Open Terms Spell Doom for Ford in Auto Racing Spat

Aug 23, 2005

A federal court in the Eastern District of Michigan has granted a professional race car driver’s motion for summary judgment, finding that the contract he had to race for the Ford Motor Company was unenforceable.
The court’s determination was based on the contract’s wording that Ford would provide Kahne “with opportunities to participate in one or more mutually acceptable racing series with a reasonably competitive team.” The fact that Kahne was not willing to accept the scenarios proposed by Ford, in effect, gutted the contract, allowing Kahne to find another deal with a rival sponsor.
The relationship between the parties began in 2000 when Kahne and Ford entered into a contract where Ford would try to nurture the undiscovered, yet promising, race car driver into the upper echelon of professional auto racing. The contract called for Kahne to race with Ford or a Ford supported racing team through August 29, 2002. Then, Ford would have the “option to renew [the] agreement for an additional two years with similar terms, to be negotiated in 2002.”
Ford alleged in its complaint that it devoted substantial financial resources to developing Kahne as a driver, such as hiring a driving coach and purchasing a practice car. Then around November 2001, Kahne informed the company that he was interested in stock car racing and wanted to drive in a racing series sanctioned by NASCAR. Ford claimed it informed Kahne that it was in the process of working out a deal with a sponsor to place him with a NASCAR Busch Series stock car team for the 2002 season.
Kahne signed another contract in early 2002 with Robert Yates Racing, a partner of Ford, to drive exclusively for that team in NASCAR races. Meanwhile, Kahne was working on another agreement, a “Personal Services Agreement,” with Ford. The May 2002 agreement included the following “key disputed terms,” noted the court:
“DRIVER (Kasey Kahne) agrees to participate in one or more racing series as a driver of ‘Ford’ branded vehicles and/or Ford powered vehicles. FORD agrees to provide DRIVER with opportunities to participate in one or more mutually acceptable racing series with a reasonably competitive team. The specific series and team will be determined jointly and will be subject to the following considerations:
“a. The Team selected will utilize Ford vehicles and/or engines and will have sponsors compatible with the business interests of FORD. The DRIVER will act as a representative of FORD and will display the FORD logos on the driver[‘]s suit and helmet.
b. The DRIVER will be employed by the Team. FORD will act on behalf of the driver to ensure that Team compensation is comparable with “FORD” drivers of similar experience and accomplishment. DRIVER must reserve the right in the Team Agreement to allow for the option of racing in other series[] (schedule permitting).
c. In the event that the relationship between DRIVER and the employing Team becomes unsatisfactory, for any reason, in the opinion of FORD, FORD has the option together with the DRIVER, to place the DRIVER with another series/team.
d. The DRIVER is encouraged to participate in other racing events where FORD participates, e.g. NASCAR, USAC Midget, Silver Crown, Sprint Car, CART, etc. FORD has the right to deny participation where FORD feels the team is incompatible with Company business or policy reasons, but disapproval will not be unreasonably withheld. FORD will make every effort to accommodate DRIVER participation in mutually [*8] beneficial racing events.
e. Participation in a series that FORD does not support (e.g. the Indianapolis 500 IRL Race) will be accommodated, where possible, by placing the DRIVER with a FORD associated team. If no team is available, FORD would consider placement with a team that is competitive, has a record of safe operations and the team sponsors are compatible with the business interests of FORD. FORD has the right to deny participation where FORD feels the team is incompatible with Company business or policy reasons, but disapproval will not be unreasonably withheld.”
The first problems emerged in late 2002 when RYR decided that it was not going to race a Busch Series team the following year. RYR assigned its contract for one year (the 2003 season) to Akins Motorsports, another Ford affiliated NASCAR Busch team. Kahne had a successful season on the track in 2003, but was frustrated with the opportunities RYR and Ford were providing him. Specifically, he would later claim, Ford declined to offer him a position as a driver for a full-time Nextel Cup Series team for 2004. In fact, in a letter written by Ford’s director of Ford Racing Technology, Kahne was informed that it was premature for him to drive full-time on the NASCAR Nextel Cup Series.
So on October 2, 2003, Kahne, through Kasey Khane Incorporated, signed a contract with Evernham Motorsports, LLC (a Dodge team) giving Kahne a slot on the NASCAR Nextel Cup Series. Kahne had an extremely successful 2004 season, winning NASCAR’s rookie of the year.
Ford sued for breach of contract, describing a “nefarious plan” driven by a more lucrative deal from another racing organization. Specifically, it alleged that Kahne reached out to the rival racing team in late spring of 2003.
The crux of Kahne’s rationale for his decision was outlined in a letter to Ford in which he wrote: “By telling me that RYR would not be fulfilling its obligations with respect to my contract, RYR anticipatorily repudiated our Agreement and therefore, it is my position that our contract was terminated.”
After considering Kahne’s motion for summary judgment, the court concluded that Kahne’s contract with Ford “is not enforceable under Michigan law. No reasonable jury could conclude, based on the record evidence presented, that the parties had reached agreement on all material or essential terms. First, the clear and unambiguous language of the contract shows that the parties intentionally left the material terms of the racing ‘series’ and ‘team’ for future negotiation and mutual agreement or joint determination.”
“Second, the sworn testimony of Ford’s own representative establishes that these contract terms were intentionally left open for future joint agreement by the parties and that these terms were ‘very important.’”
Ford Motor Co. v. Kahne; E.D. Mich.; Case No. 04-CV-72525-DT; 7/28/05
Attorneys of Record : (for plaintiff) Emily M. Petroski, Khalilah V. Spencer, Maurice G. Jenkins and Dickinson Wright of Ford Motor Co. Detroit, MI. (for defendant) David R. Baum, of Sonnenschein, Nath in New York, NY and Harvey R. Heller and Mark H. Fink of Maddin, Hauser in Southfield, MI.


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