United States District Court, E.D. Texas, Sherman Division
LIVERPOOL FC AMERICA MARKETING GROUP, INC.
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
L. MAZZANT UNITED STATES DISTRICT JUDGE
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
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.
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,
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.
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.
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.
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).
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”).
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).
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).
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).
Colorado River Abstention
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).
Motion to Dismiss Pursuant to 12(b)(6)
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).
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
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.
“[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).
move to (1) dismiss or stay the suit based on Colorado
River abstention and (2) dismiss the case under Federal
Rule of Civil Procedure ...