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Feb 6, 2001

Appeals Court Ruling Means AMA Won't Be Able To Claim Innocence Or Attempt To Mitigate Guilt With Rebuttal Witnesses At Retrial On Amount Of Edmondson Damages

While some AMA supporters are proclaiming a significant legal victory for the AMA, and while a recent website headline proclaimed "Court Favors AMA Over Edmondson In Suit," a February 2 Appeals Court ruling requiring a retrial on the amount of damages the AMA owes to Roger Edmondson presents the AMA with a very difficult legal problem and the possibility of even greater damages being awarded to Edmondson.<BR><BR>The AMA's problem is that the Court of Appeals has ruled that the association's guilt has already been established and all that is at issue is the amount of money the AMA has to pay Edmondson over and above the $240,000 already affirmed. What that means, legal experts say, is that while Edmondson's lawyers get to present their case again in front of a new jury, the AMA lawyers will not be able to present rebuttal witnesses or claim that the AMA is not guilty as charged.<BR><BR>The issues to be decided by the new jury include the value of the tangible and intangible assets of Edmondson's business, including cash flow projections and good will, as well as the amount of punitive damages the AMA will be ordered to pay Edmondson. There is nothing to prevent a new jury from finding that the AMA should pay Edmondson even more money than the first jury ordered.<BR><BR>Edmondson also enters the retrial with a significant advantage in terms of proving the value of the disputed joint venture. At the time of the trial in December of 1998, Edmondson's legal team had to estimate and project the cash flow the joint venture could generate. At the retrial, Edmondson's legal team will not have to rely on estimates, because the exact revenues generated by AMA Pro Racing in 1995, 1996, 1997, 1998, 1999 and 2000 will be known and available and can be used to put a value on what was the joint venture and is now run soley by the AMA. Furthermore, since CCS was purchased by SFX Motor Sports in 2000, there is now an accepted method on record used to establish the value of a motorcycle racing business. The combination of those three new pieces of information--the revenue generated by AMA Pro Racing across a six-year post-Edmondson span, the method of determining the actual value of a motorcycle racing business, and the actual sales price of CCS--gives Edmondson's legal team a strong base to value the business as being worth significantly more than the first jury heard.<BR><BR>Edmondson's personal income during the years the joint venture operated can also be compared with his personal income in the years after the AMA took over the joint venture entirely, and sources close to the case say that income dropped dramatically from (approximately) between $700,000 and $1,000,000 per year.<BR><BR>It is worth noting that in its statement issued February 3, the AMA characterized the joint venture dispute as a non-renewal-of-contract dispute, while the courts have ruled it was indeed the joint venture that Edmondson has claimed it was all along.<BR><BR>And because the Court Of Appeals ruled that trebling of damages under North Carolina law applies to the case, Edmondson's legal fees will have to be paid by the AMA, again the only issue being how much the AMA will have to pay. Because significant legal costs are likely to be incurred in preparation for and during the retrial itself, the Court of Appeals vacated the order for the AMA to pay Edmondson's legal fees incurred thus far and ordered that the judge in the retrial determine the amount the AMA owes Edmondson after all the litigation in the case is completed.<BR><BR>The bottom line is that the Court of Appeals ruling is not a vindication for the AMA, and that the AMA's potential exposure in the case is as high or higher than it was prior to the ruling.