By Jeff Birren, Senior Writer
Outstanding head coaches play a critical role for earning millions of dollars a year, and in turn rake in many tens of millions of dollars directly and indirectly from the football program. Often, these large sums can lead to conflicts. At The Pennsylvania State University (“Penn State”), the university sued an RV rental business for trademark infringement in 2019. The rental company stated that it had received the necessary permission from the head coach’s agent. Recently the Court declined to dismiss Penn State’s Complaint based on the defendants’ assertion that the coach’s agent was an indispensable party to the litigation.
Background
Penn State hired James Franklin in 2014 as its head football coach. Last fall Franklin signed a 10-year contract that guarantees him $7,000,000 a year. Athletes First is Franklin’s agent. Keystone Alternatives, LLP (“Keystone”) does business as GOPSURV.COM. Matt Lauer owns Keystone. Keystone runs “an RV rental business, renting RVs to football fans traveling to Penn State football games” (Pa. State Univ. v. Keystone Alternatives LLC D/B/A GOPSURV.COM & Matt Lauer, U.S. D.C., M. D. Penn., Case No. 1:1:19-cv-02039, Opinion, (“PSU”), at 2 (9-30-22)). Keystone and Lauer registered the name “GoPSUrv.com,” and use it in advertising.
Penn State sued both Keystone, the company, and Lauer, the owner, on November 27, 2019. It asserted causes of action under federal law for trademark infringement, unfair competition, cybersquatting, and trademark dilution, and claims for trademark dilution, common law trademark infringement and unfair competition under Pennsylvania law (Memorandumat 2/3 (8-12-2020)). Keystone requested and received additional time to respond to the Complaint. Keystone and Lauer eventually filed a motion to dismiss the Complaint that was denied on March 5, 2020. Subsequently, they filed an Answer and Counterclaim on March 30, 2020.
Penn State responded with a contested motion to dismiss the Defendants’ fourth cause of action for tortious interference. That motion was granted in August 2020. Discovery began, and on several occasions the parties each requested discovery extensions. Those motions were granted. The parties also sought and received a protective order regarding licensing arrangements and intellectual property issues. There were various successful motions to compel discovery. In December 2021, Magistrate Judge Saponite denied the defendants motion to compel deposition testimony of Coach Franklin (Order,(12-10-2021)). The defendants appealed that ruling to Judge Kane, who affirmed the Order on September 27, 2022. The parties continued their discovery wars, including motions to exclude testimony or seal produced materials.
A Second Motion to Dismiss
On December 13, 2021, the defendants filed a second motion to dismiss, based on a theory that Penn State failed to join an indispensable party—Athletes First. Penn State filed an opposition in January 2022 and the defendants replied eight days later. The defendants proffered evidence that they insisted showed that an Athletes First employee “expressed approval of Keystone’s use of the trademarks in question” and that “the employee authorized Defendants to distribute coupons bearing the domain ‘goPSUrv.com’ and the words ‘Official PSU RV Rental and Tailgatings.’” They asserted that meant that Athletes First “is an indispensable party” under Federal Rules of Civil Procedure 19, (“FRCP”), (PSU at 3).
The Court stated that for such a motion, “the court must accept all factual allegations in the complaint as true and draw all reasonable inferences therefrom in the light most favorable to the plaintiff.” In the Third Circuit, the first question is whether the absent party is “necessary to the proceedings.” If the missing party is not “necessary” then it is “not indispensable.” If that party is necessary, then the next step is to determine “if it is feasible to join the party” (Id.). If so, the party must be joined. If it is not feasible to join the missing party, the court continues its analysis, but under FRCP 19(b).
The first step is to determine if the absence means that “the court cannot accord complete relief among the existing parties.” If there are no allegations against the missing party, “the absent party is not necessary.” That party may be necessary if it “claims an interest relating to the subject matter of the action.” Conversely, the missing party is not “necessary” “by virtue of being a joint tortfeasor.” Joinder “is feasible” if the missing party “is subject to service of process and would not deprive the court of jurisdiction.” If service is not feasible, “the court proceeds to the third step of the analysis, a determination as to whether a party is indispensable—that is, the action cannot proceed without them” (Id., at 4/5).
This indispensability depends on four factors: “the extent to which a judgment rendered” in that party’s absence “might prejudice that person or the existing parties”; the extent to which this prejudice “could be lessened or avoided by” protective provisions in the judgement, the shaping of relief or other measures; “whether a judgment rendered in the person’s absence would be adequate”; and “whether the plaintiff would have an adequate remedy if the action were dismissed for nonjoinder.” A court “applies these factors and makes a discretionary determination as to whether the case must be dismissed.”
Discussion
The Court summarized the defendants’ arguments as to why Athletes First “should be considered an indispensable party” (Id. at 5). They argued that Athletes First’s representations, “as an agent of Franklin” “create a dispositive issue… concerning the extent to which Franklin” and therefore PSU “authorized Defendants’ use of the PSU mark.” The defendants also “appear to argue that Athletes First is an indispensable party because of its role as an agent of Plaintiff” and that Athletes First is “indispensable because of its own potential liability to Plaintiff.”
Their third argument was that Athletes First is indispensable because its absence “might prejudice Defendants” if they were found to be liable. The reply brief added a fourth argument, that there might be inconsistent verdicts in the future “should Defendants pursue their claims against Athletes First in a separate action.” Their final theory was that Athletes First’s “interests could be impacted by the resolution” of the current dispute because the defendants “may attempt to hold Athletes First accountable in a separate action” (Id.).
Penn State countered by arguing that Athletes First did not meet the “narrow and limited criteria” of an indispensable party. It failed the first step since it was not “necessary under Rule 19(a)(1)(A) because complete relief can be afforded to the existing parties without Athletes First, insofar as the parties seek relief only from each other.” It also did not need to be joined for the Court “to grant the parties their requested relief” nor does it have “a legal interest in the dispute so as to render it necessary” under FRCP 19(a)(1)(B). Penn State further argued that the defendants failed to “identify any legally protected interest of Athletes First that would be impacted by a determination of this action.” Athletes First was thus not “necessary” and therefore “not indispensable” so that the motion should “be denied” (Id.).
The Court’s Analysis
The Court stated that after “careful consideration” of the law and the parties’ arguments, it concluded that the defendants had “not met their burden to show that Athletes First is a necessary party” and therefore it is not “indispensable” (Id. at 5/6). The defendants argued that its absence “would prejudice” their interests. However, FRCP 19(a)(1)(A) is “only concerned with the court’s ability to afford the relief requested to the existing parties” (Id. at 6). The rule does not require joinder of a party “of whom the existing parties request nothing.” None of the parties “brought a claim against Athletes First” and “nothing prevents the Court from issuing the complete relief requested” by the parties. Consequently, “Athletes First is not a necessary party with the meaning of Rule 19(a)(1)(A).”
The next “proffered ground” given by the Court was that there could be “a possibility of inconstant verdicts if Defendants were required to pursue their claims against Athletes First in a separate civil action.” However, the defendants failed “to identify a prerequisite interest in the subject matter of the action” so their argument failed, according to the Court.
Their final argument was that Athletes First “interests are affected by this action” because if the defendants are liable to Penn State, they “may seek to hold Athletes First accountable in a separate action.” This “indicates a financial, and not a legally protected, interest within the meaning of FRCP 19(a)(1)(B).” Third Circuit cases “have held” that a defendant’s “right to contribution or indemnity from an absent” party “does not render that absentee indispensable.” Other Third Circuit cases have stated “where the preclusive effect of an action on any related litigation is speculative” joinder is “not compulsory.” It is not enough that “the present dispute may set a ‘persuasive precedent’ that disfavors the absent party.” The Court noted that FRCP 19 “does not require the joinder of joint tortfeasors” nor the joinder of “principal and agent” (Id., FN. 4).
Even if Athletes First “has a legally protected interest in the present action” the defendants failed to satisfy the requirements of FRCP 19(a)(1)(B)” (Id. at 7). Should the defendants be liable to Penn State, but Athletes First is not held liable to the defendants in a possible second case, “this is not the kind that the rule aims to prevent.” Consequently, the defendants “failed to meet their burden to show that Athletes First has a legally protected interest in the subject matter” of the pending case and thus it is not “a necessary party.” Since a party cannot be considered “indispensable” if it is not first held to be necessary, “the Court’s analysis need not proceed further.”
Conclusion
The case continues and competing summary judgment motions will likely be filed. At this distance, what makes the case interesting is how the parties have dealt with Athletes First. Penn State has an interest in not suing their head coach’s agent, as that could sour their relationship. Across the aisle the defendants have not filed a claim against Athletes First either, since they will want its cooperation at trial to show that Athletes First granted them permission to use the contested marks, even though Athletes First probably lacked the requisite authority to do that. Moving forward, the defendants should also be sure that those that apparently grant them permission to use marks have the legal authority to do so and Athletes First may need to be more careful with their licensing agreements as well.
The legal world surrounding college sports is far more complex that it was fifty years ago. As the amount of money has increased, and the sources of that money has multiplied, the potential liability pitfalls have also increased. One may not need to walk softly in the sports world today, but it helps to carry a big legal stick.
