WWE Royalties Lawsuit - 5/5/17 ruling

Required Reading

FIRST AMENDED CLASS ACTION COMPLAINT
Marcus Bagwell and Scott Levy, individually and on behalf of all others similarly situated;
v. World Wrestling Entertainment, Inc.; WCW, Inc.,
filed 11/7/16

DEFENDANT WWE’S MEMORANDUM OF LAW IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT
filed 12/2/16

RULING RE: DEFENDANT’S MOTION TO DISMISS (DOC. NO. 44) by United States District Judge Janet C. Hall

ordered 5/5/17

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NOT DISMISSED - COUNT I: BREACH OF CONTRACT—FAILURE TO PAY ROYALTIES
"Count I alleges breach of contract, stemming from WWE’s refusal to pay royalties on money derived from the WWE Network."

NOT DISMISSED - COUNT II: (BREACH OF FIDUCIARY DUTY)
"Count II alleges a breach of fiduciary duty, grounded in the same failure to pay royalties."

NOT DISMISSED - COUNT III: (VIOLATION OF THE CONNECTICUT UNFAIR TRADE PRACTICES ACT, C.G.S. §42-110A, ET SEQ.)
"Count III claims that WWE violated the Connecticut Unfair Trade Practices Act (“CUTPA”)."

NOT DISMISSED - COUNT IV: Breach of Contract- Failure to Pay Royalties Within 90 Days Following the of End of Quarter
"Count IV asserts another breach of contract claim, this one stemming from WWE’s failure to pay royalties within ninety days of the end of each fiscal quarter."

DISMISSED COUNT V: Declaratory Relief
"Count V seek declaratory relief, asking for a declaration that the WWE Network qualifies as a “WCW Video Product” and a “WWF Video Product” under the relevant contracts"

DISMISSED COUNT VI: Declaratory Relief
"Counts VI seek declaratory relief that Bagwell is paid royalties because of his 2001 contract with a WWE-affiliated entity."

NOT DISMISSED - COUNT VII: Successor Liability
"Count VII alleges that WWE is liable for the “debts and liabilities” of World Championship Wrestling, Inc."

DISMISSED COUNT VIII: Breach of Contract
"Count VIII asserts a third claim for breach of contract, arising out of WWE’s refusal to allow Bagwell to examine WWE’s books and records."

DISMISSED COUNT IX: Unjust Enrichment
"Last, Count IX claims that WWE has been unjustly enriched."
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JUDGE'S DECISION

• All claims against WCW, Inc. are dismissed.

• Counts V and VI, for declaratory relief, are dismissed because plaintiffs have failed to oppose WWE’s arguments for dismissal and because declaratory relief appears duplicative of the breach of contract claims.

• Plaintiffs may seek declaratory relief as a remedy, rather than as a freestanding cause of action. 

• Count VII is dismissed because plaintiffs’ contracts with WCWI did not entitle them to royalties. 

• Last, Count IX is dismissed because unjust enrichment claims are not cognizable where an express contract governs the subject matter undergirding the unjust enrichment claim.

• The Motion to Dismiss Counts I, II, III, IV, and VIII is denied.

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Detail on decision not to dismiss "Count I: Failure to Pay Royalties on WWE Network Proceeds" 

Direct Sale

"The contractual provisions that plaintiffs cite in their claim for royalties require royalty payments on money derived from “the direct sale” of pay-per-view or non-pay-per-view videos." (page 13)

"Ultimately, the court concludes that neither party’s proffered interpretation is foreclosed by the contract’s plain language." (page 14)

"The WWE Network is neither movable nor tangible, and thus does not qualify as a 'good' under the Uniform Commercial Code." (page 15)

"In any event, there can be little doubt that WWE is selling something to subscribers to the WWE Network. WWE understandably avoids using the word “sale”—or any variation thereof—in describing its interaction with WWE Network customers. Put colloquially, however, WWE sells subscriptions to the WWE Network, enabling subscribers to view content (both pay-per-view and non-pay-per-view videos) to which they would not otherwise have access. Nothing in the Booking Contract, copyright law, or any portion of Connecticut state law so limits the term “direct sale” as to unambiguously foreclose plaintiffs’ claims. That being the case, WWE’s arguments for dismissal that are grounded in the argument that “direct sale” does not—as a matter of law—cover the provision of streaming video on the WWE Network are not persuasive." (page 16)

Video Product

"Next, WWE argues that streaming video on the WWE Network does not qualify as a “Video Product,” as that term is defined in the Booking Contracts." (page 16)

 "The court is unpersuaded by WWE’s argument that the final clause in the definition of “Video Products” refers unambiguously and exclusively to physical objects." (page 17)

 "Last, the court is not persuaded by WWE’s suggestion—raised for the first time in its Reply—that sporadic references to the Internet elsewhere in the Booking Contracts forecloses inclusion of streaming videos in the definition of “Video Products.” (page 19)

"For the reasons set forth in detail above, WWE’s Motion to Dismiss certain of plaintiffs’ claims because they rely on a reading of “Video Products” that includes the WWE Network’s streaming videos is denied."  (page 20)

Calculating Royalties

"WWE next argues that plaintiffs’ interpretation of the Booking Contracts would “render other relevant provisions of the Booking Contracts impossible to apply and would lead to an absurd result.” In response, plaintiffs assert that calculating WWE’s royalty obligations “is purely a mathematical issue that can be determined by experts and this court at a later time.” (page 20)

"However, the court does not believe, at least at this stage of the litigation, that giving effect to plaintiffs’ interpretation of the royalty provisions would lead to an absurd result. There are likely several plausible ways to calculate the royalty payments plaintiffs demand. For example, it might be that the proper way to perform the royalty calculation is to determine the number of times a specific video on the WWE Network is viewed as compared to the total number of video views, divide the gross sales derived from the WWE Network in that proportion, and create the talent royalty pool to be paid to the wrestlers appearing in the specific video from 5% of that value. To be clear, the court is not holding here that a particular method of calculating any royalty obligation on the part of WWE is the correct way, but rather offers a plausible method to show that plaintiffs’ interpretation of the Booking Contracts does not appear to render them unworkable." (page 21)

"Therefore, notwithstanding WWE’s arguments to the contrary, it does not appear that a determination that plaintiffs are entitled to WWE Network royalties would lead to an absurd result." (page 22)

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Read the ruling:

RULING RE: DEFENDANT’S MOTION TO DISMISS (DOC. NO. 44) by United States District Judge Janet C. Hallordered 5/5/17


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EDIT: The Second Amended Complaint on the WWE Royalties Case was filed 5/19/17: https://www.scribd.com/document/349138407/20170522-WWE-Royalties-Second-Amended-Class-Action-Complaint-Bagwell-Levy

Exhibits on 2nd Amended Complaint: https://www.scribd.com/document/349139805/20170522-WWE-Royalties-Exhibits

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https://twitter.com/mookieghana/status/865625223751622658

Also, in the WWE CTE case, the plantiffs attempted to use Judge Hall's opinion to justify that WWE had successor obligations related to ECW/WCW wrestlers and file a sur-reply but WWE wasn't willing to play ball at all;  https://www.scribd.com/document/348865435/WWECTE-PLANTIFFS-DEFENDANTS-MOTIONS-TO-FILE-SUR-REPLY-BRIEF-IN-REFERENCE-TO-DEFENDANTS-MOTION-FOR-SANCTIONS