Everlast World's Boxing Headquarters Corp. v. Ringside, Inc.

• Decision Date: 04 March 2013
• Docket Number: No. 12 Civ. 5297(PAE).,12 Civ. 5297(PAE).
• Citation: 928 F.Supp.2d 735
• Parties: EVERLAST WORLD'S BOXING HEADQUARTERS CORPORATION, Plaintiff, v. RINGSIDE, INC., Combat Brands, LLC and RAL, LLC, Defendants.
• Court: U.S. District Court — Southern District of New York

928 F.Supp.2d 735

EVERLAST WORLD'S BOXING HEADQUARTERS CORPORATION, Plaintiff,

v.RINGSIDE, INC., Combat Brands, LLC and RAL, LLC, Defendants.

No. 12 Civ. 5297(PAE).

United States District Court, S.D. New York.

March 4, 2013.

Jed Richard Schlacter, Schlacter & Associates, New York, NY, for Plaintiff.

Rishi Bhandari, Mandel Bhandari, LLP, New York, NY, for Defendants.

OPINION & ORDER

PAUL A. ENGELMAYER, District Judge.

Plaintiff Everlast World's Boxing Headquarters Corporation (“Everlast”) brought this action against Ringside, Inc. (“Ringside”), Combat Brands, LLC (“Combat”), and RAL, LLC (“RAL”) (collectively, “Defendants”), alleging that Defendants breached contracts with Everlast; infringed Everlast's trademarks in violation of the Lanham Act, 15 U.S.C. §§ 1114(1), 1125(a), (c); and were unjustly enriched. Defendants now jointly move to dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2) or, in the alternative, to transfer this case to the United States District Court for the District of Kansas, pursuant to 28 U.S.C. § 1404(a). For the following reasons, the motion to transfer venue is granted, and Defendants' motion to dismiss for lack of personal jurisdiction is denied without prejudice.

I. Background¹A. The Parties

Everlast is a New York corporationwith offices in New York. Compl. ¶ 5. A recognizable brand in the boxing industry, Everlast designs, manufactures, and licenses boxing products and other sporting goods and equipment.

Ringside is a Kansas corporation with offices in Kansas. It is owned by John Brown. Id. ¶ 6. Ringside designs and sells its own boxing products; it also sells boxing equipment made by others, including Everlast. On October 29, 2012, Ringside filed for bankruptcy in the United States Bankruptcy Court for the District of Kansas. See Dkt. 17.

RAL is a Kansas limited liability company with offices in Kansas. Everlast alleges that it operates out of the same premises as Ringside. Compl. ¶ 8. RAL is also owned by Brown. It was formed on June 21, 2012. Id.

Combat is a Kansas limited liability company with offices in Kansas. Everlast alleges that Combat, like RAL, operates out of the same premises as Ringside. Id. ¶ 7. Combat was formed on June 19, 2012. Id.

B. Everlast's Allegations

By way of overview, Everlast alleges that Ringside infringed on its trademarks and was assisted in doing so by Combat and RAL, entities which Ringside allegedly formed to enable it to perpetuate Ringside's infringement and shield it from creditors. Everlast alleges, first, that Ringside breached two trademark license agreements (collectively, the “License Agreements”) by failing to make required payments to Everlast for using its trademark, including by selling products containing Everlast's trademarks. Everlast further alleges that, after Ringside found itself in dire financial straits, it formed Combat and RAL to shield itself from creditors and sustain its business operations under their names. It alleges that RAL and Combat took over Ringside's inventory and sold Ringside's goods, including products bearing Everlast's trademark. Everlast alleges that Ringside and RAL have common ownership, that Combat and Ringside have common employees and officers, and that all three entities operate from the same premises. On these bases, Everlast alleges that RAL and Combat are liable under alter ego, successor, and/or de facto merger theories for trademark infringement and breach of contract.

1. The License Agreements

In the License Agreements, Ringside licensed from Everlast (1) the right to use Everlast's trademarks on boxing products in the United States and Canada (the “Boxing Products Agreement”), and (2) the right to use such trademarks on products Ringside sold through Everlast's catalogue and website (the “Catalogue and Website Agreement”). The License Agreements are governed by New York law. Compl. ¶ 3.

On or about February 4, 2009, Everlast and Ringside entered into the Boxing Products Agreement. Id. ¶ 9. Under that agreement, Everlast gave Ringside the right to use certain Everlast trademarks on its products for 10 years, in exchange for Ringside's agreement to pay Everlast royalty payments each quarter. Id. ¶¶ 9–12. The agreement also provided for guaranteed annual minimum royalties between 2012 and 2018, which together totaled $1,660,254.93. Id. ¶ 11. The agreement specified that in the event of a termination, all royalties owed to Everlast were payable immediately. Id. ¶ 13. Further, if Ringside failed to make timely payments, Everlast could provide a notice to Ringside demanding payment, and could terminate the agreement if Ringside failed to pay the overdue money within 10 days of Everlast's demand. Id. ¶ 20.

On or about February 11, 2010, Everlast and Ringside entered into the Catalogue and Website Agreement.²Id. ¶ 14. It required Ringside to purchase a minimum annual value of products from Everlast each year over a seven-year period, beginning on May 1, 2012. Id. ¶¶ 14–17. Over the life of the agreement, the amounts which Ringside committed to buy totalled $28,408,364.89. Id. ¶ 16. The Catalogue and Website Agreement also contained a provision requiring Ringside, upon termination, to pay Everlast all amounts due. Id. ¶ 18. It further permitted Everlast to terminate the agreement if Ringside breached a material term of any agreement with Everlast. Id. ¶ 19.

Everlast represents that various acts relating to the two License Agreements occurred in New York City. Specifically: (1) the License Agreements were negotiated and finalized between representatives for Everlast and Ringside in New York City, Morton Aff. ¶ 2; (2) Ringside representatives, including Brown, the owner and current Ringside president, and Joe Taylor, Ringside's former president, visited Everlast's offices in New York frequently to discuss and review business between the two companies, id. ¶ 3; (3) Ringside sent payments—including more than $3.5 million for Everlast products from 2009–2011—to Everlast in New York, id. ¶ 4; and (4) Ringside has sold products in New York City to New York residents, Compl. ¶ 3.

2. Termination of the License Agreements

Everlast alleges that by mid–2012, Ringside was in the process of liquidation. Compl. ¶ 40. On May 31, 2012, Everlast gave Ringside written notice pursuant to the Boxing Products Agreement of its overdue debts to Everlast.³Id. ¶ 20. Ringside failed to cure its alleged breach within the 10–day deadline provided by the Agreement. On June 14, 2012, Everlast terminated the Boxing Products Agreement and gave Ringside notice of termination.Id. ¶ 25. That same day, Everlast also terminated the Catalogue and Website Agreement, based on Ringside's alleged breach of the Boxing Products Agreement. Id. ¶ 26. Ringside received notices of both terminations. Id. ¶ 27. Five days later, Everlast directed Ringside's then-president, Orin Borgelt, that Ringside was not authorized to sell any Everlast-licensed products. Id. ¶ 30.

3. Formation of RAL and Combat

On June 19, 2012, the same day that Everlast instructed Borgelt to cease selling any Everlast-licensed products, Combat was formed. Compl. ¶ 32. Two days later, Brown—Ringside's owner and president—formed RAL. Id. ¶ 31. RAL and Combat operate from the same premises as Ringside, operate Ringside's website, conduct business under the name, “Ringside,” and have, as their employees, various staff and management of Ringside. Id. ¶ 39. Further, Borgelt, Ringside's president until June 19, 2012, is an employee and officer of Combat, and as recently as July 3, 2012, continued to send e-mails to Everlast from a Ringside e-mail address. Id. ¶ 37. Ringside also used the name “Combat Brands” in the course of its business. Id. ¶ 34.

To bolster its claim that RAL was formed to divest Ringside of its assets, Everlast notes that Ringside sold its assets to RAL and Combat in June 2012, days after those two entities were formed. These asset purchases were memorialized in a “Settlement and Release Agreement” among, inter alia, Ringside, RAL, Combat, and Ringside's secured lender. Schlacter Aff. ¶ 4, Ex. 1. That agreement, in turn, referenced an agreement in which Combat purportedly purchased certain Ringside assets from Ringside's lender for $1.55 million. Id. § 3(a). The settlement agreement also references another agreement between RAL and Ringside, under which RAL was to pay $600,000 to Ringside's lender for any remaining Ringside assets, id. § 3(d); because RAL did not have the money to pay the lender for the assets, the agreement calls for it to borrow that money from the lender on the condition that Combat would pay $25,000 were RAL to default. Id. The agreement notes that if any person or entity had a security interest or lien in RAL's assets ahead of the lender, Combat would have to pay the lender the full $600,000. Id. § 3(f).

Everlast alleges that Combat has acted as a selling agent for RAL, which took over Ringside's inventory, including its Everlast-licensed products, in order to sustain Ringside's business operations. Everlast alleges that under a consignment agreement between RAL and Combat, RAL was to transfer merchandise to Combat for Combat to sell. Schlacter Aff. ¶ 6, Ex. 3. It further alleges that, under that agreement, Combat was to collect RAL's accounts receivable, even though RAL, as a newly-formed entity, presumably had no accounts receivable as of the date of the agreement. Id. ¶ 10. Everlast infers that, given their common ownership, Combat was effectively succeeding to Ringside's accounts receivable. Schlacter Aff. ¶ 6.

C. Procedural History

On July 9, 2012, Everlast filed the Complaint. Dkt. 1. It recited seven causes of action, all arising out of the alleged breach by Ringside of the License Agreements. These claims were for breach of contract (two claims); trademark infringement, dilution, and false designation of origin; unjust enrichment; and for a permanent injunction. Compl. ¶¶ 43–91.

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