or deceptive practices within
the scope of the UDTPA. They contend that Carey has already
arbitrated his grievance in the proper forum through the NFLPA,
and that the UDTPA was not meant to address perceived wrongs in
recruitment practices by Contract Advisors.
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Because we agree with the district court that Plaintiffs’
allegations, even when assumed to be true, are insufficient to
establish a violation of the UDTPA, we address the factual
disputes only briefly and focus instead on the legal issues
presented.
To state a claim under the UDTPA, a claimant must allege
(1) an unfair or deceptive act or practice; (2) in or affecting
commerce; (3) which proximately caused injury to the plaintiff
or his business. See N.C. Gen. Stat. § 75–1.1; Walker v.
Fleetwood Homes of N.C., Inc., 362 N.C. 63, 653 S.E.2d 393, 399
(2007); Dalton v. Camp, 353 N.C. 647, 548 S.E.2d 704, 711
(2001). Conduct in violation of the UDTPA must be immoral,
unethical, oppressive, unscrupulous, or substantially injurious
to consumers. See, e.g., Gilbane Bldg. Co. v. Fed. Reserve
Bank, 80 F.3d 895, 902 (4th Cir.1996); Branch Banking & Trust
Co. v. Thompson, 107 N.C. App. 53, 418 S.E.2d 694, 700 (1992).
An act is deceptive if it has a tendency or capacity to deceive.
Dalton, 353 N.C. at 656, 548 S.E.2d at 711; Marshall v. Miller,
302 N.C. 539, 276 S.E.2d 397, 403 (1981). An act is unfair “if
it offends established public policy,” “is immoral, unethical,
oppressive, unscrupulous, or substantially injurious to
consumers,” or “amounts to an inequitable assertion of . . .
power or position.” Carcano v. JBSS, LLC, 200 N.C. App. 162,
684 S.E.2d 41, 50 (2009) (quotation omitted) (emphasis removed);
10
see Gilbane Bldg. Co., 80 F.3d at 902. “Whether an act or
practice is unfair or deceptive under the UDTPA is a question of
law for the court.” Kelly v. Ga.–Pac., LLC, 671 F. Supp. 2d
785, 798–99 (E.D.N.C. 2009) (collecting cases).
In a recent opinion, this Court noted that the UDTPA’s
provision for treble damages has made courts “reluctant to
classify every instance of wrongdoing in business transactions
as a violation of the UDTPA.” Curtis B. Pearson Music Co. v.
Everitt, 368 F. App’x 450, 455–56 (4th Cir. 2010); see also
Wilson v. Blue Ridge Elec. Membership Corp., 157 N.C. App. 355,
578 S.E.2d 692, 694 (2003) (“N.C. Gen. Stat. § 75–1.1 was not
meant to encompass all business activities or all wrongdoings in
a business setting but ‘was adopted to ensure that the original
intent of the statute . . . was effectuated.’”). Indeed, to
“prevail on an UDTPA claim, plaintiffs must demonstrate ‘some
type of egregious or aggravating circumstances.’” Id. Here,
the allegations made by Plaintiffs, even if taken to be true, do
not establish egregious or aggravating conduct sufficient to
establish a UDTPA claim.
Plaintiffs first allege that Impact Sports violated the
UDTPA by using runners to recruit Quinn away from Carey.
“Runner” is a term of art used in the sports industry to refer
to “any individual who performs errands for a sports agent or
agency, including offering players benefits and money to entice
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them to become clients.” J.A. 2066. Plaintiffs claim that
Defendants engaged Marvin Austin, Todd Stewart, and Christina
Quinn as runners to “secretly recruit” and “solicit” Quinn and
to “poison him against Carey.” Plaintiffs argue that this
conduct violates public policy and is both unfair and deceptive
under the UDTPA. Plaintiffs further allege that Defendants
violated the UDTPA by giving Quinn a $100,000 “Marketing
Advance” to induce him to terminate his SRA with Carey.
According to Plaintiffs, because Defendants never intended for
Quinn to pay back this advance, the payment was unfair and
deceptive.
Even if these allegations are taken to be true, an
assumption we make only to get to the heart of this case, we
believe that such activity is indicative of the industry in
which these parties operate and falls outside the scope of
business activities the UDTPA is designed to address. To
support their claims, Plaintiffs assert that certain regulations
under the North Carolina Uniform Athlete Agents Act (“UAAA”) and
NFPLA prohibit the use of runners. They also cite numerous news
articles indicating that the practice of using runners is
reviled by many in the industry. However, rather than support
Plaintiffs’ claims, the evidence they cite indicates that the
business activities of Contract Advisors are already subject to
an extensive regulatory regime under the NFLPA.
12
For example, the NFLPA has carefully crafted regulations to
manage the business relationships at issue here, specifically,
between players and agents and between agents and agents.
Recognizing the potential for unfair or deceptive practices
among agents, the NFLPA has created the NFLPA Regulations
Governing Contract Advisors (“Regulations”). It amended these
Regulations in June 2012 to expressly forbid the use of runners. 3
While this regulation was not in effect when Quinn entered into
an SRA with Impact Sports, its creation indicates that the NFLPA
was aware of the issues that using runners presented and that it
has taken significant steps to internally police such conduct.
Further, the Regulations expressly prohibit Contract Advisors
from “[e]ngaging in unlawful conduct and/or conduct involving
dishonesty, fraud, deceit, misrepresentation, or other activity
which reflects adversely on his/her fitness as a Contract
Advisor or jeopardizes his/her effective representation of NFL
players.” (NFLPA Agent Regulations at Section 3). Violators of
this regulation are subject to arbitration proceedings. (NFLPA
Agent Regulations at Section 5). Given the well-established
internal systems of governance already in place, we decline to
3 The collegiate football industry also internally regulates
the practice of using runners. The UAAA prohibits contact with a
student-athlete unless the agent is registered with the North
Carolina Secretary of State. See UAAA Art. 9 § 78C-98(b)(1).
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impose an additional statutory mechanism to govern the alleged
conduct.
Such an imposition would conflict with North Carolina’s
treatment of the UDTPA. As stated by the Western District of
North Carolina in a recent opinion, “North Carolina courts have
refused to apply the UDTPA to . . . matters already under
‘pervasive and intricate regulation’ by other statutory schemes
that contain separate enforcement, supervisory, and remedial
provisions.” Hagy v. Advance Auto Parts, Inc., No. 3:15-CV-509-
RJC-DCK, 2016 WL 5661530, at *2 (W.D.N.C. Sept. 28, 2016)
(quoting Skinner v. E.F. Hutton & Co, Inc., 314 N.C. 267, 333
S.E.2d 236, 241 (1985)). Recognizing that the “UDTPA’s broad
language and provision for treble damages” has led to its
inclusion “in most every complaint based on a commercial or
consumer transaction in North Carolina,” Judge Conrad noted that
courts have found this remedy inappropriate “where there already
exists an extensive regulatory regime to address the
violations.” Hagy, 2016 WL 5661530, at *2. This is “because
such a remedy under those circumstances would improperly create
overlapping supervision, enforcement, and liability in this
area.” Id. (quoting Wake County v. Hotels.com, LP, 2007 WL
4125456 (N.C. Sup. Ct. Nov. 19, 2007) (internal quotations
omitted)); see also Skinner, 314 N.C. at 275, 333 S.E.2d at 241
(holding that the UDTPA does not apply to securities
14
transactions because they are subject to “pervasive and
intricate regulation”); Bache Halsey Stuart, Inc. v. Hunsucker,
38 N.C. 414, 248 S.E.2d 567, 570 (1978) (holding that the UDTPA
does not apply to commodities transactions because they are
subject to a “pervasive” federal scheme).
While admittedly not a statutory scheme, the NFLPA has
created an extensive regulatory regime to govern business
activities within the industry. It has provided a remedy for
violations in the form of monetary damages and a means to obtain
that remedy through arbitration. Plaintiffs themselves recognize
that the NFLPA views itself as a “self-regulating” industry.
Thus, were the Court to find the UDTPA applicable here, we would
risk improperly creating “overlapping supervision, enforcement,
and liability in” the NFLPA’s regime no different in kind from
that which Hagy cautioned against. Hagy, 2016 WL 5661530, at
*2.
We also would have to ignore the practical workings of this
industry. For example, the Marketing Advance complained of by
Plaintiffs appears to be a practice designed to maximize player
choice. While the Regulations do not touch on the
appropriateness of Marketing Advances, or other similar types of
payments, the evidence indicates that such payments are common
in the industry and implicitly approved by the NFLPA. The
record reveals that Carey himself made a large payment to Quinn
15
when solidifying their business relationship, with no apparent
expectation of repayment. Specifically, he agreed to pay Quinn
and/or his father $125,000 pursuant to a Financial Assistance
Agreement, and he paid them a portion—$25,000—on the day they
entered into the SRA. Carey’s own conduct indicates that these
kinds of payments are accepted as part of doing business in this
industry and would not be considered unfair or deceptive by the
NFLPA. This is particularly true for Defendants’ Marketing
Advance to Quinn, which was disclosed to and approved by the
NFLPA. The industry’s implicit, and sometimes explicit,
approval of these types of payments demonstrates a tactical
understanding of the business relationships at issue that we
would be unwise to disrupt.
Moreover, in the business relationships at issue here,
there is no inherent imbalance of power that would make a
statute like the UDTPA particularly necessary or beneficial to
apply. “[T]he fundamental purpose of the U[D]TPA is to protect
the consumer, and courts invariably look to that purpose in
deciding whether the act applies.” Food Lion, Inc. v. Capital
Cities/ABC, Inc., 194 F.3d 505, 520 (4th Cir. 1999). Here, no
protection is needed beyond the internal system of governance
already in place. The parties in this case are not in a
business relationship of unequal power. Rather, the business
relationships at issue are demonstrative of the competitive
16
nature of NFL recruiting and involve Contract Advisors of
sufficiently similar business sophistication and means.
Plaintiffs’ final allegation, that Defendants’ actions
were motivated by a retaliatory animus, does not alter our
finding. Plaintiffs argue that Defendants harbored a retaliatory
animus against Carey because of disparaging comments Carey made
about Fleming in 2002, when Fleming was trying to recruit NFL
player Julius Peppers (“Peppers”). Peppers opted against
signing with Impact Sports and eventually signed with Carey.
Plaintiffs claim that Defendants resented Carey as a result.
Defendants assert that they had no knowledge of Carey’s alleged
comments to Peppers about Impact Sports until Carey filed this
action, and Plaintiffs have not provided any direct evidence to
contradict this assertion. We agree with the district court
that the evidence submitted to support this claim “is little
more than allegations, conjecture, and speculation.” J.A. 3876.
However, even if we were to assume Defendants’ actions were
retaliatory in nature, such a finding does not bring Plaintiffs’
claims within the scope of the UDTPA. North Carolina courts
have typically found a UDTPA violation where the alleged
retaliation is particularly egregious and without any legitimate
business purpose. See Shepard v. Bonita Vista Props., L.P., 191
N.C. App. 614, 664 S.E.2d 388, 392 (2008), aff’d, 363 N.C. 252,
675 S.E.2d 332 (2009) (finding a UDTPA violation where an RV
17
park owner turned off a resident’s power in retaliation for
reporting the RV park to the local health depart and where the
park owner told the resident “she would ‘fix’ her”); see also
Martin v. Bimbo Foods Bakeries Dist., LLC, No. 5:15-CV-96-BR,
2015 WL 1884994, at *8 (E.D.N.C. Apr. 24, 2015) (denying motion
to dismiss UDTPA claim where plaintiff alleged that defendant
charged plaintiff unreasonable expenses in the operation of his
distribution route and failed to obtain the best price for
plaintiff’s distribution rights to punish plaintiff for opposing
defendant’s abusive practice toward its distributors). Here,
there is no overt evidence of retaliation, and the alleged
conduct can be readily explained as Defendants acting within the
accepted confines of the industry in which they operate.
This Court would be remiss, therefore, to superimpose the
UDTPA upon the rough and tumble of NFL recruiting, a competitive
arena in which the incentives are already carefully balanced by
existing policies and regulations. To do so would be to distort
those incentives in a manner detrimental to players and agents
alike. In sum, we find no basis to apply the UDTPA to the
allegations made by Plaintiffs.
III.
Because we find that Defendants’ actions did not constitute
a violation of the UDTPA, there can be no surviving claim that
18
Defendants conspired to violate this statute. Civil conspiracy
requires “an underlying claim for unlawful conduct,” Sellers v.
Morton, 191 N.C. App. 75, 661 S.E.2d 915, 922 (2008) (quoting
Toomer v. Garrett, 155 N.C. App. 462, 574 S.E.2d 76, 92 (2002)),
and none remains. Accordingly, Plaintiffs’ civil conspiracy
claim also fails as a matter of law.
IV.
Having granted summary judgment on Plaintiffs’ remaining
claims, Plaintiffs’ appeal that the district court erred in
failing to award sanctions in the form of an adverse jury
instruction is moot. For the foregoing reasons, we affirm the
district court’s judgment.
AFFIRMED
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