A Delaware judge has stayed a lawsuit filed by basketball legend Julius Erving against a marketing and branding company, ruling that the dispute must go to arbitration.
The lawsuit filed by the former Hall of Famer who is known as “Dr. J” was launched after an agreement in 2016 to sell a majority interest in his brand and other intellectual property to Authentic Brand Group LLC.
According to court filings, ABG and its senior partner and CEO, James Salter, promised to grow the Erving brand with new licensing agreements, promotional appearances and other marketing opportunities.
The lawsuit, filed last year, alleges that ABG and Salter failed to commit necessary resources to grow the “Dr. J” and focused on other, more profitable brands.
Among the specific allegations, the lawsuit alleges that ABG mistakenly diverted funds to itself to pay a 30% unauthorized handling fee, and used the wrong metric to determine the allocation of amounts.
ABG filed a motion to dismiss the lawsuit, saying the operating agreement requires the parties to arbitrate the dispute.
In Monday’s decision, Vice Chancellor Nathan Cook agreed that, according to the settlement provision of the operating agreement, the court has no jurisdiction until the case has first gone through an arbitrator.
It further indicated that in accordance with the Federal Arbitration Law, it was appropriate to suspend the claim and not dismiss it, pending the decision of the arbitrator.
If the arbitrator determines that the dispute is arbitrable then the claim will be dismissed because the Court of Chancery would have no jurisprudence. If the arbitrator determines that the dispute is not arbitrable, the parties return to court to continue the process.