World Wrestling Entertainment v. Jakks Pacific, 04-CV-8223 (KMK).

CourtUnited States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
Writing for the CourtKenneth M. Karas
Citation530 F.Supp.2d 486
PartiesWORLD WRESTLING ENTERTAINMENT, INC., Plaintiff, v. JAKKS PACIFIC, INC., Jakks Pacific (H.K.) Ltd., Road Champs Ltd., THQ, Inc., THQ/Jakks Pacific LLC, Stanley Shenker & Assocs., Inc., Bell Licensing, L.L.C., Jack Friedman, Stephen Berman, Joel Bennett, Brian Farrell, Stanley Shenker, and James Bell, Defendants.
Docket NumberNo. 04-CV-8223 (KMK).,04-CV-8223 (KMK).
Decision Date21 December 2007

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530 F.Supp.2d 486
JAKKS PACIFIC, INC., Jakks Pacific (H.K.) Ltd., Road Champs Ltd., THQ, Inc., THQ/Jakks Pacific LLC, Stanley Shenker & Assocs., Inc., Bell Licensing, L.L.C., Jack Friedman, Stephen Berman, Joel Bennett, Brian Farrell, Stanley Shenker, and James Bell, Defendants.
No. 04-CV-8223 (KMK).
United States District Court, S.D. New York.
December 21, 2007.

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Jerry Scott McDevitt, Esq., Amy Lyn Barrette, Esq., Peter Nicholas Flocos, Esq., William O. Purcell, Esq., Curtis B. Krasik, Esq., Kirkpatrick & Lockhart Preston Gates Ellis, LLP, Pittsburgh, PA, for Plaintiff.

Jonathan J. Lerner, Esq., Maura Barry Grinalds, Esq., Michael Gruenglas, Esq., Skadden, Arps, Slate, Meagher & Flom, LLP, New York, NY, Jonathan Honig, Esq., Feder, Kaszovitz, Isaacson, Weber, Skala, Bass & Rhine LLP, New York, NY, for. Defendants Jakks Pacific, Inc., Jakks Pacific (H.K.) Limited, Jack Friedman, Stephen Berman, and Joel Bennett.

Steven A. Marenberg, Esq., Philip M. Kelly, Esq., Irell & Manella LLP, Los

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Angeles, CA, for Defendant THQ, Inc. and Brian Farrell.

Richard Schaeffer, Esq., Bruce Handler, Esq., Dornbush, Mensch, Mandelstam & Schaeffer, L.L.P., New York, NY, for THQ/Jakks Pacific L.L.C.

Michael Alan Freeman, Esq., Greenberg Freeman, L.L.P., New York, NY, for Defendants Stanley Shenker and Stanley Shenker & Assocs., Inc.


KENNETH M. KARAS, District Judge.

Plaintiff World Wrestling Entertainment, Inc. ("WWE") filed this action against Defendants Jakks Pacific, Inc. ("Jakks"), Jakks Pacific H.K. Ltd. ("Jakks H.K."), Road Champs, Ltd. ("Road Champs"), THQ, Inc. ("THQ"), THQ/Jakks Pacific LLC ("the LLC"), Stanley Shenker & .Associates, Inc. ("SSAI"), Bell Licensing, LLC ("Bell Licensing"), Stanley Shenker ("Shenker"), James Bell ("Bell"), Jack Friedman ("Friedman"), Stephen Berman ("Berman"), Joel Bennett ("Bennett"), And Brian Farrell ("Farrell"). In its first Complaint, Plaintiff alleged violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1962(c), (d), the Robinson-Patman Act, 15 U.S.C. § 13(c), and causes of action under New York state law for commercial bribery, fraudulent inducement, unjust enrichment, breach of fiduciary duty, inducement of breach of fiduciary duty, tortious interference with contractual relations, and conspiracy to engage in each of the above acts. In an Amended Complaint, Plaintiff refined its factual allegations of wrongdoing by Defendants and also added a Sherman Act cause of action. Plaintiff seeks compensatory, statutory, and punitive damages, a declaration that the licensing agreements entered into or extended as a result of the alleged bribery are void, an accounting of all revenues and profits obtained by Defendants under the licenses, disgorgement and/or restitution for any improper revenues and/or profits obtained under the agreements, disgorgement and/or restitution of any amounts allegedly paid to Defendants as bribes, and attorneys' fees and costs.

Because of the delayed, timing of the filing of Plaintiff's Amended Complaint, the Court ordered bifurcated briefing. In the first stage, the Parties briefed three threshold issues raised in Defendants' motions to dismiss the first Complaint, which remained applicable to the Amended Complaint and were potentially dispositive. Those three issues were: (1) whether Plaintiff has sufficiently alleged the existence of a RICO enterprise pursuant to 18 U.S.C. § 1962(c); (2) whether Plaintiff has pled a cause of action under the Robinson-Patman Act, 15 U.S.C. § 13(c); and (3) whether Plaintiff is estopped from pursuing its RICO claim against Defendants Shenker and SSAI because it is duplicative of litigation commenced in Connecticut state court. The Parties also briefed the Plaintiff's Sherman Act claim, which was included for the first time in the Amended Complaint.

On March 31, 2006, the Court issued, an Opinion and Order granting in part and denying in part Defendants' motions to dismiss. See World Wrestling Entm't, Inc. v. Jakks Pacific, Inc., 425 F.Supp.2d 484 (S.D.N.Y.2006) ("WWE I"). The Court granted Defendants' Motion to Dismiss the Robinson-Patman and Sherman Act claims, but denied the Defendants' motions to dismiss for failure to properly plead an enterprise pursuant to § 1962(c), and denied the Shenker Defendants' Motion to Dismiss based on res judicata and abstention principles.

Now, in the second stage, all Defendants' briefed the remaining issues pertaining to

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Plaintiff's RICO causes of action against them. For the reasons discussed herein, Defendants' motions to dismiss the RICO causes of action are granted.

I. Background

For purposes of this Motion, the Court accepts as true the allegations in the Amended Complaint. The salient facts and procedural history are fully discussed in WWE I, and familiarity is presumed. See WWE I, 425 F.Supp.2d at 488-93. Further, a detailed recitation of the facts relevant to each issue is discussed below. What follows here is a summary of the basic facts necessary to put Defendants' motions into context.

Plaintiff WWE is principally engaged in the development, promotion, and marketing of television and pay-per-view programming and live arena events related to professional wrestling. (Am. Compl. ¶ 9.) As part of its business, WWE also creates characters whose names and likenesses may be licensed to third parties. (Id.) The licenses provide a separate stream of profits for WWE, in the form of royalties, that is a percentage from the sale of the licensed products.

Defendant Jakks principally sells action figures and toys. (Id. ¶ 10.) Defendant Jack Friedman is the Chief Executive Officer and Chairman of Jakks. (Id. ¶ 13.) He co-founded Jakks with Defendant Berman. (Id.) Prior to founding Jakks, Friedman was the CEO of Defendant THQ. (Id. ¶ 14.) Jakks and Friedman also own Jakks H.K. and Road Champs, both Hong Kong Corporations. (Id. ¶¶ 11-12.) During the times relevant to the Amended Complaint, Defendant Berman was the Executive Vice President of Jakks. (Id. ¶ 15.) Berman also served at times as Jakks' President, Secretary, and Chief Operating Officer. (Id.)

Defendant THQ markets and sells videogames. (Id. ¶ 17.) Defendant Farrell is the President, the Chief Executive Officer, and a member of the Board of Directors of THQ. (Id. ¶ 18.)

THQ and Jakks formed the LLC as a joint venture on June 10, 1998. (Id. ¶ 19.) The LLC was formed in order to be the official licensee for WWE's videogame license. (Id.) Defendant Berman was authorized to act on behalf of the joint venture. (Id.)

Defendant SSAI served as WWE's licensing agent from approximately April 1995 through June 13, 2000. (Id. ¶ 20.) Defendant Shenker is the sole owner and President of SSAI. (Id. ¶ 21.)

Defendant Bell is a former WWE executive and is the President and sole owner of Bell Licensing, a limited liability company allegedly formed to launder bribes paid to Bell while he was an executive at WWE. (Id. ¶¶ 22-23.) On February 10, 2005, Bell pled guilty in the United States District Court for the District of Connecticut to one count of mail fraud, in violation of 18 U.S.C. § 1342, in connection with his receipt of bribes relating to WWE's licensing program. (Id. ¶ 24.) WWE hired Bell to negotiate and procure licenses for its intellectual property. (Id. ¶ 30.) From October 1996 to his termination on March 24, 2000, Bell served as WWE's Senior Vice President of Licensing and Merchandising. (Id.)

In 1995, Friedman asked Bell and Shenker about obtaining a license on behalf of Jakks to make WWE toys. (Id. ¶ 35.) Thereafter, on October 24, 1995, WWE and Jakks entered into a domestic toy license. (Id.) Nothing improper is alleged as to this license. However, one month later, in November 1995, Jakks proposed that Shenker act as its agent on a perfumed doll deal that did not involve any WWE licenses. (Id. ¶ 42.) On January 3, 1996, Jakks and Shenker entered into an agency agreement for the perfumed doll

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deal. (Id. ¶ 46.) At around the same time, Jakks asked Shenker to act on its behalf to seek an amendment to the domestic toy license it originally obtained in October 1995. (Id. ¶ 47.) Shenker never told WWE about its efforts on behalf of Jakks. Approximately three months later, Jakks obtained the first amendment to the domestic toy license, which granted Jakks additional rights under the WWE domestic toy license. (Id. ¶ 56.)

Later in 1996, Jakks sought Shenker's assistance in driving Playmates, a competitor in the action figure market, from its WWE license. (Id. ¶¶ 57-68.) Using his influence, in January 1997, Shenker recommended that WWE grant Jakks a second amendment to its domestic toy license that conflicted with a license previously granted to Playmates. (Id. ¶¶ 67-71.) WWE accepted Shenker's recommendation, and granted Jakks a second amendment to the domestic toy license. In February 1997, WWE also granted Jakks an international toy license. (Id. ¶ 71.) Before Bell had been brought into the scheme, Playmates complained to him about WWE's bad faith in allowing competition with its products but to no avail. (Id. ¶ 70.) Eventually, Playmates was bought out by WWE. (Id. ¶ 83.) Shenker's dual role in these negotiations was never disclosed to WWE. On March 17, 1997, WWE hired SSAI as its exclusive outside licensing agent. (Id. ¶ 72.)

By November 1997, Bell was induced to join the bribery/fraud scheme based on Shenker's promises of payments. (Id. ¶¶ 81-83.) Shenker delivered on these payments, which are alleged to have been provided by the Jakks Defendants1, using a variety of covert means. (Id. ¶¶ 85-90, 94-99.) With Shenker and Bell in the fold, the Jakks Defendants sought and obtained a third amendment to the domestic toy license in January. 1998, granting to Jakks...

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