Proactive Sports Management Ltd v. 1) Wayne Rooney, 2) Coleen Rooney (formerly McLoughlin), 3) Stoneygate 48 Limited, 4) Speed 9849 Limited [2010] EWHC 1807 (QB)

Proactive Sports Management Ltd v. 1) Wayne Rooney, 2) Coleen Rooney (formerly McLoughlin), 3) Stoneygate 48 Limited, 4) Speed 9849 Limited [2010] EWHC 1807 (QB)

The case essentially concerns the image rights contract between Wayne Rooney and his former agents (Proactive Sports Management Ltd). Proactive were seeking unpaid commission and invoices totalling between £1-3m against Wayne and over £200,000 against Coleen.

At 821 paragraphs long though, it is a truly mammoth judgment. Below is a précis of the most important points. (You can read the full case report at: http://www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/EWHC/QB/2010/1807.html&query=rooney&method=boolean)

Why was the case brought?

Essentially Rooney signed an Image Rights Representation Agreement (IRRA) with Proactive Sports Management Ltd, to represent him in his commercial affairs for the next 8 years. Midway through this contract, when his agent (Paul Stretford) was fired from Proactive and set-up a new sports agency, the Rooney’s followed him across and purported to sever links with Proactive on the 18th December 2008. Proactive sued Wayne and Coleen for liquidated damages and commission that they felt continued to be owed to them on the various sponsorship contracts negotiated on their behalf by Proactive.

The Rooney’s successful counter-claim against Proactive was based on their view that any contract between them is ‘void, invalid, unenforceable and of no effect’ as the 8yr term represents a restraint of trade.

Aren’t there rules governing Player Contracts?

On-field representation agreements are comparatively well regulated by the FA: they are limited to a maximum term of two years and must be in writing. Essentially these contracts are dependent on a player’s skill and given this, an agent would normally take an average fee of 5% to represent their one-off role in negotiating the contract.

By contrast however, contracts governing off-field activities (such as image rights) are wholly unregulated by both the FA and FIFA, although the Inland Revenue is now looking into this area closely (see http://www.dailymail.co.uk/sport/football/article-1311210/Wayne-Rooney-facing-crisis-taxman-gets-set-chase-1million.html). Unlike on-field agreements, these commercial contracts need constant servicing and brand protection / management, therefore agents will usually charge an average fee of 20% to reflect the additional work undertaken. It was this type of contract that formed the basis of the case.

  • 17th July 2002, Rooney signed an 8yr, on & off field agreement with Proactive (this was later varied on the 16th Jan 2003 to strip out off-field components)
  • 19th September 2002, Rooney again signed an 8 yrs agreement, however this was quickly  torn up and replaced with Dec  version (below)
  • 14th December 2002, Rooney signed a 2yr on & off field agreement with Proactive, which was renewed in 2004 and 2006. Critics have suggested that this was only signed so a copy of the contract could be lodged with the FA.
  • 16th January 2003, Rooney signed over his commercial rights to Stoneygate. Stoneygate in turn signed an 8yr representation agreement with Proactive.
  • 1st Feb 2003, Rooney signed a playing contract with Everton FC (actually executed on  or about 15th Feb 2003)
  • 23rd August 2004, Rooney transferred to Manchester United FC in a £27m deal (the MUFC Image Rights contract was later varied to extend the contract to 30th June 2012)

 

Who was involved in the case?

Essentially, there were five main companies involved to some degree:

  • Proform Sports Management Ltd is the agency that Wayne was signed to as a 15 yr old by Peter McIntosh. This agreement was later held to be unenforceable (Proform Sports Management Ltd v. Proactive Sports Management Ltd [2006] EWHC 2903 (Ch)).
  • Proactive Sports Management Ltd is the agency that Wayne moved to at 17 and remained with for the majority of his professional career.
  • Stoneygate 48 is the limited company set-up to manage Wayne’s Image Rights
  • Speed 9849 is the limited company set-up to manage Coleen’s commercial affairs (Harper Collins, OK! Magazine etc). Although there was no formal contract between Coleen and Proactive, the Court implied this from past conduct [775] and calculated commission on the basis of a 20% rate.
  • Triple S Ltd – is a new company informally appointed July 2009 to act as Stoneygate’s Agent in relation to image rights following Paul Stretford’s move from Proactive.

And a number of key people:

  • Paul Stretford – formerly chief executive of Proactive until late 2008, Stretford is a Director of Stoneygate and his firm acts as Rooney’s on-field and off-field agent. While Mr Justice Hegarty QC found Stretford to be a highly able and effective agent, he was criticised in court for his failure to be a truthful or reliable witness [311].
  • Mel Stein – a solicitor and football agent who acted as key witness for the claimants
  • Gordon Taylor OBE – Chief Executive of the Professionals Football Association (PFA) who acted as key witness for the defendants

 

So what are Image Rights?

The Court defined these rights as:

“Image Rights means the right for any commercial or promotional purpose to use the Player’s name, nickname, slogan and signatures developed from time to time, image, likeness, voice, logos, get-ups, initials, team or squad number (as may be allocated to the Player from time to time), reputation, video or film portrayal, biographical information, graphical representation, electronic, animated or computer-generated representation and/or any other representation and/or right of association and/or any other right or quasi-right anywhere in the World of the Player in relation to his name, reputation, image, promotional services, and/or his performances together with the right to apply for registration of any such rights.”  [187]

Once at Manchester United, Rooney was restricted to signing only 5 sponsorship agreements and 5 merchandise agreements. There were two main reasons for this restriction, the first was to avoid diluting the Rooney Brand, the latter was to ensure that Rooney had enough time to focus on his football rather than the demands of sponsors. At the time of the case, the main sponsors were:

  • Nike, unusually this was a 10 yr contract to take advantage of Rooney’s potential growth
  • Coca Cola (4 yr contract)
  • EA Games (3yr contract)
  • Manchester United FC
  • Asia Pacific Breweries Ltd (2yr contract to promote Tiger Beer)
  • Big Blue Tube
  • Pringles Crisps

 

How did Proactive argue their case?

The first attempt to derail the Rooney case was to cast doubt on the credibility of Paul Stretford. Earlier in 2008, Stretford had been charged with various FA disciplinary offences relating to the 2002 Agreement and terms. These related to making false or inaccurate statements at Warrington Crown Court during the trial of John Hyland, Anthony Bacon, Christopher Bacon for offences of obtaining money by deception (by demanding money from Mr Stretford in connection with Wayne’s move from Proform to Proactive). In Court, Stretford denied Rooney had signed any footballing representation agreement prior to 12th Dec 2002 (even though he knew Rooney had signed two agreements in July and Sept 2002), although he did acknowledge there was an IR agreement. When the truth was later discovered, the Crown decided it could no longer rely on Stretford’s evidence and withdrew its case, while the Jury entered formal verdicts of not guilty for the three men. Subsequently the FA Regulatory Commission commenced disciplinary proceedings against Stretford and decided on 9th July 2008 to fine him £300,000 and suspend him from acting as a player’s agent for 18months (with the final 9 suspended). Although Proactive paid the fine, Stretford later resigned as a director of Proactive on 20th May 2008.

Post-Termination Commission

The main debate in the case was in relation to any right to Post-Termination commission payable at the end of a contract. Essentially the question before the court was if an agent negotiates a sponsorship and is then replaced or fired, are they still entitled to receive 20% commission over the life of that contract, even if the player is represented by a new agent?

[469].….“On the one hand, it might be said that the legitimate commercial interests of the agent could only properly be protected if he was entitled to receive post-termination commission on contracts which he had negotiated. Otherwise, it might be said, he might find himself in a situation in which he had successfully negotiated a highly lucrative, long-term commercial sponsorship agreement just before the end of his contract only to find that his client immediately transferred his business to another agent, thus depriving the original agent of any proper remuneration for the work which he had done.

 [470]. On the other hand, it might be said that if an agent was entitled to post-termination commission notwithstanding that a new agent had been appointed in his place, it would mean that he would continue to receive substantial sums by way of commission without having to provide any further services to his client. By the same token, in those circumstances, the new agent might have to service the inherited contracts without payment or the client might, in effect, have to pay double commission.”

 After very long and at times technical legal arguments, the Court decided that a right to commission in this instance was dependent on a service being provided – no service provided by an agent, no commission [553]. One other factor helped in reaching this decision, that the right to post-termination commission was not explicitly drafted within the contract and this was essential particularly where there was an imbalance between a contract professionally drafted by solicitors (Proactive) and commercially unsophisticated parties without any independent legal advice (Rooneys) [554].

Termination Clause within the contract

Most of the arguments made by both parties in relation to the validity and effect of the termination clause within the contract were rejected by the Court. In particular, the Court was not persuaded by the estoppels arguments raised by claimants, or the mistake argument raised by the defendants [600]. The Court also rejected the argument that the contract was ‘affirmed’ by Mr Stretford passing on any knowledge and risks of the unenforceability of the IRRA due to his prior knowledge as a Proactive Director, as he would have been under a duty of confidence not to disclose privileged legal advice [678]. The case therefore effectively turned on the question of Restraint of Trade.

Restraint of Trade (RoT)

“Any contract or contractual stipulation which is in restraint of trade is Prima facie unenforceable unless it is reasonable having regard to the interests of the parties and the public.” [621]

While it is often possible to sever offending RoT clauses from the rest of the contract, this was not possible on this occasion. The Court felt that a number of factors needed to be taken into account, in particular, the fact that there was:

  • No meaningful negotiation
  • A Flat fee of 20% was payable on each sponsorship opportunity regardless of the amount of the contract
  • The Rooney family had no commercial experience and were utterly unsophisticated in financial and contractual matters
  • The Rooney family never took any independent legal advice
  • The Image Rights Representation Agreement was unique in the industry in many respects including its long duration (The Court did however note that a 2-5yr term could have been acceptable  [723])
  • The IRRA imposed substantial restrictions on Rooneys freedom to exploit his earning ability
  • It was irrelevant whether any restriction on earning ability was partial or total
  • The cost of termination represented a significant disincentive to exit and was essentially penal rather than attempt to quantify the damages payable

 Once this RoT conclusion had been reached, all that was left was to conclude was that Proactive were entitled to quantum meruit (a restitutionary award based on objectively valuing the services they had actually provided) for any contract payments falling due before the relationship had terminated. But importantly, nothing after this termination.

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About Kris

Associate Professor in Sports Law, Staffordshire University; British Gymnastics Senior Coach

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