A federal judge from the Eastern District of Virginia has delivered a partial victory to the powerful Club Managers Association of America (CMAA), who were sued for breach of contract.
The court granted the defendants’ motion to dismiss part of the lawsuit, finding that “the plaintiffs have failed to plead sufficient facts to make out plausible claims for breach of and tortious interference with the CMAA contract, and because the contract was too indefinite to be enforced.”
The plaintiffs in the case were the United States Golf Learning Institute, LLC (USGLI) and William J. Kamm & Sons, Inc. (WJK), which are affiliated entities. USGLI provides online training courses.
The CMAA is a professional association for club managers, including country, golf, yacht and city clubs. Professional Management Services Group, Inc., a co-defendant in the case, provides management company services, sales, marketing and other services to various Human Resources Outsourcing Companies, known collectively as the SCI Companies (SCI).
This case involved two contracts: the first between USGLI and CMAA, which is addressed here, and the second between WJK and SCI. “In essence,” wrote the court, “the plaintiffs argue that both contracts contained exclusivity clauses, which defendants breached and tortiously interfered with by teaming up with each other to develop and market an online educational product that directly competes with USGLI’s analogous product.”
The purpose of the contract between the USGLI and CMAA was to create an opportunity for USGLI to sell training services, specifically an online risk management training module, to members of CMAA and compensate CMAA for that opportunity. The parties agreed to “work together to jointly market USGLI’s Risk Management Module, and other jointly-developed training modules, to CMAA members under a platform to be called Club Learning Institute (CLI). CMAA was to receive a fixed price for each CMAA member that subscribed to the Risk Management Module or any other modules available on the CLI platform.
The USGLI claimed that under the contract the CMAA could only offer its members online training through the CLI program “during the term of the contract and for one year post-termination, thereby prohibiting CMAA from partnering with other parties to provide online courses.” The defendants “vigorously disputed” the idea that there was an “exclusive obligation to use the CLI,” according to the court.
The controversy began July 6, 2011, when CMAA began to offer and promote an online training program called CMAA University “in conjunction with SCI.”
A little over a month later, the plaintiffs filed a complaint for injunctive relief and damages, alleging breach of contract and tortious interference with contract claims.
The plaintiffs alleged “that some, but not all, of the CMAA University’s offerings directly overlap with the offerings from the CLI and that CMAA is breaching its contract with USGLI by ‘offering and promoting a competing online learning platform to USGLI’s Club Learning Institute,’’’ according to the court. “Finally, the plaintiffs argue that CMAA and SCI are tortiously interfering with the other’s contract with USGLI/WJK through their involvement with CMAA University.”
The defendants filed a motion to dismiss, pursuant to Fed. R. Civ. P. 12(b)(6), spawning the instant opinion.
The court first addressed USGLI’s allegation that CMAA breached the CMAA contract by forming and promoting CMAA University, and that SCI tortiously interfered with the CMAA contract when it “unlawfully induced” CMAA to breach the CMAA contract, again through the creation of CMAA University.
The court considered the defendants’ argument that “there can be no breach due to the operation of CMAA University, because the CMAA contract did not require that CMAA use the CLI as its only online learning platform.”
The court continued that “the strongest evidence of non-exclusivity is the language of the CMAA contract itself, which fails to explicitly describe an exclusive agreement, and fails to use the word ‘exclusive’ to refer to the nature of the relationship between the parties.
“Obviously the drafters knew how to use the term ‘exclusive,’ because the term appears elsewhere in the contract when referring to other subjects. … Such language indicates that, had the drafters of the contract intended to create an exclusive relationship, they would have stated so explicitly.”
The court then shot down another one of the plaintiffs’ arguments that because a section of the contract prohibits CMAA from creating “an on-line learning platform similar to the USGLI/CLI platform for one year” after the contract terminates, that it would similarly “prohibit such conduct during the pendency of the contract.”
The court observed that “relying on what the parties agreed to do after the contract was terminated is a very strange way of trying to argue what was in a contract. It would certainly be odd for parties to enter into an exclusivity arrangement without making its exclusive nature readily apparent. Contorting contractual provisions regarding post-termination conduct to prove an exclusive relationship during the pendency of the contract is thus an unnatural reading of the contract.”
The court “declines to read into the CMAA contract an exclusivity provision that clearly does not exist.”
United States Golf Learning Institute, LLC, et al., v. Club Managers Association Of America, et al.; E.D. Va.; 1:11CV869 (LMB/JFA), 2011 U.S. Dist. LEXIS 132592; 11/15/11.
Attorneys of record: (for plaintiffs) Daniel Sage Ward, Ward & Ward PLLC, Washington, DC. (for defendant Club Managers Association Of America) Mark Edward Shaffer, Reed Smith LLP (Falls Church), Falls Church, VA. (for defendant Professional Management Services Group, Inc.) Richard Cyril Sullivan, Jr., LEAD ATTORNEY, Reed Smith LLP, Falls Church, VA.
