Houston Oilers, Inc. v. Neely

• Decision Date: 23 June 1966
• Docket Number: No. 8520.,8520.
• Citation: 361 F.2d 36
• Parties: HOUSTON OILERS, INC., Appellant, v. Ralph NEELY, Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

361 F.2d 36 (1966)

HOUSTON OILERS, INC., Appellant, v. Ralph NEELY, Appellee.

No. 8520.

United States Court of Appeals Tenth Circuit.

May 18, 1966.

Rehearing Denied June 23, 1966.

William R. Eckhardt, of Vinson, Elkins, Weems & Searls, Houston, Tex., and Gus Rinehart, of Rinehart & Morrison, Oklahoma City, Okl., for appellant.

James D. Fellers, of Fellers, Snider, Baggett & McLane, Oklahoma City, Okl., and Thomas J. Moroney, Jr., of Wynne, Jaffe & Tinsley, Dallas, Tex. (Angus G. Wynne, Dallas, Tex., and J. Howard Edmondson, Oklahoma City, Okl., with them on the brief), for appellee.

Before PICKETT, HILL and SETH, Circuit Judges.

PICKETT, Circuit Judge.

This appeal concerns the validity of a professional football contract signed by Ralph Neely, a University of Oklahoma football player, and Houston Oilers, Inc., a Texas corporation which owns and operates a professional football team in the American Football League. Neely, a high school athlete of great promise, graduated from the Farmington, New Mexico high school in 1961, and found his way to the University of Oklahoma at Norman, Oklahoma. There his proficiency in football continued to develop, and in his senior year he became one of the nation's outstanding collegiate football players. He intended to play professional football and desired to take full advantage of the financial benefits arising from the rapidly growing popularity of professional football and the rivalry existing between the two major professional football leagues. Upon completion of the regular football schedule at the University of Oklahoma on November 28, 1964, the right to contract for Neely's services was awarded under a draft process to the Houston Oilers in the American Football League and to the Baltimore Colts in the National Football League.¹ On December 1, 1964, Neely signed American Football League Standard Players Contracts with Houston, each containing a "no-cut" clause, for the seasons 1965 through 1968, and received therefor a $25,000 bonus check. Thereafter Neely signed contracts with the Dallas Cowboys of the National Football League, which had acquired Baltimore's draft rights to Neely, and returned the Houston contracts and the $25,000 bonus check.

Houston thereupon brought this action for a judgment, declaring its contract with Neely to be valid and enforceable, and for an injunction restraining him from playing professional football with any team other than Houston. The trial court, in denying the relief sought, found that the contract was tainted with fraud and violative of the Texas Statute of Frauds. We hold that the undisputed facts in the record disclose a valid and enforceable contract.

Immediately after the draft on November 28, 1964, both Baltimore and Houston had set in motion their contract machinery to acquire the services of Neely. On that date Neely, while enroute to New York City to accept honors awarded him as an All-American choice and to participate in the Ed Sullivan television show, discussed his plans with representatives of the Baltimore team and was given a firm offer to sign a contract. On the same day, Breen, the personnel director of the Houston team, went to New York for the sole purpose of obtaining a commitment from Neely. Neely was accompanied by his father-in-law, Robert Forte, an Oklahoma City businessman, who participated in all the negotiations as advisor to Neely. In New York City, Neely advised Breen of the Baltimore offer,² but indicated that he preferred to play in the southwest. Neely told Breen that in any contract negotiations he wanted to discuss an arrangement for off-season work. Breen assured Neely and Forte that such an arrangement could be worked out, but only K. S. Adams, Jr., President of the Houston Club, could discuss such proposals. For the purpose of continuing contract discussions, the three traveled to Houston, arriving there on November 30th. At a meeting attended by Neely, Forte, Adams and Martin, the club's General Manager, a four-year contract with a "no-cut" clause was offered to Neely. The offer provided for a $25,000 bonus and a salary of $16,000 per year. In addition, Adams agreed to secure employment for Neely with a local real estate firm at a guaranteed annual income of not less than $5,000. Adams also agreed that an oil company which he owned and controlled would construct a "conventional Phillips '66 Service Station" on a suitable location in Harris County, Texas, at an approximate cost of $30,000 to $60,000, and convey the same to Neely by special warranty deed, subject to the Phillips '66 lease and a deed of trust.

Neely was impressed with the offer but desired further time to consider it. On December 1, 1964, Adams was advised that the offer was accepted. In the meantime, Neely had conferred with his wife and the owner of the Baltimore Club. The Standard Players Contracts were then prepared and executed by the parties,³ but were left undated. The letter agreement for additional employment, the filling station agreement, and the bonus check were dated December 1, 1964 and executed and delivered on that date. It is stipulated that these instruments constitute a single transaction. From the beginning of the discussions, Neely, for tax reasons, had insisted that the bonus money must be paid in 1964, and further, that the signing of the contract and the acceptance of the bonus money be kept secret to prevent him being declared ineligible to participate in the post-season Gator Bowl game on January 2, 1965, to which the University of Oklahoma had accepted an invitation. Any rational consideration of the evidence leads to the conclusion that all the parties knew that if Neely signed a professional football contract and received money therefor, under the rules of the N.C.A.A. and the Big Eight Conference, of which the University of Oklahoma was a member, he would consequently become ineligible to compete in the post-season game. Neely and Forte were advised that such a large sum of money could not be paid without a signed contract. It was then agreed that when the contract was signed, the $25,000 bonus check would be made payable to Forte as Trustee and that all the contract transactions would remain confidential, with no public announcement until after the Gator Bowl game.

After the contracts were executed, copies were delivered to Neely, he and Forte returned to Oklahoma. Later that day Houston's General Manager inserted the date "December 1, 1964" on the Standard Players Contracts and thereafter copies were filed with the A.F.L. Commissioner. Neely testified that he understood the arrangement to mean that the contracts would not be effective or filed until after the post-season game. However the contracts provide in plain language that they shall be valid and binding immediately upon execution and that a copy shall be filed with the League Commissioner within ten days thereafter.⁴ The A.F.L. rules also require the filing of all player contracts within 10 days after execution.

Immediately upon his return to Oklahoma, Neely was advised that the Dallas Cowboys, another team in the N.F.L., had obtained Baltimore's draft rights and desired contract discussions with him. Forte made several trips on behalf of Neely, and, unknown to Houston, Neely's contracts were forwarded to Dallas' attorneys for examination. Neely signed letters dated December 29, 1964, prepared by attorneys for Dallas, addressed to Houston and Adams, advising that he did not consider himself bound by the contracts and was withdrawing therefrom. The $25,000 bonus check was returned. These letters were received by Houston and Adams on December 31st. On that date the Dallas Club deposited $25,000 to the account of Neely in a Dallas bank. Prior to any publicity of the matter, Neely, apparently sensing trouble after the return of the Houston contracts, advised his coach in Jacksonville, Florida, where the Oklahoma team was preparing for the Gator Bowl game, of his activities in regard to the Houston contract. At about midnight on December 31st, Neely was notified that there had been some publicity concerning his signing with Houston. On January 1, 1965, Neely was advised that he had been declared ineligible to participate in the Gator Bowl game. There is no evidence from which it can be inferred that any publicity by Houston brought about this action. That evening Neely signed a contract to play with Dallas for the 1965 through 1968 seasons. He played for Dallas during the 1965 season and will continue to do so unless enjoined therefrom.

Neely was over the age of 21 years, and it is stipulated that he had "special, exceptional, unique knowledge, skill and ability as a football player." He was competent to enter into a valid contract to perform these services exclusively for a designated person or organization, and upon agreeing to so limit his services, he was subject under Texas law, which the parties agree is controlling, to be enjoined from performing them for anyone else.⁵ Dallas Cowboys Football Club, Inc. v. Harris, Tex.Civ.App., 348 S.W.2d 37; Mission Independent School Dist. v. Diserens, 144 Tex. 107, 188 S.W. 2d 568.

Disagreement over the validity of these contracts does not arise out of the provisions contained therein, but from an extrinsic oral understanding that their existence was to be kept secret until after the post-season game. The essence of Neely's contentions before the trial court and here is that the contracts are unenforceable because Houston falsely represented that the effective date of the agreement would be January 2, 1965, and that...