Case Name: Davis v. Invictus Executive Management Services, LLC, et al.
Case No.: 1-14-CV-267466
This action and cross-action arise from a dispute between a professional athlete and a business associate. On July 3, 2014, plaintiff Vernon Davis (“Davis”), a professional football payer in the National Football League with the San Francisco 49ers, commenced this action against Invictus Executive Management Services, LLC (“Invictus”) and Amadouba Tall (“Tall”) for violations of the Miller-Ayala Athlete Agents Act (Bus. & Prof. Code, § 18895 et seq.) (the “Miller-Ayala Act” or the “Act”). On September 4, 2014, Invictus and Tall (collectively “Cross-Complainants”) filed an Answer and Cross-Complaint.
According to the allegations of the Cross-Complaint, Tall is the CEO of Invictus, which is a business management firm offering various services to professional athletes. (Cross-Complaint, ¶¶ 1, 2.) In April 2012, Invictus entered into a written one-year agreement whereby Cross-Complainants were to provide the following services: business management and business investment opportunities; product endorsement negotiations, foundation management assistance, financial planning assistance; professional guidance; personal guidance; housing assistance; transportation assistance; marketing initiatives; and branding initiatives. (Id., Ex. 1.) The parties thereafter entered into another written agreement for the same services and various other oral agreements concerning the services to be provided by Cross-Complainants. According to Cross-Complainants, Davis breached the parties’ agreements by refusing to pay the agreed upon compensation for the services rendered. (Id., ¶¶ 40, 43, 45, 73, 75.) Based upon these allegations, Cross-Complainants assert eight causes of action against Davis: (1) breach of written contract; (2) breach of oral contract; (3) fraud – intentional misrepresentation; (4) fraud – promise made without intention to perform; (5) common count for work, labor, services and materials; (6) quantum meruit; (7) breach of implied contract; and (8) intentional interference with economic and contractual relations.
Davis demurs to all eight causes of action in the Cross-Complaint on the ground that the contracts that form the basis for the claims are void under the Miller-Ayala Act. The Act requires athlete agents, as that term is defined in the statute, to file a disclosure statement with the Secretary of State and provide security for any claims against them. (Bus. & Prof. Code, § 18896.) The Act provides that any contract that does not comply with the Act’s requirements is “void and unenforceable.” (Id., § 18897.9, subd. (a).)
The causes of action in the Cross-Complaint are largely based upon the allegation that Davis entered into and breached multiple contracts for professional services with Cross-Complainants. Indeed, the first two causes of action in the Cross-Complaint are for breach of contract. It is undisputed that neither Invictus nor Tall was ever registered with the California Secretary of State as an athlete agent under the Act. Thus, the question before the Court is whether Cross-Complainants were athlete agents within the meaning of the Act. The Act defines “athlete agent” as “any person who, directly or indirectly, recruits or solicits an athlete to enter into any agent contract, endorsement contract, financial services contract, or professional sports services contract, or for compensation procures, offers, promises, attempts, or negotiates to obtain employment for any person with a professional sports team or organization or as a professional athlete.” (Bus. & Prof. Code, § 18895.2, subd. (b)(1).) In other words, the status of a person or entity as an “athlete agent” depends upon the nature of the contract entered between the agent and the athlete.
The statute defines “agent contract,” in relevant part, as “any contract or agreement pursuant to which a person authorizes or empowers an athlete agent to negotiate or solicit . . . on behalf of the person for the employment of the person as a professional athlete.” (Bus. & Prof. Code, § 18895.2, subd. (a).) The statute then defines “employment as a professional athlete” to include “employment pursuant to an endorsement contract . . . .” (Id., § 18895.2, subd. (c).) “Endorsement contract” is defined to mean “any contract or agreement pursuant to which a person is employed or receives remuneration for any value or utility that the person may have because of publicity, reputation, fame, or following obtained because of athletic ability or performance.” (Id., § 18895.2, subd. (d).) Finally, the statute defines “financial services” to mean “the making or execution of an investment or other financial decision, or counseling as to a financial decision.” (Id., § 18895.2, subd. (e).)
The allegations of the Cross-Complaint make clear that Invictus and Tall provided services to Davis that are encompassed by the Act. For instance, Cross-Complainants allege that, under the first written contract entered into in April of 2012, “[t]he services included . . . renegotiating his [referring to Davis] endorsement deals, rejecting unworthy endorsement deals, obtaining promotions, creating business entities, [and] acquiring interests in business entities . . . .” (Cross-Complaint, ¶ 13.) More specifically, Cross-Complainants allege that they negotiated endorsement contracts for Davis with Jamba Juice, Ike Inc., Franco Uomo, and Levis Inc. (Id., ¶ 28, 29.) These services and contracts clearly fall within the definitions of “endorsement contracts” and “financial services”—both of which render a person or entity an “athlete agent” within the meaning of the Act. Cross-Complainants direct the Court to the portions of the Cross-Complaint in which they allege that Tall was introduced to Davis as a “business manager,” (Cross-Complaint, ¶ 8), that Davis already had another person acting as an athlete agent, (id.), and that Davis consistently held Cross-Complainants out to be his “business manager” and not an “athlete agent” (id., ¶ 11, 14, 18). According to Cross-Complainants, these allegations demonstrate that they were not acting as an athlete agent for Davis. This argument lacks merit. The Act defines “athlete agent” by virtue of the nature of the services and contracts provided to the athlete, not by virtue of the title assumed by the agent. (See Blanks v. Seyfarth Shaw LLP (2209) 171 Cal.App.4th 336, 359 [interpreting the Talent Agencies Act, which mandates that talent agencies be licensed with the state, and stating that “[t]he Act regulates conduct, not labels; it is the act of procuring (or soliciting), not the title of one’s business, that qualifies one as a talent agency and subjects one to the Act’s licensure and related requirements”], internal quotation marks omitted.) As stated above, the services provided and contracts negotiated by Cross-Complainants clearly fall within the Miller-Ayala Act. Thus, regardless of what Cross-Complainants held themselves out to be, they were athlete agents within the meaning of the statute and subject to its requirements.
Cross-Complainants’ second argument in opposition to the demurrer is that, even assuming the Act does apply and the contracts are illegal due to their failure to register with the Secretary of State, the contracts should still be enforced. In support of this argument, Cross-Complainants rely primarily on two cases—Asdourian v. Araj (1985) 38 Cal.3d 276, and Wald v. TrueSpeed Motorcars, LLC (2010) 184 Cal.App.4th 378. As set forth below, neither case supports Cross-Complainants’ argument. Asdourian does not support Cross-Complainants’ argument for at least two reasons. First, the case is distinguishable in that the case involved a building contractor and the substantial compliance doctrine had been specifically developed in that context. Cross-Complainants have directed the Court to no authority indicating that it should be applied in this context. Second, even if the substantial compliance doctrine applied in this context, which it does not, Asdourian is no longer good law. In 1989, in response to the judicially created substantial compliance doctrine, the California Legislature amended the Business and Professions Code as follows: “The judicial doctrine of substantial compliance shall not apply under this section where the person who engaged in the business or acted in the capacity of a contractor has never been a duly licensed contractor in this state.” (WSS Industrial Construction, Inc. v. Great West Contractors, Inc. (2008) 162 Cal.App.4th 581, 595.)
Wald v. TrueSpeed Motorcars, LLC (2010) 184 Cal.App.4th 378, is similarly unhelpful to Cross-Complainants. In Wald, a car dealer promised to pay a finder’s fee to the plaintiff for locating used cars for purchase. After the plaintiff located several cars, which the car dealer did in fact purchase, the dealer refused to pay the finder’s fee. The plaintiff filed suit and the car dealer demurred based upon a provision of the Vehicle Code requiring a car dealer to be licensed. The trial court sustained the demurrer on that ground. The court of appeal reversed. The court of appeal compared two provisions of the Vehicle Code that regulate the conduct and require licenses for car dealers and car salespeople. The court noted that the provision applicable to dealerships was very strict: “Basically it says: If you are a car dealer an you sell a car, if you are not licensed, you can be stiffed by the buyer, and there’s noting you can do about it.” (Id., at p. 385.) In contrast, the provision applicable to sales persons required licensure and made sales by unlicensed sales people illegal, the provision did not provide that an unlicensed sales person was barred from recovery. Given that the provision applicable to salespeople made unlicensed sales illegal but did not bar recovery, the court of appeal held that, because the plaintiff was a salesperson and not a dealer, it was entitled to determine whether the illegal contract should be enforced as a matter of equity. (Id., at p. 390 [“The reasonable inference in the [statutory] scheme is that the Legislature was willing to leave the payment of unlicensed salespeople up to the courts under existing case law involving illegal contracts.”].)
In this case, the Legislature has not left it to the courts to determine whether an unlicensed athlete agent should be able to recover. The statute expressly states that “[a]ny agent contract that is negotiated by an athlete agent who fails to comply with this chapter . . . is void and unenforceable.” (Bus. & Prof. Code, § 18897.9, subd. (a).) Under Wald, contrary to Cross-Complainants’ argument, the Court has no authority to determine whether the illegal contract should be enforced.
Turning to the specific causes of action in the Cross-Complaint, the first cause of action in the Cross-Complaint is for breach of the written Management Services Retainer Agreement executed on April 1, 2013. That agreement provided that Invictus would provide, among other things, “product endorsement negotiations.” (Cross-Complaint, Ex. 7.) As indicated above, the services outlined in the Management Services Retainer Agreement rendered Invictus an athlete agent within the meaning of the Miller-Ayala Act. The agreement is therefore unenforceable and Davis’ demurrer to the first cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.
Because the third, fourth, and fifth causes of action are expressly tied to the unenforceable contract, the demurrer to those claims is likewise SUSTAINED WITHOUT LEAVE TO AMEND.
The second, sixth, and seventh causes of action relate to services rendered by Cross-Complainants, but are not expressly tied to the parties’ agreements which are unenforceable under the Miller-Ayala Act. For instance, the second cause of action is for breach of oral contract and alleges that, between April 1, 2013 and June of 2014, Davis made certain promises to pay for services and failed to pay for them. (Cross-Complaint, ¶ 43.) Similarly, the sixth cause of action is a common count claim for quantum meruit and alleges that, during the April 2013 to June of 2014 time period, Cross-Complainants performed services at Davis’ request that were not paid for. Finally, the seventh cause of action is for breach of implied contract and alleges that the parties agreed in May 2014 that Davis would pay for various services that were previously performed. It is clear from the Cross-Complaint that at least some of the services provided that form the basis of the second, sixth, and seventh causes of action are services that are covered by the Miller-Ayala Act. However, the causes of action are broad enough to cover services that were rendered that are not covered by the Act. Davis has not directed the Court to any authority that an unlicensed athlete agent may not bring actions for services that are not covered by the Act. Indeed, the statutory language (which regulates certain conduct) and logic dictate otherwise. In other words, the defects in these claims may be curable. Accordingly, the demurrer to the second, sixth, and seventh causes of action is SUSTAINED WITH 10 DAYS LEAVE TO AMEND.
The eighth cause of action is for intentional interference with contractual relationship. In the claim, Cross-Complainants allege that they had a business agreement with a third party and that Davis intentionally disrupted that arrangement. (Cross-Complaint, ¶ 79.) It is not clear from the face of the Cross-Complaint that the agreement with the third party would be subject to the Miller-Ayala Act and therefore illegal. Further, the cause of action is not otherwise tied to any invalid agreement between Cross-Complainants and Davis himself. Accordingly, the demurrer to the eighth cause of action is OVERRULED.
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