A Deadly Combination: Millions of Dollars, Sports, Family, and Unread Contracts
Mixing business affairs and family often has dire consequences. This is evidenced by a recent case involving a professional athlete and his family.
Ryan Howard is the Philadelphia Phillies first baseman. Early in his career he was an all star slugger, part of a World Series winning team in 2008. More recently his power has petered out and there is talk of the team trying to trade him. Ryan was smart enough to sign in 2010 a five year, $125 million contract. He has made some money mistakes common among professional athletes: he mixed his money, his business and his family members with bad results. In addition to injuries and on field performance problems, Howard dealt with a legal fight with family members.
Ryans twin brother Corey sued him in 2013 for more than $2.7 million, which resulted in a countersuit in 2014 with allegations of fraud and mismanagement of the fortune that Ryan had earned. The litigation was settled for undisclosed terms last month. Three consulting agreements were the focus of the litigation. Howard alleged he signed them without reading them because of the intimate trust he placed in his twin brother, according to the Inquirer.
Corey alleged that Ryan unjustly terminated a consulting agreement between the two. Ryan claimed that their father, mother and brothers were enriching themselves at his expense. Ryan stated he took his fathers advice and trusted family members with his finances. After winning the National League MVP award in 2006, Ryan incorporated a company called RJH Enterprises, into which he contributed more than $8 million. Eight years later, in his countersuit Ryan claimed family members conspired to defraud RJH Enterprises.
Corey claimed he worked for his brother without a written contract for three years before the brothers put their arrangement in writing in the form of a 15 year consulting agreement. By late 2011, the Inquirer reports that Ryans countersuit states, Ryan had become concerned with whether Corey and his other family members were really working to protect his financial interests or were attempting to enrich themselves at his expense. Ryan claimed that he had paid his family at least $2,795,337.38, all based on his mothers authorization.
In the first year of his 2010 contract, Ryan turned his marketing and promotional efforts over to Creative Artists Agency and away from his family. When he told his father of the new arrangement, he told his son he should pay his parents $10 million for their past efforts.
Family businesses, if run well and ethically, can help bring family members together. Though well probably never know what actually happened with the Howard family, this may be an instance where a family business simply was not run like it should have been, as a result the family has been torn apart. Add to this contracts that were not read or understood before they were signed, which is frequently a recipe for disaster. Family owned businesses are, after all, businesses and like any business they are potentially subject to fraud and abuse.
All members of a family owned business, as loving as they may be, need to protect themselves. Whether the business is a partnership or corporation, there needs to be written agreements so all the parties know their rights and responsibilities. If you are in the Rockville or Bethesda areas and thinking about starting a family run business, or are involved in one now, and have legal questions or concerns about it, contact the business law attorneys at Longman & Van Grack at (301) 291-5027 so we can talk about the situation and the best ways to move forward.
