Document Page 1 of 11 UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION In re: ARENA FOOTBALL LEAGUE, LLC, Debtor. ARENA FOOTBALL LEAGUE, LLC, v. Plaintiff, ARENA FOOTBALL ONE LLC, a Louisiana limited liability company, JERRY KURZ, GRIDIRON ENTERPRISES, INC., and Illinois corporation, and JOHN DOES 1 100, Defendants. Case No. 09-29024 Chapter 11 Hon. Susan Pierson Sonderby Adv. Pro. No. COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF Debtor and debtor-in-possession Arena Football League, LLC (the Debtor or AFL for its complaint against Arena Football One, LLC, Gridiron Enterprises, Inc., Jerry Kurz, and John Does 1-100 hereby alleges as follows:
Document Page 2 of 11 JURISDICTION AND VENUE 1. This Court has jurisdiction over this action pursuant to 28 U.S.C. 1334(a and 157(a and (b. 2. Venue is proper pursuant to 28 U.S.C. 1409(a. 3. This is a core proceeding pursuant to 28 U.S.C. 157(b(2(Aand (O. 4. This is an adversary proceeding pursuant to F.R. Bank. P. 7001(7 and (9. 5. The issues in this Complaint present an actual controversy as provided in 28 U.S.C. 2201. THE PARTIES 6. AFL, a Delaware limited liability company, is a professional indoor football league with its principal place of business in Chicago, Illinois. 7. AFL holds a 50.1% equity interest in af2, LLC ( af2. af2 is a regional developmental indoor football league, incorporated in the State of Delaware. 8. Arena Football One, LLC is a Louisiana limited liability company. 9. Gridiron Enterprises, Inc. ( Gridiron is an Illinois corporation with its principal place of business in Chicago, Illinois. Gridiron is a Member of AFL and is a signatory to AFL s operative documents, including its limited liability company agreement. 10. Jerry Kurz is an Illinois resident. Defendant Kurz is an owner and officer of Gridiron. 2
Document Page 3 of 11 11. John Does 1-100 are persons and entities who are acting in concert with Defendant Kurz and the Competing League (as defined herein in connection with the matters asserted herein, and may include Members of AFL and af2. BACKGROUND 12. At the end of 2008, AFL had completed 22 consecutive seasons as the preeminent professional indoor football league in the nation, enjoying a significant fan base, advertisers, and media coverage. 13. AFL s Limited Liability Company Agreement (the AFL Agreement provides, among other things, that all AFL Members are bound by certain operative documents. One such document is AFL s Operating Rules, which is a binding agreement by and among AFL and its Members. 14. The Operating Rules prohibit AFL Members and persons identified as Controlled Affiliates in the AFL Agreement (including the owners of the Members from engaging in certain conduct, including, but not limited to: a. Directly or indirectly owning stock or a membership interest in, or directly or indirectly have any financial interest in, or participate in any way in the management of any indoor football league other than AFL or af2 or in any indoor football team not in AFL or af2. b. Loaning money to and/or become a surety or guarantor for any indoor football league other than AFL or af2 or to any team, player, coach employee, owner, stockholder, officer, director or partner therein, or to a holder of any interest in any indoor football league other than AFL or af2 or to any indoor football team not in AFL or af2. c. Publicizing and/or take part in the publication of any allarena football league or all-opponents team not expressly authorized by AFL s Commissioner and selected according to procedures that have been established by AFL s Commissioner. 3
Document Page 4 of 11 d. Publicly making and/or publicly concurring with any statement that is not in the best interest of AFL. 15. Pursuant to the AFL Agreement, any action of a person (other than a player over which a Member has or can exercise control (or that controls or is under common control with a Member shall be considered the action of the Member. 16. AFL s assets include its intellectual property (and associated goodwill and its interest in af2. Included in its intellectual property are various registered common law and federally-registered trademarks, including ARENA FOOTBALL LEAGUE, ARENA FOOTBALL, and marks related to its Member teams (the Team Marks. 17. AFL has expended substantial time, effort and financial resources in the development and promotion to brand itself. As a result of these efforts, the distinctive ARENA FOOTBALL family of marks has attained strong secondary meaning. In addition, as a result of the participation of AFL s Member teams in the league, the Team Marks have also attained strong secondary meaning. 18. af2, through its wholly owned subsidiary af2 Enterprises, LLC, owns registered marks in the name and logos of the af2 league and some of its member teams, including BOISE BURN, MILWAUKEE IRON, and STOCKTON LIGHTENING (the af2 Team Marks. 19. On or about September 16, 2009, Arena Football One LLC filed two trademark registrations with the United States Patent and Trademark Office seeking to register the ARENA FOOTBALL ONE and ARENA FOOTBALL 1 marks. 20. On September 28, 2009, Defendant Kurz (and possibly others held a press conference to announce the formation of a new indoor arena football league under 4
Document Page 5 of 11 the name Arena Football One and/or Arena Football 1 (the Competing League that would be based in Tulsa, Oklahoma. 21. On information and belief, at that press conference, Defendant Kurz was introduced as the Commissioner of the Competing League. Also on information and belief, Defendant Kurz publicly announced that [w]e expect arena football fans both across the country and internationally to be extremely pleased with our new product and that the Tulsa office would employ up to 12 people and will expand as the Competing League grows. 22. Upon information and belief, 16 teams are signed up to participate in the Competing League, including the following Members of AFL and af2: a. The Arizona Rattlers (an AFL team; b. The Orlando Predators (an AFL team; c. The San Jose Sabercats (an AFL team; d. The Utah Valley Thunder (an af2 team; e. The Iowa Barnstormers (an af2 team; f. The Oklahoma City Yard Dawgz (an af2 team; g. The Bossier-Shreveport Battle Wings (an af2 team; and h. The Tulsa Talons (an af2 team. 23. On information and belief, the Competing League is in negotiations with additional AFL and a2 Members, including the Tampa Bay Storm. 5
Document Page 6 of 11 COUNT I PRELIMINARY AND PERMANENT INJUNCTION 24. The Debtor incorporates by express reference each of the allegations set forth in paragraphs 1 through 23 hereof. 25. Pursuant to Section 541(a of the Bankruptcy Code, the Debtor s intellectual property is property of the Debtor s bankruptcy estate (the Estate, including the ARENA FOOTBALL family of marks and Team Marks (each a Trademark and collectively, the Trademarks. 26. The Trademarks are valuable assets of the Estate because they are symbols of goodwill associated with the Debtor. 27. By forming an indoor football league under a substantially similar name, i.e., Arena Football One or Arena Football 1, the Defendants are unlawfully using and infringing upon the Debtor s Trademarks in violation of state and federal law and in violation of the automatic stay under Section 362(a(3 of the Bankruptcy Code. 28. Upon information and belief, some of the teams participating in the Competing League are using, or intend on using, the names and logos they previously used while participating in the AFL or af2. To the extent AFL owns marks in those names or logos, such usage will infringe upon the Debtor s Trademarks in violation of state and federal law and in violation of the automatic stay under Section 362(a(3 of the Bankruptcy Code. 29. The Debtor has no adequate remedy at law for the Defendants infringement of its Trademarks. 6
Document Page 7 of 11 30. Unless the Court enjoins the Defendants from infringing upon the Debtor s Trademarks, the Estate will suffer immediate irreparable harm by diminishing the value of the Debtor s assets. WHEREFORE, the Debtor requests that the Court: A. Enter a preliminary injunction enjoining the Defendants from using any of AFL s intellectual property, including its Trademarks, in connection with the Competing League or for any other purpose that violates the Debtor s rights. B. Enter a final judgment permanently enjoining the Defendants from using any of AFL s intellectual property, including its Trademarks, in connection with the Competing League or for any other purpose that violates the Debtor s rights; and C. Granting AFL such other and further relief as is just and equitable. COUNT II DECLARATION THAT DEFENDANTS ARE VIOLATING THE STAY 31. The Debtor incorporates by express reference each of the allegations set forth in paragraphs 1 through 30 hereof. 32. Section 362(a(3 stays any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate. 11 U.S.C. 362(a(3. 33. The Debtor s bankruptcy estate is comprised of all of the Debtor s property under 11 U.S.C. 541(a, including the Trademarks and its interest in af2. 7
Document Page 8 of 11 34. By using the names Arena Football One and Arena Football 1, the Defendants are attempting to exercise control over property of the Estate and/or to obtain possession of property of the estate or property from the Estate. The Defendants conduct in this regard is willful as each of the Defendants was aware of the Debtor s Trademarks and bankruptcy case. 35. The Defendants use of any of Team Marks is an attempt to exercise control over property of the Estate and/or to obtain possession of property of the estate or property from the Estate. The Defendants conduct in this regard is willful as each of the Defendants was aware of the Debtor s Team Marks and bankruptcy case. 36. In addition, any misappropriation by the Defendants of the af2 Team Marks violates the automatic stay because it diminishes the value of AFL s property interest in af2. WHEREFORE, the Debtor requests that the Court enter a judgment: A. Declaring that Defendants are violating the automatic stay; and B. Awarding the Debtor actual and punitive damages under 11 U.S.C. 362(k; and C. Awarding the Debtor such other and further relief as is just and equitable. COUNT III BREACH OF AFL OPERATING RULES 37. The Debtor incorporates by express reference each of the allegations set forth in paragraphs 1 through 36 hereof. 38. At all times relevant to the allegations contained herein, AFL s Members, including Gridiron, and Defendant Kurz were bound by the Debtor s Operating Rules, 8
Document Page 9 of 11 including its provisions prohibiting Members and Controlled Affiliates from taking certain actions that are detrimental to the Debtor. 39. AFL s Members are prohibited from, and are specifically obligated to prevent any of their officers or owners from, (i participating in any way in the management of any indoor football league other than AFL or af2 or in any indoor football team not in AFL or af2, (ii publicizing and/or take part in the publication of any all-arena football league or all-opponents team not expressly authorized by AFL s Commissioner and selected according to procedures that have been established by AFL s Commissioner, and (iii publicly making and/or publicly concurring with any statement that is not in the best interest of AFL. 40. Defendant Kurz, as an owner and officer of Gridiron, was specifically obligated to refrain from (i participating in any way in the management of any indoor football league other than AFL or af2 or in any indoor football team not in AFL or af2, (ii publicizing and/or take part in the publication of any all-arena football league or allopponents team not expressly authorized by AFL s Commissioner and selected according to procedures that have been established by AFL s Commissioner, and (iii publicly making and/or publicly concurring with any statement that is not in the best interest of AFL. 41. As a result of the conduct of Defendant Kurz, as set forth above, Gridiron and Defendant Kurz have breached their respective obligations under the Debtor s Operating Rules. 42. Specifically, Gridiron breached its obligations to the Debtor by failing to prevent Defendant Kurz from (a participating in a press conference at which he 9
Document Page 10 of 11 announced the formation of the Competing League and (b participating in the management of an indoor football league other than AFL or af2. 43. Defendant Kurz breached his obligations to the Debtor by (a participating in a press conference at which he announced the formation of the Competing League and (b participating in the management of an indoor football league other than AFL or af2. 44. In addition, to the extent any AFL Members are participating in the Competing League, those AFL Members are breaching their obligations under the AFL Operating Rules. 45. As a result of the conduct set forth herein, the Debtor has suffered damages, and will continue to suffer damages. WHEREFORE, the Debtor requests that the Court enter a judgment: A. Finding that Gridiron and Defendant Kurz breached their obligations and duties under the Operating Rules and awarding damages to the Debtor as a result thereof; B. Finding that any AFL Members participating in the Competing League have breached their obligations and duties under the Operating Rules and awarding damages to the Debtor as a result thereof; and C. Awarding the Debtor such other and further relief as is just and equitable. Dated: October 6, 2009 Respectfully submitted, ARENA FOOTBALL LEAGUE, LLC By: /s/ William J. Factor One of Its Attorneys 10
Document Page 11 of 11 William J. Factor (6205675 Sara E. Lorber (6229740 THE LAW OFFICE OF WILLIAM J. FACTOR, LTD. 1363 Shermer Road, Suite 224 Northbrook, IL 60062 Tel: (847 239-7248 Fax: (847 574-8233 Email: wfactor@wfactorlaw.com slorber@wfactorlaw.com 11