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In an opinion issued on August 15, 2024, a federal judge in Puerto Rico ordered that claims brought by Diamond Sports, a sports agency founded by rapper Bad Bunny, against the Major League Baseball Players Association (MLBPA) should be heard in arbitration rather than in court. The court’s decision revealed important differences between the MLBPA’s and the National Football League Players Association’s (NFLPA) agent regulations.
The Bad Bunny Case
Bad Bunny founded Diamond Sports, which operates under the name Rimas Sports, with Noah Assad and Jonathan Miranda in 2021. William Arroyo later joined as the company’s lead baseball agent. The agency says it represents 68 baseball players, including 14 in the MLB and the rest in Minor League Baseball.
Still, the way Rimas Sports appeared to be growing caught the attention of the MLBPA, which regulates agents under federal labor law. The union concluded that Rimas Sports was giving players benefits to turn them into clients and that it was also using unauthorized recruiters (known as “runners”) to get clients. These actions violated the MLBPA’s agent regulations.
On April 10, 2024, the MLBPA revoked Arroyo’s agent certification and denied Assad and Miranda’s pending certification applications. The trio were also fined a total of $400,000. Finally, the MLBPA banned all certified agents from working with Arroyo, Assad, Miranda, or Rimas Sports and notified MLB clubs that they could not negotiate with them.
The MLBPA’s decision could mean the end of Rimas Sports’ representation of baseball players. On April 15, 2024, Arroyo, Assad and Miranda appealed the MLBPA’s decision. An arbitrator denied their request to issue a temporary restraining order to prevent the disciplinary action pending the outcome of the appeal, which is still ongoing.
On May 16, 2024, Rimas Sports filed suit against the MLBPA in Puerto Rico. Rimas Sports argues that the MLBPA exceeded its authority under the National Labor Relations Act and thereby unlawfully interfered with the agency’s contracts with its player clients and its agents.
Specifically, Rimas Sports argued that the MLBPA has the authority to regulate individual agents when they are involved in negotiating player contracts, but does not have the authority to regulate agents or agencies when they are involved in negotiating marketing and advertising contracts on behalf of players. Nevertheless, the MLBPA’s disciplinary actions effectively prevent Rimas Sports from offering those services as well.
Yesterday, the court granted MLBPA’s motion to arbitrate the lawsuit. The court noted that the MLBPA’s Agent Rules include an agent’s business entity as subject to the Rules in several places. For example, the Rules state: “If one or more player agents own or operate as or are employed by a business, the term ‘player agent’ includes the firm or business they own or are employed by or associated with, unless the context clearly indicates otherwise.” In addition, Rimas Sports has entered into representation agreements with its clients that specifically include the MLBPA’s Rules. Rimas Sports is therefore subject to the arbitration provisions of the MLBPA’s Agent Rules.
The NFLPA’s more limited approach
Unlike the MLBPA rules, the NFLPA agent rules do not contain an extensive definition of “contracted agent” that includes the agent’s employer or company. In fact, the NFLPA rules specifically state that agent certification “is hereby granted only to individuals and not to firms, corporations, partnerships or other entities.”
The scope of the rules and their arbitration process were the subject of a complex case in 2015 between Impact Sports’ agency and one of its former employee agents, Sean Kiernan. Kiernan had joined Impact in 2003 and, according to Impact Sports, had signed a non-compete and other agreements during his employment. Kiernan left Impact Sports in 2014 to join competitor Select Sports Group. Impact Sports initiated arbitration proceedings against Kiernan and Select Sports Group under NFLPA rules, alleging that Kiernan misused confidential information in the move. (Disclosure: I was involved in representing Impact Sports and Kiernan in cases prior to their separation.) Various claims and counterclaims were asserted.
In the arbitration, arbitrator Roger Kaplan first addressed the question of whether he had jurisdiction to hear certain parts of the case. Kaplan ruled that “any claims by companies such as Impact or SSG are outside the jurisdiction of the NFLPA Rules for arbitration because such a company cannot be a contracted consultant or player (which are the only categories of persons within the jurisdiction of the NFLPA Rules).”
Consequently, Kaplan ruled that “(b)to the extent that there are disputes regarding the alleged employment contracts, operating agreements and/or non-compete agreements, such disputes must be resolved in another forum, if at all, as they are outside of my jurisdiction under the NFLPA rules.” Likewise, “(b)issues regarding conversion, misappropriation of confidential information and/or trade secrets, and allegations of disloyalty/receipt of compensation from two (2) different employers must be resolved in another forum, if at all.”
The arbitrator therefore limited his authority in this case to deciding a dispute between Impact Sports and Kiernan over the right to commissions from player contracts, an issue expressly provided for resolution through arbitration under NFLPA rules.
The potential split in the union
There is a potentially important difference between the Rimas Sports and Impact Sports cases. The Rimas Sports case concerns the MLBPA’s disciplinary power, while the Impact Sports case was a dispute between agents and agencies. The NFLPA has a Committee on Agent Regulation and Discipline (CARD), made up of players, that is responsible for investigating and potentially disciplining agents who have violated the regulations. CARD decisions can be appealed to Kaplan.
Nothing about the Impact Sports decision would prevent CARD from taking action against individual agents. However, Kaplan’s decision in that case suggests that the NFLPA would not have the authority to take sweeping disciplinary action against a sports agency for which agents worked, as the MLBPA did. The NFLPA might not be able to prohibit players from continuing to use certain agencies for marketing-related arrangements, for example.
The court’s decision in Rimas Sports supports the MLBPA’s broad authority to regulate agents and the agencies they work for, and to arbitrate disputes over its regulations. The NFLPA, on the other hand, does not appear to have such authority. The MLBPA was represented in the case by Jeffrey Kessler of Winston Strawn LLP, who has also long served as outside counsel to the NFLPA. He may recommend that the NFLPA reconsider the scope of its regulations.
