DETROIT (CN) – A sports management company’s contract with NASCAR driver Kurt Busch is not enforceable because of a conflict of interest but that does not mean the driver is entitled to damages against his former agent, a federal judge ruled Wednesday.
In 2017, Troy,
Michigan agency Sports Management
Network sued Busch, a Daytona 500 winner, in federal court alleging that he had
violated the terms of a modified agreement to pay to the firm 10 percent of his
revenue until 2018 after the driver parted ways with the company in 2016. The
management company claimed that under the agreement, it had invoiced Busch for
$930,000 but he had refused to pay that fee and an additional $540,000. It made
a damages claim of $1.4 million.
Kurt Busch leaves the garage after practice for the NASCAR Daytona 500 auto race Friday, Feb. 15, 2019, at Daytona International Speedway in Daytona Beach, Fla. (AP Photo/Chris O’Meara)
In a counterclaim, Busch said he was owed $1.3 million in
damages because the company “improperly advantaged themselves” and other
clients, including his former employers Penske Racing and Andretti Autosport,
at his expense. John Caponigro, an attorney but also the founder and CEO of Sports
Management Network, failed to look out for his interests during negotiations
for certain contracts, Busch claimed.
On Wednesday, U.S. District Judge Arthur Tarnow in Michigan granted in part
Busch’s motion to throw out the claims at the summary judgment stage, ruling
that the modification of his contract from a flat-rate annual fee to a
percentage-based contract violated the state’s regulations on professional
ethics and therefore the company could not enforce it.
“It required John Caponigro to split his loyalty between his
client [Busch] and his company, between his client and his company’s clients,
and between his client and his law firm’s clients. The court need not rule on
whether all these conflicts were even waivable, because no one ever asked Busch
for informed consent,” the 31-page ruling states.
Because Caponigro was acting as both a sports agent and an
attorney he should have made sure that Busch understood what he was “giving up
by becoming a client of his boss’s attorney” when the agreement was
modified, Tarnow wrote.
Sports Management Network “failed to provide his client with
a meaningful choice on whether such conflicts were permissible,” Tarnow added.
But that did not mean that Busch was entitled to damages for
breach of contract or legal malpractice because the driver had only speculated
that Caponigro and the management company could have pushed harder for his
share of sponsorship money or more money from racing, the judge wrote.
Without more evidence, he was not entitled to claim for damages, the
court found.
Attorneys for both sides did not immediately respond
Thursday to a request for comment.
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