Contract
Cases
Cincinnati Bengals v. Bergey
Boston Celtics Limited Partnership v. Shaw
National Football League Properties v. Dallas
Cowboys
Bonelli v. Volkswagen
Vanderbilt v. DiNardo
RODGERS v. GEORGIA TECH ATHLETIC ASSOCIATION
No. 65112
Court of Appeals of Georgia
166 Ga. App. 156; 303 S.E.2d 467; 1983 Ga. App. LEXIS 2084
March 16, 1983, Decided
PRIOR HISTORY: Action on contract. Fulton State Court. Before Judge
Moran.
JUDGES: Pope, Judge.
Deen, P. J., and Sognier, J., concur.
OPINIONBY: POPE
OPINION: Franklin C. "Pepper" Rodgers brought this
breach of contract action against the Georgia Tech Athletic Association to
recover the value of certain perquisites which had been made available to him
as the head coach of football at the Georgia Institute of Technology. Both
parties moved for summary judgment, Rodgers' motion encompassing only the issue
of liability under his contract of employment with the Association. The trial
court granted the Association's motion and denied Rodgers' motion. The issue
presented for resolution by this appeal is whether Rodgers is entitled to
recover the value of certain perquisites or "fringe benefits" of his
position as head coach of football under the terms of his contract of employment
with the Association.
Rodgers was removed from his coaching position by vote of the Association's
Board of Trustees on December 18, 1979, notwithstanding a written contract of
employment through December 31, 1981. In addition to an annual salary, the
contract provided that Rodgers, as an employee of the Association, would be
entitled "to various insurance and pension benefits and perquisites"
as he became eligible therefor. Rodgers makes no claim for base salary, health
insurance and pension plan benefits, all of which were provided voluntarily by
the Association through December 31, 1981, the expiration date of the contract.
Rather, his claim is solely for the value of the aforesaid
"perquisites," to which he claims entitlement under this employment contract.
Rodgers lists some 29 separate items as such perquisites. In support of his
motion for summary judgment, Rodgers categorized these items into two groups:
A. Items provided directly to him by the Association but discontinued when
Rodgers was relieved of his duties, and B. Items provided by sources other than
the Association by virtue of his position as head coach of football. These
items are listed in the Appendix to this opinion.
The subject contract was in the form of a letter from the Association dated
April 20, 1977 offering Rodgers the position of head coach of football for
three years at an annual salary plus certain benefits and perquisites. This
contract provided that Rodgers could be terminated for illness or other
incapacity continuing for three months, death, or "any conduct or activity
involving moral turpitude or which in the opinion of [the Board of Trustees]
would constitute an embarrassment to the school." Rodgers accepted this
contract on April 25, 1977. This contract was extended until January 1, 1982 by
a subsequent letter agreement between the parties. At its December 18, 1979
meeting, the Association's Board of Trustees determined that a change should be
made in the position of head coach of football. The following statement was
approved and released to the press: "The Board of Trustees of the Georgia
Tech Athletic Association met at its regular December meeting this morning.
After full discussion, the Board determined that in the best interest of
Georgia Tech, with full respect for Coach Pepper Rodgers, a change should be
made in the position of Head Coach of Football. The Board stated that it would,
of course, honor the financial contractual obligation to Coach Rodgers and that
Doug Weaver, the Athletic Director, had been directed to immediately pursue the
obtaining of a new head coach."
* * *
2. Rodgers contends that he was terminated or fired from his employment by the
Association. However, the evidence of record supports the Association's view
that Rodgers was merely relieved of his duties as the head coach of football
yet remained an employee of the Association, albeit without any function or
duties, for the duration of his contract. In either event, this disassociation
of Rodgers from his position and duties was not "for cause" pursuant
to the terms of the contract. Therefore, the Association was obligated to pay
Rodgers that part of the amount set forth in the contract "which he
himself was entitled to receive as compensation for his services." Southern
Cotton Oil Co. v. Yarborough, 26 Ga. App. 766, 770 (107 SE 366) (1921)....
In addition to a salary, health insurance and pension benefits, the contract
provided that Rodgers, as an employee of the Association, was entitled to
"perquisites" as he became eligible therefor. The term
"perquisites" is defined as "[e]moluments or incidental profits
attaching to an office or official position, beyond the salary or regular
fees." Black's Law Dictionary 1299 (4th ed. 1968). The term is also
defined as "a privilege, gain, or profit incidental to an employment in
addition to regular salary [***7] or wages; esp: one expected or
promised [e.g.,] the [perquisites] of the college president include a home and
car. . . ." Webster's Third New International Dictionary 1685 (1981).
Thus, Rodgers was entitled to the perquisites (or their value) for which he was
eligible during the duration of his contract. The problem presented here for
resolution is to determine whether any of the items listed in the Appendix were
indeed perquisites to which Rodgers was entitled pursuant to his contract.
First, we must determine the intention of the parties as to the scope of the
perquisites to which Rodgers was entitled under the contract.... The pertinent language of the contract
provides: "You, as Head Coach of Football, will devote your time,
attention, skill, and efforts to the performance of your duties as Head Coach
under the policies established by the Athletic Board and the Athletic Director,
and you will receive compensation at [an] annual rate of $ 35,175.00 payable in
equal monthly installments. In addition, as an employee of the Association, you
will be entitled to various . . . perquisites as you become eligible
therefor." The Association
contends that the language "as an employee of the Association"
limited Rodgers' eligibility for perquisites to those items common to all
Association employees. Rodgers argues that he was not only entitled to those
perquisites common to all Association employees, but that he was also entitled
to additional perquisites for which he became eligible as the head coach of
football. Since the contract is susceptible to either construction, it is
ambiguous. This ambiguity may be resolved by applying the appropriate rules of
construction.
"If a contract is so framed as to be susceptible of two constructions,
that interpretation which is least favorable to the author . . . should
generally be accepted. [Cits.] 'When it is possible to do so without
contravening any rule of law, the courts will construe a contract as binding on
both the parties, where, from the language of the contract, the conduct of the
parties, and all the attendant circumstances, it appears that the intention of
the parties was that both should be bound [thereby], and substantial justice
requires that the contract be given effect.... [Cits.]'" The subject contract was drafted by the
Association. Moreover, the record discloses that Rodgers, during his tenure as
head coach of football, did receive perquisites in addition to those received
by other Association employees. Accordingly, we conclude that the parties
intended that Rodgers would receive perquisites, as he became eligible
therefor, based upon his position as head coach of football and not merely as
an employee of the Association.
We must next determine the nature of the items for which Rodgers seeks damages,
i.e., whether the items listed in the Appendix are perquisites vel non. We will
first address ourselves to those items listed in Section A of the Appendix and
address separately those items listed in Section B.
(a) The Association asserts that Rodgers was not entitled to any of the items
listed in Section A because they were expense account items --
"tools" to enable him to more effectively execute his duties as head
coach of football. Rodgers counters that those items were an integral part of
the total compensation package that he received as head coach of football and
constituted consideration for his contract of employment. We certainly agree
with the Association that Rodgers would be entitled to recover only
"compensatory damages that he suffered by reason of the breach of his
contract; in other words, that the proper measure of damages arising from the
breach of the contract of employment was actual loss sustained by the breach,
and not the gross amount of [his] wages and expenses [under the
contract]..." Southern Cotton Oil Co. v. Yarborough, supra...
However, the evidence offered as to the nature of the items in Section A was in
considerable dispute. The fact that these items were not reported as taxable
income by Rodgers is not conclusive as to their nature (see Mullinax v.
Mullinax, 234 Ga. 553, 555 (216 SE2d 802) (1975)), nor is the fact that
Rodgers reimbursed the Association for occasional "personal" expenses
which it had paid. Thus, with three exceptions, we cannot say as a matter of
law either that Rodgers was entitled to the items listed in Section A as
perquisites of his employment, or that he was not.
The three exceptions to this finding are the services of a secretary, the services
of an administrative assistant, and the cost of trips to football conventions,
clinics, etc. The undisputed purpose of the services of the secretary and
administrative assistant was to assist Rodgers in fulfilling his duties under
the contract. Since Rodgers had been relieved of his duties as head coach of
football, and, thus, had no responsibilities under the contract, he had no need
for these support services. This is true even though the secretary and
administrative assistant may have occasionally provided personal services to
Rodgers beyond their duties to him as head coach of football since, as Rodgers
admits, their primary functions were to provide services to the head coach of
football. Also, since Rodgers had been relieved of his coaching duties, the
Association was not obligated to pay his expenses for trips to various
football-related activities, these costs clearly being business-related and not
in the nature of compensation. Cf. Southern Cotton Oil Co. v. Yarborough,
supra.
(b) We tirn our attention finally to those items in Section B of the Appendix
-- items which Rodgers asserts were perquisites he received from sources other
than the Association by virtue of his position as head coach of football at
Georgia Tech. The Association argues that Rodgers' claim for recovery of these
items was in the nature of a tort claim for humiliation and injury to feelings.
Rodgers counters that these items were perquisites within the contemplation of
the parties which constituted part of the consideration for the contract even
though they were provided by sources other than the Association.
We do not construe Rodgers' claim for recovery of the items in Section B to be
in the nature of a personal injury tort....
The several and ancient cases from other jurisdictions cited by the
Association in support of its contention all involve situations wherein the
party wrongfully removed from his employment by his employer's breach of the
employment contract brought suit to recover damages for personal injury such as
loss of reputation, humiliation, etc. In the case at bar Rodgers claims that
the items in Section B were part of the consideration of his contract. No claim
for personal injury appears. Furthermore, the State Court of Fulton County,
where this case was brought, has no jurisdiction over personal injury claims.
Construing Rodgers' complaint to serve his best interests, we hold that the
Association's argument here is without merit. Nevertheless, we must now
determine whether Rodgers may recover the items in Section B under his breach
of contract theory....
Can Rodgers' loss of the items in Section B be traced solely to the
Association's breach of the contract? Rodgers testified that he received these
perquisites as a result of his being head coach of football at Georgia Tech.
The record discloses, however, that the items relating to housing and the cost
of premiums on a life insurance policy were discontinued several years prior to
the Association's breach of contract and were, in fact, not related to the
breach. Thus, these items were properly excluded by the trial court. The
remaining items were discontinued as the direct result of Rodgers being
relieved of his duties as head coach of football.
Are the remaining items in Section B capable of exact computation? A
"gift" is defined as "[a] voluntary transfer of personal
property without consideration." Black's Law Dictionary 817 (4th ed.
1968). A gift, then, being a voluntary transaction and without
consideration, can not form an enforceable part of the consideration of a
contract. Although Rodgers may have received gifts of money and personalty
during his tenure as head coach of football, such voluntary contributions to
his financial well-being are totally incapable of exact computation, for a gift
made in one year is no assurance of a similar gift in the next. In fact,
Rodgers concedes that he did not receive these gifts each year. Thus, the item
which listed various financial gifts was properly excluded from recovery. The
items now remaining are sufficiently capable of computation....
Did these remaining items arise naturally and according to the usual course of
things, and were they such as the parties contemplated as a probable result of
a breach? There is no evidence of record showing that the Association had any
knowledge of Rodgers' freeloading at certain Holiday Inns or of his membership
in Terminus International Tennis Club. Thus, the loss of these items could not
be such as was contemplated as a probable result of a breach of the contract.
The evidence was in dispute as to the remaining items -- profits from his
television and radio shows and from his summer football camp plus the loss of
use of a new automobile and tickets to professional sporting events -- i.e.,
whether such items were contemplated by the parties at the time the contract
was executed as perquisites or fringe benefits to which Rodgers would be
entitled as the result of his position as head coach of football at Georgia
Tech. These items are of the type commonly provided to head coaches at major
colleges and universities. There was some evidence that the Association knew
that Rodgers would receive (and, in fact, did receive) these benefits as the
result of his head coaching position and that his removal from that position
would result in the loss of these benefits. In fact, some members of the
Association assisted Rodgers in obtaining many of these items. Also, there was
at least some evidence by which the amount of these items could be fixed.
Therefore, summary judgment in favor of the Association as to these items was
inappropriate.... For these same
reasons, summary judgment in favor of Rodgers was properly denied.
In summary, a question of fact remains as to whether Rodgers is entitled to
recover those items listed in Section A of the Appendix not excluded in this
opinion and also those items in Section B not heretofore excluded, any recovery
being subject to proof of the amount of his damages as set forth in this
opinion. All items which have been excluded are denoted by asterisks in the
Appendix.
Judgment affirmed in part; reversed in part.
Appendix.
A. Benefits and Perquisites Received by Rodgers Directly from the Georgia Tech
Athletic Association.
(1) gas, oil, maintenance, repairs, other automobile expenses;
(2) automobile liability and collision insurance;
(3) general expense money;
(4) meals available at the Georgia Tech training table;
(5) eight season tickets to Georgia Tech home football games during fall of
1980 and 1981;
(6) two reserved booths, consisting of approximately 40 seats at [*164] Georgia
Tech home football games during fall of 1980 and 1981;
(7) six season tickets to Georgia Tech home basketball games for 1980 and 1981;
(8) four season tickets to Atlanta Falcon home football games for 1980 and
1981;
(9) four game tickets to each out-of-town Georgia Tech football game during
fall of 1980 and 1981;
(10) pocket money at each home football game during fall of 1980 and 1981;
(11) pocket money at each out-of-town Georgia Tech football game during fall of
1980 and 1981;
(12) parking privileges at all Georgia Tech home sporting events;
* (13) the services of a secretary;
* (14) the services of an administrative assistant;
(15) the cost of admission to Georgia Tech home baseball games during spring of
1980 and 1981;
* (16) the cost of trips to football coaches' conventions, clinics, and
meetings and to observe football practice sessions of professional and college
football teams;
(17) initiation fee, dues, monthly bills, and cost of membership at the Capital
City Club;
(18) initiation fee, dues, monthly bills, and cost of membership at the
Cherokee Country Club;
(19) initiation fee and dues at the East Lake Country Club.
B. Benefits and Perquisites Received by Rodgers from Sources Other Than the
Georgia Tech Athletic Association by Virtue of Being Head Coach of Football.
(1) profits from Rodgers' television football show, "The Pepper Rodgers
Show," on Station WSB-TV in Atlanta for the fall of 1980 and 1981;
(2) profits from Rodgers' radio
football show on Station WGST in Atlanta for the fall of 1980 and 1981;
(3) use of a new Cadillac automobile during 1980 and 1981;
(4) profits from Rodgers' summer football camp, known as the "Pepper
Rodgers Football School," for June 1980 and June 1981;
* (5) financial gifts from alumni and supporters of Georgia Tech for 1980 and
1981;
* (6) lodging at any of the Holiday Inns owned by Topeka Inn Management, Inc.
of Topeka, Kansas, for the time period from December 18, 1979 through December
31, 1981.
* (7) the cost of membership in Terminus International Tennis Club in Atlanta
for 1980 and 1981;
(8) individual game tickets to Hawks basketball and Braves baseball games
during 1980 and 1981 seasons;
* (9) housing for Rodgers and his family in Atlanta for the period from
December 18, 1979 through December 31, 1981;
* (10) the cost of premiums of a $ 400,000.00 policy on the life of Rodgers for
the time period from December 18, 1979 through December 31, 1981.
The CINCINNATI BENGALS, INC., Plaintiff, v. William BERGEY et al., Defendants
Civ. A. No. C-1-74-142
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO, WESTERN DIVISION
453 F. Supp. 129; 1974 U.S. Dist. LEXIS 8543
May 14, 1974
JUDGES: David S. Porter, District Judge.
OPINIONBY: PORTER
OPINION: [*131] FINDINGS OF FACT AND CONCLUSIONS OF LAW ON
MOTION FOR PRELIMINARY INJUNCTION
DAVID S. PORTER, District Judge:
* * *
BACKGROUND
6. The Bengals are one of 26 teams in the National Football League (NFL). The
Cincinnati Bengals, Inc., is the holder of a franchise to operate a
professional football team as a member of NFL. The Bengals were an expansion
team, being granted a franchise in 1967 and began the exhibition of football
games in competition with other NFL teams in 1968.
7. During six seasons of competition in the NFL the Bengals have achieved
greater success than is normally expected from an "expansion" team.
They have won their division title twice and are currently regarded as a
serious contender for the World Championship.
8. The success of the plaintiff's football team is due in large part to the
careful selection of players and the grooming and training of these players by
the Bengals' coaching staff after they join the team. It is the coaching
philosophy of Paul Brown, head coach of the Bengals, and his coaching staff to
acquire young, quality players who can be moulded into highly trained units, i.
e., the offensive line unit, the defensive unit, etc. These quality players are
plaintiff's most valuable assets...
9. Professional football players possess unique talents and skills. This is
recognized in their contracts. The pertinent provisions of the Standard Player
Contract of the NFL are Para's. 6 and 8 which provide:
6. The Player represents and warrants that he is and will continue to be
sufficiently highly skilled in all types of football team play, to play
professional football of the caliber required by the League and by the Club,
and that he is and will continue to be in excellent physical condition, and
agrees to perform his services hereunder to the complete satisfaction of the
Club and its Head Coach.
* * *
8. The Player hereby represents that he has special, exceptional and unique
knowledge, skill and ability as a football player, the loss of which cannot be
estimated with any certainty and cannot be fairly or adequately compensated by
damages and thereforeagrees that the Club shall have the right, in addition to
any other rights which the Club may possess, to enjoin him by appropriate
injunction proceedings against playing football or any other professional
sport, without the consent of the Club, or engaging in activities related to
football for any person, firm, corporation, institution, or on his own behalf,
and against any other breach of this contract. (Ex. attached to Amended
Complaint)
10. The WFL and its member teams, all defendants herein,
seek to establish a new league of professional football teams. Each of the WFL
member teams is currently engaged in the formation of a professional football
team which will compete with the other WFL teams. With one or two exceptions,
all of such teams have stadiums in which to stage their football games and are
currently engaged in selling tickets for the upcoming 1974 season. For example,
Mr. Putnam, one of the owners of the Birmingham Americans and a witness for the
defendants, testified that to date 12,000 season tickets had been sold for the
coming season. The Americans will play in a stadium that seats 70,000 people...
New leagues have emerged before on two occasions to compete with NFL, one being
the All American Conference and the other American Football League. In neither
case did the members of the new league bid for the future services of players
under contract with the NFL.
EVENTS LEADING UP TO THIS LAWSUIT
11. The WFL and NFL each held a college draft in 1974. Of the college players
drafted by the teams in both leagues, at least 50 signed with the newly
organized WFL teams. At least 83 former NFL players, i. e., players
formerly under contract to NFL teams but free of any contract obligations to
those teams, have signed contracts with WFL teams to play in the upcoming 1974
season. WFL's own promotional brochure represents that there is an ample
presently available supply of football players to complete the 35-man roster
(plus 6 on the taxi squad) of the WFL teams. In this connection it is
noteworthy that the director of player personnel for the Chicago Fire, one of
the WFL teams, testified that the Fire has currently 300 players under contract
from which to select its squad....
12. In order to further its own interests by giving the new league
"credibility" in the eyes of prospective fans and players and to have
established NFL stars on its rosters in future years, the WFL and its member
teams have adopted a plan to sign such veteran NFL players to future service
contracts. On at least one occasion (Csonka, Kiick, and Warfield) all the WFL
member teams contributed to a fund to be used to induce such star NFL players to
sign contracts with a WFL team for future services....
13. On April 9, 1974, Steve Chomyszak signed a contract to play professional
football for the Philadelphia Bell, one of the newly organized WFL teams. The
contract provides that Chomyszak shall begin playing football for the Bell at
the conclusion of his contract with the Bengals unless he is sooner released by
the Bengals in which event the contract "accelerates" and becomes
effective for the 1974 season. Chomyszak is currently in his "option"
year with the Bengals. His salary with the Philadelphia Bell will be greater
than his salary with the Bengals. Chomyszak was asked to participate in a press
conference to announce his signing with the Philadelphia Bell, but he was
unable to do so because of illness....
14. Bill Bergey is currently under contract to play football for the Bengals
through May, 1975. Under that contract the Bengals have the option to extend
the term for an additional year. Bergey is the starting middle linebacker for
the Bengals. He has been on the team for six years during which time his
training and experience have made him one of the best linebackers in the NFL.
15. On April 17, 1974, Bergey signed a personal service contract with
Washington Capitols, Inc., the owner of the WFL franchise for the Virginia
Ambassadors. The contract provides that Bergey shall commence playing
professional football for the Virginia Ambassadors in May, 1976. In
consideration of signing the contract, Bergey received a bonus of $150,000,
$40,000 of which was payable upon the signing of the contract. Bergey's
compensation during the term of his contract with the Ambassadors is $125,000
per year. Bergey's compensation under his contract with the Bengals is $38,750.
The Ambassadors' contract is what is known in professional football as a
"no-cut" contract. In essence, that means that Bergey's compensation
is payable regardless of his ability to play football at any time during the
term of the contract. As with Chomyszak's contract, Bergey's contract with Washington
Capitols, Inc., contains an acceleration clause which provides:
However, should Bergey be released from his contract with The Cincinnati
Bengals, Inc. so as to be available for the entire 1974 and 1975 football
seasons or the entire 1975 football season, then, in such event, the term of
this contract shall cover the 1974, 1975 and 1976 football seasons or the 1975,
1976 and 1977 football seasons, as the case may be, and the time periods
referred to in paragraphs (3), (8), (10) and (11) hereof shall automatically be
revised to reflect the revised term of this contract.
However, Bergey's contract also provides:
From the date hereof through May 1, 1976, first party agrees that Bergey shall
not play football or engage in any activities relative to football on behalf of
either first party unless the term of this contract is accelerated pursuant to
the provisions of paragraph (13) hereof.
(px 3, cl. (2))
16. The Chomyszak and Bergey signings followed a
professional football players' draft held by the WFL teams in New York. This
draft consisted of 40 rounds in which each WFL team selected players currently
under contract with NFL teams. Following that draft each WFL team had the
exclusive right as against other WFL teams to sign the NFL players that it had
drafted to future service contracts. At the conclusion of the WFL draft, all
the undrafted players on each NFL team were assigned to WFL teams. For example,
the undrafted NFL players on the rosters of the Cleveland Browns and the
Cincinnati Bengals were assigned to the Chicago Fire. That team then had the
exclusive right to attempt to sign these players to future service
contracts....
17. In addition to the Chomyszak and Bergey signings, several other Bengal
players have received contract offers from WFL teams. Among these players are
Rufus Mayes, starting offensive tackle; Bob Johnson, starting center; Bob
Trumpy, starting tight end; and Dave Lewis, the Bengals' punter. Some of these
offers were made directly by the WFL teams; most were made through independent
agents. Of the offers made through independent agents, however, the Court finds
that the agents approached the Bengals' players for the purpose of soliciting
the agreement of these players to allow the agents to seek contract offers from
WFL teams. The Court further finds that the recruiting activities of the WFL
teams in attempting to sign certain players to future service contracts is done
for the primary purpose of furthering its own interests, as indicated above, by
giving the new league "credibility" in the eyes of its prospective
fans and players. There is no proof that the motive for such policy is to
undermine an NFL team of which the recruit is a member, though there is no
concern on the part of the WFL team that the recruiting may have such an
adverse effect.
At the time of signing the WFL contract, of course, Bergey was aware he still
had two years to play under the Bengals' contract. The officials of Washington
Capitols, Inc., were also aware of this.
18. The emergence of the new league has made for competition for the services
of the players in question and prompted their inquiries to determine their
"marketability." Such emergence has also increased "player
mobility." In that connection all NFL player contracts - standard player contracts
- contain a provision granting the football club an option to extend the
player's contract for a year, if, at the end of such contract, the parties have
not agreed on a new one. Also, the contract incorporates the by-laws and
constitution of the NFL and in one of these documents there is what is known as
the player compensation rule. It is also known as the Rozelle rule. Under the
provisions of such rule, when a player plays out his option, if he goes to
another NFL team, that team has to compensate the one from which he came. If
the clubs cannot agree on the amount of compensation, it is fixed by the
Commissioner and it may be as high as a firstround draft choice, which is
extremely valuable. The evidence showed that there is some dissatisfaction among
the NFL players with this rule because of their belief that it limits player
mobility. The rule is the subject of negotiation between the players'
association and the NFL member clubs. It is also in litigation. But in any
event some players think the rule limits their mobility somewhat, and many
players apparently desire such mobility. The plaintiff says the purpose of the
player compensation rule is to prevent personnel imbalance, i. e., to
promote parity between the NFL clubs.
19. On learning of Bergey's offer from the WFL, the Bengals offered to tear up
his contract, replace it with one for a period of five years (not a
"no-cut") with a dramatic increase in pay. Altogether it amounted to
about a $400,000 package plus fringe benefits. This was refused. The Bengals
considered attempting to trade Bergey to an NFL team which could match the WFL
offer, but dropped the idea when it could not locate Bergey.
PLAINTIFF'S CLAIM OF HARM
20. - NATURE OF FOOTBALL
A consideration of the plaintiff's claims that it is being irreparably harmed
by the alleged interference with its contractual relations requires findings as
to the nature of football. Professional football, of course, is a business, but
the findings relate to the nature of the sport, and much of the testimony was
about the nature of the sport in order to show the effect of the signing to
future contracts by Bergey and Chomyszak and the probable effect it will have
if WFL member teams sign other key players of the Bengals....
....[A]ssistant coaches for the Bengals - Bill Walsh and Jack Donaldson, Bill
Johnson and Chuck Studley, as well as one player, Mike Reed - embellished the
description, noting that football was different from other professional sports
such as hockey and basketball; the game needs inspirational performances and
the players "investment" must be with the team on which he is
playing. It takes time and money to find and develop a unit and it was
emphasized that players work as a unit. Also it takes five or six years to develop
a player of the caliber of those on the Bengals who have already signed or who
are considering signing with WFL teams.
It was pointed out that football has an emotional aspect and preparation during
the week is important to a player's ability to give total concentration on game
day. The word "cohesive" kept surfacing in the description of the
units, such as the defensive unit and the offensive line. Lastly, one coach
noted that a football team is a "delicate group of people," meaning
there is a delicate balance - a fine honing - necessary to success.
From all this the Court can and does find that football is probably unique in
that, to a greater degree than other professional sports, it is [**19] a team
sport. Also it takes time and money to develop the players and
"units" so that they will be cohesive. In short, football is a
scientific, sophisticated sport, and a delicate sort of mechanism.
21. - EFFECT ON BERGEY'S PERFORMANCE
Plaintiff claims that signing with a WFL team for future services will have an
effect on Bill Bergey's ability to perform as required for the Bengals. In
considering that claim one must not only take into account the nature of
football but the fact that Bergey is a fine young man, an emotional person,
with a great competitive spirit. Bergey has no intention of breaching his
contract by letting down in the slightest. Besides pride and the desire to live
up to his reputation as an outstanding football player, it is in Bergey's best
interest to play as aggressively and capably for the Bengals as he has in the
past to avoid physical injury (to the extent that is possible in professional
football). One must consider, also, that Bergey has been advised by the coach
of the WFL team to which he is under contract for 1976, et seq., that
Bergey should attempt to make his next two playing years with the Bengals the
best of his life in order to "live with himself" now.
All things considered, the Court finds that it is unlikely that Bergey's
performance with the Bengals in the upcoming two seasons will be impaired to
any significant extent. The Court cannot find that Bergey's performance
definitely will not suffer from the fact that he has signed with the WFL but
only that such impairment probably will not occur. We are not overlooking
testimony from at least two coaches and one player to the effect that Bergey
plays a highly emotional game and that his ability to reach the necessary
emotional peak for a Sunday game may be lessened by certain hard-to-describe
"distractions" and "forces" working on him during the week.
But for the Court to conclude that testimony of this sort is sufficient to
establish that it is more likely than not that Bergey cannot or will not give
his best efforts to the Bengals for two more years would be to treat as substantial
what is essentially speculative.
22. - EFFECT ON OTHER BENGALS' PLAYERS FROM BERGEY' SIGNING WITH WFL
The Court finds it unlikely that Bergey's actions in signing with the WFL will
have a detrimental effect on the performance or player morale of the Bengals
team as a whole. This finding is based on the testimony of several players who
stated that their relationship with Bergey had not been in any way damaged, and
the statement by Coach Studley that no animosity was apparent among the Bengals
players as a result of this lawsuit. The Court cannot find that Bergey's
signing definitely will not adversely affect the team, however, but only that
such effect is unlikely, because even the players who testified that Bergey's
relationship with them is still the same were unable to state whether the other
members of the team would feel the same way. The fact is, if it is assumed that
prior to signing with the WFL Bergey's interests with the Cincinnati Bengals
were coextensive with the interests of all the other Bengals players, Bergey,
in a sense which defies precise definition, is now a man apart from the other
players. But the testimony of Coach McCormick of the Philadelphia Eagles, to
the effect that Bergey will be "a division" whether he wants to be or
not, only restates the question and does not provide the answer as to the
degree to which Bergey will affect the team in an adverse manner, or if, in
fact, there will be any such effect at all. We cannot say that such testimony
establishes the likelihood that Bergey will have a divisive influence on his
teammates
* * *
CONCLUSIONS OF LAW
1. The Court has personal jurisdiction over the parties. The Court also has
jurisdiction over the subject matter of this action on grounds of diversity of
citizenship between the plaintiff and the defendants.
2. Defendant Bergey did not breach his contract with the Bengals by signing
with the Virginia Ambassadors of the World Football League.
3. It was not unlawful for the defendant, Washington Capitols, Inc., during the
time when Bergey was under a valid contract with the Bengals, to negotiate and
enter into a contract for Bergey's personal services, the performance of which
was not to commence until after the expiration of Bergey's contract with the
Bengals.
4. Plaintiff has not established a likelihood of success in its claim that it
suffered a tortious interference with its right to full performance under
Bergey's contract.
5. As to plaintiff's entitlement to injunctive relief, the Court concludes that
plaintiff has failed to show an absence of harm to the public interest if an
injunction is granted. On the contrary, the Court must conclude that if the
injunction is granted there will be harm to the public interest in fostering
free competition in the marketplace for the sports dollar. The Court concludes
that plaintiff has failed to establish an absence of substantial harm to the
defendants and other interested parties, namely, the players under existing
contracts - if an injunction is granted. On the contrary, the Court concludes
that the granting of injunctive relief would cause substantial harm to the WFL
defendants.
6. Finally, the Court concludes that the plaintiff has not established
probability of success in its action for injunctive relief because the facts do
not present a clear case of irreparable harm to the plaintiff for which there
is no adequate remedy at law and which can only be prevented by the granting of
injunctive relief. On the contrary, the Court finds that the threatened harm is
at least in part preventable and it is not clear that plaintiff has no adequate
remedy at law if it ultimately prevails in its substantive claim....
* * *
- HARM TO WFL AND PLAINTIFF
Plaintiff has not demonstrated an absence of harm to the WFL defendants or
"other persons." We consider the other persons the players, and are
of the opinion that if an injunction is issued they will be harmed by the
postponement of the time when there is bidding for their future services.
Plaintiff concedes that the Bengal players have a First Amendment right to
"talk" now to WFL teams about their future services. We are
sure that the plaintiff also recognizes that the right of contract is not far
behind. What the plaintiff contends, and the Court cannot accept, is that the
signing before a player has performed his last game is a tortious interference
with its contractual rights....
* * *
- BERGEY DID NOT BREACH
As far as the action against Bergey is concerned and the conclusion (No. 1)
that Bergey has not breached his contract, the Court should add that not only
has no promise been broken but there has been no anticipatory breach. As this
implies, the Court concludes that Bergey did not "acquire an
interest" in a WFL club nor agree to become an "instrument of publicity"
of the Ambassadors as the plaintiff alleged. In addition, we know of no
authority, and have been cited to none, for the Court to order rescission of
the Bergey-WFL contract, even if some or all of the charges against Bergey had
been established.
The case against Bergey has been considered, because, though not seriously
pressed, it has not been abandoned. In that connection the Court took note of
three rules of contract construction. One which needs no citation of authority
is that a contract is construed most strongly against the person who prepared
it, in this case the Bengals. Another rule of construction is that any
agreement that limits a person's authority to follow his vocation must be
strictly construed. See, e.g., Lemat Corporation v. Barry, 30 Cal.Rep.
240. See also, § 1209, Vol. 5A, Corbin on Contracts (1964). Finally, the same
case is authority for the proposition that the contract here is one of
"adhesion" and as such must be strictly construed against the
Bengals. However, we do not reach any conclusion as to the legality, under the
antitrust laws, of the contracts upon which the plaintiff relies. We do,
however, question whether the parties could legally agree to a truce in their
bidding war under which the WFL teams would agree not to sign any Bengal player
until he has played his last game in his option year (if his option is
exercised). It is the Court's view that if the parties enter into such an
agreement it would at least be at the risk of exposure to liability under the
antitrust laws. It is the Court's view further that it should not make an order
which it is doubtful the parties can agree to, appealing as that might be.
That concludes the discussion of the reasons for the Court's holding plaintiff
has not met the heavy burden that it has and the motion for temporary
injunction had to be denied.
BOSTON
CELTICS LIMITED PARTNERSHIP,
Appellee, v. BRIAN SHAW, Defendant, Appellant
No. 90-1621
UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT
908 F.2d 1041; 1990 U.S. App. LEXIS 12117; 116 Lab. Cas.
(CCH) P10,265; 17 Fed. R. Serv. 3d (Callaghan) 192
July 16, 1990
PRIOR HISTORY:
Appeal from the United States District Court for the District of Massachusetts;
Hon. A. David Mazzone, U.S. District Judge.
JUDGES: Breyer, Chief
Judge, Bownes, Senior Circuit Judge, and Selya, Circuit Judge.
OPINIONBY: BREYER
OPINION: BREYER, Chief Judge.
* * *
I
Background
A. Facts
The basic facts, which are not in dispute, include the following:
(a) In 1988, soon after Shaw graduated from college, he signed a one-year
contract to play for the Celtics.
(b) In 1989, Shaw signed a two-year contract to play with the Italian team Il
Messaggero Roma ("Il Messaggero"). The team agreed to pay him $
800,000 for the first year and $ 900,000 for the second year. The contract
contains a clause permitting Shaw to cancel the second year (1990-91). It says
that Shaw has
the right to rescind the second year of this Agreement . . . [if he] returns to
the United States to play with the NBA . . . by delivering a registered letter
to [Il Messaggero] . . . between June 20, 1990 and July 20, 1990.
(c) At the end of January 1990 Shaw signed a five-year "Uniform Player
Contract" with the Celtics. The contract contains standard clauses
negotiated by the National Basketball Association ("NBA") franchise
owners and the National Basketball Players Association (the "Players
Association"). It adopts by cross-reference arbitration provisions
contained in the NBA-Players Association Collective Bargaining Agreement. In
the contract, the Celtics promise Shaw a $ 450,000 signing bonus and more than
$ 1 million per year in compensation. In return, Shaw promises the Celtics,
among other things, that he will cancel his second year with Il Messaggero. The
contract says that the
Player [i.e., Shaw] and Club [i.e., the Celtics] acknowledge
that Player is currently under contract with Il Messaggero Roma (the
"Messaggero Contract") for the 1989-90 & 1990-91 playing seasons.
The Player represents that in accordance with the terms of the Messaggero
Contract, the Player has the right to rescind that contract prior to the
1990-91 season and the player hereby agrees to exercise such right of
rescission in the manner and at the time called for by the Messaggero
Contract.
(Emphasis added.)
(d) On June 6, 1990, Shaw told the Celtics that he had decided to play for
Il Messaggero during the 1990-91 season and that he would not exercise his
right of rescission.
B. Procedural History
On June 11, 1990, the Celtics invoked their right under the Collective
Bargaining Agreement (cross-referenced in the Contract) to an
"expedited" arbitration proceeding. The arbitrator held a two-day
hearing on June 13 and 14. He found that Shaw's refusal to rescind the Il
Messaggero contract violated Shaw's contract with the Celtics. He ordered Shaw
to rescind the Il Messaggero contract (on June 20) and not to play for any team
other than the Celtics during the term of his Celtics contract. On June 15,
Shaw said he still did not intend to rescind the Il Messaggero contract.
The Celtics responded immediately by asking the federal district court to use
its authority under § 301 of the Labor Management Relations Act, 29 U.S.C. §
185, to enforce the award, see General Drivers No. 89 v. Riss & Co.,
372 U.S. 517, 519, 9 L. Ed. 2d 918, 83 S. Ct. 789 (1963) (per curiam); Kemner
v. District Council Of Painting and Allied Trades No. 36, 768 F.2d 1115
(9th Cir. 1985); Kallen v. Dist. 1199, National Union of Hospital Employees,
574 F.2d 723, 725 (2d Cir. 1978) ("Federal courts indisputably have
jurisdiction under section 301 to enforce a labor arbitration award"), and
the parties no longer dispute that § 301 applies. The Celtics asked the court
for "expedited enforcement" of the award and for a preliminary injunction.
After receiving Shaw's response (in the form of an opposition, a motion to
dismiss, a brief, and supporting affidavits), and after holding an oral
hearing, on June 26, the court granted the Celtics' motion to expedite, ordered
Shaw to cancel the Il Messaggero agreement "forthwith," and
"enforced" the award. Shaw now appeals this district court decision,
attacking both the preliminary injunction and the order enforcing the
arbitration award.
II
The Legal Merits
Shaw makes two basic categories of argument in his effort to show that the
district court lacked the legal power to enter its order. First, he says that
the arbitration award was itself unlawful. Second, he says that regardless of
the lawfulness of the award, the district court followed improper procedures.
We shall address these arguments in turn and explain why we find each not
persuasive.
A. The Arbitrator's Decision
Shaw says that the district court should not have enforced the arbitrator's
award because that award was itself unlawful, for any of five separate reasons.
1. The termination promise. Shaw argues that the arbitrator could not
reasonably find that he broke a contractual promise to the Celtics because, he
says, the Celtics had previously agreed with the Players Association that
contracts with individual players such as Shaw would not contain promises of
the sort here at issue, namely, a promise to cancel a contract to play with a
different team. Shaw says that this previous agreement between the Celtics and
the Players Association renders his promise to terminate Il Messaggero
"null and void." To support this argument, he points to Article I,
section 2 of the Collective Bargaining Agreement, which Shaw and the Celtics,
through cross-reference, made part of their individual agreement. Section 2
says, "Any amendment to a Uniform Player Contract [of the type Shaw and
the Celtics used], other than those permitted by this [Collective Bargaining]
Agreement, shall be null and void." The Agreement permits amendments (a)
"in . . . respect to the compensation . . . to be paid the player,"
(b) "in respect to specialized compensation arrangements," (c)
in respect to a "compensation payment schedule," and (d) in respect
to "protect[ion]" of compensation in the event of contract termination.
Shaw says that his promise to cancel the Il Messaggero agreement was an
amendment to the Uniform Players Contract that does not concern compensation,
specialized compensation, compensation schedules, or compensation
protection; therefore, it is "null and void...."
Shaw's argument, while logical, fails to show that the arbitrator's contrary
finding is unlawful. The reasons it fails are fairly straightforward. First,
the argument concerns the proper interpretation of a contract negotiated
pursuant to a collective bargaining agreement. Second, federal labor law gives
arbitrators, not judges, the power to interpret such contracts. The Supreme
Court, noting the strong federal policy favoring the voluntary settlement of
labor disputes, has written that a labor arbitration award is valid so long as
it "draws its essence" from the labor contract.... An award "draws its essence" from
the contract so long as the "arbitrator is even arguably construing or
applying the contract and acting within the scope of his authority." United
Paperworkers Int'l v. Misco, 484 U.S. 29, 38, 98 L. Ed. 2d 286, 108 S. Ct.
364 (1987). We have held that "this language makes clear that any
'exception' to the normal rule (that forbids the court to find an arbitrator's
interpretation outside the authority delegated to him by the contract) is
extremely narrow." Crafts Precision Indus., Inc. v. Lodge No. 1836,
Int'l Assoc. of Machinists, 889 F.2d 1184, 1185 (1st Cir. 1989).
Consequently, "we shall uphold an arbitrator's interpretation of a
contract as long as we can find some 'plausible argument that favors his
interpretation.'" Id. (quoting Berklee College of Music v.
Massachusetts Federation of Teachers Local 4412, 858 F.2d 31 (1st Cir.
1988), cert. denied, 493 U.S. 810, 110 S. Ct. 53, 107 L. Ed. 2d 22
(1989)).
Third, one can find "plausible arguments" favoring the arbitrator's
construction. Shaw's "rescission" promise defines the beginning of
the compensation relationship. It also plausibly determines, at the very least,
whether Shaw's compensation will begin at $ 1.1 million (and continue for three
years) or whether it will begin at $ 1.2 million (and continue for only two
years).... More importantly, and also
quite plausibly, Shaw's overall compensation might have been much different had
he declined to promise to play for the Celtics in 1990-91, thereby forcing the
Celtics, perhaps, to obtain the services of a replacement for that year. The
NBA Commissioner, who reviews all player contracts, found that the term was
related to "compensation," as did the arbitrator. We cannot say that
their findings lack any "plausible" basis.
2. The arbitrator's order. Shaw points out that he promised only
"to exercise his right of rescission in the manner and at the time called
for by the Messaggero contract." See p. 3, supra. The
Messaggero contract permits him to send his rescission letter "between
June 20, 1990 and July 20, 1990." (Emphasis added.) Therefore, he argues,
the arbitrator acted unlawfully by ordering him to send the letter on
June 20 rather than permitting him to send it between June 20 and July 20.
The short, conclusive answer to this argument is that because Shaw did not
raise it in the district court, he cannot raise it now.... In any event, Shaw agreed in paragraph 9 of his Celtics contract
that if he was "attempting or threatening to play" for another team,
the Celtics were entitled to "obtain from any court or arbitrator . . .
such equitable relief as may be appropriate." In light of the Celtics'
need to know, well before July 20, whether Shaw would honor, or refuse to
honor, his obligation to terminate Il Messaggero, the arbitrator's selection of
June 20 as the date for termination would seem "appropriate" relief.
3. Notice. Shaw says that the arbitration award is invalid because he
did not receive proper notice of the proceedings. The relevant notice provision
appears in Article XXVIII of the Collective
Bargaining Agreement, which is cross-referenced by Shaw's contract.
It says, among other things, that when a player "attempts or
threatens" not to play, a club may demand "expedited
arbitration" of the dispute. In that case the arbitrator "shall
convene a hearing "at the earliest possible time, but in no event later
than 24 hours following" the demand for arbitration. The arbitrator
"shall . . . issue" his award "not later than 24 hours after the
conclusion of the hearing;" and the "failure of any party to attend
the hearing as scheduled shall not delay" it, nor prevent the arbitrator
from "taking evidence" or "issuing an award as though such party
were present." The "notice" provision says that "the
dispute . . . shall be asserted by notice in writing or by telegram, return
receipt requested, given to the other parties. . . ." Shaw says that he did
not receive "notice in writing . . . return receipt requested."
The record shows the following undisputed facts. At Shaw's direction his
attorney, W. Jerome Stanley, wrote the Celtics a letter stating that he
(Stanley) had "been retained as counsel by Brian Shaw." On June 12, a
Celtics representative personally served Stanley with written notice of the
Celtics' demand for expedited arbitration. The next morning the arbitrator
commenced the hearing. After hearing the Celtics' evidence, the arbitrator, at
Stanley's request, adjourned the hearing until the following afternoon. Stanley
phoned Shaw in California and left a message about the arbitration on Shaw's
answering machine. Shaw received the message at 6:00 p.m., but he decided not
to return Stanley's call.
It seems to us obvious that the arbitrator had the legal power to decide that
the Celtics complied with the contract's notice provisions. He could (1)
interpret the contract to require only substantial compliance with the notice
provisions; (2) interpret the notice language to mean that the player must
receive "notice in writing . . . return receipt requested or the
equivalent;" and (3) given the need for expedition, he could
reasonably find that written notice to Shaw's lawyer plus actual oral
notice to Shaw amounted to "the equivalent" and, therefore,
substantially complied with the contractual notice provision. We do not find
such an argument "implausible..." and, given the need for a quick
decision, the parties' agreement (in their contract) to obtain quick decisions
through expedited arbitration proceedings, and the absence of any showing of
substantial prejudice to Shaw, we do not see how one could characterize the
notice to Shaw as "fundamentally unfair...."
4. Continuance. Shaw says that the arbitration proceedings were
fundamentally unfair because the arbitrator refused to continue the hearing for
one week to give Shaw a chance to attend the hearing and present evidence in
his own behalf. The contract, however, does not require the arbitrator to
continue the hearing; on the contrary, it specifically directs him to convene
the hearing after 24 hour's notice and authorizes him to "take evidence
and issue an award" notwithstanding "the failure of any party to
attend." Given these agreed-upon procedures, the acute need for expedition
in this case, the fact that Shaw was represented at the hearing by three
lawyers able to present evidence and cross-examine witnesses, the fact that
Shaw either did foresee (or should have foreseen) that his last-minute refusal
to terminate Il Messaggero would probably trigger an expedited arbitration
proceeding, and the absence of convincing evidence that Shaw would have
benefited from a continuance, the arbitrator's refusal to grant Shaw such a
continuance was not "fundamentally unfair." See Hoteles Condado
Beach v. Union De Tronquistas Local 901, 763 F.2d 34, 39 (1st Cir. 1985)
(fundamental fairness requires only that each party to a dispute be given
"an adequate opportunity to present its evidence and arguments").
5. Representation. Lastly, Shaw argues that the arbitration proceeding
was invalid because he was not represented. The record before us shows,
however, that on June 6 Stanley wrote the Celtics at Shaw's direction, saying
that he had "been retained as counsel by Brian Shaw," and would be
"available to resolve any issues" arising from Shaw's decision to
continue playing for Il Messaggero; that Shaw concedes Stanley was his
"agent;" that on June 12 he met with representatives of the Celtics
and of Il Messaggero in Boston to resolve the dispute over Shaw's contract;
that he retained two attorneys to accompany him to the June 13 arbitration
proceeding in New York; and that he and one other of these attorneys made
arguments (both orally and in writing) on Shaw's behalf. Given these facts,
along with the considerations we have discussed previously (i.e., the
need for expedition and the agreed-upon expedited procedures), Stanley's
statement that, although he was Shaw's "agent," he had not been
"retained as Shaw's attorney in the arbitration," cannot show a
violation of "fundamental fairness."
In sum, we find the arbitration award lawful; and, in doing so, it has not been
necessary for us to consider the Celtics' additional argument that Shaw bears
an especially heavy legal burden in this case because the Players Association
does not support him....
B. The District Court Proceedings
The district court, as we have pointed out, issued a preliminary injunction
requiring Shaw to rescind "forthwith" his contract with Il Messaggero
and forbidding him to play basketball for any team other than the Celtics
during the term of his Celtics contract. The court also "enforced" an
arbitration award containing essentially the same terms. Shaw argues that both
the preliminary injunction and the enforcement order are unlawful. Since the
district court correctly upheld the award's validity, Shaw's only remaining
arguments are that the district court lacked discretion to award preliminary
injunctive relief and that it mismanaged the proceedings below. We discuss both
points briefly.
1. The preliminary injunction. The disputed award in this case
resulted from arbitration procedures contained in a collective bargaining
agreement between a labor organization (the Players Association) and an
employers' association (the NBA). Shaw bound himself to that collective
bargaining agreement in his contract with the Celtics, the terms of which are
themselves a product of collective bargaining between employees and employers.
Well-established public policy embodied in statute..., and in numerous
lower court opinions, strongly favors judicial action to "effectuate[] . .
. the means chosen by the parties for settlement of their differences under a
collective bargaining agreement. . . ." "If all other
requirements for preliminary relief are met, the fact that the plaintiff would
get no additional relief if he prevailed on the merits should not deprive him
of his remedy."
The only legal question before us, therefore, is whether the district court
acted outside its broad equitable powers when it issued the preliminary
injunction. That is to say, did the court improperly answer the four questions
judges in this Circuit must ask when deciding whether to issue a preliminary
injunction. They are: (1) have the Celtics shown a likelihood of success
on the merits? (2) have they shown that failure to issue the injunction would
cause the Celtics "irreparable harm?" (3) does the "balance of
harms" favor Shaw or the Celtics? and (4) will granting the injunction harm
the "public interest?" Our examination of the record has convinced us
that the court acted well within the scope of its lawful powers....
To begin with, the Celtics have shown a clear likelihood of success on the
merits. As we pointed out in section "A," the arbitration award is
lawful, and courts have authority to enforce lawful arbitration awards. The
Celtics also have demonstrated irreparable harm. Without speedy relief, they
will likely lose the services of a star athlete next year, and, unless they know fairly soon whether Shaw will, or will not
play for them, they will find it difficult to plan intelligently for next
season. Indeed, in his contract Shaw expressly
represents and agrees that he has extraordinary and unique skill and ability as
a basketball player, . . . and that any breach by the Player of this contract
will cause irreparable injury to the Club.
Further, the court could reasonably find that the "balance of harms"
favors the Celtics. Of course, a preliminary injunction, if ultimately shown
wrong on the merits, could cause Shaw harm. He might lose the chance to play in
the country, and for the team, that he prefers. On the other hand, this harm is
somewhat offset by the fact that ultimate success on the merits -- i.e.,
a finding that Shaw was not obligated to terminate Il Messaggero after all --
would likely result in the following scenario: Shaw might still be able to sign
with Il Messaggero and, if not, he would always have the Celtics contract of
over $ 5 million to fall back upon. At the same time, the court's failure
to issue the injunction, if the merits ultimately favored the Celtics, could
cause them serious harm of the sort just mentioned (i.e.,
significantly increased difficulty in planning their team for next season).
Given the very small likelihood that Shaw would ultimately prevail on the
merits, and the "comparative" harms at stake, the district court
could properly decide that the overall "balance" favored the Celtics,
not Shaw.
Finally, the court could properly find that issuing a preliminary injunction
would not harm the public interest. Indeed, as we have pointed out, the public
interest favors court action that "effectuates" the parties' intent
to resolve their disputes informally through arbitration.... Where the dispute
involves a professional basketball player's obligation to play for a particular
team, one could reasonably consider expeditious, informal and effective
dispute-resolution methods to be essential, and, if so, the public interest
favoring court action to "effectuate" those methods of
dispute-resolution would seem at least as strong as it is in respect to
work-related disputes typically arising under collective bargaining agreements.
See New England Patriots Football Club, Inc. v. University of Colorado,
592 F.2d 1196, 1200 (1st Cir. 1979) (collecting cases in which professional
sports players were enjoined from playing for rival teams). Shaw, while
conceding that the public also has an interest in seeing that contracts between
consenting adults are honored, points to a general policy disfavoring
enforcement of personal service contracts. That latter policy, however,
typically prevents a court from ordering an individual to perform a personal
service, ... it does not prevent a court from ordering an individual
to rescind a contract for services and to refrain from performing a service for
others.
Shaw makes an additional argument. He notes that courts will not provide
equitable relief such as an injunction to a party with "unclean
hands," and he argues that the Celtics' hands are not clean. To support
this argument, he has submitted an affidavit saying, in effect, that he signed
the contract in a weak moment. His trip to Italy had made him
"homesick;" he was "depressed" by what he viewed as
undeserved and "negative criticism" in the Italian press; he was not
represented by an agent; the Celtics had been urging him to sign up; he read
the contract only for about 20 minutes while he was driving around Rome with a
Celtics official; and no one ever explained to him that if he did not
sign and played with Il Messaggero for another year, he would become a
"free agent," able to bargain thereafter with any American team,
perhaps for an even greater salary than the Celtics were willing to pay him.
Other evidence in the record, however, which Shaw does not deny, shows that he
is a college graduate; that he has played under contract with the Celtics
before; that the contract is a standard form contract except for a few, fairly
simple, rather clear, additions.... that he had bargained with the Celtics for
an offer that increased from $ 3.4 million (in December) to $ 5.4 million (less
than one month later); that he looked over the contract before signing it; that
he told the American consul in Rome (as he signed it) that he had read and
understood it; and that he did not complain about the contract until he told
the Celtics in June that he would not honor it.
Given this state of the record, the district court could easily, and properly,
conclude that the Celtics' hands were not "unclean." The one case
Shaw cites in support of his position, Minnesota Muskies, Inc. v. Hudson,
294 F. Supp. 979, 981 (M.D.N.C. 1969), is not on point. The player in Muskies
had a contract with Team A that permitted Team A, not the player, to renew the
contract for additional years. Team B lured the player away from Team A even
though it knew that Team A intended to exercise its contractual right to keep
the player. The court held that this contractual interference amounted to
"unclean hands" and refused Team B's request for an injunction
preventing the player from returning to Team A. Here, in contrast, Il
Messaggero has no contractual right to retain Shaw; whether or not the contract
is renewed or rescinded is entirely up to Shaw, not Il Messaggero. Under those
circumstances, we cannot find anything improper, "unclean," or unfair
about the Celtics' convincing Shaw (indeed, paying Shaw) to exercise his
contractual right in their favor. Cf. Restatement (Second) of Torts §
768 (1979).
In sum, issuance of the preliminary injunction was legally proper.
2. The Arbitration Award Enforcement Order. At the same time the court
issued the preliminary injunction, it also ordered the arbitration award
enforced. The enforcement award was the equivalent of a permanent injunction
and amounted to a final judgment on the merits. This action made
considerable practical sense, for the preliminary injunction and the
enforcement order, as we understand them, amounted to the same thing. Once the
preliminary injunction issued, the case was virtually over for Shaw and he had
lost. Nevertheless, Shaw argues that even if the preliminary injunction was
lawful, the order enforcing the award was not proper, for, in Shaw's view, the
entry of that final order so soon after the complaint was filed, deprived him
of certain important procedural rights. In particular, he says that granting
enforcement of the award was like granting the Celtics summary judgment. The
Federal Rules of Civil Procedure normally require the plaintiff to wait 20 days
before moving for summary judgment, see Fed.R.Civ.P. 56, and only 11
days elapsed between the filing of the complaint and the court's decision.
In our view, Shaw's argument is unduly formal. The important question, in
respect to time limits such as those Shaw cites, is whether failure to observe
them somehow injured Shaw. Was he prevented from making a defense he might
otherwise have made? Was he unable to prove a critical fact that he might
otherwise have been able to show? Shaw indicated his awareness that the
district court might award relief on an expedited basis. He presented
affidavits, statements, and arguments. We have not found anywhere in the record
any offer by counsel to produce additional specific, significant factual
evidence or information. We asked counsel at oral argument whether Shaw had
additional evidence that might have affected the district court's decision, and
he could not point to anything not already in the record. The district court
itself said at hearing that "there simply is not more information that
would affect the decision in this case." It is well-established that
"where no potential disputed material issue of fact exists, a summary
judgment will not be disturbed even though the district court disregarded the
procedure which should have been followed." Milwaukee Typographical
Union No. 23 v. Newspapers, Inc., 639 F.2d 386, 391 (7th Cir.), cert.
denied, 454 U.S. 838, 70 L. Ed. 2d 119, 102 S. Ct. 144 (1981)...
The more formal, and more direct, answer to Shaw's formal argument is that the
district court followed proper procedure. The court, in effect, consolidated
the proceedings on the merits of the case with the hearing on the preliminary
injunction motion. Fed.R.Civ.P.65(a)(2) specifically authorizes a court to
"order the trial of the action on the merits to be advanced and
consolidated with the hearing of the application" for preliminary
injunction. And, since courts do not hold a "trial" where no
genuine issue of material fact is in dispute, cf. Fed.R.Civ.P. 56,
this provision logically authorizes whatever "summary judgment"
proceedings are appropriate. Where prompt resolution of a matter is important,
courts have moved swiftly to order final relief
We add that the case before us, while arising in the world of professional
sports, involves a collective bargaining agreement between employees and
employers, an agreement that provides for expedited arbitration. The Supreme
Court has frequently emphasized the importance of permitting unions and
employers to create informal dispute-resolution mechanisms that satisfy
both, and it has given courts broad
authority to ensure that those agreed-upon mechanisms are effective. In Textile
Workers Union v. Lincoln Mills, 353 U.S. 448, 456-57, [*1051]
1 L. Ed. 2d 972, 77 S. Ct. 912 (1957), for example, the Supreme Court held that
a union can obtain specific performance of an employer's promise to arbitrate
In our view, the legal principles that
grant courts broad powers to enforce arbitration agreements and to use their
contempt powers or equitable powers, even enjoining strikes, all in
support of arbitration, permit the district court's expedited enforcement of
the arbitration award. The court used procedures that preserved basic fairness
while permitting the resolution of a dispute in the expeditious manner called
for by the circumstances and the parties' own agreement.
In a final bid for relief, Shaw points to a state law governing labor
arbitration, Mass. Gen. Laws ch. 150C, § 11, which says that an application to vacate a labor-arbitration award must be made
within thirty days. Shaw says that this state-law time limit on a party's right
to ask a court to vacate an award prevented the district court from enforcing
the award before the thirty-day period expired. The time-limit provisions of
Mass. Gen. Laws ch. 150C, § 11 do not prevent the court from ruling as it did.
Of course, federal courts sometimes fashion rules for decision under § 301 by
looking at appropriate state statutes....
We do not understand Shaw to argue, however, that § 301 necessarily
incorporates this provision of Massachusetts law. Regardless, the language of
the Massachusetts law, literally read, does not limit a federal court's
authority to enforce an award under federal law, and we would not construe that
state law language as doing so.
For these reasons, the order of the district court is
Affirmed.
NATIONAL FOOTBALL LEAGUE PROPERTIES, INC., Plaintiff, - against - DALLAS COWBOYS FOOTBALL CLUB, LTD., TEXAS STADIUM CORPORATION, AND JERRAL W. JONES, Defendants.
95 Civ. 7951 (SAS)
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
922 F. Supp. 849; 1996 U.S. Dist. LEXIS 1814
February 20, 1996, Dated
February 20, 1996, FILED
JUDGES: Shira A. Scheindlin, U.S.D.J.
OPINIONBY: Shira A. Scheindlin
OPINION: OPINION AND ORDER
SHIRA A. SCHEINDLIN, U.S.D.J.:
Defendants Dallas Cowboys Football Club, Ltd., Texas Stadium Corporation, and
Jerral W. Jones (together, Defendants") move, pursuant to Fed. R. Civ. P.
12(b)(6), to dismiss this lawsuit for failure to state a claim upon which
relief can be granted. For the reasons set forth below, this motion is granted
in part and denied in part.
I. Factual Background
The National Football League ("NFL") is an unincorporated association
comprised of 30 Member Clubs, including the Defendant Dallas Cowboys Football
Club, Ltd. ("Cowboys Partnership"), which owns and operates the
football team known as the Dallas Cowboys. Effective October 1, 1982, entities
owning 26 of the then 28 Member Clubs entered into a trust agreement (the
"Trust Agreement") which created the NFL Trust. The Trust Agreement
provided that each Member Club would transfer to the NFL Trust the exclusive
right to use its "Club Marks" for commercial purposes (with certain
limited exceptions). These "Club Marks" include a team's name, helmet
design, uniform design, and identifying slogans... The Member Clubs also granted to the NFL Trust the exclusive
right to use NFL Marks, such as the NFL Shield Design, and the names
"NFL," "American Football Conference," "National
Football Conference," and "Super Bowl."
As soon as the NFL Trust was created, it entered into a "License
Agreement" with Plaintiff NFL Properties, Inc. that provides Plaintiff
with "the exclusive right to license the use of the Trust Property on all
types of articles of merchandise and in connection with all types of
advertising and promotional programs...." The Club Marks of the Cowboys
Partnership, like the marks of other Member Clubs, are included in the Trust
Property exclusively licensed to Plaintiff.
Plaintiff has been active in promoting the NFL and its Member Clubs, and has
issued hundreds of licenses for the use of Club Marks.... Plaintiff has also
entered into agreements with companies involved in specific product categories
-- such as soft drinks or charge cards -- to be exclusive sponsors of the NFL
and its Member Clubs. Sponsors are given the right to use the Club Marks and
NFL Marks in advertising, promotion and packaging, to promote themselves as an
"Official Sponsor" of the NFL and, in some cases, as an
"Official Sponsor" of the Member Clubs. The revenue generated from Plaintiff's sale of licensing and
sponsorship rights is shared equally by the Member Clubs, which are the sole
shareholders of Plaintiff....
Plaintiff contends that Defendants have embarked upon a wrongful plan and
scheme which violates the Trust and License Agreements and infringes upon
Plaintiff's rights. Specifically, the Complaint alleges that Defendants have
entered into a number of highly-publicized contractual arrangements -- with Dr.
Pepper, Pepsi, and NIKE -- that "impermissibly exploit the Club Marks and
the NFL Marks, and thus wrongfully misappropriate revenue that belongs to
plaintiff and should be shared among all the Member Clubs." The Complaint also alleges that Defendants
are negotiating a similar contract with American Express. Although all of the contractual
arrangements Plaintiff mentions are nominally between the "sponsors"
and Defendant Texas Stadium Corporation, Plaintiff claims that Defendants are
using Texas Stadium as a "stand in" to help the Cowboys Partnership
circumvent its obligations under the Trust and License Agreements.....
The Complaint further alleges that Defendants misappropriated Club Marks and
NFL Marks in solicitation materials they submitted to potential sponsors. In
particular, Plaintiff asserts that Defendants used Club Marks -- including the
Cowboys "Star" logo -- and NFL Marks -- including the NFL's
"Shield" logo -- in the solicitation booklet they sent to Dr.
Pepper.... Plaintiff contends that Defendants had no right to use such marks
for any purpose....
The Complaint contains nine counts. Count I alleges that Defendants' actions
violate § 43(a) of the Lanham Act. Counts II and III assert, respectively, that
Defendants have acted in concert to cause the Cowboys Partnership to breach
express provisions of the Trust and License Agreements and the implied covenant
of good faith. Count IV maintains that the Cowboys Partnership has breached its
obligations as a settlor of the NFL Trust and as an owner of marks licensed to
Plaintiff. Count V alleges that, by engaging in the scheme set forth in the
Complaint, the Cowboys Partnership and Defendant Jones have violated fiduciary
duties owed to Plaintiff and the other Member Clubs. Count VI asserts that
Defendants have been unjustly enriched by their scheme, Count VII that they
have misappropriated revenue belonging to Plaintiff, and Count VIII that they
have tortiously interfered with contractual rights granted by Plaintiff to its
licensees. Finally, Count IX seeks a declaratory judgment establishing that
Defendants' actions violate the law, as set forth in Counts I through VIII. n1
- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -
n1 Plaintiff seeks, inter alia, compensatory damages in an amount not yet
determined but believed to be in excess of $ 100 million, treble damages under
the Lanham Act, at least $ 200 million in punitive damages, and a permanent
injunction enjoining Defendants from engaging in conduct similar to that
alleged in the Complaint...
- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -
Defendants deny that their actions in any way violate either the Trust
Agreement or the License Agreement. In support of their argument, Defendants
have submitted copies of the contracts Texas Stadium entered into with Nike,
Pepsi, and Dr. Pepper, as well as the contract it eventually entered into with
American Express. Defendants maintain that none of these contracts grant
sponsors the right to use any Trust Property -- namely, either Club Marks or
NFL Marks; indeed, they note that the contracts with Pepsi, Nike and American
Express explicitly state that the sponsor is not entitled to use any Club Marks Defendants argue that all of Plaintiff's
claims are based on false assertions that are refuted by the underlying
contracts, and that Plaintiff's action should therefore be dismissed.
II. Legal Standard
In evaluating a motion to dismiss, courts must accept as true the factual
allegations contained in the complaint. See Cohen v. Koenig, 25 F.3d 1168, 1171
(2d Cir. 1994). All reasonable inferences must be drawn in favor of the
non-moving party on such a motion. See Allen v. WestPoint-Pepperell, Inc., 945
F.2d 40, 44 (2d Cir. 1991). Moreover, "a complaint should not be dismissed
for failure to state a claim unless it appears beyond doubt that the plaintiff
can prove no set of facts in support of [its] claim which would entitle [it] to
relief." Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct.
99 (1957). While courts ordinarily consider only the facts alleged in the
complaint and documents incorporated therein, they may also consider documents
which are integral to a plaintiff's claims. See I. Meyer Pincus & Assocs.
v. Oppenheimer & Co., 936 F.2d 759, 762 (2d Cir. 1991).
The contracts submitted by the Cowboys are clearly "integral" to
Plaintiff's claims. The Complaint repeatedly alleges that Defendants have
unlawfully licensed Club Marks and NFL Marks to Pepsi, Nike, and Dr. Pepper....
III. Analysis
Plaintiff repeatedly alleges in its Complaint that Defendants, through Texas
Stadium, have granted sponsors the right to use the mark "Texas Stadium,
home of the Dallas Cowboys...."
Plaintiff also alleges that Defendants have "authorized NIKE
branded apparel to be worn on the field and on the sidelines during televised
NFL games." An examination of
the contracts at issue reveals that they neither grant the use of the phrase
"home of the Dallas Cowboys" nor authorize NIKE apparel to be worn on
the Dallas Cowboys' sidelines. Defendants contend that because the contracts do
not authorize the alleged misconduct, Plaintiff's entire case must be
dismissed.
A. Breach of Contract
Plaintiff's claim for breach of contract withstands Defendants' motion to
dismiss for a number of reasons. First, although the contracts do not contain
the language discussed above, they do grant other rights which may violate the
Trust and License Agreements. The Pepsi contract grants Pepsi the right to use
a logo which says "Texas Stadium/Home of America's Favorite Team,"
which Plaintiff claims is a Club Mark. The logo licensed for use by American
Express contains a star which Plaintiff claims is similar to the star that
appears on the Dallas Cowboys' helmets. n2 Accepting Plaintiff's allegation
that Texas Stadium entered into these contracts as a "stand in" for
the Cowboys Partnership, n3 and drawing all inferences in favor of Plaintiff,
the use of either of these logos would violate the Trust and License
Agreements.
- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -
n2 The Texas Stadium logo American Express is licensed to use features a
picture of the stadium, with the words "Texas Stadium" beneath it.
The star is superimposed on the letter "D" in the word
"Stadium." Defendants assert that: 1) the star that appears on this
logo is not similar to the star that appears on the Dallas Cowboys' helmets;
and 2) a star is so generic a symbol (especially in Texas, which is known as
the "Lone Star" state) that nobody would associate it exclusively
with the Dallas Cowboys. At this stage of the litigation, it is too early to
determine whether the star contained in the Texas Stadium logo is similar to
that appearing on the Dallas Cowboys' helmet. Moreover, where the star is used
in conjunction with other symbols that are clearly associated with the Dallas
Cowboys (e.g., a picture of Texas Stadium), I cannot conclude as a matter of
law that it is too generic a symbol to serve as a distinctive logo for the
Dallas Cowboys.
n3 The claim that Texas Stadium is a "stand in" for the Cowboys
Partnership is bolstered by the allegation that Defendant Jones controls both
Texas Stadium and the Cowboys Partnership.... and the fact that the Dallas
Cowboys are the only professional sports team that plays in Texas Stadium.
- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -
Second, the Complaint alleges that Defendants engaged in conduct which might
violate the Trust and License Agreements -- namely, a concerted campaign to
create the impression that companies such as NIKE and Pepsi were sponsors of
the Dallas Cowboys organization. During a nationally televised game, Defendant
Jones, who controls both the Cowboys Partnership and Texas Stadium Corporation,
allegedly escorted the CEO of NIKE to the Dallas Cowboys' sideline while both
men prominently wore NIKE branded attire.... The Complaint further alleges that
Jones ordered team personnel not to dress in apparel licensed by Plaintiff
during this game, so that "millions of television viewers observed no
apparel brand other than NIKE" on the Cowboys' sideline. Hence, despite contractual provisions to
the contrary, in practice Defendants may have authorized NIKE apparel to be
worn on the Dallas Cowboys' sideline, adjacent to players wearing the Club
Marks.
Plaintiff also alleges that, in furtherance of their scheme to mislead the
public, the Dallas Cowboys and NIKE jointly issued a press release in which the
CEO of NIKE referred to the agreement as one with the "Dallas
Cowboys"; and that Defendant Jones announced that the entire Cowboys
organization drinks Pepsi, and posed for pictures at a press conference dressed
in a "shirt emblazoned with a Cowboys Club Mark and boots emblazoned with
a Pepsi logo . . . ." All of the
above conduct may constitute an impermissible use of Club Marks (e.g., the name
"Dallas Cowboys" and the team's uniforms), since under the Trust and
License Agreements the Cowboys Partnership gave Plaintiff the exclusive right
to use these marks for commercial purposes. At a minimum, alleging such conduct
is sufficient to state a claim for breach of the implied duty of good faith,
which constitutes a breach of contract under New York law....
Finally, the Complaint alleges that Defendants misappropriated Club Marks and
NFL Marks in solicitation materials they sent to potential sponsors.
Specifically, the Complaint states that Defendants used the Club's
"Star" logo and the NFL's "Shield" logo in a solicitation
booklet they sent to Dr. Pepper....
Because the Trust and License Agreements give Plaintiff the exclusive
right to use these Marks for commercial purposes, Defendants may have breached
these agreements by using these Marks in a solicitation booklet. Defendants'
counsel conceded that his clients' use of the Marks in solicitation materials
was "absolutely inappropriate" and "probably violated their
obligations . . . ." Transcript of Oral Argument, February 15, 1996n4
- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -
n4 While conceding that this conduct violated the Trust and License Agreements,
counsel argued that it was a single isolated incident and constituted an
innocent mistake. See Transcript of Oral Argument, February 15, 1996...
- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -
B. The Lanham Act
Plaintiff also alleges that Defendants violated § 43(a) of the Lanham Act, 15
U.S.C. § 1125(a), which provides in relevant part:
(a)(1) Any person who, on or in connection with any goods or services, or any
container for goods, uses in commerce any word, term, name, symbol, or device,
or any combination thereof, or any false designation of origin, false or
misleading description of fact, or false or misleading representation of fact,
which--
(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities of another person, . . .
shall be liable in a civil action by any person who believes that he or she is
or is likely to be damaged by such act (emphasis added).
Such a claim requires only a valid trademark and a likelihood of confusion on
the part of the public. See NIKE, Inc. v. Just Did It Enters., 6 F.3d 1225,
1227 (7th Cir. 1993).
Plaintiff has the exclusive right to use NFL Marks and Club Marks for commercial
purposes. Plaintiff clearly alleges that Defendants have commercially exploited
Club Marks and NFL Marks by using them to solicit a sponsorship agreement and
by authorizing their use in agreements with Dr. Pepper, Pepsi, NIKE.... As
described above, Plaintiff also alleges that Defendants, through various press
conferences and public appearances, have sought to create the impression that a
relationship exists between the Cowboys and various sponsor companies.... Of
course, whether the marks used by Defendants were NFL Marks or Club Marks is a
question of fact.
There are decisions of this Court which suggest that an exclusive licensee of
the right to distribute goods bearing a certain trademark cannot bring an
action under § 43(a) of the Lanham Act against the trademark owner for
permitting the use of the trademark in violation of the licensing
agreement.... The reasoning of these
cases is that where the trademark owner, who is the source of the goods,
authorizes the use of the mark for "genuine" goods, there can be no
likelihood of confusion as to the source of the goods and, consequently, the
quality of the goodsPlaintiff's interest in the marks, however, is in
authorizing the international corporate sponsorship of goods, not in selling
goods. In this context the concepts of genuine goods, quality of goods, and
source of goods have little significance. The quality, source, or genuineness
of Pepsi or NIKE shoes, for example, are primarily reflected by their
respective marks regardless of whether they are sponsored by the Cowboys or the
NFL. As neither Plaintiff nor Defendants sell or manufacture goods, it makes
little sense to focus on the source of the goods as the courts did in... other
cited cases Rather, in the sponsorship
context, the focus should be on the nature of Defendants' activities regarding
marks which Plaintiff has the exclusive right to commercially exploit.
Plaintiff has pleaded that Defendants have used NFL Marks and Club Marks in a
manner which is likely to confuse the public as to Plaintiff's
"sponsorship or approval" of Dr. Pepper, Pepsi, and NIKE.... These allegations are sufficient to state a
cause of action under the broad language of § 43(a) of the Lanham Act.
C. Other Claims
Plaintiff's other claims arise out of the same set of operative facts as the
breach of contract and Lanham Act claims, and are likewise not defeated by the
contracts Defendants have submitted. However, Defendants have raised
independent objections to several of Plaintiff's common law claims, two of
which are convincing.
i. Breach of Implied Covenant of Good Faith
Defendants seek to dismiss Plaintiff's claim for breach of the implied duty of
good faith because it is duplicative of Plaintiff's breach of contract claim.
"Under New York law, parties to an express contract are bound by an
implied duty of good faith, but breach of that duty is merely a breach of the
underlying contract." Fasolino Foods, 961 F.2d at 1056. Plaintiff's
separate claim for breach of the implied duty of good faith is therefore dismissed
as redundant....
ii. Breach of Obligations as Settlor of the NFL Trust
Agreement and as Licensor of the Cowboys Club Marks
Defendants contend that Count IV of the Complaint should be dismissed because
neither a settlor of a trust nor a licensor is under any duty -- beyond that
set forth in the underlying trust or licensing agreement -- to refrain from
taking steps that will reduce the value of the trust property or
license.... The case does not support
Plaintiff's view that a settlor has any duty independent of its obligations
under a trust agreement, which include the implied duty of good faith. Count IV
is therefore dismissed....
iii. Misappropriation of Property
Defendants assert that the Complaint fails to state a claim for
misappropriation of property because it does not adequately identify the
property rights allegedly misappropriated. Further, they argue that this claim
fails because New York does not recognize a cause of action for the
misappropriation of intangible assets. Neither of these arguments has merit.
The first fails because the Complaint clearly alleges that Defendants have
misappropriated revenue belonging to Plaintiff.... The second is irrelevant because revenue is not an "intangible
asset."
Even if the Complaint only alleged that Defendants have misappropriated Club
Marks, which are intangible, dismissal would not be warranted. Misappropriation
claims that concern intangible rights are generally not recognized. See
Ippolito v. Lennon, 150 A.D.2d 300, 542 N.Y.S.2d 3, 6 (1st Dep't 1989).
However, in the context of unfair competition, a plaintiff may state a cause of
action for the misappropriation of an intangible asset, at least where it is
ultimately embodied in a tangible product. See Standard & Poor's Corp. v.
Commodity Exchange, 683 F.2d 704, 710 (2d Cir. 1982).
iv. Tortious Interference
Defendants contend that the Complaint fails to allege the elements of tortious
interference with contract. A plaintiff in such an action must allege that: i)
a valid contract existed between plaintiff and a third party; ii) defendant
knew of this contract; iii) defendant intentionally induced the third party to
breach the contract or otherwise render performance impossible; and iv)
plaintiff suffered damages.... See Kronos, Inc. v. AVX Corp., 81 N.Y.2d 90, 94,
595 N.Y.S.2d 931, 612 N.E.2d 289 (1993); Enercomp, Inc. v. McCorhill
Publishing, Inc., 873 F.2d 536, 541 (2d Cir. 1989).
Kronos suggests that a plaintiff can state a claim for tortious interference
with contract without actually alleging that the third party breached its
contract. However, a plaintiff must at least allege that the defendant's
interference made the contract impossible to perform, or that the defendant
induced the third party to render performance impossible. See Museum Boutique
Intercontinental, Ltd. v. Picasso, 886 F. Supp. 1155, 1163 & n.19 (S.D.N.Y.
1995).
The Complaint meets this requirement. Plaintiff alleges that Defendants'
intentional conduct has "interfered with and caused the violation and
derogation of contractual rights granted by plaintiff to its licensees and
sponsors...." Plaintiff has
entered into contracts that make companies exclusive sponsors of the NFL and
its Member Clubs for specific product categories. Plaintiff alleges that
Defendants, by making unilateral arrangements with the direct competitors of
these exclusive sponsors, have made it impossible for Plaintiff to honor its
contractual obligations. Accordingly, Plaintiff's claim for tortious
interference withstands Defendants' motion.
IV. Conclusion
For the reasons set forth above, Defendants' motion is granted in part and
denied in part.
SO ORDERED:
Shira A. Scheindlin
U.S.D.J.
Dated: New York, New York
February 20, 1996
J.B. Bonelli, Plaintiff-Appellee/Cross-Appellant, v. Volkswagen of America, Inc., and James Neal Harvey Advertising, Inc., Defendants-Appellants/Cross-Appellees, and Amateur Hockey Association of The United States, Defendant-Appellee/Cross-Appellee
Docket Nos. 91864, 91865
Court of Appeals of Michigan
166 Mich. App. 483; 421 N.W.2d 213; 1988 Mich. App. LEXIS 65
October 15, 1987, Submitted
February 17, 1988, Decided
JUDGES: Wahls, P.J., and Sawyer and C. W.
Simon, Jr., * JJ.
OPINIONBY: PER CURIAM
* * *
FACTS
On February 22 and 24, 1980, the United States Olympic Hockey Team, an underdog
in the competition, defeated teams from the Soviet Union and Finland to win the
gold medal for hockey at the Winter Olympic Games held at Lake Placid, New
York. The marketing potential of the hockey team for product advertising
purposes was immediately recognized by advertisers in the United States -- a
country whose morale was then diminished to some extent by the lengthy
Iran-hostage crisis. The financially strapped AHAUS, which owned the exclusive
rights to the advertising and promotional activities of the hockey team,
including its signs, logos and symbols, also recognized that the team's victory
had produced a unique fund-raising opportunity.
Plaintiff was one of those persons who hoped to capitalize on the excitement
surrounding the hockey team's victory. On Monday, March 3, 1980, he contacted
Harold Trumble, the executive director of AHAUS, and by March 7, 1980,
according to plaintiff, he and Trumble had come to a verbal understanding that
plaintiff would purchase the exclusive rights to sell posters of the team in
exchange for payment of $ 100,000 plus ten percent of the gross sales receipts.
On March 13, 1980, plaintiff and Trumble signed contracts which provided, among
other things, that plaintiff was to have the "exclusive print and poster
rights to the 1980 U.S. Hockey Team" and the "exclusive license to
use the Names and Logos in connection with the sale and marketing of prints and
posters." On the same date, plaintiff also signed a letter of agreement in
which he agreed to purchase advertisements in the upcoming twelve consecutive
monthly issues of a magazine published by AHAUS. Consistent with the prior
verbal understanding between plaintiff and Trumble, the contracts required
plaintiff to pay $ 100,000 plus ten percent of the gross receipts from the sale
of "prints and posters."
Unbeknownst to plaintiff, at the same time the terms of his contracts were
being firmed up Trumble and other AHAUS representatives were negotiating with
personnel from VW and its advertising agent, JNHA, about the use of the hockey
team in an advertisement campaign promoting the sale of VW vehicles. On Monday,
February 25, 1980, the day after the hockey team's victory over the team
representing Finland, Fred Campbell, the president of the sports marketing firm
which had been secured in October, 1979, as AHAUS's nonexclusive agent to
obtain corporate sponsors, contacted James Neal Harvey, chairman of the board
of JNHA, and left a phone message encouraging JNHA to consider using the hockey
team as part of an advertising campaign for one of its clients. At that time,
JNHA was the advertising agent for one of VW's vehicles, the Vanagon. A
tentative agreement was reached, under the terms of which VW would pay $ 50,000
to AHAUS for use of the hockey team to promote VW's Vanagon. The men met
shortly thereafter, apparently on February 27, 1980, to discuss the project,
but the actual content of the advertising package proposed by Harvey at this
initial meeting was disputed at trial. According to JNHA attorney Stephen
Froling, who was not personally present at the meeting, Campbell and other
AHAUS representatives were made aware that VW intended to support its use of
the hockey team in television commercials with the free distribution of team
photographs at local VW automobile dealerships. Campbell and Trumble, on the
other hand, testified that there had been no discussion of a poster or
team-photo giveaway at the meeting.
According to Campbell, a second meeting was held two days after the first, at
which Campbell showed John Slavin, the advertising manager for VW, some
proposed layouts for television commercials and commercial print material, but
no mention was made of a poster giveaway. Campbell further testified that
Slavin was so impressed with the advertising package that he decided to use the
hockey team to promote the entire VW line of automobiles rather than just the
Vanagon, thus causing a doubling of the fee payable to AHAUS from $ 50,000 to $
100,000.
On February 29, 1980, an article appeared in the New York Times stating that VW
had "pulled off the advertising coup of the season by signing up the
United States Olympic Hockey Team." According to the article,
"[print] ads and television commercials for the whole line of Volkswagen products
will offer color posters of the team." A similar story appeared in a March
3, 1980, article in Adweek. The Adweek article explained that VW would be
reinforcing its television, newspaper and magazine advertisements with an
"offer of a giveaway poster featuring a color photo of the team
members." Trumble, AHAUS outside counsel Donald Parson, and plaintiff all
testified that they had not read either article when published and did not
become aware of their contents until, at the very earliest, several weeks
later. Campbell acknowledged at trial that he had read the New York Times
article on February 29, 1980, but that at the time he dismissed the comment
about a color poster giveaway as the product of an overzealous public relations
person who threw in the idea as a "possibility." Trumble testified
that Campbell never mentioned the article to him.
Also on February 29, 1980, Trumble arrived in New York and spoke with Campbell
and Scott Weeker, a JNHA executive in charge of the VW account. According to Trumble,
the two men informed him that during the following few days a ticker-tape
parade would be held for the hockey team and a television commercial involving
the team would be made, but not that a poster giveaway program was planned. On
Tuesday, March 4, 1980, a meeting took place in Harvey's New York office with
James Harvey, JNHA attorney Stephen Froling, JNHA account executive Scott
Weeker, AHAUS agent Fred Campbell, and AHAUS executive director Harold Trumble.
Trumble and Campbell testified that a poster giveaway was not mentioned to them
at this meeting.
Later in the day on March 4, 1980, at a hockey rink in New Jersey, JNHA
personnel were filming a television commercial involving the hockey team.
Trumble testified that while watching the filming, JNHA executive Scott Weeker
asked him for a team picture. When asked what kind of picture he needed,
Trumble said that Weeker responded, "Just a team picture that we can give
out to the people that come into the showrooms, to look at Volkswagens."
Trumble asserted that he was not told how many of the pictures would be
distributed or that VW intended to use the pictures as part of a poster,
stating, "If they had mentioned the poster, it would have been a red flag
to me," since during that time period he was negotiating with other people
regarding the rights for the sale of posters of the hockey team.
At trial, JNHA attorney Stephen Froling testified that neither VW nor JNHA had
heard of the ongoing negotiations or the contract between plaintiff and AHAUS until
a week after plaintiff's contract was executed. However, the deposition
testimony of Chip Prosnit, an ex-JNHA employee who wrote and produced the VW
television commercial with the hockey team, indicated that he had first heard
of the "problem with J. B. Bonelli" on Tuesday, the second day of
shooting the commercial, which apparently was March 4, 1980. Moreover, Prosnit
stated that at a meeting held on the Tuesday or Wednesday of the following
week, which would have been on March 11 or 12, 1980, he was "told outside
of the meeting by Weeker and perhaps Harvey that there may be a problem"
regarding the use of the words "team poster" in the proposed
television commercial. According to Prosnit, he was told to change the words
"team poster" to "team photo" because "someone else
might have the rights to the poster . . . we would have to call it a team
photo."
On March 12, 1980, there was another meeting in Harvey's office, at which were
present Harvey, Weeker, Prosnit, Froling and Trumble. The trial testimony was
conflicting regarding whether Trumble was shown a sample poster which had been
produced by VW or whether the thirty-second television commercial prepared by
Prosnit, which included an oral invitation to viewers to pick up a free team
photo at a VW dealership, was shown with or without its audio accompaniment. At
this meeting, prior to his receiving payment from VW, Trumble signed a release
form, under the terms of which AHAUS consented to the use of its "name,
logo, trademarks . . . and other identifying symbols ('Marks') to advertise and
promote the products of [VW] by means of a single television commercial."
The release also gave VW the "rights to use the Marks and print and
commercial materials supporting the television campaign," as well as
"sole control over the production and content of advertising and
promotion," with AHAUS retaining no right "to inspect or approve the
finished product or the media in which the finished product is used."
AHAUS also warranted that it had not, and would not, enter into any agreement
with a third party which would interfere with the free exercise of VW's rights
under the release. Although Harvey and Trumble signed the release form on March
12, 1980, VW executive John Slavin did not sign it until the following day.
As noted earlier, plaintiff's contracts with AHAUS for the exclusive print and
poster rights to the 1980 U.S. Hockey Team and the exclusive license to use the
names and logos in connection with the sale and marketing of such prints and
photos were signed on March 13, 1980.
On March 19, 1980, plaintiff learned for the first time that VW intended to
give away free posters of the hockey team. He met with Harvey and Weeker in
Harvey's office and was shown a copy of the VW poster, which he described at
trial as being substantially identical to the team poster he had arranged to
produce. Thereafter, AHAUS attorney Donald Parson wrote a letter to JNHA
advising that agency not to distribute its posters because VW's rights under
the release agreement did not include the right to give away team posters. A
March 24, 1980, meeting held in Harvey's office failed to resolve the dispute.
On March 15, 1980, Trumble offered to release plaintiff from his contracts and
to return all monies paid to AHAUS up to that point, but plaintiff refused this
offer and on April 1, 1980, paid his remaining balance due.
On November 5, 1980, plaintiff filed suit against VW and JNHA in Oakland
Circuit Court, alleging tortious interference with an advantageous business
relationship and intentional infliction of emotional distress. In the fall of
1981, deposition testimony was taken from both Harvey and Weeker at the request
of VW and JNHA. Subsequently, in March, 1983, plaintiff amended his complaint
to add AHAUS as a codefendant, alleging tortious interference with an
advantageous business relationship, intentional infliction of emotional
distress, breach of contract, fraud and intentional misrepresentation. The circuit court made the rulings and entered
the judgments recited at the beginning of this opinion, and defendants VW and
JNHA's appeal and plaintiff's cross-appeal ensued. We will address the issues
seriatim.
ISSUES
First, defendants VW and JNHA contend
that the trial court erred by denying their motion for judgment notwithstanding
the verdict with respect to plaintiff's claim of tortious interference with an
advantageous business relationship. We disagree.
In reviewing a trial court's denial of a defendant's motion for judgment
notwithstanding the verdict, this Court must view the testimony, and all
legitimate inferences that may be drawn therefrom, in the light most favorable
to the plaintiff and determine whether the evidence was sufficient to establish
a prima facie case... If reasonable jurors could honestly have reached different
conclusions, then the motion should have been denied and the case should have
been decided by the jury, since no court has the authority under such a
circumstance to substitute its judgment for that of the jury.
The elements of the tort of interference with an advantageous business
relationship were set forth by this Court in Northern Plumbing &
Heating, Inc v Henderson Bros, Inc, 83 Mich App 84, 93; 268 NW2d 296 (1978), lv den 405 Mich 845
(1979), quoting 45 Am Jur 2d, Interference, § 50, p 322:
"The basic elements which establish a prima facie [showing of] tortious interference with a business relationship are the existence of a valid business relation (not necessarily evidenced by an enforceable contract) or expectancy; knowledge of the relationship or expectancy on the part of the interferer; an intentional interference inducing or causing a breach or termination of the relationship or expectancy; and resultant damage to the party whose relationship or expectancy has been disrupted. One is liable for commission of this tort who interferes with business relations of another, both existing and prospective, by inducing a third person not to enter into or continue a business relation with another or by preventing a third person from continuing a business relation with another."
This recitation of the elements of tortious interference with an advantageous
business relationship has been relied upon by this Court.... Defendants argue
that plaintiff's proofs are fatally deficient as to each of the elements of
this tort. We discern no such
deficiencies...
First, the proofs presented regarding
the existence of a business relationship or expectancy between plaintiff and
AHAUS for the exclusive rights to distribute posters of the 1980 U.S. Hockey
Team were sufficient to establish the initial element of the tort. Plaintiff
and AHAUS were contractual parties for the purpose of mutual pecuniary gain. As
this Court has observed, "there can be no more reasonable expectation of
business advantage than that based upon a valid contract." Woody,
supra, p 778. Moreover, we conclude below, in section V, that plaintiff's
damages caused by the alleged interference with his contractual relationship
were proven with reasonable certainty sufficient to permit plaintiff's claim to
go to the jury. Clearly, the parties' contract evidenced a valid business
relationship which was created for the obvious business advantage of making
money.
Second, plaintiff presented sufficient evidence from which reasonable jurors
could infer that before VW and JNHA launched their national advertising
campaign, they knew that plaintiff had purchased the exclusive rights to
distribute posters of the hockey team, but nevertheless chose to offer free
posters of the team as part of their campaign. Viewed in a light most favorable
to plaintiff, the deposition of Chip Prosnit, the JNHA employee who wrote and
produced the VW commercial advertising free posters of the hockey team,
indicates that JNHA knew about the "problem with J. B. Bonelli" early
on in the negotiating process between plaintiff and AHAUS. In addition, not
only did Prosnit suggest that JNHA knew about the ongoing negotiations with
plaintiff, but he indicated that at least one JNHA executive ordered him to
change the words offering a free "team poster" in the television
commercial to "team photo" since "somebody else might have the
rights to the poster [so] . . . we would have to call it a team photo."
JNHA attorney Stephen Froling conceded that this word change was made, and
Prosnit understood the change to be a purely semantic one, i.e., one not
requiring any alteration of the item VW actually intended to give away. It is
also clear that VW and JNHA were made aware of plaintiff's exclusive rights to
distribute posters of the hockey team no later than the March 21, 1980, warning
letter from AHAUS attorney Donald Parson, and certainly no later than when
telegrams were sent by plaintiff himself on March 24, 1980. Nevertheless,
defendants refused to cancel their upcoming national magazine ads and their
yet-to-be-aired national television commercials.
Third, plaintiff presented sufficient evidence from which reasonable jurors
could infer that defendants had performed an intentional interference inducing
or causing a breach or termination of plaintiff's business relationship or
expectancy. To fullfil this element, a plaintiff must show not only that the
defendant acted intentionally, but further that he acted improperly or without
justification....
We have little difficulty in concluding that plaintiff presented sufficient
evidence from which reasonable jurors could conclude that VW and JNHA, through
the distribution of their 120,000 free posters in conjunction with a national
advertising scheme including television, newspaper and magazine commercials,
intentionally and improperly interfered with plaintiff's exclusive right to
sell substantially identical posters. See 4 Restatement Torts, 2d, §§ 766A,
767, pp 19, 26-27. Plaintiff testified that defendant's actions caused
investors to abandon their involvement with his enterprise upon learning that
VW was giving away the same kind of poster plaintiff hoped to sell for profit,
and that VW's free-poster campaign generally rendered his poster an
unattractive buy for both major retailers and consumers. These consequences
should have surprised no one. And while the societal interest in maintaining a
competitive, free enterprise system fosters legitimate dickering, outbidding,
and even outmaneuvering among individuals and businesses.... in this case, we perceive no justification
for defendants' behavior on the basis of fair competition. Indeed, the evidence
indicated that VW and plaintiff were not openly and honestly competing for the
same rights. Rather, there was substantial evidence to support the inference
that, instead of trying merely to outbid plaintiff, VW and JNHA chose instead
to appropriate to themselves, without payment and under the authority of
generalized and vague language in a release form, the rights which they knew
had previously been purchased by plaintiff. Moreover, there was substantial
evidence to support the views that AHAUS never intended to give VW the right to
distribute posters of the hockey team and that the release by AHAUS did not
grant VW such a right. Ultimately, we are at a loss to discern any praiseworthy
societal interest which would be furthered by permitting a defendant to
unilaterally and knowingly appropriate to itself the benefits of exclusive
contractual rights enjoyed by another.
Finally, we also conclude that plaintiff presented sufficient proof of damages
resulting from the invasion by VW and JNHA of his business relationship with
AHAUS....
* * *
...[D]efendants VW and JNHA contend that the trial court erred in
refusing to set aside or reduce the damage award rendered in plaintiff's favor,
asserting that that award was excessive and based on speculative damages. We
disagree.
For a plaintiff to be entitled to damages for lost profits, the losses must be
subject to a reasonable degree of certainty and cannot be based solely on mere
conjecture or speculation; however, mathematical certainty is not required, and
even where lost profits are difficult to calculate and are speculative to some
degree, they are still allowed as a loss item....
At trial, Fred Campbell, president of the sports marketing
firm which acted as the nonexclusive agent for obtaining corporate sponsors for
AHAUS; Michael Brausen, the president of a corporation which specializes in the
marketing of sports and business promotional items, particularly posters and
calendars; and plaintiff all discussed to some extent the issue of damages
suffered by plaintiff as a result of the conduct of VW and JNHA.
Brausen, who possessed many years of experience with sports promotional
programs, testified that the marketing potential of a poster of the 1980
Olympic Hockey Team was "phenomenal" because of the excitement
generated by the team's victory and the national scope of the team's appeal. He
estimated that sales of anywhere from three to twenty million of plaintiff's
posters could reasonably be anticipated, and that the profit margin per poster
would have been one dollar or higher. Campbell estimated that the potential
sales of plaintiff's posters would have reached in the "middle six
figures" during the first few months after the team's victory, with
possibly more sales thereafter. Plaintiff testified that based on the marketing
studies he had obtained he could have sold seven million posters. All three men
also opined that VW's poster giveaway program made plaintiff's poster an
unattractive buy for consumers since the desire to purchase the poster would
have waned after a substantially similar poster was advertised as a free item
by VW. Plaintiff also explained that once the VW poster giveaway program became
widely advertised, his major investors deserted him, thus seriously delaying
the completion of his venture and depriving him of sales during the crucial
high demand period immediately after the team won its gold medal.
We believe that plaintiff established his losses sufficiently to allow the
issue to go to the jury. Doubts as to the certainty of the damages could
properly have been resolved against VW and JNHA since, as the wrongdoers, the
risk of uncertainty was cast upon them, not plaintiff, who was the injured
party.... We conclude that the jury's award was within the range of the
evidence produced at trial and is not shocking to the conscience....
Accordingly, we find no error in the trial court's refusal to set aside or
reduce the jury's damage award in this case...
Finally, plaintiff contends, as
cross-appellant, that the trial court erred in directing a verdict in favor of
VW, JNHA and AHAUS on the claim of intentional infliction of emotional
distress. We disagree.
In reviewing a trial court's denial of a defendant's motion for directed
verdict, this Court must view the testimony, and all legitimate inferences that
may be drawn therefrom, in the light most favorable to the plaintiff and
determine whether the evidence is sufficient to establish a prima facie case. Matras
v Amoco Oil Co, 424 Mich 675, 681-682; 385 NW2d 586 (1986). If reasonable
jurors could honestly have reached different conclusions, then the motion
should have been denied and the case should have been decided by the jury,
since no court has the authority under such a circumstance to substitute its
judgment for that of the juryAlthough the Supreme Court has not formally
adopted the modern tort of intentional infliction of emotional distress into
this state's jurisprudence as a separate theory [**228] of recovery, Roberts
v Auto-Owners Ins Co, 422 Mich 594, 597; 374 NW2d 905 (1985), it
nevertheless has identified the four elements comprising a prima facie claim:
(1) extreme and outrageous conduct; (2) intent or recklessness; (3) causation;
and (4) severe emotional distress. Id., p 602. The Court derived these
elements from 1 Restatement, Torts, 2d, § 46, pp 71-72, which states:
§ 46. Outrageous Conduct Causing Severe Emotional Distress
(1) One who by extreme and outrageous conduct intentionally or recklessly
causes severe emotional distress to another is subject to liability for such
emotional distress, and if bodily harm to the other results from it, for such
bodily harm.
In discussing the first element, extreme and outrageous conduct, the Roberts Court quoted with agreement the following comment from 1 Restatement, Torts, 2d, § 46, comment d, pp 72-73:
Liability has been found only where the conduct has been so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community. Generally, the case is one in which the recitation of the facts to an average member of the community would arouse his resentment against the actor, and lead him to exclaim, "Outrageous!" [ Roberts, supra, p 603.]
See also Deitz v Wometco, 160 Mich App 367, 381; 407 NW2d 649 (1987), Margita
v Diamond Mortgage Corp, 159 Mich App 181, 188; 406 NW2d 268 (1987), and Early
Detection v New York Life Ins Co, 157 Mich App 618, 625-626; 403 NW2d 830
(1986).
At best, the evidence in the present case indicated that VW and JNHA
distributed posters of the 1980 U.S. Hockey Team even though they knew that
plaintiff had the exclusive rights to distribute such posters and their
contract with AHAUS did not give them the right to such distribution. Viewing
the evidence against AHAUS in a light most favorable to plaintiff, it indicates
that AHAUS was double-dealing by giving the impression to VW and JNHA that they
would be permitted to distribute posters -- even though AHAUS knew that it had
sold plaintiff the exclusive rights to distribute the posters. We feel that
this behavior by defendants falls far short of being extreme and outrageous for
purposes of the tort of intentional infliction of emotional distress because it
does not, we believe, go beyond all bounds of decency so as to be regarded as
atrocious and utterly intolerable. This
Court has allowed attempts at recovery under the aegis of this novel tort only
in the most egregious of cases
Plaintiff's feelings of extreme disappointment, understandable though they may
be, do not rise to the level of severe emotional distress in support of his
tort claim. Plaintiff made no mention of severe depression, substantial
psychological trauma, or even minor physical consequences. Thus, the harm
alleged fell far short of making a threshold showing of the requisite emotional
distress....
Accordingly, we find no error in the trial court's grant of directed verdict in
favor of defendants on plaintiff's claim for intentional infliction of
emotional distress.
CONCLUSION
We conclude that the trial court did not err in denying a motion of VW and JNHA
for a judgment notwithstanding the verdict with respect to plaintiff's claim of
tortious interference with an advantageous business relationship; excluding
from evidence the depositions of James Harvey and Scott Weeker; refusing the
request of VW and JNHA to give a proffered jury instruction regarding New York
law as it applied to the interpretation of the contract between VW and AHAUS;
refusing to dismiss the claims against JNHA on the basis of the lack of
personal jurisdiction; refusing to set aside or reduce the damage award
rendered by the jury in plaintiff's favor; and granting a motion of defendants
for a directed verdict against plaintiff on his claim for intentional
infliction of emotional distress.
Affirmed.
VANDERBILT
UNIVERSITY, Plaintiff-Appellee, v. GERRY DINARDO,
Defendant-Appellant.
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
174 F.3d 751; 1999 U.S. App. LEXIS 7184; 1999 FED App.
0135P (6th Cir.); 138 Lab. Cas. (CCH) P58,635; 14 BNA IER CAS 1702
October 27, 1998, Argued
April 14, 1999, Decided
April 14, 1999, Filed
SUBSEQUENT HISTORY: [**1] Rehearing Denied May 21,
1999, Reported at: 1999 U.S. App. LEXIS 10906.
PRIOR HISTORY: Appeal from the United States District Court
for the Middle District of Tennessee at Nashville. No. 95-00869. Robert L.
Echols, Chief District Judge.
JUDGES: Before:
NELSON, CLAY, and GIBSON, Circuit Judges. * GIBSON, J., delivered the opinion
of the court. DAVID A. NELSON (pp. 16-18) and CLAY (pp. 19-21), JJ., delivered
separate opinions concurring in part and dissenting in part.
OPINIONBY: JOHN R. GIBSON
OPINION:
On December 3, 1990, Vanderbilt and
DiNardo executed an employment contract hiring DiNardo to be Vanderbilt's head
football coach. Section one of the contract provided:
The University hereby agrees to hire Mr. DiNardo for a period of five (5) years
from the date hereof with Mr. DiNardo's assurance that he will serve the entire
term of this Contract, a long-term commitment by Mr. DiNardo being important to
the University's desire for a stable intercollegiate football program. . . .
The contract also contained reciprocal liquidated damage provisions. Vanderbilt
agreed to pay DiNardo his remaining salary should Vanderbilt replace him as
football coach, and DiNardo agreed to reimburse Vanderbilt should he
leave before his contract expired. Section eight of the contract stated:
Mr. DiNardo recognizes that his promise to work for the University for the
entire term of this 5-year Contract is of the essence of this Contract to the
University. Mr. DiNardo also recognizes that the University is making a highly
valuable investment in his continued employment by entering into this Contract
and its investment would be lost were he to resign or otherwise terminate his
employment as Head Football Coach with the University prior to the expiration
of this Contract. Accordingly, Mr. DiNardo agrees that in the event he resigns
or otherwise terminates his employment as Head Football Coach (as opposed to
his resignation or termination from another position at the University to which
he may have been reassigned), prior to the expiration of this Contract, and is
employed or performing services for a person or institution other than the
University, he will pay to the University as liquidated damages an amount equal
to his Base Salary, less amounts that would otherwise be deducted or withheld
from his Base Salary for income and social security tax purposes, multiplied by
the number of years (or portion(s) thereof) remaining on the Contract.
During contract negotiations, section eight was modified at DiNardo's request
so that damages would be calculated based on net, rather than gross, salary.
Vanderbilt initially set DiNardo's salary at $ 100,000 per year. DiNardo
received salary increases in 1992, 1993, and 1994.
On August 14, 1994, Paul Hoolahan, Vanderbilt's Athletic Director, went to Bell
Buckle, Tennessee, where the football team was practicing, to talk to DiNardo
about a contract extension. (DiNardo's original contract would expire on
January 5, 1996). Hoolahan offered DiNardo a two-year contract extension.
DiNardo told Hoolahan that he wanted to extend his contract, but that he also
wanted to discuss the extension with Larry DiNardo, his brother and attorney.
Hoolahan telephoned John Callison, Deputy General Counsel for Vanderbilt, and asked
him to prepare a contract extension. Callison drafted an addendum to the
original employment contract which provided for a two-year extension of the
original contract, specifying a termination date of January 5, 1998.
Vanderbilt's Chancellor, Joe B. Wyatt, and Hoolahan signed the Addendum.
On August 17, Hoolahan returned to Bell Buckle with the Addendum. He took it to
DiNardo at the practice field where they met in Hoolahan's car. DiNardo stated
that Hoolahan did not present him with the complete two-page addendum, but only
the second page, which was the signature page. DiNardo asked, "what am I
signing?" Hoolahan explained to DiNardo, "it means that your contract
as it presently exists will be extended for two years with everything else
remaining exactly the same as it existed in the present contract." Before
DiNardo signed the Addendum, he told Hoolahan, "Larry needs to see a copy
before this thing is finalized." Hoolahan agreed, and DiNardo signed the
document. DiNardo explained that he agreed to sign the document because he
thought the extension was the "best thing" for the football program
and that he "knew ultimately, Larry would look at it, and before it would
become finalized he would approve it." Hoolahan took the signed document
without giving DiNardo a copy.
On August 16, Larry DiNardo had a telephone conversation with Callison. They
briefly talked about the contract extension, discussing a salary increase.
Larry DiNardo testified that as of that date he did not know that Gerry DiNardo
had signed the Addendum, or even that one yet existed.
DiNardo stated publicly that he was "excited" about the extension of
his contract, and there was an article in the August 20, 1994, newspaper, The
Tennessean, reporting that DiNardo's contract had been extended by two
years.
On August 25, 1994, Callison faxed to Larry DiNardo "a copy of the draft
Addendum to Gerry's contract." Callison wrote on the fax transmittal
sheet: "let me know if you have any questions." The copy sent was
unsigned. Callison and Larry DiNardo had several telephone conversations in
late August and September, primarily discussing the television and radio
contract. Callison testified that he did not recall discussing the Addendum,
explaining: "the hot issue . . . was the radio and television
contract." On September 27, Callison sent a fax to Larry DiNardo
concerning the television and radio contract, and also added: "I would
like your comments on the contract extension." Larry DiNardo testified
that he neither participated in the drafting nor suggested any changes to the
Addendum.
In November 1994, Louisiana State University contacted Vanderbilt in hopes of
speaking with DiNardo about becoming the head football coach for L.S.U.
Hoolahan gave DiNardo permission to speak to L.S.U. about the position. On
December 12, 1994, DiNardo announced that he was accepting the L.S.U. position.
Vanderbilt sent a demand letter to DiNardo seeking payment of liquidated
damages under section eight of the contract. Vanderbilt believed that DiNardo
was liable for three years of his net salary: one year under the original
contract and two years under the Addendum. DiNardo did not respond to
Vanderbilt's demand for payment.
Vanderbilt brought this action against DiNardo for breach of contract. DiNardo
removed the action to federal court, and both parties filed motions for summary
judgment. The district court held that section eight was an enforceable
liquidated damages provision, not an unlawful penalty, and that the damages
provided under section eight were reasonable. Vanderbilt University v.
DiNardo, 974 F. Supp. 638, 643 (M.D. Tenn. 1997). The court held that
Vanderbilt did not waive its contractual rights under section eight when it
granted DiNardo permission to talk to L.S.U. and that the Addendum was
enforceable and extended the contract for two years….. The court entered judgment against DiNardo
for $ 281,886.43….. DiNardo appeals.
I.
DiNardo first claims that section eight of the contract is an unenforceable
penalty under Tennessee law. DiNardo argues that the provision is not a
liquidated damage provision but a "thinly disguised, overly broad
non-compete provision," unenforceable under Tennessee law.
We review the district court's summary judgment de novo, using the same
standard as used by the district court…. We view the evidence in the light most
favorable to the non-moving party to determine whether there is a genuine issue
as to any material fact…. Summary judgment is proper if the record shows that "there is
no genuine issue as to any material fact and that the moving party is entitled
to judgment as a matter of law." Fed. R. Civ. P. 56(c).
Contracting parties may agree to the payment of liquidated damages in the event
of a breach. See Beasley v. Horrell, 864 S.W.2d 45, 48 (Tenn. Ct. App.
1993). The term "liquidated damages" refers to an amount determined
by the parties to be just compensation for damages should a breach occur…..
Courts will not enforce such a provision, however, if the stipulated amount
constitutes a penalty….. A penalty is designed to coerce performance
by punishing default….. In Tennessee, a provision will be considered
one for liquidated damages, rather than a penalty, if it is reasonable in
relation to the anticipated damages for breach, measured prospectively at the
time the contract was entered into, and not grossly disproportionate to the
actual damages…. When these conditions
are met, particularly the first, the parties probably intended the provision to
be for liquidated damages. However, any doubt as to the character of the
contract provision will be resolved in favor of finding it a penalty….
The district court held that the use of a formula based on DiNardo's salary to
calculate liquidated damages was reasonable "given the nature of the
unquantifiable damages in the case." 974 F. Supp. at 642. The court held
that parties to a contract may include consequential damages and even damages
not usually awarded by law in a liquidated damage provision provided that they
were contemplated by the parties…. The court explained:
The potential damage to [Vanderbilt] extends far beyond the cost of merely
hiring a new head football coach. It is this uncertain potentiality that the
parties sought to address by providing for a sum certain to apply towards
anticipated expenses and losses. It is impossible to estimate how the loss of a
head football coach will affect alumni relations, public support, football
ticket sales, contributions, etc . . . . As such, to require a precise formula
for calculating damages resulting from the breach of contract by a college head
football coach would be tantamount to barring the parties from stipulating to
liquidated damages evidence in advance.
DiNardo contends that there is no evidence that the parties contemplated that
the potential damage from DiNardo's resignation would go beyond the cost of
hiring a replacement coach. He argues that his salary has no relationship to
Vanderbilt's damages and that the liquidated damage amount is unreasonable and
shows that the parties did not intend the provision to be for liquidated
damages.
DiNardo's theory of the parties' intent, however, does not square with the
record. The contract language establishes that Vanderbilt wanted the five-year
contract because "a long-term commitment" by DiNardo was
"important to the University's desire for a stable intercollegiate
football program," and that this commitment was of "essence" to
the contract. Vanderbilt offered the two-year contract extension to DiNardo
well over a year before his original contract expired. Both parties understood
that the extension was to provide stability to the program, which helped in
recruiting players and retaining assistant coaches. Thus, undisputed evidence,
and reasonable inferences therefrom, establish that both parties understood and
agreed that DiNardo's resignation would result in Vanderbilt suffering damage
beyond the cost of hiring a replacement coach.
This evidence also refutes DiNardo's argument that the district court erred in
presuming that DiNardo's resignation would necessarily cause damage to the
University. That the University may actually benefit from a coaching change (as
DiNardo suggests) matters little, as we measure the reasonableness of the
liquidated damage provision at the time the parties entered the contract, not
when the breach occurred, Kimbrough & Co., 939 S.W.2d at 108, and
we hardly think the parties entered the contract anticipating that DiNardo's
resignation would benefit Vanderbilt.
The stipulated damage amount is reasonable in relation to the amount of damages
that could be expected to result from the breach. As we stated, the parties
understood that Vanderbilt would suffer damage should DiNardo prematurely
terminate his contract, and that these actual damages would be difficult to
measure…..
Vanderbilt hired DiNardo for a unique
and specialized position, and the parties understood that the amount of damages
could not be easily ascertained should a breach occur. Contrary to DiNardo's
suggestion, Vanderbilt did not need to undertake an analysis to determine
actual damages, and using the number of years left on the contract multiplied
by the salary per year was a reasonable way to calculate damages considering
the difficulty of ascertaining damages with certainty…. The fact that liquidated damages declined
each year DiNardo remained under contract, is directly tied to the parties'
express understanding of the importance of a long-term commitment from DiNardo.
Furthermore, the liquidated damages provision was reciprocal and the result of
negotiations between two parties, each of whom was represented by counsel.
We also reject DiNardo's argument that a question of fact remains as to whether
the parties intended section eight to be a "reasonable estimate" of
damages. The liquidated damages are in line with Vanderbilt's estimate of its
actual damages…. Vanderbilt presented evidence that it incurred expenses
associated with recruiting a new head coach of $ 27,000.00; moving expenses for
the new coaching staff of $ 86,840; and a compensation difference between the
coaching staffs of $ 184,311. The stipulated damages clause is reasonable under
the circumstances, and we affirm the district court's conclusion that the
liquidated damages clause is enforceable under Tennessee law.
II.
DiNardo next argues that Vanderbilt waived its right to liquidated damages when
it granted DiNardo permission to discuss the coaching position with L.S.U.
Under Tennessee law, a party may not recover liquidated damages when it is
responsible for or has contributed to the delay or nonperformance alleged as
the breach. See V.L. Nicholson Co. v. Transcon Inv. and Fin. Ltd., Inc.,
595 S.W.2d 474, 484 (Tenn. 1980).
Vanderbilt did not waive its rights under section eight of the contract by
giving DiNardo permission to pursue the L.S.U. position…. First, Hoolahan's permission was quite
circumscribed. Hoolahan gave DiNardo permission to talk to L.S.U. about their
coaching position; he did not authorize DiNardo to terminate his contract with
Vanderbilt. Second, the employment contract required DiNardo to ask
Vanderbilt's athletic director for permission to speak with another school
about a coaching position, and Hoolahan testified that
granting a coach permission to talk to another school about a position was a
"professional courtesy." Thus, the parties certainly contemplated
that DiNardo could explore other coaching positions, and indeed even leave
Vanderbilt, subject to the terms of the liquidated damage provision…. Allowing
DiNardo to talk to another school did not relinquish Vanderbilt's right to
liquidated damages….
]
III.
DiNardo claims that the Addendum did not become a binding contract, and
therefore, he is only liable for the one year remaining on the original
contract, not the three years held by the district court.
A.
DiNardo argues that the Addendum did not extend section eight, or that there is
at least a question of fact as to whether the Addendum extended section eight.
Under Tennessee law, the rights and obligations of contracting parties are
governed by their written agreements. Hillsboro Plaza Enterprises v. Moon,
860 S.W.2d 45, 47 (Tenn. Ct. App. 1993). When the agreement is unambiguous, the
meaning is a question of law, and we should enforce the agreement according to
its plain terms. Richland Country Club, Inc. v. CRC Equities, Inc.,
832 S.W.2d 554, 557 (Tenn. Ct. App. 1991).
DiNardo argues that the original employment contract explicitly provides that
section eight is limited to "the entire term of this five-year
contract," and the plain, unambiguous language of the Addendum did not
extend section eight. He points out that the Addendum did not change the
effective date in section eight, unlike other sections in the contract.
The plain and unambiguous language of the Addendum read in its entirety, however,
provides for the wholesale extension of the entire contract. Certain sections
were expressly amended to change the original contract expiration date of
January 5, 1996, to January 5, 1998, because those sections of the original
contract contained the precise expiration date of January 5, 1996. The district
court did not err in concluding that the contract language extended all terms
of the original contract.
B.
DiNardo also claims that the Addendum never became a binding contract because
Larry DiNardo never expressly approved its terms. DiNardo contends that, at the very least, a question of fact
exists as to whether the two-year Addendum is an enforceable contract.
The district court concluded that the Addendum was enforceable as a matter of law
because the parties acted as though the contract had been extended and because
Larry DiNardo never objected to the Addendum….
Under Tennessee law, parties may accept terms of a contract and make the
contract conditional upon some other event or occurrence. See Disney v.
Henry, 656 S.W.2d 859, 861 (Tenn. Ct. App. 1983). DiNardo argues that the
Addendum is not enforceable because it was contingent on Larry DiNardo's
approval.
Vanderbilt responds that the undisputed facts establish that there was no condition
precedent to the Addendum's enforceability. Vanderbilt first points out that
DiNardo did not make this argument until late in the litigation, and more
importantly did not make this argument when Vanderbilt initially requested
payment from DiNardo in January 1995. Vanderbilt also contends that if Larry
DiNardo found any of the language in the simple two-page Addendum
objectionable, he should have objected immediately. Finally, Vanderbilt argues
that if we decide that Larry DiNardo's approval was a condition precedent to
enforceability, the condition was satisfied by Larry DiNardo's failure to
object.
In Disney, the defendants sent a mailgram accepting a buyer's offer on
their house "subject to review" of the actual sales contract.
Although the court held that the contract could be conditioned on final
approval of the sales contract, the court enforced the contract because the
defendants' failure to object within a reasonable time validated the
acceptance…..
Viewing the evidence in the light most favorable to DiNardo, as we must, we are
convinced that there is a disputed question of material fact as to whether the
Addendum is enforceable. There is a factual dispute as to whether Larry
DiNardo's approval of the contract was a condition precedent to the Addendum's
enforceability. Gerry DiNardo testified that he told Hoolahan that the contract
extension was not "final" until Larry DiNardo looked at it. Hoolahan's testimony on this point was
consistent with DiNardo's: "He [Gerry DiNardo] said that he wanted to
discuss the matter with you [Larry DiNardo], which I said
certainly." Furthermore, although Callison's version of Larry
DiNardo's role in the preparation of the contract extension differs from
DiNardo's, it is undisputed that on August 25, nine days after Gerry DiNardo
signed the Addendum, Callison sent Larry DiNardo an unsigned copy of the
"draft Addendum." The cover sheet on a fax sent by Callison to
DiNardo on September 27 closes with: "I would like your comments on the
contract extension." From these facts, a jury could conclude that Larry
DiNardo's approval was required before the Addendum became a binding contract.
Of course, there is evidence that the Addendum was not contingent on Larry
DiNardo's approval. Gerry DiNardo told others that he was happy with his
contract extension, and Larry DiNardo never objected to the Addendum. This
evidence, however, does not carry the day, because we view the evidence on
summary judgment in the light most favorable to DiNardo and resolve all factual
disputes in his favor…..
Likewise, Larry DiNardo's failure to object to the Addendum may have
constituted acceptance of the Addendum's terms…, but on this record, we cannot
resolve the issue on summary judgment. There is evidence from which a jury
could find that Larry DiNardo's failure to object did not amount to acceptance
of the Addendum. First, in contrast to Disney,…. there is evidence
explaining DiNardo's delay. The parties were primarily negotiating the radio
and television contract during the fall of 1994. Callison testified that he
could not recall whether he had any conversations with DiNardo in September
about the contract extension. He explained: "The hot issue, if you will,
was the radio and television contract. That was what was on my mind." It
is not unreasonable to infer that the parties had not completely negotiated the
details of the contract extension; the original contract did not expire for
another year. On September 27, Callison asked Larry DiNardo for "his
comments" on the contract extension. A jury could conclude from this
solicitation that even Vanderbilt did not believe that the Addendum had been
approved and was enforceable as of that time. We cannot say that Larry
DiNardo's failure to object by December 12, [1994, constitutes an acceptance
of the Addendum as a matter of law.
Accordingly, we affirm the district court's judgment that the contract
contained an enforceable liquidated damage provision, and we affirm the portion
of the judgment reflecting damages calculated under the original five-year
contract. We reverse the district court's judgment concluding that the Addendum
was enforceable as a matter of law. We remand for a resolution of the factual
issues as to whether Larry DiNardo's approval was a condition precedent to the
enforceability of the Addendum and, if so, whether the condition was satisfied
by Larry DiNardo's failure to object.
We affirm in part, reverse in part, and remand the case to the district court
for further proceedings consistent with this opinion.
CONCURBY: DAVID A. NELSON (In Part); CLAY (In Part)
DISSENTBY: DAVID A. NELSON (In Part); CLAY (In Part)
DISSENT:
CONCURRING IN PART, DISSENTING IN PART
DAVID A. NELSON, Circuit Judge, concurring in part and dissenting in part. If
section eight of the contract was designed primarily to quantify, in an
objectively reasonable way, damages that the university could be expected to
suffer in the event of a breach, such damages being difficult to measure in the
absence of an agreed formula, the provision is enforceable as a legitimate
liquidated damages clause. If section eight was designed primarily to punish
Coach DiNardo for taking a job elsewhere, however, the provision is a penalty
unenforceable under Tennessee law. My colleagues on the panel and I are in agreement,
I believe, on both of these propositions. We disagree, however, as to section
eight's primary function.
It seems to me that the provision was designed to function as a penalty, not as
a liquidation of the university's damages. Insofar as the court holds
otherwise, I am constrained to dissent. In all other respects, I concur in
Judge Gibson's opinion and in the judgment entered pursuant to it.
My principal reasons for viewing section eight as a penalty are these: (1)
although the damages flowing from a premature resignation would normally be the
same whether or not Coach DiNardo took a job elsewhere, section eight does not
purport to impose liability for liquidated damages unless the coach accepts
another job; (2) the section eight formula incorporates other variables that
bear little or no relation to any reasonable approximation of anticipated
damages; and (3) there is no evidence that the parties were attempting, in
section eight, to come up with a reasonable estimate of the university's probable
loss if the coach left. I shall offer a few words of explanation on each of
these points.
Section eight does not make Coach DiNardo liable for any liquidated damages at
all, interestingly enough, unless, during the unexpired term of his contract,
he "is employed or performing services for a person or institution other
than the University . . . ." But how the coach spends his post-resignation
time could not reasonably be expected to affect the university's damages;
should the coach choose to quit in order to lie on a beach somewhere, the
university would presumably suffer the same damages that it would suffer if he
quit to coach for another school. The logical inference, therefore, would seem
to be that section eight was intended to penalize the coach for taking another
job, and was not intended to make the university whole by liquidating any
damages suffered as a result of being left in the lurch.
This inference is strengthened, as I see it, by a couple of other anomalies in
the stipulated damages formula. First, I am aware of no reason to believe that
damages arising from the need to replace a prematurely departing coach could
reasonably be expected to vary in direct proportion to the number of years left
on the coach's contract. Section eight, however, provides that for every
additional year remaining on the contract, the stipulated damages will go up by
the full amount of the annual take-home pay contemplated under the contract.
Like the "other employment" proviso, this makes the formula look more
like a penalty than anything else.
Second, the use of a "take-home pay" measuring stick suggests that
the function of the stick was to rap the coach's knuckles and not to measure
the university's loss. Such factors as the number of tax exemptions claimed by the
coach, or the percentage of his pay that he might elect to shelter in a 401(k)
plan, would obviously bear no relation at all to the university's anticipated
damages.
Finally, the record before us contains no evidence that the contracting parties
gave any serious thought to attempting to measure the actual effect that a
premature departure could be expected to have on the university's bottom line.
On the contrary, the record affirmatively shows that the university did not
attempt to determine whether the section eight formula would yield a result
reasonably approximating anticipated damages. The record shows that the
university could not explain how its anticipated damages might be affected by
the coach's obtaining employment elsewhere, this being a subject that the
draftsman of the contract testified he had never thought about. And the record
shows that the question of why the number of years remaining on the contract
would have any bearing on the amount of the university's damages was never
analyzed either.
In truth and in fact, in my opinion, any correspondence between the result
produced by the section eight formula and a reasonable approximation of
anticipated damages would be purely coincidental. What section eight prescribes
is a penalty, pure and simple, and a penalty may not be enforced under
Tennessee law. On remand, therefore, in addition to instructing the district
court to try the factual questions identified in Judge Gibson's opinion, I
would instruct the court to determine the extent of any actual damages suffered
by the university as a result of Coach DiNardo's breach of his contract.
Whether more than the section eight figure or less, I believe, the university's
actual damages should be the measure of its recovery.
CONCURRING IN PART, DISSENTING IN PART
CLAY, Circuit Judge, concurring in part and dissenting in part. Because I would
affirm the ruling below in all respects, I dissent from Part III.B of the
court's opinion. Even if we conclude that the approval of the contract
extension by Larry DiNardo, Gerry DiNardo's brother and attorney, was a
condition precedent to the enforceability of the Addendum, a grant of summary
judgment on behalf of Vanderbilt was appropriate because relevant
circumstantial and direct evidence support the conclusion that the contract was
agreed upon. This evidence, combined with Larry DiNardo's failure to object to
the contract extension, causes me to conclude that summary judgment was
properly granted.
The Court's opinion correctly notes that in Disney v. Henry, 656
S.W.2d 859 (Tenn. Ct. App. 1983), the state court held that where enforcement
of a sales contract was expressly conditioned on the sellers' final approval,
the sellers' failure to object to the terms and conditions of the contract
within a reasonable time validated the acceptance…. However, the Court's
opinion fails to note that in determining that a reasonable time had lapsed,
the state court relied exclusively on the fact that the sellers had allowed the
buyers to take concrete steps in reliance on the contract….
Particularly in this light, the facts on record establish that Larry DiNardo's
failure to object validated his brother's acceptance of the contract. Following
lopsided losses by Vanderbilt's football team to close out the 1993 season, there
was rampant speculation that Gerry DiNardo would be fired. The magazine Sports
Illustrated listed him as a coach on the "hot seat." By early
1994, Vanderbilt's athletic department became aware that the coach's status was
becoming "more and more of an issue in recruiting." This evidence
indicates that due to this concern about the coach's status, Vanderbilt
initiated contract extension discussions specifically in order to quiet
speculation of instability in the football program.
As a result, Vanderbilt announced the signing of the Addendum almost
immediately -- presumably to quell the rumors of Gerry DiNardo's impending
dismissal. Local sports columnists applauded the move precisely because it put
to rest rumors of the coach's firing and the possibility of ensuing
instability. Even more significantly, the coach himself confirmed that the deal
was done. In remarks published on August 20, 1994, Gerry DiNardo expressed his
happiness with the contract extension and his relief that this issue had been
settled. Among other things, the coach said:
[The extension] sends a message publicly that I've known right along, that [the
athletic director] and the chancellor are very supportive of us. . . . I want
less distraction, less public controversy, and the best way to do that is to
keep myself out of the picture with the public as much as possible. I don't
want people talking about me, about external parts of football. I want our
players to be the focus.
* * * *
I always felt they were committed, but actually having it makes me feel big
time happy. I remember when we were at Colorado and they gave [the head coach
an extension] after three years. It means a lot to our assistants. It's pretty
important when someone does that for you. Then, it's easy to circle the wagons
and identify the enemy. There is no second-guessing.
Vanderbilt and Gerry DiNardo thus both took steps immediately in reliance on
the Addendum by moving forcefully to put to rest any uncertainty about the
coach's job security and potential instability in the football program.
Indeed, Gerry DiNardo's pronouncement embracing the contract extension renders
Larry DiNardo's failure to object to Vanderbilt's announcement of the extension
particularly significant. Vanderbilt asked Larry DiNardo in late August and
again in late September of 1994 for any comments he might have on the Addendum.
(This occurred after Gerry DiNardo had already signed the Addendum
extending his contract on August 17, 1994, but had informed Vanderbilt that
notwithstanding the fact that he had signed the extension, he still would like
to have his brother review it.) Larry DiNardo said nothing -- even though the
coach had already publicly expressed his happiness that the extension was
complete and Vanderbilt had announced the extension to the world.
Taking all of these facts into account, and viewing this evidence in the light
most favorable to the defendant, I would hold that Larry DiNardo's failure to
object to the Addendum validated the coach's acceptance, even assuming that
Gerry DiNardo's acceptance was initially conditional in nature, and so put the
Addendum into effect. Accordingly, I concur in the Court's opinion with the
exception of Part III.B, from which I dissent for the reasons set forth above.