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1. Plaintiff Gale Force Nine, LLC (“GF9”) is a Virginia Limited Liability Corporation with its principal place of business in Earlysville, Virginia. GF9 is wholly owned by Battlefront Miniatures Ltd. a New Zealand corporation with its principal place of business in Auckland, New Zealand. Battlefront New Zealand Ltd. is owned by John Paul Brisigotti a British citizen with his current residence in Virginia and Peter Simunovich a New Zealand citizen with his current residence in Auckland, New Zealand.
2. Defendant Wizards of the Coast LLC (“Wizards”) is a Delaware Limited Liability Company with its primary place of business located at 1600 Lind Avenue Southwest, Suite 400, Renton, Washington 98057.
II. JURISDICTION AND VENUE
3. This court has jurisdiction over the subject matter and the parties pursuant to 28 U.S.C. § 1332. GF9 and Wizards are diverse citizens and the amount in controversy, exclusive of costs and interest, exceeds seventy-five thousand dollars ($75,000.00).
4. This Court also has jurisdiction over the subject matter of this action for declaratory relief under 28 U.S.C. §§ 2201 and 2202.
5. Venue is proper in this Judicial District pursuant to 28 U.S.C. § 1391(a) and (c) in that Defendant Wizards resides in this Judicial District and the parties have stipulated to venue in Washington State by contract, a true and correct copy of which is attached hereto as Exhibit A.
6. GF9 is a manufacturer and distributor of figurines, board games, cards, books, and other products associated with sci-fi and fantasy titles and/or brands such as Dungeons & Dragons, Dr Who, Dune, Star Trek, and other similar titles.
7. Wizards is the owner of the Dungeons & Dragons brand and trademark. Wizards is a subsidiary of, and wholly owned by, Hasbro, Inc.
8. This dispute arises out of a Merchandise Licensing Agreement (“2017 Agreement”), entered into between Wizards and GF9 on February 22, 2017, relating to the translation and distribution in foreign markets of Dungeons & Dragons brand products and books. A true and correct copy of the 2017 Agreement is attached hereto as Exhibit A.
9. The 2017 Agreement was amended on or about May 1, 2018, to among other items, extend the term of the 2017 Agreement from February 7, 2021 to December 31, 2021.
10. The parties also entered into a Merchandising Licensing Agreement on May 1, 2008 (“2008 Agreement”) for the manufacture and worldwide distribution of Dungeons & Dragons brand products. A true and correct copy of the 2008 Agreement is attached hereto as Exhibit B.
A. Wizards Failure to Approve Products Previously Agreed Upon for Release
11. Under to the 2017 Agreement, products planned for translation and release in the different foreign markets for the coming calendar year are agreed upon between Wizards and GF9 in December of the then current calendar year (sometimes bleeding into the beginning of the next calendar year) and a product release schedule is established. Based off this release schedule, GF9, through its translation and distribution subcontractors in their respective foreign markets, plan for and begin translation and production of the products several months before the scheduled release date.
12. Products scheduled for release in the coming year are then added to the Wizards’ approval platform prior to the planned release date and Wizards gives the final approval for the distribution subcontractor to release the product for sale.
13. From the inception of the 2017 Agreement to June 2020, all the products which were included on the approved release schedule were subsequently approved by Wizards through its approval platform without comment or correction. Wizards has occasionally taken longer than the designated approval process time to provide its approval, but prior to June 2020, had never declined to approve a product that had been included on the agreed upon release schedule.
14. The 2020 release schedule for products licensed under the 2017 Agreement was approved by Wizards and GF9 in December of 2019.
15. Subsequent revisions to the release schedule were made each month in January, February, March, and April, primarily to show delay to planned product release dates that were being affected by the COVID 19 pandemic.
16. On or about May 18, 2020, Wizards communicated to GF9 its desire to end the 2017 Agreement and the 2008 Agreement one year early – on December 31, 2020 rather than the planned expiration date of December 31, 2021.
17. The parties communicated over the next several months in an attempt to strike a compromise; however, no agreement has been reached.
18. During the discussions regarding Wizards’ requested early end to the 2017 and 2008 Agreements, Wizards informed GF9 that certain products licensed under the 2017 Agreement, which were included in the parties’ agreed to release schedule, were not going to be approved.
19. Wizards did not note any issue with the products, yet declined to approve the products for release.
20. All of the products Wizards declined to approve were listed on the approved release schedule and updates. These unapproved products are not wholly new products, but rather new translations of previously approved and released products – in English and other languages – planned for release by Wizards approved translation and distribution subcontractors in Wizards approved foreign markets.
21. From June 2020 to October 2020, GF9 repeatedly communicated with Wizards to continue to seek approval of the products, but Wizards continued to decline to approve the products and would not provide any rationale for its failure to do so.
22. GF9 and its foreign translation and distribution subcontractors spent significant time and money translating and preparing the products included on the release schedule.
23. The course of dealing between Wizards and GF9 established that GF9 and the foreign subcontractors could rely on the mutually agreed upon release schedule to plan for and begin translation and production of products.
24. On November 9, 2020, GF9 sent a letter to Wizards notifying it that GF9 considered Wizards’ failure to approve submitted products was a breach of the 2017 Agreement and demanded that Wizards’ cure its breach. As of today, Wizards has not done so.
B. Wizards Allegation of Breach of Contract by GF9
25. On November 9, 2020, Wizards sent to GF9 a notice of breach of the 2017 Agreement.
26. Wizards’ breach notice alleged two breaches of the 2017 Agreement by GF9 through the actions of two of GF9’s foreign translation and distribution subcontractors.
27. First, Wizards alleged that GF9 breached the 2017 Agreement through the actions of TRPG Club (GF9’s Korean translation and distribution subcontractor). Wizards alleged that certain unidentified products translated into Korean and distributed by TRPG Club were of low quality, including translations that were poorly done and included inaccurate, missing, and offensive translations. Wizards breach notice went on to further allege that TRPG Club failed to provide adequate customer service to consumers of Dungeons & Dragons materials.
28. Second, Wizards alleged a breach of the 2017 Agreement due to the actions of Black Book Editions FR (“BBE”). Wizards alleged that after BBE translated certain Dungeons & Dragons books into French, it republished certain portions of the translated product under its own brand “Heros & Dragons.”
29. Wizards’ notice of breach states that it intends to terminate of the 2017 Agreement, unless GF9 remedies its breach to Wizards’ satisfaction within the applicable time periods for cure. 30. However, the products translated and distributed by TRPG Club, which are the subject of Wizards’ allegation of breach, were submitted in their final translated form to Wizards and approved by Wizards for release. Wizards informed GF9 that it had reviewers on its staff who were fluent in Korean who reviewed the product as translated and did not note a single correction or issue.
31. GF9 disputes that the TRPG Club translation was of a poor quality, and TRPG Club provided a report stating the adequacy of its translation that was subsequently provided to Wizards, on November 12, 2019.
32. When the translation quality issue was brought to the attention of GF9 and Wizards, GF9 sought direction from Wizards on the action necessary to rectify the alleged translation issue. Although GF9 and TRPG Club disputed that any significant deficiency in the translation was present in the products, GF9 offered to remove the products from the market. However, Wizards directed GF9 to leave the products in the market and to not renew its contract with TRPG Club or submit any additional products for approval.
33. Acting on Wizards direction, GF9 did not take any further action related to the translated products, informed TRPG Club that its contract would not be renewed, and has not submitted any additional TRPG Club products for approval or release.
34. GF9 cured any breach of the 2017 Agreement it may have committed related to the alleged poor translation when it enacted the actions directed by Wizards.
35. Wizards’ breach notice further alleged a breach of the 2017 Agreement by the actions of TRPG Club for customer complaints about damaged books and orders that never arrived. 36. GF9 is aware of very few customer complaints related to TRPG Club produced products all of which occurred in fall 2019 (one year before the breach notice). Customer complaints stem largely from products being damaged in transit. The amount of products for which customers complained is extremely minimal and within the expected threshold of transit damaged products experienced in all other markets (including the US market).
37. GF9 worked with TRPG Club to ensure that each of the customer complaints TRPG Club received were rectified by either providing replacement products or a refund as requested by the respective customer.
38. GF9 and TRPG Club rectified each of the customer issues and therefore no breach exists. Even said breach did occur, it has since been cured.
39. GF9 disputes that it breached the 2017 Agreement due to the alleged actions of BBE in utilizing Wizards’ intellectual property for its own benefit.
40. GF9 does not have an obligation under the 2017 Agreement to prosecute and defend Wizards intellectual property from use by the translation and distribution subcontractors. The 2017 Agreement provides Wizards the sole right to determine whether or not any action shall be taken on account of an intellectual property infringement and GF9 is required to assist Wizards in this defense, if requested to do so.
41. On information and belief, Wizards has not instituted an action against BBE.
42. However, even if GF9 may have some responsibility under the 2017 Agreement for
BBE alleged infringement, BBE did not utilize Wizards’ intellectual property gained through its relationship with GF9. BBE produced and distributed for sale its Heros & Dragons product in the fall of 2016, approximately ten months before it entered into the contract with GF9 to translate and distribute Dungeons & Dragons products. BBE’s Heros & Dragons product utilized text previously translated under a Dungeons & Dragons open gaming license, which permits the Dungeons & Dragons core rules and mechanics of game play to be used by others.
43. Upon information and belief, Wizards was aware of the Heros & Dragons products already in the market prior to GF9’s agreement with BBE to translate and distribute Dungeons & Dragons products in the French market. Wizards approved BBE as the French partner with knowledge that Heroes & Dragons already existed in the market.
44. Under its contract with GF9, when BBE translated the Dungeons & Dragons products, it utilized the same translated text it had previously translated and used in its Heros & Dragons products (i.e. the open gaming license core rules and game play mechanics). BBE did not use intellectual property gained through its contractual relationship with GF9 for its Heros & Dragons products, instead when translating the Dungeons & Dragons products it used translated text it already possessed before the contract with GF9 to expedite the translation process.
45. Upon Wizards informing GF9 of its belief that BBE was utilizing Wizards’ intellectual property in its Heros & Dragons products, GF9 entered into discussions with BBE to terminate the existing translation and distribution agreement between BBE and GF9, to purchase all outstanding stock of Heros & Dragons at GF9’s expense, to pull all existing Heros & Dragons products from the market, and to destroy all product purchased.
46. Agreement between GF9 and BBE was reached to accomplish the above stated objectives, and GF9 informed Wizards of the agreement. After reaching agreement with BBE and informing Wizards, Wizards required that BBE sign an admission of liability indicating that it had improperly utilized Wizards’ intellectual property. BBE refused to sign the admission of liability that Wizards demanded and the deal between GF9 and BBE was not completed.
47. Because BBE refused to sign the admission of liability demanded by Wizards, and upon the request of Wizards, in November 2019, GF9 terminated BBE for breach of its agreements with GF9 for failure to timely pay its royalties. The termination of BBE and settlement of outstanding claims was concluded fully in May 2020, with full agreement on termination and settlement from Wizards. A new French partner was approved and the market became active again in February 2020.
48. GF9 has no control over BBE after termination of its agreement with BBE and therefore, cannot cure any breach that Wizards has alleged relating to BBE’s continued use of intellectual property in BBE’s Heros & Dragons product.
IV. FIRST CAUSE OF ACTION – BREACH OF CONTRACT
49. GF9 incorporates by this reference each and every allegation contained in paragraphs 1 through 48 as though fully set forth herein.
50. Wizards and GF9 entered into the 2017 Agreement on February 22, 2017.
51. The 2017 Agreement provides that “...[GF9] will have the right to translate and the exclusive rights to manufacture, publish, market, sell and distribute physical translated versions of the Dungeons & Dragons’ Starter Set, Player’s Handbook, Dungeon Master’s Guide, and Monster Manual (and at [Wizards’] sole discretion, other Dungeons & Dragons products as provided to [GF9] by [Wizards].” (Emphasis in original).
52. Wizards provided approval to GF9 to translate, manufacture, and distribute in foreign markets certain other Dungeons & Dragons products.
53. After being provided Wizards approval for other products, GF9 and Wizards agreed in the 2020 release schedule to release these previously approved products in certain approved markets.
54. Wizards actions in failing to approve products under the 2017 Agreement, despite the products being included on the mutually agreed upon release schedule, is a breach of the 2017 Agreement.
55. As a direct and proximate result of Wizards’ breach of contract GF9 suffered and will continue to suffer damages in an amount to be proven at trial, and which on information and belief, is in excess of $950,000.00.
V. SECOND CAUSE OF ACTION – BREACH OF IMPLIED DUTY OF GOOD FAITH AND FAIR DEALING
56. GF9 incorporates by this reference each and every allegation contained in paragraphs 1 through 55 as though fully set forth herein.
57. The 2017 Agreement between Wizards and GF9 contained an implied covenant of good faith and fair dealing by and between the parties, which prohibits them from engaging in any activity or conduct that would prevent the other party from receiving the benefit of the contract.
58. Wizards actions in declining to approve products under the 2017 Agreement, despite the products being included on the mutually agreed upon release schedule, is contrary to the established course of dealing between the parties and a breach of Wizards’ duty of good faith and fair dealing.
59. Wizards actions in declining to approve products included on the release schedule deprived GF9 and its translation and distribution subcontractors of the benefit of the contract and had the effect of interfering with and destroying the value of the 2017 Agreement.
60. As a direct and proximate result of Wizards’ breach of the implied covenant of good faith and fair dealing GF9 suffered and will continue to suffer damages in an amount to be proven at trial, and which on information and belief, is in excess of $950,000.00.
VI. THIRD CAUSE OF ACTION – DECLARATORY RELIEF AND TEMPORARY INJUNCTIVE RELIEF
61. GF9 incorporates by this reference each and every allegation contained in paragraphs 1 through 60 as though fully set forth herein.
62. Wizards sent to GF9 a notice of breach on November 9, 2020, alleging breach of contract by GF9 for the actions of its prior translation and distribution subcontractors – TRPG Club and BBE.
63. Wizards’ breach notice states that it will terminate the 2017 Agreement, if the breaches alleged by Wizards are not cured the full satisfaction of Wizards within the respective cure period provided in the 2017 Agreement.
64. Wizards’ accusations are without merit, because (1) Wizards approved for release the TRPG Clubs’ final translation of the product it now alleges to have been poorly translated; (2) TRPG Club’s translation was not of poor quality; (3) GF9 and TRPG Club adequately and appropriately resolved any customer complaints about damaged or incomplete products; (4) GF9 followed the direction of Wizards in leaving the complained of products in the Korean market, not renewing TRPG Club’s contract, and not approving any additional products for release by TRPG Club; (5) GF9 is not responsible under the 2017 Agreement for the alleged improper use of Wizards’ intellectual property by BBE; (6) BBE used open gaming license content (core rules and game play mechanics) that Wizards permitted to be utilized by the public; and (7) BBE’s Heros & Dragons product(s) were published in the fall of 2016, ten months before BBE and GF9 entered into contract for translation and distribution of Dungeons & Dragons products and Wizards knew of the BBE’s Heros & Dragons product and the use of open gaming license content prior to GF9 entering into contract with BBE.
65. GF9 herein seeks a determination by the court that GF9 is not in breach of the 2017 Agreement, such that any termination by Wizards would be wrongful.
66. Absent injunctive relief, GF9 will be irreparably harmed if Wizards is allowed to terminate the 2017 Agreement on the basis of the alleged breach of contract. As such, GF9 herein seeks to enjoin Wizards from terminating the 2017 Agreement based on the alleged breaches in its November 9, 2020 Notice.
67. Under the 2008 and 2017 Agreements, if there is a default and termination under one of them, it automatically causes a default (and likely termination) of the other. As such, Wizards is expected to terminate the 2017 Agreement, based on the meritless reasons set forth in its November 9, 2020 letter, which will then lead to the termination of the 2008 Agreement. The loss of both these Agreements will cause devastating, irreparable harm to GF9.
68. If wrongfully terminated, GF9 will be forced to lay off a significant amount of its work force – as the Dungeons & Dragons products account for a substantial portion of GF9’s yearly revenue. GF9 will suffer significant impacts to its reputation in the industry – with distribution partners to whom GF9 supplies the manufactured products and licensors of other products with whom GF9 currently works and desires to work. Further, GF9’s manufacturing partners with whom GF9 has contracted to manufacture Dungeons & Dragons and other products – will be significantly harmed, as GF9 will be forced to terminate its foreign translation and distribution subcontractors and face legal challenges in numerous jurisdictions worldwide. Finally, GF9 will lose the continued revenue expected to be earned under the 2017 Agreement for the remainder of its term.
69. If Wizards is permitted to terminate the 2017 Agreement, GF9 is required to immediately cease production of any additional products and very shortly thereafter either sell to Wizards the products it has already produced or destroy the entirety of its remaining stock of produced products.
70. If Wizards termination of the 2017 Agreement is allowed to proceed, GF9 will face significant hardships as described above.
VII. PRAYER FOR RELIEF
WHEREFORE, Plaintiff Gale Force Nine, LLC, having set forth the above fact and having alleged the above first through third causes of action, prays for judgment against Defendant Wizards of the Coast LLC as follows:
1. Judgement for monetary damages against Wizards in an amount to be proven at trial, and which on information and belief, is in excess of $950,000.00;
2. An award of attorneys’ fees and costs incurred by GF9 in prosecuting the foregoing claims against Wizards;
3. For declaratory relief finding that GF9 has not breached the 2017 Agreement for the breaches alleged by Wizards in its November 9, 2020 notice of breach;
4. For permanent injunctive relief restraining Wizards from:
a. Terminating the 2017 Agreement for the breach of contract alleged in its November 9, 2020 notice of breach;
5. For any other costs, including interest, authorized by law; and
6. For such other relief as the court may deem just and equitable.
DEMAND FOR JURY TRIAL
Plaintiff hereby demands a jury trial of all issues in the Complaint that are triable to a jury.
DATED THIS 17th day of November, 2020.
OLES MORRISON RINKER & BAKER LLP
/s/ Eric P. Forner
Thomas R. Krider, WSBA #29490
Eric P. Former, WSBA #49264
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