Last year Erving, aka “Dr. J,” sued ABG for breach of contract and related claims stemming from a 2016 agreement in which herein Erving sold a majority interest in his intellectual property, including his name, image and trademark, to ABG. In exchange, ABG promised to grow his brand by obtaining new licensing agreements and promotional appearances. The deal also contemplated the use of Erving’s name in memorabilia and collectibles.
The two sides disagree about whether ABG has met its end of the bargain. Erving insists that ABG, as Vice Chancellor (Judge) Nathan Cook wrote, “failed to devote adequate resources to grow the ‘Dr. J’ brand, instead effectively shelving it to focus on more profitable brands.” Erving cites several specific allegations, including his contentions that ABG used the wrong metric to determine distribution amounts, that ABG lacked authorization to pay a management fee and that ABG failed to undertake reasonable efforts to grow his brand.
ABG, which owns Sports Illustrated and manages the likeness rights of David Beckham, Shaquille O’Neal and other celebrities, rejects the accusations and insists the dispute must go to arbitration. ABG wrote that its contract with Erving contains a dispute resolution clause that requires the two sides to “submit any dispute, claim or controversy arising out of or relating to this Agreement … to final and binding arbitration.” Arbitration is a private forum for dispute resolution, and accompanying documents and testimony are inaccessible to the public or media.
In court filings, Erving argued the binding arbitration provision is contradicted by a jurisdiction provision, which indicates he and ABG consent “to the exclusive jurisdiction of the state and federal courts sitting in Delaware.” Erving maintained there is a tension between requiring both private arbitration and public court jurisdiction, and this tension created an “ambiguity” and “irreconcilable conflict” that compels a judge to intervene.
Cook flatly disagreed.
He found “these two provisions can—and should—be read harmoniously” in that the parties agree to arbitration, but if one side seeks “to avoid application of the arbitration requirement,” it agrees to petition a Delaware court to address that issue. “That,” Cook wrote, “is exactly what happened here.” Cook also reasoned that Erving’s arguments center on a dispute about contract interpretation which, the contract states, must go to arbitration.
Cook stayed the case pending a decision by the arbitrator. If the arbitrator decides that Erving’s claims are in fact arbitrable, the case will be dismissed; if not, Erving can return to court.