A federal judge from the Western District of Kentucky has ordered that former University of Louisville men’s basketball coach Rick Pitino must pursue his claim that Adidas America, Inc. wronged him through arbitration, not the courts.
Pitino sought relief through the courts with a single claim of outrage under Kentucky law against the sporting goods manufacturer, alleging that it knowingly or recklessly caused him emotional distress when its employees conspired to bribe University of Louisville basketball recruits, as detailed in a criminal complaint filed in the U.S. District Court for the Southern District of New York.
Adidas moved to dismiss, stay, or transfer this case, arguing that Pitino’s claim is subject to mandatory arbitration under the parties’ Endorsement Agreement; “that any court action must proceed in the U.S. District Court for the District of Oregon pursuant to the Endorsement Agreement; and that the complaint failed to state a claim for relief in any event.”
By way of background, the endorsement agreement between Pitino and Adidas provided that Pitino would endorse Adidas products and require the University’s basketball coaching staff and players to wear only Adidas products during games, practices, and other team activities.
In order to secure top basketball players for college programs with which it was associated, Adidas allegedly bribed recruits, including making arrangements for payments totaling $100,000 for one recruit to join the University of Louisville men’s basketball team. Pitino asserted that he “now is publicly perceived as having participated or acquiesced in Adidas’ actions” and has suffered “profound embarrassment, humiliation, and emotional injury” as a result of the company’s “extreme and outrageous conduct.”
Adidas maintained that the endorsement agreement requires arbitration of Pitino’s claim. It pointed to the agreement’s arbitration provision, which states:
“The parties agree that any dispute concerning the interpretation, construction or breach of this Agreement shall be submitted to a mediator agreed upon by the parties for nonbinding confidential mediation at a mutually agreeable location. . . . If the parties fail to resolve their dispute through mediation, then the parties agree that the dispute shall be submitted to final and binding confidential arbitration before the American Arbitration Association in Portland, Oregon.”
Adidas noted that Pitino has already “initiated the dispute resolution process under the Endorsement Agreement, claiming that Adidas ‘breached its duties of good faith and fair dealing by conspiring with others to bribe the family of a University of Louisville basketball recruit.'” That breach-of-contract claim and the outrage claim (asserted here), Adidas argues, “arise from the same operative facts” and thus are both covered by the arbitration clause.
The court wrote that to determine “whether a particular claim or dispute falls within the scope of an arbitration agreement,” it must consider whether the action “can be maintained without reference to the contract or relationship at issue.” NCR Corp., 512 F.3d at 814 (quoting Nestle Waters N. Am., Inc. v. Bollman, 505 F.3d 498, 505 (6th Cir. 2007)). If so, then “the action is likely outside the scope of the arbitration agreement–along with the presumption in favor of arbitrability and the intent of the parties.” Id. (quoting Nestle Waters, 505 F.3d at 505).
“But a party cannot avoid arbitration simply by renaming its claims so that they appear facially outside the scope of the arbitration agreement. In order to determine whether such renaming has occurred, a court must examine the underlying facts–when an otherwise arbitrable claim has simply been renamed or recast it will share the same factual basis as the arbitrable claim. Id. at 818 (quoting Simon v. Pfizer Inc., 398 F.3d 765, 776 (6th Cir. 2005)).
“Here, the facts underlying Pitino’s tort and contract claims are identical: both claims are based on Adidas’s alleged bribing of a University of Louisville basketball recruit or his family.”
Moreover, there is a “strong presumption in favor of arbitration,” Id. at 813, and thus “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration,” particularly whereas here the arbitration clause is broad. NCR Corp., 512 F.3d at 813 (quoting Masco Corp. v. Zurich Am. Ins. Co., 382 F.3d 624, 627 (6th Cir. 2004)); cf. Turi, 633 F.3d at 507 (explaining that “the FAA’s presumption of arbitrability regarding the merits of a dispute does not apply with equal force to narrow arbitration agreements” and that “[t]he more narrow the arbitration clause in question, the more likely that the provision does not even ‘arguably’ apply to the dispute at issue.” (citations omitted)). Given this standard and the shared factual basis between the claims, the Court finds that the claim asserted here is “at least arguably covered by” the Endorsement Agreement. Turi, 633 F.3d at 511; see Simon, 398 F.3d at 776. The question of whether it is in fact arbitrable must therefore be answered by the arbitrator. See Turi, 633 F.3d at 511.
Richard A. Pitino v. Adidas America, INC.; W. D. Ky; Civil Action No. 3:17-cv-639-DJH; 2018 U.S. Dist. LEXIS 137103; 8/14/18
Attorneys of Record: (For plaintiff) Michael A. Valenti, LEAD ATTORNEY, Valenti, Hanley & Robinson, PLLC, Louisville, KY; Stephen Beville Pence, LEAD ATTORNEY, Pence & Whetzell, PLLC, Louisville, KY. (for defendant) Miheer Mhatre, William H. Taft, V, LEAD ATTORNEY, Debevoise & Plimpton LLP, New York, NY; Clark C. Johnson, Michael T. Leigh, LEAD ATTORNEYS, Kaplan Johnson Abate & Bird, LLP, Louisville, KY.
