Nassau Sports v. Peters

• Decision Date: 21 December 1972
• Docket Number: No. 72 C 1086.,72 C 1086.
• Parties: NASSAU SPORTS, a limited partnership, Plaintiff, v. Garry PETERS et al., Defendants.
• Court: U.S. District Court — Eastern District of New York

352 F. Supp. 870

NASSAU SPORTS, a limited partnership, Plaintiff, v. Garry PETERS et al., Defendants.

No. 72 C 1086.

United States District Court, E. D. New York.

December 21, 1972.

COPYRIGHT MATERIAL OMITTED

Roth, Carlson, Kwit, Spengler & Goodell, New York City, and Fritz, Christ, O'Brien & Farrell, Mineola, N. Y., for plaintiff by J. Edward Meyer III, New York City (M. Halstead Christ, Mineola, N. Y., and Fred J. Halsey, Jr., New York City, of counsel).

Paul, Weiss, Rifkind, Wharton & Garrison, New York City, for Garry Peters and Metropolitan Hockey Club, Inc. by Jay Topkis, New York City (Anthony M. Radice, New York City, of counsel).

Graubard, Moskovitz, McGoldrick, Dannett & Horowitz, New York City, for Charles L. Abrahams by Emanuel Dannett, New York City (Robert I. Gosseen, Everett A. Eisenberg, and Jack Weinberg, New York City, of counsel).

MEMORANDUM DECISION AND ORDER

NEAHER, District Judge.

This case presents a local skirmish in the reported—and apparently well-financed —"war"¹ between the fledgling World Hockey Association (WHA) and the established National Hockey League (NHL) over rights to the exclusive services of talented professional hockey players formerly under contract with NHL teams. While professional baseball, football and, more recently, basketball have provided many chapters "in the history of contract jumping by famous American athletes," Erving v. Virginia Squires Basketball Club, 468 F.2d 1064 (2 Cir. 1972),² it remained for professional hockey to generate in one season a mass exodus of players from NHL to WHA clubs. As Judge Higginbotham found in his comprehensive opinion in Philadelphia World Hockey Club, Inc. WHA v. Philadelphia Hockey Club, Inc. NHL, 351 F.Supp. 462 (E.D.Pa., 1972), for this season alone approximately 60 former NHL players signed up with WHA clubs.³ The lure was, of course, offers of greatly increased compensation which in one instance approached the fantastic—a guaranteed bonus of $1,000,000 in advance just for signing a contract.⁴

At issue in this action is the right to the exclusive services of defendant Garry Peters ("Peters"), one of the former NHL players who signed with the WHA.⁵ The contesting clubs, plaintiff and defendant here, unlike their respective leagues, stand on a more equal footing. Plaintiff Nassau Sports, a New York limited partnership, is the owner of the newly-franchised New York Islanders Club in the NHL. It has just begun its first hockey season and plays its home games at the Nassau County Memorial Coliseum in Uniondale, Long Island. Defendant Metropolitan Hockey Club, Inc., a New Jersey corporation, is the owner of the newly-franchised New York Raiders club in the WHA. It, too, has just begun its first hockey season and has been playing its home games at Madison Square Garden because no suitable facilities as yet exist in New Jersey where the club is based.

Plaintiff commenced this action in the New York Supreme Court, Nassau County, in August 1972, to enjoin Peters from playing hockey for defendant Metropolitan in breach of plaintiff's alleged contract rights to Peters' exclusive services. Defendants joined in removing the action to this court on the ground of diversity of citizenship and a subsequent motion by plaintiff to remand the action was denied. 352 F.Supp. 867.

Prior to removal of the action to this court, Supreme Court Justice Berman had granted an ex parte temporary restraining order which restrained Peters

from playing hockey or rendering any service of any kind in any capacity to the defendant, Metropolitan Hockey Club, Inc., or to any other professional hockey team other than the New York Islanders.⁶

After this court accepted jurisdiction, plaintiff applied for a preliminary injunction to continue the foregoing restraint pending final determination of the action. Defendants oppose that application and have counter-moved to vacate the temporary restraining order. Although these motions present somewhat different issues, the parties recognize that the determinative question is whether plaintiff has any rights to Peters' services which would warrant preliminary injunctive relief in light of defendants' defenses of antitrust illegality and the requirements for such relief.

Plaintiff's claim of exclusive contract rights to Peters' services is based upon the following substantially undisputed facts. Peters, a Canadian citizen and resident, is a veteran professional hockey player of considerable talent, who had been under contract during the 1971-72 playing season with the Boston Professional Hockey Association, Inc., of the NHL, familiarly known as the Boston Bruins. The contract he entered into in Massachusetts on October 1, 1971 is known as the "Standard Player's Contract" required under league by-laws to be used by all NHL clubs. Peters had signed similar contracts annually from his rookie days in 1963.⁷

The Bruins' contract specified that the Club "hereby employs the Player Peters as a skilled Hockey Player for the term of one year commencing October 1st, 1971-1972" at a salary of $20,000 plus certain conditional major league bonuses.⁸ Peters played only part of that season with the Bruins, although he received his full salary. Due to a knee injury, he played most of the season with the Boston Braves of the American Hockey League (AHL), a minor hockey league farm club of the Bruins. Despite his injury he finished the season as "Most Valuable Player" in the AHL, scoring 39 goals and making 34 assists in 58 games.⁹

Plaintiff's relationship with Peters began in June 1972 while his contract with the Bruins was still in effect. Plaintiff having paid $6,000,000 for its newly-acquired NHL franchise thereby gained the right to staff its team with 21 players selected from the other member clubs through the operation of the NHL expansion draft system. Peters was among those drafted by plaintiff and on June 21, 1972 a formal assignment was executed by the Bruins transferring the rights to his services to plaintiff.¹⁰ Although Peters was not a party to the assignment, his contract with the Bruins specifically provided for that eventuality as follows:

"11. It is mutually agreed that the Club shall have the right to sell, assign, exchange and transfer this contract, and to loan the Player's services to any other professional hockey club, and the Player agrees to accept and be bound by such sale, exchange, assignment, transfer or loan, and will faithfully perform and carry out this contract with the same purpose and effect as if it had been entered into by the Player and such other Club."

See n. 8, supra.

Peters learned quite promptly that he had been drafted by plaintiff and of the assignment of his contract. He acknowledges that

"during June and early July of 1972 I negotiated with the New York Islanders, specifically with William Torrey, the Islanders' General Manager, for the purpose of reaching a contract for my services for the 1972-1973 hockey season. Their highest salary offer during this time was $37,500."¹¹

On July 15, 1972, Peters signed a contract with defendant Metropolitan's New York Raiders to play hockey for three seasons at a progressive annual salary of $55,000, $60,000 and $65,000.¹² Although his Bruins' contract assigned to plaintiff remained in effect until at least September 30, 1972, Peters failed to report to plaintiff's training camp in Canada in early September as required by that contract. And, after signing with the Raiders, he participated in defendant Metropolitan's promotional activities in further breach of its provisions. Finally, in a separate agreement with defendant Metropolitan, he bound himself "not to execute or sign any contract with any other professional hockey club for his services during the term" of the New York Raiders' contract and agreed to accept service of process in New Jersey "in an injunction action which would preclude him from playing for any other hockey club during the term of this contract." See n. 12, supra.

Since Peters admittedly did not sign a new contract with plaintiff for the 1972-1973 season and the assigned Bruins' contract terminated on September 30, 1972, the first question requiring answer is whether any legally enforceable rights to his services were created which survived that termination. Plaintiff, estimating it paid about $300,000 for such rights,¹³ insists that the Bruins' contract expressly so provided. Paragraph 17 of that contract, supra n. 8, reads in pertinent part:

"17. * * *

"The Player hereby undertakes that he will at the request of the Club enter into a contract for the following playing season upon the same terms and conditions as this contract save as to salary which shall be determined by mutual agreement. In the event that the Player and the Club do not agree upon the salary to be paid the matter shall be referred to the President of the League, and both parties agree to accept his decision as final." (Emphasis supplied.)¹⁴

The foregoing provision, commonly called the "reserve clause", plainly gives the "Club"—here plaintiff—an option to renew Peters' contract "for an additional year", as Peters concedes.¹⁵ Although defendants object to the reserve clause as illegal and unenforceable on antitrust grounds hereinafter discussed, such options are not uncommon in personal services contracts, especially in the professional sports and entertainment fields.

While a promise to render personal services will not be specifically enforced by an affirmative decree, Restatement of Contracts § 379, it has long been settled that injunctive relief may be granted to restrain an employee's violation of negative covenants in a personal services contract and such enforcement has in fact been granted in numerous cases involving professional athletes. Long Island American Ass'n Football Club, Inc. v. Manrodt, 23 N.Y.S.2d 858 (Sup.Ct.1940); American League Baseball Club of Chicago v. Chase, 86 Misc. 441, 149 N.Y.S. 6 (Sup.Ct.1914); Metropolitan...