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Tuesday, December 29, 2009
The Aroldis Chapman Sports Law Saga Continues

A couple of weeks ago, Ed and I discussed an interesting lawsuit filed in a Massachusetts state court by the former agents of 21-year-old Cuban defector Aroldis Chapman against his new agents for "stealing" Chapman as a client. The lawsuit -- Athletes Premier International v. Hendricks Sports Management -- is based on a tortius interference claim, which Jimmy Golen of the Associated Press has discussed. Chapman, a lefthander who can reportedly throw 100 miles per hour, remains a free agent, having turned down a $15 million (guaranteed) offer from the Red Sox. He apparently seeks a deal that will guarantee him $30 million, which will be harder to obtain when 2010 arrives because of federal laws which tax signing bonuses when a person works in the U.S. but not when the person does not work in the U.S. (see below).

David Frank of Massachusetts Lawyers Weekly has a new and extensive story (subscription only) on the agency commission that will be owed when Champan signs with a team. Frank interviews the allegedly aggrieved agent, Edwin L. Mejia (a 2001 graduate of Boston University School of Law whose agency is based in White Plains, New York and who is being represented by Gary Greenberg of Greenberg Trauig in the litigation) and me for the story. Here are some excerpts:

* * *
Chapman, a 21-year-old member of the Cuban national team, signed a contract in July naming Mejia as his exclusive representative . . . From that point on, Mejia, who heads up Athletes Premier International, says he spent the summer in Europe helping guide Chapman through the complicated legal process of being declared eligible to play ball in the majors.

"It's tough to quantify how much time went into all of this, but we met on July 2, and from then until [Chapman] arrived in the U.S. in mid-October, I spent virtually the entire time with him," Mejia says. "I did everything from make breakfast for him to deal with the legal and procedural stuff. "

With Chapman's 100 mile-per-hour fastball wowing teams, including the Red Sox, it was clear that some big bucks were headed his way - a percentage of which would land in Mejia's bank account. "I was negotiating with a couple of clubs and knew several other teams were also interested," he says . . .

Then, on Nov. 16, Chapman suddenly disappeared. "I didn't know where he was, which was very odd because he and I talked every day," he says. "We did some research and found out, in part through cell phone records, that he had been contacted by representatives from [Hendricks Sports Management]. Subsequent to notifying [Hendricks] that we knew they were talking to [Chapman], we received documentation that indicated he had allegedly fired me. "

* * *

Although representatives from Hendricks Sports did not return calls from Lawyers Weekly, the agency issued a written statement to the Associated Press . . .

* * *

While the concept of tortious interference clearly covers attempts to interfere with another's business relationship, Michael A. McCann, a Vermont Law School professor who writes for Sports Illustrated, says Mejia is facing an uphill battle.

"There is a deference by the courts to the competitive nature of sports agents, and the reality is that, while the behavior isn't praise-worthy, it is very much a part of the industry," McCann says. "It would truly be a ground-breaking decision if a court were to find that poaching players constitutes tortious interference. "
* * *

There's another angle to the story, though, that I think is very interesting: the tax implications of Chapman still not being signed as 2010 approaches. Basically, by waiting until 2010, Chapman will cost himself millions of dollars in taxes and its not clear if any of his agents were aware of that.

Jorge Aranguré Jr. of ESPN Insider (subscription only) has the details:

* * *
By signing in 2010, Chapman's bonus will now be eligible to be taxed by the U.S. government. "Signing bonuses that are received outside the U.S., by a non-U.S. resident, and in a tax year in which the person did not work in the U.S., are not subject to U.S. taxation," wrote agent Joe Kehoskie, who has represented Cuban players for several years, in an email. "As far as I'm aware, neither the Hendricks brothers nor Rodney Fernandez (who represent Chapman) have ever completed a contract for a foreign free agent, so I bet this issue flew right under their radar.

Right now, it's shaping up as a $3 million (or more) loss for Chapman."Unless Chapman signs for well over $20 million, he'll net less money than if he had simply signed with Boston for $15 million when that offer was presented."
* * *
For a guy who still hasn't signed with an MLB team, let alone thrown a pitch for one, Aroldis Chapman has certainly generated a lot of controversy.



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