By Jacqueline Sudano
Michael Jordan’s induction to the Naismith Memorial Basketball Hall of Fame has sparked a heated legal dispute between sportswear giant Nike, Massachusetts-based apparel company SportsFuzion, Inc. and the Hall of Fame.
On June 22, 2009, SportsFuzion, through its attorneys at Fish & Richardson P.C., filed a complaint in a Massachusetts state court, alleging several counts against Nike and the Hall of Fame. The complaint alleges fraud and unfair and deceptive trade practices against both entities. Additionally, SportsFuzion asserts that the Hall of Fame breached its contract and the implied covenant of good faith and fair dealing. The counts filed against Nike include tortious interference with contract, unjust enrichment, and violation of the Lanham Act. As a result, SportsFuzion seeks more than $10 million in actual and punitive damages.
The events leading to this suit began in 2005, when the Hall of Fame and SportsFuzion began negotiations regarding licensing of the Hall of Fame’s names, logos, and trademarks to be used in the manufacture and sale of merchandise on its behalf. On March 1, 2006, the parties came to a licensing agreement after what SportsFuzion describes in the court document as “the protracted negotiation including the exchange of multiple drafts of an extensive document.” This agreement gave to SportsFuzion “a license to the names, logos, trademarks, designs, phrases of or associated with the Hall of Fame … and all photography owned by the Hall of Fame or contained within the archives of the Hall of Fame (the ‘Photo Rights’)” from the date of signing until December 31, 2012, subject to a five-year optional extension thereafter. The complaint continues,
“[the]Hall of Fame undertook that it would contractually obtain all rights from certain third parties which were necessary for all uses contemplated by the Agreement including the manufacture, distribution, promotion, advertisement and sale of the Licensed Products (‘Necessary Rights’). These third parties from whom the Hall of Fame agreed to secure the Necessary Rights were specifically identified in the Agreement and consist of certain Hall of Fame players and their associated teams.”
Michael Jordan was an identified third party, and the agreement contained a detailed revenue percentage split in his case.
SportsFuzion’s contractual relationship with the Hall of Fame is evidenced by its providing jerseys used in both the 2006 and 2007 enshrinement ceremonies. The company allegedly raised capital reasonably relying on its agreement with the Hall of Fame, and the Hall of Fame encouraged the NBA to assist SportsFuzion in launching product, arranging meetings between the company and Adidas/Reebok and Mitchell & Ness. In addition to these meetings, SportsFuzion approached Nike, seeking its possible partnership in the Hall of Fame opportunity. After three meetings, two Nike executives wrote SportsFuzion in November 2007 indicating that Nike was no longer interested in pursuing the opportunity.
With regards to its claims against the Hall of Fame, SportsFuzion alleges that the Hall of Fame misrepresented its ownership of the photos in its archives and that it would be able to secure rights from third parties named in the Agreement for licensing purposes. Contrary to this belief, the Hall of Fame did not have the authority to license the “Photo Rights” for the purposes set forth in the Agreement. SportsFuzion allegedly spent considerable time and money relying on this misrepresentation, and alleges that the Hall of Fame, as a result, committed fraud in deliberately making a material misrepresentation about the legal ownership of its archives.
SportsFuzion claims that Nike circumvented its Agreement with the Hall of Fame and entered into its own agreement to launch the Air Jordan “Hall of Fame” Collection, interfering with and in violation of SportsFuzion’s exclusive Agreement with the Hall of Fame.
The trouble here lies in the status of the contract between SportsFuzion and the Hall of Fame. In January of 2008, the Hall of Fame indicated its interest in renegotiating the agreement, and SportsFuzion agreed to renegotiate in good faith. On January 17, 2008, counsel for the Hall of Fame allegedly sent SportsFuzion a letter claiming that SportsFuzion was in breach of the agreement and that it intended to terminate said agreement because of this breach. On April 2 of that same year, SportsFuzion, through counsel, replied, alleging it was the Hall of Fame that breached the agreement and posited that any breach by SportsFuzion was de minimis and cured. Eventually, the two parties met on September 11, 2008 and came to a new agreement after the Hall of Fame specifically represented that it was not engaged in any discussions with third parties to replace SportsFuzion as the Hall of Fame’s exclusive licensee.
But in December 2008, SportsFuzion discovered that Nike was already planning and designing merchandise for the Hall of Fame. “Having Nike and the Hall of Fame go behind our backs to cut us out of the deal has become my worst nightmare,” said Andrew Mirken, SportsFuzion’s co-founder and president, in a statement. Pursuant to discovering this information, SportsFuzion attempted to negotiate a buyout of the exclusive rights in good faith with the Hall of Fame. The Hall of Fame still allegedly denied negotiating with third parties as late as March 2009.
This past spring, Nike announced to industry insiders its plans to go ahead with the Hall of Fame sneakers and began taking orders from its retail partners. In June, it launched a website (www.getyourbasketballon.com) featuring fictional character Leroy Smith (played by comedian Charlie Murphy) and his petition to be inducted to the Hall of Fame. By incorporating the Hall of Fame logo and launching a Hall of Fame Air Jordan sneaker collection, Nike had, according to SportsFuzion’s complaint, “simply induced the Hall of Fame to repudiate its contract with SportsFuzion.”
Nike’s Air Jordan brand is producing three shoes to commemorate Michael Jordan’s Hall of Fame induction: the 6 Rings, the Retro 1, and the Jordan 2009. Michael Jordan’s induction, along with former NBA stars David Robinson and John Stockton, is scheduled to occur at the Naismith Memorial Basketball Hall of Fame in Springfield, MA on September 11, 2009.
