A Michigan state appeals court has affirmed a lower court’s ruling that the Michigan High School Athletic Association (MHSAA) acted within the scope of a contract it had with an apparel maker when it let the contract expire and signed with another apparel maker.
The plaintiff in the case was Lighthouse Sportswear, Inc., which for 14 years maintained a royalty agreement with the MHSAA to produce MHSAA apparel. In December 2008, Lighthouse and MHSAA executed their last agreement, for August 1, 2009 to July 31, 2011. The agreement gave Lighthouse the exclusive right to distribute premium items at tournaments.
The passage in the agreement that led to the litigation provided as follows: “The term of this agreement shall be from August 1, 2009 to July 31, 2011. This agreement shall automatically be lengthened by one (1) year if neither party serves written notification by March 31 of the current school year, beginning during the 2009-10 school year. Lighthouse Sportswear, Inc., shall have the option in each year of this agreement to renew until the date of termination by, not later than March 31, meeting terms of any unsolicited offer considered more favorable by the MHSAA and in its possession prior to January 1.”
The court noted that in March of 2010, Lighthouse allegedly received a call from a third party, who sought business information pertaining to the agreement between Lighthouse and MHSAA. “Lighthouse refused to give the person any information and later learned that the caller was an associate of defendant EA Graphics,” wrote the court. “Around April 2010, MHSAA drafted a memo to potential merchandise vendors, outlining the process for submitting proposals to MHSAA for future seasons. In July 2010, MHSAA sent Lighthouse a letter stating that ‘MHSAA will not automatically renew or extend its agreement with Lighthouse Sportswear, Inc., for MHSAA tournament merchandise and related services after July 31, 2011.’ Thereafter, Lighthouse learned that MHSAA chose EA Graphics as its new vendor.”
Lighthouse sued for breach of contract and MHSAA moved to dismiss, pursuant to MCR 2.116(C)(10). “The parties agree with the trial court that the automatic renewal provision of the royalty agreement is ambiguous,” wrote the court. “… However, there is no genuine issue of material fact on the question of whether the parties intended and conducted themselves with the understanding that the deadline was July 31.”
The court also cited the email of a Lighthouse executive that “indicates his clear understanding that the agreement permitted MHSAA to decline the automatic renewal by July 31st of the preceding year.”
The court continued: “A party cannot acquiesce to changes in a written agreement through their actions and then attempt more than a year later to argue that it never agreed to the changes. Indeed, this is precisely why a review of the business dealings of the parties to a contract was adopted as a means of determining the parties’ intent—to prevent one party from blindsiding the other with a challenge months or years after the alleged breach.
“Taken all together, it is clear that while the parties may have disagreed on the cut off date prior to and at the time of executing the Royalty Agreement, subsequently the cut off date was clarified by defendant to be July 31 and the plaintiff acquiesced to this clarification.”
Lighthouse Sportswear, INC., v Michigan High School Athletic Association, INC., Ethnic Artwork, INC. d/b/a EA Graphics, and Robert Artymovich; Ct. App. Mich. No. 310777, 2013 Mich. App. LEXIS 1184; 7/2/13
http://statecasefiles.justia.com/documents/michigan/court-of-appeals-unpublished/310777.pdf?ts=1372853138
