Zion Williamson v. Prime Sports Marketing: Agents and Advisors PAY ATTENTION

On May 6, 2024, the Fourth Circuit issued its opinion in favor of Zion Williamson (“Williamson”) upholding the District Court’s decision in favor of Williamson.  The Fourth Circuit concluded that Williamson was engaged in an intercollegiate sport while on the Duke University (“Duke”) men’s basketball team, and was thus a “student-athlete,” so Prime Sports Marketing (“Prime”) was required to comply with the North Carolina Uniform Athlete Agents Act (“Act”).  The failure to comply with the Act rendered any agreement between Williamson and Prime void.

After Williamson played his final game for Duke, but before he was drafted, Williamson hired Prime to serve as his marketing agent.  In accordance with the terms of the agreement between Williamson and Prime, the agreement could only be terminated after five (5) years and only for cause. Later, Williamson’s mother and stepfather informed Prime’s representative that Williamson was terminating the agreement and instructed Prime to no longer contact third-parties on Williamson’s behalf.  On May 31, 2019, Williamson emailed Prime’s representative to formally terminate the agreement.  The same day, Williamson signed a marketing agreement with CAA.  On June 2, 2019, Williamson’s legal counsel sent a letter to Prime informing Prime that the marketing agreement between Williamson and Prime was void under the terms of the Act.

Williamson argued that the agreement was void under the terms of the Act for two (2) reasons: 1) neither Prime nor its representative were registered with the North Carolina Secretary of State as required by the Act; and 2) the agreement did not contain the following notice in boldface type with capital letters:

WARNING TO STUDENT-ATHLETE

IF YOU SIGN THIS CONTRACT:

(1) YOU SHALL LOSE YOUR ELIGIBILITY TO COMPETE AS A STUDENT-ATHLETE IN YOUR SPORT;

(2) IF YOU HAVE AN ATHLETIC DIRECTOR, WITHIN 72 HOURS AFTER ENTERING INTO THIS CONTRACT, BOTH YOU AND YOUR ATHLETE AGENT MUST NOTIFY YOUR ATHLETIC DIRECTOR; 

(3) YOU WAIVE YOUR ATTORNEY-CLIENT PRIVILEGE WITH RESPECT TO THIS CONTRACT AND CERTAIN INFORMATION RELATED TO IT; AND

(4) YOU MAY CANCEL THIS CONTRACT WITHIN 14 DAYS AFTER SIGNING IT. CANCELLATION OF THIS CONTRACT SHALL NOT REINSTATE YOUR ELIGIBILITY.

In accordance with the express terms of the Act, an agency agreement lacking this exact warning is voidable by the athlete.  There was not dispute that the agreement between Williamson and Prime did not contain the required statutory language and neither Prime nor its represented was registered as an agent under the terms of the Act.

Prime, however, argued that Williamson was not a student-athlete, as the term is defined in the Act, at the time he executed the agreement between the parties.  Specifically, Prime argued that Williamson was “permanently ineligible” to compete and, thus, was not entitled to the protections under the Act.  Under the terms of the Act, if a “student-athlete” violated NCAA rules, then the athlete is not a “student-athlete” as defined in the Act.  Conversely, Williamson argued that “someone who is ‘permanently ineligible,’ by definition doesn’t “engage in”; isn’t ‘eligible to engage’; and won’t ever be eligible to engage in an intercollege sport.”  The Fourth Circuit agreed with Williamson’s analysis and stated as follows:

[i]f a student is engaged in an intercollegiate sport when he signs an agency contract, he is a student-athlete subject to the Act.  The permanent ineligibility clause doesn’t apply to Williamson, who was engaged in a single sport.

Similarly, the Fourth Circuit rejected Prime’s request that the court take a dive into NCAA rules to determine whether Williamson was permanently ineligible due to rules violations.

In conclusion, the Fourth Circuit found that the agreement between Williamson and Prime was an agreement subject to the terms of the Act.  Under the terms of the Act, any agency agreement between a student-athlete and an agent who fails to register in North Carolina is automatically void.  Also, being that the agreement between Williamson and Prime did not contain the above-referenced “warnings”, if the agreement was not already void, “Williamson was free to void it…which he did both via email and through counsel.”  Accordingly, the Fourth Circuit concluded that the District Court correctly granted Williamson’s judgment on the pleadings.  The Fourth Circuit also affirmed the dismissal of Prime’s claims for fraud and misappropriation of trade secrets.