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Jordan v. Knafel

February 3, 2005

MICHAEL JORDAN, PLAINTIFF AND COUNTER-DEFENDANT-APPELLEE AND CROSS-APPELLANT,
v.
KARLA KNAFEL, DEFENDANT AND COUNTER-PLAINTIFF-APPELLANT AND CROSS-APPELLEE.



Appeal from the Circuit Court of Cook County. No. 02 CH 19143, Honorable Richard A. Siebel, Judge Presiding.

The opinion of the court was delivered by: Justice Theis

PUBLISHED

Plaintiff Michael Jordan sought a declaratory judgment that a contract asserted by defendant Karla Knafel was extortionate and void against public policy. Knafel filed a counterclaim, alleging that Jordan owed her $5 million for breach of a confidential settlement agreement. The trial court dismissed the complaint and counterclaim, finding that Jordan failed to allege an actual controversy and that Knafel's alleged contract was unenforceable. Subsequently, Knafel's motion for leave to amend her counterclaim was denied.

On appeal, Knafel contends that the trial court erred in holding that the contract was unenforceable as extortionate and that it violated public policy. Jordan cross-appeals, contending that the trial court erred in dismissing his declaratory judgment action where there was an actual disagreement between the parties as to their respective legal obligations. For the following reasons, we affirm in part, reverse in part, and remand for further proceedings.

BACKGROUND

On October 23, 2002, Jordan filed a complaint for a declaratory judgment and injunctive relief against Knafel, a woman with whom he had an intimate relationship. Therein, he alleged that Knafel, through her attorneys, was attempting to extort money from Jordan by threatening to publicly expose their relationship unless Jordan paid Knafel $5 million. He further alleged that Knafel had previously extorted $250,000 from him under threat of publicly exposing their relationship. Jordan denied that he agreed to pay Knafel $5 million pursuant to a purported second agreement and sought a declaratory judgment that her demand for payment was unenforceable because (i) extortionate agreements violate public policy; (ii) there would be no consideration to support any such agreement due to Knafel's existing obligation not to publicly expose their relationship; (iii) any such agreement would violate the statute of frauds because there is no agreement in writing; and (iv) any such agreement would be barred by the statute of limitations. Additionally, Jordan sought an order enjoining Knafel, and any other persons acting on her behalf, from engaging in further efforts to extort money from him.

Knafel responded to the complaint by filing a verified answer and affirmative defenses denying the material allegations of the complaint. Therein, she admitted that Jordan paid her $250,000, but stated that it was for her mental pain and anguish arising from their romantic relationship. In addition, Knafel filed a verified counterclaim asserting theories of breach of contract and anticipatory breach of contract based on Jordan's alleged breach of his promise to pay Knafel $5 million "when he retired from professional basketball in exchange for her agreement not to file a paternity suit against him and for her agreement to keep their romantic involvement publicly confidential." The following relevant facts were alleged in the verified counterclaim.

In the spring of 1989, Knafel was performing in a band at a hotel in Indianapolis, Indiana. The Chicago Bulls were in town to play the Indiana Pacers. After her performance, Knafel was introduced to Jordan over the telephone by Eddie Rush, a National Basketball Association referee, who had approached Knafel at the hotel. Knafel declined an invitation from Jordan to meet him at the Indianapolis airport and continued to decline his invitations to meet during the spring and summer of 1989. Nevertheless, Jordan and Knafel continued long-distance telephone conversations during that time.

On September 2, 1989, Jordan married his wife, Juanita. In December 1989, Knafel traveled to Chicago to meet Jordan, where they had unprotected sex. Thereafter, in November 1990, Knafel stayed with Jordan in Phoenix, Arizona, where they again had unprotected sex. In early 1991, Knafel learned that she was pregnant. She believed the baby was Jordan's, but kept silent about the pregnancy for some time. The Bulls were on their way to their first NBA championship. Jordan's product endorsements were earning him large sums of money. Knafel alleged that as a result, Jordan was "troubled" when she told him she was pregnant with his child in the spring of 1991. He was worried about destroying his public image, which he and his agent had carefully cultivated, and was concerned about the loss of future endorsements. Knafel further alleged that Jordan demanded that she abort the baby, but because of her personal beliefs, she refused.

According to Knafel, in the spring of 1991, Jordan offered, and urged Knafel to accept, his proposed settlement agreement to resolve their problems. Jordan offered to pay her "$5 million when he retired from professional basketball in return for her agreement not to file a paternity suit against him in a court of law and for her agreement to keep their romantic involvement publicly confidential." Knafel accepted Jordan's offer. In consideration for his promise to pay her, she agreed to forbear filing a public paternity action against him and agreed to keep their romantic relationship confidential.

In July 1991, Knafel's child was born. Jordan paid certain hospital bills and medical costs and paid Knafel $250,000 for "her mental pain and anguish arising from her relationship with him." Knafel did not file a paternity suit against Jordan and she kept their relationship confidential. In October 1993, Jordan announced his retirement from the Bulls. However, in March of 1995, he returned to the NBA again to play for the Bulls. Knafel had not contacted Jordan to demand her payment of the $5 million amount which he had allegedly promised her in 1991. In September 1998, Knafel approached Jordan while he was vacationing in Las Vegas. During their conversation, Knafel reminded Jordan of his obligation to pay her the money under their agreement. Knafel alleged that Jordan reaffirmed his agreement to pay her the $5 million. A few months later, Jordan retired from professional basketball again.

Two years later, Knafel's counsel contacted Jordan's counsel to resolve their contract dispute. Jordan denied that he had promised to pay Knafel $5 million. Knafel's counterclaim sought $5 million for breach of contract. Additionally, at the time Knafel filed her counterclaim, it was alleged that Jordan was playing basketball for the Washington Wizards. Accordingly, she also alleged an anticipatory breach of their 1991 contract and 1998 reaffirmation.

Thereafter, Jordan filed a hybrid motion for judgment on the pleadings, which was directed to his complaint, and a motion to dismiss Knafel's counterclaim pursuant to section 2-615 of the Illinois Code of Civil Procedure (the Code) (735 ILCS 5/2-615 (West 2002)). Therein, Jordan argued that the alleged agreement was unenforceable because it violated public policy or, in the alternative, that it was induced by fraud or mutual mistake of fact regarding the paternity of her child. The trial court initially struck the allegations raised in the motion for judgment on the pleadings that went beyond those pled in the declaratory judgment complaint, and struck the exhibits attached to Knafel's response brief. The court further declined to proceed with a hearing on the combined motions, and by agreement of the parties, proceeded to hear the motion for judgment on the pleadings. Jordan was then granted leave to file a separate motion to dismiss the counterclaim. Thereafter, Jordan filed his motion to dismiss the counterclaim pursuant to section 2-615 of the Code. He argued that the alleged agreement was unenforceable because (1) it was contrary to public policy; (2) it was fraudulently induced; and (3) if not fraudulently induced, it was based on a mutual mistake of fact as to paternity.

After a separate hearing on both motions, the trial court dismissed Jordan's complaint for declaratory judgment and denied his motion for judgment on the pleadings. The court found that Jordan failed to allege an actual controversy and that issuing a declaratory judgment on a hypothetical contract would constitute the rendering of an advisory opinion. The trial court further dismissed the counterclaim, finding the agreement to be extortionate and against public policy. Knafel subsequently filed a motion for leave to amend her verified counterclaims. Therein, ...


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