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Superagent Steinberg sues former partner for stealing clients

Len Pasquarelli May 30, 2001
By Len Pasquarelli
SportsLine.com Senior Writer
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One of the NFL's quiet offseason bloodlettings, the pending split of powerful agents with ramifications that will resonate across the league and throughout the representation business, got very public and very ugly on Wednesday evening.

In a 34-page document filed in Superior Court for the County of Los Angeles, a copy of which was obtained by SportsLine.com, superagent Leigh Steinberg is suing onetime partner David Dunn and his new firm, Athletes First, and charging them with pirating away a number of clients.

Drew Bledsoe is one of the players who left Leigh Steinberg's agency for David Dunn's. 
Drew Bledsoe is one of the players who left Leigh Steinberg's agency for David Dunn's.(AP) 

Dating back to February there have been a number of published and broadcast reports, including several by SportsLine.com, detailing Dunn's exit from the powerful firm of Steinberg, Moorad and Dunn (SMD), one of the nation's largest and most successful sports representation agencies. The lawsuit validates most of the reports, provides insight into the increasing acrimony between Dunn and his former partners, and in general publicly airs the firm's dirty laundry.

It also sets up what figures to be a compelling legal battle for the representation rights to many of the 86 current NFL players who have retained SMD for negotiations and ancillary services.

Neither Steinberg nor Dunn could be immediately reached for comment on Wednesday evening. In recent months, Steinberg had attempted to rebut reports of a split, but the lawsuit leaves little room for any reconciliation and draws obvious battle lines.

"This thing could shake up the (NFL) representation business big-time," said a competing agent who had viewed the lawsuit. "If nothing else, it gives the rest of us a look inside at the world of Steinberg, and provides us a tool to use in recruiting against him. Everyone has known for some time now what's been going on, but this is an official war declaration, and everyone in the NFL is going to be paying attention. We're not talking a ripple effect here. It's more like a tsunami."

As recently as last Friday, league sources told SportsLine.com that the long-rumored divorce was indeed a reality, with Dunn setting up offices of his own. In truth, the lawsuit details that a split was several months in the making.

The suit is a complaint for damages and injunctive relief for breach of contract, fraud, common law and statutory unfair competition, misappropriation of trade secrets, intentional interference with contract, intentional interference with prospective economic advantage, breach of fiduciary duty, accounting and declaratory relief.

The action claims that SMD "trained Dunn in the sports agency business" and that the agent early this year "formed a scheme to secure the athlete client relationships for himself and to secure the loyalty of the employees he supervised for himself so that he could leave his employment." Dunn is referred to in the suit as "the mastermind of the conspiracy" to funnel off clients from SMD and sign them to representation contracts with his new company, Athletes First.

It further claims that Dunn, or those acting in concert with him, "have asserted to SMD that 70 to 80 percent of SMD's existing NFL clients will have terminated or will terminate their relationship with SMD." If Dunn comes even close to that number, the consequences to Steinberg and Moorad could be dire. To date, Dunn has been able to pry several clients -- including high-profile players such as New England quarterback Drew Bledsoe, safety Darren Woodson of the Dallas Cowboys and tailback Corey Dillon of the Cincinnati Bengals -- away from SMD.

Among other contentions is that Dunn misappropriated SMD's confidential client information, encouraged current clients not to pay commission fees, downloaded spreadsheet information on the contracts of existing clients, pirated trade secrets and also "acted with fraud, oppression and malice, and with callous and intentional disregard" for the assets of SMD.

Steinberg was a pioneer of sorts in representing NFL players. The former University of California student body president began in '75 by representing longtime friend and Atlanta Falcons quarterback Steve Bartkowski, the first player selected overall in that year's draft. In the ensuing quarter-century, he has become one of the sport's most powerful movers and shakers, at times representing more than half of the starting quarterbacks in the league.

The suit suggests Dunn's actions will "cause substantial damage to SMD's NFL-related business, as will his public comments, disparaging remarks and solicitations of existing and prospective SMD clients." For the past three months, however, Dunn has not publicly addressed the rumored split and, in fact, has declined interview requests.

In November of 1999 SMD entered into a merger with Assante, a Canadian firm, and Dunn signed a five-year employment agreement that paid him a $2 million lump sum signing bonus, salaries totaling $1 million, annual bonuses totaling $1.35 million, and a profit sharing bonus of at least $400,000. His contract also include a 24-month non-compete clause, which apparently precluded Dunn from engaging in the sports representation business for two years after his departure or termination from SMD.

Dunn filed what the lawsuit incessantly terms "his purported resignation" in February of this year. The action contends that SMD has continued to pay his salary since then and that Dunn remains bound by his contract. It suggests that there was an effort made at reconciliation and that, during the period after his resignation, Dunn even made recruiting trips in the name of SMD.

One of more intriguing passages claims that SMD has "developed a (system) for recruiting clients and negotiating their agreements." While somewhat benign in the overall scope of the lawsuit, it is notable because Steinberg has long contended his firm did not recruit clients, but rather signed prospective players only from referrals.

The actions requests the court to prevent Dunn from operating in the agent business, to return to SMD any assets or confidential information he has taken and to pay the firm any fees he earned by representing its former clients. It also seeks general and punitive damages.



   

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