A Michigan credit union has cried foul in court against the Detroit Pistons, but its case against the basketball team and its owner, Palace Sports & Entertainment, isn't exactly a slam-dunk, according to recent court filings.

This week a Michigan appeals court reversed an injunction that Lathrup Village, Michigan-based Michigan First Credit Union originally won against the team over a soured sponsorship agreement, according to court records. That sponsorship agreement, signed on November 9, 2016, would have made the credit union a sponsor of the Pistons until October 13, 2021.

But just days after signing the agreement, on November 22, 2016, the Pistons announced the team was moving from the Palace of Auburn Hills to Little Caesars Arena, which was under construction, for the 2017-2018 basketball season.

According to court documents, the sponsorship agreement allowed the Pistons to terminate the deal if the team stopped playing home games at the Palace. But it also required the team to negotiate a new agreement that would provide comparable sponsorship opportunities to Michigan First.

That apparently became a problem for Michigan First when the Pistons signed a competing, exclusive sponsorship agreement with Flagstar Bank. That deal, announced in July 2017, put the bank's logo on the team's jerseys and involved a number of social media, radio and community outreach activities. The next month, in August 2017, the Pistons formally terminated the agreement with Michigan First.

A Michigan trial court issued a preliminary injunction requiring the Pistons to negotiate a deal with Michigan First, which has $863 million in assets and about 139,000 members, and give it “identical” rather than “comparable” sponsorship assets.

The Pistons appealed, and earlier this week a state appeals court agreed with the team and reversed the injunction.

Part of the problem appears to revolve around the difficulty measuring the damages Michigan First suffered as a result of the broken deal, and it was a significant factor in why the trial court awarded the injunction in the first place.

But according to the appeals court, the trial court's job wasn't to determine the dollar amount of the damages Michigan First suffered, it was to determine whether awarding damages could remedy the injury to the credit union in the first place.

“It was not incumbent at this stage of litigation, prior to discovery, for the trial court to determine what MFCU's damages might have been, or even exactly how they might be calculated. Rather, to justify the extraordinary remedy of an injunction, MFCU had the burden of showing that its injuries were not fully capable of being calculated in damages,” the appeals court found.

“Uncontroverted testimony demonstrated that there are firms which undertake such analysis with regularity and which, at trial, could offer a reliable expert opinion as to value and damages,” it added. “Thus, the testimony at the hearing established clearly that if PSE breached the sponsorship agreement, the harm inflicted by such breach could be measured and thus compensated at law by an award of damages.”

Michigan First also failed to prove that the loss of goodwill it suffered as a result of the broken deal amounted to economic harm, the court said.

“[Michigan First chief marketing officer Sue] Postemski testified that she was unaware of any customers or potential customers that MFCU would lose as a result of the changes in MFCU's sponsorship relationship with the Pistons, nor was she aware of any specific concrete business that MFCU had lost due to the sponsorship issue. Poulos acknowledged that MFCU would not be destroyed because of the loss of the Pistons sponsorship and that there is no serious and immediate threat to MFCU's economic existence if MFCU were unable to obtain a comparable sponsorship deal,” it noted.

The trial court's requirement to give the credit union with “identical” rather than “comparable” sponsorship opportunities was over the line as well, according to the appeals court.

“Even if an injunction had been justified in the present case, we nevertheless would have to vacate the injunction that the trial court entered because it was overly broad,” it said.

Instant Insights /

Court Reverses Injunction in Michigan CU's Suit Against Detroit Pistons

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