The recent case involving England and Manchester United footballer Wayne Rooney and his former agents, Proactive Sports Management Limited, attracted some media attention on the basis that anything involving the country's highest profile footballer (and, reputedly, highest-paid author) tends to catch the public eye. However, the case goes far beyond a story of the commercial machinations within football and (subject to any appeal that may take place) creates an important precedent for a wide range of industries.
The facts of the matter are fairly complicated. It goes back originally to as long ago as 2002 when Wayne Rooney was only 16 years of age. He was already a hot prospect, but at that age even the most precocious talents exist more in potential than in reality. At that point, he was apparently already signed up with an agent, although that original agency agreement plays little part in the present case as it was later found not to be enforceable.
Proactive Sports Management Limited was one of the leading agency companies involved in football. Clearly they had identified Rooney's potential and felt that there was immense commercial potential on top of his clear gifts as a player. Initially, in 2002, a contract was signed between Rooney and Proactive which provided for Proactive to represent Rooney both on and off field for a period of eight years. On field representation refers to the ability to negotiate on behalf of the player contracts with football clubs that relate specifically to the playing services of the player. Off field representation then refers to the myriad of other opportunities that present themselves to successful footballers - sponsorship, authorship, public appearances and so forth. When signing a player so early in his career, the reasoning behind putting in place such a long-term contract is clear enough: a footballer will reach his peak as a player and therefore as a commercial earner sometime around his early to mid-20s. No agent will want a situation to arise where the agency has put in all the hard work only to see then another agency come along to reap the benefit.
Around Christmas and New Year of 2002, the contracts involving Rooney were reformed. Rooney had set up a company called Stoneygate 48 Limited to become the vehicle for the exploitation of his commercial rights. This again is a fairly familiar procedure: a player will frequently set up a company which then receives from the player an assignment of various commercial rights together with the right to use the player’s name, fame, image and personal services for the advertising, marketing and promotional services the company then sells to third parties. At the same time, the 2002 agreement between Rooney and Proactive was altered so that the off field representation element was removed and placed under the fresh agreement which was formed in January 2003. The on field representation element of the 2002 agreement remained, however; this is relevant from the point of view that under FIFA and FA rules an agreement between a player and an agent for on field representation cannot last longer than two years. This formed in part the subject matter of an FA disciplinary hearing whose subject was Paul Stretford, the agent who was at that time a director of Proactive.
It is common ground to all that the resulting arrangement was immensely successful. Rooney fulfilled his promise as a player and also proved to be equally successful in exploiting the commercial rights that surround such on field success. As the celebrity culture and football grew ever closer, Rooney's wife Colleen became a celebrity in her own right and began also to exploit the commercial rights that flowed from that celebrity by way of her own image rights company, for which Proactive also acted. There does not appear however to have been any written agreement governing that relationship.
We have referred above an FA disciplinary hearing involving Paul Stretford. During the course of that hearing the relationship between Mr. Stretford and Proactive broke down. Mr. Stretford left Proactive and the Rooneys remained loyal to him, taking their business away from Proactive at the same time. The current litigation flows from that decision, because of course, at that time, the 2003 agreement (and the 2002 agreement) remained in force. Essentially, the case turns around the attempts by Proactive as the party to the contract with the Rooneys and their companies to enforce those arrangements notwithstanding that the Rooneys had moved their business away by following Mr Stretford.
So what did Proactive have to claim? If the agreements had the force of law they would be entitled to breach of contract damages, which would put them in the position they would have been in had the contract been properly performed. They also had claims to ongoing commission on deals that they had negotiated for the Rooneys, to be paid even after the 2003 contract was at an end. It is a common enough provision of agency contracts that where an agent has negotiated a deal for their client, and that deal goes on for a period of time even after the agency agreement has ended, that the commission to the agent continues notwithstanding.
The precise nature of the court's decision in terms of who should pay what money to whom need not concern us here. In effect, there was something in the judgment for everybody in that regard, in that whilst the agent by no means recovered everything it sought, it will ultimately not go away empty-handed. The court ruled that where services had been provided by Proactive and freely accepted by the Rooneys and their companies, Proactive was entitled to be paid for those. There will be an inquiry into quite how much money that then yields in due course. They will not get commission relating to any period after the contracts would have expired, however.
The importance of this case really turns on the analysis the court provided of the contracts that were entered into and the extent to which they were enforceable. It has to be remembered that when he entered into the 2002 and then the 2003 agreement, Wayne Rooney was very young and had little or no experience of commercial matters. The contracts entered into lasted for some eight years, with the potential for the obligation to make payment on certain income streams to last considerably longer.
The court held that the 2003 agreement was in fact not enforceable against Wayne Rooney's company. It decided this, not on the basis that the player and his family had been unaware of the nature of the contract they were signing, but rather on the basis that as a matter of principle a contract of that nature, entered into in these circumstances, was in restraint of trade and therefore unenforceable. It did not matter that the parties had carried on with the contract for some years and that the contract had yielded considerable success to all concerned. Essentially, as far as the court was concerned, in providing for there to be an exclusive contract under which all exploitation of Rooney's commercial image rights had to be managed by Proactive, the contract imposed an unreasonable restraint of trade on Rooney. Even though Rooney's main business was playing football it was still a major element of his business to do off field deals, so there was no way out in suggesting that fundamentally the contract did not deal with the main subject matter of Rooney's trade.
A contract which is in restraint of trade is generally not going to be enforceable. If the restraint of trade can be justified, however, it may not fall foul of the law in that way. Here, there was a fairly extensive analysis of the various criteria that led to the decision on the part of the judge as to which side of the line this contract fell.
Firstly, the agreement place for a long period of time. The FIFA and FA rules concerning the maximum length of on field representation contracts were noted. The longer an agreement remains in place on an exclusive basis, the more likely it is to be found to be in restraint of trade. It was noted that this eight year term was not a reflection of any standard practice in the industry or industry norm. In other words, this was not an arrangement which the market had evolved as a standard solution to the issues at stake for the parties. Whilst the court understood that for an agency to sign up such a young player involved a certain element of risk, and there would have been a considerable amount of work which might not initially have been rewarded in evolving a complete strategy for the marketing of the player and the image to be attached to the player, for which the agency would then expect to see paid back over a longer period of time, the judge was unimpressed by that as a justification for the length of the contract.
The judge also found that Wayne Rooney and his family were at the time the 2003 agreement was signed unsophisticated in legal and commercial matters, and therefore could not draw on a broad range of experience of such negotiations. The judge found that they had not been advised to take their own independent legal advice, and they were not represented by lawyers who were looking out solely for their interests. The lawyers involved were quite properly looking out for the interests of their own client and could not look after the interests of the player or the player’s company. Finally, the judge acknowledged that the contract contained a specific clause saying that legal advice had been taken, but in fact it had not. It is frequently the case that such clauses appear in contracts of this nature, and so it is highly relevant that the judge ruled so clearly to the effect that even where such a clause appears, if the legal advice is not taken, the clause does not prevent the contract from being declared unenforceable on that basis.
So, what does the case teach us in the long-term? Firstly, the point needs to be made that this is not a case whose relevance is confined to football. Many industries, and in particular, the entertainment industry, rely on arrangements where exclusive rights are placed by one party under the control or in the hands of another. In music, recording artists sign exclusive recording deals and a broad range of entertainers sign up to exclusive management and agency arrangements. The same considerations could apply in those contexts as apply in the Rooney case.
Any of these contracts therefore could be seen as vulnerable to challenge if great care is not taken with the way they are formed. The points raised by Proactive, to the effect that agents and managers will take a risk on untried talent on the basis that there will be a longer-term pay off where the gamble is successful, have considerable force. Much of the difficulty new talent has in breaking through, be it in sport or in entertainment, depends upon the cost of developing that talent, and the limited number of promising candidates who never really make the grade. For those whose business is the development of such talent, there is a need for those who break through to pay for the process which developed them, on the basis that not everybody will be so fortunate. However, if the courts then strike down the arrangements the agents and managers put in place to achieve that payback, the likelihood that the risk will still be taken on development gets less. Such an arrangement may be in restraint of trade from the point of view of an individual, but the effect of striking that down could be that there is altogether less trade in the broader picture to be restrained.
