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Jeter Endorsement Dispute Examines Role As a Director of Apparel Company
Contracts between a corporation and a corporate director can give rise to certain difficulties in managing expectations of the director's obligations and responsibilities. Such contracts may create obligations that extend beyond those fiduciary duties inherent to the director position. This extension of the director's role may increase the risk of a conflict between a director's contractual obligations and his fiduciary duties.
The issue is important to entertainer and athlete endorsement deals. In Jeter v. Revolutionwear, 11706-VCG (Del. Ch. 2016), the Delaware Court of Chancery examined the relationship between a director's contractual obligations to promote his role with the corporation and particular brand of clothing, and his standard obligations as a fiduciary of the company. The case revealed the risks associated with “reverse endorsement,” or the use of the director role as a marketing tool, particularly when the subject of such a reverse endorsement, or the famous individual, is already party to an exclusive endorsement agreement.
In 2009, then-New York Yankees baseball player Derek Jeter's representatives entered into discussions with RevolutionWear Inc. (RWI), makers of high-tech underwear, to engage the former professional baseball player under a strategy of “reverse-endorsement.” The reverse-endorsement concept was developed by RWI in order to attract public figures or high-profile individuals as “significant owners, directors, advisers and founders.” Instead of using the standard endorsement model popular with sports and fashion brands, RWI presumably thought Jeter's business involvement would appear “more sincere to the underpants-buying public.”
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