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COLE, SCHOTZ, MEISEL, FORMAN & LEONARD, P.A. A Professional Corporation Court Plaza North 25 Main Street P.O. Box 800 Hackensack, New Jersey 07602-0800 201-489-3000 201-489-1536 Facsimile Frank Smith, Esq. (admitted pro hac vice) SMITH AND VERBIT, PL 9900 Stirling Road, Suite 303 Cooper City, Florida 33024 954-965-8350 954-241-6947 Facsimile Attorneys for Defendant/Counterclaimant, Eddie Alvarez BELLATOR SPORT WORLDWIDE, LLC, : UNITED STATES DISTRICT COURT : FOR THE DISTRICT OF NEW JERSEY : Plaintiff, : : Civil Action No. 2:13-cv-00063-JLL-MAH : v. : : EDDIE ALVAREZ AND JOHN DOES 1-5, : : : Defendant. ______________________________________________________________________________ MEMORANDUM OF LAW IN OPPOSITION TO PLAINTIFFS MOTION TO DISMISS COUNTS III AND IV OF THE COUNTERCLAIM ______________________________________________________________________________

Of Counsel: Frank Smith, Esq. Steven R. Klein, Esq. Adam J. Sklar, Esq.

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TABLE OF CONTENTS Page TABLE OF AUTHORITIES .......................................................................................................... ii STATEMENT OF FACTS ..............................................................................................................1 LEGAL ARGUMENT.....................................................................................................................3 I. II. STANDARD OF REVIEW .....................................................................................3 THE COUNTERCLAIM STATES A PLAUSIBLE CLAIM FOR TORTIOUS INTERFERENCE ...............................................................................4 A. B. The Counterclaim Sets Forth Sufficient Facts to State a Claim for Tortious Interference Against Plaintiff ........................................................4 The Facts Underlying Alvarezs Tortious Interference Claim Are Not Privileged and May Form the Basis of a Tortious Interference Claim............................................................................................................5

III.

THE COUNTERCLAIM STATES A PLAUSIBLE CLAIM FOR BREACH OF CONTRACT.....................................................................................7 A. B. The Counterclaim Sets Forth Sufficient Facts to State a Claim for Breach of Contract .......................................................................................7 The Facts Underlying Alvarezs Breach of Contract Claim Are Not Privileged and May Form the Basis of a Breach of Contract Claim ...........8

IV.

IN THE EVENT THE COURT DETERMINES THAT ALVAREZ HAS FAILED TO PLEAD A CLAIM IN COUNTS III OR IV, ALVAREZ REQUESTS LEAVE TO AMEND HIS COUNTERCLAIM TO CURE ANY SUCH PLEADING DEFICIENCY ...............................................................9

CONCLUSION..............................................................................................................................10

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TABLE OF AUTHORITIES Page Cases Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009)........................................................................................3 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ..........................................................................3 Cargill Global Trading v. Applied Development Co., 706 F.Supp. 2d 563 (D.N.J. 2010) .............5 Century 21 Real-Estate LLC v. All Professional Realty, 2012 WL 3260452 (E.D. Cal. 2012)..........................................................................................5 LaMorte Burns & Co., Inc. v. Walters, 167 N.J. 285 (2001)...........................................................5 Murphy v. Implicito, 392 N.J. Super. 245 (App. Div. 2007)...........................................................6 New Jersey Sport Productions, Inc. v. Bobby Bostick Promotions, LLC, 405 N.J. Super. 173 (Ch. Div. 2007) .....................................................................................5, 8 Phillips v. County of Allegheny, 515 F.3d 224 (3d Cir. 2008) .......................................................3 Printing-Mart Morristown v. Sharp Elecs. Corp., 116 N.J. 739 (1989)...........................................4 Sandler v. Lawn-A-Mat Chemical and Equipment Corp., 141 N.J. Super. 437 (App. Div. 1973) .......................................................................................5 Santiago v. Warminster Tp., 629 F.3d 121 (3d Cir. 2010) ..............................................................3 Seidenberg v. Summit Bank, 348 N.J. Super. 243 (App. Div. 2002) ..............................................7 Sons of Thunder v. Borden, Inc., 148 N.J. 396 (1997)....................................................................7 Wilson v. Amerada Hess Corp., 168 N.J. 236 (2001) .....................................................................7

Statutes and Rules Fed. R. Civ. Proc. 8(a)(2).................................................................................................................3 Fed. R. Civ. Proc. 15(a)(2)...............................................................................................................9

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STATEMENT OF FACTS / PRELIMINARY STATEMENT The relevant issues as to the Motion to Dismiss of plaintiff, Bellator Sport Worldwide, LLC (Bellator) (Docket Document 31), are simple: there exists, as has been admitted by both sides, the Bellator Contract (Counterclaim 7); there exists, as has been admitted by both sides, the Zuffa Offer Counterclaim 10); and there exists, as has been admitted by both sides, the Bellator Offer (Counterclaim 11). The Motion to Dismiss is aimed at the Intentional Interference and Breach of Contract claims contained in the Counts III and IV of the Counterclaim of defendant, Eddie Alvarez (Alvarez). Alvarez has alleged that Bellator had no intention and/or ability to perform certain terms of the Bellator Offer and tendered the Bellator Offer in bad faith and with malicious intent (Counterclaim 16.i and fn. 1; 46-47; 52-54). These allegations must be accepted as true for purposes of the Motion to Dismiss. Alvarez has further alleged he has been damaged as a result of Bellators action, which also must be accepted as true for purposes of the Motion to Dismiss (Counterclaim 50, 55)). As to the Intentional Interference with Prospective Economic Advantage claim, it is undisputed that Bellator was aware of all of the terms of the Zuffa Offer. To the extent Bellators actions in submitting the Bellator Offer, an offer that they knowingly had no intention and/or ability to perform, were done with the intent to prevent or obstruct Alvarez from signing with Zuffa, that is simply a prima facie case of tortious interference. As to the Breach of Contract claim, Bellator was aware of its obligations under the Bellator Contract, including the right to match provision (Counterclaim 8), and is presumed to have knowledge of the Covenant of Good Faith and Fair Dealing. To the extent Bellator made Alvarez an offer that it had no intention and/or ability to perform, that would be both a breach of the Bellator Contract and the Covenant of Good Faith and Fair Dealing. 1
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For each of those claims, the prima facie elements of the causes are set forth. Further, the factual allegations pled are sufficient to state a plausible claim for relief. It is worth noting that much of the case law relied upon by Bellator in support of its motion deals with fact issue determinations made at summary judgment or trial, and, therefore, is inapplicable to the analysis and consideration of a motion to dismiss a partys initial pleading. Further, to the extent the Court believes that Bellators privilege argument is appropriate at this juncture, Alvarez is not alleging that the pre-litigation correspondence itself forms the basis for either claim at issue. Bellators argument would require this Court to conclude that Bellator could, under the Bellator Contract, submit a purported matching contract to Alvarez that Bellator had neither the intention nor ability to perform, without repercussion. Bellator unconvincingly attempts to shield its actions through the submission of the Bellator Offer under a cover letter from counsel and under the guise that Bellator simply was exercising its rights under the Bellator Contract. As aptly pointed out by this Court in its January 25, 2013 Order, this Court will not predetermine whether or not Bellator intends to perform, can perform or will perform at this stage of the proceedings, accepting Bellators allegations at this juncture of its ability and intention to perform under the Bellator Offer and awaiting the outcome of fact finding before ruling further. The same logic applies here, as Bellator is asking this Court to predetermine that when it submitted the Bellator Offer, Bellator intended to perform and could perform the requirements of the Bellator Offer. In the meantime, absent signing the Bellator Offer and fighting for Bellator under that contract, Alvarez is subject to a de facto injunction, unable to sign with Zuffa or any other promoter. If Bellator has acted wrongfully and in bad faith in making the Bellator Offer, as Alvarez believes, Alvarez must have the ability to be made whole for the resulting damages he has suffered and will continue to suffer.

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LEGAL ARGUMENT I. STANDARD OF REVIEW

A pleading that states a claim for relief must contain a short and plain statement of the claim showing that the pleader is entitled to relief. Fed. R. Civ. Proc. 8(a)(2). As Bellator correctly points out, to survive a motion to dismiss for failure to state a claim, a pleading must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). In conducting its review of the pleading, however, the court must accept as true all of the well-pleaded factual allegations and draw all reasonable inferences in favor of the non-moving party. See Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008). A pleading attacked by a motion to dismiss does not need detailed factual allegations. Twombly, 550 U.S. at 555. Mere legal conclusions, unsupported by factual allegations,

however, are insufficient to state a claim. Iqbal, 129 S. Ct. at 1940. The Third Circuit has set forth a three-part analysis for District Courts to employ when reviewing whether a pleading has stated a claim: To determine the sufficiency of a complaint under the [Iqbal] pleading regime . . ., a court must take three steps: First, the court must "tak[e] note of the elements a plaintiff must plead to state a claim." Iqbal, 129 S. Ct. at 1947. Second, the court should identify allegations that, "because they are no more than conclusions, are not entitled to the assumption of truth." Id. at 1950. Finally, "where there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief." Id. [Santiago v. Warminster Tp., 629 F.3d 121, 130 (3d Cir. 2010) (footnote omitted).] Here, Alvarez has set forth sufficient factual allegations to state plausible claims for both intentional interference with prospective economic advantage and breach of contract.

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II.

THE COUNTERCLAIM STATES TORTIOUS INTERFERENCE A.

PLAUSIBLE

CLAIM

FOR

The Counterclaim Sets Forth Sufficient Facts to State a Claim for Tortious Interference Against Plaintiff

In New Jersey, to establish a claim for intentional or tortious interference with prospective economic advantage, a plaintiff must demonstrate: (1) the existence of a reasonable expectation of economic advantage, (2) the defendants intentional interference with that interest, (3) the harm was inflicted without justification or excuse, and (4) the interference caused the loss of the interest. Printing-Mart Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 751-52 (1989). In making its argument that Alvarez has failed to state a claim for tortious interference, Bellator focuses on the third prong of the above-recited test - arguing that it acted justifiably. Alvarez alleges that Bellator acted in bad faith in presenting, under the Bellator Contract, its purported match to the Zuffa Offer when it had no ability or intention to match. For example, as set forth in the Counterclaim, Bellator had no ability or intention to provide Alvarez with a payper-view event that could provide Alvarez with the financial remuneration and exposure that Zuffa could provide. See Counterclaim 16.i. and fn. 1 thereto. Alvarez has alleged that Bellator made numerous other changes to the Zuffa Offer, which this Court may or may not determine constitute a match but the ultimate determination of facts is improper at this stage of the proceedings. There mere submission of Bellators proposal clearly is not the gravamen of Alvarezs Counterclaim, but rather it is Bellators intentional bad faith assertion that it matched the Zuffa Offer, thereby preventing Alvarez from contracting with any other promoter and exerting undue and improper leverage over Alvarez. In fact, Bellator is actually seeking a factual determination by way of this motion as to its intentions and whether it has a business related explanation justifying its actions. The cases cited by Bellator as instructive are all either trial decisions or review of summary judgment 4
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decisions, and therefore are anything but instructive on these fact issues. See Cargill Global Trading v. Applied Development Co., 706 F.Supp. 2d 563 (D.N.J. 2010) (decision on issue at trial); Sandler v. Lawn-A-Mat Chemical and Equipment Corp., 141 N.J. Super. 437, 451-452 (App. Div. 1973) (review of trial determination on issue); LaMorte Burns & Co., Inc. v. Walters, 167 N.J. 285, 307 (2001) (review of summary judgment determination on issue); Century 21 Real-Estate LLC v. All Professional Realty, 2012 WL 3260452 (E.D. Cal. 2012) (summary judgment determination on issue). A motion to dismiss on the pleading, however, is not the time to weigh the merits of the parties evidence and factual assertions. Rather all allegations of the pleader and all reasonable inferences drawn therefrom are to be accepted as true. Alvarez alleges much more than that Bellator was simply [f]ollowing its contractual right to match Alvarez alleges that it was proposing an alleged matching proposal in bad faith and with malice, with no ability or intention to perform thereon, and for the very purpose of restricting Alvarez from freely contracting with Zuffa, or any other promoter in the industry.

B.

The Facts Underlying Alvarezs Tortious Interference Claim Are Not Privileged and May Form the Basis of a Tortious Interference Claim

In connection with the Second Point of its motion argument, Bellator relies heavily on New Jersey Sport Productions, Inc. v. Bobby Bostick Promotions, LLC, 405 N.J. Super. 173 (Ch. Div. 2007), for the proposition that pre-litigation correspondence from counsel, in and of itself, is privileged and, therefore, not actionable. Here, however, Alvarez is not relying on what would be deemed pre-litigation settlement letters from Bellators counsel threatening court action, but on Bellators proffer of a purported matching contract made in bad faith and the fact that Alvarez is now subject to a de facto injunction that will not allow him to negotiate or contract with other promoters, including Zuffa. Alvarezs additional allegations regarding

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Bellators lack of ability or intention to perform the proffered contract satisfy the applicable pleading standard. Alvarezs tortious interference claim is predicated on a final determination by this Court that Bellator had no ability or intention to perform the Bellator Offer. Dismissing this claim on the pleading as Bellator suggests would be tantamount to making a finding that Bellator had both the ability and intention to perform. Inasmuch as the Court was loathe to make a finding one way or another on the Order to Show Cause (where Bellator was entitled to the benefit of a presumption), so too should the Court find in favor of Alvarez here (where Alvarezs factual allegations are presumed to be true).

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III.

THE COUNTERCLAIM STATES A PLAUSIBLE CLAIM FOR BREACH OF CONTRACT A. The Counterclaim Sets Forth Sufficient Facts to State a Claim for Breach of Contract

To establish a breach of contract claim, a plaintiff has the burden to show that the parties entered into a valid contract, that the defendant failed to perform his obligations under the contract and that the plaintiff sustained damages as a result. Murphy v. Implicito, 392 N.J. Super. 245, 265 (App. Div. 2007). Under New Jersey law, implied in all contracts is a covenant of good faith and fair dealing. Sons of Thunder v. Borden, Inc., 148 N.J. 396, 420 (1997). That covenant requires that "neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract." Id. The covenant of good faith and fair dealing "has been utilized to allow redress for the bad faith performance of an agreement even when the defendant has not breached any express term." Seidenberg v. Summit Bank, 348 N.J. Super. 243, 257 (App. Div. 2002). A claimant must show that the counterparty to the contract breach the covenant with "bad motive or intention," Wilson v. Amerada Hess Corp., 168 N.J. 236 (2001), though an allegation of bad faith is all that is required at the pleading stage. See Seidenberg, 348 N.J. Super. at 263. First, it is absurd for Bellator to argue that it is unclear what contract Alvarez is referring to in 52 and 53, when that contract is specifically set forth as the Bellator Contract, which is a term defined in the Counterclaim as the October 28, 2008 contract between Bellator and Alvarez. See Counterclaim, 7. Second, Count IV incorporates by reference all prior allegations in the Counterclaim, including the specific right to match provision (8), and those paragraphs relating to Bellators bad faith action in proffering a purported matching contract, which it had no ability or intention to fulfill (e.g., 29, 46). Alvarez clearly has pled an actionable claim for breach of the Bellator Contract, as there is no dispute that the parties entered 7
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into the Bellator Contract, Alvarez has alleged Bellators failure to perform its obligations, including the obligation to act in good faith, under the Bellator Contract, and Alvarez has alleged that he has been damaged as a result of Bellators breach. It should be noted that while the Court may clearly assess damages under Counterclaim Count I for Declaratory Relief, it is not clear that such count will provide Alvarez a full and proper recovery of damages he has suffered and continues to suffer, as word the claims contained in Counts III and IV. Bellator will have an opportunity to move for summary judgment on these claims, or defend against these claims at trial, in the event Alvarez has failed to support its claim in Counts III and IV. It is simply premature and improper at this stage of the case to dispense with these counts.

B.

The Facts Underlying Alvarezs Breach of Contract Claim Are Not Privileged and May Form the Basis of a Breach of Contract Claim

Once again, Bellator attempts to hide behind the pre-litigation counsel communication privilege expressed by the court in New Jersey Sport Productions, Inc., supra, in seeking dismissal of Alvarezs breach of contract claim For the same reasons Bellators argument fails in regard to the tortious interference claim, however, it fails in regard to Alvarezs breach of contract claim. To wit, Alvarezs claim is based on Bellators wrongful, bad faith proffer of a purported matching contract and not on counsels correspondence threatening litigation against Alvarez if he failed to sign the Bellator Offer. For the same reasons set forth in Point II.B. above, Bellators privilege argument is without merit.

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IV.

IN THE EVENT THE COURT DETERMINES THAT ALVAREZ HAS FAILED TO PLEAD A CLAIM IN COUNTS III OR IV, ALVAREZ REQUESTS LEAVE TO AMEND HIS COUNTERCLAIM TO CURE ANY SUCH PLEADING DEFICIENCY

If the Court were to determine that Counts III and/or IV of the Counterclaim lack sufficient factual allegations to support those claims, Alvarez should not be foreclosed the opportunity to seek leave to re-plead Counts III and IV. Fed. R. Civ. Proc. 15(a)(2) provides that absent the written consent of the opposing party, a party may amend its pleading upon leave of Court, which should freely give leave when justice so requires. Accordingly, in the event the Court grants Bellators motion, Alvarez respectfully requests that any such dismissal be without prejudice so as to preserve Alvarezs right to formally apply for leave of Court to amend his Counterclaim.

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CONCLUSION For all the foregoing reasons and authorities, defendant/counterclaimant Eddie Alvarez respectfully requests that Bellators motion to dismiss Counts III and IV of the Counterclaim be denied in its entirety, but that to the extent either Count is deemed improperly pled, that Alvarezs right to amend the Counterclaim be preserved so that he may cure any such deficiencies.

Respectfully submitted, COLE, SCHOTZ, MEISEL, FORMAN & LEONARD, P.A. Attorneys for Defendant/Counterclaimant, Eddie Alvarez By: Adam J. Sklar Steven R. Klein Adam J. Sklar DATED: April 1, 2013

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