Factual Background
On May 21, 2024, Jaden Rashada filed a 38-page lawsuit in federal court against Hugh Hathcock, a University of Florida (“UF”) booster (“Hathcock”), Billy Napier, the current UF Head Football Coach (“Napier”), Marcus Castro-Walker, the former Director of Player Engagement & NIL for UF (“Castro-Walker”) and Velocity Automotive Solutions LLC, a Florida limited liability company that was owned and controlled by Hathcock during the alleged conduct (“Velocity, and together with Hathcock, Napier and Castro-Walker, the “Defendants”) (the “Complaint”). At the time of the alleged wrongdoing, Rashada was a top-ranked high school quarterback.
In the Complaint, Rashada alleges that the Defendants engaged in fraudulent and deceptive practices to induce his de-commitment from the University of Miami (“Miami”), where he allegedly had a $9.5 million Name, Image and Likeness (NIL) deal in place that was contingent on his enrollment at Miami, and subsequent commitment to UF, by promising Rashada an NIL deal valued at $13.85 million. According to the Complaint, the $13.85 million deal was to be funded through two vehicles: (i) $5.35 million, including a $500,000 signing bonus, through Velocity, and (ii) the remaining $8.5 million through Gator Guard Marketing, LLC, an NIL collective allegedly established by Hathcock (“Gator Guard”). [1]
Once Rashada publicly committed to UF, the Defendants allegedly pulled back on the deal, missed the originally agreed payment date for the $500,000 signing bonus, and continued to assure Rashada that the donors would make good on their $13.85 million commitment. The Complaint insinuates that deal initially began to break down when Hathcock communicated his intentions to sell Velocity to a third party, and that another UF-based collective, the Gator Collective, would be the vehicle through which the $13.85 million would be funded and paid. Further, the Complaint alleges that the day after the signing bonus payment date passed without payment, the Gator Collective canceled the purported contract with Rashada; however, one day after the Gator Collective reneged on their participation in the deal, Castro-Walker told Rashada’s agents that the Hathcock’s collective, Gator Guard, would accept assignment of the $13.85 million deal, and that Hathcock, through the Gator Guard, would personally guarantee the entirety of the obligation himself. According to the Complaint, the Defendants represented that the Gator Collective would retract its termination, and once the agreement was “uncancelled,” the $13.85 million obligation would be assigned to the Gator Guard collective. However, as national signing day approached, Rashada had still not received any payments pursuant to the purported deal, nor had Hathcock assumed any written obligation with Rashada. In response to Rashada’s concern with deal certainty and his delay with the signing of his national letter of intent, Napier allegedly called Rashada and informed him that he would receive $1 million from Hathcock as a partial payment towards the promised $13.85 million once Rashada formally executed his national letter of intent with UF. Over the next several weeks, the Defendants allegedly made a series of new promises of NIL agreements that remained unfulfilled. On January 18, 2023, Rashada withdrew his national letter of intent to play for UF and subsequently committed to play football at Arizona State University. Rashada is currently a quarterback for the University of Georgia.
Rashada’s complaint alleges seven counts against the Defendants and requests that any judgment against the Defendants for compensatory and/or punitive damages [2] be enforced jointly and severally [3] among the Defendants. Each count, discussed below, requires Rashada to prove various elements. An element is a necessary component or requirement for making a claim or defense in court.
The Complaint: Summary of Claims and Analysis of Likelihood of Success
I. Fraudulent Misrepresentation and Fraudulent Inducement. Four elements: (1) false statement concerning a material fact; (2) the representor’s knowledge that representation is false (noting this element can be established in three ways – collectively known as “scienter”: (i) with actual knowledge of the falsity of the representation; (ii) without knowledge either of the representation’s truth or falsity; OR (iii) under circumstances in which the person making the representation ought to have known, if the person did not know, of its falsity); (3) an intention that the representation induce another to act on it; and (4) consequent injury by the party acting in reliance on the representation.
In the Complaint, Rashada alleges that the Defendants made false promises regarding a $13.85 million Name, Image and Likeness (NIL) deal to induce Rashada to decommit from the University of Miami, where Rashada had $9.5 million NIL deal in place, and commit to UF when the Defendants knew or should have known that these promises could not be fulfilled. In a fraud claim, the most difficult element to establish is often element (2) – the representor’s knowledge.
Here, based on the Complaint, it seems quite likely that Hathcock, at minimum, would have had knowledge that either his business, Velocity, or his collective, Gator Guard, would be unable to make good on the promises made to Rashada to secure his commitment to UF. As for Napier and Castro-Walker, absent discovery of additional evidence, establishing actual knowledge is unlikely; however, Rashada may be able to argue that Napier, as head coach, and Castro-Walker, as the Director of Player Engagement & NIL, should have known of Hathcock’s inability to make good on the promised compensation.
II. Aiding and Abetting Fraud. Three Elements: (1) The existence of an underlying fraud; (2) that the defendant had knowledge of the fraud; and (3) that the defendant provided substantial assistance to advance the commission of the fraud. Here, the Complaint explicitly outlines each Defendant’s role and assistance in perpetuating the fraud, including evidence of specific false representations and public endorsements of the purported deal (i.e., element (3)). Accordingly, assuming the finding of an underlying fraud, Rashada’s likelihood of success on the Aiding and Abetting Fraud claim likely depends on Rashada’s ability to prove each Defendant’s knowledge of the fraud. In the case of Hathcock, the individual behind both entities funding the purported $13.85 million deal, it is plausible that Hathcock knew, or at minimum, should have known, of the fraud. In the case of Napier and Castro-Walker, absent discovery of additional evidence, the key question will be – should they have known that the deal was fraudulent?
III. Civil Conspiracy to Commit Fraud. 4 Elements: (1) An agreement between two or more parties; (2) to do an unlawful act or to do a lawful act by unlawful means; (3) the doing of some overt act in pursuance of the conspiracy; and (4) damage to the plaintiff as a result of the acts done under the conspiracy. Here, the Complaint likely alleges sufficient facts to show that there was a coordinated effort by the Defendants to convince Rashada to forgo his NIL opportunity and scholarship offer at Miami, and to, instead commit to UF, causing Rashada significant damages. The key to Rashada’s success on the Civil Conspiracy to Commit Fraud claim will be Rashada’s ability to prove element (2) – the fraud. The Complaint sets forth that the objective of the conspiracy was the “commission of the underlying tort of fraud.” As with the analysis of the first two claims, this will hinge on Rashada’s ability to establish the Defendants’ scienter.
IV. Negligent Misrepresentation. 4 Elements: (1) a misrepresentation of a material fact; (2) lack of knowledge by the representor as to the truth or falsity of the representation, or circumstances under which the representor ought to have known its falsity; (3) intent by the representor that the representation induce another to act on it; and (4) injury to the plaintiff as a result of acting in justifiable reliance on the misrepresentation. Here, the Complaint alleges that to the extent any of the Defendants’ alleged misrepresentations do not rise to the level fraud, that Rashada alternatively sues all Defendants for negligent misrepresentation. Importantly, negligent misrepresentation does not require Rashada to prove that the Defendants knew of the falsity of the representation, unlike the claim for fraudulent misrepresentation. Accordingly, while there is likely a fair question and plausible defense as to the knowledge of Napier and Castro-Walker with respect to the ability of Hathcock, a wealthy UF donor, to make good on his financial commitments to Rashada through Velocity and Gator Guard, it is a more difficult task for Napier, the head coach, and Castro-Walker, the Director of Player Engagement & NIL, to argue that, in light of a number of delays and complications on their end in finalizing Rashada’s NIL deal, they were not negligent in repeatedly assuring Rashada that the deal would be honored without verifying the deal’s feasibility.
V. Tortious Interference with a Business Relationship or Contract. 4 Elements: (1) a business relationship; (2) knowledge of the relationship on the part of the defendant; (3) an intentional and unjustified interference with the relationship by the defendant; and (4) damage to the plaintiff as a result of the breach of the relationship. In general, the tort of tortious interference oscillates between to two competing values – the desire to protect the expectations of the parties to a business relationship on the one hand, and the need to avoid excessive restrictions on free-market competition on the other. Here, the Complaint alleges facts that assert that the details of Rashada’s $9.5 million NIL deal with Miami were well publicized and personally known by the Defendants, and that Rashada suffered damages as a result of the breach of the relationship with Miami. Rashada’s success on the Tortious Interference claim likely depends on Rashada’s ability to establish (i) that a handshake NIL deal that was contingent on his enrollment at Miami constitutes a business relationship and (ii) that the interference by the Defendants was unjustified. Interestingly, Florida has no specific statute that governs tortious interference with a business relationship or contract, and instead relies on common law, a body of law created by judicial decisions and precedent rather than legislation. Under Florida common law, a plaintiff must prove the existence of business relationship under which the plaintiff has legal rights. Accordingly, Rashada will need to successfully argue that his NIL deal constituted a business relationship, and will likely need to overcome the Defendants’ assertion that Miami’s NIL deal was merely an offer and not tantamount to a business relationship under which Rashada had any legal rights. As for establishing that the Defendants’ interference was unjustified or improper, Rashada will need to demonstrate the Defendants engaged in some form physical violence, misrepresentations, intimidation, conspiratorial conduct, illegal conduct, and threat of illegal conduct. Here, Rashada will likely rely on the Defendants’ alleged misrepresentations and alleged conspiratorial conduct, each discussed above, to establish unjustified interference.
VI. Aiding and Abetting Tortious Interference. 3 elements: (1) the existence of an underlying tortious interference; (2) that the defendant had knowledge of the tortious interference; and (3) that the defendant provide substantial assistance to advance the commission of the tortious interference. To the extent Rashada is able to establish Tortious Interference, discussed above, then Rashada will likely prevail on the Aiding and Abetting Tortious Interference claim as well given the likely sufficient facts that each of the Defendants collaborated and played a role to induce Rashada’s decommitment from Miami.
VII. Vicarious Liability Against Velocity. 2 Elements: (1) an employee committed a negligent act; and (2) the act was either (i) within the scope of the employment or (ii) during the course of employment and to further a purpose or interest of the employer. Here, Hathcock was an officer of Velocity during the alleged conduct, but the ultimate question will be whether Hathcock acted within the scope of his employment as an officer. If Hathcock’s actions are deemed within the scope of employment and for the benefit of Velocity, Velocity could be held vicariously liable. Interestingly, Velocity was subsequently sold to another company in the automotive repair industry in early 2023. Accordingly, Velocity, under new ownership, will likely argue that its founder, Hugh Hathcock, acted outside of his scope of employment in offering an NIL deal of such a magnitude.
Thoughts on Rashada and Lessons to Carry Forward
Rashada’s lawsuit underscores the broader legal issues in the name, image and likeness space; namely, the lack of governing guidelines and the enforcement of such guidelines. At the time of the alleged conduct in the Rashada case, there were guidelines in place that clearly prohibited essentially all of the alleged conduct by the Defendants in this case, including prohibitions on (i) recruiting conversations occurring between a booster (individual or entity) and a prospective student-athlete, (ii) boosters communicating directly with a prospective student-athlete, their family, or others affiliated with the prospective student-athlete for a recruiting purpose or to encourage the prospective student-athlete’s enrollment at a particular institution, and (iii) coaches and staff members communicating, directly or indirectly, with a prospective student-athlete on behalf of a booster. In the Complaint, there are explosive allegations, including a promise from a head coach to a prospective student-athlete that a booster would pay the prospective student-athlete $1 million dollars upon the execution of a national letter of intent, text messages from the Director of Player Engagement & NIL for UF and an affiliated booster that openly discuss a prospective student-athlete getting paid in exchange for his timely commitment to UF, and a booster agreeing to fund a $500,000 signing bonus if a student-athlete committed to UF – each of which, if true, are clear inducements and violations of NCAA guidelines. For many, the natural question is “what happens next for UF?” The answer: probably nothing. Why? Lack of enforceability.
While the NCAA had informed UF in June 2023 of its pending investigation surrounding the recruitment of Rashada, the NCAA’s ability to enforce any of its NIL guidelines and punish violations of such guidelines became substantially undermined as of February 23, 2024 with the ruling in the lawsuit filed against the NCAA by the State of Tennessee and the Commonwealth of Virginia. For background, Tennessee and Virginia alleged that the NCAA violated federal antitrust laws under the Sherman Act by controlling compensation for use of prospective student-athletes’ name, image and likeness as a recruiting inducement. In the case, the plaintiffs are seeking a permanentinjunction barring the NCAA “from enforcing its NIL-recruiting ban or taking any other action to prevent prospective college athletes and transfer candidates from engaging in meaningful NIL discussion prior to enrollment, including under the NCAA’s Rule of Restitution.” To the NCAA’s chagrin, the court (i) granted a preliminary injunction temporarily prohibiting the NCAA from enforcing any rule that prohibits student-athletes from negotiating compensation for NIL with any third party, including boosters, and (ii) ordered that the NCAA may not enforce the Rule of Restitution with respect to NIL activities until the final court decision (meaning that the NCAA may not retaliate against any student-athlete that engages in such NIL activities while the preliminary injunction is in effect, even if the court later rules in favor of the NCAA). In response, on March 1, 2024, the NCAA notified all member schools that the NCAA enforcement staff had paused all current investigations, and would not begin any new investigations, relating to third parties participating in NIL activities. Interestingly, while the NCAA conceded its new reality regarding the use of NIL activities for the inducement of prospective and current student-athletes, the NCAA simultaneously reaffirmed its commitment to enforce its policies prohibiting pay-for-play, direct institutional payment for NIL and NIL compensation without quid pro quo.
What is the most likely outcome in the Rashada case? Settlement. Although UF is not a named defendant, it is providing legal representation to its head football coach and named defendant, Billy Napier, and perhaps has the strongest incentive to encourage settlement of any stakeholder to the litigation. For all of the Defendants, perhaps most important to UF, settlement provides: (i) predictability and control over the process and outcome, (ii) confidentiality in terms of protecting the university from reputational harm and disruptions to the operations of the football program, (iii) avoiding the establishment of adverse precedent for similar future claims, (iv) cost savings and (v) time efficiency. For UF, a messy, public dispute between a former recruit could not only be financially costly to the tune of an 8-figure judgement levied against its head football coach and a top UF donor, but such a dispute could also become a significant deterrent to future recruits and a detriment to the focus and morale of its football coach and football program. Additionally, in the world of college athletics where state and NCAA rules are constantly changing due to legislative action and a number court rulings, operating successfully in the NIL space often requires navigating a gray area. To the extent UF, its football coaches, its staff members or boosters have taken similar actions in the recruitment of other student-athletes, there is a strong incentive to avoid setting a negative precedent, thereby opening the door to additional suits from any current or former student-athletes that may feel that UF’s football coaches, staff members or boosters made misrepresentations with respect to the NIL deal they were promised.
Going forward, the one thing that is certain about the way collegiate athletics will operate is change. A few years ago – NIL did not exist; four months ago – the NCAA would likely have taken significant action against UF for its violations surrounding the recruitment and inducement of Jaden Rashada; eight days ago – the NCAA fundamentally changed the way college athletics will operate. [4]
According to The Athlete’s Bureau (TAB), the projected overall total athlete compensation over the next ten years will be upwards of $32 billion, comprised of $17.68 billion in the form of a revenue share with universities, $8.5 billion from NIL collectives, $3.1 billion from NIL deals with brands, and $2.6 billion in back-pay to student-athletes. The projected compensation represents an opportunity for some student-athletes to earn life-changing money for themselves and their families. The model for college athletics is no longer rooted in amateurism. While it is an exciting time for student-athletes and their families, the need for further regulation is paramount. One such area of much-needed regulation is in the representation of student-athletes. While the NFL requires a comprehensive application process to become an NFL agent, including passing a background check, obtaining a graduate degree, obtaining malpractice insurance, paying annual dues, attending seminars and passing a comprehensive substantive exam, the barrier to becoming an “NIL Agent” is non-existent. While the alleged conduct by the Defendants in the Rashada case is troubling and occurred at the outset of NIL dealmaking, there were red flags in the process prior to Rashada’s public announcement of his commitment to UF, including changing the source of a substantial amount of funds ($13.85m) approximately 12 hours before the public announcement of his commitment. Additionally, after Rashada’s public announcement and prior to signing his national letter of intent, there were more red flags, including a delinquent $500,000 payment in the form of a signing bonus that was allegedly due two weeks prior to national signing day, the unliteral termination of his NIL deal the day after the purported $500,000 payment was due and the purported plan to “uncancel” the termination and subsequently assign the “uncanceled” contract to Gator Guard and Hathcock. In other words, Rashada signed his letter of intent despite numerous broken promises and without anything in writing. I say this not to cast blame, but in a space with little to no regulation of agents representing collegiate athletes, the Rashada case underscores the importance of seeking qualified representation with legitimate dealmaking experience. Until the NCAA, its member conferences, universities and/or national or state lawmakers create an enhanced regulatory framework for agents representing student-athletes, choose your representation wisely.
[1] The Complaint further alleges that no entity called “Gator Guard Marketing, LLC” was ever registered with the Florida Secretary of State, and while there was a non-profit registered under the name “Gator Guard Charity, Inc.” with the same registered address as Velocity, it is unclear how the entity would have supported $8.5 million in payments.
[2] Punitive damages are damages awarded separately from actual damages and are generally awarded only when it determined that the defendant has acted in particularly harmful manner.
[3] When two or more parties are jointly and severally liable for a tortious act, each party is independently liable for the full extent of the injuries stemming from the tortious act. In other words, if a plaintiff (Rashada) wins a money judgement against the Defendants collectively, Rashada may collect the full value of the judgement from any one of them.
[4] To further highlight the ever-changing nature of the college athletics and the NIL space, on May 23, 2024, the five power conferences (ACC, Big10, Big12, Pac12 and SEC) and the NCAA agreed to settlement terms in House v. NCAA. The key terms of the settlement include (i) an estimated $2.8 billion in aggregate back-pay to student-athletes, dating back to 2016, with payment beginning by Fall 2025, (ii) direct payment from schools to student-athletes in the form of a revenue sharing model that will allow schools to pay around 22% of total revenue to student-athletes (which, in dollars, is estimated to be between $20-$22 million annually). The final terms of the settlement must be filed with and approved by the court.
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