A negotiation is not an inherently “bad” event, even for the negotiating party with relatively more leverage. Negotiation can crystallize disagreements that either allow the parties to walk away from the deal or work through their differences, can lead to more buy-in from both parties, and can result in an agreement that is more likely to discourage the parties from airing their dirty laundry about one another if and when they decide to part ways.

A dispute between FaZe Clan and one of its players, TFue, illustrates the downside of a more one-sided approach.

In FaZe Clan v. Tenney, each FaZe Clan and TFue brought claims against the other. TFue filed two lawsuits in California, alleging that the Gamer Agreement was void. FaZe Clan filed its own lawsuit, in New York, asserting four causes of action for breach of contract.

“The Gamer Agreement, in very brief summary, obligated Tenney to ‘play[ ] on FaZe Clan’s team, participat[e] in training activities, and participat[e] in various promotional, marketing and social media activities,’ all in exchange for FaZe Clan’s obligation to provide him with ‘(1) a monthly fee, (2) a share of income from cash prizes won at eSports tournaments, and (3) a share of revenue from certain merchandise, apparel, brand deals, and other activities,’ plus training and other support for his career.” Before their lawsuits were filed, TFue publicly announced his desire to split with FaZe Clan, noting in a YouTube video that he “tried multiple times for multiple months to get out of this contract.”

The New York court denied FaZe Clan’s motion for summary judgment on TFue’s two California claims, which order should give all eSports teams a reason to review their own agreements. First, the court held that TFue’s claim that the Gamer Agreement violated California Labor Code section 1700.4 (which prohibits anyone from “procuring offering, promising, or attempting to procure employment or engagements for an artist or artists,” unless they have a license for doing so) could proceed to trial. There was no dispute that FaZe Clan had procured sponsorship opportunities for TFue, although there was a dispute over whether any of this activity happened in California. If those activities happened in California, they were potentially covered by the California Labor Code.

Second, the Gamer Agreement contained three restrictions on TFue’s right to compete with FaZe Clan, all lasting for as long as the agreement remains in force. “Specifically, the Gamer Agreement provides, first, that TFue grants FaZe Clan an exclusive license to his name and likeness; second, that TFue agrees not to work for a gaming organization other than FaZe Clan or endorse any product not approved by FaZe Clan; and third, that TFue grants FaZe Clan a right to approve any third-party request for his services.” TFue’s claim that these provisions violated California Business and Professions Code section 16600 (which provides that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void”) were allowed to proceed to trial.

These two provisions, as drafted, indicate a certain one-sidedness during negotiations. Nevertheless, the end result (a looming trial) is not good for either party. Parties negotiating player contracts should welcome robust negotiations and pay attention certain key issues as they do so:

  • Fees to be paid, with clear definitions and formulas;
  • Relevant labor laws;
  • Sponsorship and endorsement rights, media rights, and merchandising rights, with an eye toward applicable laws;
  • Streaming and other player-generated content;
  • Ownership and usage of various intellectual property rights;
  • Public appearances;
  • Term length, renewals, and terminations;
  • Morality clauses;
  • Exclusivity clauses; and
  • What happens as the player grows in skill and fame over time for all of the foregoing.