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Business litigation may implicate entities beyond the defendant

Fans of the Colorado Rapids may have heard that the team is searching for a new sponsor to display on players’ jerseys. 

The current corporate sponsor is Ciao Telecom, pursuant to a five-year contract valued at $8.3 million. However, the team is currently engaged in a civil lawsuit with its former sponsor, alleging a breach of contract. 

Specifically, the lawsuit is against Global Logistics Solutions, the distributor for Ciao Telecom in North America. According to the complaint, the defendant failed to make any sponsorship payments under the contract. Although it paid $75,000 to close the deal, the Rapids claim that they never received any subsequent payments. At the time of the lawsuit, the defendant reportedly was behind in payments totaling almost half a million dollars.

Not surprisingly, non-payment is often regarded as a material breach of a contract's terms. When it occurs, the wronged party may be justified in ceasing its own performance obligations under the contract. In this case, the Rapids officially severed the deal in conjunction with filing their breach of contract lawsuit in a federal court in Denver.

In an interesting procedural development, Global brought its own lawsuit against Ciao Telecom, apparently attempting to shift liability for the unpaid sponsorship. However, the CEO for Ciao Telecom claims that his company did not negotiate the terms of the contract or even see a final version of it.

The lawsuit illustrates the complexities that can arise in commercial litigation. Companies might have subsidiaries or other contractual arrangements for the distribution of their products. When entering into contracts, it is important to understand the other party’s business structure. Otherwise, in the event of a material breach of one of the contract terms, the wronged party may find itself entangled in a blame-shifting game. With the help of an attorney who is experienced in business law and commercial litigation, this fiasco might be navigated toward a happy outcome.

Source: Denver Business Post, “Colorado Rapids search for new jersey sponsor as Ciao logo disappears,” Daniel Boniface, Feb. 18, 2015 

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