Review Problem: Did Shawn Kemp Materially Breach?

Shawn Kemp is an NBA basketball player for the Portland Trailblazers who is nearing the end of a professional career that began in 1989. In 1992, he signed an agreement with Reebok to endorse a line of basketball shoes that included the following provisions:

“5.1 Exclusivity: Player warrants and represents that he has not authorized and, during the Term of Agreement, will not authorize or permit the use of his performance, the Player Endorsement, or any part thereof, nor will he render services in connection with any radio or television commercial or participate in any other activity for the purpose of advertising or promoting any service or product which, in the company’s reasonable opinion, is competitive with or antithetical to Company’s products and/or the Endorsed Goods, including, but not limited to footwear or athletic apparel and accessories of any nature or kind.

5.2 Use: . . . It is agreed and understood that Player shall use exclusively the type of Company basketball shoes and other Endorsed Goods as Company shall request while participating in any and all games, practices, workouts and other athletic activities as a professional basketball player. Player further agrees not to appear in public in any product that is competitive with Company’s products and/or Endorsed Goods and to wear Endorsed Goods where appropriate.

5.3 No Disparagement: Player agrees that at no time during and after the Term of the Agreement will he disparage his association with the Company, the products of Company, its advertising agencies or others connected with Company. . . .”

The contract commenced in October 1992 and was extended in 1997 to run until the end of September 2002. Under the extension, he was to receive approximately $11.2 million over the last five years of the agreement.

In April 2000, when Kemp was playing for the Cleveland Cavaliers, the Akron Beacon Journal published an article entitled “Footnoting Prose of Pros’ Footwear: Kemp and His Teammates Stroll Down Memory Lane, Recalling Their Favorite Kinds of Shoes Growing Up.” Near the beginning of the story is the following: “’My all time favorite pair I would probably have to say was Air Force II by Nike’, said Kemp, not caring the least that he has an endorsement deal with Reebok. ‘They were worn by Durell Griffith and Moses Malone. Oh, yeah, you had to have them. When I got a pair of Air Force IIs, I was the coolest kid in school. I’d wear them around just to let everybody know I’m a basketball Player.’” The story then includes quotes from other players and concludes with this: “Kemp says today’s shoes aren’t as good as the old ones, because they’re made to be lighter. Kemp calls them ‘throw-aways,’ because they rip so easily. ‘I might go back next year to (Reebok) Kamakazes,’ Kemp said. ‘They’ve got a real crazy design. That’s the shoe I started out wearing my third year and wore when I made my first All-Star Game (in his fourth season of 1992-93).’ Kemp has plenty of Kamakazes in his basement. Alas. He has no Air Force IIs.”

Later that same month Reebok terminated his endorsement agreement, claiming that by making these statements Kemp has breached the contract provisions quoted above. In its termination letter, Reebok’s attorney states, “Given that you have been contractually obligated since 1992 to wear Reebok footwear exclusively during all athletic workouts, practices, tournaments, games, exhibitions and to otherwise fulfill your obligations under the Agreement, it is patently clear your comments could only have been directed at Reebok footwear.” Under the terms of the agreement, this meant Reebok refused to pay approximately $4.1 million still due for the final 2½ years of the contract.

Questions:

• Did Kemp materially breach his agreement with Reebok? Was Reebok justified in terminating its agreement with Kemp, or by attempting to do so, has Reebok breached the agreement itself?
• Would it affect your answer – and if so, why – to know that Kemp’s career was in significant decline by 2000? Would it affect your answer – and if so, why – to know that Reebok was doing very poorly in the sales of basketball shoes and cut its endorsement contracts from around fifty to just a few?