Liz Mullen reports in this week's edition of Street & Smith's Sports Business Journal that, according to a Nike executive, the fact that Reebok consultant Mike Ornstein was personally representing former USC running back Reggie Bush played a role in Nike’s decision not to sign Bush to an endorsement deal. Bill Kellar, director of Nike football sports marketing stated:
Mullen noted that Ornstein represented Bush in the negotiation of a five-year, roughly $5 million deal with Adidas that Bush ultimately signed. However, Adidas owns the company (Reebok) that employs Ornstein as a consultant! This arrangement is typically considered a conflict of interest because Ornstein is on both sides of the transaction. Interestingly, according to Mullen, Tom Shine, Reebok’s senior vice president of sports marketing and Ornstein’s boss, even admitted it as such: “Certainly you have a conflict of interest.”“We certainly had a high level of interest. (Ornstein) is a guy we have competed against as a Reebok consultant. To a certain extent that factored into the whole scenario."
Even if Ornstein negotiated a fair market deal for Bush (which I have no idea), the conflict is evident. Ornstein is caught in a situation in which he must choose which interest is paramount - that of his client or his employer. [Detroit Lions, Inc. v. Argovitz comes to mind here.] And Nike does not have an incentive to engage in a bidding war for Bush when he is represented by one of Nike's largest competitors (which is obviously not beneficial for Bush). Presumably, Bush consented to the conflict after having been made fully aware of all of the facts such that he could make an informed judgment when he permitted Ornstein to represent him in negotiations with Adidas.
But the message here is that conflicts of interest are prevalent in the sports agent business at many different levels. Conflicts of interest are considered to be a breach of the common law fiduciary duty, in which the agent owes his principal a duty of undivided loyalty. Undivided loyalty means that the agent cannot get himself in a situation in which there is an actual, or even apparent, conflict between his interests and the interests of the player he represents. Last week on the blog, I discussed how client solicitation, which is prohibited by law in fiduciary relationships, is commonplace in the agent-player fiduciary relationship as well.
So I'll ask the same question that I did last week: Are athletes just less deserving of the legal protections generally afforded to principals in fiduciary relationships?
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