Lewis & Lin recently won a dismissal of a lawsuit filed against our client, the founder and CEO of a Nevada ticketing company.
Plaintiff, a major online secondary marketplace for entertainment and sporting tickets, sued our client for alleged violation of a ticket data sharing agreement. Plaintiff alleged that the agreement provided defendant’s company access to plaintiff’s online database of tickets offered by ticket brokers, which defendant’s company could access for its customers. In exchange for the access, defendant’s company was to pay plaintiff the amount sought by the broker for any tickets purchased, plus an additional 3% fee. Plaintiff claimed that defendant owed over $2 million for unpaid fees. An arbitration was filed in Connecticut to enforce the terms of the agreement, which contained an arbitration clause and was signed by the defendant. In addition, plaintiff filed an action in Connecticut state court seeking a prejudgment remedy.
Both Plaintiff’s arbitration and court complaints named our client individually, but not the corporate entity. After removing the state court action to federal court, Lewis & Lin immediately filed a motion to dismiss for two reasons: (1) the fiduciary shield doctrine prevented a Connecticut court from exercising personal jurisdiction over the individual defendant for actions he took in Connecticut solely as an agent of the corporate entity, and (2) plaintiff failed to state a claim against the individual defendant because he did not sign the agreement that formed the basis for the parties’ dispute in his individual capacity.
The court agreed with our position, resolving both issues in our favor based on its determination that the defendant signed the contract only as a representative of a corporate entity. Analyzing the case under Connecticut law, the court ruled that in order to avoid personal liability on a contract on another’s behalf, an agent must disclose both the fact that he is acting in a representative capacity, and the identity of the principal. In this case, the legal name of the corporate entity was not disclosed in the contract; listed instead was its trade name (a “dba”), which was registered in New York. The issue thus turned on whether registering a trade name in New York provides constructive notice of that name’s user as a matter of Connecticut law—an issue of first impression.
After reviewing the purposes behind Connecticut’s and New York’s parallel statutes governing the registration of assumed business names, the court concluded that plaintiff had constructive notice that defendant was acting in a representative capacity on behalf of a known principal based in New York. Accordingly, the individual defendant, our client, “cannot be held personally liable on the contract he signed, because he contracted on behalf of a disclosed corporation.”
Shortly after the case was dismissed against our client, the parties resolved their differences amicably. The full decision is available here.