Agent’s non-solicitation agreement was unenforceable, but agent still had fiduciary duty to company not to take away clients when he left company: Court
A sport agent’s non-solicitation agreement was unenforceable, but the agent was still liable for more than $200,000 for breach of fiduciary duty when he indirectly recruited the employer’s clients, the Alberta Court of Appeal has ruled.
Richard Evans was an agent for The Sports Corporation (TSC), a sports representation agency based in Edmonton. Evans was employed with TSC for six years, where he managed current and prospective professional hockey players from the Czech Republic and Slovakia.
Evans had an employment agreement with TSC that included a non-solicitation clause. The clause stipulated that Evans could not try to convince any TSC employees to leave the company or solicit any TSC clients during his employment with TSC or for 24 months following the end of it, nor could Evans directly profit from TSC clients during that time.
In early 2006, the end of Evans’ contract was nearing and he spoke with two contacts who helped him recruit and manage players. He convinced them to work with him if he left TSC and, five days before the termination date of his contract, Evans told TSC he was leaving. TSC immediately terminated the contract and didn’t pay him for the last few days.
The two contacts also left TSC and joined Evans, taking many of the players they represented with them. TSC didn’t try to retain the players, since they expected the non-solicitation agreement to prevent Evans from competing against them.
Evans sued for unpaid wages and bonuses, while TSC counterclaimed for breach of the non-solicitation agreement and breach of fiduciary duty.
The Alberta Court of Queen’s Bench found TSC owed Evans wages for the last five days of the contract, for which it had effectively sent him home, as well as any unpaid bonuses. However, the court found Evans had breached his agreement. Though the two contacts weren’t officially TSC employees, they were for the purposes of the non-solicitation agreement, said the court, though there were no direct damages from this breach. Rather, any damages would be from the loss of the client players.
The trial court also found Evans had a fiduciary duty to TSC because he could exercise some scope of power or discretion unilaterally to pursue TSC’s interests, which made the company particularly vulnerable. Damages from breaching this fiduciary duty also rose out of the loss of client players, said the court.
The court determined the clause in the employment agreement was only a non-solicitation clause, not a non-competition clause, so it was enforceable even without a geographic element. It found Evans there was no evidence Evans directly solicited players who were TSC clients, but the two contacts in the Czech Republic and Slovakia solicited players on his behalf. Though Evans didn’t specifically ask them to do that, he had to have known what they were doing and this breached the non-solicitation agreement with TSC. The court ordered Evans to pay $207,463.47 for the solicitation of TSC’s clients by his contacts, who he recruited away from TSC. Evans appealed the decision to the Alberta Court of Appeal.
The Court of Appeal found the trial judge erred in finding the non-solicitation clause was enforceable because it prevented Evans from soliciting past TSC clients who were no longer with the company. However, the unenforceability of the non-solicitation clause didn’t remove Evans’ liability because the appeal court agreed with the trial court that Evans had a fiduciary duty to TSC.
The appeal court found Evans was “the face and voice of TSC” to the Czech and Slovak clients recruited by his contacts. TSC entrusted Evans with managing those players with little supervision for six years and the relationships he developed with those clients made TSC vulnerable if Evans decided to leave the company, said the appeal court, which gave him a fiduciary duty to the company. The players TSC entrusted to Evans to develop on behalf of the company were diverted for Evans’ own benefit when he struck out on his own, which constituted a breach of that duty. The failure of TSC to pay Evans for the last five days of his contract was a minor breach which wasn’t a repudiation of the employment agreement that warranted the breach of fiduciary duty, said the appeal court.
The appeal court agreed with the trial court’s finding that Evans knew and expected his Czech and Slovak contacts would bring the TSC clients they worked with over to him when he asked them to follow him. Evans was just as liable for this indirect solicitation of TSC clients as if he had done it himself, which was a breach of his fiduciary duty. The appeal court upheld the damage award and dismissed Evans’ appeal.
For more information see:
- Evans v. The Sports Corp.
