The NBA’s Detroit Pistons are facing off against an unusual opponent – a credit union.
The dispute between the two parties began in August 2017, when the Pistons canceled a sponsorship deal, citing alleged breach of a contract first signed in November 2016 between $863 million-asset Michigan First Credit Union and Palace Sports & Entertainment. The Lathrup Village, Mich.-based institution subsequently sought an injunction compelling the team and its owners to negotiate a new deal, but an appeals court in the state has now reversed that injunction, meaning the next steps in the fight are unclear.
According to a document from the State of Michigan Court of Appeals, the deal between the Pistons and the credit union would have kept Michigan First as a sponsor for almost five years – until Oct. 13, 2021. Shortly after the deal was signed, however, the Pistons announced plans to relocate from the Palace of Auburn Hills in Auburn Hills, Mich., to the new Little Caesar’s Arena in downtown Detroit. The sponsorship agreement specified that the Pistons had the right to terminate their deal with the credit union in the event that the team left the Palace, but could negotiate “in good faith” to reach a new sponsorship deal.
When the team terminated the sponsorship agreement on Aug. 27, the credit union alleged breach of contract, among other claims. In the meantime, the Pistons signed a multi-year corporate sponsorship agreement with Troy, Mich.-based Flagstar Bank.
Michigan First claims negotiations on a new deal can not be done in good faith since the tam has already signed a new deal with Flagstar.
Chuck Holzman, managing member and founder of Holzman Corkery of Southfield, Mich., and general counsel for Michigan First, told Credit Union Journal the Pistons offered the credit union a number of sponsorship, marketing and brand alignment opportunities at Little Caesars Arena before they signed their exclusive agreement with Flagstar, but those opportunities were not to the same level as the original deal.
“What they offered the credit union was more in the lines of ‘hospitality’ instead of a proper sponsorship arrangement,” he said.
Once the Flagstar agreement was signed, the Pistons were unable to offer anything sponsorship-related and even refused to allow the credit union to call itself a sponsor.
Kevin Grigg, VP of public relations for the Detroit Pistons, told Credit Union Journal via email that the club will have no comment on the case.
What’s a sponsorship worth?
One of the major issues surrounding the case is the difficulty in calculating actual damages Michigan First has suffered as a result of the canceled sponsorship.,
Speaking during an evidentiary hearing, Michigan First Chief Marketing Officer Sue Postemski said it is difficult to measure the financial value of a sponsorship deal. According to court documents, she also asserted that the credit union’s relationship with the Pistons was “more than economic” because Michigan First was “attempting to develop awareness of its brand by associating with the Pistons.”
Michigan First President and CEO Michael Poulos also testified during the hearing that he did not know how to measure damages because he “did not know how to put a value on brand alignment, community support, and name recognition.”
The credit union alleges it has “suffered a loss of goodwill” as a result of the Pistons’ actions, but again conceded that a loss of goodwill is “difficult to value.”
The court has ruled that the credit union is a “substantial company and would not be driven out of business in the absence of injunctive protection.” Under these circumstances, the court added, the plaintiff has “failed to show irreparable harm, in as much as a possible loss of customer goodwill does not threaten complete destruction of its business.” The court further stated that the credit union “failed to demonstrate any injury to its overall economic well-being.”
Indeed, both Postemski and Poulos testified that the credit union did not appear to lose any members or potential members as a result of the canceled sponsorship agreement, nor does Michigan First face any “serious and immediate threat” to its economic existence.
Still a ‘proud partner’?
Michael Bell, a credit union attorney at Howard & Howard in Royal Oak, Mich., noted that sponsorship agreements of this magnitude involve material amounts of money and opportunity costs for credit unions.
“I don't have specific knowledge of the facts in this case, but I can fully understand why the credit union would take action to protect its members’ interest in this contract,” he said. “In a sense it's an expensive earning asset.”
Moreover, Michigan First’s website sill lists the credit union as a “proud partner” of the Pistons.
Michigan First attorney Holzman said the credit union believes that no amount of compensation could make up for the loss of the sponsorship with the Pistons, but the court of appeals disagreed and ruled that money damages would be the proper remedy. The next step will likely mean a jury trial to determine such compensation, he added.
This story was updated at 5:34 p.m. on March 2, 2018.