Agent defection creates nasty litigation

By Eriq Gardner

A legal dispute between a CAA agent and his former employer is getting heated, and the outcome could influence how freely agents can jump from one agency to another. 

IMG Worldwide says that one of its former sports agents, Matthew Baldwin, who defected to CAA last month, destroyed key documents pertaining to clients and their salaries. The agency claims documents were deleted in order to interfere with its attempts to prove that Baldwin misappropriated trade secrets and violated a non-compete clause in his contract.

The new claims by IMG were revealed in an amended complaint filed Wednesday in Ohio District Court. Baldwin's move from IMG to CAA in early April has triggered two lawsuits that may influence the future of client poaching, non-compete clauses and trade secrets around the nation.

Baldwin was a junior agent in the sports division in IMG's Minneapolis office. He helped represent such clients as Washington Redskins coach Mike Shanahan and former Texas Tech coach Mike Leach. On April 2, he announced his resignation to join competitor CAA, just days after receiving a bonus and assuring his superiors that he was staying.

On March 29, Baldwin signed a lease for an apartment in Los Angeles, which he claims makes him a resident there and deserving of California's unique statutory protections limiting an employer's ability to enforce certain provisions in a non-compete clause. Four days later, on the same day he announced his resignation, Baldwin filed a lawsuit against IMG seeking a declaration that his employment agreement with IMG was void and unenforceable.

IMG responded by filing its own lawsuit against Baldwin in Ohio claiming he breached his contract and misappropriated trade secrets. The agency alleges that upon leaving, Baldwin took on his laptop some 7,000 files, which Baldwin disputes and says were merely personal documents or public information.

A key aspect of the case will be the forum of dispute, since California's rules on non-compete clauses are less generous to employers than Ohio's. Baldwin was the first to file his case, but on Wednesday, IMG moved to dismiss the California case, alleging he is an "admitted liar" who was "forum shopping."

To buttress its case against Baldwin, IMG has also introduced new claims in an amended complaint that says Baldwin destroyed evidence on his computer and violated the parties' standstill agreement. "The fact that most of the confidential information at issue in this lawsuit has a situs in this District nails the coffin shut on Defendant's venue argument," IMG argues in court papers.

Baldwin is represented by Adam Kaiser at Dewey & LeBoeuf. Kaiser says allegations that Baldwin destroyed evidence are false and that all the alleged spoilage is on the laptop that was turned over to IMG. Kaiser also argues that the idea that coaches' salaries are trade secrets is "preposterous," and that IMG is trying to avoid the 2007 outcome of a similar case involving another former IMG agent, Jay Danzi.

"If anyone is trying to forum shop, it's IMG," Kaiser says. "They saw how things went in the Danzi case and decided to file in Ohio in order to avoid a judgment about the non-enforceability of a restrictive covenant, even though a large part of their business in California regularly takes advantage of this."

It's rare that disputes over agent defections and client poaching get into the public eye because most go to arbitration. But in this instance, neither party seems interested in going that route. As a result, the case could provide a window into the sometimes shadowy world of agency employment. The Baldwin case could also mean something to corporate America at large, deciding what happens when an employee with a restrictive contract moves to California.