Williamson v. Prime Sports Mktg., LLC

101 F.4th 302

Zion WILLIAMSON, Plaintiff - Appellee, v. PRIME SPORTS MARKETING, LLC; Gina Ford, Defendants - Appellants.National Basketball Players Association, Amicus Supporting Appellee.

No. 22-1793

No. 22-1946

United States Court of Appeals, Fourth Circuit

Argued: October 24, 2023

Decided: May 6, 2024

Appeal from the United States District Court for the Middle District of North Carolina, at Greensboro. Loretta C. Biggs, District Judge. (1:19-cv-00593-LCB-JLW)

ARGUED: Douglas Frederic Eaton, EATON & WOLK PL, Miami, Florida, for Appellants. Zachary D. Tripp, WEIL, GOTSHAL & MANGES, LLP, Washington, D.C., for Appellee. ON BRIEF: Jeffrey S. Klein, CLARICK GUERON REISBAUM LLP, New York, New York; Lauren E. Richards, LOEB & LOEB LLP, New York, New York; John R. Wester, Fitz E. Barringer, ROBINSON, BRADSHAW & HINSON, P.A., Charlotte, North Carolina; Robert B. Niles-Weed, Zachary A. Schreiber, WEIL, GOTSHAL & MANGES, LLP, New York, New York, for Appellee. Ronald E. Klempner, NATIONAL BASKETBALL PLAYERS ASSOCIATION, New York, New York; Nicole A. Saharsky, Minh Nguyen-Dang, Erik P. Fredericksen, MAYER BROWN LLP, Washington, D.C., for Amicus Curiae.

Before DIAZ, Chief Judge, TRAXLER, Senior Circuit Judge, and Jamar K. WALKER, United States District Judge for the Eastern District of Virginia, sitting by designation.

Affirmed by published opinion. Chief Judge Diaz wrote the opinion, in which Judge Traxler and Judge Walker joined.

DIAZ, Chief Judge:

In this case, we interpret the North Carolina Uniform Athlete Agents Act, which governs contracts between student-athletes and their agents. Prime Sports Marketing, LLC, and Gina Ford¹ argue that their former client, Zion Williamson, wasn't a "student-athlete" when he contracted with them, so he can't benefit from the Act's protections.

The district court rejected that argument. It also granted summary judgment to Williamson on Prime's contract and tort claims.

Because Williamson was engaged in an intercollegiate sport while on the Duke University men's basketball team, and was thus a "student-athlete," we agree with the district court that Prime's failure to comply with the Act's requirements voided the contract. We also affirm the district court's grant of summary judgment on Prime's contract and tort claims.

I.

A.

When he enrolled at Duke University, Zion Williamson was one of the most prominent young stars in basketball. As a freshman on the Duke men's basketball team, Williamson was named Atlantic Coast Conference (ACC) Player of the Year and led Duke to the ACC Championship. At the end of his first season, Williamson entered the NBA draft, where he was selected by the New Orleans Pelicans as the number one overall pick.

Williamson's talents generated interest not just from basketball fans, but from agents eager to represent him. During his freshman year, Williamson began to communicate with Gina Ford, a marketing agent and Prime's president. Ford met with Williamson and his mother and stepfather several times to discuss Prime representing Williamson as his marketing agent when he turned pro.

After Williamson played his last game at Duke (but before being drafted), he hired Prime as his marketing agent. Under the agreement, the parties could terminate the contract only after five years, and then, only for cause.

For a few weeks, all seemed well. Ford secured a cover shoot and article about Williamson for Slam Magazine. She also sent Williamson two "Partnership Summaries," which contained a compilation of one-page offers purportedly made to Williamson by various companies, J.A. 1849-97, 1965, as well as a "Brand Management Strategy," which discussed Williamson's brand and identified "potential brand partnerships," J.A. 1426-45.

But the day after receiving the strategy document, Williamson's mother and stepfather told Ford that Williamson was terminating the Prime contract and instructed her to stop negotiating with third parties on Williamson's behalf. Unbeknownst to Ford, Williamson's parents also forwarded the strategy document and Partnership Summaries to agents from Creative Artists Agency ("CAA"), a competitor agency that Williamson had retained as his player agent.²

On May 31, 2019, Williamson emailed Ford to formally terminate the contract. That same day, Williamson signed a marketing contract with CAA. CAA later negotiated partnerships for Williamson with many of the same companies identified in Prime's partnership summaries.

B.

On June 2, 2019, Williamson's attorney sent a preemptive cease-and-desist letter to Prime. The letter stated that the Prime contract was void under the North Carolina Uniform Athlete Agents Act, N.C. Gen. Stat. § 78C-85 et seq.

Williamson alleged that the contract violated two provisions of the Act, which made it unenforceable. First, with two exceptions not relevant here, an agent seeking to contract with a student-athlete must register as an agent with the North Carolina Secretary of State. N.C. Gen. Stat. § 78C-88(a). If an agent fails to register, any agency contract the agent makes with a student-athlete is void. N.C. Gen. Stat. § 78C-88(d). Williamson claimed that because Ford never registered as an agent in North Carolina, the Prime contract was void.

Second, the contract must contain, "in close proximity to the signature of the student-athlete," a notice in boldface type and capital letters that states:

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.

N.C. Gen. Stat. § 78C-94(c).

An agency contract lacking this exact warning is voidable by the student-athlete. N.C. Gen. Stat. § 78C-94(d). The Prime contract didn't contain this notice, so Williamson stated that, even if the contract weren't void under the registration requirement, he was voiding the contract on this ground.

Prime responded that the Act didn't apply to the contract because Williamson wasn't a "student-athlete," as defined by the Act, when he signed it. See N.C. Gen. Stat. § 78C-86(11).

Williamson then sued Prime in federal court, invoking the court's diversity jurisdiction. He sought a declaratory judgment that Prime's violations of the Act voided the Prime contract. He also claimed that Prime violated North Carolina's Unfair and Deceptive Trade Practices Act, N.C. Gen. Stat § 75-1 et seq., ("UDTPA") and that Prime fraudulently induced him to contract.

After the district court denied its motion to dismiss, Prime answered the complaint and counterclaimed. As relevant here, Prime raised a breach of contract claim and two related contract claims. It also claimed that Williamson misappropriated its trade secrets and acquired its marketing materials by making fraudulent representations.³

Williamson moved for partial judgment on the pleadings on his declaratory judgment claim. In response, Prime conceded that Ford never registered as an agent nor included the requisite warning in the Prime contract. But it argued that Williamson wasn't a "student-athlete" under the Act because he allegedly violated National Collegiate Athletic Association (NCAA) rules, and those violations made him "permanently ineligible" to play college basketball. See N.C. Gen. Stat. § 78C-86(11).

Under the Act, a player who is "permanently ineligible" to compete in intercollegiate sports isn't a "student-athlete" entitled to the Act's protections. Id. Williamson disputed that he violated NCAA rules and argued that even if he did, those violations wouldn't impact whether he was a "student-athlete" under the Act. Prime then moved to supplement its response with more evidence of Williamson's alleged wrongdoing.

The district court denied Prime's motion to supplement and granted Williamson's motion for partial judgment on the pleadings. Williamson v. Prime Sports Mktg., LLC, No. 1:19-cv-593, 2021 WL 201255, at *9 (M.D.N.C. Jan. 20, 2021). It held that Williamson was a student-athlete when he signed the Prime contract, and that Prime's allegations that Williamson violated NCAA regulations didn't create "a genuine issue of material fact as to whether Plaintiff had been deemed permanently ineligible during the time period in question." Id. at *8. And it concluded that supplementing Prime's response with more evidence of Williamson's misconduct would be futile. Id. at *4.

After the district court entered judgment for Williamson, Prime filed four related motions seeking to amend, reconsider, or vacate the court's judgment. Prime also moved to amend its pleadings. The district court denied these motions. Williamson v. Prime Sports Mktg., LLC, No. 1:19-cv-593, 2021 WL 4193343, at *9 (M.D.N.C. Sept. 15, 2021).

Following discovery, the parties filed cross motions for summary judgment on Prime's counterclaims. The district court granted Williamson's motion and denied Prime's, holding that Prime's violations of the Act barred its contract claims. Williamson v. Prime Sports Mktg., LLC, No. 1:19-cv-593, 2022 WL 2802611, at *3-4, *12 (M.D.N.C. July 18, 2022). It also held that Williamson was entitled to summary judgment on Prime's fraud, misappropriation of trade secrets, and related claims because Prime failed to establish essential elements of those claims. Id. at *4-9. Williamson voluntarily dismissed his UDTPA and fraudulent inducement claims, and the court entered final judgment.

Prime now appeals (1) the grant of Williamson's motion for judgment on the pleadings; (2) the denial of its motion for leave to amend; and (3) the grant of summary judgment for Williamson on its counterclaims.

II.

A.

We begin with Prime's appeal of the district...