The following e-filed documents, listed by NYSCEF document number (Motion 001) 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 33, 34, 35, 36 were read on this motion to/for DISMISSAL.

No baseball cap is more ubiquitous on the subways in the Bronx and Manhattan than the one bearing the iconic interlocking NY logo of the New York Yankees. For years families have enjoyed watching the Staten Island Yankees, the former minor league affiliate of the New York Yankees, play games in their Richmond County stadium overlooking the Statue of Liberty. But the New York Yankees ended their affiliation with the Staten Island Yankees toward the end of [*2]2020, despite vigorous objections by the Staten Island Yankees and much to the dismay of their fans and the local community that supported the team.

Plaintiff Nostalgic Partners, LLC ("Nostalgic"), the owner of the Staten Island Yankees ("the SI Yankees"), commenced this suit on December 3, 2020 against defendants the New York Yankees Partnership ("the Yankees" or "the NY Yankees"), various related Trusts ("the Trusts"), and The Office of the Commissioner of Baseball, an Unincorporated Association d/b/a Major League Baseball ("MLB"), asserting claims sounding in breach of contract, promissory estoppel, tortious interference with contract, breach of fiduciary duty, and violations of the New York State Franchise Sales Act (Compl., NYSCEF Doc. No. 1). Nostalgic seeks in excess of $20 million, claiming that defendants' wrongful conduct caused the demise of the SI Yankees by, among other things, terminating the minor league team's affiliation with the New York Yankees and MLB despite years of a productive working relationship.

The affiliation was ended as part of a larger restructuring of the relationship between MLB and minor league baseball ("MiLB") discussed at length in this Court's August 24, 2021 decision and order, which granted in part a motion to dismiss filed by defendants MLB and the Houston Astros in a related action involving the termination of the affiliation between the Houston Astros and its minor league counterpart the Tri-City ValleyCats (Tri-City ValleyCats, Inc. v Houston Astros Inc., et al., Index No. 650308/21). Before the Court at this time is defendants' pre-Answer motion to dismiss this action for failure to state a claim. Oral argument was held simultaneously on the present motion and the motion to dismiss the ValleyCats action (see Transcript efiled June 10, 2021, "TR", NYSCEF Doc. No. 25). However, the two motions are being decided separately because each motion relies on different documents and each Complaint alleges different causes of action. For the following reasons, defendants' motion to dismiss this action is granted in part and denied in part.

The following facts are alleged in the Complaint or stated in the documents referenced therein (NYSCEF Doc. Nos. 1 and 11-22). As the courts have repeatedly held, when determining a pre-Answer motion to dismiss for failure to state a claim pursuant to CPLR 3211, the Court must "accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory." Himmelstein, McConnell, Gribben, Donoghue & Joseph, LLP v Matthew Bender & Co., Inc., 37 NY3d 169, 175 (2021), quoting Leon v Martinez, 84 NY2d 83, 87-88 (1994); see also Connaughton v Chipotle Mexican Grill, Inc., 29 NY3d 137, 141 (2017).

The documents in this case that generally govern the relationship between MLB and its minor league affiliates are the same documents discussed in the ValleyCats case. For more than 100 years, MLB and minor league baseball—organized under the umbrella of the National Association of Professional Baseball Leagues (the "National Association" or "MiLB")—have promoted professional baseball in North America (Comp. ¶ 1). As of 2020 when this dispute arose, professional baseball had grown to include 30 MLB and 160 MiLB teams operating in 20 minor leagues throughout the United States, Canada, Mexico, Venezuela, and the Dominican Republic. (Comp. ¶ 19). Despite the historic business relationship between them, MLB and MiLB were separate and "independent" entities, and the MiLB teams and leagues were represented in their dealings with MLB by the National Association, as reflected in the National Association Agreement most recently revised as of December 31, 2017. (Comp. ¶ 1; a copy of [*3]the "NAA" is provided as Doc. No. 16 in the ValleyCats case).^[FN1]

The relationship between MLB and MiLB was governed until recently by various documents, but principally by the Professional Baseball Agreement ("PBA", Doc. No. 12), which outlined the terms of the parties' relationship and incorporated the Major League Baseball Rules ("MLR", Doc. No. 13). Article III(A) of the PBA in effect during the period relevant to this dispute states in the section entitled "Term of Agreement" that the "Agreement shall be effective as of October 1, 2004 and shall terminate September 30, 2020, subject to the rights to effect an earlier termination of this Agreement described in this Section (A)."

Pursuant to Rule 56 of the MLR, each MiLB club was required to sign a one-page standard form Player Development Contract with the MLB team with which it was affiliated ("PDC") agreeing to the highly detailed provisions set forth in Rule 56 at pages 185-197 of the MLR. Among other things, the MiLB teams helped to develop talent for their MLB affiliates and also paid MLB eight percent of their ticket sales, which allegedly was the "overwhelming majority" of the revenue for most MiLB teams. (Compl. ¶ 18).

According to Major League Rule 56(c), the term of any PDC shall be two years or four years (with limited exceptions) and shall "automatically be renewed" for a two-year or one-year term unless terminated. The Rule further provides that: "No PDC may have a term extending beyond the expiration of the PBA " The PDC most recently signed by the parties in this case indicates it was effective from October 1, 2018 through September 30, 2020 (Doc. No. 22), and, as previously noted, the PBA states that it "shall terminate September 30, 2020."

The relationship between Nostalgic and the NY Yankees dates back to 2011, when Nostalgic purchased the SI Yankees from Staten Island Minor League Holding, LLC ("SIMLH"), a holding company owned as of 2006 in part by the defendant Trusts and "effectively controlled by the NY Yankees." (Comp. ¶ 4).^[FN2] At that time, the SI Yankees played in the New York-Pennsylvania League ("NY-Penn League") and were a Single-A team affiliated with the NY Yankees.

According to Nostalgic, the Yankees promised Nostalgic that the SI Yankees would continue to be associated with the NY Yankees and would continue to play in the NY-Penn League. Id. As evidence of this alleged promise, Nostalgic claims the NY Yankees insisted that: (1) the SI Yankees keep the "Yankees" name, notwithstanding a name change requested by a community vote; (2) the SI Yankees enter into an amendment to the Staten Island Yankees Operating Agreement with the NY Yankees that anticipated each team promoting the efforts of the other; and (3) the Trusts, which are entities that control shares of the NY Yankees, retain a five percent ownership interest in the SI Yankees (the "Ownership Interest"). Id.

Nostalgic further contends that the "NY Yankees promised that as long as the NY [*4]Yankees continued to hold the Ownership Interest (which they still do through the Trusts), the NY Yankees would remain affiliated with the SI Yankees and would provide the SI Yankees with players and coaches and marketing assistance." In reliance on this and other promises, Nostalgic alleges that it purchased the SI Yankees, entered into financial commitments, and operated the SI Yankees in good faith for nine years. (Comp. ¶ 5). Notwithstanding all of the above, the NY Yankees unilaterally terminated their affiliation with the SI Yankees in 2020, while maintaining an affiliation with six other minor league teams, including one owned by one of the NY Yankees' limited partners. (TR pp 39, 67).

In addition to the documents discussed above, Nostalgic relies in its Complaint on documents that are specific to the parties in this action. The series of documents begins with the February 2011 Offering Memorandum prepared by SIMLH for prospective buyers with the full participation and approval of the NY Yankees and the Trusts (the "OM", NYSCEF Doc. No. 16). In the Complaint (at ¶¶27-36), Nostalgic quotes numerous provisions in the Offering Memorandum that touted the value of the SI Yankees as a member of the NY-Penn League and an affiliate of the NY Yankees and arguably implied an intent to maintain that affiliation by, for example, confirming that the Trusts, the Yankees, or a related affiliate would "retain a 5% financial interest in the SI Yankees and, in consideration, the Yankees will agree to continue its Marketing Assistance Agreement with the SI Yankees." (Comp. ¶ 35, OM at p 2).

In September 2011 Nostalgic purchased the SI Yankees, including all assets and intellectual property, from SIMLH for $8.35 million and assumed certain liabilities. (Comp. ¶ 27). The closing documents included approvals from MLB, the National Association, and the NY-Penn League. The closing documents also included the Nostalgic Limited Liability Agreement confirming the 5% equity interest in Nostalgic and the SI Yankees held by the NY Yankees through the Trusts (Doc. No. 11).

In connection with the sale, an Operating Agreement Amendment ("OAA") was issued, dated August 23, 2011, that amended the 2007 Staten Island Yankees Operating Agreement from 2007 (a copy of the OAA is attached to the Complaint as Exhibit 1; the 2007 Letter Agreement referencing the 2007 Operating Agreement is filed as NYSCEF Doc. No. 15). The OAA states (at ¶ 4) that the NY Yankees "Partnership covenants to have a PDC in effect with Nostalgic for so long as (i) the Trusts and (ii) a majority of the initial holders of Class A Units in Nostalgic are members of Nostalgic " The parties also agreed that Nostalgic would maintain the SI Yankees name and logo (OAA Ex A, ¶ X), and the Marketing Assistance agreement was more broadly confirmed with specific details (OAA Ex A, pp 4-5). As all the specified conditions of the covenant between the NY Yankees and Nostalgic are still satisfied, Nostalgic argues that the NY Yankees are still "contractually obligated" to "have a PDC in effect" with the SI Yankees, and the SI Yankees are still allowed to use the Yankees name. (Comp. ¶ 42).

The NY Yankees and Nostalgic maintained a productive working relationship for nine years following the 2011 purchase, with Nostalgic assuming various unanticipated expenses, such as the cost of expedited stadium repairs made necessary by the nearby construction of Staten Island's Empire Outlet Mall. (Comp. ¶ 43). When rumors of the MLB restructuring plan began to circulate in 2019, Randy Levine, President of the NY Yankees, reportedly stated that "there have been no decisions made regarding the elimination of the Staten Island Yankees." (Comp. ¶ 44, fn 11). Lonn Trost, Chief Operating Officer of the NY Yankees, directly assured Nostalgic of the organization's commitment to its minor league affiliate, consistent with alleged private assurances of continued support and affiliation that Levine had purportedly made to [*5]Nostalgic during the purchase negotiations. (Comp. ¶ 46).

But at some point in 2020, having heard nothing from the NY Yankees that would have caused concern, the SI Yankees learned from press reports that MLB was dropping its affiliation with the entire NY-Penn League and with the SI Yankees in particular. (Comp. ¶ 49). On November 7, 2020, the NY Yankees issued a formal press release confirming that the affiliation between the SI Yankees and the NY Yankees and MLB was ending and that the NY Yankees had decided to put a different team in the Staten Island Stadium. (Comp. ¶ 50). Nostalgic describes the NY Yankees as "enthusiastic supporters" of the MLB restructuring plan designed to replace the Professional Baseball Agreement—based on an independent MiLB—with a system whereby MLB directly controls minor league baseball and deals with individual MiLB owners on a team-by-team basis, thereby maximizing MLB's leverage and control while minimizing or eliminating the bargaining power MiLB clubs had received from having the National Association protect their interests. (Comp. ¶ 51; see also the discussion of the "Houston Plan" in the ValleyCats decision). The end of its affiliation with the NY Yankees allegedly caused the demise of the SI Yankees and dealt a blow to the Staten Island economy, which had reportedly benefited significantly from sales revenue, jobs, and taxes. (Comp. ¶¶ 52-53).

In the First Cause of Action, Nostalgic seeks damages from the NY Yankees based on an alleged breach of contract. (Comp. ¶¶ 55-61). The contract at issue is the 2011 Operating Agreement Amendment which provides that "the Partnership [the NY Yankees] covenants to have a PDC in effect with Nostalgic" so long as certain conditions were met.^[FN3] Nostalgic claims the Yankees violated that contract by declining to negotiate a new PDC or other type of agreement between the two teams and ending any further affiliation, even though the conditions in the OAA/Letter Agreement Amendment had been met. Nostalgic further asserts that this conduct not only resulted in a breach of contract but also breached the implied covenant of good faith and fair dealing arising out of the OAA/Letter Agreement Amendment and other transaction documents related to the purchase, causing significant damages by destroying the business model of the SI Yankees and its affiliation with the NY Yankees which had contributed to the team's success.

The Court declines to dismiss the First Cause of Action based on the liberal pleading standard set forth above. In urging this Court to dismiss the breach of contract claim, the NY Yankees argue that the covenant in the Letter Agreement Amendment "to have a PDC in effect [*6]with Nostalgic" so long as certain conditions were met "was plainly contingent on continuation of the PBA, which has now expired by its own terms . 'PDC,' as defined in the Letter Agreement 'means a standard Player Development Contract as referred to in Major League Rule 56 of the Professional Baseball Agreement.' And the MLR, which were incorporated in their entirety into the PBA, clearly provide that '[n]o PDC may have a term extending beyond the expiration of the PBA,' and that 'the rights and obligations of all parties to a PDC shall terminate (and be of no force and effect) as of the expiration of the PBA.' Thus, any right to a PDC that Plaintiff might have had under the Letter Agreement Amendment was extinguished along with the PBA." (NYSCEF Doc. No. 8 at pp 8-9). The Yankees add that Section 7(b) of the 2007 Letter Agreement on which the 2011 Amendment was based (Doc. No. 15) itself provides that the rights and obligations of the parties terminate upon the "failure of the [SI Yankees] to have a PDC in effect with the [NY Yankees]."

Nostalgic offers several persuasive arguments in opposition (Doc. No. 23 pp 6-9). First, Nostalgic asserts that the Letter Agreement Amendment is clear on its face in setting forth the conditions under which the PDC covenant remains in effect, and the continuation of the PBA in its present form is not one of the conditions. Further, MLB's decision to restructure its relationship with MiLB and to change the name of MLB's minor league affiliation agreement from a "Professional Development Contract" to "Professional Development License" is a "distinction without a difference" because it ignores the intent of the parties to maintain a relationship going forward. Further, Nostalgic asserts that the Yankees' reliance on Section 7(b) of the 2007 Letter Agreement is misplaced, as that Agreement involved different parties and the application of that clause to these parties is disputed.

In addition to these arguments, the Court cannot ignore the various representations made by the NY Yankees in the Offering Memorandum on which Nostalgic claims to have relied when deciding to purchase the SI Yankees (Doc. No. 16). Those representations included the benefits of being affiliated with MiLB as a member club, the benefits of being affiliated with the NY-Penn League, and the promise of continued marketing assistance by the NY Yankees that was confirmed in the 2011 Letter Agreement Amendment. In exchange for those benefits, the NY Yankees insisted upon retaining a 5% interest "in the tangible and intangible assets of the SI Yankees" which, as indicated above, allowed the Yankees to retain a certain degree of control over the SI Yankees. (Id., p 10). The August 8, 2011 Asset Purchase Agreement between SIMLH LLC, as Seller, and Nostalgic, as Buyer, confirmed the Yankees' retention of its 5% ownership interest. (Doc. No. 21, ¶ 3.02.f). That same provision also confirmed the Yankees' commitment to maintain its Marketing Agreement, which provided substantial benefits to the SI Yankees related to the affiliation, and extended the existing PDC for a four-year-term (that was later extended again at least two more times through September 30, 2020).

In reply, the Yankees assert that Nostalgic's claim of a contractual obligation to maintain an affiliation beyond the expiration of the PDC and PBA ignores Nostalgic's agreement to be bound by the Major League Rules which, as noted above, created the PDC concept with a term that could not extend beyond the PBA. (Doc. No. 24). But to make the MLB/MiLB structure dispositive of the breach of contract claim is to ignore the terms of the unique contract between the parties to this action. Pursuant to that contract the NY Yankees agreed to provide certain benefits to Nostalgic in exchange for Nostalgic's agreement to allow the NY Yankees to sell only 95% of their ownership interests to Nostalgic, with the NY Yankees retaining a 5% interest in the SI Yankees and the control that accompanies it. While Nostalgic cannot, and did not here, [*7]seek to enforce the contract by compelling the NY Yankees to execute a PDC when that type of instrument no longer exists, the pleadings, liberally construed, do state a claim for money damages based on an alleged breach of contract for the reasons stated above.

No separate discussion of the alleged breach of the implied covenant of good faith and fair dealing is required. That covenant is implied in every contract, and it is also set forth in Section 8.09 of the APA. Nostalgic has not asserted the claim as a separate cause of action but has merely included it in the allegations relating to the First Cause of Action, which survives dismissal.^[FN4]

The Court grants dismissal of the Second Cause of Action sounding in promissory estoppel. It is black-letter law that a claim for promissory estoppel "cannot stand when there is a contract between the parties." Susman v Commerzbank Capital Mkts. Corp., 95 AD3d 589, 590 (1st Dep't 2012). Nostalgic relies on oral promises allegedly made by the NY Yankees during the purchase negotiations. The written contract controls as to the Yankees and the Trusts. And MLB's approval of the transaction does not satisfy the elements of a promissory estoppel claim, which requires a "sufficiently clear and unambiguous promise; (ii) reasonable reliance on the promise; and (iii) injury caused by the reliance." Castellotti v Free, 138 AD3d 198, 204 (1st Dep't 2016).

In the Third Cause of Action, Nostalgic claims that MLB tortiously interfered with Nostalgic's contract with the NY Yankees in that the restructuring plan implemented by MLB was a cause of the Yankees' decision to end its affiliation with the SI Yankees.^[FN5] Even after giving plaintiff the benefit of every favorable inference, including the alleged breach of contract, the Court finds that Nostalgic has failed to state a claim against MLB. Nostalgic alleges that MLB used "wrongful means" by threatening to impose "crippling economics" on the MiLB teams and by employing a "divide and conquer" strategy that included ending the relationship between MLB and MiLB and undermining the bargaining power of the minor league teams. (Comp. ¶ 2). However, in contrast to the claims by the ValleyCats against the Astros, Nostalgic's tortious interference claim here against MLB is too vague and conclusory and the conduct too indirect to state a claim. Therefore, the Third Cause of Action is dismissed.

The Court dismisses the Fourth and Fifth Causes of Action sounding in breach of fiduciary duty. As was the case in the ValleyCats decision, the Court rejects the notion that a "joint venture" existed between MLB and MiLB that gave rise to a fiduciary relationship. The written agreements control, and the agreements nowhere mention a joint venture. The absence of any agreement to share losses, an "essential" element of a joint venture, is further evidence that no joint venture or other type of "special relationship" exists that would create a fiduciary duty. See Lebedev v Blavatnik, 193 AD3d 175, 185-86 (1st Dep't 2021). As for the Yankees, the relationship between the parties is based on commercial contracts, and no fiduciary duty exists [*8]that is separate and apart from the contractual duties. See, e.g., Northeast Gen. Corp. v Wellington Adv., 82 NY2d 158, 162 (1993). Nor do the Trusts, as non-managing members of Nostalgic, owe fiduciary duties, notwithstanding the allegations of limited control, and their duties are in any event governed by the terms of the LLC Agreement.

The Court dismisses the Sixth through Eighth Causes of Action which assert various violations of the New York State Franchise Sales Act (General Business Law § 680 et seq.). In the Sixth Cause of Action Nostalgic claims that MLB violated GBL § 683 by failing to register as a franchisor and file an offering prospectus that was required to include, among other things, a statement of the conditions under which the franchise agreement could be terminated or renewal refused. In the Seventh Cause of Action, Nostalgic asserts a similar claim against the NY Yankees. In the Eighth Cause of Action, Nostalgic claims the NY Yankees "made a number of untrue statements of material fact, and/or omissions of material fact necessary in order to make the statements made not misleading, in connection with the offer and sale of the SI Yankees franchise " (Comp. ¶ 19). Nostalgic specifies some examples of the untrue statements allegedly made in connection with the 2011 sale.

Even assuming arguendo that the various defendants qualify as "franchisors" covered by the Franchise Sales Act (a claim the Court does not accept), the claims must be dismissed as time-barred. Pursuant to GBL § 691(4), the applicable statute of limitations period is three years. The period begins to run when the franchise contract is entered into, which in this case was 2011, far more than three years before this action was commenced on December 3, 2020. United Mag. Co. v Murdoch Mags. Distrib., Inc., 146 F. Supp. 2d 385, 407 (SDNY 2001), aff'd sub nom. United Mag. Co, Inc. v Curtis Circulation Co., 279 F. App'x 14 (2d Cir. 2008).

Citing GBL § 691(4), Nostalgic counters that the limitations period begins to run from the "act constituting the violation", which was the failure to continue the parties' affiliation. (Memo in Opp, Doc. 23, at pp 21- 22). But the initial breach alleged is the failure to comply with the rules governing the creation of the franchise in the first instance, and any alleged later breach would not extend the statute of limitations, as this Court discussed at length in the ValleyCats decision.

Equally unavailing is plaintiff's reliance on provisions in GBL § 691(5) that generally maintain other common law rights to urge the application of the common law statute of limitations—six years from the date of the fraud or, if the fraud is concealed, two years from the date plaintiff discovered or could have discovered the fraud with reasonable diligence (the "fraud" being the "plotting" by MLB and the NY Yankees to end the affiliation with the SI Yankees and the purported misstatements made by the Yankees) (Memo at p 22). A general provision such as that cited here cannot be construed to override the extremely specific three-year statute of limitations set forth in the Franchise Act. Further, the allegations in the Eighth Cause of Action lack the specificity required for fraud. Therefore, the Sixth, Seventh and Eighth Causes of Action are dismissed.

Accordingly, it is hereby

ORDERED that defendants' motion to dismiss is granted to the extent of severing and dismissing the Second, Third, Fourth, Fifth, Sixth, Seventh, and Eighth Causes of Action, and the Clerk is directed to enter judgment dismissing those causes of action; and it is further

ORDERED that defendants' motion is denied insofar as it seeks dismissal of the First Cause of Action against the New York Yankees Partnership; and it is further

ORDERED that defendant New York Yankees Partnership shall file an Answer within [*9]twenty days of entry of this decision addressing the single remaining cause of action; and it is further

ORDERED that counsel shall thereafter meet and confer to agree upon a proposed Preliminary Conference Order using the form available on the Part 61 website and appear remotely for a Preliminary Conference on October 7, 2021 at 10:00 a.m. Counsel are directed to efile a Joint Appearance Sheet for this action and the related ValleyCats action by September 20, 2021 using the same letter format that was used for the Teams appearance for the oral argument held on the motions.