Legal Question regarding negotiations

[Neurotik]

This actually has more to do with sports contracts.

A friend and I were having a discussion about Scott Boras and his negotiating tactics. Often, a team will make an offer and Boras will reject, saying that he has a better offer from some other teams and that the team making the offer will need to up the contract. Suppose Boras is bluffing and he actually has no other offers and the team caves and offers the Boras client a better contract which is then signed.

Legally speaking, did Boras commit fraud? Or did he just bluff as a negotiating tactic?

I say that it wasn’t fraud because what other teams are offering aren’t truly material to what what that player is actually worth to that particular team. My friend says otherwise.

In a seperate question, would you say that this is “bad faith” negotiating by Boras, in a legal sense?

[rfgdxm]

IANAL, but I’d have to wonder how the team being told that he has a better offer from some other teams could ever prove that he didn’t? Unless Boras actually said “Team X has already offered me Y sum of money, and you’ll have to do better”, his statement is not proveably wrong. Particularly as this sort of haggling is usually done privately, and in oral form.

[Neurotik]

I dunno. I guess if it went to court, the other GMs could testify that they never made any such offer or something like that. I’m sure teams keep written track of what offers they’ve made to players.

[mazinger_z]

IANYL, though I do something similar for a living.

My answer centers around the agent actually saying what other teams are interested and what prices they are willing pay.

From what I can gather, typically, in these types of deals, an agent has some leeway when it comes to shopping for the best deal for his client. He can bandy about names of potential employers, salary ranges (in reference to the market), etc.

However, there are several rules which the agent must abide by: any rules/limitations in the principal/agent agreement (i.e. the “master agreement” between the athlete and the agent), any rules within the professional sports organization (I personally know that te NBA has to certify agents, other leagues may have similar criteria as well), and any non-disclosure agreements limiting what can be said.

These NDAs and master agreements are usually the only restrictions in the non-sports related contract negotations. Typically, they mention that the price is confidential, and I’ve seen some that say even mentioning the other contracting party is also confidential.

So, to answer your question as to whether one is in violation or not, it depends on what agreements are in place and what the rules of negotiating are in the particularly league.
To answer you other question about “bad faith,” my knowledge on this is pretty rusty:

Bad faith (against the agent) is typically between principal and the agent. These types of allegations usually center around some sort of tortious interference of contract/business (depending on what the relationship is at the time, here I am assuming business, as a contract has yet to be signed) argument/theory. The elements of this tort vary by state, but typically include 1) a business right was interefered with; 2) the interference was wrongful and was not priviliged or excusable; and 3) damage resulted because of the interference

I’m going to skip the analysis/theory of how the agent factors into this, but let it be known that an agent can be subject to such claims (c.f. agents are thought to be an extension of the principal, so arguments can be made that the principal cannot interfere with himsel)

In these type of cases, the agent is acting in bad faith to the interest of the principal with a third party’s contract/agreement with the principal. Bad faith is typically demonstrated by the agent acting in his own best interests, rather than his principal. So to demonstrate a scenario where Boras is acting in bad faith (which I would argue isn’t demonstrated in your scenario): Boras would have to have some side arrangement with a particularly team (for ex. the Cubs or the Tribune Company) that for every player he can have sign with the Cubs for less than X, the team will pay him extra cash.

As a side note, IME, it is poor negotiation tactics to actually tell the person you are trying to sell what the actual price is. The team will have some idea in mind of market value based on the player’s past contract. As an agent, one should try to make the team say what price they want first, then drive the price up from there. The first price is never the best price.

[Neurotik]

Thanks, mazinger.

My friend just recently brought up the Model Rules of Professional Conduct from the American Bar Association, claiming that they pertain to this situation since Boras is a lawyer.

Specifically, he is saying that telling the team that your client has better offers when he, in fact, does not violates Rule 4.1:

In the course of representing a client a lawyer shall not knowingly:

(a) make a false statement of material fact or law to a third person; or

(b) fail to disclose a material fact to a third person when disclosure is necessary to avoid assisting a criminal or fraudulent act by a client, unless disclosure is prohibited by Rule 1.6.

And also the Comments on this section:

Misrepresentation

[1] A lawyer is required to be truthful when dealing with others on a client’s behalf, but generally has no affirmative duty to inform an opposing party of relevant facts. A misrepresentation can occur if the lawyer incorporates or affirms a statement of another person that the lawyer knows is false. Misrepresentations can also occur by partially true but misleading statements or omissions that are the equivalent of affirmative false statements. For dishonest conduct that does not amount to a false statement or for misrepresentations by a lawyer other than in the course of representing a client, see Rule 8.4.

Statements of Fact

[2] This Rule refers to statements of fact. Whether a particular statement should be regarded as one of fact can depend on the circumstances. Under generally accepted conventions in negotiation, certain types of statements ordinarily are not taken as statements of material fact. Estimates of price or value placed on the subject of a transaction and a party’s intentions as to an acceptable settlement of a claim are ordinarily in this category, and so is the existence of an undisclosed principal except where nondisclosure of the principal would constitute fraud. Lawyers should be mindful of their obligations under applicable law to avoid criminal and tortious misrepresentation.

Bolding of relevant sections mine.

[Freddy_the_Pig]

I think you’ve answered your own question via the sentence you bolded concerning “statements of fact”. In addition, one could question whether Boras is practicing law, since he is representing his clients as a business agent. Of course, they are negotiating legal contracts, so he may be combining legal and business representation, and it might be difficult to say where one leaves off and the other begins. But either way, there is a certain amount of bluff and deception in every negotiation (for example, saying “If we don’t get ten million, we’re gonna walk” when you have no intention of walking) and I don’t believe anyone considers this unethical whether it is practiced by lawyers or otherwise.

Also, if Boras is really lying about specific counter-offers, it shouldn’t work for long. Few people talk to each other more often or are worse at keeping secrets than baseball GM’s. If any GM is fooled by this more than once, shame on him.