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DON KING PRODUCTIONS, INC. v. DOUGLAS

May 18, 1990

DON KING PRODUCTIONS, INC., PLAINTIFF,
v.
JAMES "BUSTER" DOUGLAS, JOHN P. JOHNSON, GOLDEN NUGGET, INC., AND THE MIRAGE CASINO-HOTEL, DEFENDANTS.



The opinion of the court was delivered by: Sweet, District Judge.

      OPINION

This action is brought by plaintiff Don King Productions, Inc. ("DKP") against defendants James "Buster" Douglas ("Douglas") and his manager John P. Johnson ("Johnson") for breach of contract, and against Golden Nugget, Inc. and The Mirage Casino — Hotel (collectively, "Mirage") for tortious interference with contract. The Mirage has asserted a counterclaim seeking a declaration that the contracts between DKP and Douglas are invalid. Before the court is DKP's motion pursuant to Rule 56, Fed.R.Civ.P., for summary judgment on the breach of contract count of its complaint; DKP's motion to dismiss the counterclaim of GNI pursuant to Rule 12(b)(1) for lack of standing; Douglas and Johnson's motion pursuant to Rule 56 for summary judgment dismissing the complaint; and Mirage's motion pursuant to Rule 56 for summary judgment dismissing the complaint. For the reasons stated below, the summary judgment motions of DKP, Mirage and Douglas and Johnson are denied. The motion of DKP to dismiss Mirage's counterclaim is granted.

The Parties

The parties to this proceeding and their various causes are somewhat notorious within the confines of the sporting and gaming world. The unacquainted (those who need a program to tell the players) are referred to the prior opinion of this court dated April 4, 1990, which denied the motion of the defendants to dismiss the complaint on jurisdictional grounds (or alternatively, to transfer it to Nevada), except as against former plaintiff Trump Plaza Associates, whose companion complaint was dismissed for want of jurisdiction. 735 F. Supp. 522.

  Prior and Parallel Proceedings

This breach of contract and tortious interference action by DKP against Johnson, Douglas and Mirage (the "New York action") was commenced in this district at 10:48 a.m., Eastern Standard Time, on February 22, 1990. The prior day, at 4:58 p.m., Pacific Standard Time, in the District Court of Clark County, Nevada, an action was filed by Douglas, Johnson and Mirage against DKP, requesting a declaratory judgment that Douglas and Johnson were not bound by their contracts with DKP and that Mirage had not tortiously interfered with those contracts.

By order to show cause of March 7, 1990, DKP sought in this forum a preliminary injunction order enjoining Douglas and Johnson from acting in any manner inconsistent with DKP's asserted contractual right exclusively to promote boxing bouts engaged in by Douglas. The show cause order also sought expedited discovery and the setting of an early trial date. At the order to show cause hearing of March 9, 1990, expedited discovery was granted, a discovery and motion schedule established, and a date of April 16, 1990 set down for a consolidated trial of the complaint and motion for preliminary injunction.

Pursuant to the approved schedule, Johnson, Douglas and the Mirage on March 13 filed motions to dismiss or transfer to Nevada the DKP complaint (and the Trump Plaza Associates complaint that had been subsequently filed), returnable on March 16, 1990. The motions were argued on that date, and decided in the noted April 4 Opinion granting the defendants' motion to dismiss the complaint of Trump Plaza Associates and denying their motion to dismiss or transfer the DKP action.

Meanwhile, the Nevada state court action was removed by DKP to the United States District Court, District of Nevada, on diversity grounds, and assigned to the Honorable Howard D. McKibben. A remand motion followed. On or about March 19, 1990, the Nevada federal court denied the motion to remand the action to state court. The federal court also on that date established a discovery schedule, and set the matter for hearing on April 9, 1990, i.e., one week in advance of the previously-assigned date for trial of the action set in the United States District Court for the Southern District of New York.*fn1

The April 9 date set in the Nevada action proved to be premature for some or all of the parties. Accordingly, three or four days before that date a stipulation of the parties was entered in that action continuing the trial to April 23. Simultaneously, a stipulation was submitted in the New York action, and was "so ordered" on April 6, 1990, providing that the trial scheduled to take place on April 16 in New York would be continued to a date convenient to the court and after April 30, 1990.*fn2

As it turned out, the rescheduled April 23 date for trial of the Nevada action also proved untenable. Three days after the parties' stipulation to that date, on April 9, 1990, on the Nevada court's own motion, an order was entered vacating the trial setting that had three days before been "trailed" to April 23. The order continued the Nevada trial date another month, to May 21, 1990.

Further jockeying back and forth by the parties over the trial dates ensued. DKP sought a conference before this court for the asserted purpose of fixing a firm, prompt date for the consolidated trial on the preliminary injunction motion (which had been brought on by order to show cause on March 7) and on the complaint. At conference before this court on April 23, and consistent with the court's understanding of the parties' New York stipulation (which provided for rescheduling of the adjourned April 16 New York trial to a convenient date "not before April 30, 1990"), the New York trial was set for May 1, 1990.

Following that conference but on the same day, counsel for Douglas and Johnson arranged an emergency telephone conference before the Nevada court during the course of which Judge McKibben indicated that he had not yet ruled on DKP's pending application to transfer the action to New York but was disinclined to grant the motion and in all probability would retain the case. The court further indicated that if it determined there had been a breach of the parties' Nevada stipulation, it would consider advancing the May 21 Nevada trial date to April 30, the day before the May 1 trial setting in New York.

Apprised by the parties of the Nevada court's predicted course of ruling on the transfer motion, this court held a conference on April 25 to again address the trial setting. For the purpose of providing all parties with a date certain for trial, and in view of indications that the urgency of DKP's request for prompt hearing of its preliminary injunction motion had abated, the trial setting in New York was adjourned to the date of the Nevada trial — May 21 — the court further deferring to the Nevada court the determination of the geographic location of the trial to be held on that date.

Following that conference and in accordance with the briefing schedule previously agreed to in the New York action, the parties brought the instant motions, each returnable on April 27, 1990. The motions were orally argued on the return date, and taken under submission as of that date. An amicus curiae brief of Evander Holyfield was also permitted to be filed on that date.

The Facts

The following facts for purposes of these motions are undisputed. Douglas, a professional boxer, and Johnson, his manager, both citizens of Ohio, entered into a boxing promotion agreement dated December 31, 1988 (the "Promotional Agreement" or "Agreement"), with DKP, a New York corporation engaging in boxing promotions with its principal place of business in New York. Douglas was paid $25,000 by DKP as consideration for entering into the Promotional Agreement.

A. Negotiation of the Agreement

The Agreement was negotiated on behalf of Douglas by his manager Johnson and his attorney Stephen Enz, who had represented Douglas and Johnson in past contractual dealings with DKP.*fn3 The arms-length negotiations were conducted with King, and DKP's counsel, by correspondence between Ohio, New York and Nevada, and to some degree by telephone between Ohio (where Douglas, Johnson and Enz reside) and New York (where DKP's office and counsel are located) and between Ohio and California and Las Vegas, Nevada (locations at which King was also present during part of the period of the negotiations). No face-to-face negotiations took place. Instead, following initial correspondence back and forth, a draft agreement was drawn up by Enz, working from the prior promotional agreement DKP and Douglas had contracted, apparently was signed by Douglas and Johnson in Ohio, and was then sent to King. King made certain changes to the draft, and executed the Agreement, which was sent by his counsel in New York to Enz in Ohio.*fn4 Douglas and Johnson there executed the Agreement. Their counsel thereafter sent one of the final copies to King in Las Vegas, where a fight he was promoting was about to take place.

B. Terms of the Promotional Agreement

The Agreement provides DKP with the "sole and exclusive right to secure and arrange all professional boxing bouts" of Douglas for the term of the Agreement. DKP in turn obligates itself to promote not less than four bouts requiring Douglas' services during the annual period ending February 25, 1990, and, for two years' thereafter, no less than three bouts per year. Such bouts were to be on dates and at sites designated by DKP, and against opponents designated by DKP after consultation with Douglas and Johnson.

With respect to any bout, the contract deems DKP to have complied with its promotional obligations if it has made a "bona fide offer" to Douglas to promote a bout, "irrespective of whether such bout actually takes place for any reason other than DKP's nonperformance." Purses payable by DKP to Douglas for bouts undertaken pursuant to the Agreement are to be negotiated and mutually agreed upon by the parties, and are subject to a floor of $25,000 and $10,000 in training expenses per bout. The Promotional Agreement contemplates that such bouts would be governed by individual bout agreements, the standard terms of which were affixed to the Promotional Agreement.

The Promotional Agreement also set forth the intention of DKP to promote a heavyweight championship bout involving Douglas, and provided that the three year term of the Agreement would be automatically extended in the event Douglas was recognized as world champion, "to cover the entire period you are world champion and a period of two years following" loss of the title. Under the Agreement Douglas promised to "not participate in any bouts other than bouts promoted or co-promoted by DKP" nor "render . . . services as a professional boxer" to any entity other than DKP. Douglas also represented that he would not enter into any oral or written contract that "conflict[ed] in any material respect with the provisions" of the Agreement, that "purport[ed] to grant similar or conflicting rights" to any person other than DKP or that "might interfere with [Douglas'] full and complete performance" of the Agreement.

The Agreement authorized DKP to promote other professional boxers, including those in the same weight class as Douglas. The Agreement also contained a choice of law provision providing that it would "in all respects be governed, construed and enforced in accordance with the laws of the State of New York applicable to contracts to be fully performed therein."

C. Performance under the Promotional Agreement

Pursuant to the Promotional Agreement, Douglas participated in three bouts arranged by DKP during the first year ending February 25, 1990. The last of these was the heavyweight championship bout held on February 10, 1990, in Tokyo, Japan between Douglas and the then-heavyweight champion, Michael Tyson. In accordance with the Promotional Agreement, which called for the monetary terms of each bout to be negotiated and set forth in a separate agreement, Douglas and Johnson entered into a bout agreement for that fight, dated August 14, 1989 (the "Bout Agreement"), pursuant to which Douglas was to be paid $1.3 million, inclusive of training expenses.*fn5 Douglas won the bout and became the undisputed heavyweight champion of the world.

D. Events In Tokyo

During the February 10 Tokyo bout against Tyson, Douglas was knocked down during the eighth round but came to his feet prior to the referee's conclusion of the count. Douglas went on to knock out Tyson in the tenth round. King, who also is Tyson's promoter, protested at the end of the eighth round, to boxing officials who were ringside, that the referee's count had been too long. After the fight, a press conference was held at which the "long count" theory was further aired, and later, formal challenges to the fight decision were filed by the Japanese Boxing Commission and by Tyson with certain boxing governing bodies, apparently predicated on the "long count" theory. The result was to place in temporary doubt official recognition of Douglas' victory over Tyson.

E.  Post-Tokyo Negotiations and the Douglas-Mirage Contract

On or about February 14, 1990, Johnson met with King in New York to discuss terms for a Douglas rematch with Tyson which King sought to hold in June 1990 at Trump Plaza in Atlantic City, New Jersey. Around the same time, a representative of Mirage contacted Johnson and expressed an interest in having Douglas' next fight at the Mirage Hotel in Las Vegas. After further phone conversations with Johnson and Douglas' lawyer, and a visit by a Mirage emissary to Ohio, on February 18, 1990, Mirage sent its president and corporate jet to Columbus, Ohio to pick up Douglas and Johnson and bring them to the hotel to stay as guests of the Mirage, where discussions were planned concerning holding Douglas' next fight at the hotel.

Prior to the February 18 plane ride, DKP had become aware of Mirage's interest in Douglas. On February 16, 1990, DKP had its lawyers notify Mirage by letter of DKP's contractual rights to Douglas' boxing services. Mirage thereafter obtained and reviewed a copy of the Promotional Agreement.

After returning to Las Vegas, Mirage officials met with Johnson and Douglas over the next two to three days, and with numerous lawyers and promoters, discussing possible terms and arrangements for a boxing contract involving Douglas' services. King flew out to the Mirage on February 20 in an effort to come to terms with Johnson or reach some understanding with Mirage. His efforts apparently failed and on February 21, 1990, Douglas and Johnson executed a contract with Mirage (the "Mirage-Douglas Contract").

The Mirage-Douglas Contract provides for Douglas to fight two bouts at the Mirage, in consideration for which he is to receive a minimum payment of $25 million for performing in the first bout and another $25 million for a second heavyweight championship bout to be performed pursuant to its terms. The Contract also contains an express condition precedent, which makes Mirage's rights and obligations under the Contract contingent upon the parties' first obtaining, by September 1, 1990, a release from DKP of its purported exclusive rights or a judicial declaration that the exclusive promotional rights of the Promotion Agreement and Bout Agreement are void and unenforceable. The parties to the Contract filed a suit on the date of its execution in Nevada state court, seeking such a declaration, which action is now before the federal district court in Nevada.

I. The Breach of Contract Motions

Preclusion of DKP's Litigation of Choice-of-Law and Contract Validity Issues Underlying the Breach of Contract Claim

In Top Rank, Inc. and Matthew Hilton v. Don King Productions, Inc. and Don King, No. A266756 (Clark County, Nevada July 27, 1988) (the "Hilton action"), the Honorable J. Charles Thompson, a Nevada state court district judge, entered a preliminary injunction restraining DKP from interfering with the staging or televising of a boxing contest to be held two days' later in Las Vegas involving a fighter, Matthew Hilton, who was at that time under an exclusive contract to DKP. The court found that the promotional agreement and bout agreement between Hilton and DKP were prohibited by Regulation 467.112, Rules and Regulations of the Nevada Athletic Commission ("N.A.C."), in that each agreement provided that Hilton "must fight exclusively for one promoter or at his option." Finding No. 1. The court further concluded that the agreements "are void and unenforceable in the State of Nevada." Finding No. 3.

On the basis of this ruling, Johnson and Douglas urge, by virtue of offensive collateral estoppel, that DKP is precluded from litigating in this court (1) whether New York, as opposed to Nevada, law governs the validity and enforceability of the Promotional and Bout Agreements and (2) whether N.A.C. § 467.112 renders the Promotional and Bout Agreements void and unenforceable.

In determining the issue-preclusive effect of the Nevada state court's judgment in the Hilton action, this "federal court must give to [the] state court judgment the same preclusive effect as would be given that judgment under the law of the state in which the judgment was rendered," i.e., Nevada. Migra v. Warren City School Dist. Bd. of Education, 465 U.S. 75, 81, 104 S.Ct. 892, 896, 79 L.Ed.2d 56 (1984); Kremer v. Chemical Constr. Corp., 456 U.S. 461, 102 S.Ct. 1883, 72 L.Ed.2d 262 (1982); Gelb v. Royal Globe Ins. Co., 798 F.2d 38, 42 n. 3 (2d Cir. 1986), cert. denied, 480 U.S. 948, 107 S.Ct. 1608, 94 L.Ed.2d 794 (1987); Brennan v. EMDE Medical Research, Inc., 652 F. Supp. 255, 266 (D.Nev. 1986) (citing Hirst v. State of California, 770 F.2d 776 (9th Cir. 1985)). Nevada law, like that followed in New York and this federal court, requires that for preclusive effect to be given with respect to a particular issue, (a) the party against whom preclusion is asserted be a party fully represented in the prior adjudication; (b) the issue decided in the prior adjudication be identical to that presented in the action in question; (c) final judgment on the merits have been entered in the prior adjudication; and (d) the issue have been actually litigated in, and were necessary and material to, the prior adjudication.*fn6

A. Identity of Factual Predicates

As further evinced in the choice-of-law portion of this opinion, infra, determinations of governing law are fact-based, resting, inter alia, upon discrete findings with respect to such matters as the contractual parties' citizenship, residence, place of contract negotiation, place of contract execution, contract subject matter, and contemplated or actual place of performance under an agreement. In a particular case, distinct choice-of-law approaches no doubt provide differing assessments of the relevance of such contacts (and perhaps suggest the relevance of additional contacts), and there are a myriad of such choice-of-law approaches theoretically available to guide the ultimate legal determination.*fn8 However, each depends in the first instance on a determination of the array of facts connecting the particular litigation to the competing governing laws (a determination necessary even to determine which fora are candidates for selection as source of governing law).*fn9

Obviously, the Hilton court did not and could not have made findings as to the broad set of facts that connect the instant litigation between Douglas, Johnson and DKP to Nevada, Ohio and New York, respectively, since that collection of parties, contractual relations and possible law choices was not before it, was not necessary to its decision, and was not actually litigated. Yet collateral estoppel "makes conclusive in subsequent proceedings only determinations of fact, and mixed fact and law, that were essential to the decision," Yates v. United States, 354 U.S. 298, 336-337, 77 S.Ct. 1064, 1085-1086, 1 L.Ed.2d 1356 (1957). The Hilton determination as to appropriateness of the application of Nevada law to that prior litigation therefore may not foreclose consideration of the distinct factual record of contacts presented by this litigation, nor the mixed question of fact and law that necessarily arises from it. However broad is the reach of issue preclusion, a given resolution of a question of application of law (or a mixed question of law and fact) may not serve to preclude litigation of the same overlying legal issue where the second determination properly requires taking cognizance of distinct, or changed, facts.*fn10 See Steel v. United States, 813 F.2d 1545, 1550 (9th Cir. 1987) (California state court determination in 1977 as to jurisdiction over person in 1977 had no preclusive effect upon personal jurisdiction determination by federal court in action brought in 1985 because "issue preclusion . . . is limited to cases where the legal and factual situations are identical."); Smith v. Western Electric Co., 770 F.2d 520, 525 n. 5 (5th Cir. 1985); Milens v. Richmond Redevelopment Agency, 665 F.2d 906, 908-09 (9th Cir. 1982); Hilkovsky v. United States, 504 F.2d 1112, 1113-14, 205 Ct.Cl. 460 (1974). See also Dracos v. Hellenic Lines, Ltd., 762 F.2d 348, 353 (4th Cir. 1985) (en banc) ("If the facts upon which jurisdiction [and choice of law] [are] based are inherently subject to change, then a district court may be justified in giving the prior finding no preclusive effect.").

Even were that general proposition in doubt, the result it implies is necessarily compelled when the judicial fact-finder in the prior adjudication does not disclose the factual determinations it made that served as the predicate for its legal conclusion, since without such an indication it cannot be known whether the subsequent litigation involves essentially the same facts as were before the fact-finder in the prior action, or "separable" ones requiring a different legal conclusion. In the Hilton action, the judge made no factual findings as to the basis for his implicit holding that Nevada law governed the dispute.*fn11 Whether the factual predicate the Hilton court relied upon at the time of its decision corresponded in all essential respects with that presented here therefore cannot be established with any certainty. Cf. Brennan v. EMDE Medical Research, Inc., 652 F. Supp. 255, 266 (D.Nev. 1986) (denying issue preclusive effect to state court judgment under Nevada law where "[f]rom the face of the order, it is impossible to tell what the state judge relied upon in making his decision.").*fn12 For each of these reasons, preclusive effect cannot be given to the Hilton court's choice-of-law determination, upon which was predicated the determination that the Hilton contract was unenforceable in Nevada.*fn13

B. Finality of the Hilton Judgment

The same result is independently compelled because the Hilton judgment was not a final judgment on the merits, as required by principles of collateral estoppel. See City of Reno v. Nevada First Thrift, 100 Nev. 483, 488, 686 P.2d 231, 234 (1984); Bull v. McCuskey, 96 Nev. 706, 710, 615 P.2d 957, 960 (1980); Paul v. Pool, 96 Nev. 130, 605 P.2d 635, 637 (1980). As noted, the Hilton suit was a declaratory judgment action in which plaintiffs also sought preliminary relief. The lawsuit was served on DKP on July 20, on July 27 a hearing was held at which plaintiffs' motion for a preliminary injunction was granted, and that order enjoined DKP from interfering with a bout involving Hilton that took place on July 29.

In entering the preliminary injunction, the Hilton court stated that it had considered "the probability of [Hilton] prevailing on the merits" and determined that "there's a likelihood of this Court determining that the exclusivity provisions in the King contract is prohibited in Nevada." Under Nevada law, like the Federal Rules of Civil Procedure, those tentative findings were an appropriate basis for determining the preliminary relief request since, as the Supreme Court has pointed out,

  [t]he purpose of a preliminary injunction is
  merely to preserve the relative positions of the
  parties until a trial on the merits can be held.
  Given this limited purpose, and given the haste
  that is often necessary if those positions are to
  be preserved, a preliminary injunction is
  customarily granted on the basis of procedures
  that are less formal and evidence that is less
  complete than in a trial on the merits. A party
  thus is not required to prove his case in full at
  a preliminary injunction hearing . . . and the
  findings of fact and conclusions of law made by a
  court granting a preliminary injunction are not
  binding at trial on the merits.

University of Texas v. Camenisch, 451 U.S. 390, 395, 101 S.Ct. 1830, 1834, 68 L.Ed.2d 175 (1981) (citations omitted).

Findings made in a preliminary injunction proceeding therefore are seldom considered sufficiently final to be given preclusive effect. See Kuzinich v. County of Santa Clara, 689 F.2d 1345, 1350-51 (9th Cir. 1982) ("issues litigated in a preliminary injunction action are not res judicata and do not form a basis for collateral estoppel") (relying on Continental Baking Co. v. Katz, 68 Cal.2d 512, 528, 67 Cal.Rptr. 761, 771, 439 P.2d 889, 899 (1968)); Medtronic, Inc. v. Gibbons, 684 F.2d 565, 569 (8th Cir. 1982) (granting or denial of preliminary injunction is not a final judgment for purposes of collateral estoppel); Neuman v. Pike, 456 F. Supp. 1192, 1205 (S.D.N.Y. 1978), rev'd on other grounds, 591 F.2d 191 (2d Cir. 1979) (grant of preliminary relief "by its very nature . . . is not a final judgment" and has "no res judicata or collateral ...


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