Blue Stone Entertainment LLC v. AGS CJ Corporation

Background

Blue Stone Entertainment LLC sued AGS CJ Corporation, formerly known as Amaya Americas Corporation. Blue Stone principally alleged that AGS CJ breached a stock purchase agreement under which Blue Stone was a third-party beneficiary. The agreement concerned AGS CJ’s 2013 purchase of Diamond Game Enterprises, a vendor of machines offering a version of donation sweepstakes.

At the time of the stock purchase agreement, Diamond Game was leasing sweepstakes machines to the Ysleta Del Sur Pueblo Indian tribe. In 2014, Diamond Game leased 416 machines and related accessories to Blue Stone. Blue Stone also subleased the equipment to the Pueblo. The stock purchase agreement was later amended to incorporate the lease and to provide for a $7 million holdback from the purchase price.

The amended agreement’s Section 5.3 required AGS CJ to cause Diamond Game to convey the equipment to Blue Stone for $1 if Diamond Game terminated the lease "upon or following" the occurrence of a defined "Texas Event." Blue Stone alleged that Diamond Game terminated the lease before any Texas Event occurred, later sold the equipment, and did not transfer it to Blue Stone.

Blue Stone brought claims for breach of contract and unjust enrichment. AGS CJ moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not state a legally sufficient claim. In deciding the motion, the court treated the complaint’s factual allegations as true and considered the stock purchase agreement and related lease because they were integral to the complaint.

Breach-of-Contract Claim

Applying New York law, the court explained that a breach-of-contract claim requires allegations of an agreement, the plaintiff’s adequate performance, the defendant’s breach, and damages. The parties did not dispute that the stock purchase agreement was binding, that AGS CJ owed obligations to Blue Stone as a third-party beneficiary, or that New York law applied.

The court found Section 5.3 straightforward and unambiguous. It held that Blue Stone’s entitlement to the equipment depended on two conditions: a Texas Event had to occur, and the lease had to be terminated "upon or following" that event. The court interpreted that phrase to require the Texas Event to precede termination of the lease.

Blue Stone conceded that the lease was terminated before, rather than upon or following, a Texas Event. The court rejected Blue Stone’s argument that the timing was immaterial or that the provision should be interpreted according to the agreement’s broader purpose. It also rejected the argument that the timing requirement should be excused as an unimportant condition. In the court’s view, excusing that requirement would change the written agreement. Because Blue Stone did not allege facts showing that it was contractually entitled to the equipment, the court concluded that the breach claim failed.

Unjust-Enrichment Claim

Blue Stone also alleged that AGS CJ was unjustly enriched by the sale of the equipment and sought restitution equal to what AGS CJ received from that sale. Under New York law, unjust enrichment is a quasi-contract theory that applies when no agreement governs the relevant obligation.

The court dismissed this claim because the stock purchase agreement governed AGS CJ’s alleged obligation to cause the equipment to be conveyed to Blue Stone. Since the dispute was covered by a valid contractual arrangement, the court held that Blue Stone could not recover under unjust enrichment.

Disposition

The court granted AGS CJ’s motion to dismiss for failure to state a claim and directed the Clerk of Court to close the case. The opinion does not state that the dismissal was with or without prejudice.