Pitino v. Adidas: Motion to Dismiss Granted based on Arbitration Provision

Rick Pitino (“Pitino”) filed suit against Adidas America, Inc. (“Adidas”) under Kentucky law and stated Adidas knowingly or recklessly caused him emotional distress when its employees conspired to bribe University of Louisville (“Louisville”) recruits, as detailed in a criminal compliance filed in the U.S. District Court or the Southern District of New York. Adidas allegedly bribed recruits, including making arrangements for payments totaling $100,000.00 for one recruit to join the Louisville basketball team. Pitino asserted that he “now is publicly perceived as having participated or acquiesced in Adidas’ actions” and has suffered profound embarrassment, humiliation, and emotional injury” as a result a result of Adidas’ “extreme and outrageous conduct.” Adidas moved to the dismiss the complaint by arguing that Pitino’s claims fall within the confines of an Endorsement Agreement that requires such claims to be arbitrated. The U.S. District Court for the Western District of Kentucky, Louisville Division agreed with Adidas and granted the motion to dismiss without prejudice.

Pitino and Adidas entered into an Endorsement Agreement that provided Pitino would endorse Adidas products and require the Louisville basketball coaching staff and players to wear only Adidas products during games, practices, and other team activities. Adidas argued that the arbitration provision in the Endorsement Agreement was controlling and, further, argued that Pitino has already “initiated the dispute resolution process under the Endorsement Agreement, claiming that Adidas ‘breached its duties of good faith and fair dealing by conspiring with others to bribe the family of a [Louisville] basketball recruit.’” Adidas stated the breach of contract claim asserted by Pitino under the dispute resolution procedure and the claim set forth here “arise[] from the same operative facts” and, thus, both are covered by the arbitration clause in the Endorsement Agreement. The Endorsement Agreement states as follows:

The parties agree that any dispute concerning the interpretation, construction or breach of this Agreement shall be submitted to a mediator agreed upon by the parties for nonbinding confidential mediation at a mutually agreeable location…. If the parties fail to resolve their dispute through mediation, then the parties agree that the dispute shall be submitted to final and binding confidential arbitration before the American Arbitration Association in Portland, Oregon.

The Court then analyzed the applicable law. Many courts have held that where the parties agree to arbitration in accordance with the American Arbitration Association (“AAA”) rules, the AAA rules provide a clear and unmistakable delegation of authority to the arbitrator to decide the scope of the arbitration provision, because AAA rules provide that the arbitrator shall have the power to rule on his or her own jurisdiction including objections. Here, the above-referenced arbitration provision does not expressly refer to AAA rules. However, courts have concluded that a party consents to use of the AAA rules when AAA is cited in the arbitration provision in the contract. Specifically, AAA rules state “parties shall be deemed to have made [AAA rules] a part of their arbitration agreement whenever they have provided for arbitration by the [AAA] under its Commercial Arbitration Rules….”

The Court indicated that the facts underlying Pitino’s tort and contract claims are identical and are based on Adidas’ alleged bribery of a Louisville basketball recruit. As such, the Court found that the tort claim asserted is “at least arguably” covered by Endorsement Agreement and, thus, the question of whether the facts are arbitrable must be decided by the arbitrator. Accordingly, the Court dismissed Pitino’s complaint.

For any questions, feel free to contact Christian Dennie at cdennie@bgsfirm.com.