One of the most common causes of corporate lawsuits is the decision by the founder of a company to retire or pursue a different professional opportunity. Corporate founders often possess significant knowledge about the business and intellectual property of their corporate protégés, and their departure can be crippling to the young corporation. For these reasons, the corporation usually signs an agreement with its founder arranging for the transfer of all rights to the individual’s intellectual property. A recent lawsuit and a district court decision involving Jack Nicklaus demonstrate how intense these conflicts can become.
The Nicklaus Companies v. GBI Investors and Jack W. Nicklaus
Nicklaus is regarded by many golf fans as the greatest golfer who ever lived, with the possible exception of Tiger Woods. Over the course of his career, Nicklaus acquired significant items of intellectual property, including the use of his name, his design of many top-quality golf courses (GBI Investors is an architectural services firm) and books bearing his name. According to the complaint filed in the lawsuit, when Nicklaus left The Nicklaus Companies in 2007, the company agreed to pay him $145 million for his intellectual property, which included an agreement to provide exclusive services and property to the Nicklaus companies. In its lawsuit, the company now alleges that Nicklaus and the company he controls, GBI Investors, have breached the agreement by failing to live up to their contractual obligations and working against the company’s interests.
The motion to dismiss
Nicklaus’ attorneys brought a motion in the New York State Supreme Court for the District of New York to dismiss the complaint. The judge granted significant portions of the motion but denied the motion as to the last cause of action alleged in the complaint, breach of the parties’ noncompete agreement. Nicklaus was given 21 days to respond to this allegation.
The claims dismissed by the judge
The portions of the motion that were denied include causes of action alleging that Nicklaus breached the contract’s implied covenants of good faith and fair dealing. The judge also dismissed a claim alleging breach of the sale agreement and claims alleging tortious interference, with contract, and breach of fiduciary duty. These claims are commonly included in most business cases, but in most cases, as in this one, the claims are ultimately dismissed by the judge.
With the dismissal of six of the seven causes of action, the chances of this case being resolved by a settlement appear strong, especially considering the statement of the chairman of Nicklaus Companies, Howard Milstein: “We look forward to resolving these issues once and for all and continue to be willing to work collaboratively with Mr. Nicklaus as these matters are considered by the court.”
The right legal support
This case demonstrates the importance of being represented by competent counsel. Without competent counsel, Nicklaus’ motion may have failed and all seven causes of action would have proceeded to trial. Without competent counsel, the plaintiffs may not have been able to obtain dismissal of six of the seven causes of action.