A New York state appeals court has ruled that the owners of a defunct American Basketball Association (ABA) franchise must pursue their claim — that the NBA and several of its franchises violated the terms of a 35-year-old agreement — in federal court.
The agreement in question allowed for essentially the merger of the ABA and NBA. While some ABA teams — the Denver Nuggets, the Indiana Pacers, the New Jersey Nets and the San Antonio Spurs – received direct passage into the NBA, the Kentucky Colonels and St. Louis Spirits did not.
With the agreement, the Colonels received a $3 buyout from the NBA, while the Spirits, the plaintiff in this case, and received $2 million and a promise of at least 1/7th of the television revenues of the four new NBA teams or 1/49th of the NBA’s overall television revenues.
The agreement also contained a clause designating the United States District Court for the Southern District of New York as the exclusive forum:
“The parties agree that this agreement shall be filed in the lawsuit in the United States District Court, Southern District of New York, as a stipulation of settlement of the Spirits’ amended cross-claim, and the parties shall request the court to issue an order decreeing that this agreement shall have the effect of a Judgment therein pursuant to which the court shall retain jurisdiction over the parties to enforce the terms of this agreement and the judgment.”
On January 11, 2009, the plaintiff sued, alleging that the NBA and the teams failed to calculate and pay plaintiff its share of the TV revenues from certain NBA games telecast internationally. The first cause of action alleges breach of the agreement against all the defendants. The second cause of action alleges breach of the agreement against the teams. The third cause of action alleges breach of the covenant of good faith and fair dealing against all the defendants. The fourth cause of action asks for an accounting.
The trial court granted the defendants’ motion to move the case to federal court
The plaintiff argued “that no agreement can vest the federal courts with jurisdiction absent an independent basis for federal subject matter jurisdiction. While this is a correct statement, the Southern District should resolve issues regarding its own jurisdiction (see Purcell v Town of Cape Vincent, 281 F Supp 2d 469, 475, ND NY 2003),” wrote the appeals court.
Spirits of St. Louis Basketball Club, L.P. v. Denver Nuggets, Inc., etc., et al., ; S.Ct.N.Y., App. Div., 1st Dept.; 3920, 600096/09, 2011 NY Slip Op 3715; 2011 N.Y. App. Div. LEXIS 3627; 5/5/11
Attorneys of Record: (for appellant) Dechert LLP, New York (Robert J. Jossen of counsel). (for respondents) Skadden, Arps, Slate, Meagher & Flom LLP, New York (Jeffrey A. Mishkin of counsel).
