Washington Capitols Basketball Club, Inc. v. Barry

• Decision Date: 28 November 1969
• Docket Number: No. 24921.,24921.
• Citation: 419 F.2d 472
• Parties: WASHINGTON CAPITOLS BASKETBALL CLUB, INC., a District of Columbia corporation, Appellee, v. Richard F. BARRY, III, also known as Rick Barry; Lemat Corporation, a Delaware corporation and the general partner of a limited partnership doing business under the name of San Francisco Warriors; and San Francisco Warriors, a limited partnership, Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

419 F.2d 472 (1969)

WASHINGTON CAPITOLS BASKETBALL CLUB, INC., a District of Columbia corporation, Appellee, v. Richard F. BARRY, III, also known as Rick Barry; Lemat Corporation, a Delaware corporation and the general partner of a limited partnership doing business under the name of San Francisco Warriors; and San Francisco Warriors, a limited partnership, Appellants.

No. 24921.

United States Court of Appeals Ninth Circuit.

November 28, 1969.

Robert M. Ruben (argued) and Robert A. Holtzman, of Loeb & Loeb, Los Angeles, Cal., Morrison, Foerster, Holloway, Clinton & Clark, San Francisco, Cal., for appellants.

Frederick P. Furth (argued), San Francisco, Cal., for appellee.

Before HAMLEY, MERRILL and TRASK, Circuit Judges.

TRASK, Circuit Judge:

This is an appeal from an order of The United States District Court for the Northern District of California which granted a preliminary injunction to the plaintiff, Washington Capitols Basketball Club, Inc., (1) enjoining the defendant, Richard F. (Rick) Barry III from playing basketball for any professional team other than the Washington "Caps" and (2) enjoining the San Francisco Warriors and Lemat Corporation¹ from attempting to enforce a five year playing contract signed on August 26, 1969 between Rick Barry and the Warriors.

Barry and the Warriors appeal to this court pursuant to 28 U.S.C. ß 1292. Jurisdiction is based upon diversity of citizenship. 28 U.S.C. ß 1332.

The basic controversy is whether Rick Barry will play professional basketball pending final determination of this action as a member of the Washington "Caps" of the American Basketball Association or the San Francisco Warriors of the National Basketball Association. The District Court on Sept. 26, 1969, on the basis of the facts and the law then presented, ruled in favor of the Washington "Caps". 304 F.Supp. 1193. We affirm.

All parties agree that the playing ability of Rick Barry on a basketball court is such that he is a legally "unique" party to a player's contract. After an outstanding collegiate career at The University of Miami, he signed and played with the Warriors during the 1965-66 basketball season and was named the league's "Rookie of the Year". On August 29, 1966, he signed a second contract with the Warriors for one year beginning October 1, 1966 and executed a National Basketball Association Uniform Player Contract containing a "reserve" or "option clause".² Such a clause gives the club the right to contract with the player for an additional year. This option was exercised on or about June 22, 1967 by the Warriors for the playing year 1967-1968.

In the meantime, on June 19, 1967, Barry signed an option agreement with Pat Boone and Kenneth Davidson giving the optionees or their assigns the right on or before October 2, 1967, to contract with him for three years beginning 1967-1968, or if he were to be enjoined, to begin at a later date and in the meantime reserved the right to play with the Warriors. On October 31, 1967, Barry signed the contract in question here with Oakland Basketball, Inc. a corporation, to play for Oakland for three years commencing on October 2, 1968.

This contract likewise contained a reserve clause for an additional year. In addition to his salary, Barry also received an annual bonus plus a 15% stock interest in the corporation which owned the Oakland franchise.

The dispute resulting from Barry's action in signing the allegedly conflicting contracts caused the Warriors to file suit against him to determine their contract rights under their 1966 contract. They asserted claims for both damages and equitable relief by way of injunction. The Court of Appeal of California determined that the Warriors were entitled to enjoin Barry from playing for anyone else until September 30, 1968. The Court further held that the Warriors were not entitled to injunctive relief beyond that date and that they could not recover damages from Barry in addition to the equitable relief granted. Lemat Corporation v. Barry, Cal.App., 80 Cal.Rptr. 240 (1969). That decision settled all issues as between the Warriors and Barry arising out of the August 29, 1966 contract. Neither the Oakland Club nor its franchise owners were parties to that litigation. Barry did not play during the 1967-1968 playing season. However, he played for Oakland during the 1968-1969 season pursuant to the terms of the contract with Oakland signed on October 31, 1967. No question was apparently raised by the Warriors against either Barry or the Oaks as to the legality of this performance under the contract.

On August 28, 1969, the Oaks, having lost substantial sums of money during their two years' existence, entered into an agreement of sale with the Washington Capitols Basketball Club, Inc. in which Washington contracted to purchase all property and assets of the Oaks including the contracts of basketball players under contract to the Oaks. A specific amount of the purchase price was allocated to the contract between Oakland and Barry which was being assigned. Subsequently a Bill of Sale was executed by Oakland transferring the assets to Washington.

Although his Oakland contract would remain in effect until October 1, 1971, upon the day following the Oakland-Washington purchase agreement, Barry entered into a new contract to play professional basketball with the San Francisco Warriors for a term of five years beginning October 2, 1969 and ending October 1, 1974.

Promptly upon learning of Barry's contract with the Warriors, the plaintiff, Washington Capitols Basketball Club, Inc., brought this action against Barry, Lemat Corporation and the Warriors. The action sought to enjoin Barry from playing basketball with any club other than the Caps during the remainder of the term of the contract which Washington had acquired. It further sought to enjoin the Warriors from asserting any contract with Barry or interfering with the performance of the Caps contract. It also sought damages both compensatory and punitive. A temporary restraining order was issued on September 15, 1969, the date the action was filed.

A hearing was held on September 23, 1969 on the application for a preliminary injunction. The Honorable Gerald S. Levin issued an opinion and judgment on September 26, 1969, granting the injunction against both Barry and the Warriors pending final determination. Barry and the Warriors appeal from that order. The court required a bond in the sum of $100,000 from the plaintiff to secure the payment of all costs and damages and that bond was filed on September 29, 1969. Because of the urgency involved, this court agreed to expedite the appeal and heard the matter on oral argument on October 28, 1969.

The grant of an order for a preliminary injunction is not a final determination of the case. It evidences the exercise of the discretion of the trial court to maintain the status quo between the litigants until final judgment may be rendered. Hamilton Watch Co. v. Benrus Watch Co., 206 F.2d 738 (2 Cir. 1953).

"The decision to grant or to refuse a preliminary injunction lies within the District Court\'s sound exercise of its discretion. In an appeal from the grant of a preliminary injunction, the question before this court is, did the District Court abuse its discretion in granting a preliminary injunction?" Ross Whitney Corp. v. Smith Kline & French Labs., 207 F.2d 190, 194 (9th Cir. 1953).

On an appeal from such an order it is the responsibility of this court to decide only the question as to whether or not the grant of the order was an abuse of discretion. An abuse of discretion has been defined as "a plain error, discretion exercised to an end not justified by the evidence, a judgment that is clearly against the logic and effect of the facts as are found." Bowles v. Quon, 154 F.2d 72, 73 (9th Cir. 1946). We consider that the District Court did not abuse its discretion and that pending a decision on the merits the order granting a preliminary injunction should stand. The discussion which follows, however, and any conclusions drawn therefrom should be read as preliminary and "are not to be construed as foreclosing any findings and conclusions to the contrary based upon evidence which may be received at the trial on the merits." Ross Whitney Corp. v. Smith Kline & French Labs., 207 F.2d 190, 199 (9th Cir. 1953).

THE STATUS QUO

The function of a preliminary injunction is to maintain the status quo ante litem pending a determination of the action on the merits. The status quo is the last, uncontested status preceding the commencement of the controversy. Tanner Motor Livery, Ltd. v. Avis, Inc., 316 F.2d 804, 808-809 (9th Cir. 1963), cert. denied, 375 U.S. 821, 84 S.Ct. 59, 11 L.Ed.2d 55 (1963). It is therefore necessary to examine what constituted the last, uncontested status of the parties.

The plaintiff, Washington Caps, purchased the Oakland Oaks by agreement dated August 28, 1969. The action by Washington against the Warriors was commenced September 15, 1969. The status quo on these dates appears to have been as follows:

1. All rights under the Warriors\' contract with Barry, dated August 29, 1966, had been litigated and the judgment of the court had been performed. Lemat Corporation v. Barry, supra. Neither Barry nor the Warriors had further rights or obligations under it due each other after September 30, 1968.

2. The Oakland contract, which Washington acquired and upon which this action was brought, was signed October 31, 1967 for Barry to play for three years beginning October 2, 1968 with an option for one year more.

3. Barry had played one year — the playing season of 1968-1969 — under his contract with Oakland — without legal interruption. This contract, by its terms, was to commence October 2, 1968 and to continue until 1972.

4. Washington had acquired the Oakland franchise, assets and player contracts on August 28, 1969.

5. Barry signed a contract with the Warriors on August 29, 1969 for

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