The CEO of Big League Advance Makes His Case

Last Monday, I wrote on this very site about both the lawsuit Indians uberprospect Francisco Mejia has filed against Big League Advance (“BLA”) and also BLA’s counterclaim. With the rise of branding contracts in professional sports, Mejia’s lawsuit likely represent a harbinger of things to come — rather than an aberration unlikely to be repeated — as a new frontier in sports litigation develops.

Shortly after publishing that piece, I spoke with BLA Chief Executive Officer Michael Schwimer about his company, the Mejia lawsuit, and what the future might hold. Schwimer, it should be noted, was good enough to spend a full hour being grilled by an attorney while simultaneously fathering his two young children, an arrangement most reasonable people would consider to be less than ideal.

Big League Advance

Schwimer himself is a former major-league pitcher, owner of an abbreviated 48-inning career with the Philadelphia Phillies marked by a lot of strikeouts (9.62 K/9) and a lot of walks (4.25 BB/9). After leaving the game, he started Big League Advance. Schwimer said he started BLA because of his own experience in the minor leagues. “I was reffing basketball games [to make ends meet],” Schwimer told me. “I was babysitting.” Schwimer believed there was a better way, and BLA was born.

According to Schwimer, BLA trades capital for a percentage of a player’s major-league career earnings. “This kind of business has been around for hundreds of years in boxing and golf,” Schwimer said, citing Upstart and Thirteenth Avenue as examples of companies that have made similar deals with students. (Upstart, it should be noted, is a personal loan company.) Schwimer told me the purpose of the company was to help minor leaguers, particularly given the low pay and long odds of making the major leagues.

The capital is intended to be used by players for one of two purposes. First, players can use it to improve their chances of making the big leagues, and Schwimer cited specifically the opportunity to use the money to “eat healthier.” Alternatively, Schwimer talked about creating a safety net for minor leaguers whose careers don’t pan out. “We’ve already had players getting released. We’re helping them start their second lives,” he said. As for the money itself, Schwimer said it isn’t a loan — players are only required to pay the money back if they make the major leagues, and then only the agreed percentage of their major-league earnings.

BLA’s clientele is primarily minor leaguers; Schwimer told me that, of the firm’s 99 clients, “over 90%” are current minor leaguers, and “75% were outside the top 300 prospects when they signed with us.” Schwimer wouldn’t identify any of those 99 clients besides Mejia but did say that they include some “players and prospects ranked way higher than Francisco Mejia.”

Schwimer said that BLA has a proprietary method of identifying minor league players, which looked for “Ben Zobrist types, Moneyball guys.” Schwimer wouldn’t disclose how that model worked, but did say it was “different than anything else around.” That includes, by the way, Fantex: Schwimer told me that BLA and Fantex have completely different business models, with Fantex focused on major leaguers, while BLA uses proprietary methods to identify minor leaguers of interest. Schwimer also bristled at the suggestion that his company was analogous to a payday lender for minor-league players. “We are the exact polar opposite of that,” Schwimer said. “We let the players choose what percentage they want to give up.”

Thus far, Schwimer described his company in less-than-stellar terms. “We’ve raised more than $100 million in two years [of doing business] and returned less than $350,000,” Schwimer said. Schwimer said that, nevertheless, BLA has started to see returns from a handful of major leaguers who signed deals with BLA while in the minors, all of whom had “paid in full.” Based on that, Schwimer said that he was optimistic that the business model could be successful. “If we lose money on 80% of our investments, we’re in great shape,” he said. And Schwimer did say that his business was growing. “We’ve got 10 players wanting to do deals with us every day.”

The Mejia Lawsuit

Our discussion of Mejia’s suit against BLA began with me asking Schwimer why the contract itself, and BLA’s counterclaim, called for the existence of the contract itself to be confidential. I returned to that question no fewer than four times during our conversation, and, to his credit, Schwimer’s answer was consistent each time. “I don’t care at all [about disclosing the existence of the contract],” he said. “That was never the issue.” In fact, Schwimer said several times that he “encouraged” BLA clients to tell teammates about their deals so as to provide a larger customer base for BLA.

Instead, Schwimer focused on the terms of the contract, on which he said he spent hundreds of thousands of dollars and six months developing with the aid of the law firm Morrison Foerster (known in the industry — and on their own website — as “MoFo”). It’s the terms of that contract which Schwimer said he wanted confidential, worried that competitors might be able to backwards engineer their business model and formula. Interestingly, however, Schwimer said that the contract Mejia signed is no longer used, having been replaced by a new contract drafted by Zwillgen, the firm which employs BLA’s current litigation counsel, attorney Jeff Landis.

I asked Schwimer why, if the Mejia form contract had been retired, BLA still considered it a trade secret. Schwimer provided two reasons. First, he indicated that although some changes had been made between contract versions, much of it remained the same. Second, Schwimer said that the equity percentage and payment for that equity were confidential — specifically for the players’ protection. “[The players] all think they’re better than everybody else… [T]hey all think they’re hall of famers,” Schwimer said. And although he said that mindset was needed to make the big leagues — Schwimer said he needed it, for example — he was concerned about players bidding based on what other players received.

Schwimer also said that the confidentiality provisions were “all for the players’ protection… [T]hey don’t want people knowing they have this capital.” Schwimer did concede, however, that it was for BLA’s protection as, well. Schwimer, as can be seen, is remarkably guarded when it comes to disclosing the inner workings of his company.

Schwimer provided a very different narrative of events than what is contained in Mejia’s complaint. According to Schwimer, Mejia did, in fact, have three different contracts with BLA — and, in fact, was among their first clients. But Schwimer said that Mejia was represented by counsel of his own choosing each time, and BLA never paid for Mejia’s attorneys or went to his house. “We don’t even know where Francisco lives,” Schwimer said. Schwimer contends that Mejia was represented by his ISE agents at the first negotiation, which was $100,000 for 3% of Mejia’s career earnings. Thereafter, Schwimer says Mejia approached BLA twice more without his BLA representation and asked for more capital, using a separate attorney and cutting his ISE attorneys out of the picture each time. Schwimer said that the contract was explained to Mejia in Spanish and said the terms are always explained to every client in their native language. In fact, Schwimer said, that after the third contract, Mejia sent a text to BLA saying, “I love you guys.”

According to Schwimer, things went south between Mejia and BLA after the catcher asked for a fourth deal, proposing $500,000 for an additional 1% after the 2017 season, saying another company had offered those terms. Schwimer balked at that deal. “At the absolute most, we might do an extra 2% at a much higher valuation, really only to help him out.” Schwimer says that, after BLA turned down Mejia’s proposal, Mejia sued his company and blindsided him in the process.

I asked Schwimer point-blank if Mejia was lying in his complaint. “Absolutely yes,” he said. “Where we said ‘denied’ [in our Answer], then obviously we’re saying that [that allegation is] a lie.” I then asked Schwimer if he would be pursuing a sanctions motion against Mejia based on that position. “I haven’t even spoken to anyone about that,” Schwimer said.

The Future

One matter about which I was curious is whether Schwimer plans to change any of BLA’s business model in the wake of Mejia’s lawsuit. “Absolutely not,” he said. “Integrity and character, that is what we live by.” Schwimer made clear that he and BLA are seeking no future earnings in their counterclaim and that he is seeking only to keep the terms of the contract under wraps so as to prevent competitors learning their trade secrets. But Schwimer did tease that this story wasn’t over. “One of the best prospects in all of baseball is demanding to go on the record [defending BLA],” Schwimer said, though he wouldn’t reveal who that was. He did say, however, that we wouldn’t have to wait long to find out.

One thing is for certain: these companies aren’t going away. So long as minor-league pay is a problem, companies which offer deals like BLA’s will provide an attractive alternative, particularly for players who aren’t the proverbial bonus babies. I found Schwimer to be credible, but questions do remain. His story and Mejia’s are so different that they both can’t be true, and Schwimer seemed to recognize he’s in for a protracted court battle, even acknowledging he won’t be filing a motion to dismiss. “Unconscionability is a pretty tough thing,” he said.