Echols v. Pelullo ( 2004 )

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Precedential or Non-Precedential: Precedential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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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.
17