ASI, Inc. v. Aquawood, LLC

Background

ASI, Inc., formerly known as Aviva Sports, Inc., had obtained an $8,588,931.59 judgment against Manley Toys, Ltd. in earlier litigation. The judgment was based on a false-advertising claim under the Lanham Act. ASI later brought this action against several defendants, alleging fraud, abuse of process, civil conspiracy, and civil violations of the Racketeer Influenced and Corrupt Organizations Act. ASI alleged that the defendants acted as an enterprise and used fraudulent transfers to avoid paying the Manley judgment.

Aviva Sports had sold most of its assets to Revel Match LLC. The central Asset Purchase Agreement transferred various claims against third parties but expressly excluded certain assets, including a patent and related claims. A separate Consent to Continued Use of Name stated that the Manley litigation and all claims asserted there were excluded assets. ASI relied on these documents to argue that it retained the judgment.

Motion to Dismiss

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(1), which permits dismissal for lack of subject-matter jurisdiction. They argued that Aviva Sports had sold its rights to the Manley judgment to Revel Match. According to the defendants, ASI therefore could not collect the judgment, had not suffered an injury, and lacked standing—the legal requirement that a party have a sufficient stake to bring a claim.

The court treated the motion as a factual challenge to jurisdiction. It considered whether the Asset Purchase Agreement and the Consent should be read together under Minnesota law. That law treats documents executed at the same time, for the same purpose, and as part of the same transaction as one instrument unless the parties agree otherwise.

Court’s Analysis

The court found persuasive evidence that the agreements were part of one transaction. The Asset Purchase Agreement was to be executed at closing, the Consent was executed at closing, the Consent referred to terms defined in the Asset Purchase Agreement, and the documents were included together as closing documents for the sale of Aviva Sports’ assets to Revel Match.

The defendants argued that the agreements could not be treated as one contract because ShoreMaster, Aviva Sports’ stockholder, signed the Asset Purchase Agreement but not the Consent. The court rejected that argument, explaining that ShoreMaster was not the seller and that the Consent did not alter or concern ShoreMaster’s rights or assets. The court distinguished the Minnesota case cited by the defendants because that case involved separate transactions with different subjects and parties.

Ruling

The court held that the closing documents constituted one transaction and that the sale contract explicitly excluded the Manley litigation and the entire judgment ASI sought to recover. It concluded that ASI had plausibly alleged an injury and had standing to sue.

The court denied the defendants’ Motion to Dismiss [Docket No. 630].