Dr. J Sues In Del. Over Alleged Brand Management Breaches

Dr. J Sues In Del. Over Alleged Brand Management Breaches By Jeff Montgomery
Law360 (September 27, 2021, 7:44 PM EDT)

Basketball great Julius Erving II — Dr. J — has slam-dunked brand and intellectual property giant Authentic Brands Group with fraud, breach of contract and related counts in a heavily redacted six-count suit made public in Delaware's Chancery Court late Monday. Most details in the suit, filed Oct. 22 under seal, remain nonpublic. Some public text in the action, however, focused on ABG's alleged assurances that its work for other celebrities and clients would not interfere with its duties to the Dr. J Brand. No details regarding how those assurances figured in the suit were made public. Erving and Dr. J. Enterprises LLC filed the suit both for direct and derivative damages on behalf of ABG-Dr. J LLC, the entity created in 2016 when Erving agreed to sell an undisclosed interest in his name, image, licensing rights, domain name and social media accounts to Authentic Brands. ABG LLC is a high-profile global owner of fashion and sports brands and intellectual property, including Muhammad Ali, Shaquille O'Neal and Sports Illustrated. The company says it has clients in "the media, entertainment, luxe, fashion, street, wellness, home, active and outdoor lifestyle sectors." The suit hit as ABG is positioning itself for an initial public stock offering, nominally valued at $100 million but potentially much larger. Erving played professional basketball for 16 seasons from 1971 to 1987, including 11 storied years with the Philadelphia '76ers, netting more than 30,000 career points and being inducted into the Naismith Memorial Basketball Hall of Fame in 1993. He has remained a revered sporting figure, while also pursuing a post-sports career in a range of businesses and public causes. The Authentic Brands deal, according to the suit, included the right to "monetize business memorabilia, collectibles and all good will" in the Dr. J. brand. According to the suit, Erving and his interests acknowledged that AGB Intermediate Holdings 2, the entity created to act as managing member of AGB-DR. J, would work for other clients. But the suit said the agreement expressly required efforts necessary to meet commitments to Dr. J, with other work permitted "provided that such participation or involvement shall not interfere" with duties to Dr. J. Nothing in the public document indicated how AGB Intermediate, from Dr. J's point of view, came up short of hitting the basket. Founder James Salter was named in the complaint, though, and was specifically named, along with ABG, in a count alleging tortious interference. The complaint publicly referred to AGB Intermediate's obligations to make net cash flow distributions quarterly, secure approval of annual budgets and provide AGB-Dr. J members access to the LLC's books and records. Vast swaths of the suit were blacked out, however, including nearly all details about the six counts and demands for relief. Alleged were breaches of the operating agreement by ABG Intermediate, both derivatively on behalf of ABG-Dr. J and directly on behalf of Erving and Dr. J. Enterprises. Another count alleged both direct and derivative tortious interference with the agreement by parent ABG LLC and Salter, while a fourth sought specific performance of the agreement, both directly and derivatively. Similarly alleged was unjust enrichment, with another count claiming fraud, gross negligence and willful misconduct. Authentic Brands and Dr. J. Enterprises did not immediately respond to a request for comment. Julius W. Erving II, et al., are represented by Kurt M. Heyman and Gillian L. Andrews of Heyman Enerio Gattuso & Hirzel LLP, Daniel R. Meachum of Daniel R. Meachum & Associates LLC and Lawrence P. Eagel of Bragar Eagel & Squire P.C. Counsel information for Authentic Brands Group was not immediately available. The case is Julius W. Erving II et al. v. ABG Intermediate Holdings 2 et al., case number 2021-0816, in the Court of Chancery of the State of Delaware. --Editing by Rich Mills.
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