Major League Baseball Properties, Inc. v. Price
| Decision Date | 14 March 2000 |
| Docket Number | No. 98 CV 6023.,No. 98 CV 5894.,No. 98 CV 5947.,98 CV 5894.,98 CV 5947.,98 CV 6023. |
| Citation | 105 F.Supp.2d 46 |
| Parties | MAJOR LEAGUE BASEBALL PROPERTIES, INC., National Football League Properties, Inc., NBA Properties, Inc., NHL Enterprises, L.P., Plaintiffs, v. Steven PRICE, Barry Elgort, Lance Kuba, Patricia Sullivan, Sean Sullivan, Marty Schwartz, Jeffrey Fishman, Irene Torres, Jon Rodriguez, and all other similarly situated persons, Defendants. National Football League Players, Inc., Plaintiff, v. Lance Kuba, Marty Schwartz, Irene Torres, as Guardian ad litem for Jon Rodriguez on behalf of themselves and all others similarly situated, Defendants. Topps Company, Plaintiff, v. Steven Price, Barry Elgort, Irene Torres, Jon Rodriguez, Bruce Laxer, and all other similarly situated persons, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
Skadden, Arps, Slate, Meagher & Flom (James A. Keyte, Peter S. Julian Shepard Goldfein, of counsel), New York City, for plaintiffs Major League Baseball Properties, Inc., National Football League Properties, Inc., NBA Properties, Inc. NHL Enterprises, L.P., and Topps Co.
Weil, Gotshal & Manges (James W. Quinn, of counsel), New York City, for plaintiff National Football League Players, Inc.
Willkie Farr & Gallagher (Richard L. Klein and Martin B. Klotz, of counsel), New York City, for plaintiff Topps Co.
Milberg, Weiss, Bershad, Hynes & Lerach, LLP (Michael C. Spencer and Melvyn I. Weiss, of counsel) New York City, for defendants Lance Kuba, Marty Schwartz, and Steven Price.
Milberg, Weiss, Bershad, Hynes & Lerach, LLP (William Lerach, Alan Mansfield, Randall J. Baron and James Swiderski, of counsel), San Diego, CA, for defendants.
Milberg, Weiss, Bershad, Hynes & Lerach, LLP (Kevin P. Roddy, of counsel), Los Angeles, CA, for defendants.
Law Offices of Harry C. Batchelder, Jr. (Harry C. Batchelder, Jr., of counsel), New York City, for defendants.
Moritt, Hock & Hamroff, LLP (Neil J. Moritt and Alan S. Hock, of counsel), Garden City, NY, for defendants.
Plaintiffs, licensors and manufacturers of sports and entertainment trading cards (collectively "licensors and manufacturers"), bring this consolidated action for a declaratory judgment and an injunction against a defendant class of alleged sports and entertainment trading card purchasers (the "card purchasers"). The licensors and manufacturers seek a declaration that the card purchasers lack standing to sue for violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1964(c), because no card purchaser has shown that he has been "injured in his business or property by reason of" acts allegedly in violation of RICO, 18 U.S.C. § 1962(c), committed by licensors and manufacturers by engaging in a "pattern of racketeering activity" through acts of gambling "chargeable under State law and punishable by imprisonment for more than one year." 18 U.S.C. § 1961(1)(A).
The card purchasers have moved to dismiss the complaint under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) or, alternatively, to transfer or stay this action.
The licensors own or have the right to license the names, symbols, and other marks of their respective sports leagues and member teams for use in the design and manufacture of sports trading cards. The manufacturers make, market, and distribute the cards.
Trading cards, when sold in retail stores, generally come in sealed packages containing between five and twelve cards. The identity of the cards is unknown until the package is opened. Some packages contain randomly placed limited edition cards, also known as "insert" cards, that have attributes, such as more colorful designs or depictions of more notorious persons, making those cards generally more attractive to card purchasers. The odds of receiving an insert card are printed on the packaging.
Collectors actively buy, sell, and trade sports cards in a secondary market consisting primarily of card stores, card conventions, and the Internet. Insert cards, because of their appeal, often, but not always, possess a higher value in this secondary market.
For the last three years, the card purchasers, represented chiefly by the attorneys in this case, have shopped around to find a forum "friendly" to their claims in order to induce a financial settlement. Card purchasers have brought thirteen virtually identical class action lawsuits in four different forums against numerous licensors and manufacturers of entertainment and sports trading cards, including, among others, the licensors and manufacturers in this case, claiming that the marketing and placement of insert cards constitute an unlawful gambling activity in violation of RICO.
From July 1996 through September 1996, the attorneys filed seven suits in the Eastern District of New York against licensors and manufacturers of trading cards, seeking treble damages, costs and attorneys' fees for "injury" to the card purchasers' "property" under RICO, 18 U.S.C. § 1964(c).
The attorneys also filed one suit in the Southern District of California against The Upper Deck Co., one suit in the Northern District of Texas against Pinnacle Brands, Inc. ("Pinnacle"), and one suit in the District of New Jersey against The Score Board, Inc. Each of these three defendants make, market, and distribute trading cards and are not parties to the present action.
All seven suits in the Eastern District of New York and the one suit in the Northern District of Texas were dismissed for lack of standing under RICO. The Fifth Circuit affirmed the Texas District Court's dismissal. See Price v. Pinnacle Brands, Inc., 138 F.3d 602 (5th Cir.1998). The attorneys for the card purchasers in the New York cases appealed to the Second Circuit, but thereafter withdrew the appeal.
The suit in the District of New Jersey was dismissed as to two of its claims and was dismissed as to a third claim without prejudice. The attorneys in that case subsequently filed an amended complaint. Its present status is unknown.
Meanwhile the card purchasers' attorneys brought a similar action in the United States District Court for the Southern District of California. That court dismissed the original complaint with leave to amend, see Schwartz v. The Upper Deck Co., 956 F.Supp. 1552, 1560 (S.D.Ca.1997) ("Schwartz I"), and thereafter denied a motion to dismiss the amended complaint. See Schwartz v. The Upper Deck Co., 967 F.Supp. 405, 417 (S.D.Cal.1997) ("Schwartz II").
After the California District Court's decision denying the motion to dismiss, the attorneys filed two more class action suits there against Pacific Trading Cards and Pinnacle, manufacturers of trading cards not parties in this action. Pinnacle had just obtained a dismissal in the Texas district.
On September 16, 1998, counsel for the card purchasers sent copies of a draft complaint to the licensors and manufacturers in this case and threatened to file new suits against them in the Southern District of California unless they agreed to pay a financial settlement. On September 22, 1998, and September 29, 1998, the licensors and manufacturers responded by filing the present declaratory judgment actions against the defendant class of card purchasers. The actions were later consolidated.
The attorneys for the card purchasers then followed through on their threat by filing suits in the California District Court against various licensors and manufacturers, including, among others, those sued in this District. These California actions are currently stayed pending the outcome of this declaratory judgment action.
Consistent with its earlier decisions, the California District Court denied motions to dismiss other complaints asserting substantially the same allegations as were contained in the previous cases. See Dumas v. Fleer/Skybox Int'l, LP, No. 99cv1739-B, slip op. (S.D.Ca. Dec. 21, 1999); Dumas v. Major League Baseball Properties, Inc., 52 F.Supp.2d 1170 (S.D.Ca.1999); Rodriquez v. The Topps Co., No. 98cv2121-B, slip op. .
In order to put in context the basic difference between the New York courts' holdings with the contrary holdings of the California District Court, it is useful to set forth the reasoning of both sides as to whether the card purchasers have suffered a "property injury" within the meaning of RICO, 18 U.S.C. § 1964(c).
Congress enacted RICO "to combat organized crime, not to provide a federal cause of action and treble damages" for personal injuries. Oscar v. University Students Co-operative Assoc., 965 F.2d 783, 785 (9th Cir.1992). To carry out its purposes, RICO's substantive provisions describe certain "prohibited activities," and, in pertinent part, make it "unlawful" for "any person" "employed by or associated with" any such "enterprise" to participate in the conduct of such enterprise's affairs through a "pattern of racketeering activity." 18 U.S.C. § 1962(c).
"Racketeering activity" means, among other things, "any act ... involving ... gambling ... which is chargeable under State law and punishable by imprisonment for more than one year." 18 U.S.C. § 1961(1). A "pattern of racketeering activity" must include "at least two acts of racketeering activity...." 18 U.S.C. § 1961(5).
To enforce RICO the statute provides for extensive fines and other criminal penalties for violations of § 1962, including the forfeiture of property and imprisonment of up to a maximum of life. See 18 U.S.C. § 1963. RICO also enables the United States Attorney General to institute civil proceedings to restrain violations of § 1962 and to obtain orders requiring offenders to divest themselves of any interest in any enterprise. See 18 U.S.C. § 1964(a),(b).
In addition to the harsh and sweeping criminal and civil sanctions obtainable by federal officials, RICO provides in § 1964(c) that "[a]ny person injured in his business or property by reason of a violation of section 1962 ... may sue therefore in...
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