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SMEHLIK v. ATHLETES & ARTISTS

August 24, 1994

RICHARD SMEHLIK, Plaintiff,
v.
ATHLETES AND ARTISTS, INC., Defendant.


CURTIN


The opinion of the court was delivered by: JOHN T. CURTIN

Plaintiff Richard Smehlik, a Czechoslovakian hockey player now under contract with the Buffalo Sabres hockey club ("the Sabres"), brought this action against defendant Athletes and Artists ("A&A"), a New York corporation retained by Smehlik to act as his representative in negotiating professional hockey contracts with the Sabres or with other National Hockey League ("NHL") teams. Smehlik's original 3-count complaint alleged breach of contract (Count I), negligent performance of contract (Count II) and fraudulent misrepresentation (Count III).

 On July 22, 1993, A&A filed a motion to dismiss the action on three grounds, (i) that the court should abstain from hearing the case in view of a prior state court action brought by A&A against Smehlik concerning the same contract dispute; (ii) failure to state a claim; and (iii) improper venue. On November 2, 1993, I issued an order:

 
(1) dismissing Counts II and III of the complaint, but granting Smehlik leave to replead Count III;
 
(2) withholding ruling on the question of abstention; and
 
(3) withholding ruling on the question of venue, but
 
(a) granting Smehlik leave to conduct limited discovery to determine the extent of A&A's contacts with this district, and
 
(b) ordering both parties to further brief the venue issue.

 Smehlik has filed an amended complaint, repleading the original Count III as Count II. A&A has filed an answer, and moved to dismiss Count II pursuant to Fed. R. Civ. P. 12(b)(6). Smehlik has conducted discovery on A&A's contacts with this district, and both sides have rebriefed the issue of venue. Both parties have also advised the court as to the current status of the state court action. This decision will address A&A's motion to dismiss Count II of Smehlik's amended complaint, and the questions of venue and abstention.

 BACKGROUND

 Smehlik was drafted by the Sabres in the 1990 NHL draft. On August 28, 1990, while still in Czechoslovakia, he signed an agreement with A&A under which, inter alia, A&A was to act as his exclusive representative in the negotiation of professional hockey contracts with the Sabres, or with whichever team held his rights. The agreement had an initial term of two years, or until such time as A&A had completed the negotiation of Smehlik's next professional hockey contract, whichever was longer.

 A&A, a New York corporation whose principal place of business is in New York, New York, claims that it commenced contract negotiations with the Sabres on behalf of Smehlik in the summer of 1990. The negotiations, which were conducted entirely via telephone and fax, continued periodically until about April 1992. At that time, A&A received a letter from Smehlik stating that he was terminating his agreement with A&A, and/or that he believed the agreement to be invalid. Subsequently, in August 1992, Smehlik entered into a contract with the Sabres. That contract was negotiated by Rich Winter of The Entertainment & Sports Corporation, Smehlik's current agent.

 On May 10, 1993, A&A commenced an action for breach of contract against Smehlik in New York State Supreme Court in New York County, seeking declaratory relief, damages, restitution, and attorneys' fees. Smehlik's answer, dated June 15, 1993, contained four affirmative defenses: (i) breach of contract by A&A, (ii) negligent performance of the agreement by A&A, (iii) misrepresentation by A&A of its ability to perform under the contract, and (iv) indefiniteness or unconscionability of various terms of the agreement. On the same day that Smehlik served his answer in the state court action, he commenced this lawsuit.

 DISCUSSION

 1. Abstention

 In Colorado River Water Conservation District v. United States, 424 U.S. 800, 47 L. Ed. 2d 483, 96 S. Ct. 1236 (1976), the Supreme Court recognized that in "exceptional circumstances," district courts have discretion to dismiss lawsuits, for reasons of "wise judicial administration," when there are concurrent state court proceedings addressing the same issues. Id. at 817-19. A&A urges that I exercise my discretion under Colorado River to dismiss this case because there is a pending state court action involving issues identical to those presented here.

 Indisputably, the issues raised here are the same as those being litigated in the state court action -- whether or not there was a valid contract between the parties, and if so, which side breached. However, the existence of a state proceeding involving the same issues is not by itself sufficient to justify dismissal. Colorado River Water Conservation District v. United States, 424 U.S. at 817. As the Second Circuit has recognized, the Colorado River Court:

 
identified several factors to be considered by district courts in applying the exceptional circumstances test: the assumption by either court of jurisdiction over any res or property, the inconvenience of the federal forum, the avoidance of piecemeal litigation, ...

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