Opinions of the United 2004 Decisions States Court of Appeals for the Third Circuit
7-30-2004
Echols v. Pelullo Precedential or Non-Precedential: Precedential
Docket No. 03-2740
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Recommended Citation "Echols v. Pelullo" (2004). 2004 Decisions. Paper 422. http://digitalcommons.law.villanova.edu/thirdcircuit_2004/422
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova University School of Law Digital Repository. It has been accepted for inclusion in 2004 Decisions by an authorized administrator of Villanova University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu. PRECEDENTIAL Harry P. Marquis 112 Graces Avenue, Suite 120 UNITED STATES COURT OF Las Vegas, NV 98101 APPEALS FOR THE Counsel for Appellant THIRD CIRCUIT Robert A. Burke Blank Rome No. 03-2740 One Logan Square Philadelphia, PA 19103
ANTWUN ECHOLS, Lamont Jones [ARGUED] an individual 4434 Crenshaw Boulevard Los Angeles, CA 90043 v. Counsel for Appellee
ARTHUR PELULLO, an individual; BANNER PROM OTIONS, INC., OPINION OF THE COURT a Delaware Corporation, Appellants RENDELL, Circuit Judge. Appeal from the United States A boxing promoter seeks to recover District Court for the from the District Court’s knockout punch Eastern District of Pennsylvania aimed, and delivered, at the enforceability (D.C. Civil No. 03-cv-01758) of its promotional agreement. Banner District Court Judge: Promotions, Inc. entered into a Clarence C. Newcomer promotional agreement with boxer Antwun Echols, the terms of which left Echols’s compensation for participating in bouts Argued February 24, 2004 secured by Banner subject to negotiation Before: RENDELL, BARRY between the two parties, and to and ROSENN, Circuit Judges. renegotiation under certain circumstances. The District Court determined that the (Filed: July 30, 2004) agreement’s failure to specify minimum compensation for Echols’s participation in these bouts rendered it so indefinite as to be unenforceable. For the reasons set forth George A. Bochetto [ARGUED] below, we will reverse. Bochetto & Lentz 1524 Locust Street Philadelphia, PA 19102 I. irrespective of whether such [b]out actually takes place for any reason other Arthur Pelullo is the president and than Banner’s nonperformance.” owner of Banner Promotions, Inc. (“Banner”), a company engaged in the Section Six of the Agreement promotion of professional boxers and delineated Echols’s compensation for his professional boxing matches. Antwun appearance in the bouts secured by Echols is a professional boxer with a Banner: current record of twenty nine wins, five Your purse for all bouts losses and one draw. covered by this agreement In November 1999, Echols signed a shall be structured as P romotional Ag reem ent (“th e follows (a) non television, Agreement”) with Banner, receiving a not less than $7,500.00 $30,000 signing bonus. The Agreement (b) Univision, not less than granted Banner “the sole and exclusive $10,000.00 (c) Telemundo, right to secure all professional boxing not less that $10,000.00 bouts requiring [Echols’s] services as a (d) ESPN 2, Fox Sports or professional boxer and to promote all such small pay-per-view, not less bouts” for a term of at least four years, and t h a n $ 20,00 0.00 p lu s possibly longer, if certain conditions were $10,000.00 training met. In essence, the Agreement gave expenses. (e) HBO AFTER Banner the right to be Echols’s sole DARK as a challenger or in representative in negotiations with any a non title bout, not less than third parties that were interested in having $45,000.00 plus $10,000.00 Echols box on their television networks, in training expenses. (f) HBO their arenas, or against boxers they AFTER DARK as a World represented. Champion not less than $80,0000.00 plus Banner’s major obligation under the $10,000.00 training Agreement was to “secure, arrange and expenses. (g) HBO as a promote” not less than three bouts for challenger or in a non-title Echols during each year of the contract. b o u t , n o t l e ss t h a n Banner had sole discretion to determine $50,000.00 plus $10,000 the time and place of each bout. While training expenses. (h) HBO Echols had to approve each opponent, his as a World Champion, not approval could not be “unreasonably less than $125,000.00 plus withheld.” Under Section Five of the $15,000.00 training Agreement, Banner could satisfy its expenses. obligation to secure a bout “if it shall have made a bona fide offer in writing
2 Thus, Banner was to pay Echols not less any compensation at all. than a stated minimum amount for each Tension also arose between the two bout in which he appeared, with the parties over a “step-aside” fee that Banner amount of the minimum depending on negotiated on Echols’s behalf in where the bout was televised and whether connection with a fight in Germany.1 Echols appeared as a champion or not. E c h o l s b e l i ev e d t h a t B a n n e r However, these “minimum purses” could misrepresented the amount of the “step- be subject to renegotiation, or the entire aside” fee, telling him that it was less than Agreement cancelled, at Banner’s option, it actually was, so that Banner could by operation of Section Eight, which pocket the difference. provided that “[i]f during the course of this Agreement Boxer should lose any bout, Finally, in February 2003, Echols Banner shall [sic] the right but not the requested information about the purse for obligation to rescind this Agreement or the a fight on March 15 of that year. Banner purses set forth in paragraph (6) shall be offered $30,000. When Echols made a subject to renegotiation.” counter-offer, Banner responded by rescinding the offer and stating it would One month after entering the offer the March 15 fight to another boxer. Agreem ent, E chols lost a world Echols filed this suit shortly thereafter. championship bout to Bernard Hopkins, triggering Section Eight. Banner chose not to exercise its right to rescind the II. Agreement, but took the position that Echols’s compensation would thereafter be In his complaint, Echols alleged negotiated on a bout-by-bout basis. that: (I) the Agreement was unenforceable Indeed, the parties proceeded to negotiate for indefiniteness; (II) Banner and Pelullo several individual bout purse agreements breached the covenant of good faith and in the years after the loss to Hopkins. fair dealing by misrepresenting the amount Echols, however, b e c a me dissatisfied with the situation. According 1 Under certain circumstances, to him, Banner had made him “take it or boxing association rules force a champion leave it” offers - offering him bouts for to offer to fight the next-ranking what he believes is below-market contender. If the champion wishes to fight compensation, and then rescinding the a boxer other than the next-ranking offers if he attempted to negotiate for a contender, or if a boxer other than the larger purse. Because the operation of next-ranking contender wishes to fight the Section Eight eliminated the minimum champion, they may pay the next-ranking purses specified in Section Six, Echols felt contender to decline the champion’s offer that he was forced to accept Banner’s and “step aside” for another boxer. Such unsatisfactory offers in order to receive a payment is known as a “step-aside” fee.
3 of the “step-aside” fee; (III) Banner and Echols’s motion for partial summary Pelullo committed fraud against him by judgment and denied Appellants’ cross- misrepresenting the amount of the “step- motion, holding that the Agreement was aside” fee; (IV) Banner and Pelullo unenforceable for indefiniteness, as the violated the Muhammad Ali Boxing Agreement contained no price term. The Reform Act (“the Ali Act”), 15 U.S.C. § parties then settled Echols’s remaining 6301, by misrepresenting the amount of claims, with Banner and Pelullo reserving the “step-aside” fee; and (V) he was the right to appeal the order declaring the entitled to a constructive trust over monies Agreement unenforceable. They now that Banner and Pelullo owed him. exercise that right. Echols also moved for injunctive relief preventing Banner and Pelullo from III. asserting their rights under the Agreement in conjunction with a title bout that was to The District Court had subject take place in June 2003. The District matter jurisdiction pursuant to 28 U.S.C. § Court denied the motion, finding that 1332. We have appellate jurisdiction Echols had not established irreparable pursuant to 28 U.S.C. § 1291. Our review harm. of an order granting summary judgment is plenary. Morton Int’l, Inc. v. A.E. Staley Banner and Pelullo then moved to Mfg. Co., 343 F.3d 669, 679 (3d Cir. dismiss the Ali Act claim, arguing that 2003). because the Ali Act did not apply to boxing matches fought outside the United States and Echols had predicated his Ali IV. Act claim on misrepresentations relating to a match in Germany, Echols had failed to A federal court exercising state a claim upon which relief could be diversity jurisdiction must apply the granted. The District Court granted the choice of law rules of the forum state. motion. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 497 (1941). Accordingly, The defendants then moved to we apply Pennsylvania choice of law dismiss the remaining claims for lack of rules in this case. Pennsylvania courts subject matter jurisdiction, and both sides g e n e r a l l y e n f o r c e c h o i c e -o f - l a w moved for partial summary judgment to provisions in contracts. Kruzits v. decide the enforceability issue. The Okuma Mach. Tool, Inc., 40 F.3d 52, 55 District Court denied the motion to (3d Cir. 1994). In this case, Section dismiss, holding that the parties were Nineteen of the Agreement provides that diverse and that the amount in controversy it “shall be governed and construed under satisfied the statutory requirement for the laws of the state of Delaware.” Thus, diversity jurisdiction. It then granted our task is to predict how the courts of
4 Delaware would resolve this issue if essence of the parties’ agreement after presented with these facts. The District [Echols’s] loss became a contract to enter Court, applying principles of Delaware into a future contract.” Relying on the contract law, held that the Agreement Raisler Sprinkler court’s pronouncement was unenforceable. However, we predict that “an agreement that [parties] will in that the Delaware Supreme Court would the future make such contract as they conclude otherwise, and will accordingly may agree upon amounts to nothing,” the reverse. District Court deemed the Agreement unenforceable. In Delaware, as in most jurisdictions, a court will not enforce a We think this conclusion of the contract that is indefinite in any of its District Court is overly simplistic. It material and essential provisions. Hindes would no doubt be correct if the v. Wilmington Poetry Society, 138 A.2d Agreement between Echols and Banner 501, 503 (Del. Ch. 1958). However, a were nothing more than a contract for court will enforce a contract with an Echols to appear in a particular bout or indefinite provision if the provision is series of bouts. If that were the case, not a material or essential term. Id. The Echols’s price for appearing in a bout Delaware courts have not spoken on this would be a material and essential term, issue recently, nor have they ever really and, consequently, the failure to specify focused on what types of contract the amount of that compensation or some provisions are material and what types method of determining that are not, although they noted decades ago compensation would certainly make the that “[t]he general rule is that price is an contract indefinite. However, the essential ingredient of every contract.” Agreement does not merely deal with a Raisler Sprinkler Co. v. Automatic bout or a series of bouts. Rather, it Sprinkler Co., 171 A. 214 (Del. Super. establishes the relationship between the Ct. 1934) (citation and quotations two parties, a relationship in which omitted); see also Hindes, 138 A.2d at Echols promised to fight exclusively for 503 (“A provision for compensation is Banner, and Echols desired Banner’s certainly one of the most important services on an ongoing basis. The aspects of any agreement.”). consideration that Banner paid Echols to secure this promise included a $30,000 Here, the District Court held that signing bonus and a guarantee that the operation of Section Eight of the Banner would arrange at least three bouts Agreement, which required the parties to per year for him. While the purses for negotiate Echols’s compensation for these bouts were relevant, we do not appearing in bouts secured by Banner on view them as so material and essential to a bout-by-basis after the December 1999 the unde r sta nding r e ga r d ing th e loss, “removed any mention of price relationship such that providing that from the agreement.” In its view, “the
5 certain events could alter the price would clearly contemplates such an outcome. render the contract so indefinite as to be The Agreement does not require the invalid. parties to enter into contracts for individual bouts, so it is not, as the This is supported by the way in District Court posited, “a contract to which the Agreement was intended to enter into a future contract.” Thus, it function. Under Section Four, Banner need not specify the terms of those future was obligated to secure three bouts for contracts to be enforceable. Echols per year. Under Section Five, Banner discharged its duty to secure a There is a paucity of Delaware bout “if it shall have made a bona fide law on point, and the pronouncements offer in writing irrespective of whether that do exist are general in nature and such [b]out actually takes place for any quite dated. Under Delaware law, “it is reason other than Ban ner’s well settled that an agreement in order to nonperformance.” Notably absent is any be a legally binding agreement must be requirement that Echols agree to such an reasonably definite and certain in its offer or that Echols must agree to such terms.” Most Worshipful Prince Hall an offer before Banner will be deemed to Grand Lodge of Free & Accepted have fulfilled its obligation to him. As a Masons of Delaware v. Hiram Grand result, the parties could satisfy the terms Lodge Masonic Temple, 80 A.2d 294, of the Agreement without any bouts 295 (Del. Ch. 1951). More recent occurring, as long as Echols continued to authorities in the area of contracts have deal exclusively with Banner and Banner considered the concept of definiteness; continued to make the required number specifically, the Restatement (Second) of of bona fide offers.2 While neither party Contracts § 33(2) provides that “[t]he would likely be pleased with that result, terms of a contract are reasonably certain the Agreement - with or without the if they provide a basis for determining minimum purse structure in place - the existence of breach and for giving an appropriate remedy.” And, Comment e to this section specifically acknowledges 2 The dissent opines that under our that price terms can be indefinite in interpretation of the contract Banner could certain situations, setting forth tests that comply with the contract terms by making apply to contracts for the sale of goods, offers for fights at any price. However, and the rendition of services - which the this contention ignores the contractual instant contract would appear to be.3 The requirement that the offers be “bona fide,” and the covenant of good faith and fair 3 dealing implied in contracts under Comment e, concerning Indefinite Delaware law. Cincinatti SMSA Ltd. Price, provides: P’ship v. Cincinatti Bell Cellular Sys. Co., 708 A.2d 989, 992-93 (Del. 1998). Where the parties manifest an intention not
6 material and essential terms of the in such an event. The terms of the Agreement here satisfy the Restatement Agreement are quite clear that Echols test. Echols breaches the contract if he must continue to deal only with Banner deals with some entity other than Banner; and that Banner must continue to secure if he were to breach in this manner, bouts for and to promote Echols for as Banner might be entitled to injunctive long as the Agreement lasts. relief prohibiting him from dealing with While the Delaware courts have that entity and possibly money damages. not had the opportunity to construe an Banner breaches the contract if it fails to agreement of this type, there is one case pay the signing bonus or fails to make from another jurisdiction that is clearly three bona fide offers per year; if it were on point. In Don King Prods., Inc. v. to breach in this manner, Echols might be Douglas, 742 F. Supp. 741 (S.D.N.Y. entitled to rescission and possibly money 1990), the court was confronted with a damages. More importantly, there is no nearly identical issue. A boxer argued breach in the event that Banner and that his agreements with a promoter were Echols are unable to reach an agreement unenforceable for indefiniteness. The on a purse for a particular bout. And promotional agreement between the two there is no uncertainty as to what occurs parties provided $25,000 to the boxer in return for the exclusive right to promote his fights for a period of time. to be bound unless the amount of money to Compensation for individual fights was be paid by one of them is fixed or agreed made subject to further negotiation and and it is not fixed or agreed there is no agreement, with the terms to be set forth contract. Uniform Commercial Code § 2- in individual bout agreements. The 305(4). Where they intend to conclude a promotional agreement specified floor contract for the sale of goods, however, levels of compensation for all bouts and the price is not settled, the price is a except title bouts, where the purse was to reasonable price at the time of delivery if be “negotiated and mutually agreed upon (a) nothing is said as to price, or (b) the between [the parties].” Id. at 761.4 price is to be left to be agreed by the parties and they fail to agree, or (c) the 4 price is to be fixed in terms of some agreed The dissent correctly notes that the market or other standard as set or recorded parties later reached a second agreement, by a third person or agency and it is not so but misstates the effect of that agreement. set or recorded. Uniform Commercial It established that the boxer would receive Code § 2-305(1). Or one party may be a $1.3 million purse for a title bout in given the power to fix the price within Tokyo, Japan, and $1 million per fight for limits set by agreement or custom or good his first three post-Tokyo fights, unless he faith. Similar principles apply to contracts was the winner in Tokyo, in which case for the rendition of services. the amount per fight would be subject to
7 The court found that while the nature of Echols’s relationship with agreement left certain terms open to Banner and the services that Banner has future negotiation, it was more than an agreed to perform for Echols in exchange agreement to agree, at least with respect for this exclusivity. The Agreement to the exclusivity terms, as it was clearly indicates Echols’s obligation to “explicit and definite about [the boxer’s] deal only with Banner and Banner’s commitment to fight only for [the obligation to secure a certain number of promoter] during the life of those bouts for Echols. However, nowhere contracts and about the minimum does it obligate Echols to participate in consideration he could receive for those bouts, and, in the absence of such making that commitment.” Id. at 762. an obligation, it is unnecessary for the The fact that the agreement left open the parties to have agreed in advance upon compensation that would be payable purses for Echols’s participation. The under certain circumstances (i.e., title purses were not material and essential bouts) did not affect the essential subject terms, and the fact that they were left matter of the agreement, as “the writing open to future negotiation does not manifests in definite language . . . the render the contract unenforceable. agreement to deal exclusively with one Other courts have enforced another with respect to title defenses and agreements that we find analogous to the to negotiate in an effort to reach a mutual one at issue here. In Mantell v. Int’l understanding as to the open price term Plastic Harmonica Corp., 55 A.2d 250 for such a defense.” Id. (N.J. App. 1947), a contract between a Similarly, the failure to specify plastic harmonica manufacturer and a Echols’s purses does not affect the distributor did not fix a price for the essential subject matter of the contract in goods to be distributed. When the the instant case, which is the exclusive manufacturer sought to have the contract declared invalid for failure to set a price, the court noted that the agreement was negotiation with $1 million as a floor. not purely one for the sale and purchase Don King, 742 F. Supp. at 762. It did not of goods. Instead, it was one for an establish a $1 million minimum purse exclusive right to distribute the goods in guarantee for all title bouts. If the boxer a certain region, and the consideration fought in a title bout after the three post- offered by the distributor was for these Tokyo fights, there was no minimum rights. guarantee for that fight in either the This type of contract is a comparatively original contract or the second agreement. recent device to meet modern needs in Thus, even after the second agreement, the marketing and distribution of goods when the court decided the case, there on a nation-wide or regional scale. In the were still fights for which there were no very nature of the exclusive sales and minimum purse guarantees.
8 distribution contract, it is not usually was to vary from month to month, as practicable to fix prices and the quantum “mutually agreed upon by the parties for of goods sold; and the rules of certainty each contract of hauling.” Id. at 418. and definiteness which govern the When the waste disposal company ordinary contract of sales have no sought to have the contract declared void application. Unlike a pure contract of for its failure to specify a price, the court purchase and sale, agreements of this upheld the arrangement, due to its class embody mutual promises and similarity to an exclusive sales and obligations with sufficiently definite distribution contract. Id. at 420. The standards by which performance can be open price term merely reflected the tested. The grant of the exclusive parties’ knowledge that different types of franchise is a consideration for the wa ste require d diff erent disposal grantee’s obligation to establish and methods, and that since there was no way develop a market for the sale and to know in advance how much of each distribution of the product in the area type of waste would be disposed, it was covered by the monopoly. The character wise to leave the exact price to be of the contractual arrangement is such as negotiated later. Id. at 421. to preclude explicitness as to quantity In Marcor M gmt., Inc. v. IWT and prices. This is especially so where . Corp., No. 96-CV-1519FJS, 1998 WL . . the product is new and untried and its 809011 (N.D.N.Y. Nov. 17, 1998), the potential worth and market value and the parties had entered into a contract under cost of manufacture and distribution are which Marcor paid IWT a sum of money unknown quantities. Such contracts have for exclusive marketing rights to IWT’s the requisite mutual assent and soil remediation technologies. The consideration. They are not comparable agreement between Marcor and IWT did to the ordinary executory agreement to not state a price at which IWT would sell buy and sell goods. its product to third parties identified by Marcor. When IWT argued that the a g r e e m e n t w i t h M a rc or w as Id. at 256-57 (emphasis added). As a unenforceable because these price terms result, the court enforced the contract were left open, the court disagreed, despite its failure to set a price for the stating that “the fact that a term is left goods. open does not automatically render a In Allied Disposal, Inc. v. Bob’s contract unenforceable.” Id. at *6 (citing Home Service, Inc., 595 S.W.2d 417 Restatement (2d) of Contracts § 33). The (Mo. App. 1980), a waste disposal court noted that the contract required company contracted with a waste site IWT’s consent before it could be bound owner for exclusive use of the site. The to any agreement with a third party and price it was to pay for the use of the site c o ncluded that “ a r e a s o n ab le
9 interpretation of this provision is that the We r e c o g niz e tha t t h es e parties would mutually agree upon the pronouncements are from courts other price at a later date.” Id. Because there than those of Delaware. The Delaware was no requirement that IW T enter into courts have not had an opportunity to future contracts for its services, there was confront the issue of price indefiniteness no problem with the fact that the in the context of an exclusive distribution exclusive marketing agreement with or marketing contract. What little Marcor left open the price terms of such Delaware case law exists regarding contracts. indefinite terms tends to arise in situations involving a pure sale of goods Although the Agreement between or services. See, e.g., Hammond & Banner and Echols deals with a very Taylor, Inc. v. Duffy Tingue Co., 161 different subject matter from the A.2d 238 (Del. Ch. 1960) (examining a contracts at issue in Mantell, Allied contract for sale of a business); Hindes v. Disposal, and Marcor, its structure Wilmington Poetry Society, 138 A.2d closely resembles the structure of the 501 (Del. Ch. 1958) (examining a agreements in those three cases. In each contract for sale of a manuscript); Most of the three cases, one party bargained Worshipful Prince Hall Grand Lodge of for the exclusive right to distribute, use Free and Accepted Masons of Delaware or market the other party’s product or v. Hiram Grand Lodge Masonic Temple, service, just as Banner bargained for the 80 A.2d 294 (Del. Ch. 1951) (examining exclusive right to promote Echols in the a contract for a sale of stock); Raisler instant situation. In each of the three Sprinkler Co v. Automatic Sprinkler Co. cases, the prices of specific transactions of America, 171 A. 214 (Del. Super. Ct. that might occur within the exclusive 1934) (examining a contract for a relationship were left open, just as the license). While these older Delaware purses for any bouts that Echols might cases stand generally for the principle fight during the course of the exclusive that price is an essential term of every promotional agreement were left open contract, we believe this principle would here. And, as a practical matter in these give way if fact patterns were presented, fact settings, the price would presumably such as those in Mantell, Allied Disposal, be affected by certain factors arising and Marcor, where the price left later, beyond anyone’s control. Leaving indefinite was not the price of the the prices to be negotiated at a later time exclusive relationship, but the price of a would allow the parties to arrive at a transaction occurring within that more informed decision. So too, here, relationship, and Delaware would losses by Echols clearly would impact address these nuances in the same the value of his bouts, and later reasonable manner as the courts did in negotiations would better address any these cases. Also, because Delaware such situation. a p p e a r s t o h a v e e m b r a ce d t h e
10 Restatement of Contracts, 5 wh ich Echols’s participation in bouts secured addresses, and reflects a more modern by Banner rendered it so indefinite as to v i e w r e g a r d in g e n f o rce a b i l i t y be unenforceable. Accordingly, we will notwithstanding indefinite price terms, REVERSE the District Court’s order we predict that the Delaware Supreme granting summary judgment in favor of Court would find the instant Agreement Echols. to be enforceable. We reject not only the somewhat ROSENN, Circuit Judge, dissenting. simplistic view of the District Court but also the impassioned view of our Boxing is a perennial sport, dissenting colleague. The issue squarely stretching from the golden days of presented involved indefiniteness in ancient Greece to present times. The specific terms, not bargaining power, professional life of a boxer, however, is oppression or other factors. The unequal ephemeral and because of the violence of bargaining power of a boxer in the the sport, is limited to a few fleeting boxing marketplace was not briefed, nor years. The possibility of a defeat is do we think that it should impact our always imminent. Thus, a purported analysis of certainty in contractual terms. contract between a promoter and boxer, which permits the promoter in the event the boxer “should lose any bout” to V. rescind its obligation to provide any minimum purses, lays all the odds in In light of the foregoing favor of the promoter. discussion, we conclude that the District Court erred when it determined that the Boxer Antwun Echols (“Echols”) Promotional Agreement’s failure to and his promoter, Banner Promotions, specify minimum compensation for Inc. (“Banner”) dispute the enforceability of the exclusive promotional agreement that they executed in 1999. The 5 purported contract, drafted by Banner Although the Delaware Supreme and governed by Delaware law, allowed Court has never relied upon Section 33 of B a n ne r to r e ta in the exclu siv e the Restatement, other Delaware courts promotional rights to secure all have cited it with approval. See, e.g., professional boxing bouts for at least Independent Cellular Telephone, Inc. v. four years, but failed to maintain any Barker, No. Civ. A.15171, 1997 WL price term following a defeat. As 153816, at *4 (Del Ch. Mar. 21, 1997); drafted, Echols must rely on Banner’s Middle States Drywall, Inc. v. DMS good will for future compensation, Properties-First, Inc., No. Civ. A 95L-01- hoping that the promoter will renegotiate 041 SCD, 1996 WL 453418, at *8 (Del. acceptable new terms on either a bout- Super. Ct. May 28, 1996).
11 by-bout or collective-bout basis. If the agreement with respect to the purses for new financial terms are unacceptable to all bouts reflects how important and the boxer, the purported contract does material the related parties regarded the not allow him to look elsewhere. In my purses. The majority’s ipse dixit mind, this one-sided instrument is not a statement that the purses are not essential legal contract. The instrument is not com pletely ignor e s the language worthy of judicial enforcement, and I painstakingly set forth in Section Six. believe that the Delaware Supreme Court Boxing can be a brutal business, would hold it unenforceable. I therefore and fighters have precious little time to respectfully dissent. capitalize on their talents and age. In this I. case, the price limits set forth in Section Six guar ante e d th e m in im u m The majority acknowledges the compensation that Echols could expect that Delaware Courts “will not enforce a each time he stepped into the ring. contract that is indefinite in any of its Therefore, the essentiality of the material and essential provisions.” (Maj. minimum price term to the bargain Op. at 8) But, the majority rationalizes reached between the parties to this that the disputed agreement “does not contract cannot be denied. merely deal with a bout or a series of bouts” but with “the relationship between Neither party disputes that from the two parties, a relationship in which the time the instrument was executed Echols promised to fight exclusively for until Echols’ first boxing loss, the Banner. . . .” (Maj. Op. at 9) Every contract guaranteed Echols minimum contract between two parties deals with a purses for each fight. However, relationship, but from the boxer’s corner, following Echols’ loss to Bernard the essen tial ingredients of that Hopkins in 1999, Section Eight of the relationship are the bout or series of instrument authorized Banner to either bouts and the obligation of the promoter “rescind this Agreement or the purses set to provide a purse for the boxer. forth in paragraph (6) shall be subject to renegotiation.” Banner did not rescind, A professional fight is no mere but elected to renegotiate. The majority exhibition. It is a contest for victory and interprets this clause as requiring that the money. The relationship between a p r i c e t e r m s therea fter m ust b e promoter and a boxer is meaningless renegotiated on a “bout-by-bout” basis. unless the boxer engages in his craft and (Maj. Op. at 8) However, the District receiv es appropriate compensation. Court interpreted the contract differently, Therefore, the bouts and their purses are and found the clause in Section Eight to not only relevant, but material and be “undoubtedly ambiguous.” (D. Ct. Op. essential to the relationship. The details at 8) According to the District Court, the spelled out in Section Six of the disputed renegotiation clause may also be
12 interpreted to require that following a Co. v. Automatic Sprinkler Co., 171 A. loss, the entire minimum price structure 214, 219 (Del. Super. Ct. 1935) (citation must be renegotiated all at once, omitted). See also Middle States establishing new price minimums to Drywall, Inc. v. DM S Properties-First, govern the agreement. (D. Ct. Op. at 8) Inc., 1996 WL 453418, at *7 (Del. Super. Under this interpretation, the parties May 28, 1996). would be able to revitalize the instrument The majority holds that while the following the defeat by renegotiating a purses for the fights are “relevant,” they schedule of minimum prices that reflect are not material and essential because the Echols’ market value as a fighter with parties could satisfy the terms of the one loss. agreement without any bouts occurring. I recognize th a t both I acknowledge that under the strict terms interpretations of the renegotiation clause of the contract, Banner could make three present risks to the parties. If price offers per year for boxing matches with minimums are to be renegotiated all at de minimus purses, Echols could reject once, both parties risk that a new all of Banner’s offers, and both parties agreement will not be reached and the would be technically compliant with the contract, which they otherwise would contract terms. Under this interpretation, choose to maintain, would be voided. a court could determine when a party On the other hand, if prices are left to be breaches these terms, thereby providing renegotiated on a bout-by-bout basis, the some level of reasonable certainty in the boxer risks that he will be forced to contract.6 However, I do not believe that accept whatever minimal price the this theoretical certainty changes the promoter offers, or not fight at all. For essential character and terms of this the reasons described below, I believe boxing promotion contract, nor does it that under the relevant contract law, the make the contract enforceable under former interpretation is the only Delaware law. Even the most basic enforceable and fair option. service contract would be deemed unenforceable if it failed to state a price Echols essentially argues that he term, regardless of whether the contract did not bargain for an agreement where requires the parties to ever actually following a loss, he is left to either fight exercise their ability to purchase or sell for whatever price Banner offers, or not fight at all. I believe that the general rule of contract law, recognized in Delaware 6 “The terms of a contract are and other jurisdictions, that “price is an reasonably certain if they provide a basis essential ingredient of every contract ... for determining the existence of breach for the rendering of services” is intended and for giving an appropriate remedy.” to protect against exactly the situation Restatement (Second) of Contracts § that Echols now faces. Raisler Sprinkler 33(2).
13 the services. The Delaware Superior fights at any price, even below market Court reinforced this idea in Raisler rates, and still remain technically Sprinkler, explaining that compliant with the contract terms.7 I believe this holding “destroys the [o]ne of the commonest promise and makes it merely illusory.” kind of promises too Id. In reality, all boxers eventually lose, i n d e f in i t e f o r l e g al enforcement is where the p r o m i s o r r e t a in s a n 7 unlimited right to decide The majority, at note 2, opines that later the nature or extent of because the agreement requires Banner to his performance. This make “bona fide” offers, a de minimus unlimited choice in effect price offer would not be valid under the destroys the promise and agreement and may trigger a breach. First, makes it merely illusory. interpreting “bona fide” to mean that a *** But a promise to give court should imply a reasonableness anything whatever which standard to the price term is inconsistent the promisor may choose ... with the majority’s holding that the price is illusory, for such term is non-essential. Second, I find no promises would be case law, in Delaware or elsewhere, s a ti s f ie d by g i v i n g establishing that a “bona fide offer” something so infinitely implies a reasonable price term. Rather, near noth ing or by when used to describe an offer, the term performance so indefinitely “bona fide” refers to an offer intended to postponed as to have no produce a legal contract, regardless of calculable value. whether the price is reasonable. See e.g. Foxboro Co., Inc. v. Soft Systems Engineering, Inc., 894 F.Supp. 48, 51 171 A. at 219 (quoting Williston on (D.Mass. 1995) (explaining that a bona Contracts, vol. 1 § 43). fide offer refers to an offer made with an intent to bind); In re Formica Corp. The majority portrays Section Shareholders Litigation, 1989 WL 25812, Eight of the purported agreement to at *11 (Del. Ch. Mar. 22, 1989) allow for certain events to merely “alter” (explaining that an offer to purchase a the price structure in the contract. (M aj. company made for the purpose of Op. at 9) In my view, Section Eight does stimulating stock activity and raising share more than alter the price. It removes the price is not a bona fide offer). Under this price structure completely, and this definition of “bona fide,” Banner could renders the contract fatally defective. make bona fide offers for fights at any Under the majority’s holding, Echols’ price, as long as the offer is intended to loss authorizes Banner to make offers for bind the parties if accepted.
14 and some live to fight another day. contr a c t suf f ic iently definite for Although a loss may decrease a boxer’s enforcement.” Id. at 761. The court market value, and some mechanism to found that the $1,000,000 minimum adjust price may be required to account price was sufficient to bind the parties, for this lack of certainty in the boxing and clearly stated that “the minimum market, I believe that the Delaware price terms, together with DKP’s upfront Supreme Court would interpret the prior payment of $25,000 and its commitments case law in the state to require the to hold a set number of bouts, clearly did maintenance of some minimum price in provide an expectancy of compensation order to deem the contract enforceable. for Douglas that was sufficiently definite to induce his promise to fight exclusively for DKP.” Id. at 763 (emphasis added). II. Thus, Don King stands only for the proposition that an exclusive boxing In my view, the sparse case law promotion contract with an indefinite on this topic also supports the premise price structure, supported at least by that boxing promotions contracts must minimum price terms, is enforceable. have at least some minimum price term to be enforceable. Both Banner and the F u r t h e rm o r e , Don King majority cite to Don King Prods., Inc. v. establishes that minimum price terms are Douglas, 742 F.Supp. 741 (S.D.N.Y. considered part of the bargain that a 1990), to support their position in this promoter offers a boxer to induce a case. Yet, Don King supports the promise of exclusivity. By failing to opposite conclusion. The original consider the minimum price term as an contract in Don King set forth minimum essential component of the bargain in the prices for all bouts except title bouts, and present case, the majority deviates from the parties later reached a second the rule established in Don King. Under agreement establishing a $1.3 million the majority’s holding, a boxer loses the purse for a title bout and a $1 minimum certainty of minimum compensation; the purse guarantee for the next three fights, promoter, however, maintains exclusive subject to renegotiation upwards in price control. Echols maintains a price if the fighter, Douglas, should win the guarantee as long as he wins, but heavyweight title. 742 F.Supp. at 748, receives no minimum price guarantee n5. Therefore, when the court decided after a loss, when he is most vulnerable. the case, there were minimum price The effect of the majority’s decision is to guarantees in place, and Douglas was leave a boxer subject to the whim and forced to take the position that because mercy of the promoter, once the boxer his market value as a fighter had risen loses a bout. significantly, the $1,000,000 price Similarly, I believe that the minimum was “insufficient to render the majority’s reliance on the Restatement
15 (Second) of Contracts is equally ratification that was relied upon as an misplaced. Section 33(2) of the essential term in the original bargain. Restatement acknowledges that price Thus, it is more reasonable in these cases terms may be indefinite in certain to conclude that price was a non-essential situations. However, Comment e, relied term. Second, the cases cited by the upon by the majority, deals primarily majority dealt with contracts for new with contracts for the sale of goods, products (Mantell), new technology where price may be determined through (Marcor), or undefined services (Allied market forces. To the extent that Disposal). Therefore, those contracts all Comment e may also “apply to contracts dealt with situations where there was for the rendition of services,” it also extreme market uncertainty that could states that “one party may be given the not be sufficiently defined at the time of power [to set the price] within limits set the agreement. The court in Mantell by agreement or custom or good faith” noted that the recent development of (emphasis added). In my reading, the contracts with indefinite price terms may contract between Echols and Banner be particularly necessary where “the operated in accordance with Comment e product is new and untried and its before Echols lost a fight, because it did potential worth and market value and the not set specific prices, but allowed cost of manufacture and distribution are Banner to make offers for bouts “within unknown quantities.” 55 A.2d 250, 389. limits,” i.e. above the minimum price Even though individual boxers levels. After the loss, all limits were may be untested, the sport and spectacle removed and no formula was set forth to of boxing is hardly a new industry with fix prices for purses. Therefore, the unknown production and distribution contract no longer complied w ith costs. If a promoter and a boxer can Comment e. reasonably agree to minimum purses Finally, the cases cited by the when the boxer is undefeated, they majority from jurisdictions outside of should be able to agree fairly on them Delaware, Mantell v. Int’l Plastic when the boxer has one loss and both Harmonica Corp., 55 A.2d 250 (N.J. retain some bargaining power. The App. 1947), Allied Disposal, Inc. v. disputed instrument leaves the boxer Bob’s Home Services, Inc., 595 S.W.2d with no guaranteed purses, no bargaining 417 (Mo. App. 1980), and Marcor power, and the promoter in total control Mgmt., Inc. v. IWT Corp., 1998 WL of his boxing career for the next several 809011 (N.D.N.Y. Nov. 17, 1998), are years. all distinguishable in two key respects. The District Court found the First, none of the products or service contract unenforceable because the contracts in these cases included a contract is an agreement to negotiate defined price limit at the time of contract future agreements without specifying its
16 material and essential price terms. (D. Ct. Op. at 10) I agree with the District Court.
III. Therefore, I would hold the contract in this case unenforceable and affirm the judgment of the District Court.