F1’s Eddie Jordan is back in court again in a sponsorship dispute. Last time it was Vodafone, this time it’s the makers of the handheld gaming device Gizmondo. Osborne Clarke sponsorship guru Nick Johnson reports
Jordan team back in court with new sponsorship dispute
Jordan Grand Prix Limited, Tiger Telematics Inc, Eddie Jordan
Royal Courts of Justice, London
The Jordan Formula One team’s legal action against Tiger Telematics Inc looks set to go to trial in April 2005, with Tiger having been ordered to pay US$1.5 million into court in the meantime.
The case relates to sponsorship agreements entered into in 2003 and 2004 between Jordan and Tiger Telematics, manufacturers of handheld gaming device Gizmondo. The deals were together worth US$3 million in sponsorship for Jordan, and gave Tiger Telematics various on-car branding rights and other sponsorship benefits in relation to the device, which was originally called Gametrac.
The first payments under each of the two contracts were due on 1 January 2004 but Tiger refused to pay. Following various exchanges of correspondence, Jordan issued proceedings in March 2004. In their defence and counterclaim, Tiger allege various pre-contractual misrepresentations by Jordan, including representations that: (a) Jordan would secure two top drivers for 2004 and would pay them; (b) Jordan would switch from Ford to Mercedes/McLaren engines; (c) Jordan had secured enough finances to be able to compete competitively in the 2004 season and to achieve a top 5 finish; etc. Tiger also allege misrepresentations to the effect that Jordan “was bound to win the Vodafone case”, that Jordan’s lawyers had advised that Jordan “was bound, or at least likely, to win the Vodafone case” and that Eddie Jordan was personally paying Jordan’s legal costs of the Vodafone case”.
Tiger say they relied on these representations, that they were false and that Jordan was negligent in making them. Although the sponsorship contracts contained “entire agreement” clauses, there were no provisions excluding the effect of pre-contractual representations.
At a hearing in October 2004, Master Eyre refused to grant Jordan summary judgment. He held that Tiger Telematics’ case on misrepresentation was very weak, but not so weak that he could, without hearing evidence, exclude the possibility that this defence might succeed. However he was persuaded to order Tiger Telematics to pay US$2.5 million into court as a condition of Tiger being allowed to continue with its defence and counterclaim.
Tiger appealed against this order, claiming that a conditional order was not appropriate and that, even if it was, the amount ordered was too high in light of Tiger Telematics’ sensitive financial situation. By the time of the appeal hearing in January 2005,Tiger had raised approximately US$54m in funding but claimed that it still had no available cash, as all of the funding had been earmarked for particular aspects of the launch of the Gizmondo product. Tiger were partially successful in this appeal, with Mr Justice Nelson ordering that the appropriate figure to be paid into court should be US$1.5million rather than US$2.5million. He was also persuaded to order that the payment into court be postponed until 1 week before trial, provided that Tiger Telematics in the meantime place shares in escrow to the value of US$1.5 million.
If the parties are unable to settle the matter, expect further details on this case following the trial in April…
Why this matters
After Mr Justice Langley’s stinging criticism of Jordan in their failed action against Vodafone, it is perhaps surprising to see the team back in court so soon in another sponsorship dispute. The August 2003 judgment in that case found Eddie Jordan and at least one other Jordan team witness to be “wholly unsatisfactory witnesses” whose evidence became “more and more contrived and unsustainable during the trial”. Jordan’s claim to have a binding multi-million pound sponsorship agreement with Vodafone on the basis of a telephone conversation was held to be “without foundation”.
However, the position with Tiger/Gizmondo is rather different. Here, there is a signed sponsorship agreement. The dispute is not as to whether a binding contract was entered into. Rather in essence it is about (a) whether Tiger is entitled to rely on the various pre-contractual representations which it claims Jordan made; and (b) some technical points in the termination provisions of the agreement.
There were suggestions last year from some commentators that Tiger may have gone through the Gametrac/Gizmondo re-branding exercise solely in order to get out of its Jordan deal. However, this does not seem to be borne out by the judgments in the summary judgment application or in the appeal to Mr Justice Nelson. And it is a matter of public record that In2Games Limited brought trade mark proceedings against Gametrac Europe Limited (a Tiger Telematics subsidiary) in relation to In2Games’s trade mark GAMETRAK. However it may be that the postponement of the product’s launch to April 2005 arose to some extent from the Gametrac trade mark dispute and Jordan have apparently alleged that it was the re-brand that led to Tiger Telematics reneging on the sponsorship deal.
One suspects that Jordan may in future look to ensure that each of their sponsorship agreements contains a provision ousting the effect of any pre-contractual misrepresentations. A clause along those lines in this case might well have helped avoid some costly litigation…