Arbitrator Jay Gandhi Finds That Fantex’s Marketing and Brand Management Activities Required It to Register as an “Athlete Agent” Under California Law

December 2021

Putterman Yu Wang LLP partners Constance J. Yu and George Chikovani obtained a victory on behalf of San Francisco 49ers wide receiver Mohamed Sanu against Fantex, Inc. JAMS arbitrator and retired federal magistrate judge Jay Gandhi found that Fantex violated of the California’s Miller Ayala Athlete Agents Act and is required to pay Sanu $1,147,593.60 in restitution and attorneys’ fees.

The award has been covered in the online sports law publication Conduct Detrimental. See Jason Morrin, Mohamed Sanu Wins $1.1 Million Arbitration Award Against Fantex, Jan. 19, 2022, available at https://www.conductdetrimental.com/post/mohamed-sanu-wins-1-1-million-arbitration-award-against-fantex.  

Fantex was launched in 2013, providing a unique investment opportunity to sports fans: the ability to buy and sell stock in individual athletes. In 2014, Fantex solicited Sanu, then a 24-year-old NFL wide receiver, to enter into a “Brand Agreement” to participate in an innovative fan-investor driven public trading platform registered with the SEC. Fantex agreed to make an up-front payment of $1.56 million to Sanu, and to use its expertise and industry connections to assist in “brand building” activities, which would purportedly enhance Sanu’s earning power through endorsement and commercial contracts. In return, the agreement required Sanu to pay Fantex 10 percent of his football-related earnings in perpetuity.

The Fantex model failed just over two years from Sanu’s signing of the Brand Agreement. In August 2016, Fantex shut down the trading platform, laid off all staff, and converted to a new business model where it simply collects checks from athletes, and distributes a portion of the earnings to the holders of stock (more than half held by Fantex itself, or its insiders). All public trading of the Sanu tracking stock ceased, as did all “brand building” activities.

Sanu paid over $1.97 million to Fantex between 2014 and 2019. When Sanu stopped making payments in 2019, Fantex initiated arbitration seeking further payments. Sanu counter-claimed, arguing that the Brand Agreement was invalid because Fantex failed to comply with the Miller Ayala Athlete Agents Act, and therefore could not collect any compensation from Sanu under the Brand Agreement and was required to return all fees collected from Sanu under the agreement.

Following a three-day arbitration hearing held in San Francisco, CA, Judge Gandhi issued an award in Sanu’s favor, finding that Fantex’s promised “brand building” activities on behalf of Sanu made it an “athlete agent” under the Miller Ayala Act, resulting in a failure of Fantex’s claims for further payment from Sanu and requiring restitution of money paid by Sanu to Fantex as well as Sanu’s attorneys’ fees and costs.