George Foreman Associates, Ltd. v. Foreman

• Decision Date: 25 March 1974
• Docket Number: C-73-1230 RFP.,Civ. A. No. C-73-1483 RFP
• Citation: 389 F. Supp. 1308
• Parties: GEORGE FOREMAN ASSOCIATES, LTD., a limited partnership, Plaintiff, v. George FOREMAN et al., Defendants. George FOREMAN and Charles R. Sadler, Counterclaimants and Cross-Claimants, v. GEORGE FOREMAN ASSOCIATES, LTD., a limited partnership, and Martin Erlichman, Counterdefendants and Cross-Defendants. George FOREMAN and Charles R. Sadler, Plaintiffs, v. GEORGE FOREMAN ASSOCIATES, LTD., a Pennsylvania limited partnership, and Martin Erlichman, Defendants.
• Court: U.S. District Court — Northern District of California

389 F. Supp. 1308

GEORGE FOREMAN ASSOCIATES, LTD., a limited partnership, Plaintiff, v. George FOREMAN et al., Defendants.

George FOREMAN and Charles R. Sadler, Counterclaimants and Cross-Claimants, v. GEORGE FOREMAN ASSOCIATES, LTD., a limited partnership, and Martin Erlichman, Counterdefendants and Cross-Defendants.

George FOREMAN and Charles R. Sadler, Plaintiffs, v. GEORGE FOREMAN ASSOCIATES, LTD., a Pennsylvania limited partnership, and Martin Erlichman, Defendants.

Civ. A. Nos. C-73-1483 RFP, C-73-1230 RFP.

United States District Court, N. D. California.

March 25, 1974.

COPYRIGHT MATERIAL OMITTED

Frederick P. Furth, John H. Boone, Clyde W. Stitt and Daniel S. Mason, Law Offices of Frederick P. Furth, San Francisco, Cal., for plaintiff and counterdefendants George Foreman Associates, Ltd. and Martin Erlichman.

Stephen V. Bomse and Robert J. Vizas, Heller, Ehrman, White & McAuliffe, San Francisco, Cal., for defendants and counterclaimants George Foreman, Charles R. Sadler and George Foreman Development Corp.

John W. Keker, Kipperman, Shawn & Keker, San Francisco, Cal., for defendant Leroy Jackson.

PECKHAM, District Judge.

These two related cases arise out of a series of contracts entered into by George Foreman, the recognized world heavyweight boxing champion; Charles R. "Dick" Sadler, his manager and trainer; Martin Erlichman; and George Foreman Associates, Ltd. (Associates), a partnership. In No. C-73-1230 RFP, plaintiffs Foreman and Sadler seek relief from the most recent of these contracts, and have moved for summary judgment on the grounds that the most recent contract is illegal under California law and therefore void and unenforceable; defendant Associates, by way of counterclaim, seeks a declaration that the contract is valid and enforceable and further seeks a preliminary injunction compelling plaintiffs to comply with the terms of the contract. In No. C-73-1483 RFP, plaintiff Associates seeks injunctive relief compelling defendants Foreman, Sadler, Leroy Jackson (Foreman's business manager), and George Foreman Development Corporation (Development) to abide by the contract, and defendants Foreman and Sadler assert the invalidity of the contract by way of defense and counterclaim; Associates has moved in this action for a preliminary injunction, and has further moved to have defendants adjudged to be in contempt of a stipulated preliminary injunction entered on August 28, 1973, while Foreman and Sadler have moved for summary judgment on their defense of illegality of the contract. For convenience, this memorandum and order will embrace all the pending motions in both cases.

I. FACTS

The initial contract between the parties to these actions was entered into in October, 1971, by Foreman, Sadler and Erlichman. The precise details of this contract (hereinafter referred to as "the 1971 Agreement") are immaterial; in broad terms, it required Erlichman to render certain promotional services and make certain payments to Foreman in exchange for the right to receive 50 percent of Foreman's revenues (except for live boxing gate receipts). Shortly thereafter, Erlichman assigned his rights under the contract to Associates, a partnership formed for the express purpose of accepting that assignment.

Disputes arose almost immediately over the performance by all parties of their obligations under the 1971 Agreement. The resulting flood of litigation was ultimately settled by the parties' acquiescence in a new contract ("the 1972 Agreement") entered into on December 1, 1972, by Foreman, Sadler and Associates. It is this 1972 Agreement which is at issue in the present actions.

Under the 1972 Agreement, Foreman and Sadler are employed by Associates for participation in live boxing performances and for promotional activities in connection with those performances. Foreman and Sadler are given sole responsibility for the timing and location of all fights and for the negotiation of financial arrangements; Associates has no active part in any negotiations or promotional activities, except that it retains the right to approve or disapprove financial arrangements as long as such approval is not unreasonably withheld. Disputes as to the reasonableness of withholding of approval by Associates are to be referred to an arbitrator. Associates agrees to pay Foreman $10,000 per year for five years to cover training expenses, and an additional $25,000 per year for nine years, ending with the termination of the agreement on October 7, 1981. In exchange for these payments, Associates is given the right to receive 25 percent of Foreman's "promotional receipts," which include live gate and television receipts as well as virtually all receipts from endorsements and personal appearances. The payments from Associates to Foreman, supra, are to be "deemed satisfied" to the extent of any amounts received by Foreman as his share of his own promotional receipts; in effect, the payments from Associates to Foreman represent mere advances which are to be repaid to Associates out of Foreman's earnings.

Foreman gained the world heavyweight title in January, 1973, by knocking out Joe Frazier in the second round of their bout in Kingston, Jamaica; the fight receipts were placed in escrow and then distributed as provided in the 1972 Agreement. On July 18, 1973, Foreman and Sadler filed their complaint in No. C-73-1230 RFP; however, that complaint was not served until August 23, 1973, at a hearing on the motion for a preliminary injunction filed by Associates pursuant to its complaint in No. C-73-1483 RFP. On August 28, 1973, a stipulated injunction was entered into whereby Foreman, Sadler, Development, their officers and agents, and persons acting in concert with them, were preliminarily enjoined from disposing of any and all amounts received directly or indirectly by Foreman or Sadler from Foreman's title bout with Joe "King" Roman in Tokyo on September 1, 1973. The proceeds directly payable to Foreman ($250,000), less Japanese withholding tax, were placed in escrow pending resolution of the litigation; however, Associates contends that approximately $350,000 paid to Leroy Jackson in connection with the Roman fight was money indirectly paid to Foreman and therefore covered by the terms of the injunction. None of the money paid to Jackson has been placed in escrow, and in fact its precise location seems uncertain; accordingly, Associates has asked the court to hold the various defendants in contempt of the stipulated injunction by virtue of their alleged efforts to divert funds from Foreman.

Foreman has recently contracted for a defense of his title against Ken Norton on March 26, 1974; fearing a repetition of the difficulties encountered in tracing the proceeds of the Roman fight, Associates has requested a further injunction restraining defendants from disposing of any of the proceeds of the Norton fight pending the outcome of this litigation.

We will turn first to a consideration of the motions for summary judgment by Foreman and Sadler, and then to a consideration of the various motions raised by Associates.

II. SUMMARY JUDGMENT

A. Applicable Law

Paragraph 15 of the 1972 Agreement provides that the Agreement and obligations thereunder shall be construed in accordance with California law. While such a stipulation may bind the parties inter se, it cannot, of course, force a court to apply California law under circumstances where such application would otherwise be inappropriate. Nevertheless, in light of the facts that the Agreement was negotiated and signed in California, that Foreman resides in California, and that many of the principal obligations of the Agreement are to be performed in California (e.g., payments of money), this appears to be a particularly appropriate case for the application of California law.

Regulation of professional boxing in California falls within the province of the State Athletic Commission, established by Cal.Bus. & Prof.Code § 18620.¹ The Commission is authorized to promulgate regulations in aid of the exercise of its statutory obligations (§§ 18624, 18682), and these regulations appear in Title 4, Chapter 2 of the Cal. Administrative Code.

The Commission is granted sole authority and jurisdiction over the licensing of participants in boxing contests (§ 18672), a power which is set out at length in § 18674 as follows:

The commission may license professional boxers . . . and . . . managers, trainers, and seconds of each.

No such person shall participate in any boxing contest . . . or serve in the capacity of a . . . manager, trainer, or second, unless he has been licensed for that purpose by the commission.

For the purpose of this section, the term "manager" means any person who does any of the following:

(a) By contract, agreement, or other arrangement with any person undertakes or has undertaken to represent in any way the interest of any professional boxer in procuring or with respect to the arrangement or conduct of, any professional boxing contest in which such boxer is to participate as a contestant . . .

(b) Directs or controls the professional boxing activities of any professional boxer.

(c) Receives or is entitled to receive more than 10 percent of the gross purse of any professional boxer for any services relating to such boxer's participation in a professional boxing contest. . . .

Failure to obtain a license, when one is required, is a misdemeanor. § 16240.

In addition, the Commission has issued the following regulations, appearing in 4 Cal.Admin.Code:

§ 256. Form of Contract. Contracts between boxers and managers . . . shall be executed on printed forms approved by the commission. The commission may approve a contract not on its printed form if entered into in another jurisdiction by non-residents of this state.

§ 257. Provisions of Contract. The original of all contracts entered into between managers and boxers must be placed on file with the commission at the time it is approved

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