A federal judge will allow a $20 million contract lawsuit filed by FaZe Clan Inc. against a popular eSports star to proceed.
In May 2019, Fortnite player and social media celebrity, Turner Tenney, known to fans as “Tfue,” sued FaZe Clan, a popular eSports organization, in California state court. Tenney alleged that FaZe lured him and other gamers into “grossly oppressive, onerous and one-sided” contracts, allowing FaZe to make millions while Tenney earned a mere $60,000. He also filed a complaint with the California Labor Commissioner (CLC), arguing that the contract violated the California Talent Agencies Act (CTAA). FaZe responded with its own breach of contract lawsuit in August, in which it claimed that Tenney disparaged the company, leaked confidential information, and actively encouraged gamers to leave the company.
Tenney’s lawsuit and complaint were filed in California, while FaZe filed its lawsuit in New York federal court, as per the contract’s forum selection clause. Because of this, Tenney moved to dismiss or stay the FaZe lawsuit.
Under the Colorado River Water Conservation District v. United States doctrine, federal courts can decline to exercise jurisdiction and instead defer to parallel state proceedings, unless there are exceptional circumstances. Courts consider six factors in making the decision to defer. Tenney argued that his California lawsuit and complaint were parallel state proceedings and that the factors favor dismissal.
U.S. District Judge Jed S. Rakoff disagreed with Tenney, stating that his motion to dismiss “appears to be an obvious attempt by defendant to avoid a binding and enforceable forum selection clause.” He found that only one factor, the risk of piecemeal litigation, leaned in favor of dismissal. The rest of the factors weighed strongly against dismissal, and the risk of piecemeal litigation was mitigated by the fact that the cases have yet to begin discovery and that a federal ruling could preclude the other actions.
Judge Rakoff did admit that piecemeal litigation was possible, specifically if the CLC claimed exclusive jurisdiction over the CTAA claim while another court found that New York has jurisdiction over the other claims. However, Judge Rakoff stated that this was purely speculative at this stage. Ultimately, he concluded that conflicting results were unlikely since a decision in one proceeding would likely “have a preclusive effect in the other two.”