Agents and the Internet -- Part I

Special Report: Agents on the Web -- Part I

The acceptance of the new technologies may change recruiting -- and the laws regulating it

[This is the first of a three-part series on issues involving agents doing business on the Internet.]

In 1993, there were 9 million users on the Internet. Today there are 200 million and rapidly rising. Two years ago, e-commerce was a blip on the gross domestic product radar. Now it has become a $200 billion factor. Despite the recent stock market declines in tech stocks, it is safe to say the Internet is not going away and its business applications will continue to grow, although possibly in a less dramatic way.

What does this mean for sports agents? Not much, as of yet. But the Internet poses new challenges to the way agents do their business.

This article will focus on the jurisdictional aspects of the Internet. The medium is one which truly knows no boundaries and the application of national laws to it has proven difficult and frustrating. Does a firm based in the Cayman Islands have jurisdiction in the United States courts for violation of a U.S. law? And even within the United States, the notion of state jurisdiction over out of state activities poses interesting questions.

Personal Jurisdiction

In personam jurisdiction is a legal term denoting the power of the state to hear a dispute involving a defendant. The traditional rule has been that the defendant must have "minimum contacts" with that state to satisfy due process (constitutional fairness) requirements. Essentially, if a defendant individual or business "resides" in the state, it is fair game to sue that defendant for any activities the defendant engages in, whether in that state or not. But let us say that the defendant engages in activities outside his or her home state. Can that defendant be sued in that foreign state due to those activities?

The Supreme Court answered that question in 1945 when it decided the International Shoe v. Washington case. It concluded that a state can be a proper forum against a defendant who does not "reside" in the state, but "transacts business" there. Those activities "transacted" in the state can be the basis for jurisdiction in a suit based on those activities. Since that case, many states have passed so-called "long-arm" statutes, conferring jurisdiction over their activities in a foreign state.

With the basics out of the way, let's see how this applies to Agents. Can an agent be sued by a disgruntled client in that client's home state if the agent and client transacted their activities strictly through the Internet? Are e-mails soliciting an athlete enough to satisfy the "minimum contacts" test?

As of now, the answer is probably not. But if an actual contract was "negotiated" and consummated by sending as an attached file to the athlete, the answer would likely be yes. And it is not a distant thought to have contracts made and sent in this manner. If an agent, based in New York and never having set foot in West Virginia, sends a complete contract to the athlete, who lives there, litigation over that contract may arise there based on the "transaction of business."

The next question involves jurisdiction of state laws. Agents must get clients and many states have laws restricting their solicitation activities regarding college students (the professional sports unions govern agents who represent existing pro players). Florida, for example, prohibits agents from "directly or indirectly" contacting students to entice them to enter into a contract. [click here] Does "indirect" mean sending e-mail messages? Obtaining e-mail lists of promising student-athletes? Obtaining the e-mail address of a students from "mutual friends?" Obtaining the e-mail address from the parents of a student-athlete? Does it apply an Ohio resident who is a student at a Florida school who reads the message during mid-winter break about in Ohio on his own America Online account, rather than the school's server? The answers are not clear. What adds to the mix is that the NCAA does not specifically prevent agents from "talking" to athletes; it just prohibits contracting and giving gifts to the students, with the penalty (loss of eligibility) strictly on the student.

Presently, there are 28 states which regulate agents and require them to register when engaging in activities in the given state. None of them deal with the situation outlined above.

Most agent web sites are informational. They give backgrounds on the agents, the athletes represented, services rendered and a few press releases. The sites are adjuncts to the legwork done. I have noticed that many are still wary of the Internet as a way to do business and agents are not an exception. But the rapid changes in technology -- and the rapid merger of agent firms to entertainment firms -- can fuel a change in doing business.

The next article will feature contract issues for agents who will conduct business on the World Wide Web.