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Liverpool FC America Marketing Group, Inc. v. Red Slopes Soccer Foundation

United States District Court, E.D. Texas, Sherman Division

May 21, 2018

LIVERPOOL FC AMERICA MARKETING GROUP, INC.
v.
RED SLOPES SOCCER FOUNDATION, RED SLOPES SOCCER, LLC, RED SLOPES UTAH SOCCER, LLC, WAYNE SCHOLES, AS TRUSTEE FOR RED SLOPES FOUNDATION; HEATHER AMBER SHOLES, AS TRUSTEE FOR RED SLOPES FOUNDATION; AND DAVE HUBBARD, AS TRUSTEE FOR RED SLOPES FOUNDATION

          MEMORANDUM OPINION AND ORDER

          AMOS L. MAZZANT UNITED STATES DISTRICT JUDGE

         Pending before the Court is Defendants' Motion to Dismiss, or to Stay (Dkt. #24). The Court, having considered the relevant pleadings, finds that Defendants' motion should be denied.

         BACKGROUND

         In 2015, Liverpool Football Club and Athletic Grounds Limited's (“LFC”) entered into a Junior Affiliate Agreement (the “Junior Affiliate Agreement”) with Liverpool Management, Inc., which assigned its rights to Liverpool FC American Marketing Group, Inc. (“LFC America”). LFC granted LFC America limited rights to use its trademarks for the purpose of operating a youth soccer program in Texas. LFC also granted LFC America the right to sublicense those same rights to “Expansion Clubs” in other states.

         In August 2016, LFC America was approached by Defendants who inquired about entering into a contract with LFC America for the purpose of obtaining a limited license to advertise, promote, develop and operate a Liverpool branded Expansion Club in Utah for youth soccer (“Soccer Club”). On October 12, 2017, LFC America entered into a Soccer Development and Licensing Agreement (the “License Agreement”) with Red Slopes Soccer Foundation (“Red Slopes”) to go into effect on January 1, 2017.

         Before fully executing the License Agreement, Defendants sought two changes to the Licensing Agreement. First, they sought to reduce the minimum number of players for purposes of calculating the Per Player Fee from 500 to 150 players for the first year and from 500 to 450 players for the second year. Second, they sought to change venue to the state of Utah. No. other substantive changes other than the specific entities included in the agreement as Licensees were requested or proposed. LFC America consented to reduce the minimum number of players for the first two years as requested, but refused to change venue to the state of Utah.

         The License Agreement established Red Slopes as an Expansion Club and began to use the LFC Crest and other LFC trademarks to operate as an LFC youth soccer organization. Following execution of the Licensing Agreement, Defendants began soliciting soccer players and clubs and promoting its Soccer Club, operating under several entities, including Red Slopes Soccer, LLC and Red Slopes Utah Soccer, LLC, and using the licensed Liverpool Trade Name “Liverpool FC International Academy-Utah”. The Licensing Agreement obligates Defendants to make several payments to LFC America in exchange for the limited rights to the licensed Liverpool Trade Name and use of the Proprietary Information provided under the Agreement.

         LFC America alleges that Red Slopes failed to make any required payments under the License Agreement. Accordingly, on or about August 7, 2017, LFC America sent a Notice of Default to Red Slopes. Red Slopes did not cure the default, and on or about August 23, 2017, LFC America terminated the License Agreement and notified LFC of the termination of Red Slopes' rights to use the LFC Intellectual Property.

         On July 27, 2017, Red Slopes filed suit against LFC America in Utah state court asserting claims for fraudulent inducement, violations of the Texas Deceptive Trade Practices Act (“DTPA”), and for breach of the License Agreement. Red Slopes Soccer, LLC et al. v. Liverpool FC America Marketing Group, Inc., No.170904802, Third Judicial District Court of Salt Lake County, Utah. Specifically, Red Slopes asserts that “although the [License] Agreement is fraudulently induced and unenforceable, it relied upon LFC America's representations, commenced its soccer club and utilized LFC's marks and curriculum-and, in fact, paid [LFC] all fees required to use the intellectual property.” (Dkt. #24 at p. 4).

         On October 12, 2017, LFC America filed a motion to dismiss the Utah Case, arguing that a forum-selection clause in the License Agreement barred the parties from litigating their dispute in Utah. On February 16, 2018, the Utah court denied the Utah Motion to Dismiss as to LFC America, finding that it possesses personal jurisdiction over LFC America and that, pursuant to Utah law, Red Slopes' fraud claim renders the License Agreement's forum-selection clause unenforceable at the motion to dismiss stage. On March 8, 2018, LFC America filed a petition seeking interlocutory appeal by the Utah Court of Appeals (the “Petition”). On March 6, 2018, in anticipation of its contemplated Petition, LFC America filed a motion to stay the Utah Case pending the outcome of LFC America's proposed interlocutory appeal (the “Motion to Stay”).

         On September 9, 2017, LFC America filed suit against Defendants in Texas state court, asserting claims for breach of contract, false representations and descriptions in commerce, common law and statutory unfair competition, and misappropriation of trade secrets and confidential information. The case was removed to this Court on October 20, 2017 (Dkt. #1). On December 29, 2017, this Court granted LFC America's Unopposed Motion for Temporary Stay (Dkt. #21), staying this case until March 29, 2018 (Dkt. #22).

         On April 19, 2018, the Utah Court of Appeals issued an order denying LFC America's Petition, which sought to appeal the Utah court's denial of the Utah Motion to Dismiss (Dkt. #27, Exhibit 4 at ¶ 8). On April 23, 2018, the Utah state court entered an order denying LFC America's previously-filed Motion to Stay and ordering LFC America to answer Defendants' pleading in the Utah Case within seven days (Dkt. #27, Exhibit 5 at ¶ 9).

         On March 29, 2018, Defendants filed a motion to dismiss, or stay under Colorado River abstention, or in the Alternative, Motion to Dismiss Under Rule 12(b)(6) (Dkt. #24). On April 12, 2018, LFC America filed its response (Dkt. #25). On April 24, 2018, Defendants filed a reply (Dkt. #27). On April 26, 2018, LFC America filed a sur-reply (Dkt. #30).

         LEGAL STANDARD

         1. Colorado River Abstention

         The Colorado River doctrine allows a court to abstain from exercising jurisdiction over federal claims under “exceptional circumstances.” Brown v. Pacific Life. Ins. Co., 462 F.3d 384, 394 (5th Cir. 2006). The existence of the following six (6) factors determine whether “exceptional circumstances” exist:

(1) assumption by either state or federal court over a res; (2) relative inconvenience of the fora; (3) avoidance of piecemeal litigation; (4) order in which jurisdiction was obtained by the concurrent fora; (5) extent federal law provides the rules of decision on the merits; and (6) adequacy of the state proceedings in protecting the rights of the party invoking federal jurisdiction

Id. at 395. The decision to abstain must be based on a careful balancing of important factors as they apply to a case, “with the balance heavily weighted in favor of the exercise of jurisdiction.” Id. Additionally, the doctrine only applies when there are parallel proceedings pending in federal and state court. Id. at 395 n.7. Proceedings are considered parallel if they “involve the same parties and the same issues.” Id. It is not necessary that there be “a mincing insistence on precise identity of parties and issues.” Id. The Colorado River test “should be applied in a pragmatic, flexible manner with a view to the realities of the case at hand.” Allen v. La. State Bd. of Dentistry, 835 F.2d 100, 104 (5th Cir. 1988).

         2. Motion to Dismiss Pursuant to 12(b)(6)

         The Federal Rules of Civil Procedure require that each claim in a complaint include a “short and plain statement . . . showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Each claim must include enough factual allegations “to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).

         A Rule 12(b)(6) motion allows a party to move for dismissal of an action when the complaint fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). When considering a motion to dismiss under Rule 12(b)(6), the Court must accept as true all well-pleaded facts in plaintiff's complaint and view those facts in the light most favorable to the plaintiff. Bowlby v. City of Aberdeen, 681 F.3d 215, 219 (5th Cir. 2012). The Court may consider “the complaint, any documents attached to the complaint, and any documents attached to the motion to dismiss that are central to the claim and referenced by the complaint.” Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010). The Court must then determine whether the complaint states a claim for relief that is plausible on its face. ‘“A claim has facial plausibility when the plaintiff pleads factual content that allows the [C]ourt to draw the reasonable inference that the defendant is liable for the misconduct alleged.'” Gonzalez v. Kay, 577 F.3d 600, 603 (5th Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “But where the well-pleaded facts do not permit the [C]ourt to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not ‘show[n]'-‘that the pleader is entitled to relief.'” Iqbal, 556 U.S. at 679 (quoting Fed.R.Civ.P. 8(a)(2)).

         In Iqbal, the Supreme Court established a two-step approach for assessing the sufficiency of a complaint in the context of a Rule 12(b)(6) motion. First, the Court should identify and disregard conclusory allegations, for they are “not entitled to the assumption of truth.” Iqbal, 556 U.S. at 664. Second, the Court “consider[s] the factual allegations in [the complaint] to determine if they plausibly suggest an entitlement to relief.” Id. “This standard ‘simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary claims or elements.'” Morgan v. Hubert, 335 Fed.Appx. 466, 470 (5th Cir. 2009) (citation omitted). This evaluation will “be a context-specific task that requires the reviewing [C]ourt to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679.

         Thus, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.”' Id. at 678 (quoting Twombly, 550 U.S. at 570).

         ANALYSIS

         Defendants move to (1) dismiss or stay the suit based on Colorado River abstention and (2) dismiss the case under Federal Rule of Civil Procedure ...


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