Mr Flatley sat with his legal team in court 60 at the High Court in London as Mr Reid's QC, Robert Englehart, opened the case against him.
Mr Reid claims he was sacked after helping the popular Riverdance star launch the successful Lord of the Dance stage show.
Counsel told Mr Justice Lightman that the action involved "a claim for damages by way of compensation for the repudiation of a management agreement".
Mr Reid, 47, former manager of the rock star Elton John, claims he was sacked early into the British run of Lord of the Dance.
The case will last about five weeks, during which the dancer and his former manager are expected to be among a "considerable" number of witnesses who will give evidence.
At the opening of the hearing Mr Englehart told the judge that the defendant was "a well-known dancer of some considerable repute and undoubtedly a considerable talent in the dance field".
Counsel said that Mr Reid was "summarily dismissed" in a solicitor's letter on 16 January 1997: "The management contract had only been entered into some seven months previously and was not due under its terms to expire until October 15 1998."
Mr Englehart said Mr Flatley's case was that he was "entitled to summarily dismiss his manager" for a number of reasons. "Firstly, he says that Mr Reid made various statements when he, Mr Flatley, and Mr Reid, first met in St Tropez in September 1995 and he says that he was induced by what Mr Reid said then to enter into the management agreement in June 1996."
Counsel told the packed court that the star also claimed that the management contract was "procured by undue influence" on the part of John Reid Enterprises Ltd.
It was further alleged, he said, that the contract at the centre of the case represented an "unconscionable bargain" and was the result of "economic duress".
Mr Englehart said another line of defence put forward by Mr Flatley was that there had been "repudiatory breaches" of contract - "breaches of contract of such gravity that Mr Flatley ... was entitled summarily to terminate this contract", which happened on January 16 1997.
The case continues today.