Why more talent agents might soon be defecting to rival agenciesMon Aug 23, 2010 @ 06:10AM PST
By Eriq Gardner
In April, Matthew Baldwin, a sports agent who has represented clients including Washington Redskins coach Mike Shanahan and Texas Tech coach Mike Leach, defected from IMG to CAA. On the eve of his resignation, Baldwin moved from Minneapolis to Los Angeles. The move might have been to take advantage of California's employee-friendly laws limiting an employer's ability to enforce certain parts of a non-compete agreement.
On the day he announced his resignation, he filed a lawsuit against IMG in Los Angeles, seeking a declaration that his employment agreement with IMG was void and unenforceable.
IMG responded two weeks later by filing its own lawsuit against Baldwin in Ohio, claiming he breached his contract and misappropriated trade secrets.
The key question has been where this court fight will occur: California or Ohio? The land of free agency or the home of restrictive covenants?
Although the fight is far from over, the Ohio judge in the case has decided to defer judgment on the issue to the California judge, indicating an advantage to Baldwin.
In a decision a week ago, Ohio District Court Judge Kathleen O'Malley has stayed the proceedings in her court pending the resolution of concurrent case in federal court in California. In making her determination, Judge O'Malley analyzes the "first to file" rule, which typically grants jurisdiction to the court where the first lawsuit was filed. The judge finds the parties "identical" and the claims asserted as "substantially overlap[ing]."
Judge O'Malley rejects IMG's argument that the California lawsuit was filed as an "anticipatory strike," ruling that "because [Ohio] is the second-filed court, it would be inappropriate for this Court to evaluate whether the circumstances of this case justify an exception to the 'first to file' rule."
This means that it will be up to the California court to decide whether Baldwin filed his first lawsuit in bad faith to merely gain a procedural advantage. The judge there has already indicated this argument will likely fail.
On May 27, the California court issued a tentative ruling that it was "inclined to deny [IMG's] motion to dismiss," finding that Baldwin's lawsuit was not an "anticipatory strike." The California court requested more briefing from the parties, however.
Both sides will now argue the issue before California judge George Wu on September 9.
IMG will need to come up with more convincing arguments for the California court to transfer jurisdiction to the case to Ohio. Otherwise, pending appeals, the case may go forward in California, and Baldwin will be able to argue his non-compete clause was invalid.
Should this happen, Baldwin (who has since left CAA), agents and perhaps all employees around the country may have a road map to escaping non-compete clauses from their employers: Move to California and file a quick lawsuit.