The Spring League, LLC v. Frost Brown Todd LLP

• Court: Superior Court of Delaware
• Decided: October 8, 2024
• Docket: N24C-01-095 EMD CCLD
• Status: Published

Opinion

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

THE SPRING LEAGUE, LLC, a ) Delaware limited liability company, ) ) Plaintiff, ) ) C.A. No. N24C-01-095 EMD CCLD v. ) ) FROST BROWN TODD LLP, a Delaware ) partnership, ) ) Defendant. )

Submitted: August 8, 2024 Decided: October 8, 2024

Upon Consideration of Defendant Frost Brown Todd LLP’s Motion to Dismiss GRANTED.

Patrick C. Gallagher, Esquire, Courtney R. Prinski, Esquire, Jacobs & Crumplar, P.A., New Castle, Delaware. Attorneys for Plaintiff The Spring League, LLC.

David E. Ross, Esquire, Eric D. Selden, Esquire, Ross Aronstam & Moritz LLP, Wilmington, Delaware. Attorneys for Defendant Frost Brown Todd LLP.

Davis, J.

I. INTRODUCTION

This is a legal malpractice action assigned to the Complex Commercial Litigation

Division. Plaintiff The Spring League, LLC (“The Spring League”)1 filed the civil action in this

Court on January 14, 2024. The Spring League asserts a legal malpractice claim against Frost

Brown Todd LLP (“Frost Brown”). Presently before the Court is Frost Brown’s Motion to

1 The parties use different names when addressing The Spring League. Compare D.I. No. 1 with D.I. No. 14. For example, the Complaint identifies the plaintiff as The Spring League, LLC. See D.I. No. 1. The Spring League in its response to the motion to dismiss provides that The Spring League is “Spring League” in the caption and “The Spring League, a Delaware limited liability company” in the body of the response. See D.I. No. 14. The Court will use the name provided in the Complaint and the Complaint’s caption. Dismiss The Spring League’s Complaint (the “Motion to Dismiss”).2 The Court held a hearing

on August 8, 2024.3 At the conclusion of the hearing, the Court took the Motion to Dismiss

under advisement.4

For the reasons set forth below, the Motion to Dismiss is GRANTED.

II. BACKGROUND

The Spring League is an American football developmental league, and Delaware limited

liability company.5 Frost Brown is a Delaware partnership and law firm.6 The Spring League

retained Frost Brown as its counsel.7

In August 2020, Frost Brown reviewed and negotiated the terms of a Television Rights

Agreement (the “TV Agreement”) between The Spring League and Fox Sports 1, LLC (“Fox

Sports”).8 The TV Agreement related to the relaunch of the United States Football League

(“USFL”).9

The TV Agreement required The Spring League to carry intellectual property insurance.10

The Spring League alleges that Frost Brown represented that it would “handle everything”

regarding the need to obtain this type of insurance.11 Frost Brown communicated with brokers,

sent and filled out applications for insurance to The Spring League, and “represented that the

Spring League could rely on [Frost Brown] to coordinate every aspect of the insurance.”12

2 D.I. No. 4. 3 D.I. No. 19. 4 Id. 5 Complaint (“Compl.”) ¶¶ 2, 6. 6 Id. ¶ 9. 7 Id. ¶ 12. 8 Id. 9 Id. ¶ 1. 10 Id. ¶¶ 1, 15. 11 Id. ¶ 16. 12 Id. ¶ 17. 2 The Spring League purchased insurance from Certain Underwriters at Lloyd’s, London

(the “Insurer”).13 The insurance coverage extended to claims of intellectual property rights

infringement for which the Insurer was notified during the policy period (the “Policy”).14 The

parties agree that the coverage period for the Policy began on October 26, 2020, but dispute its

end date. Frost Brown claims the Policy ended on June 28, 2021.15 The Spring League says it

ended on October 27, 2021.16

The Spring League, even though it signed the Policy,17 claims it was not aware of the

Policy’s notice and premium requirements.18 The Spring League attributes the ignorance of

these terms to Frost Brown’s alleged failure to ever “discuss[] or advise[] The Spring League” of

them.19 The Spring League also makes the conclusory assertion that “[Frost Brown] remained

entirely in control with respect to every aspect of insurance per the [TV Agreement].”20

The Spring League maintains that Frost Brown failed to adequately investigate the

ownership of the marks the Spring League sought to use.21 On August 29, 2020, The Spring

League asked Frost Brown to seek trademark protection for the logo of The Spring League.22

Two days later, a Frost Brown partner told another partner that “I assume the client doesn’t want

us to run a trademark clearance search prior to filing the application, based on our call and given

that it is already using the mark, but let me know if that’s wrong.”23

13 Id. ¶ 20. 14 Id. 15 Defendant’s Opening Brief in Support of Its Motion to Dismiss Plaintiff’s Complaint (“MTD”) (D.I. No. 4) at 8. 16 Compl. ¶ 3. 17 Id. ¶ 17. 18 Id. ¶ 21. 19 Id. 20 Id. 21 Id. ¶ 40.b. 22 Id. ¶ 14. 23 Id. 3 Less than one year later, Fox publicly announced the launch of the new USFL league in

partnership with The Spring League on June 3, 2021.24 The same day, the Philadelphia Inquirer

ran a story (the “Inquirer Story”) reporting that an executive in the former USFL questioned

whether the trademark rights “[came] from any legitimate source.”25 Following its release, Frost

Brown conducted an investigation.26 The Spring League alleges that Frost Brown never advised

it of the need to notify the Insurer of this development, which The Spring League contends was a

“Claim” under the Policy.27 Frost Brown does not dispute that it represented The Spring League

over the next several months.28

On August 20, 2021, The Spring League received a letter from counsel of purported

executives of the former USFL regarding “Trademark Infringement/Misappropriation of

Rights/Consumer Confusion” (the “August 2021 Letter”).29 Neither The Spring League itself,

nor its counsel, notified the Insurer of the August 2021 Letter.30

On February 28, 2022, a complaint was filed against The Spring League based on

trademark infringement concerns (the “Trademark Suit”).31 The Spring League hired new

counsel to assist in the Trademark Suit.32 The Spring League then sent notice to the Insurer of

that litigation.33 The Insurer denied The Spring League’s request for insurance coverage as

24 Id. ¶ 22. 25 Id. ¶ 23. 26 Id. ¶ 25. 27 Id. ¶ 26. 28 MTD at 6. 29 Id. ¶ 29. 30 Id. ¶ 32. 31 Id. ¶ 33. 32 Id. 33 Id. 4 untimely.34 The Trademark Suit plaintiffs settled with The Spring League, which allegedly

incurred legal fees of over $220,000.35

On January 4, 2024, The Spring League filed a single-count complaint (the “Complaint”)

against Frost Brown for legal malpractice.36 Frost Brown filed Defendant’s Opening Brief in

Support of Its Motion to Dismiss Plaintiff’s Complaint on March 28, 2024.37 The Spring League

filed Plaintiff’s Answering Brief in Opposition to Defendant’s Motion to Dismiss Plaintiff’s

Complaint (the “Opposition”) on April 26, 2024.38 On May 17, 2024, Frost Brown filed

Defendant’s Reply Brief in Further Support of its Motion to Dismiss Plaintiff’s Complaint.39

The Court heard oral argument on August 8, 2024.

III. STANDARD OF REVIEW

Frost Brown moves to dismiss the complaint under Superior Court Rule 12(b)(6) for

failure to state a claim, and Rule 9(b)’s particularity standard.

Delaware is a notice pleading jurisdiction. Plaintiff must “only give the defendant fair

notice of a claim and is to be liberally construed.”40 When considering a motion under Rule

12(b)(6), the court (i) accepts as true all well-pleaded factual allegations in the complaint, (ii)

credits vague allegations if they give the opposing party notice of the claim, and (iii) draws all

reasonable inferences in favor of the plaintiff.41 The motion to dismiss will be denied “unless the

plaintiff would not be entitled to recover under any reasonably conceivable set of

34 Id. ¶ 34. 35 Id. ¶¶ 35-36. 36 D.I. No. 1. 37 D.I. No. 4. 38 (“Opp.”) (D.I. No. 14). 39 (“Reply”) (D.I. No. 15). 40 VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 611 (Del. 2003). 41 Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Holdings LLC, 27 A.3d 531, 535 (Del. 2011). 5 circumstances.”42 Damages may be pled generally.43 Nonetheless, Delaware’s minimal notice

pleading standard does not excuse a party’s requirement to allege facts raising a reasonable

inference that damages are causally related to the alleged misconduct.44

Rule 9(b) further requires that averments of fraud, negligence, or the circumstances

constituting fraud or negligence, be stated with particularity.45

IV. DISCUSSION

The elements of a legal malpractice action are (1) the existence of an attorney/client

relationship; (2) the failure of the attorney to exercise ordinary skill and knowledge; and (3) that

the negligence of the lawyer was the proximate cause of damage to the client.46

The Spring League Complaint fails to meet the pleading standards of the Civil Rules.

The Spring League’s claim rests on two theories of legal malpractice. The first relates to Frost

Brown’s alleged failure to advise The Spring League of the notice obligations under the Policy.

The second relies on a single assertion in paragraph 14 of the Complaint that Frost Brown failed

to adequately investigate the ownership of the marks The Spring League sought to use. The

Spring League, however, provides no detail as to the requisite standard of care and merely states

42 Id. 43 Super. Ct. Civ. R. 9(g); Horton v. Organogenesis Inc., 2019 WL 3284737, at *1 (Del. Ch. 2019) 2019 WL 3284737, at *4 (“At the pleadings stage, allegations regarding damages can be pled generally.”) (alteration and internal quotation marks omitted)). 44 See Surf’s Up Legacy Partners, LLC v. Virgin Fest, LLC, 2021 WL 117036, at *6 (Del. Super. 2021) (“[T]he Court will dismiss if the non-movant fails to plead specific allegations supporting an element of its claim or where no reasonable, i.e., unstrained, interpretation of the facts alleged reveals a remediable injury.”); Phage Diagnostics, Inc. v. Corvium, Inc., 2020 WL 1816192, at *9 (Del. Super. 2020) (“Where Plaintiff generally pleads damages for fraud, Plaintiff must relate its alleged injury to the misrepresentations that constitute its grounds for fraud such that the issue of damages may be inferred from the complaint.”); Wellgistics, LLC v. Welgo, Inc., 2024 WL 113967, at *6 (Del. Super. 2024) (“Welgo responds that Delaware only requires notice pleading and Wellgistics is on notice of Welgo’s damages theory. Notice pleading, however, requires more than conclusory allegations. Here, Welgo provides no factual basis to infer that Wellgistics’ use of Welgo’s confidential information caused the increase in the utilization rate.”). 45 Super. Ct. Civ. R. 9(b). 46 Carr v. Levinson, 1983 WL 472091, at *1 (Del. Super. 1983). 6 what Frost Brown did not do. In the alternative, even assuming that The Spring League can cure

this pleading deficiency, it has not shown causally related damages to Frost Brown’s inactions.

A. The Spring League Has Adequately Pled that An Attorney-Client Relationship Existed.

The parties do not dispute that an attorney-client relationship existed. Though Frost

Brown disputes the scope of representation, Frost Brown represented The Spring League during

the negotiation of the TV Agreement, and several months after the Inquirer Story broke.47

Indeed, Frost Brown hired an investigator after publication of the Inquirer Story.48 The Spring

League has therefore adequately pled the first element of its legal malpractice claim.

B. The Spring League Has Not Adequately Pled Negligence.

The Spring League fails to make any allegations of the standard of care in the Complaint.

In the 41-paragraph Complaint, The Spring League focuses on the alleged failures of Frost

Brown to investigate the trademark history of the USFL marks and notify the Insurers of

potential claims. But The Spring League does not devote a single sentence as to what constitutes

the exercise of “ordinary skill and knowledge.” The Spring League believes that asserting the

alleged inactions of Frost Brown is sufficient to overcome a pleadings-stage challenge to the

Complaint. The Court has interpreted the Complaint in the most plaintiff-friendly light.

Moreover, the Court gave The Spring League’s counsel an opportunity during oral argument to

identify the Complaint’s allegations regarding standard of care and breach. After this, the Court

cannot find that the Complaint satisfactorily alleges element two of the legal malpractice count.

Even if The Spring League satisfied the second element, it has not adequately alleged

causally related damages.

47 MTD at 3, 6. 48 Compl. ¶ 25. 7 C. The Spring League Has Failed to Show Damages With Respect To the Alleged Failure to Notify the Insurer of a “Claim.”

Frost Brown argues that no Claim (defined below) existed during the time of the Policy

period. As such, Frost Brown contends that The Spring League cannot show any damages as to

any alleged failure to notify the Insurer of potential claims.

1. The Court May Consider the Policy, Including Endorsements, and the Inquirer Story.

Central to Frost Brown’s argument is that the Policy expired before the August 2021

Letter, and the Inquirer Story did not constitute a Claim under the policy. If correct, The Spring

League did not suffer any damages from the failure to notify the Insurer, because coverage did

not ripen until a Claim existed and, once it did, the Policy had already expired.

The Court may consider the Policy, any amendments thereto, and the Inquirer Story.

“Where an agreement plays a significant role in the litigation and is integral to a plaintiff's

claims, it may be incorporated by reference without converting the motion to a summary

judgment.”49 Accordingly, “[a] plaintiff may not reference certain documents outside the

complaint and at the same time prevent the court from considering those documents’ actual

terms.”50 The “‘doctrine permits a court to review the actual document to ensure that the

plaintiff has not misrepresented its contents and that any inference the plaintiff seeks to have

drawn is a reasonable one.”51

The Complaint refers to the Policy and the Inquirer Story. The Spring League, however,

did not attach the Policy, any endorsements, or the Inquirer Story to the Complaint. Frost Brown

also did not attach the Policy in the Motion to Dismiss. Frost Brown did attach correspondence

49 Furnari v. Wallpang, Inc., 2014 WL 1678419, at *4 (Del. Super. 2014). 50 Reiter on Behalf of Cap. One Fin. Corp. v. Fairbank, 2016 WL 6081823, at *5 (Del. Ch. 2016) (quoting Winshall v. Viacom Int’l, Inc., 76 A.3d 808, 818 (Del. 2013)). 51 Phoenix Mgmt. Tr. v. Win S. Credit Union, 2019 WL 1575272, at *5 (Del. Ch. 2019) (citation omitted). 8 between the Insurer and The Spring League that included an endorsement to the Policy as well as

other terms.

The attached Policy endorsement states that the Policy expired on June 28, 2021, which is

in direct contradiction to The Spring League’s assertion that the Policy expired on October 28,

2021.52 The Complaint references that the Policy and the Policy’s terms are integral to the

success of The Spring League’s claim. Therefore, the Court will consider the Policy

endorsement and the Policy when examining the Complaint. The Court will also review the

Inquirer Story.

2. The Inquirer Story Did Not Constitute a “Claim.”

The Policy requires that the insured notify the Insurer of a “Claim” within the Policy

period.53 The Policy provides that a “Claim” is:

a) a demand for money, services, retraction or correction including the service of a suit or institution of arbitration or mediation proceedings; or b) a threat or initiation of a suit seeking injunctive relief (meaning a temporary restraining order or a preliminary injunction) or declaratory relief[.]54

“In construing a contract, our goal is to give effect to the intent of the parties.”55 “We

will read a contract as a whole and we will give each provision and term effect, so as not to

render any part of the contract mere surplusage.”56 “When the language of a contract is plain and

unambiguous, binding effect should be given to its evident meaning.”57 A contract is ambiguous

only if there are at least two differing, reasonable interpretations of it.58

52 See MTD, Ex. 3. at 3. 53 Compl. ¶ 20. 54 Id. 55 Weinberg v. Waystar, Inc., 294 A.3d 1039, 1044 (Del. 2023). 56 Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010) (citation omitted). 57 Allied Cap. Corp. v. GC-Sun Hldgs., L.P., 910 A.2d 1020, 1030 (Del. Ch. 2006). 58 Twin City Fire Ins. Co. v. Delaware Racing Ass’n, 840 A.2d 624, 628 (Del. 2003). 9 The Inquirer Story is not a Claim. The Spring League argues that the Inquirer Story is a

Claim made in the form of “a demand . . . or threat of a suit seeking injunctive relief . . . or

declaratory relief.”59 A demand is “something claimed as due or owed.”60 Here, that

“something” must be “money, services, retraction or correction.”61

In itself, the Inquirer Story is not a “demand.” Rather, the Inquirer Story is a news story

in a city paper. The Inquirer Story reports certain statements made by a purported executive of

the former USFL; however, those statements themselves do not constitute a “demand.” First,

those statements are speculative—the former executive states, “I want to dig into it and see who

they’re claiming they acquired these rights from. Because it didn’t come from any legitimate

source.”62 Second, the only “demand” in the Inquirer Story is a request to “sit down and talk

with us.”63 That is not a demand for “money, services, retraction or correction.” Much less is it

a “threat of a suit.”

In contrast, the August 2021 Letter contains all the hallmarks of a “Claim.” It was a letter

from counsel of the purported executives of the former USFL to Frost Brown; the “re” line stated

it was for “Trademark Infringement/Misappropriation of Rights/Consumer Confusion;” and, the

letter expressly threatened legal action.”64 While the Inquirer Story seemed to presage the

August 2021 Letter, the Court looks to the face of the Inquirer Story alone and does not read

future events back into the past. Applying the plain-reading interpretation of the definition of

“Claim” to the facts of the case, the Inquirer Story or statements reported therein did not

59 Compl. ¶ 20. 60 See Merriam-Webster, https://www.merriam-webster.com/dictionary/demand. 61 Compl. ¶ 20. 62 MTD, Ex. 1 at 1. 63 Id. 64 Compl. ¶¶ 29-30. 10 constitute a “demand for money, services, retraction or correction,” or the “threat . . . of a suit

seeking injunctive relief . . . or declaratory relief[.]”

3. The Policy Expired Before a Claim Was Made.

The parties do not dispute that the Policy period was originally from October 2020 to

October 2021. Frost Brown, however, claims that the Policy period was shortened to June 28,

2021, apparently due to The Spring League’s failure to make premium payments. In support,

Frost Brown points to the Policy endorsement.

During oral argument, counsel for The Spring League disputed that the Policy Period

ended in June, stating for the first time that it did not receive notice of the cancellation. The

Court finds that The Spring League has waived this argument by failing to adequately raise it in

its Opposition.65 Even if considered, The Spring League does not explain why the failure to

notify an insured of the cancellation of the policy period precludes cancellation of that policy.

Instead, The Spring League argues that another policy provision extended the reporting

date for 60 days, thus putting the August 2020 Letter in the coverage orbit.66 The relevant

provision, cited in the Insurer’s Letter to The Spring League, states that:

an Extended Reporting Period of 60 days following the Expiry Date as shown in the Declarations shall be automatically granted hereunder at no additional premium. Such Extended Reporting Period shall cover claims first made against you during the period of the policy and notified to us during this 60 day Extended Reporting Period but only in respect of any act, error or omission committed prior to the Expiry Date shown in the Declarations, and subject to all other terms, conditions and exclusions of the Policy.67

65 See Emerald Partners v. Berlin, 726 A.2d 1215, 1224 (Del.1999) (“A party’s failure to raise an argument in its answering brief constitutes a waiver of that argument.”). 66 Opp. at 19. 67 MTD, Ex. 3 at 3. The italicized language, which was not in the original, represents the language The Spring League decided to omit. 11 As provided for in the italicized language above, the extended 60-day reporting period

only covered “claims first made against you during the period of the policy.” Thus, if no one

made a “Claim” against The Spring League during the period of the policy, the 60-day reporting

period does not apply. As explained above, the Inquirer Story did not constitute a “Claim,” and

therefore no “claims first made against you during the period of the policy” occurred for which

the extended reporting period applied.

For these reasons, the Court finds that that The Spring League has not plead damages for

Frost Brown’s failure to advise The Spring League of the obligation to notify the Insurer of the

Inquirer Story, or August 2021 Letter because no Claim was made during the coverage period.

D. The Spring League Does Not Allege Causally Related Damages to Frost Brown’s Allegedly Inadequate Investigation.

Even assuming breach of the standard of care, The Spring League does not plead any

causally related damages as to its second theory—Frost Brown’s alleged failure to investigate the

ownership of the marks it intended to use. The Spring League pleads that it lost coverage for the

settlement amounts and attorneys’ fees incurred therein as a result of Frost Brown’s alleged

negligence.68 But those damages were a result of the failure to notify of a potential claim, not

any allegedly inadequate investigation that would have revealed what either The Spring League

already knew, or what it was specifically insuring against.

In its Opposition, The Spring League asserts that had Frost Brown properly investigated

the issue, Frost Brown would have “protected” The Spring League against future claims.69 The

Court, however, is not required to credit conclusory allegations, and though damages may be

pled generally, that does not excuse the requirement that The Spring League must demonstrate

68 Compl. ¶ 35-36. 69 Opp. at 20. 12 some causal nexus between the damages it seeks—here, coverage for the settlement amounts and

fees’ incurred therein—and Frost Brown’s alleged failure to evaluate the risk of what was being

insured. The Court finds that The Spring League has not pled facts raising a reasonable

inference of such a causal connection.

V. CONCLUSION

Because The Spring League has not alleged breach of the standard of care, and in the

alternative, causally related damages to either of its theories, the Motion to Dismiss is

GRANTED.

October 8, 2024 Wilmington, Delaware /s/ Eric M. Davis Eric M. Davis, Judge

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