Opinion
05 Civ. 9581 (DC).
July 28, 2006
JUDD BURSTEIN, P.C., Judd Burstein, Esq. Peter B. Schalk, Esq. New York, NY, Attorneys for Plaintiff.
SMITH ALLING LANE, P.S., By: Robert E. Mack, Esq., Michael A. McAleenan, Esq., Tacoma, WA. and
McELROY, DEUTSCH, MULVANEY CARPENTER, LLP, By: Brian J. Carey, Esq., I. Michael Bayda, Esq., Jay A. Katz, Esq., New York, NY, Attorneys for Defendant.
MEMORANDUM DECISION
Plaintiff Souleymane M'Baye moves for leave to file a second amended complaint. Defendant the World Boxing Association (the "WBA") opposes the motion on the grounds that the claims that plaintiff proposes to add fail to state a claim upon which relief can be granted. For the following reasons, the motion is granted in part and denied in part.
BACKGROUND
This case has a tortured procedural history, a full description of which can be found in M'Baye v. World Boxing Association, 429 F. Supp. 2d 660 (S.D.N.Y. 2006). Familiarity with that opinion is assumed. Briefly, plaintiff originally filed suit in state court in November 2005. The WBA removed the case on November 11, 2005. Plaintiff originally sought an injunction prohibiting the WBA from sanctioning a fight that was to take place on November 26, 2005, between Carlos Maussa and Ricky Hatton. The Court declined to grant that relief but did enjoin the WBA from sanctioning any bout between the winner of the fight and anyone other than M'Baye. 429 F. Supp. 2d at 666. Hatton won the fight and became the champion in M'Baye's weight class, 140 pounds. Id.Thereafter, M'Baye again sought preliminary relief from this Court in the form of an order to compel Hatton to fight M'Baye or else be stripped of his title. A hearing was held over the course of two days in February 2006. Thereafter, before the Court ruled, Hatton relinquished his title in M'Baye's weight class and announced his intention to fight a championship bout in another weight class against a fighter named Luis Collazo. Id. at 670. M'Baye then asked the Court to enjoin the WBA from sanctioning the Hatton/Collazo bout unless Hatton agreed to fight M'Baye in his next fight. Id. at 666-67. The Court declined to grant that relief but did enjoin the WBA from sanctioning any bout for the currently vacant WBA championship or super championship in the 140-pound weight class unless that bout involved M'Baye. (Id. at 670).
M'Baye's original complaint, apart from its prayers for injunctive relief, also contained claims for breach of contract and breach of the covenant of good faith and fair dealing. M'Baye now seeks leave to add claims arising under 15 U.S.C. § 6309 (the "Ali Act") and 18 U.S.C. § 1964 ("RICO"). He also seeks to add claims for fraud and unjust enrichment. The gist of the proposed second amended complaint is that the WBA accepted sanctioning fees from M'Baye, thereby representing that it would grant him a championship bout if he attained the position of official contender, and then wrongfully bypassed him to sanction more lucrative fights involving other fighters.
Plaintiff did file an amended complaint, naming both the WBA and Hatton as defendants, in February 2006. That complaint also contained claims for breach of contract and breach of the covenant of good faith and fair dealing against the WBA, as well as various requests for injunctive relief and some substantive claims against Hatton. When it became apparent at a hearing that the inclusion of Hatton might have destroyed subject matter jurisdiction, the Court granted plaintiff's request to withdraw the amended complaint and, over plaintiff's objection, granted Hatton's request to withdraw as an intervenor. Hatton is therefore no longer a party.
The proposed second amended complaint also contains a claim asserting that M'Baye was a third-party beneficiary of a contract between the WBA and Hatton, but M'Baye has agreed to withdraw the claim. (M'Baye Reply Br. at 1 n. 1).
M'Baye also has filed another complaint against Hatton, two boxing promoters, and several others, asserting causes of action for RICO, breach of contract, tortious interference with contract rights, and other related claims. Motions to dismiss in that case are currently pending.
DISCUSSION
Federal Rule of Civil Procedure 15(a) provides that leave to amend "shall be freely given when justice so requires," and amendments are generally favored "to facilitate a proper decision on the merits." Conley v. Gibson, 355 U.S. 41, 48 (1957). The decision whether to grant leave to amend is within the sound discretion of the trial court. Cresswell v. Sullivan Cromwell, 922 F.2d 60, 72 (2d Cir. 1999). One reason to deny leave to amend, and the reason that the WBA presses here, is futility of the amendment. See Foman v. Davis, 371 U.S. 178, 182 (1962). An amendment is futile if the proposed claim could not withstand a motion to dismiss. Jones v. N.Y. State Div. of Military Naval Affairs, 166 F.3d 45, 50 (2d Cir. 1999). Thus, I must consider whether the proposed second amended complaint states a claim upon which relief can be granted, reading it in the light most favorable to plaintiff and drawing all inferences in his favor. See Henneberry v. Sumitomo Corp., 415 F. Supp. 2d 423, 432-33 (S.D.N.Y. 2006) ("Because leave to amend a complaint will be denied if the amended complaint could not withstand a motion to dismiss, . . . the Court will review the amended complaint through the prism of a Rule 12(b)(6) analysis.") (citations omitted).
As noted, M'Baye seeks to add four new claims: a claim under the Ali Act, a RICO claim, a claim for fraud, and a claim for unjust enrichment. I address each in turn. I also address the proposed second amended complaint's breach-of-contract claim, which was included in the original complaint but which the WBA apparently now challenges as well.
A. Ali Act
The Ali Act provides:
A sanctioning organization shall not be entitled to receive any compensation, directly or indirectly, in connection with a boxing match, until, with respect to a change in the rating of a boxer previously rated by such organization in the top 10 boxers, the organization —
(1) posts a copy, within 7 days of such change, on its Internet website or home page, if any, including an explanation of such change, for a period of not less than 30 days; and
(2) provides a copy of the rating change and explanation to an association to which at least a majority of the State boxing commissioners belong.15 U.S.C. § 6307c(c).
The Ali Act provides for a private right of action:
Any boxer who suffers economic injury as a result of a violation of any provision of this Act may bring an action in the appropriate Federal or State court and recover the damages suffered, court costs, and reasonable attorneys fees and expenses.15 U.S.C. § 6309(d).
The proposed second amended complaint alleges that the WBA violated the Ali Act when, on three separate occasions, M'Baye was the official contender (and therefore entitled under the WBA rules to a championship bout) but the WBA invoked exceptions to its rules to sanction championship bouts that did not involve him. He alleges that allowing these other fighters to leapfrog him in the rankings effectively changed his rating and that the WBA accepted money for fights without posting a notice of the ratings change on its website, in violation of 15 U.S.C. § 6307c(c).
The WBA argues that this does not state a claim upon which relief can be granted primarily because the term "ratings" is not defined by the Ali Act and the act of sanctioning a title bout or granting a special exception did not constitute a change in any "ratings." The WBA further argues that its alleged receipt of sanctioning fees in connection with bouts by other boxers did not result in any damages to M'Baye.
M'Baye has the better of the argument. As he points out, the legislative history of the Ali Act makes clear that the Ali Act was intended to protect boxers from arbitrary ratings changes.See S. Rep. No. 106-83 at 11-12 ("The ratings system in professional boxing today is universally criticized as arbitrary and manipulative. . . . Boxing rankings have more to do with financial interests of sanctioning officials and promoters than with the skills and achievements of boxers. . . . Since the often arbitrary ratings system has a large impact on the career of a boxer, the Committee believes this is an important measure to have these organizations fairly explain why they have changed the boxer's rating."). If, as the proposed amended complaint alleges, M'Baye was ranked as the number one contender but was repeatedly bypassed by the WBA in favor of other fighters promoted by Main Events, a reasonably jury could find that his "rating" was effectively changed. That is all that need be alleged.
As for the WBA's argument that M'Baye did not suffer any damages as a result of the WBA's alleged actions, this is not a proper basis for dismissal. Under Federal Rule of Civil Procedure 8, all M'Baye need do is allege that he suffered damages as a result of the alleged violation of the Ali Act. This he has done. (See Proposed Second Amended Complaint ¶ 76). The fact that he may not be able to produce evidence to support this allegation is a matter for the summary judgment stage.
B. RICO and Fraud
"To state a valid claim under [ 18 U.S.C. § 1962(c)], a plaintiff must allege the following: (1) defendants through the commission of two or more predicate acts (2) constituting a "pattern" (3) of "racketeering activity" (4) directly or indirectly invested in, or maintained an interest in, or participated in (5) an "enterprise," (6) the activities of which affected interstate or foreign commerce. Nat'l Group for Commc'ns Computers Ltd. v. Lucent Techs., Inc., 420 F. Supp. 2d 253, 269-70 (S.D.N.Y. 2006).
To state a claim for fraud, a plaintiff must allege a representation or omission of material fact, falsity, scienter, deception, and injury. See Ellison v. Am. Image Motor Corp., 36 F. Supp. 2d 628, 639 (S.D.N.Y. 1999) (citation omitted). Fraud claims, of course, are subject to the heightened pleading requirements of Federal Rule of Civil Procedure 9(b). This requires the plaintiff to (1) detail the statements or omissions that the plaintiff contends are fraudulent, (2) identify the speaker, (3) state where and when the statements (or omissions) are were made, and (4) explain why the statements (or omissions) are fraudulent. See Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co., 375 F.3d 168, 187 (2d Cir. 2004) (citation omitted). Malice or intent may be averred generally, but this is not a "license to base claims of fraud on speculation and conclusory allegations." Id. (citations omitted). Rather, a plaintiff must allege facts that give rise to a strong inference of fraudulent intent. Id.
The proposed amended complaint fails to state a claim for either RICO or fraud because it does not adequately allege that the WBA made any representations that were fraudulent when made. It states in conclusory terms that the WBA "had no intention" of following its rules when it accepted M'Baye's sanctioning fees (Proposed Second Amended Compl. ¶ 22), and then spends several paragraphs detailing how it proceeded to grant an exception to its rules to allow a lower ranked fighter to bypass M'Baye, who was then the official contender. (See id. at ¶¶ 23-26). At most, this is an allegation that the WBA made an implicit representation that it would follow its rules when it accepted the sanctioning fee, and then failed to abide by that promise. This does not raise the required strong inference of intent.See Compania Sud-Americana de Vapores, S.A. v. IBJ Schroder Bank Trust Co., 785 F. Supp. 411, 421 (S.D.N.Y. 1992) ("[F]raudulent intent not to perform a promise cannot be inferred merely from the fact of nonperformance."); Deligiannis v. PepsiCo, Inc., 757 F. Supp. 241, 254 (S.D.N.Y. 1991) (same);Zola v. Merrill Lynch, Pierce, Fenner Smith Inc., No. 84 Civ. 8522, 1987 WL 7742, at *5 (S.D.N.Y. Mar. 2, 1987) ("Mere non-performance of a promise does not support an inference that it was fraudulent when uttered."). The RICO claim fails for the same reason. See United States v. Autori, 212 F.3d 105, 115 (2d Cir. 2000) (explaining that claim of mail or wire fraud requires allegation of "scheme to defraud").
The WBA sanctions dozens, if not hundreds, of boxing matches every year. Plaintiff's allegations that it treated-him and a few other fighters unfairly may give to claims sounding in breach of contract or unjust enrichment, but do not give rise to the required strong inference that it was running a racket or otherwise scheming to defraud him. Accordingly, the motion to amend is denied to the extent it seeks to assert RICO and fraud claims.
C. Breach of Contract and Unjust Enrichment
The elements of a breach of contract claim under New York law are (1) the existence of an agreement, (2) performance of the contract by the plaintiff, (3) breach of the agreement by the defendant, and (4) damages. See Bridgeway Corp. v. Citibank, N.A., 132 F. Supp. 2d 297, 305 (S.D.N.Y. 2001). The WBA argues that the proposed amended complaint does not state a claim for breach of contract because, as a matter of law, the rules and regulations promulgated by the WBA do not create an enforceable contract. But, as M'Baye points out, M'Baye's breach of contract claim does not rely exclusively on the existence of the rules; rather, he alleges a contract based on his payment (and the WBA's acceptance) of sanctioning fees with the understanding that M'Baye would be granted a championship bout after he attained the ranking of official contender. The WBA then breached that agreement by repeatedly granting exceptions to its rules. Whether M'Baye can prove the allegations remains to be seen; the allegations are unquestionably adequate.
The proposed second amended complaint also adequately states a claim for unjust enrichment. Such a claim requires simply an allegation that (1) the defendant was enriched, (2) the enrichment was at the plaintiff's expense, and (3) the defendant's retention of the benefit would be unjust. See Marathon Enters. v. Schroter GMBH Co., No. 01 Civ. 0595, 2003 WL 355238, at *9 (S.D.N.Y. Feb. 18, 2003) (citations omitted). As M'Baye argues, the claim stands on the theory that it would be inequitable for the WBA to retain the sanctioning fees that he paid if it indeed wrongfully failed to honor his rights as the official contender because it could earn more money by sanctioning other bouts. The claim is adequately pleaded.
CONCLUSION
The motion to amend is granted with respect to the Ali Act claim and the breach-of-contract and unjust enrichment claims. The motion is denied to the extent it seeks to assert claims based on RICO and fraud. Plaintiff shall serve and file his second amended complaint consistent with this memorandum decision by August 14, 2006. Defendant shall serve and file its answer to the second amended complaint by August 28, 2006.
SO ORDERED.