Faze Clan Inc. v. Tenney

• Decision Date: 17 June 2020
• Docket Number: 19-cv-7200(JSR)
• Citation: 467 F.Supp.3d 180
• Parties: FAZE CLAN INC., Plaintiff, v. Turner TENNEY, Defendant.
• Court: U.S. District Court — Southern District of New York

467 F.Supp.3d 180

FAZE CLAN INC., Plaintiff,

v.Turner TENNEY, Defendant.

19-cv-7200(JSR)

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

Signed June 17, 2020

Joel Siegel, Katherine Clements, Katherine Ramlose McMorrow, Manny Joseph Caixeiro, Paul Kakuske, Dentons US LLP, Los Angeles, CA, Judd Robert Spray, Law Office of Judd R. Spray, Justin Nessim Kattan, Dentons US LLP, New York, NY, for Plaintiff.

Bryan J. Freedman, Pro Hac Vice, Freedman & Taitelman, LLP, Los Angeles, CA, Joshua Donovan Liston, Beys, Liston & Mobargha LLP, New York, NY, for Defendant.

OPINION AND ORDER

JED S. RAKOFF, U.S.D.J.

Now before the Court are the parties’ cross-motions for summary judgment in this action for breach of contract and ancillary claims sounding in tortious interference and quasi-contract. For the following reasons, plaintiff FaZe Clan's motion is granted in part and denied in part. Defendant Tenney's motions are denied in their entirety.

BACKGROUND

Defendant Turner Tenney, aka "TFue," is a social media celebrity and professional player of the video game Fortnite. See Compl. ¶¶ 1-10, ECF No. 1 (Aug. 1, 2019). Plaintiff FaZe Clan, in the words of one of its officers, is an "esports and entertainment organization that competes in video game tournaments and creates social media content." Anderson Decl. ¶ 2, ECF No. 47-3 (Mar. 5, 2020). FaZe Clan enters into contracts with "gamers" such as Tenney and "invest[s] in and support[s]" their careers, working to boost their profiles. Id. ¶ 4.

In April 2018, Tenney signed such a contract, the "Gamer Agreement," with FaZe Clan. Gamer Agreement, ECF No. 51-1 (Mar. 6, 2020). That contract is the subject of this dispute. The Gamer Agreement, in very brief summary, obligated Tenney to "play[ ] on FaZe Clan's team, participat[e] in training activities, and participat[e] in various promotional, marketing and social media activities," all in exchange for FaZe Clan's obligation to provide him with "(1) a monthly fee, (2) a share of income from cash prizes won at esports tournaments, and (3) a share of revenue from certain merchandise, apparel, brand deals, and other activities," plus training and other support for his career. FaZe Clan's Statement Pursuant to Local Rule 56.1 ¶¶ 3-4, ECF No. 47-1 (Mar. 5, 2020) (hereinafter "FaZe Clan's 56.1 Statement").

About a year after FaZe Clan and Tenney entered into the Gamer Agreement, the relationship between them soured. In May 2019, Tenney revealed to the public, via his social media channels, that he wanted to end his affiliation with FaZe Clan and start a rival esports organization. See, e.g., Ex. I to Caixeiro Decl., ECF No. 47-4 (Mar. 5, 2020) (containing a screen shot of a YouTube video posted by Tenney, with the description written by Tenney declaring "I want to make it very clear that I tried multiple times for multiple months to get out of this contract. This is what had to be done.").

This public split gave rise to three lawsuits that comprise the current dispute. In May 2019, around the time of Tenney's social media comments described above, Tenney filed two lawsuits against FaZe Clan in California state tribunals, seeking to have the Gamer Agreement declared void ab initio.¹ First, Tenney filed an action before the California Labor Commissioner ("CLC"), arguing that the Gamer Agreement was void under California's Talent Agency Act ("TAA"), Cal. Lab. Code. § 1700.4 et seq., because, he alleged, FaZe Clan was operating as an unlicensed talent agency. See Petition to Determine Controversy, Ex. D to Caixeiro Decl. That same month, Tenney filed a second action in California Superior Court, arguing that the Gamer Agreement was void ab initio on other state law grounds, including California's prohibition of many agreements not to compete under Cal. Bus. & Prof. Code § 16600 et seq. See Petition to Determine Controversy, Ex. E to Caixeiro Decl.

In August 2019, FaZe Clan initiated the instant suit against Tenney in this Court, asserting four causes of action for breach of the Gamer Agreement, Compl. ¶¶ 37-53, and five related tort and quasi-contract claims.² For its choice of the New York forum, FaZe Clan relied on a provision of the Gamer Agreement that required "[t]he Parties [to] submit exclusively to the state or federal courts located in New York, NY for any claim hereunder." Gamer Agreement, Introduction: Miscellaneous. As a result of this forum selection clause, FaZe Clan was able to successfully move the California Superior Court to stay that action and allow the parties’ claims and defenses to be litigated as part of the instant action.³ Caixeiro Decl. ¶ 8.

Unlike all the other claims and defenses, however, Tenney's TAA claim is not yet properly before this Court. Under California law, the CLC has exclusive and non-waivable original jurisdiction to adjudicate claims arising under the TAA. See Cal. Lab. Code § 1700.44(a) ("In cases of controversy arising under this chapter, the parties involved shall refer the matters in dispute to the Labor Commissioner ...."). That claim, accordingly, remains pending before the California tribunal; but all other issues are now ripe for summary adjudication by this Court.

The parties now move for summary judgment on various claims and defenses. Because these motions primarily involve questions of fact, the Court must grant summary judgment to the moving party on only those issues where the party "shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). Applying this standard, the Court grants FaZe Clan's motions for summary judgment only with respect to Tenney's personal jurisdiction and otherwise denies them. Further, the Court denies Tenney's motions for summary judgment in their entirety.

PLAINTIFF FAZE CLAN'S MOTIONS

Plaintiff FaZe Clan moves for partial summary judgment in its favor. First, FaZe Clan moves the Court to enter judgment denying three of Tenney's affirmative defenses. Then, FaZe Clan moves for summary judgment in its favor on one of its breach of contract claims.⁴ For the following reasons, these motions are granted in part and denied in part.

I. Tenney's Personal Jurisdiction Defense

FaZe Clan first moves the Court to enter summary judgment denying Tenney's first affirmative defense, which argues that this Court lacks personal jurisdiction over him. Tenney's Amended Answer at 9, ECF No. 32 (Dec. 13, 2019). This motion is granted.

The sole basis for this Court's personal jurisdiction over Tenney is the Gamer Agreement; but that agreement not only contains a mandatory forum selection clause in favor of New York, but also, as part of that clause, provides that "each Party consents to the jurisdiction" of the state and federal courts there. Gamer Agreement, Introduction: Miscellaneous. FaZe Clan appears to concede that Tenney, who is a resident of Florida, would not otherwise be subject to general or specific personal jurisdiction in New York. See FaZe Clan's 56.1 Statement ¶ 15.

As discussed below, however, a forum selection clause ordinarily is binding and enforceable. Tenney's personal jurisdiction defense, therefore, is that the entire Gamer Agreement, including the forum selection clause, is void. The Court rejects this argument. As an initial matter, with certain exceptions noted below but not relevant here, New York law governs the interpretation and enforcement of the Gamer Agreement, see Gamer Agreement, Introduction: Miscellaneous. New York follows the federal rule from M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972) that "such clauses are prima facie valid and should be enforced unless enforcement is shown by the resisting party to be ‘unreasonable’ under the circumstances." See Brooke Grp. Ltd. v. JCH Syndicate 488, 87 N.Y.2d 530, 534, 640 N.Y.S.2d 479, 663 N.E.2d 635 (N.Y. 1996) ; see also Sun Forest Corp. v. Shvili, 152 F. Supp. 2d 367, 381 & n.22 (S.D.N.Y. 2001) (explaining that both federal and New York law apply a "strong policy" in favor of enforcing forum selection clauses).⁵

The record contains no facts that would raise a triable question as to whether the forum selection clause is unenforceable under this standard. The only such fact even suggested by Tenney is the bare assertion in his memorandum of law that he was not "specifically aware of the forum selection clause" or "focused on it at all," Tenney's Mem. of Law in Oppo. to FaZe Clan's Mot. for Partial Summary Judgment at 19, ECF No. 59 (Mar. 19, 2020). But even if true, that fact does not come close to suggesting that the clause was unreasonable.⁶

Nevertheless, Tenney argues that any grant of summary judgment in FaZe Clan's favor would be premature because the CLC action, in which decision remains pending, could potentially invalidate the entire Gamer Agreement, including the forum selection clause. This is unpersuasive. In situations like this, courts applying New York law have determined the enforceability of a forum selection clause separately from the validity of any foreign-law defenses to contract enforcement. See Sun Forest Corp., 152 F. Supp. 2d at 378-80 (holding that the New York court had personal jurisdiction over a defendant based on a forum selection clause, even while the defendant argued that the entire contract, including the forum selection clause, was unenforceable under Ontario law). Moreover, even if the CLC eventually rules in Tenney's favor on the TAA claim, there is no risk that this Court's personal jurisdiction ruling alone would unduly prejudice Tenney, because Tenney could simply assert the TAA as a defense at a later stage of this action. FaZe Clan's motion is accordingly granted.

II. Tenney's Defenses and Counterclaims Under California's Talent Agency Act

FaZe Clan next moves for summary judgment in its favor on all of Tenney's defenses and counterclaims arising from the TAA, Cal. Lab. Code § 1700.4, et seq. ⁷ This statute prohibits anyone from "procuring, offering,...