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Erving v. Virginia Squires Basketball Club

decided: October 24, 1972.

JULIUS W. ERVING, PLAINTIFF-APPELLANT,
v.
THE VIRGINIA SQUIRES BASKETBALL CLUB, A LIMITED PARTNERSHIP, DEFENDANT-APPELLEE



Friendly, Chief Judge, and Medina and Anderson, Circuit Judges.

Author: Medina

MEDINA, Circuit Judge:

This case presents another chapter in the history of contract jumping by famous American athletes. As usual the amounts paid by the competing teams are fantastic. Julius W. Erving, we are told, was playing a remarkable game of basketball as an undergraduate at University of Massachusetts when, after his junior year, he agreed to turn professional and he signed a contract with the Virginia Squires to play exclusively for the Squires for four years commencing October 1, 1971 for $500,000.00. He made an extraordinary record in his first year as a pro, but he seems, for one reason or another, to have defected and in April, 1972 he signed a contract to play for the Atlanta Hawks. This contract with the Hawks is not before us but we were informed on the oral argument that it called for payments to Erving, or "Dr. J." as he was generally called by the fans, aggregating $1,500,000.00 or more.

What is before us is an appeal from an injunction order, in support of a counterclaim asserted by the Squires in an action by Erving to set aside his contract with the Squires for fraud. The counterclaim seeks an injunction enjoining Erving from playing basketball with any team other than the Squires, pending the determination of the dispute between the parties by arbitration pursuant to the terms of the contract between Erving and the Squires*fn1 and the provisions of the federal Arbitration Act, 9 U.S.C., Sections 1, et seq. Judge Neaher gave the case extensive consideration below, not only in granting the application of the Squires for arbitration and for a supporting injunction, 349 F. Supp. 716 but also in deciding a prior motion 349 F. Supp. 709 attacking the jurisdiction of the District Court for the Eastern District of New York and in the alternative for the transfer of the case to a federal court in Virginia. The opinion below is not yet reported.

In view of the large sums of money involved, and the publicity generated by the reputation of "Dr. J." as a highly talented basketball player with a brilliant future, we need not be surprised at the amount of perhaps pardonable exaggeration and bombast in the claims of the respective parties. On the one hand we are assured that "Dr. J.," was, as stated in the opinion below, "for all practical purposes" the Squires' "whole team," that he was featured in the Squires' advertisements as "fabulous" and that the fans were deserting in droves when told that "Dr. J." had switched to the Hawks. On the other hand we are told that there is no showing of irreparable harm to the Squires if "Dr. J." plays with the Hawks, and the charge of fraud in inducing this innocent collegian to leave college and play for the Squires for four years for the inadequate sum of $500,000.00 is repeated ad nauseam.

We think, however, that irreparable damage to the Squires is plainly proved even if we assume that "Dr. J." is not the Squires' "whole team" and even if we doubt, as we do, that in the absence of "Dr. J." the Squires will collapse and with them the whole American Basketball Association.

Just as counsel for "Dr. J." repeat in various colorful phrases the claim that "Dr. J." was defrauded, counsel for the Squires insist that this is just a plain, ordinary case of contract jumping to get more money, that the claim of fraud did not originate until two months or more after "Dr. J." had signed his contract with the Hawks, and that the whole sorry business is nothing more nor less than the usual maneuvering by a greedy young athlete to sell out to the highest bidder. We do not pass upon these conflicting claims as they are the very issues to be determined by the arbitration of the dispute.

After appellant's application to Judge Feinberg for a stay of the order appealed from was denied, the hearing of the appeal was expedited and we heard oral argument on Thursday, October 12. We are filing this opinion at the earliest possible moment consistent with a proper consideration of the numerous points raised by counsel for Erving.

We find the order clearly appealable without reaching many of appellee's contentions to the contrary. The appeal is from an order granting an injunction, 28 U.S.C., Section 1292(a)(1), and it is well settled that such an appeal brings before us the entire order and not merely the propriety of the granting of the injunctive relief. Wright, Federal Courts, 459 (2d Ed. 1970); Smith v. Vulcan Iron Works, 165 U.S. 518, 17 S. Ct. 407, 41 L. Ed. 810 (1897); see also Deckert v. Independence Shares Corp., 311 U.S. 282, 61 S. Ct. 229, 85 L. Ed. 189 (1940).

As to the other law points we have little to add to Judge Neaher's excellent opinion.

We find no lack of mutuality in the arbitration clause of the contract. Both parties are required to arbitrate any disputes arising between them. The provision relative to "obtaining an injunction or other equitable relief" is merely declaratory of existing legal rights. Boys Markets, Inc. v. Retail Clerks Union, Local 770, 398 U.S. 235, 90 S. Ct. 1583, 26 L. Ed. 2d 199 (1970); Albatross S.S. Co. v. Manning Bros., 95 F. Supp. 459 (S.D.N.Y.1951).

The arbitration clause is as broad as can be imagined and, if federal law governs as we later hold, the fraud issues are for the arbitrator to decide. Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 87 S. Ct. 1801, 18 L. Ed. 2d 1270 (1967); Robert Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402 (2d Cir. 1959), cert. granted, 362 U.S. 909, 80 S. Ct. 682, 4 L. Ed. 2d 618, dismissed, 364 U.S. 801, 81 S. Ct. 27, 5 L. Ed. 2d 37 (1960). And, in a proper case such as we have here, the only way to preserve the status quo during the pendency of the arbitration proceeding is by the granting of injunctive relief. See Boys Markets, Inc. v. Retail Clerks Union, Local 770, supra ; Albatross S.S. Co. v. Manning Bros., supra.

The claim that Judge Neaher had no power to direct the substitution of a neutral arbitrator for the disqualified Commissioner of the American Basketball Association is typical of other attempts to emasculate arbitration procedures under the federal act.*fn2 We must bear in mind that here, as we later hold, we are applying federal law (Robert Lawrence Co. v. Devonshire Fabrics, Inc., supra), and that the federal law is to be implemented in such a way as to make the arbitration effective and not to erect technical and unsubstantial barriers such as were the mode in the early days when arbitration was viewed by many courts with suspicion and hostility.

Erving claims that the Squires have waived their right to arbitration. This claim has no merit whatever and we reject it. After continuing to play for the Squires and accepting payments from them pursuant to the terms of his contract with them through May, 1972, Erving on June 9, 1972 commenced this action in the District Court for the Eastern District of New York for rescission of the contract because of alleged fraud and for damages. After Judge Neaher denied the motion of the Squires attacking the jurisdiction of the Court over the person of the defendant and in the alternative for the transfer of the action to the Eastern District of Virginia, Norfolk Division, an answer was filed in which the Squires alleged a counterclaim against Erving and, as a defense, the arbitration clause of the contract. Consistent with the claim of the Squires that the proper judicial tribunal to pass upon issues arising out of the dispute between the parties was not the District Court for the Eastern District of New York but rather the District Court for the Eastern District of Virginia, Norfolk Division, the Squires, on September 13, 1972, commenced an action in the Virginia federal court asserting its right to arbitration and for injunctive relief. How this could be deemed a waiver of the right to arbitration is far from clear. Indeed, it is just the opposite. While Judge Neaher was deliberating on the motion for dismissal for lack of jurisdiction of the person or for the transfer of the case to Virginia, the Virginia case was held in abeyance, evidently by agreement of the parties. With the jurisdiction and transfer issues disposed of on September 19, 1972, the answer of the Squires containing the counterclaim and the assertion of their right to arbitration was filed on September 21, 1972. The Squires' motion for injunctive relief was heard on October 2, 1972 and resulted in the order appealed from sustaining the Squires' right to arbitration and enjoining Erving during the pendency of the arbitration proceeding from playing basketball for any club other than the ...


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