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Feb 3, 2001

AMA Issues Statement Regarding Ruling In Edmondson Case, Admits Errors Were Made, And Outlines Plans To Avoid Problems In Future

For the first time in the Edmondson v. AMA case, the AMA has publicly admitted that errors were made and has outlined a plan to avoid similar problems in the future.

A statement posted on the AMA website February 3 and headlined "Court Rules In AMA Appeal", reads:

"The Fourth Circuit Court of Appeals in Richmond, Virginia, has issued a decision in the American Motorcyclist Association's appeal of a 1998 circuit-court ruling stemming from a lawsuit filed by the Association's former road-racing manager, Roger Edmondson, the AMA reports.

"The Court of Appeals reversed the lower-court ruling on two of the 10 points raised in the AMA's appeal, and ordered the lower court to correct mistakes in four other areas. That had the effect of upholding less than 10 percent of the damages awarded to Edmondson, reducing the judgment from $3.2 million to $240,000, with some elements of the case still to be determined.

"The lawsuit arose from the non-renewal in 1994 of contracts under which Edmondson functioned as manager for the AMA's national championship road-racing series and administrator for several classes included in that series. At the time of his departure from those positions, the AMA entered into negotiations with Edmondson and made a financial offer to terminate the relationship.

"Those negotiations were unsuccessful, and Edmondson ultimately formed the North American Sport Bike series, signing contracts with several racetracks that had previously hosted AMA road races. Subsequently, most of those racetracks terminated those contracts and returned to the AMA schedule.

"Edmondson then sued the AMA, alleging that the Association had interfered with his racing program. In 1998, he received a $930,000 award from a jury, and a ruling by the lower court that the AMA should pay triple damages, resulting in a $2.8 million judgment. To that was added some $400,000 in legal fees for a total of $3.2 million.

"'We felt, and several internal and external legal advisors agreed, that the facts of this case did not justify the damages assessed in the lower court, so we proceeded with the appeal,' said Rick Gray, Chairman of the AMA Board of Trustees. 'We are pleased that the Court of Appeals listened to our arguments and substantially reduced the damages in this case.

"'In 1990, the AMA entered into a joint venture agreement with Edmondson that bound us together contractually,' Gray noted. 'By 1993, we realized that we had irreconcilable differences regarding the future of the AMA's road-racing program, and we sought to find an amicable end to that joint venture agreement.

"'The AMA never set out to take anything from Mr. Edmondson without compensation,' Gray said. 'Indeed, Mr. Edmondson was repeatedly offered a fair value for his consulting services after the end of his business relationship with the AMA, a value that far exceeded the amount of damages affirmed by the appeals court. However, the AMA could not reach agreement with Mr. Edmondson and, when he repeatedly refused those offers, the AMA had to go forward and continue to run its racing series as it had for the previous 70 years.'

"The ruling by the appeals court says that after the negotiations failed, the AMA moved to appropriate the property that was part of the joint venture. It specifically says that the AMA took control of a mailing list owned by Edmondson and interfered with contracts he signed with three racetracks. The total value of those assets is placed at $80,000, and the court has, pursuant to North Carolina law, ordered the AMA to pay Edmondson triple that value as compensation, for a total of $240,000.

"Still at issue is the value of Edmondson's share of other tangible assets of the joint venture agreement, including such items as computer and racing equipment. The appeals court ruled that the lower-court judge had made a serious error in the way he instructed the jury to tabulate that value. That part of the lawsuit was responsible for $2.25 million of the $2.8 million total award. The appeals court also completely rejected the lower court's finding that the AMA owed Edmondson a portion of television revenues.

"'Hopefully, this decision moves us much closer to the conclusion of a case that is based on business dealings which took place many years ago,' Gray said. 'It is apparent that errors were made by the trustees and staff in the way agreements were structured with Roger Edmondson, in the attempts to negotiate with him and during the litigation. Those actions were misconstrued and played a role in the lower court's original verdict.'

"The lower-court judgment has been budgeted by the Association and set aside since the original ruling was handed down. In the meantime, the AMA Board has reviewed policies and instituted a number of changes in the way the Association enters into contracts with those providing services.

"'One of the results of this litigation is a resolve on the part of the trustees and staff to never let this happen again,' said Gray. 'In today's commercial climate, we cannot avoid lawsuits. However, since the time of the turmoil that led to this verdict, the Association has taken steps to protect against a recurrence.

"'Contracts with significant vendors and other business relationships are now subject to an intense business and legal review prior to execution. In today's business world, relationships must be defined at the outset, and those definitions must be in writing. If that had been done with Mr. Edmondson, both he and the AMA would have known exactly what the ending of their business relationship would mean to them.'

"While the case has dragged on, the AMA has moved forward with its competition program, creating a professional racing subsidiary under the direction of a separate board. In road racing, Supercross, motocross, flat-track and hillclimb competition, the Association has been able to bring in new sponsors, increase payouts to riders, expand the fan base and substantially upgrade the level of television coverage for professional motorcycle racing.

"'The creation of this new subsidiary has allowed the AMA, under the leadership of its President, Robert Rasor, to focus on its primary role of protecting motorcyclists' right to ride, while AMA Pro Racing continues to expand opportunities for the racers, teams, promoters and fans involved in motorcycle competition,' Gray concluded."