Professional Fighters League, LLC v. Takeover Industries, Inc.

Background

Professional Fighters League, LLC (PFL) sued Takeover Industries, Inc., also known as NXT LVL, for breach of contract. The case concerns a Sponsorship Agreement effective December 16, 2021. PFL agreed to provide promotional and sponsorship benefits, including branding, signage, athlete appearances, product placement, social-media posts, and broadcast features. Takeover agreed to pay sponsorship and marketing fees scheduled to total $650,000 in 2022, $715,000 in 2023, and $787,000 in 2024.

PFL alleged that Takeover made an initial payment of $108,500 and then made only a $100,000 partial payment toward a $136,500 installment. PFL alleged that Takeover made no further payments, although PFL performed its contractual obligations. PFL sought $1,353,250 in damages, plus monthly late fees of 1.5 percent under the Agreement.

Motion to Dismiss

Takeover moved to dismiss PFL’s Second Amended Complaint under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal for failure to state a legally sufficient claim. Takeover relied primarily on Section 13.c, a limitation-of-liability provision stating that, with specified exceptions, each party’s maximum aggregate liability would be limited to the amount of the fee actually paid by Takeover to PFL for the year in which the claim arose. Takeover argued that this provision barred additional recovery and made retention of previously paid amounts PFL’s only remedy.

PFL argued that applying the provision to unpaid sponsorship fees would produce an absurd and commercially unreasonable result. In PFL’s view, that interpretation could allow Takeover to receive the promised sponsorship benefits without paying the required fees and could make Takeover’s payment obligations effectively meaningless.

Court’s Analysis

Under New York law, a breach-of-contract claim requires allegations of an agreement, the plaintiff’s performance, the defendant’s breach, and damages. Takeover did not dispute that PFL adequately alleged the first three elements. The dispute concerned whether PFL adequately alleged damages in light of Section 13.c.

Judge Gary Stein first held that Section 13.c did not eliminate all possible recovery. Even under Takeover’s interpretation, the provision would limit liability to the amount already paid during the relevant year. Because Takeover had paid $208,500 in 2022, the provision would still require at least that amount of potential liability. For that reason alone, the court concluded that the motion could not dismiss the entire complaint.

The court then considered whether Section 13.c applied to Takeover’s obligation to pay the Sponsorship Fee. Although the provision’s wording appeared to support Takeover’s reading when considered in isolation, the court held that contract language must be read in the context of the entire agreement. Applying the provision to unpaid sponsorship fees could mean that Takeover would have no liability in a year when it had made no prior payment. It could also mean that the more Takeover failed to pay, the less PFL could recover.

The court concluded that this result could be viewed as absurd because it would deprive PFL of the central benefit for which it had contracted and could allow Takeover to breach its payment obligations without an effective remedy. The court therefore held, for purposes of the motion, that the Agreement was ambiguous as applied to PFL’s remedies for nonpayment.

Holding and Disposition

The court did not adopt PFL’s interpretation of the Agreement or decide the ultimate amount of damages. It held only that PFL’s interpretation was sufficiently plausible to make the contract ambiguous and that the ambiguity could not be resolved on a motion to dismiss. Extrinsic evidence—evidence outside the contract’s text—might later show that the parties intended the liability cap to apply to unpaid sponsorship fees.

Judge Gary Stein denied Takeover’s motion to dismiss the Second Amended Complaint and directed Takeover to answer within 14 days. The court stated that a definitive resolution of the Section 13.c dispute must await discovery.