The news that Turner ‘Tfue’ Tenney was filing a lawsuit against FaZe Clan — the organisation that he was signed to — rocked the esports industry. It’s safe to say that everyone across the industry has had their say on what’s been one of the biggest stories of recent times. Nascent esports contracts are nothing new, but this represents the first time that a high profile player has filed a case against the team whom they represent.
Max Nicolaides and Simon Leaf of esteemed law firm Mishcon de Reya has contributed a guest post explaining the complexity of the case, the likely outcome, and considering any potential lasting ramifications for the esports industry.
Disclaimer: This is a guest post from Mishcon de Reya.
An image rights battle royale: professional esports player Turner ‘Tfue’ Tenney files lawsuit against FaZe Clan.
Photo credit: FaZe Clan
Professional Fortnite player Turner ‘Tfue’ Tenney has issued proceedings in the Superior Court of the State of California against his esports team FaZe Clan. Tfue alleges that FaZe Clan has breached the ‘Gamer Agreement’ he signed with the team and that the Gamer Agreement, and FaZe Clan through its conduct, have violated Californian law.
The main issue centres on who should benefit from the revenues generated from the sponsorship rights and branded content on Tfue’s Twitch, YouTube and social media channels; FaZe Clan or Tfue.
Tfue alleges that the Gamer Agreement is anti-competitive and illegal, as it gives FaZe Clan exclusive rights to find and negotiate all sponsorship deals for Tfue (with up to 80% of the fees paid going to FaZe Clan), and prevents Tfue from obtaining his own personal sponsorship deals with brands.
This reflects a wider issue within the esports industry, which has yet to establish industry norms for the carve out of different categories of sponsorship rights for esports leagues, teams and players respectively. While the industry is rapidly evolving, it is still in its infancy when it comes to the sophistication of its contractual arrangements. Traditional sports personalities have long been able to agree personal sponsorships, alongside team sponsorships, recognising the difference between their on-field and off-field activities, and it is likely that this will come to esports players in the near future.
Unless Tfue and FaZe Clan settle the claim, the court will decide whether FaZe Clan can enforce the Gamer Agreement and therefore ultimately who is entitled to benefit from revenues that are generated from Tfue’s sponsorship-related activities.
What happened in the lead up to Tfue bringing his claim to court?
In April 2018, at the age of 20, Tfue signed a Gamer Agreement with FaZe Clan. The Gamer Agreement had an initial term of six months, automatically extendable to 36 months if certain conditions were met.
Under the Gamer Agreement, FaZe Clan has the exclusive right for sourcing sponsorship to Tfue. All payments are made to FaZe Clan, who then pays Tfue the amount due to him; which varies depending on the nature of the deal struck.
The Gamer Agreement entitles FaZe Clan a finder’s fee of up to 80% of the revenue paid by third parties for Tfue’s services. It also provides that Tfue cannot obtain his own sponsorship deals without FaZe Clan’s prior written approval.
On 20 May 2019, Tfue’s lawyers, following an attempt to resolve the dispute in correspondence, filed a complaint at court.
“Esports teams worldwide will be keeping a close eye on the outcome, and looking to make sure that their own contracts are as watertight as possible”
What does the court complaint say?
In short, Tfue claims that:
- The exclusivity provisions (including the 80% finder’s fee) relating to sponsorship within the Gamer Agreement are anti-competitive and amount to an unlawful restraint of trade.
- The Gamer Agreement and FaZe Clan’s conduct violates California’s Talent Agency Act.
- FaZe Clan has failed to pay money owed to Tfue under the Gamer Agreement.
The complaint also notes that “until now FaZe Clan has enjoyed the fruits of this illegal business model with impunity because no-one could or was willing to stand up to FaZe Clan. Those days are over. Through this action, Tenney seeks to shift the balance of power to the gamers and content creators/streamers, those who are actually creating value and driving the industry. As a result of this action, others will hopefully take notice of what is going on and help to clean up esports.”
What does Tfue want?
Tfue has asked the court for (amongst other things):
1. Declarations that:
- The Gamer Agreement has been terminated as a result of FaZe Clan’s material breach.
- To the extent the Gamer Agreement was not void from the beginning, the exclusivity clauses are void and unenforceable.
- Tfue does not owe FaZe Clan any further obligations under the Gamer Agreement.
- FaZe Clan to pay damages to Tfue for the losses suffered as a result of its allegedly illegal business practices.
- FaZe Clan to pay Tfue all outstanding money owed to him from third parties.
- An order that FaZe Clan pay damages to compensate Tfue for the value of his services provided to third parties that FaZe Clan has failed to pay to him.
- Punitive damages as a result of FaZe Clan being an unlicensed agent.
- FaZe Clan to pay his legal costs.
What has FaZe Clan said?
FaZe Clan first responded publicly by tweeting the following statement:
“We’re shocked and disappointed to see the news of Tfue’s press article and lawsuit. Over the course of our partnership with him, which began in April 2018, FaZe Clan has collected: $0 – Tournament Winnings, $0 – Twitch Revenue, $0 – YouTube Revenue, $0 – from any social platform.
“In fact, we have only collected a total of $60,000 from our partnership, while Tfue has earned millions as a member of FaZe Clan. While contracts are different with each player, all of them – including Tfue’s – have a maximum of 20% to FaZe Clan in both tournament winnings as well as content revenue, with 80% to the player. In Turner’s case, neither of those have been collected by FaZe Clan….”
Since then, FaZe Clan has released this video setting out its position on the matter, which further attacks Tfue’s claim and defends its position on this matter.
While high profile sports personalities in traditional sports are well-versed in negotiating carve-outs in their employment contracts with their main employers, far too few esports players and teams seek legal advice before signing such contracts. This heightens the risk of both sides entering into long term arrangements without properly understanding the implications. While on the face of it, this case highlights the risk to players there are also risks for esports teams, such as making their arrangements more susceptible to legal challenges and negative publicity, such as in this case.
This distinction between on and off-field activities requires careful consideration (and definition). The esports stars of today, when not competing in major esports events, are also live streaming on Twitch, creating on-demand content on YouTube and engaging with fans on Twitter, Facebook and Instagram.
This case may prove to be a significant early example of professional esports players using legal redress to hold esports teams to account. Esports teams worldwide will be keeping a close eye on the outcome, and looking to make sure that their own contracts are as watertight as possible. After all, like traditional sports teams, esports teams are under pressure from their existing sponsors to make sure that players representing the team (and promoting a team sponsor) are not diluting the value of team sponsorships by also working with rival sponsors. There are several football clubs in Europe, for example, that deliberately restrict their players from working with non-club sponsors in return for additional payments (often to the athlete’s image rights company) for giving up their rights to work with other partners.
For a more in-depth conversation on ‘Teams vs Players – developing image rights and branding‘, check out the ESI Podcast in partnership with Mishcon de Reya where host Ollie Ring speaks with Sports Lawyer Tom Murray, Managing Director of Rogue Anna Baumann, and Commercial Director of Hashtag United Seb Brown about team vs player rights in esports.
If you want to discuss esports player contracts contact Max Nicolaides and Simon Leaf of Mishcon de Reya at firstname.lastname@example.org and email@example.com.
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Source: GSI ESports Insider