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Independent Sports & Entertainment, LLC v. Fegan

United States District Court, C.D. California

May 30, 2017

INDEPENDENT SPORTS & ENTERTAINMENT, LLC, Plaintiff,
v.
DANIEL FEGAN, Defendant.

          ORDER GRANTING MOTION FOR REMAND AND DENYING MOTION TO DISMISS

          HONORABLE ANDRÉ BIROTTE JR. UNITED STATES DISTRICT COURT JUDGE

         Before the Court is Plaintiff Independent Sports & Entertainment LLC's (“ISE”) Motion for Remand (Dkt. No. 12) and Defendant Daniel Fegan's (“Fegan”) Motion to Dismiss. (Dkt. No. 8.) Oppositions and replies were filed for both motions. The Court heard oral argument on May 1, 2017. For the following reasons, the Court GRANTS the motion for remand and DENIES the motion to dismiss.

         I. BACKGROUND

         ISE alleges that Fegan breached a non-competition agreement, and in this action seeks a preliminary injunction, pending a related arbitration, barring Fegan from continuing to breach that agreement. The relevant allegations of the Complaint (“Compl., ” Dkt. No. 1-1) are as follows.

         ISE is a sports management company that represents athletes in several leagues, including the National Basketball Association (“NBA”). Compl. ¶ 4. Fegan is a well-known sports agent who represents NBA players. Id. ¶ 5. In 2013, ISE and Fegan entered into an Asset Purchase Agreement (“APA”) whereby ISE agreed to purchase Fegan's basketball business assets and goodwill in exchange for cash and stock in ISE. Fegan also agreed to become an employee of ISE so he could continue to represent his NBA clients as an employee of ISE. Id. ¶ 5.[1]

         The APA included non-competition provisions whereby Fegan promised, as relevant, “[t]o refrain from directly or indirectly owning, managing, operating, controlling, or working for any business or organization that engages in sports marketing, representation, recruiting, or that otherwise competes with ISE from March 15, 2013 through February 15, 2018 (‘Non-competition Period').” Id. ¶ 31; see also APA (Bauman Decl. (Dkt. No. 12-3) Exh. F), § 8.1. The APA also has a non-solicitation agreement whereby Fegan agreed to not compete with ISE by soliciting any of ISE's employees, agents, or consultants. Compl. ¶ 31; APA § 8.2.

         ISE alleges that Fegan violated the APA by, among other things, running a side business in violation of the noncompetition clause, undermining ISE employees' loyalty to ISE, repeatedly violating the non-solicitation clause, and otherwise failing to perform satisfactorily, so ISE terminated his employment for cause on March 10, 2017. Id. ¶ 49. The same day, pursuant to an arbitration clause in the APA, ISE brought two arbitrations against Fegan for his breach of the APA and the employment agreement. In those arbitrations, ISE seek damages and an injunction to enforce the noncompetition agreement. Id. ¶ 2.

         Also on March 10, 2017, ISE filed this action in state court. ISE's Complaint states only one cause of action: for a preliminary and permanent injunction pending the arbitrations, pursuant to Cal. Code Civ. Proc. §§ 525-527. ISE states that it “only seeks injunctive relief to enforce the non-compete covenant and maintain the status quo” until the arbitrations are concluded or the noncompetition covenant expires on February 15, 2018. Id. ¶ 59. As relevant to the motions, the Complaint seeks an order prohibiting Fegan from:

b. Competing with ISE by directly or indirectly owning, managing, operating, joining, controlling, or participating in the ownership management, operation or control, or being involved as a director, officer, employee, partner, or consultant, of any profit or non-profit business that competes with ISE in the sports marketing, sports representation, sports recruiting, and/or sports business management fields. This includes owning any equity interest in such a firm or business.
c. Competing with ISE in his individual capacity by directly or indirectly soliciting NBA players, coaches, or their agents and representatives that he currently does not represent, or to do anything to expand the representation of his current NBA clients under existing SPACs in a way that would be competitive to ISE.

Compl. Prayer or Relief ¶ A(b) and A(c), 21:7-20.

         On March 17, the state court issued a TRO enjoining Fegan from engaging in the activities referenced in paragraph (b).

         On March 28, 2017, Fegan removed the action to federal court on the ground that it is completely preempted by § 301 of the Labor Management Relations Act (“LMRA”), 29 U.S.C. § 185. ISE then filed a motion for preliminary injunction to bar Fegan from:

engaging in, committing, performing, directly or indirectly, by any means whatsoever, the following acts: owning, managing, operating, controlling, or having any involvement with a business organization that competes with ISE in violation of a valid noncompete clause during the non-competition time period, which expires on February 15, 2018.

See Dkt. No. 11-10, 3:12-15.

         Fegan now moves to dismiss the Complaint on the same ground on which he removed it: that it is completely preempted by the LMRA. ISE argues that its claim is not completely preempted and seeks an order remanding the action back to state court.

         II. LEGAL STANDARD

         A. Removal Jurisdiction

         A defendant may remove from state to federal court any civil action over which the district court would have had original jurisdiction. 28 U.S.C. § 1441(a). Federal district courts have original jurisdiction over “all civil actions arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. Federal jurisdiction exists only if the federal question appears on the face of the plaintiff's “well-pleaded complaint.” Caterpillar Inc. v. Williams, 482 U.S. 386, 392, (1987). Under the well-pleaded complaint rule, a defense based on federal law, including the defense of preemption, does not establish a federal question and does not render a state law action removable. Id. at 393 (“it is now settled law that a case may not be removed to federal court on the basis of a ...


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