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Trematerra v. Major League Lacrosse, LLC

Superior Court of Massachusetts, Suffolk, Business Litigation Session

October 13, 2017

Peter TREMATERRA et al.
v.
MAJOR LEAGUE LACROSSE, LLC et al.

          Caption Date: October 12, 2017

          MEMORANDUM OF DECISION AND ORDER ON DEFENDANTS’ MOTION TO DISMISS

          Janet L. Sanders, Justice

         Major League Lacrosse, LLC (MLL or the League) operates a professional outdoor lacrosse sports league. In 2014, Peter Trematerra entered into negotiations with MLL and its commissioner David Gross to introduce an Atlanta-based team into the League. After a year of negotiations, Trematerra formed Atlanta Lacrosse Club, LLC (Atlanta Lacrosse), which purchased an equity interest in MLL and began to operate a team known as the Atlanta Blaze. In the instant action, Trematerra and Atlanta Lacrosse, as the named plaintiffs, allege that during these negotiations, Gross made several misrepresentations regarding MLL’s profitability and that he also failed to disclose, among other things, that the League had sold its broadcast and sponsorship rights at far below market value to companies owned or controlled by other MLL equity holders. Plaintiffs further allege that, after Atlanta Lacrosse became a MLL member, the League’s Board of Managers and Gross breached numerous fiduciary and contractual obligations. The defendants, which include Gross, MLL, and other individuals and entities, now move to dismiss the Complaint pursuant to Mass.R.Civ.P. 23.1 and 12(b)(6). For the reasons that follow, this Court concludes that the defendants’ Motion must be Denied, in part and Allowed in part.

         BACKGROUND

         The following is drawn from the allegations in the Complaint together with the exhibits attached thereto.

         MLL currently has ten members, including Atlanta Lacrosse and MLL Founding Members, LLC (MFM). MFM owns five of the League’s fourteen Teams Units, which equates to 35.72 percent of the membership equity in MLL. The remaining nine Team Units are each owned by Atlanta Lacrosse and eight other LLCs, which operate the League’s nine lacrosse teams. Defendant James Davis holds interests in some of these LLCs. Each MLL member elects one individual to serve on MLL’s Board of Managers (the Board). Members approve or deny Board actions in proportion to their respective shares of equity. MLL is a Delaware LLC.

         In April 2008, several years before Atlanta Lacrosse became an MLL member, the League entered a Broadcast and Digital Rights License Agreement (the Broadcast Agreement) with defendant Lax United Marketing, LLC (LUM). LUM is an entity that was created to produce, market, and license television, internet streaming, and broadcast rights to League games and other League promotional events. At the time, Gross, the League’s Commissioner and COO, was the president of LUM. MFM, defendant New Balance Athletics, Inc. (New Balance), and Davis, who had a controlling interest in New Balance, held equity interests in LUM.[1] Under the Broadcast Agreement, MLL engaged LUM to produce all League games and events and create a League website. The plaintiffs allege that, because of the interconnection between LUM, Gross, Davis, and MFM, the League sold its broadcast rights to LUM for consideration that was not commercially reasonable.

         MLL also entered into Sponsorship Agreements with New Balance and two lacrosse equipment manufacturers, Warrior and Brine, Corp. This too took place before Atlanta Lacrosse became an MLL member. Warrior is a wholly-owned New Balance subsidiary; Brine, Corp., which was founded by one of MFM’s members, is currently controlled by Davis. The plaintiffs assert that, due to the interconnection between New Balance Warrior, Brine, MFM, and Davis, the League sold its sponsorship rights at far below market value.

         In 2014, plaintiff Trematerra entered into negotiations to form an Atlanta-based lacrosse team and join MLL. It is alleged that during these negotiations, Gross made various misrepresentations about the League’s profitability and presented Trematerra with information and documents that inaccurately reflected the League’s current and future prospects. Gross also failed to disclose, among other things, the Broadcast Agreement, the lack of monetary consideration LUM gave in connection with the Broadcast Agreement, Davis and MFM’s interest in LUM, the Sponsorship Agreements with New Balance, Warrior, and Brine, and Davis’ control of these entities.

         In July 2015, Trematerra formed Atlanta Lacrosse and purchased an equity interest in MLL pursuant to a Unit Purchase Agreement (the UPA). The parties to the UPA were Trematerra, Atlanta Lacrosse, and MLL. At the same time, Atlanta Lacrosse and MLL entered into a " Fifth Amended and Restated Limited Liability Company Agreement" (the LLC Agreement) and a Team Management Agreement (the TM Agreement). The UPA, the LLC Agreement, and the TM Agreement are each governed by Delaware law. The LLC and TM Agreements also contain arbitration provisions. The plaintiffs allege that since 2015, Gross and the Board are in breach of these agreements and have also breached their fiduciary duties to plaintiffs.

         In April 2017, plaintiffs filed this lawsuit. The Complaint asserts the following claims: misrepresentation against Gross and MLL (Count 1); fraudulent inducement against Gross and MLL (Count 2); violation of G.L.c. 93A, § 11 against MLL (Count 3); breach of the LLC Agreement against MLL (Count 4); breach of the TM Agreement against MLL (Count 5); breach of fiduciary duty against Gross (Count 6); aiding and abetting Gross’s breach of fiduciary duty against Davis, MFM, and LUM (Count 7); breach of fiduciary duty against MLL (Count 8); aiding and abetting MLL’s contractual breach of fiduciary duty against LUM and New Balance (Count 9); declaratory judgment against MLL (Count 10); conversion against MFM, Gross, Davis, LUM, and New Balance (Count 11); breach of the implied covenant of good faith and fair dealing against MLL (Count 12); and unjust enrichment against LUM and New Balance (Count 13). Defendants move to dismiss all of these claims.

         DISCUSSION

         The plaintiffs’ sprawling thirteen-count Complaint has been pled in a disorganized fashion, making it difficult for the Court to analyze each claim separately. The counts, however, appear to fall into three categories. Counts 1 through 3 each arise from alleged misrepresentations and omissions made by Gross to induce Trematerra to enter into the UPA. Counts 4 and 6 through 13 concern alleged failures by Gross and the Board to comply with their obligations under the LLC Agreement. These counts also challenge their decision to enter into the Broadcast and Sponsorship Agreements before Atlanta Lacrosse was a League member. Finally, Count 5 asserts that MLL breached Section 2.12 of the TM Agreement by requiring Atlanta Lacrosse to outfit Atlanta Blaze players in merchandise at commercially ...


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