Christmas Edition – Esports Gamer Contract Fight Between FaZe Clan and Turner “Tfue” Tenney Must Continue in New York

When FaZe Clan initially brought suit against Turner “Tfue” Tenney in the Federal District Court of the Southern District of New York, Tfue’s attorney, Bryan Freedman, initially said he had to check the calendar to see if it was Christmas.  Given Judge Rakoff’s recent denial of Turner “Tfue” Tenney’s motion to dismiss the case, I would imagine Tfue’s attorney may be regretting stating that the case was “[A]n absolute gift” to his client.

First, let’s take a step back.  Last month, Judge Jed Rakoff denied Tfue’s motion to dismiss FaZe Clan’s lawsuit, requiring Tfue to continue to defend the action brought by FaZe Clan related to the breach of the Gamer Agreement Tfue signed with the venerable esports powerhouse. The Gamer Agreement in question had a provision that required that disputes be resolved in the courts located in the state of New York.  Tfue, attempting to leverage the fact that California’s laws and courts harbor a general contempt of corporate entities and the ability for individuals to be accountable for agreements they make, initially filed multiple actions in California, in hopes that the Gamer Agreement he signed with FaZe Clan would be deemed invalid in light of California law.

Tfue’s attorney had argued that dismissal of the NY Federal lawsuit was advisable under the Colorado River abstention doctrine.  The main argument in the present matter involved the desire to avoid piecemeal litigation, which would result in concurrent litigation with potentially inconsistent findings.   However, even despite the earlier filings in California by Tfue, Judge Rakoff stated that Tfue’s motion was an, “obvious attempt by defendant to avoid a binding and enforceable forum selection clause.”

Judge Rakoff continued to note that the Colorado River abstention doctrine generally applies only in, “exceptional circumstances,” and that the analysis is, “heavily weighted in the favor of the exercise of jurisdiction by the federal court.”  The analysis of abstention under Colorado River requires consideration of six factors: i) whether the controversy involves a res over which one of the courts has assumed jurisdiction; ii) whether the federal forum is less inconvenient than the other for the parties; iii) whether staying or dismissing the federal action would avoid piecemeal litigation; iv) the order in which the actions were filed, and whether proceedings have advanced more in one forum than in the other; v) whether federal law provides the rule of decision; and vi) whether the state procedures are adequate to protect the plaintiff’s federal rights.

Here, the court found that, “the only factor that materially counsels in favor of abstention is the third: the desire to avoid piecemeal litigation.”  Judge Rakoff did note that allowing the federal lawsuit to continue could possibly result in requiring the parties to obtain final judgments in two different proceedings, and that the Supreme Court of the United States has at least once “characterized the avoidance of piecemeal litigation as ‘paramount’ in a Colorado River analysis.”  However, Judge Rakoff reasoned that, “these concerns do not rise to the level of an ‘exceptional’ circumstance that would justify abstention,” and that none of the other factors weighted in favor of Tfue.  In light of this, the court denied Tfue’s motion to dismiss.  Most Notably in the opinion, Judge Rakoff added that, “In effect, [Tfue] seeks to create something like a categorical rule that Colorado River excuses litigants from foreign forum selection clauses whenever those parties can find a home-state contract defense that is conceivably nonwaivable.  Such a rule would stray far from Colorado River’s own instruction that federal courts have a ‘virtually unflagging obligation . . . to exercise the jurisdiction given to them’.”

So, for now, both the state actions in California and the federal suit in New York will continue.  Trial dates in New York are set to be confirmed in March of 2020.  It looks, from the outset, that the real Christmas present here is for FaZe Clan.

Happy Holidays to all!