Washington Capitols Basketball Club, Inc. v. Barry
304 F. Supp. 1193 (1969)
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Rule of Law:
An assignee of a personal services contract that expressly permits assignment is entitled to injunctive relief against the employee. The equitable defense of "unclean hands" does not apply to an assignee who was not involved in the predecessor's prior misconduct, especially when that misconduct is unrelated to the current contractual dispute.
Facts:
- On June 19, 1967, Richard F. Barry III granted an option for his services as a professional basketball player to the franchise that would become the Oakland Oaks ('Oaks') of the American Basketball Association (ABA).
- Barry later signed a three-year ABA Uniform Player Contract with the Oaks, set to commence on October 2, 1968.
- A provision in Barry's contract explicitly stated that the Oaks had the right to sell, exchange, assign, and transfer the contract to any other professional basketball club in the ABA, and that Barry agreed to accept such an assignment.
- On August 28, 1969, the Oaks, which were in financial distress, entered into an agreement to sell all their assets, including player contracts, to the Washington Capitols Basketball Club, Inc. ('Washington').
- The purchase agreement specifically allocated $750,000 of the price for the 'Rick Barry Contract.'
- On August 29, 1969, one day after the sale agreement between Oaks and Washington, Barry entered into a new five-year contract to play for the San Francisco Warriors ('Warriors') of the rival National Basketball Association (NBA).
Procedural Posture:
- Washington Capitols Basketball Club, Inc. filed a lawsuit in the U.S. District Court against Richard F. Barry III, the San Francisco Warriors, and Lemat Corporation.
- The lawsuit sought declaratory relief, equitable relief, and damages.
- Plaintiff Washington then moved for a preliminary injunction to enjoin Barry from playing professional basketball with any team other than Washington pending the final outcome of the litigation.
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Issue:
Is a basketball club that purchased a player's contract entitled to a preliminary injunction to prevent that player from performing for another team, when the player's original team may have had 'unclean hands' in a prior, separate transaction?
Opinions:
Majority - Levin, District Judge.
Yes, a basketball club that purchased a player's contract is entitled to a preliminary injunction. The court granted Washington's motion for a preliminary injunction, reasoning that Washington met the two-part test by showing a probability of success on the merits and the threat of irreparable harm. The court found a high probability of success because Barry's contract with the Oaks expressly permitted assignment, and Washington was the legal assignee of that contract. Barry's subsequent contract with the Warriors was therefore a breach of his obligations to Washington. The court determined that the loss of a unique, star athlete like Barry constitutes irreparable harm that cannot be compensated by money damages. The court rejected the defendants' 'unclean hands' defense, which was based on the fact that Oaks had previously induced Barry to breach a contract with the Warriors. The court held that this doctrine did not apply because 1) the alleged misconduct was by Oaks (the predecessor), not Washington (the plaintiff), and the taint of unclean hands is personal and does not impute to an innocent assignee; and 2) the prior misconduct concerned a different transaction that had already been redressed, not the current dispute over Barry's breach of the assigned contract.
Analysis:
This case solidifies the principle that personal service contracts for unique individuals, like professional athletes, are assignable when the contract language explicitly permits it. It significantly limits the applicability of the 'unclean hands' defense in cases of assignment, establishing that the misconduct of a seller (assignor) does not taint a good-faith purchaser (assignee) who was not involved in the original wrongdoing. The decision reinforces the view of player contracts as business assets that can be freely transferred with a franchise, protecting the investments of team owners and providing stability in player-team obligations during franchise sales. This precedent is crucial in sports law for upholding the enforceability of contracts after a team is sold.
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