Sports Agent Tackles Ex-Protege in Court

Fans of the romantic comedy “Jerry Maguire” could be excused if they do a double-take over a legal feud now playing out in Los Angeles federal court.

The popular 1996 movie, starring Tom Cruise, features a character loosely based on Newport Beach sports agent Leigh Steinberg who strikes out on his own to represent athletes, eventually finding redemption in love and business.

But in real life, roles are reversed. Steinberg -- considered an early pioneer as a sports agent -- is suing former protege David Dunn for striking out on his own to build a rival firm to Steinberg’s empire.

Like the movie, the case playing out in U.S. District Judge Ronald S.W. Lew’s courtroom offers a window into a highly competitive realm of the sports world that is filled with intrigue and back-biting.

It has featured an appearance by former quarterback Warren Moon, and promises more testimony, live or videotaped, from current players such as Buffalo Bills quarterback Drew Bledsoe and Kansas City Chiefs receiver Johnnie Morton about their decision to fire Steinberg and join Dunn.

At the core of the $40-million lawsuit, however, are questions that apply to even the most prosaic of businesses. What loyalty does an employee owe an employer? Where do personal friendships stop and business interests start?

Steinberg, 53, has accused Dunn, 41, and his associates of stealing more than 50 of his 84 football clients and then threatening blackmail if Steinberg sued. Steinberg did that last year, alleging false advertising, intentional interference with players’ contracts, unfair competition and conspiracy. He also has filed a grievance against 47 of the pro players, seeking about $3 million in fees.

Meanwhile, Dunn’s attorneys say it was their client who was betrayed when the firm’s parent company, Assante Corp. of Canada, failed to give him millions of dollars in guaranteed stock as promised. Dunn has counter-sued Steinberg for invasion of privacy and false advertising.

Whatever the outcome, Steinberg’s public image has taken a beating. The author of “Winning With Integrity: Getting What You Want Without Selling Your Soul” has been portrayed in court records and testimony as an alcoholic and a mercurial manager who lost his recruiting touch. Steinberg testified he has battled alcoholism but said he’s still an effective agent.

After graduating from Berkeley with a law degree in 1974, Steinberg operated out of his parents’ Los Angeles home. From there, he snagged his first client, former dorm mate Steve Bartkowski. A quarterback, Bartkowski was the first pick in the 1975 draft, and went on to sign what was then the largest rookie contract in league history.

The instant fanfare that followed -- and hard work -- led to more success for Steinberg. He soon had an impressive base of A-list clients, including quarterbacks Steve Young, Troy Aikman and Jeff George.

By then, Steinberg had taken on a partner, Jeff Moorad, to branch out into baseball. But the firm’s core business was the gridiron, and Steinberg hired a close friend to help with the task of beating out dozens of other agents for new recruits -- a close friend named David Dunn.

“Outside of my family, he was really the best friend I had in the world,” Steinberg testified. “And I would have trusted him with my life.”

A product liability lawyer with no prior sports recruiting experience, Dunn was at first assigned “client maintenance” -- helping players with a variety of problems -- then quickly moved into contract negotiations. He rose to become a partner in charge of the football practice by 1999, when Assante struck a deal to buy the firm, then known as Steinberg, Moorad & Dunn, for $74 million.

It was a sign of how the sports agent business was changing. No longer satisfied with fixed commissions, such as the 3% on football players’ earnings, sports agencies were looking for deep pockets to help them leverage their contacts, including the development of “content supply” for television shows and video games.

The Winnipeg, Canada-based financial services firm coveted the agency’s association with the high-priced athletes and considered Steinberg and his partners, Dunn and Moorad, to be key “assets” in the transaction.

“That’s really what you’re buying, is the people and the relationships,” testified former Assante corporate secretary Anita Wortzman.

According to court records and testimony, Assante wanted the option to extend Dunn’s five-year contract for an additional three years. If he decided not to renew his agreement and leave the firm, Assante required Dunn not to compete or lure away clients for up to 2 years after his departure. In exchange, it guaranteed him $2.5 million in stock.

Confusion over the final terms -- Dunn believed he would receive at least some of the stock up front -- prompted the agent to call Assante headquarters the night before the merger was announced. Assante Chief Executive Martin Weinberg urged Dunn to “take a leap of faith” and trust the details would be ironed out after the merger, according to testimony and documents. The matter dragged on for a year, causing Dunn to beg for a resolution, according to court records.

“For the past four or five months I have pleaded with you to address the finalizing of my deal and the stock component of my compensation,” Dunn wrote Wortzman in an Oct. 20, 2001 e-mail entered into evidence.

Dunn’s contract woes came on top of complaints about Steinberg’s drinking, testimony and documents show. Among those allegedly unhappy: Bledsoe, one of the firm’s star clients, who met with Dunn for dinner in January 2001 and expressed “distaste” over how Steinberg behaved at a 1996 party in the quarterback’s home.

Bledsoe encouraged Dunn to go out on his own, suggesting “a lot of guys would go with you,” Dunn testified. Dunn mentioned the conversation to Brian Murphy, a fellow football agent who had expressed his own frustrations with Steinberg. On Jan. 21, 2001, Murphy penned a lengthy memo describing the agency as a “dysfunctional firm that is headed on a downward spiral.”

The memo, recovered from Murphy’s company computer and entered by Steinberg’s attorneys as evidence of a blackmail effort, also paints the agent as a glory-monger who skimps on the work but shows up at news conferences to take credit for big deals. “The entire firm knows that he is useless and we all work around him,” Murphy wrote.

And in what has become key language in the suit, Murphy added that Steinberg has “lots of secrets” which could “prove to be useful in negotiating a settlement.... If we wanted to, we could rip apart his marriage, his reputation and his career.”

Murphy alleged that he once had to pay a Las Vegas prostitute to recover Steinberg’s wallet. At trial, Steinberg acknowledged that his wallet was taken from him and had to be retrieved from a woman in Las Vegas. He called it “an embarrassing incident” but denied spending the night with an escort.

Dunn, Murphy and others shocked the firm by resigning en masse in February 2001.

Wortzman testified that a couple of days later, Murphy called her at home to say that the exodus would take away “70% to 80% of the NFL client base.” Wortzman said that when she protested that such a move violated the non-compete contracts, Murphy argued that any legal action could reveal “some very negative information that would be very embarrassing” to Steinberg and Assante.

“I said, ‘That sounds like blackmail,’ ” Wortzman said. Dunn’s attorneys contend that Murphy wasn’t making a threat but explaining that any lawsuit would force them to air their gripes about Steinberg.

Efforts at negotiation failed. Within a few months, Steinberg, Moorad & Dunn’s roster of pro football players was decimated as dozens of athletes defected to Dunn’s group, which was incorporated as Athletes First. Overnight, the new firm became a major sports agency.

Dunn’s attorneys contend that Bledsoe, Morton and others insisted that the decision to follow Dunn was of their own free will, and that Athletes First didn’t violate any football recruiting rules as outlined by the National Football League Players Assn.

Steinberg has testified that he has faced backlash from the split that has made it difficult to sign new clients. His firm now represents 18 pro football players. But Steinberg is more than willing to press on with the messy lawsuit and settle the score in court, his attorneys say.

“He’s a wounded lion,” said lead attorney Franklin Brockway “Brock” Gowdy of San Francisco, “but he’s still a lion.”