Walters v. Fullwood

• Decision Date: 17 December 1987
• Docket Number: No. 87 Civ. 2624 (CLB).,87 Civ. 2624 (CLB).
• Citation: 675 F. Supp. 155
• Parties: Norby WALTERS and Lloyd Bloom, d/b/a World Sports and Entertainment, Inc., Plaintiffs, v. Brent FULLWOOD and George Kickliter, Defendants.
• Court: U.S. District Court — Southern District of New York

675 F. Supp. 155

Norby WALTERS and Lloyd Bloom, d/b/a World Sports and Entertainment, Inc., Plaintiffs, v. Brent FULLWOOD and George Kickliter, Defendants.

No. 87 Civ. 2624 (CLB).

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

December 17, 1987.

Gold and Wachtel by Robert Gold, Elliot Silverman, and Anthony Pennachio, New York City, for plaintiffs.

Granik, Silverman, Sandberg, Campbell, Nowicki by Richard A. Glickel, New City, N.Y., for defendants.

MEMORANDUM AND ORDER

BRIEANT, Chief Judge.

By motion fully submitted on October 5, 1987 in this diversity action, defendants Brent Fullwood and George Kickliter move (1) under 9 U.S.C. sec. 3, to stay, pending arbitration sought to be compelled by this Court pursuant to 9 U.S.C. sec. 4, the claims against Fullwood asserted by plaintiffs Norby Walters and Lloyd Bloom, doing business as World Sports and Entertainment, Inc. ("W.S. & E."); (2) under Rule 12(b)(2), F.R.Civ.P., to dismiss plaintiffs' action in whole or in part for lack of personal jurisdiction over the defendants; (3) under Rule 12(b)(3), F.R.Civ.P., to dismiss the action in whole or in part for improper venue or, alternatively, to transfer it to the Middle District of Alabama pursuant to 28 U.S.C. 1406(a); and (4) under Rule 12(b)(6), F.R.Civ.P., to dismiss plaintiffs' fourth claim for failure to state a claim upon which relief can be granted.

The following facts are uncontroverted.

Defendant Brent Fullwood, a Florida resident, was an outstanding running back with the University of Auburn football team in Alabama. His success in the highly competitive Southeastern Athletic Conference marked him as a top professional prospect. At an unspecified time during his senior year at Auburn, Fullwood entered into an agreement with W.S. & E., a New York corporation ("the W.S. & E. agreement"). The agreement was dated January 2, 1987, the day after the last game of Fullwood's college football career, and the first day he could sign such a contract without forfeiting his amateur status under sec. 3-1-(c) of the N.C.A.A. Constitution, quoted infra. The contract was arranged and signed for the corporation by plaintiff Bloom, and granted W.S. & E. the exclusive right to represent Fullwood as agent to negotiate with professional football teams after the spring draft of the National Football League ("N.F.L."). Walters and Bloom were the corporate officers and sole shareholders of W.S. & E. As a provisionally certified N.F.L. Players' Association ("N.F.L.P.A.") contract advisor, Bloom was subject to the regulations of that body governing agents ("N.F.L.P.A. Agents' Regulations"), which require the arbitration of most disputes between players and contract advisors.

On August 20, 1986, W.S. & E. paid $4,000 to Fullwood, who then executed a promissory note in plaintiffs' favor for that amount. The note was secured by a pledge of:

"a security interest in all of the players rights to receive payments under any existing and or future contract or other agreement ("Player Contract") to which the Player may become a party relating to the Players services to or on behalf of any professional football team, if, as, and when such payments shall become due, including any insurance proceeds to which player may become entitled."

August 20, 1986 promissory note, exh. D to defendants' Notice of Motion. At various times throughout the 1986 season, plaintiffs sent to Fullwood or his family further payments that totaled $4,038.

Reviewing substantially similar facts involving these same plaintiffs and a different defendant in an unrelated case, Justice Altman of the New York State Supreme Court concluded,

"The underlying facts of the case reveal a pernicious practice of encouraging young college athletes to enter into deceptive agreements which are postdated so they can continue to play college football. The athletes thus act unethically and in violation of the rules of the National Collegiate Athletic Association and the National Football League."

Walters v. Harmon, 135 Misc.2d 905, 516 N.Y.S.2d 874 (Sup.Ct., N.Y.Cty.1987). While neither plaintiffs nor defendants have specifically admitted that the W.S. & E. agency agreement was post dated, they have conspicuously avoided identifying the actual date it was signed. There is a powerful inference that the agreement was actually signed before or during the college football season, perhaps contemporaneously with the August 20 promissory note, and unethically postdated as in other cases involving these plaintiffs. No argument or evidence has been presented to dispel this inference, and the Court believes the parties deliberately postdated the contract January 2. Even if this likelihood is not accepted, it is conceded by all parties and proven by documentary evidence that a security interest was granted on Fullwood's future earnings from professional football, by the express terms of the promissory note of August 20, 1986.

At some point prior to the N.F.L. spring 1987 draft, Fullwood repudiated his agreement with W.S. & E., and chose to be represented by defendant George Kickliter, an attorney in Auburn, Alabama. As anticipated, Fullwood was taken early in the N.F.L. draft. The Green Bay Packers selected him as the fourth player in the first round; he signed a contract with them, and currently is playing in his rookie season in the N.F.L.

In March, 1987, Walters and Bloom brought suit, since removed from New York State Supreme Court, alleging (1) that Fullwood breached the W.S. & E. agency agreement, (2) that Fullwood owed them $8,038 as repayment for the funds he received during the autumn of 1986, which are now characterized as loans, (3) that Kickliter tortiously induced Fullwood's breach of the 1986 agreement, and (4) that Fullwood and Kickliter tortiously interfered with plaintiffs' contractual relations with other players by breaching or inducing the breach of the W.S. & E. agency agreement by Fullwood.

Jurisdiction

Walters and Bloom argue for the personal jurisdiction of this Court over Fullwood based on paragraph 10 of the W.S. & E. agency agreement, which reads, in relevant part:

This agreement shall be governed and construed according to the laws of the State of New York. The parties hereto consent to the jurisdiction of the courts of the State of New York, and of any federal court located in such state, in connection with any action, or proceeding, arising out of or relating to this agreement.

Defendant Fullwood concedes that this language creates jurisdiction by consent for the breach of contract claim, but argues that this Court lacks the power to consider plaintiffs' other claims against him. This Court concludes that the language of paragraph 10 also consents to jurisdiction over Fullwood for the second claim, since the alleged loans from W.S. & E. were made in connection with the W.S. & E. agency agreement, and for the fourth claim, which alleges damages flowing from the breach of that agreement. Since plaintiffs have jurisdiction by consent for all their claims against Fullwood, there is no need to consider their dubious argument for jurisdiction under the New York Civil Practice Laws and Rules ("C.P.L.R.") sec. 302(a)1, based on a contention that Fullwood transacted business in New York by telephoning his requests for money into this state.

Plaintiffs argue for jurisdiction over defendant Kickliter, an Alabama resident, under New York C.P.L.R. secs. 302(a)3(i) and 302(a)3(ii). These subdivisions of the so-called New York "long arm statute" provide for personal jurisdiction by a New York court over a non-domiciliary who:

"commits a tortious act without the state causing injury to person or property within the state ... if he (i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or (ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce" (emphasis supplied).

This section has been held to include commercial torts. Sybron v. Wetzel, 46 N.Y.2d 197, 413 N.Y.S.2d 127, 385 N.E.2d 1055 (1978). Because the alleged injury to plaintiffs did not occur in New York State for the purposes of C.P.L.R. sec. 302(a)3, neither (i) nor (ii) of that section confers jurisdiction.

The New York Court of Appeals has held that jurisdiction under C.P.L.R. sec. 302(a)3 requires "a more direct injury within the State and a closer expectation of consequences within the State than the indirect financial loss resulting from the fact that the injured person resides or is domiciled there." Fantis Foods, Inc. v. Standard Importing, 49 N.Y.2d 317, 326, 425 N.Y.S. 2d 783, 787, 402 N.E.2d 122, 126 (1980) (suit by New York Corporation for conversion of feta cheese by a foreign corporation dismissed for lack of jurisdiction over defendants, when conversion took place in Greece and no other defendant contacts with New York were established). Thus, while a New York plaintiff suffers a kind of injury whenever it is the victim of a tort by a non-domiciliary, the statute "looks to the imparting of the original injury within the State of New York and not resultant damage, in order that jurisdiction may be effectuated." American Eutectic Welding Alloy Sales Co. v. Dytron Alloys Corp., 439 F.2d 428, 434 (2d Cir.1971), quoting, Black v. Oberle Rentals, Inc., 55 Misc.2d 398, 400, 285 N.Y.S.2d 226, 229 (Sup.Ct.Onondaga Cty.1967).

Plaintiffs assert that their injuries on the third and fourth claims occurred in New York because their offices are in New York City, and performance of the contract that Kickliter allegedly induced Fullwood to breach was anticipated there, through representation at the N.F.L. player draft. This Court rejects the contention that Fullwood's breach of contract thus occurred in New York so as to make Kickliter's inducement of that breach in Alabama an...