With...legal and business insights | Episode 1 : Sports law

The inaugural episode of our new With… legal and business Insights podcast features Michael Rueda, head of U.S. sports and entertainment at Withers. Michael sits down with our host, Joe Morales, to discuss the path of youth soccer players in the U.S. to becoming a professional international player. He speaks to the sports law capabilities and sites some issues that soccer players may face. Moreover, Joe and Michael discuss how U.S. soccer clubs compare to international clubs.

Listen to the full episode:


J. Morales: Hello and welcome to With… Legal and Business Insights. I’m your host, Joe Morales. This is our first episode of the Withers podcast series. We hope it’s the first of many episodes that will deliver insight on an array of topics both legal and non legal. The vision for the series is to provide a platform for attorneys as well as non attorneys to discuss interesting legal and business issues. This episode features a recent conversation with my colleague Mike Rueda, the head of the firms US sports practice about youth soccer player development in the US and our next episode will focus on inbound real estate investment considerations. So the topics and content of the series will be diverse. The tone of our podcast is conversational by design. I want you the listener to feel like you’re part of the discussion, like you’re at the table with us sitting in on a conversation rather than being talked at. In the show notes, you’ll find an email link that you can use to provide feedback on this episode or any other episode for that matter.

Before we go too much further. Let me get lawyerly here for just a minute. I suppose the pro of being a lawyer is that I can write and deliver my own legal disclaimer, I have to mention that we’re not providing any legal advice via this podcast. The information contained in this podcast is for informational purposes only and I’ll say it again, does not constitute legal or other advice. You shouldn’t rely on this content and we don’t accept any liability to any person who, despite what I just said, relies on this content. Legal revisions change frequently and any commentary in this program should be reconfirmed before any action is taken. This podcast material is not intended to be used and cannot be used by anyone, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer. Thank you for joining us. Enjoy the podcast, but talk to your lawyer for actual legal advice. If you’re interested in connecting with me or today’s guest, you’ll find helpful links in the show notes. We’ve also provided a link to the firm’s website. We’ll start today’s discussion shortly, but given this is the first episode of the series let me provide a bit of background on our firm and me.

Since 1896 yes, we’re talking 19th century, Withers attorneys have been trusted advisors to successful people in businesses with complex legal needs. With offices in London, New York, San Francisco, Hong Kong, and Geneva among many others. We deliver seamless international services around the world, providing personalized assistance to our clients worldwide, while combining local knowledge in an international way to understand the global dimensions of our clients’ requests. That’s the firm in a nutshell and you can find out more about our team and practice areas as well as the firm in general by visiting our website at withersworldwide.com. As for me, I’m a partner in the firm’s business division and I’ve been with Withers since September, 2010 when I started in our firm’s New Haven, Connecticut office. I moved to the firm’s Greenwich Office in October, 2011 and I currently split time between Greenwich and our office in New York City. As they say, need to go where the clients are. I usually describe my practice as a general corporate practice because I advise clients on various kinds of corporate and commercial matters. From entity formations to mergers and acquisitions, employment issues to commercial real estate work and financings to private securities transactions. I’ve had a fairly diverse experience so far.

This episode features Michael Rueda, head of the firm’s US sports practice. Michael joined Withers in 2015 and is based in our Greenwich, Connecticut Office, though he spends time in New York too. In addition to leading our US sports practice, Michael maintains a general corporate practice and among other things he’s represented both private and public companies and venture funds and advised clients in connection with finance and securities law matters, mergers and acquisitions and general corporate and commercial matters. Michael authored an article on the current landscape of US youth soccer. And in his article he offers insight on the path that some youth players are taking or considering taking to reach professional ranks here in the US and abroad. The title of the article is Newest Peer Pressure in American Soccer, Going Pro at 16. And you can find it published in an early December, 2017 edition of Street and Smith’s sports business journal. We’ve included a link to the article and this episode’s show notes. Michael was kind enough to spend some otherwise billable time talking about the firm’s sports practice and some of the issues discussed in his article. The first part of our conversation focuses on our firm’s US sports practice. And then we talk a little bit about some of the issues that he sees as players and parents attempt to reach professional ranks. So here’s the first part of the interview. Give me the thirty second sort of what you do in a nutshell.

M. Rueda: In our sports practice, we advise players, the representatives, like agents, we work with teams, owners, sports properties, sports brands. We act as their outside counsel. So if you’re a player signing a deal with, at Nike for example, we’ll advise you and your agent. If you’re signing with a new team, we do that work too. I think a lot of, in today’s culture, especially in the US a lot of players rely on their agents for all these different types of transactions and there’s some great agents out there, but as sports evolve and become more of a business, I think being well equipped with lawyers like us to help you through these deals is good advice. So we do that on a variety of different fronts. We do that internationally, which is even more important.

J. Morales: Right. So when it comes to players who, you know, have come up through the development program system, but are excellent players and really have legitimate opportunities internationally. What have you seen in terms of players who had maybe already signed contracts and are pro players here in the US and maybe ones that have not, but you know, they’re good enough that they’re getting books from international teams.

M. Rueda: Most of the kids that get the opportunity to play abroad, in bigger clubs and move before, have been able to get to a bigger club in Europe before they’re 18, Were part of our US national team program for the most part I think. And those are special situations. FIFA has some very strict guidelines that relate to the transfer of minors. So if you’re under 18, transferring from one, you know, from one country to, to an international club, right. There have been cases where kids have uprooted their entire families and FIFA has ruled that they, they did it in violation of FIFA’s rules and the families have had to pull the kid out of the program and they’ve been at top programs. And there are other cases like Pulisic and there’s another kid that we, we’ve worked with before, CJ Desantos who’ve done it at the under 18, and they’ve been able to get there properly and are, you know, obviously doing well with their own clubs

J. Morales: When you say properly what does that mean? That means we can’t, I’ve got to take a guess here that they don’t want people uprooting families and lives simply to go play soccer. Does there need to be some kind of other legitimate reason?

M. Rueda: So the general rule is if you’re, if you’re playing for a club, whether it’s a youth, but you’re signed to play for a club with your home federation, you can’t just transfer, that club can’t just transfer you to you know, to Manchester United if you’re under the age of 18. There are some exceptions. Like if you, if your family lives within, a number of miles from the facility that the club operates within. If you have an EU passport, I think, there, there are some, and that might even be too broad. It might be even more specific than that, but there’s some very limited exceptions. And in some cases, some kids have actually moved and I think FIFA found that the sole purpose of your move was to do this.

What FIFA wants to prevent is like big clubs buying, you know, some kid from some really poor country, and then the kid not working out and just cutting him loose and leaving this kid high and dry in a new country. So if you navigate the rules properly it can be done right. Whether you can meet those exceptions, in my opinion is extremely difficult. So they’re unique, very unique circumstances. So it’s a bit risky. Kids have been able to do that, but even for pro players that do it when they’re moving internationally and there American players and they’re relying typically on just their American agents advice, they may get a local attorney to help them, but in a lot of cases, you know, there’s some great agents out there, and they know the business, but there are some nuances to signing contracts internationally. And when we do deals for very large, like very significant players who, who have enough leverage to, to demand a lot of different things, we still, you know, we still have things that we’re concerned about and things that we need to look out for. And you know, I’m under the impression that the guys that move solely on their American agents advice aren’t really on the lookout for the same sorts of things. And I’ve seen situations where you’ve got guys, making decisions, making moves, you know, while they’re still in contract that that can be very detrimental to them financially. You know, clubs here can take recourse.

FIFA can, you know, there could be, you can sue through FIFA or bring an action through FIFA that can really, you know, have an impact on the player and the club that signs them, that maybe tried to lure them in properly. I mean, these things can work out not in your favor. And if you’re relying on somebody that doesn’t understand the legal recourse available to clubs, or the issues to identify when you’re signing in a particular country. Like for some of the youth players that I know have transferred property, you know, been able to transfer due to a club in Europe. They’ve signed contracts that have termination clauses and they operate like a break fee. Like we see in a business deal. You know, if the kid wants to get out the contract before the termination date, you know, we’ve seen kids sign deals with a break fee that’s essentially five times the market rate for someone his age. You know, there was a kid that, you know, we’re talking tens of millions of dollars, so this kid’s never getting out of this contract earlier until somebody agrees to pay that fee, which is just crazy.

J. Morales: So it’d be the acquiring club would have to probably would pay that money?

M. Rueda: Yes, and even if the kid was stuck at this club, he’s not getting the training he likes, he not, he’s not playing enough with the teams that, that he should be playing with. Therefore he’s not getting enough exposure. It’s not being developed properly. I mean, he’s never going to be able to get out of this contract unless they decide to just release them. So that’s one particular issue. But you know, contracts work out well if everything goes well. But you know, the reason that when you find out you made a bunch of mistakes as when they don’t go well and there were those cases happen frequently enough where it’s worth paying someone to make sure that you’re doing this the right way.

J. Morales: So some interesting thoughts, information there from Michael. At this point, we’re going to jump to another portion of our conversation. Michael already gave us an overview with the, from sports law capabilities and some of the issues that he’s seen. But then we also started to discuss how the development program in the US compares with the development programs of international leagues and other countries. And specifically we’re going to discuss and we did discuss the development academies that have sprung up in the US and how those have impacted youth soccer development here in this country.

M. Rueda: We have institutionalized concepts about sports leagues. Right. And we’re already quite different with like the academy program for example.

J. Morales: Why don’t you describe a little bit about that because that’s a system that exists internationally. If you’re in the US, it’s essentially a pipeline from youth soccer all the way up to the highest level in the relapse.

M. Rueda: Yeah. So the way youth soccer was always run, you know, since I can remember since I was a youth player, it was you played for your local town team. Okay. And then there were these things called premier teams, which were like, if you’re in the state of Connecticut, in any state, a club, a premiere team or club team basically had no borders within that state. You can take the best kids in each age group and put them on one team and play every other club team. And if you, if you made a premier team in your age group, you’re essentially playing at the highest level in your state. I mean you competed against, you go to tournaments and compete against other similar teams from other states. What they did now was, you know, I think partly because the appetite to play soccer has grown and it’s become more competitive. They established and more elite league and with MLS teams developing their own youth academies, which is an MLS team that has an academy for young players within a geographic border that’s been assigned to them essentially by MLS within they can scout players from. This most elite league is called the Development Academy League. And the MLS Youth Academies and then there’s a select group of other clubs that are not necessarily under the umbrella and don’t wear the badge and the uniform of an MLS club, all compete at that level.

But if you play for an MLS academy team and you’ve played in their youth program, and you’re 12 or 13 or 14, at a certain point, it’s fully funded. I don’t know if all clubs fully fund their youth academies from start to finish. But I think once you, at least, once you get to a certain level, it’s fully funded and there’s a commitment expectation. Most of those, I’d say all those kids don’t play high school ball anymore. This is what they do full time. And if you’re good enough, you know, once you get to like senior year of high school and you’re still playing for the club, your choices are typically, you either go to college and play in college, you know, but if you’re the best player in your club and the club feels like you’re someone who can contribute fairly soon, the club can sign you directly into their, into their senior roster. Their MLS team roster of 30 or so players that competes week in and week out in major league soccer. So effectively what they’ve done is said this is your territory to, to scout and develop players. And if you do a good job, you’re going to, you’re going to be able to sign these kids right up into your team. You’re not going to have to go out into the market and by players are trying to get players through the draft. And then if you get a player, if you develop a player and he becomes, you know, he’s ready to leave the program and go to college and he decides to go play in college and he continues to play. Obviously most teams watch the players that have been through their program because they can still sign that player back into their program without losing him to the draft.

J. Morales: That’s that homegrown player.

M. Rueda: Correct. So if you signed directly into the program without going to college or they let you go to college or you choose to go to college and then they sign you out of college, whether you played two years or you played all four years, they can sign you without letting all the other teams try to pick you, you are a homegrown player.

J. Morales: Okay, so your rights stay with the team that you’ve come up with and they’ve got the opportunity to still play college soccer.

M. Rueda: And it’s common. You see kids who have gotten into college and then you know, they signed with the team that they trained with before college.

J. Morales: This concludes the first episode of With… Legal and Business Insights. Thank you for tuning in and a special thanks to Mike Rueda for joining me today and providing his thoughts and insight. Remember, you can find links to our website and the show notes as well as links to provide feedback on this episode and to contact both Michael and me. Next time I’ll be joined by Vasi Yiannoulis, another Withers partner, to talk about inbound investments in the US real estate market. I’m Joe Morales, and you’ll hear me next time on With…Legal and Business Insights. Thanks for listening.

With...legal and business insights podcast

Providing insights into an array of interesting business and legal issues.