Rooney Doesn’t Have To Pay Commissions Due To Unfair Restraint Of Trade

Rooney Doesn’t Have To Pay Commissions Due To Unfair Restraint Of Trade

Brent Randall is a JD candidate at the University of Ottawa.

On December 1, 2011, the Court of Appeal of England and Wales ruled on a case involving English soccer superstar Wayne Rooney and his former agency, Proactive Sports Management Limited, over commission payments.  Among five issues the Court decided, the most important involved whether the agency was entitled to commissions from contracts it had negotiated previously, and whether the contract it entered into with Mr. Rooney was a restraint of trade.

As previously reported here on IP Osgoode, the plaintiff, Proactive, sued Mr. Rooney for the payment of commissions from an image rights representation agreement (IRRA) between Proactive and Mr. Rooney.  Mr. Rooney ended his relationship with the agency, but Proactive argued that they should still get their 20% commission from those continuing endorsements and advertising deals negotiated when Mr. Rooney was a client of their agency.  Since Mr. Rooney was only 17 at the time of the agreement, and both he and his parents did not appreciate the legal implications of the contract, including its relatively long term (eight years) and high, unchanging, commission rate, the agreement was originally found to be unenforceable.  Proactive was later granted this appeal.

When considering the issue of whether Proactive was entitled to commissions, after termination, on those endorsements and contracts it had negotiated, the test according to Lady Justice Arden was a simple one: the right to commission was created whenever Proactive procured an endorsement contract.  Mr. Rooney’s counsel had argued that the idea of continuing commissions, even after termination of their agreement, would be unfair as Proactive would essentially be getting paid for not doing any work for Mr. Rooney at the time. Lady Justice Arden put this argument to rest when she stated that “it is the procuring of endorsement contracts that gives rise to the right to commission and not the ongoing provision of services.”  Proactive ought to be entitled to reap the benefits of the work that it did for Mr. Rooney, based on the agreement they had in place, regardless of how long those benefits may extend.

In fact, this should be a key incentive in an agent-client relationship: the client wants a long, lucrative contract, and the agent is motivated to negotiate one in order to be rewarded with the commissions. In addition to this, Lady Justice Arden also noted that practically speaking, Proactive likely had significant expenses to provide Mr. Rooney with the services he expected, and as such, would be counting on commissions from the contracts they negotiated to continue in order to be compensated.  Proactive’s appeal on this issue was therefore allowed.

However, Proactive did not have the same success on the remaining issues.  In appealing that the contract between Proactive and Mr. Rooney was not an unreasonable restraint of trade, the agency set out three arguments:

  1. Mr. Rooney’s trade is playing soccer, not endorsements, and as such the IRRA could not restrain his trade;
  2. The IRRA did not restrict Mr. Rooney’s earning potential, and in fact increased it.
  3. Nothing about the IRRA made it unfair or oppressive, as had been required in previous case law on the issue such as in A Schroeder Music Publishing Co. v. Macaulay.

On the first argument, Lady Justice Arden noted that while Mr. Rooney’s primary occupation is soccer, “a person’s ancillary activity of exploiting his image rights is just as capable of protection under the doctrine of restraint of trade as any other occupation.”  Lady Justice Arden appealed to public policy, as she said that to the public, it would not matter whether someone’s potential is being restrained in their primary or ancillary activities – having potential restrained ought to be enough to be problematic.

Furthermore, Lady Justice Arden noted that except in very rare circumstances, the exploitation of image rights is by its very nature going to be ancillary to someone’s primary occupation.  This only further strengthened the reasoning that just because an activity is ancillary it does not naturally follow that the doctrine of restraint of trade is unavailable.

On the second argument, Lady Justice Arden referred to Schroeder in stating that “it is possible for a single activity…to be both creative and yet ‘sterilised’.”  In Schroeder, the argument had been made by the defendant that the agreement could not have been an unfair restraint of the plaintiff’s trade because it was a means for sharing his creative talent with the world.  Essentially, just because a contract brings someone benefit does not necessarily mean that it is not still unfair, as it may not fully suit the best interests of one party to the agreement.

On the third argument, Lady Justice Arden considered what was required to trigger the restraint of trade doctrine.  For Lady Justice Arden, the very unusual length of the contract (which she noted, at eight years, was about the average length of a soccer player’s career), the fact that the Mr. Rooney and his parents had no legal advice at the time of signing, and lack of bargaining power afforded Mr. Rooney despite being a “hot property” all pointed toward the agreement being oppressive.  From the disposal of all of these arguments, Proactive was denied its appeal on this issue.

After considering the rest of the issues on appeal, Lady Justice Arden and the rest of the Court decided that while Proactive was entitled to commissions for those contracts negotiated prior to termination, the agreement was an unfair restraint of trade and therefore nullified the claim for commissions.

The important lesson to take away from this case is not new: contracts must be carefully drafted and appreciated by all of the parties involved.  This means setting out, in as certain terms as possible, what each side intends by its agreement, and assuring that the other side understands what benefits or restrictions each term implies (which usually requires independent legal advice).  Perhaps a newer lesson that this case teaches us is that since a person’s reputation, likeness, and overall “brand value” could endure indefinitely, considerations must be made in the contract to appreciate that fact.  This would include paying particular attention to how long aspects of the agreement can extend into the future, what happens in the event that a party breaches or ends the contract, and what will occur when the contract naturally ends but the work and benefits of the relationship continue to live on.