Derek Jeter Unable to Dismiss Claims of Fraud

Derek Jeter’s bid for dismissal of fraud and fiduciary claims brought against him by high-end underwear maker RevolutionWear Inc. (RWI) last November was largely unsuccessful. On July 19, Vice Chancellor Sam Glasscock III of the Delaware Chancery Court retained four of the five counts against Jeter: acting in bad faith, fraudulently concealing his interests, fraudulently inducing company actions, and knowingly making false claims to investors.

The lawsuit spawned from Jeter’s promotion to RWI’s board of directors in 2011, giving him a 15 percent stake in the company. RWI alleges that in return, Jeter was to promote and publicize his position as co-founder of the company. In addition to claiming Jeter did not fulfill that promise, RWI also claims Jeter fraudulently concealed an endorsement deal with Nike by waiting two years to tell RWI that his Nike deal precluded him from publicly endorsing a RWI brand, Frigo. All of RWI’s claims center around the failed investment in Jeter as a member of their board, which the company claims cost them $30 million.

Glasscock concluded that it was “reasonably conceivable” Jeter violated the covenant of good faith and fair dealing in Delaware corporate law, and that Jeter must defend the claims of bad faith action in court. However, he found that Jeter did not have a duty to promote or protect RWI aside from standing behind company statements, resulting in the dismissal of a single count.

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