N.Y. Knicks v. Maple Leaf Sports & Entm't

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NEW YORK KNICKS, LLC, Plaintiff, v. MAPLE LEAF SPORTS & ENTERTAINMENT LTD. d/b/a TORONTO RAPTORS, DARKO RAJAKOVIC, NOAH LEWIS, IKECHUKWU AZOTAM, and JOHN DOES 1-10, Defendants.

No. 23-CV-7394 (JGLC)

United States District Court, S.D. New York

June 28, 2024

OPINION AND ORDER

JESSICA G. L. CLARKE, United States District Judge:

The New York Knicks allege that the Toronto Raptors poached a former Knicks employee and directed that employee to steal the Knicks' confidential information on his way out, all in an effort to give the Raptors a competitive advantage. The truth or falsity of that allegation is not the question at this stage. Instead, the question before the Court is where this case should proceed: either in this Court or in arbitration before the Commissioner of the National Basketball Association (the “NBA”). The answer hinges on the arbitration clause in the NBA Constitution which purports to give the NBA Commissioner exclusive jurisdiction over any dispute involving two NBA teams. Based on Second Circuit precedent construing similarly broad arbitration clauses, the determination of whether this dispute is arbitrable is one for the NBA Commissioner, not the Court. Thus, the Court GRANTS Defendants' motion to compel arbitration.

BACKGROUND

Plaintiff New York Knicks, LLC (the “Knicks” or “Plaintiff”) brings this action against Defendants Maple Leaf Sports & Entertainment Ltd. d/b/a Toronto Raptors (the “Raptors”) and Darko Rajakovic, Noah Lewis, Ikechukwu Azotam, and John Does “1” through “10” (unknown Raptors employees) (collectively, the “Individual Defendants,” and together with the Raptors, the “Defendants”), alleging that Defendant Azotam, a former Knicks employee and current employee of the Raptors misappropriated the Knicks' confidential and proprietary information at the behest of the Raptors, Rajakovic, and Lewis (collectively with the John Doe Defendants, the “Raptors Defendants”). ECF No. 1 (“Complaint” or “Compl.”) ¶¶ 1, 19. The Knicks bring claims for: (1) violation of the Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C. § 1030, et seq.; (2) violation of the Defend Trade Secrets Act (“DTSA”), 18 U.S.C. § 1832, et seq.; (3) misappropriation of trade secrets under New York common law; (4) breach of contract; (5) tortious interference with contractual relations; (6) conversion; (7) unfair competition; and (8) unjust enrichment. Id. ¶¶ 59-131; see also ECF No. 35 (“Opp.”) at 4-5.

Before the Court is Defendants' motion to compel arbitration ECF No. 21 (“Motion” or “Mot.”) and motion to seal an exhibit (Azotam's employment agreement with the Knicks) filed in support of the Motion, ECF No. 23. The following facts are not in dispute.

I. The NBA Constitution, the Commissioner, and the Arbitration Clause

The Knicks and Raptors are professional basketball teams that are members of the National Basketball Association (the “NBA” or “League” or “Association”). Compl. ¶¶ 15-16; Mot. at 4. As members of the NBA, the Knicks and Raptors are governed by the NBA Constitution and By-Laws, a contract among the members of the Association, as well as the “rules, regulations, resolutions, and agreements of the Association.” See ECF No. 25-1 (“NBA Constitution” or “NBA Const.”), Art. 2. The NBA Constitution provides that, “[f]or purposes of this Constitution and By-Laws, an action on behalf of a Member by any of its Owners, employees, officers, directors, managers, agents or representatives . . . shall be the action of a Member.” Id. at 2.

The Commissioner of the NBA (the “Commissioner”), the Chief Executive Officer of the League, is elected by the NBA's Board of Governors, on which each member of the League is represented. NBA Const., Arts. 18(b), 24(a). The current NBA Commissioner is Adam Silver. Opp. at 18. The NBA Constitution provides that the Commissioner “shall have exclusive, full, complete, and final jurisdiction of any dispute involving two (2) or more Members of the Association.” NBA Const., Art. 24(d). It further provides that “all actions duly taken by the Commissioner pursuant to this Article 24 or pursuant to any other Article or Section of the Constitution and By-Laws, which are not specifically referable to the Board of Governors, shall be final, binding and conclusive, as an award in arbitration, and enforceable in a court of competent jurisdiction in accordance with the laws of the State of New York.” Id., Art. 24(m) (together with Art. 24(d), the “Arbitration Clause”).

II. The Individual Defendants

Defendants Darko Rajakovic, Noah Lewis, and Ikechukwu Azotam are currently employed as the Raptors' head coach, assistant video coordinator and player development coach, and head of video and player development assistant, respectively. Compl. ¶ 1; Mot. at 5.

III. Azotam's Employment with the Knicks

Prior to his employment with the Raptors, Azotam worked for the Knicks as an Assistant Video Coordinator and later, after being promoted, as a Director of Video/Analytics/Player Development Assistant. Compl. ¶¶ 19, 26. In the latter role, the Complaint states that Azotam “oversaw the Assistant Video Coordinators and was responsible for planning, organizing and distributing all video scouting responsibilities for the Knicks coaching staff.” Id. ¶ 27. Azotam was employed by the Knicks beginning on October 5, 2020. Id. ¶ 25.

In his employment agreement with the Knicks, Azotam agreed “that he shall be bound and governed by the Constitution and By-Laws, rules, regulations, resolutions and agreements of the NBA ....” ECF No. 24-2 (the “Employment Agreement”) § 6(G). The confidentiality provision of the Employment Agreement required that Azotam “maintain in strictest confidence all confidential or proprietary information concerning the [Knicks] or its businesses or organizations (in any form including, without limitation, confidential or proprietary information . . .),” including “tactics and strategies; economic or commercially sensitive information, policies, practices, procedures or techniques; trade secrets; play books; scouting reports; draft strategies; [and] trade strategies.” Id. § 8 (the “Confidentiality Provision”). With respect to any breach of the agreement by Azotam, the contract provides that the Knicks “shall have the right to obtain, from any court having jurisdiction, such equitable relief as may be appropriate ....” Id. § 13. The agreement contains a forum selection clause, which provides that Azotam “irrevocably submits to the jurisdiction of the courts of the State of New York and the federal courts of the United States of America located in the State of New York, and [Azotam] hereby waives and agrees not to assert as a defense that [Azotam] is not subject thereto or that the venue thereof may not be appropriate.” Id. § 16(B) (the “Forum Selection Clause”).

IV. Azotam's Alleged Misappropriation of the Knicks' Confidential Information on Behalf of the Raptors Defendants

The Knicks allege that, in July 2023, Azotam and the Raptors Defendants began discussing Azotam's potential employment with the Raptors and that “Defendant Rajakovic and the other Raptor Defendants recruited and used Azotam to serve as a mole within the Knicks organization to convey information that would assist the Raptors Defendants in trying to manage their team.” Compl. ¶¶ 37-38. The Complaint further alleges that in early August 2023, while he was still working for the Knicks, “Azotam began to illegally convert and misappropriate the Knicks' confidential and proprietary data. This theft of data was done at the direction of Defendant Rajakovic and the Raptors Defendants.” Id. ¶ 39. Specifically, the Knicks allege that Azotam sent emails from his Knicks email address to his new Raptors and personal email addresses with confidential Knicks documents, including scouting reports, play frequency data, opposition research, opposing play tendencies, lists and diagrams of opponents' key plays, and the Knicks' prep book. Id. ¶¶ 40-44. Azotam allegedly sent an email to the Raptors with a link to third-party licensed software that allowed Defendants to access proprietary compilations of NBA game film, and according to the Complaint, Azotam shared over 3,000 video files with Rajakovic and Lewis through a Knicks-operated file-sharing website. Id. ¶¶ 47-55.

The Knicks allege that Azotam left the Knicks and began his current employment with the Raptors, as head of video and player development assistant, in or around August 14, 2023. Id. ¶ 32.

V. Pre-Litigation Correspondence Between the Knicks and Raptors

On August 17, 2023, the Knicks' general counsel wrote a letter to the chairman of the Raptors, alleging that Azotam and the Raptors were in “illegal possession of more than 3,300 files containing proprietary scouting information compiled by the Knicks” and demanded that the Raptors “immediately destroy” more than 3,300 video files, provide a signed affidavit attesting to having done so, provide the Knicks access to the Raptors' electronic files, direct Azotam to sit for an interview with the Knicks, provide the Knicks a full accounting of all Knicks' proprietary files in its possession, and agree to preserve all data on personal and company electronic devices containing communications with Azotam. ECF No. 25-3 (the “August 17 Letter”); Mot. at 7.

On August 18, 2023, the Raptors' chief legal officer emailed the Knicks' general counsel, stating that the Raptors did not know “what information if any that Mr. Azotam has relating to his work with the [Knicks],” and that the Raptors have “no interest in any of the information” described in the August 17 Letter. ECF No 25-4. The email stated that the Raptors would meet with Azotam “to determine what if any information he has” before advising the Knicks on how the...