Jordan v Knafel: a troubling take on mutual mistake: the first district found in favor of Michael Jordan against his former mistress in an opinion that, while interesting, includes a troubling analysis of the mutual-mistake-of-fact doctrine. This article considers the ramifications of the ruling and suggests practice pointers

Illinois Bar Journal, June, 2009 by Joseph Siprut

As readers of Chicago newspapers are well aware, Michael Jordan and his former mistress, Karla Knafel, engaged in long-running litigation in Illinois state court over an alleged $5 million aternity and confidentiality agreement. This grudge match ended when the first district court of appeals affirmed the trial court's grant of summary judgment in favor of Jordan. (1)

The appellate court held that the alleged agreement was unenforceable, both because it was fraudulently induced by Knafel's statement to Jordan that "she was pregnant with his child"--a statement that later turned out to be untrue--and because it was predicated on a mutual mistake of fact as to the paternity of Knafel's unborn child.

While the facts in the litigation are colorful, the court's analysis reads like a roadmap of black-letter contract law. As such, the opinion is a worthwhile read for those who encounter contract issues frequently in their practice.

However, as explained below, the court's analysis gave short shrift to the notion that Jordan bargained for the risk that he was not the father of Knafel's child at the time he made the agreement. The court's treatment of the "mutual mistake of fact" doctrine may accordingly muddle this area of the law--something Illinois practitioners should be aware of.

Background

Jordan initiated the litigation in 2002 by filing a declaratory judgment action--a preemptive strike--against Knafel (2) Jordan alleged that he had a relationship with Knafel more than a decade prior, but denied the existence of any agreement to pay Knafel $5 million.

He claimed that Knafel had previously "extorted" $250,000 from him under threat of publicly exposing their relationship, and that Knafel subsequently threatened to again expose their relationship unless Jordan paid her an additional $5 million. Jordan sought a declaratory judgment that even if such an agreement existed, it would be extortionate, and thus unenforceable. (3)

Knafel filed a counterclaim, asserting breach of contract. Knafel alleged that that she and Jordan engaged in a sexual relationship beginning in December 1989, including a specific weekend in November 1990 where they had unprotected sex. (4) Knafel alleged that she learned she was pregnant in early 1991, and was "convinced" Jordan was the father.

Knafel alleged that after informing Jordan of the news, he agreed 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." (5) After Knafel's child was born, Jordan paid various medical expenses, and gave Knafel $250,000 for "her mental pain and anguish arising from her relationship with him."' Knafel refrained from filing any paternity suit against Jordan, and kept the relationship confidential.

After Jordan retired for the second time, Knafel's counsel contacted Jordan's counsel and sought payment of the $5 million. (7) Jordan's declaratory judgment action followed.

As a procedural point, Jordan responded to Knafel's counterclaim with a hybrid motion for judgment on the pleadings and to dismiss Knafel's claim. 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 Knafel's child. (8)

After the trial court dismissed Knafel's counterclaim, the appellate court reversed, holding that "the agreement could be construed as a good-faith settlement of her paternity claim with a confidentiality provision which is not violative of public policy." (9) The appellate court further held that it could not address the merits of the fraudulent inducement and mutual mistake arguments because there was no evidence presented from which the court could conclude Jordan was not the father of the child. (10)

As a result, in the next go-round in the trial court, Jordan attacked Knafel's counterclaim with a motion for summary judgment. For purposes of the summary judgment motion, Jordan did not contest the existence of the alleged agreement. Instead, Jordan argued that the agreement was unenforceable either because it was fraudulently induced or because it was based on a mutual mistake of fact as to the paternity of Knafel's child. (11)

This time, however, Jordan attached the affidavit of a doctor who conducted paternity tests of Jordan and Knafel. The affidavit stated that in August 1991-one month after Knafel's child was born and several months after the alleged settlement agreement--the doctor collected blood samples from Jordan, Knafel, and Knafel's child, and determined that the tests "exclude[d] Mr. Jordan from being the father" of Knafel's child. (12)

Knafel responded by arguing that Jordan's actual paternity was irrelevant to the enforceability of the alleged agreement. She stated in an affidavit that at the time of the agreement, she believed in good faith Jordan was the father of her child. She also attested that she informed Jordan "throughout their relationship" that she was having sex with another man and said her sexual interactions with Jordan were unprotected. (13)