Do you have contracts with all of your athletes? Manufacturers who provide more than swag to athletes may be sued without a written agreement.

Posted: September 7, 2015 | Author: | Filed under: Contract, Cycling, Massachusetts, Mountain Biking | Tags: , , , , , , , , , , , , , , | Leave a comment

In this case the manufacturer one because the damages were not able to be proven, however, this is just the tip of the iceberg on what could happen. What if the rider was injured, and you were their largest contributor to their income?

Rogatkin v. Raleigh America Inc., 69 F. Supp. 3d 294; 2014 U.S. Dist. LEXIS 164154

State: Massachusetts, UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MAS-SACHUSETTS

Plaintiff: Nicholi Rogatkin, Minor by His Father and Next Friend, Vladmir Rogatkin

Defendant: Raleigh America Inc./Diamondback BMX, and John Does 1-8

Plaintiff Claims: : unauthorized use of name and portrait or picture in violation of Mass. Gen. Laws ch. 214 § 3A (Count I); unfair and/or deceptive business practices in violation of Mass. Gen. Laws ch. 93A, §§ 2 & 11 (Count II); defamation (Count III); negligent misrepresentation (Count IV); unjust enrichment (Count V); promissory estoppel (Count VI); and intentional misrepresentation (Count VII).

Defendant Defenses: No evidence and No damages

Holding: for the defendant

Year: 2014

The plaintiff was a very talented BMX rider starting at a very early age. The defendant started sponsoring him at age 11 in 2007. That sponsorship continued for five years until 2012 when the plaintiff moved on to another sponsorship. During that time, the sponsorship started as a bike and other equipment and grew to a monthly income and travel expenses. During that time the plaintiff wore the defendant’s logos and sent photographs and videos to the defendant to be used on their website.

The plaintiff one year flew out to the defendants, at the defendant’s expense to be photographed for the defendant’s catalog. The defendant started asking for in 2010 and was told that he had a great career ahead of him.

Prior to receiving income, the plaintiff and defendant did not have any contract between them. Once the defendant started receiving a monthly income the plaintiff signed a Team Rider Sponsorship Agreement. The agreement was signed by the plaintiff’s father on behalf of the plaintiff. The agreement provided the plaintiff with a monthly payment, and the defendant got unlimited promotional use of the plaintiff’s name and likeness.

At no time, was the plaintiff restricted from receiving sponsorship from other manufacturers. Eventually, the plaintiff was picked up by other manufacturers, including other bike manufacturers. Eventually, he went to one of the manufacturers as a high-paid rider and left the defendant. Soon thereafter the plaintiff, by and through his father, sued the defendant. The claims total seven counts.

unauthorized use of name and portrait or picture in violation of Mass. Gen. Laws ch. 214 § 3A (Count I);

unfair and/or deceptive business practices in violation of Mass. Gen. Laws ch. 93A, §§ 2 & 11 (Count II);

defamation (Count III);

negligent misrepresentation (Count IV);

unjust enrichment (Count V);

promissory estoppel (Count VI);

and intentional misrepresentation (Count VII).

Basically, the plaintiff sued to get more money believing that he was not compensated enough by the defendant for his work prior to leaving. He did not win any of these arguments. The judge granted the defendants motion for summary judgment.

Analysis: making sense of the law based on these facts.

The decisions starts with an analysis of the defamation claim. To prove defamation on Massachusetts law the plaintiff must prove:

…the defendant was at fault for the publication of a false statement regarding the plaintiff, capable of damaging the plaintiff’s reputation in the community, which either caused economic loss or is actionable without proof of economic loss.

The plaintiff based his claims on the theory that the defendant did not change the photos on its website fast enough to match the growth of the plaintiff and his riding larger bikes. For a year or so after he had advanced from a 16” (wheel size) bike to 18” then 20” bikes he was pictured on the website riding 16” bikes.

Although Rogatkin admits that the accused material was accurate and non-defamatory when published, he contends that as he grew in age and skill, his static portrayal by Raleigh took on a defamatory undertone.

Because the information was valid at the time it was posted, and the plaintiff’s date of birth was on the site, the court found no major issue with not changing photographs as quickly as the plaintiff wanted. The court even had fun with this argument.

Although Raleigh did not update Rogatkin’s biography with the march of time (the court knows of no duty the law imposes to do as much), it published Rogatkin’s accurate date of birth on the same page — a reasonable assurance that the public would never confuse Rogatkin with, say, Peter Pan or Benjamin Button.

More importantly the plaintiff could not offer any evidence showing that by failing to change the photographs, he had suffered an injury.

A false statement is defamatory if it “would tend to hold the plaintiff up to scorn, hatred, ridicule or contempt, in the minds of any considerable and respectable segment in the community

The court then had fun and brought in Shirley Temple in its analysis of the negative publicity claimed by the plaintiff.

The publication of Rogatkin’s age (12) and characterizing him as a “kid” in a biography is no more susceptible to a defamatory meaning than biographical references to Ambassador Shirley Temple as a child actor or as “America’s Little Darling.

A biography, like a photograph, is a faithful snapshot of a person taken at a particular time in his or her life.

The court also looked at the argument made by the plaintiff as one of not suffering injury from not showing him riding larger bikes, but of failing to post more images of him on larger bikes, which could not be actionable.

Rogatkin alleges that Raleigh’s continued publication of images of him as a 16-inch bike rider led to ridicule and scorn because he was not shown riding a larger bike. This is not an objection to the publications, but to the lack of publication of photos showing Rogatkin riding larger bikes. Rogatkin has not identified any support for the novel proposition that the absence of publication may form the basis of a defamation claim.

The court then looked at the first count, unauthorized use of the name and image of the plaintiff.

The statute at issue allows a private right of action when an image had been used for commercial advertising without the consent of the person. The defendant argued that the emails between them showed consent to use the images. The court agreed.

…Rogatkin does not disagree that he condoned Raleigh’s use of his name and images for purposes of advertising at the time of publication, or that he attended the various photo shoots (such as the one in Seattle in 2008) with any expectation other than that his name and image would be used by Raleigh to promote sales of its bikes.

The court also brought up the fact the emails from the plaintiff complained they were not posting enough photographs of him on the defendant’s website. Again, the plaintiff could not show any damages from the posting of his images. Just because Raleigh made money from using his injuries is not damages for injury upon the plaintiff. “Because Rogatkin has adduced no material evidence of damages attributable to the use of his name and image, Raleigh is entitled to summary judgment on Count I.”

Next the court took on claims IV, VI and VII, Intentional/Negligent Misrepresentation, and Promissory Estoppel.

Under Massachusetts’s law to win a claim of misrepresentation, the plaintiff had to show false statement that induced him to do something.

To sustain a claim of misrepresentation, a plaintiff must show a false statement of material fact made to induce the plaintiff to act, together with reliance on the false statement by the plaintiff to the plaintiff’s detriment. . . . The speaker need not know ‘that the statement is false if the truth is reasonably susceptible of actual knowledge, or otherwise expressed, if, through a modicum of diligence, accurate facts are available to the speaker.’

However, even if the defendant had made a false representation, the plaintiff had to prove he was worse off based on the false representation.

…a plaintiff must allege that (1) a promisor makes a promise which he should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee, (2) the promise does induce such action or forbearance, and (3) injustice can be avoided only by enforcement of the promise.

The plaintiff could have rejected the sponsorship from the defendant, and the plaintiff was free to contract with other manufacturers for sponsorship.

On top of that, the plaintiff could not prove a promissory estoppel claim because he could not prove any terms or elements to create a legal claim.

Under Massachusetts law, “as with a claim for breach of contract, [i]n order to establish the existence of an enforceable promise under promissory estoppel, the plaintiff must show that the defendants’ promise included enough essential terms so that a contract including them would be capable of being enforced.”

Count V, unjust enrichment was reviewed by the court next.

The plaintiff claimed that the defendant unfairly profited from his work and photographs by paying him minimally. To prove an unjust enrichment claim the plaintiff must show:

(1) a benefit conferred upon the defendant by the plaintiff;

(2) an appreciation or knowledge of the benefit by the defendant; and

(3) the acceptance or retention of the benefit by the defendant under circumstances which make such acceptance or retention inequitable.

Damages from an unjust enrichment claim are the disgorgement of the property unjustly appropriated.

Because unjust enrichment is a theory of equitable recovery, and not a separate cause of action, a court may not order restitution as a form of damages; it may only require a party to disgorge property that has been wrongfully appropriated from the rightful possession of the other party.

First because the relationship between the parties was voluntary there were no fraud or “unjust” actions by the defendant. On top of that, the plaintiff benefited from the relationship just as the defendants did.

He also benefited materially from the relationship in terms of equipment, gear, and travel expenses. If Rogatkin found the terms of his association with Raleigh unsatisfactory, he was free to renegotiate, or leave to pursue other opportunities (both of which he eventually did). Because Raleigh did not unfairly retain any benefit conferred by Rogatkin,….

Here again, the plaintiff could show no damages nor could he even show injury in this case.

The court looked at Count II then, Unfair and/or Deceptive Business Practices under Chapter 93A, a Massachusetts statute.

Here again, the plaintiff did not successfully argue this claim because he could not prove that the defendant was unethical, unscrupulous and a fraud.

Rogatkin has not shown that Raleigh’s actions fell within “the penumbra of some common-law, statutory, or other established concept of unfairness . . . or [was] immoral, unethical, oppressive or unscrupulous . . . [or] cause[d] substantial injury to consumers (or competitors or other businessmen).

These arguments were all based in fraud or contract. In all cases, the damages cannot be what the defendant got from third parties but what it cost the plaintiff in dealing with the defendant. Here the plaintiff could not show any damages that qualified, in fact, the court found the plaintiff had benefited from the relationship and at worse was a bad negotiator.

So Now What?

Once you put someone’s image on your website or your give something, specifically to someone based upon their relationship with your product you better have that relationship in writing.

Once you hand product to someone to sue in an effort to promote your product and create a long-term relationship with that person that is not defined by other facts, such as product testers, writers, reviewers, etc., you might look at immortalizing that relationship in writing.

Most states have laws concerning the unauthorized use of someone’s likeness without their permission. That is an easy reason to see why you should have an agreement.

The facts here are another reason. A written contract outlining the relationship from the beginning would have eliminated this lawsuit.

However, this can get worse.

The IRS wants to know what your relationship is. Without an agreement, the IRS is free to determine that relationship on its own with little help. (Although a contract is not persuasive, it helps when dealing with the IRS.) If the sponsored athlete is only sponsored by you and uses your equipment and does not pay taxes, the IRS can look to you for failing to pay withholding for the “employee.” The IRS wants it money and will work hard to get it from anyone who can write a check easily.

Another group that wants money is the athlete’s health insurance carrier or the unpaid hospital and doctors if the athlete does not have any insurance. The health insurance carrier through its subrogation clause can look to anyone it believes is legally responsible for the damages it paid out for the injured athlete’s medical bills. The insurer may see the action as the same way the IRS does; the injured athlete was an employee and should have been covered under your worker’s compensation insurance. A successful lawsuit on this issue will not only cost you money in paying the health insurance company, but double more for penalties to your worker’s comp carrier for not listing the athlete.

The health insurance carrier could also come after you if it believes the bike or another product was defective. Again, a contract with the athlete would eliminate both arguments.

Unpaid medical bills can also trigger claims based on either an employee theory or on the legal theory that you were legally responsible for encouraging the athlete.

It is easy to get these contracts written. You need to specify general issues like medical coverage, health insurance, taxes and the legal definition of the parties and that relationship. More importantly you need to define what you are going to do and all limits to that relationship so that no matter who or what, they cannot exceed the limits placed in the agreement.

You want to get your product out there, and you want to help up-and-coming athletes. However, taking the time to establish legally the relationship will make everyone’s life easier from the start.

Who knows, fifty years from now, that signature on an athlete’s first contract might have value in itself.

What do you think? Leave a comment.

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