Jeter Can't Bat Away Suit Over Underwear Co. Board Role

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By Michael Greene

July 19 — RevolutionWear Inc. can proceed with claims against former New York Yankee star Derek Jeter over his role in promoting the luxury underwear company as a director, the Delaware Chancery Court ruled July 19 ( Jeter v. RevolutionWear Inc. , 2016 BL 231014, Del. Ch., No. 11706-VCG, 7/19/16 ).

According to the court's decision, RevolutionWear used a strategy called “reverse-endorsement” in which famous athletes join the company as owners and directors rather than simply endorsing its products.

In the lawsuit, RevolutionWear said that Jeter breached his contractual duties under a “director agreement” and misrepresented whether he could publicize his role as a director.

Vice Chancellor Sam Glasscock III held that it was reasonably conceivable that Jeter's refusal to approve a proposed press release announcing his role with the company breached part of the director agreement in which it is assumed the parties will act in good faith.

The court also ruled that RevolutionWear can proceed with claims that it was induced into entering the director agreement based upon misrepresentations Jeter made about his contract with Nike.

‘Acted Like a Real Board Member.'

Jeter, one of the most iconic professional baseball players of his era, won five World Series with the New York Yankees and was selected to 14 all-star teams. He has retired from professional baseball.

The litigation began in November 2015 after Jeter filed a lawsuit in the chancery court seeking a declaration that he complied with the director agreement and that he was entitled to inspect RevolutionWear's books and records. The company filed counterclaims seeking at least $30 million in damages.

In addition to fraud and contract-based claims, RevolutionWear also alleged that Jeter breached his fiduciary duty of loyalty as a director in several ways, including trying to take control of the company.

The court noted that the case shows the problems that may arise when a corporation expects its directors to perform acts outside of their traditional fiduciary role. The court dismissed all of RevolutionWear's allegations except one that claimed that Jeter misled investors.

To contact the reporter on this story: Michael Greene in Washington at mgreene@bna.com

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bna.com

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