Whether you are team Europe or team USA, a golf fan, or an occasional viewer, there is no doubt that the Ryder Cup is a key moment in the sporting calendar. It is an opportunity to see fresh talent battle against the brightest stars in the game. This is our second post in our series looking at legal issues that golfers, and sports people generally, face at different stages in their careers. Yesterday we took a look at issues that may arise at during the 'first nine' holes in the course of a career. We move on today to the 'back nine' and to look at issues facing the established professional at the height of their career and as they begin to move towards retirement.
Click here to view the 'front nine' holes in the course of a sporting career.
Hole 10 - aligning your stance with your sponsors
For certain athletes the income generated from endorsement and sponsorship opportunities can rival, and even significantly surpass, the income generated from their professional careers. Most endorsement and sponsorship agreements contain "morals clauses" which enable the brand or sponsor to unilaterally terminate the agreement if the athlete engages in conduct that could have some sort of negative impact upon the particular company or organization. Examples of this happening in practice are widespread in golf and in other sports. The reasoning is simple, parties should be able to protect their respective brands.
Today athletes and brands are increasingly vocal on social issues. Prominent athletes have taken public positions on issues such as gun control, diversity and inclusion, sexual harassment and social injustice and police brutality. Big brands have also made their positions public on similar issues. The increased social activism by both athletes and brands creates an opportunity for athletes to partner with brands that are committed to supporting issues and initiatives an athlete is passionate about. Certain athletes, typically big-name stars in each sport, may have increased leverage to demand broader support, particularly if the brand is significantly reliant on the athlete in a particular sport or industry. Given this new framework and increased athlete leverage, athletes can negotiate for a "reciprocal" or "reverse" morals clause that will give the athlete the ability to terminate a deal if actions by a sponsor or its executives and related parties could damage the athlete's brand. For example, if an athlete is under contract with a financial institution that is charged with fraud, or if the CEO of a sponsor is caught on video making racist statements or is charged with sexually harassing employees, athletes today should be able to terminate a deal immediately in order to protect their personal brand.
Michael Rueda, US Head of Sports and Entertainment, Greenwich
Hole 11 - estate planning - reviewing your scorecard
Professional golfers and other successful athletes go to great lengths to keep their game on top form. They are often less attentive to organizing their personal assets and affairs. A good place to start is to assure that wills and other basic estate planning documents are in place. Of late, the press has been full of stories about Aretha Franklin, Prince and other performers dying intestate – without wills providing for the disposition of their assets upon their deaths. Not naming executors and beneficiaries, much less making no provision for the disposition of one’s estate, is an invitation for squabbles following death. For celebrities there is often a clear benefit from avoiding the very public probate process that generally follows a death intestate. Having no will and estate plan in place misses creative opportunities to plan during your lifetime for your assets, particularly for unique assets such as name and likeness.
Paul Sczudlo, Special Counsel, private client and tax, Los Angeles
Hole 12 - owning your online space
In an ever increasing digital world, the strength of the sponsor's online brand presence is a key consideration for any player. Some sponsors may even provide tech advantages to boost a player's personal brand and career. Sponsors will be keen to dominate the online space and close attention should be paid to any clauses which seek exclusivity over online channels. Players should try to avoid overly stringent brand approval rights and maintain as much flexibility as possible in terms of how they conduct their social media presence. Players must also remember to abide by the rules of online advertising when using social media to promote a sponsor's brand, as a simple '#ad' can be the difference between a compliant and non-compliant tweet.
Hole 13 - driving forward in business
Today's athletes and entertainers are increasingly business-minded and look to start secondary careers often before their professional careers have come to an end. More often than not those secondary careers include making direct investments into early-stage companies instead of investing through venture capital funds. Investing directly can be lucrative and rewarding, but it also presents unique risks and requires technical investment expertise and industry know-how. Athletes and entertainers shouldn’t make the mistake of relying solely on their inner circle or a non-legal professional, like an agent, for advice on these matters. Engaging an attorney and other advisers with the background and expertise to review a particular transaction is essential to making an informed investment decision.
Moreover, certain venture funds have recently started to offer funds focused on bringing in athlete limited partners to invest in sectors that are relevant to those individuals (e.g., sport tech, fitness/wellness, and next-gen sports sectors). Funds like this can serve as collaborative entry into the sector. Relatedly, former top-ranked golfer Greg Norman and Verizon Ventures, the corporate venture capital unit of Verizon Communications Inc., together recently invested in developing a smart golf course, teaming up Norman's golf knowledge with Verizon Ventures' investment expertise.
Michael Rueda, US Head of Sports and Entertainment, Greenwich
Hole 14 - philanthropy
For many sports professionals being successful must include 'giving back' to the causes they care about, and not only once their career quietens down. This philanthropic instinct can mean raising awareness of issues, contributing to communities, or making game-changing grants and donations to help existing charities and NGOs. Taking advice on how to achieve philanthropic goals can help professionals make real change. In particular, deciding where and how to give, and deciding on establishing an eponymous foundation or working with others, is crucial to building a worthy legacy. Sports professionals should also consider their tax position to ensure their giving is tax efficient and maximises the value of any charitable donation for the greatest impact.
John Huxley, Associate, charities, London
Hole 15 - staying clear of the rough with tricky tax issues
We can all agree that tax is now a more contentious issue than ever before, with the press naming and shaming accused tax avoiders as well as evaders and governments giving regulators greater powers to investigate, penalise and prosecute individuals. We are frequently consulted by individuals who have (sometimes inadvertently) signed up to a tax ‘scheme’ of some kind and we are currently representing individuals and companies caught up in film schemes as well as high profile individuals in the world of international sport. In appropriate cases, we can help those who wish to make a voluntary disclosure of unpaid taxes, ensuring that the process is handled confidentially and with protection from criminal investigation wherever possible. It is almost always better to approach the relevant authorities rather than digging yourself further into the bunker.
Andrew Fremlin-Key, Associate, litigation and arbitration, London
Hole 16 - keeping on par with your agent
Disputes with agents or managers can be thorny and destabilising, both for the player and the agent/manager. Both parties will have much to lose from a protracted and public dispute. Inserting a mediation and arbitration clause in the representation/management agreement, whereby the dispute would be resolved quickly and discreetly under the rules of the most convenient arbitration institution (not necessarily the Court of Arbitration for Sport) can be a sensible step. Using this approach, arbitration proceedings can be commenced following the conclusion of a mediation procedure (if the mediation is not successful). More often than not, a well-structured and calibrated mediation procedure leads to pre-arbitration settlement, avoiding further costs and uncertainty.
Luca Ferrari, Partner, corporate, Milan
Hole 17 - divorce
Divorce can be a stressful and emotional time for both spouses. Being under the media spotlight can make that worse. Tiger Woods provides an example of how a private matter can become public and how it can impact on the performance of a sporting star. However, there are a number of different options that parties can consider to resolve their financial disputes and address any disagreements they may have about issues relating to their children. Dealing with matters away from the media spotlight is often desirable for sports people and the family Court has encouraged parties to mediate, arbitrate or use alternative dispute resolution, where possible. These have the advantage of being cheaper, quicker and more private than traditional Court contested litigation which in turn and is certainly something to consider in the appropriate case.
Brett Frankle, Partner, divorce and family, London
Hole 18 - don't finish your round with a bogey dispute
Finding yourself embroiled in a commercial dispute, whether it's with a sponsor, a team, or any other third party is on no sportsperson's agenda. When it happens, it can be costly, time-consuming and reputationally damaging. Taking early advice is key in order to assert or defend your contractual or other rights. Sportspeople frequently turn to us to assist them in bringing and defending legal claims, and trust us to do so professionally and in a way that minimises risk. It is rarely in a client's interests to take a case all the way to Court or an arbitration tribunal and we are frequently able to negotiate commercial settlements on favourable terms. Not only does this minimise cost, it also avoids the vagaries of the legal system and its inherent uncertainties, and allows the client to focus on what they do best. A settlement can also contain a public statement agreed between the parties, minimising the reputational damage caused by an often public hearing.
Josh Swift, Associate, litigation and arbitration, London
*The information and comments in this blog are for the general information of the reader and are not intended as legal advice or opinions to be relied upon in relation to any particular circumstances. For particular application of the law to specific situations, the reader should seek professional advice.