World Wrestling Entertainment v. Jakks Pacific
| Citation | 425 F.Supp.2d 484 |
| Decision Date | 31 March 2006 |
| Docket Number | No. 04-CV-8223 (KMK).,04-CV-8223 (KMK). |
| Parties | WORLD WRESTLING ENTERTAINMENT, INC., Plaintiff, v. JAKKS PACIFIC, INC., Jakks Pacific (H.K.) Ltd., Road Champs Ltd., THQ, Inc., THQ/Jakks> Pacific L.L.C., Stanley Shenker & Assocs., Inc., Bell Licensing, L.L.C., Jack Friedman, Stephen Berman, Joel Bennett, Brian Farrell, Stanley Shenker, James Bell, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Jerry McDevitt, Amy Lyn Barrette, William Purcell, Kirkpatrick & Lockhart Nicholson Graham, LLP, Pittsburgh, PA, for Plaintiff.
Jonathan Lerner, Maura Barry Grinalds, Michael Gruenglas, Skadden, Arps, Slate, Meagher & Flom, LLP, New York City, Jonathan Honig, Feder, Kaszovitz, Isaacson, Weber, Skala, Bass & Rhine LLP, New York City, for Defendants Jakks Pacific, Inc., Jack Friedman, Stephen Berman, and Joel Bennett.
Steven Marenberg, Irell & Manella LLP, Los Angeles, CA, for Defendant THQ, Inc. and Brian Farrell.
Richard Schaeffer, Bruce Handler, Dornbush, Mensch, Mandelstam & Schaeffer, L.L.P., New York City, for THQ/Jakks Pacific L.L.C.
Michael Alan Freeman, Law Offices of Michael A. Freeman and McCallion & Associates, New York City, for Defendants Stanley Shenker and Stanley Shenker & Assocs., Inc.
Plaintiff World Wrestling Entertainment, Inc. ("WIVE") 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 ("THQ/Jakks"), 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"). Plaintiff's original Complaint asserted federal claims arising under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c), (d), and the Robinson-Patman Act, 15 U.S.C. § 13(c). The Complaint also alleged 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.
As will be discussed more fully below, on March 31, 2005, Plaintiff filed an Amended Complaint. The Amended Complaint contains more detailed factual allegations of wrongdoing by Defendants and also adds 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 attorney's fees and costs.
All Defendants have moved to dismiss the RICO causes of action on the ground that they fail to adequately plead a RICO enterprise. Certain Defendants have also moved to dismiss the Robinson-Patman and Sherman Act causes of action against them. Furthermore, Defendants Shenker and SSAI have moved to dismiss the RICO causes of action on res judicata and abstention grounds.1 For the reasons discussed in detail herein, the Motions to Dismiss the RICO causes of action are denied and the Motions to Dismiss the Robinson-Patman and Sherman Act causes of action are granted.
This action involves a large number of parties with various roles in the unlawful scheme alleged by Plaintiff. For clarity, the Court provides a summary of the Parties and their respective roles in the alleged scheme.
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. (Am. Compl.¶ 9)
Defendant Jakks principally sells action figures and toys. (Am.Compl.¶ 10) Defendant Jack Friedman is the Chief Executive Officer and Chairman of Jakks. (Am. Compl.¶ 13) He co-founded Jakks with Defendant Berman. (Am.Compl. ¶ 13) Prior to founding Jakks, Friedman was the CEO of Defendant THQ. (Am.Compl.¶ 14)
Jakks and Friedman also own Jakks H.K. and Road Champs, both Hong Kong Corporations. (Am.Compl.¶¶ 11-12)
During the times relevant to the Amended Complaint, Defendant Berman was the Executive Vice President of Jakks. (Am. Compl. ¶ 15) Berman also served at times as Jakks's President, Secretary, and Chief Operating Officer. He currently serves on Jakks's Board of Directors. (Am. Compl.¶ 15)
Defendant Bennett was Jakks's Chief Financial Officer during the times relevant to the Complaint. (Am.Compl.¶ 16)
Defendant THQ, Inc. markets and sells video games. (Am.Compl.¶ 17) Defendant Farrell is the President, Chief Executive Officer, and a member of the Board of Directors of THQ. (Am.Compl.¶ 18)
THQ and Jakks formed THQ/Jakks Pacific LLC as a joint venture on June 10, 1998. (Am.Compl.¶ 19) THQ/Jakks was formed in order to be the official licensee for WWE's video game license. (Am. Compl. ¶ 19) Defendant Berman was authorized to act on behalf of the joint venture. (Am.Compl.¶ 19)
Defendant SSAI served as WWE's licensing agent from approximately April 1995 through June 13, 2000. (Am Compl.¶ 20) Defendant Shenker is the sole owner and President of SSAI. (Am. Compl. ¶ 21) He is also the sole owner and alleged alter ego of a Hong Kong corporation known as Stanfull Industrial, Ltd. (Am.Compl. ¶ 21) Shenker allegedly used Stanfull for a variety of criminal and fraudulent enterprises. (Am.Compl. ¶ 21)
Defendant Bell Licensing is a limited liability company and was allegedly formed to launder bribes paid to Bell while he was an executive at WWE. (Am.Compl.¶ 22) Defendant Bell is a former WWE executive and is the President and sole owner of Bell Licensing. (Am.Compl.¶ 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. (Am. Compl.¶ 24)
For purposes of this Motion, the Court accepts as true the allegations in the Amended Complaint, which are: In March 1995, WWE hired Bell to negotiate and procure licenses for its intellectual property. (Am.Compl.¶ 29) From October 1996 to his termination on March 24, 2000, Bell served as WWE's Senior Vice President of Licensing and Merchandising. (Am. Compl.¶ 29)
At Bell's urging, WWE entered into a nonexclusive agency agreement with SSAI in April 1995. (Am.Compl.¶ 32) SSAI was to procure and negotiate licensing contracts on behalf of WWE. (Am.Compl.¶ 32) The agreement between SSAI and WWE provided that SSAI would receive a commission of eleven percent of royalties on licenses negotiated by SSAI. (Am. Compl.¶ 77)
Shortly after SSAI and WWE entered into the agency agreement in 1995, Friedman approached Bell and Shenker at the annual New York Toy Fair. (Am. Compl.¶ 35) Friedman inquired about obtaining a license on behalf of Jakks to make WWE toys. (Am.Compl.¶ 35) On October 24, 1995, WWE and Jakks entered into a domestic toy license which was scheduled to terminate on December 31, 1997, with a one-year right to renew. (Am.Compl.¶ 35)
At around the same time, Shenker and SSAI entered into undisclosed agreements with Jakks to represent Jakks's interests at the same time as Shenker and SSAI were serving as WWE's agents. (Am. Compl.¶¶ 40-46) At first, Shenker's work for Jakks was on matters unrelated to WWE. But at the New York Toy Fair in 1996, Shenker and Jakks discussed hiring Shenker as Jakks's agent on WWE matters as well. (Am.Compl.¶ 49) Jakks's outside legal counsel, however, advised that such an arrangement would present a conflict of interest for Shenker unless Shenker disclosed the arrangement to WWE and obtained WWE's full consent. (Am. Compl.¶ 50) Nevertheless, without informing WWE, Shenker and Jakks entered into an arrangement whereby Shenker would secretly serve as Jakks's agent in negotiations with WWE. (Am.Compl.¶¶ 53-56)
On February 12, 1996, Jakks paid SSAI $2,500 in connection with Shenker's work as its agent. (Am.Compl.¶ 48) Shortly thereafter, on April 22, 1996, the domestic toy license between WWE and Jakks was amended to provide additional rights to Jakks. (Am.Compl.¶ 56) According to WWE, in compensation for his services, Jakks and Shenker agreed that Shenker would accept bribes from Jakks, and split them with Bell if necessary, to obtain various toy and video game licenses from WWE. The monies used to pay the bribes would be laundered through foreign shell corporations. (Am.Compl.¶ 62)
Pursuant to SSAI's and Shenker's recommendation, on January 21, 1997, WWE amended the domestic toy license with Jakks a second time, further expanding Jakks's domestic licensing rights. (Am. Compl.¶¶ 64-67) Subsequently, on February 10, 1997, again on the recommendation of SSAI and Shenker, WWE entered into an international toy licensing agreement with Jakks. (Am.Compl.¶ 71) 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. (Am.Compl.¶ 72)
Plaintiff also alleges that Defendants conspired on behalf of Jakks to obtain the video game license from WWE, which had been previously licensed to video gamemaker Acclaim. (Am.Compl.¶¶ 100-03) WWE alleges that Shenker wanted Jakks to have the video game license because SSAI and Shenker would not receive royalties from the Acclaim license, which had been negotiated before SSAI was hired. (Am.Compl.¶¶ 83, 102...
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