1828723

CAUSE NO. __________
Walker County - 278th District Court

IN THE __TH JUDICIAL

BMK TRAINING FACILITIES, LTD.;
BMK PARTNERS, LTD.; KAROLYI
TRAINING CAMPS, LLC;
BELA KAROLYI; and
MARTHA KAROLYI.

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Plaintiffs,
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vs.
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UNITED STATES OLYMPIC COMMITTEE §
and USA GYMNASTICS, INC.
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Defendants.
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DISTRICT COURT OF

WALKER COUNTY, TEXAS

PLAINTIFFS’ ORIGINAL PETITION
FOR DECLARATORY JUDGMENT AND DAMAGES
TO THE HONORABLE JUDGE OF SAID COURT:
Plaintiffs BMK Training Facilities, LTD., BMK Partners, LTD., Karolyi Training
Camps, LLC, Bela Karolyi and Martha Karolyi (collectively “Plaintiffs”) petitions this Court
pursuant to the Declaratory Judgments Act, Chapter 37 of the Texas Civil Practice and
Remedies Code, for declarations that:
1) Plaintiff BMK Training Facilities, LTD. (“BMK Training”) does not owe
indemnification to Defendant United States Olympic Committee (“USOC”) for the
alleged1 sexual misconduct of USA Gymnastics, Inc.’s (“USAG”) agent Larry Nassar
which would have occurred while Larry Nassar was acting as an employee of USAG
and at events under the exclusive control of USAG; and

1

In July 2017, Nassar was sentenced to 60 years in federal prison after pleading guilty to child
pornography charges. On January 24, 2018, Nassar was sentenced to 40 to 175 years in a Michigan
state prison after pleading guilty to seven counts of sexual assault of minors. On February 5, 2018,
he was sentenced to an additional 40 to 125 years in prison after pleading guilty to an additional three
counts of sexual assault. However, Larry Nassar has not been convicted (to date) of any acts of sexual
assault which are alleged in the specific lawsuits cited in this complaint. Instead, all of the convictions
in Michigan are related to his work at the gymnastics club Twistars and Michigan State University.
Since this petition is in reference to allegations of sexual assault for which Larry Nassar has not been
convicted, this Petition will refer to the sexual assaults of Larry Nassar as “alleged” at this time.

PLAINTIFFS’ ORIGINAL PETITION

Filed: 4/20/2018 2:34 PM
Robyn M. Flowers
District Clerk
Walker County, Texas
Melissa Fuentes

PAGE 1 OF 32

 2) Plaintiffs Karolyi Training Camps, LLC (“Karolyi Camps”), Bela Karolyi (“Bela”)
and Martha Karolyi (“Martha”) are owed indemnification by USOC and USAG
pursuant to contract, corporate governance and the common law, for fees and costs
incurred in lawsuits and related civil and criminal investigations in which they were
named or investigated which arise out of the alleged sexual misconduct of USAG’s
agent, Larry Nassar.
Moreover, Plaintiffs file this petition for damages against USOC and USAG for
various breaches of contract and duties owed to Plaintiffs which have resulted in severe
damages to Plaintiffs’ reputation, health, and real property.
1. DISCOVERY PLAN
1.1

Pursuant to Rule 190 of the Texas Rules of Civil Procedure, Plaintiffs request

that all discovery for this matter be conducted pursuant to the Discovery Control Plan Level
Three (3).
1.2

At this time, Plaintiffs estimate is that they seek monetary relief in excess of

$1,000,000.00.
2. CONDITIONS PRECEDENT
2.1

All conditions precedent to the causes of actions brought by Plaintiffs have

occurred.
3. PARTIES
3.1

Plaintiff BMK Training Facilities, LTD. (“BMK Training”) is a Texas limited

partnership which owns a portion of the real property in Walker County, Texas which is at
the center of this dispute (the entire property hereinafter referred to as the “Karolyi
Ranch”). At all relevant times, USAG was the lessee of approximately 40 acres of the
Karolyi Ranch known as the “U.S. Women’s National Team Training Center” or “NTTC”2
2

The NTTC has also been referred to as the “USA Gymnastics National Team Training Center at the
Karolyi Ranch”.

PLAINTIFFS’ ORIGINAL PETITION

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 by virtue of a lease between USAG and BMK Training (the “NTTC Lease”). The NTTC is
where the USAG held the “National Team Camps.”
3.2

Plaintiff BMK Partners, LTD. (“BMK Partners”) is a Texas limited partnership

which owns a piece of the Karolyi Ranch.
3.3

Plaintiff Karolyi Training Camps, LLC (“Karolyi Camps”) is a Texas limited

liability company which was assigned the rights to the NTTC Lease by BMK Training and
acted as landlord to USAG from 2011 forward. Moreover, USAG would sublease back to
Karolyi Camps portions of the NTTC for the few weeks of the year when Karolyi Camps
would hold a series of independent summer camps open to the general public.
3.4

Plaintiffs Bela Karolyi (“Bela”) and Martha Karolyi (“Martha”) (collectively

the “Karolyis”) are individuals who reside in Walker County, Texas on a house located on
the Karolyi Ranch. The Karolyis have a long history of successfully coaching women’s
gymnastics in the United States and previously maintained a long-standing relationship
with USAG until it was terminated by USAG.
3.5

Defendant USA Gymnastics, Inc. (“USAG”) is a Texas corporation. USAG is

the authorized national governing body for gymnastics in the United States and is overseen
by Defendant USOC. USAG was at all relevant times: a) the lessee of the NTTC and
pursuant to the NTTC Lease and held exclusive control over the NTTC, b) the employer
and/or principal of Larry Nassar, and c) the organization which oversaw all gymnastics
competitions in the United States and set forth the governing standards for those who
wished to participate in any capacity. Further, USAG entered into a contract to purchase
a portion of the NTTC/Karolyi Ranch from Plaintiffs BMK Training, BMK Partners, and the
Karolyis which it would later breach by refusing to complete the purchase.
3.6

USAG may be served with process by serving its registered agent CT

PLAINTIFFS’ ORIGINAL PETITION

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 Corporation System, 1999 Bryan St., Ste. 900, Dallas, TX 75201.
3.7

Defendant United States Olympic Committee (“USOC”) is a federally

chartered corporation organized under the Ted Stevens Olympic and Amateur Sports Act
which maintains its principal place of business in Colorado Springs, Colorado. USOC has
the exclusive right to use and authorize the use of Olympic-related images and trademarks
in the United States. USOC oversees and maintains complete control over the “national
governing bodies” which oversee any Olympic-sanctioned sports. Pursuant to this, USOC
had the right to assert complete control over Defendant USAG (the national governing body
for gymnastics in the United States), including overseeing its policies, employees and its
manner of conducting business.3 Pursuant to an agreement between BMK Training, USAG
and USOC, the NTTC was designated as a “U.S. Olympic Training Site.”
3.8

USOC may be served with process by serving its registered agent National

Registered Agents, Inc., 1999 Bryan St., Ste 900, Dallas, Texas 75201.
4. JURISDICTION AND VENUE
4.1

This Court has general jurisdiction over Defendants as they are domiciled in

Texas and/or have such substantial contacts with the state so as to make them essentially
at home herein.
4.2

Moreover, this Court has jurisdiction over these Defendants as the lawsuit

arises out of the NTTC Lease the Defendants entered into which contemplated extended
contacts with Texas for over a decade. Further, Defendants conducted substantial business
in this state out of which Plaintiffs’ causes of action arise.
4.3

3

Venue is proper in Walker County because that is where the Karolyi Ranch

USOC’s complete control over USAG and its internal policies and guidelines was recently made
abundantly clear when USOC unilaterally made the decision that USAG’s entire Board of Directors
would be required to resign or the entity would face losing its status as a national governing body.

PLAINTIFFS’ ORIGINAL PETITION

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 is located and is where a substantial part of the actions giving rise to this lawsuit occurred.
5. FACTS
A.

Background on Bela and Martha Karolyi.
5.1

Bela and Martha were both born in 1942 in Romania under communist rule.

Bela coached the Romanian Olympic Gymnastics Team and most notably, coached Nadia
Comaneci to the first ever perfect score in a women’s Olympic gymnastics competition and
a gold medal. On March 30, 1981, Bela and Martha defected from Romania’s communist
dictatorship while in the United States for a sporting event and were quickly granted
political asylum. Bela and Martha have lived in Texas, specifically the Houston and
Huntsville area, since December 1981. Bela and Martha acquired both a house within
Houston and land near Huntsville, Texas which would later become the Karolyi Ranch.
5.2

Upon moving to Texas, the two worked at a Houston gym as coaches for

individual gymnasts. Bela and Martha would, within a year, buy that gym and began to run
it. After the success of their individual gymnasts in the 1984 Olympics (most notably, Mary
Lou Retton who won five medals and was the first American to win gold in the sport), Bela
was named Head Coach of the 1988 and 1992 USAG Women’s Olympic Team. The title of
‘Head Coach’ is primarily an honorary title usually bestowed upon the coach with the top
athletes competing. However, despite such title, all athletes still retain their own individual
coaches who train them and oversee them at any gymnastics’ events.
5.3

For the 1996 Olympic games, Martha replaced Bela as Head Coach of United

State’s Olympics Team. That team went on to win the first ever team gold medal in the
sport for the United States.
5.4

In November of 1999, Bela was appointed as the first ever National Team

Coordinator for USAG. USAG created the position of National Team Coordinator to

PLAINTIFFS’ ORIGINAL PETITION

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 facilitate the creation of a semi-centralized system of training for U.S. athletes to work
along side the largely autonomous structure currently in place.4 The National Team
Coordinator had the responsibility for the creation of an overall training program and
overseeing the preparation of the U.S. team heading into the 2000 Olympic Games in
Sydney, Australia. The National Team Coordinator was not eligible to be named as a head
coach of the women’s gymnastics team, was not a coach to any individual athletes, and the
athletes still retained their individual coaches as their primary coach.
5.5

Bela retired as National Team Coordinator in 20005 and since then, has not

held any position of authority or control within USAG nor has he been involved in the
training, coaching, or supervision of its athletes. Bela, however, has been regularly used by
USAG as a tool of their marketing campaign for the sport of gymnastics in the United States
and was held out as an “ambassador” of the sport. Bela has given numerous interviews to
the media at the Karolyi Ranch, attended various other gymnastics sporting events as a
guest, and even acted as a commentator for NBC for the 2008 Beijing Olympics.
5.6

In 2001, Martha was elected as the National Team Coordinator for the USAG

Women’s National and Olympic Teams. Martha would be responsible for coordinating the
overall training program for the women's national team through the 2004 Olympic Games.
Martha served as an advisor to the individual coaches and directed the team’s preparation
4

Gymnastics is conducted primarily on an individual basis with each gymnast spending most of their
time with their individual coach in their home state and preparing for their individual events.
Individual gymnasts choose which competitions they wish to compete in so as to qualify for the
National Team. In many other countries, the entire process is far less de-centralized.

5

Bela’s contract with USAG expired at the end of December 2000, at which time Bela announced that
he would not be placing himself as a candidate for the position of National Team Coordinator. When
Bela left the National Team Coordinator position in 2000, it was not because of any type of improper
conduct on his part but was instead due to a power struggle between the newly created position of
National Team Coordinator and the individual coaches who had historically run the operations. A
compromise was reached with Martha Karolyi being elected as the next National Team Coordinator
by a vote of the individual coaches.

PLAINTIFFS’ ORIGINAL PETITION

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 for world championships and Olympic games. Martha was continuously re-elected to the
position of National Team Coordinator through the 2016 Olympics, after which Martha
made the decision to retire.
5.7

The position of National Team Coordinator has no role within the governance

of either USOC or USAG and has no authority to set the code of conduct USOC or USAG or
determine how those entities will oversee their own employees or events. Further, the
National Team Coordinator holds no role in overseeing the operations of the NTTC other
than the actual training occurring inside the gymnasiums. Instead, the operations of the are
primarily overseen by the National Training Center Director—an employee of USAG who
is in no way subject to Plaintiffs’ control.6
B.

Background on the Karolyi Ranch.
5.8

In 1983, the Karolyis purchased roughly 40 acres of land bordering on the

Sam Houston National Forest and began building a gym and cabins on the property for
what would become the Karolyi Ranch. In 1984—the same year Mary Lou Retton won gold
and helped increase the Karolyis’ popularity in the U.S.—the Karolyi Ranch opened up for
summer camps. By 1989, the Karolyi Ranch had grown in size to almost 2,000 acres.
5.9

In 2001, a small portion of the Karolyi Ranch was designated by USAG as the

“U.S. Women's National Team Training Center” concurrent with Martha Karolyi being
elected National Team Coordinator. At this time, BMK Training began leasing the NTTC

6

In the “Job Description” of the Director of National Team Training Center it provides that this person:
<
“is responsible for all aspects of scheduling and oversight of the activities conducted at the
USA Gymnastics National Team Training Center at the Karolyi Ranch.”
<
“Serve as the primary USA Gymnastics staff member to oversee all activities at the NTTC”
<
“Serve as on-site supervisor for all USA Gymnastics activities at the Training Site”
By contrast, the job description of the National Team Coordinator does not contain any of these duties
to oversee the operations and procedures of the NTTC.

PLAINTIFFS’ ORIGINAL PETITION

PAGE 7 OF 32

 to USAG for the purpose of running the National Team Camps and for hosting various
international exchanges and competitions. The National Team Camps were typically held
for one week a month, 9 months out of the year. At all other times, gymnasts would train
with their individual coaches at their individual gyms.

USAG’s National Medical

Coordinator, Larry Nassar, would attend the National Team Camps approximately two to
three times a year and may have been present at certain USAG-sponsored competitions at
the NTTC. The Karolyis’ contacts with Larry Nassar during these few appearances at the
NTTC were almost exclusively limited to short team meetings.
5.10

Between 2001 and 2011, BMK Training and USA Gymnastics maintained a

verbal lease which arose out of the Karolyis and USAG’s close personal and professional
relationship. On January 3, 2011, BMK Training and USAG memorialized their prior verbal
agreements through an additional written lease (the previously defined “Lease”) which
would be for another ten-year term, e.g. through 2021. That same day, BMK Training
assigned the NTTC Lease to Karolyi Camps. The NTTC Lease provides in relevant parts:
1.1
Description
... Lessor [BMK Training] does hereby lease to Lessee [USAG] ... all of the
training gymnasiums, also commonly referred to as the “Karolyi Gymnastics
Training Facility,” the manager’s house, the guest house, and all other lodging
facilities, including what are commonly referred to as the “motel” and
“cabins” ... the clubhouse and associated facilities for recreational activities...
1.2
Exclusive Use
Lessee shall have the exclusive use of the Premises during each Term
(hereinafter defined) of this Lease...
12.3 Restriction upon Unlawful Activity
Lessee shall not permit the Premises, or any part thereof, to be used for any
disorderly, unlawful or hazardous purpose, nor as a source of annoyance or
embarrassment to Lessor, nor for any purpose other than as is specified in
the Lease...
17.
Lessee’s Use of the Premises
Lessee covenants and agrees: (a) not to violate applicable fire laws or

PLAINTIFFS’ ORIGINAL PETITION

PAGE 8 OF 32

 regulations, or any applicable statutes, rules or regulations now existing or
subsequently enacted or established by the local, state or federal
governments, and Lessee shall be answerable for all nuisances caused or
suffered at the Premises, or caused by Lessee at the Premises; ... (c) not to
suffer or permit any activities to be carried on or use made of the Premises
which shall be unlawful, noisy, offensive, or injurious to any person or
property ... or which shall be contrary to any law or ordinance, rule or
regulation from time to time established by public authority...
19.2 Indemnification of Lessor
Lessee covenants and agrees that it will be solely responsible for and will
indemnify, defend and hold harmless Lessor and Lessor’s officers, directors,
partners, managers, agents, employees, visitors and invitees from any and all
fines and penalties, and any and all claims by, or liability to, any third party,
for loss, damage, cost, liability or expense of any kind, to persons or property
which is based upon or in any manner arises out of or is incidental to: (a) any
breach by Lessee of any provision of the Lease; (b) any negligence or
intentional misconduct of Lessee, or its agents and employees...
5.11

For the Karolyis’ independent summer camps, USAG would sublease the

property back to Karolyi Camps7 for the short period of time of the Karolyis’ private
summer camps. During the time of the Karolyis’ private summer camps, USAG’s agent
Larry Nassar was never present.
5.12

On September 21, 2010, BMK Training, USOC and USAG all entered into the

Olympic Training Site Facility Designation License and Use and Access Agreement (the
“Licensing Agreement”) which would make the NTTC an official U.S. Olympics Training
Site. The Licensing Agreement provided the following relevant indemnification provision:
7.
Indemnification
7.1
[BMK Training] will indemnify, defend and hold harmless the USOC,
[USAG] and their respective officers, directors, agents, employees and
volunteers from and against any and all fines and penalties, and any and all
claims by, or liability to, any third party, for loss, damage or injury to persons

7

Before the NTTC Lease was formalized in 2011, because of the ‘handshake’ nature of the deal between
the Karolyis and USAG it is difficult to determine the exact details of the sub-lease agreement for the
summer camps (which would typically be for only six weeks some time between June 1 and August
31). It appears however, that property began being subleased to the entity Karolyi Camps in 2006
(when that entity was first created) and prior to that, the sublease would be to BMK Training.

PLAINTIFFS’ ORIGINAL PETITION

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 or property which is based on or in any manner arises out of or is incidental
to (a) any breach by [BMK Training] of any provision of this Agreement; (b)
any negligence or intentional misconduct of [BMK Training] or its agents
hereunder; and (c) ..., including but not limited to legal fees and costs and
other expenses associated with or incurred in connection with any such claim
or loss.
7.2
[USAG] will indemnify, defend and hold harmless [BMK Training] and
the USOC and their respective officers, directors, agents, employees and
volunteers from and against any and all fines and penalties, and any and all
claims by, or liability to, any third party, for loss, damage or injury to persons
or property which is based on or in any manner arises out of or is incidental
to (a) any breach by [USAG] of any provision of this Agreement; and (b) any
negligence or intentional misconduct of [USAG] or its agents hereunder,
including but not limited to legal fees and costs and other expenses
associated with or incurred in connection with any such claim or loss.
7.3
The USOC will indemnify, defend and hold harmless [BMK Training],
[USAG] and their respective officers, directors, agents, employees and
volunteers from and against any and all fines and penalties, and any and all
claims by, or liability to, any third party, for loss, damage or injury to persons
or property which is based on or in any manner arises out of or is incidental
to (a) any breach by USOC of any provision of this Agreement; (b) any
negligence or intentional misconduct of the USOC hereunder; and (c) ...,
including but not limited to legal fees and costs and other expenses
associated with or incurred in connection with any such claim or loss.
5.13

On February 1, 2013, USOC, USAG and BMK Training all signed an

amendment to the Licensing Agreement extending the license to use Olympic trademarks
and NTCC’s designation as an official Olympic Training Site through March 31, 2017.8
5.14

Sometime after 2010, USAG began to verbally commit to Plaintiffs that USAG

would purchase the portion of the Karolyi Ranch under the NTTC Lease. In accordance
with this, USAG entered into the second ten-year NTTC Lease with BMK Training and
worked to get the NTTC designated as an Olympic Training Facility (which brought with
it a sponsorship by Hilton and various facility upgrades around the NTTC). Based on these
8

The Licensing Agreement was never extended beyond this date.

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 representations, the Karolyis allowed USAG to use their name, image, and reputation to
promote the NTTC and took steps to develop the premises of the NTTC pursuant to USAG’s
various promises and assurances that USAG would purchase the property and otherwise
look out for Plaintiffs’ best interest.
5.15

On July 22, 2016, USAG entered into a contract to purchase a 36.2 acre

portion of the Karolyi Ranch/NTTC from BMK Training, BMK Partners, Bela and Martha
(the “Purchase Agreement”). The purchase price of over $3 million took into consideration
the value of the land as an official U.S. Olympic Training Site, the facilities located thereon,
and the historical significance of the Karolyi Ranch.9
5.16

On July 25, 2016, USAG put out a press release on their website announcing

the Purchase Agreement and which read:
USA Gymnastics has agreed to terms with Bela and Martha Karolyi to
purchase the gymnastics facilities, including gyms, athlete and coach housing
and recreational areas, currently owned by the legendary coaches. Located in
Huntsville, Texas, the USA Gymnastics National Team Training Center,
which is an official U.S. Olympic Training Site, will be renamed as the USA
Gymnastics Athlete Development Center at the Karolyi Ranch.
“Acquiring the gymnastics-related portion of the Karolyi Ranch is an
important step in our upcoming transition from Martha’s leadership as
national team coordinator to her successor,” said Steve Penny, president of
USA Gymnastics. “The women’s national team has been training at the
Karolyi Ranch since the turn of the century, and it has now become our home
for training athletes in many of our disciplines. Athletes of all ages and skill
levels are impacted by the prestige and tradition embodied at the Ranch, and
we are excited to continue the legacy of success that has been developed over
the years.”

9

In fact, Section 2 of the Purchase Agreement (“Purchase Price”) provides that “In consideration of the
Karolyis’ long and distinguished support and service to USA Gymnastics and its gymnastics programs,
Purchaser also agrees to keep the name Karolyi Ranch associated with the gymnastics training center
located on the Real Property so long as USA Gymnastics owns the Real Property and operates a
gymnastics training center thereon.”

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 “This is a dream come true,” commented Bela Karolyi. “From the very
beginning our goal has been to create something truly unique for
USA Gymnastics and over the past few years that mission has been
accomplished. The transition of ownership to the federation is
exactly what we envisioned.”
USA Gymnastics agree to purchase Karolyi Ranch gymnastics facilities, USA Gymnastics
(July 25, 2016) (emphasis added).
5.17

On the same day, the Associated Press put out an article which quoted Steve

Penny as saying:
“It has everything we could possibly ask for... Along with what it represents
to our heart and soul, as a physical facility, we couldn't go out and build it. It's
been custom made what for what we want and need. You add up all the
elements and it's like Dang, what an easy decision.”
Will Graves, Karolyis' Texas ranch flips to USA Gymnastics after Rio, Associated Press
(July 25, 2016).
C.

Larry Nassar’s sexual misconduct while acting as USAG’s agent at
USAG’s events.
5.18

Larry Nassar was a Michigan doctor who initially volunteered to provide

medical services to USAG and who often traveled with USAG and its athletes to various
USAG competitions and events. Larry Nassar began working as an athletic trainer for
USAG in 1986. After ten years of Larry Nassar working for USAG (during which time Larry
Nassar completed his medical degree and fellowship), in 1996 Larry Nassar was appointed
the National Medical Coordinator for USAG and would remain in this role until
2015—when USAG allowed him to quietly resign amid not-yet-public allegations of sexual
misconduct.
5.19

During his tenure at USAG—and while employed concurrently at Michigan

State University—Larry Nassar is alleged to have sexually assaulted over two hundred

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 minors and young women under the guise of medical treatment. Larry Nassar is currently
in federal prison for possession of child pornography and has been convicted on various
counts of sexual assault with minors in Michigan state courts.
5.20

The Karolyis never had any knowledge of Larry Nassar’s reprehensible

conduct and would have reported such conduct had they learned of it or had there been any
suspicion.10 Nor were the Karolyis ever informed that Larry Nassar was performing any
supposed pelvic-floor/intra-vaginal osteopathic on gymnasts (or any other inappropriate
treatments). The Karolyis were first informed of possible misconduct by Larry Nassar in

10

For those who wonder how such conduct could go unnoticed by the Karolyis for so many years, the
nature of Larry Nassar’s crime made it extremely difficult to detect in the absence of complaints of
inappropriate conduct ever being communicated to Plaintiffs. For example, multiple gymnasts have
stated their parents were present when they were sexually assaulted and the parents had no
knowledge. See e.g. Schladebeck, Jessica, Mother Recalls How Former U.S. Gymnastics Doctor
Larry Nassar Assaulted Daughter in Front of Her, N.Y. Daily News (Feb. 9, 2018); Evans, Tim,
Former USAG Doctor Accused of Abuse , IndyStar (Sept. 12, 2016). Further, many gymnasts were
not aware themselves they were sexually assaulted until years later when reports began to surface of
Larry Nassar’s abuse. See Kimble, Lindsay, Elite Gymnast on How Dr. Larry Nassar Allegedly
Preyed on Young Girls: ‘I Thought He Was My Friend’, People Magazine (March 20, 2017). As one
gymnast put it: “I didn’t know the abuse was happening to me until I was older, until I had time to
process it and realised that Nassar was being investigated. If we don’t know you can’t expect our
personal coaches to know.” Le Grand, Chip, New Gymnastics Coach ‘Knew Nothing’ of Nassar’s
Abuse, The Australian (Feb. 21, 2018) (quote from Aly Raisman).
Typically, the number of staff, coaches, and other adults present at the NTTC outnumbered the
number of gymnast. Gymnasts were accompanied by their individual coach (or coaches), most
equipment in the gyms had a specialty coach, there were multiple trainers at Ranch, there were
directors and other staff from USAG present, housekeeping and food service companies and their
employees, media on occasion, etc. Further, the training rooms are open and visible to these dozens
of coaches and other adults who would be in the gyms during training and typically would have been
staffed with a secondary USAG trainer.
The Karolyis, understandably, did not attempt to oversee USAG’s hired doctor, at USAG events, on
the premises which USAG held exclusive control over USAG agents and employees, and without a
single warning as to the possible inappropriate behavior of the doctor during his medical procedures.
Larry Nassar worked for USAG for over 15 years before the first National Team Camp was ever held
at the Karolyi Ranch and continued to remain under the control and supervision of USAG during the
2 or 3 times a year he would visit the NTTC.
Moreover, the allegations of Larry Nassar’s sexual assaults have not been limited to any supposed
‘toxic environment’ at the NTTC but occurred almost everywhere Nassar worked—including many
locations where the Karolyis had absolutely no connection (e.g. the local school district where Nassar
ran for the school board, Michigan State University, Twistars in Michigan, family friends of Nassar,
etc.).

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 2015, when USAG contacted Martha and told her that Larry Nassar would not be returning
to USAG because of treatment concerns. USAG then asked the Karolyis not to further
discuss the matter. When USAG told the Karolyis in 2015 that Larry Nassar would not be
returning, USAG never mentioned that the alleged mistreatment was potentially sexual
assault nor did they relay the nature of the treatments at issue.
D.

The initial lawsuits and cancellation of the purchase agreement.
5.21

The Karolyis first learned of the exact nature of Nassar’s conduct leading to

his dismissal—e.g. allegations of sexual misconduct—some time after the 2016 Summer
Olympics. Around the same time, the first lawsuits were filed against USAG in September
of 2016. These lawsuits are Jane JD Doe v. Doe 1, Cause No. 34-2016-00200075
(Sacramento County, CA) (September 8, 2016) (the “JD Matter”) and Jane LM Doe v.
Larry Nassar, BC-638724 (October 27, 2016) (Los Angeles County) (the “LM Matter”). The
LM Matter named Bela, Martha and Karolyi Camps as defendants but the JD matter did
not. By this time, Martha had already retired from her position as National Team
Coordinator and neither she nor Bela had any further coordinating, coaching, or any other
type of role with USAG.
5.22

Prior to the lawsuits, Plaintiffs had entered into a Purchase and Sale

Agreement dated July 22, 2016 for the sale of a portion of the Karolyi Ranch/NTTC to
USAG. During the negotiation of the Purchase Agreement, USAG never informed the
Karolyis of Larry Nassar’s alleged sexual misconduct on the property although they had
knowledge of the same from the reports they received in 2015.
5.23

After the initial lawsuits were filed, Plaintiffs and USAG were still on track to

close the sale of the property and the Karolyis were given the impression by USAG that
these lawsuits were isolated events. The Karolyis requested indemnification from USAG

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PAGE 14 OF 32

 pursuant to USAG’s by-laws and the aforementioned lease. USAG refused to provide full
indemnification to Bela, Martha and Karolyi Camps at that time but did seek to have
Plaintiffs covered as additional insured’s on its insurance policies so as to cover a portion
of their defense costs. USAG made repeated representations to the Karolyis that USAG
would provide them with indemnification and continue to work towards closing the
Purchase Agreement as soon as some small issues with the septic system were worked out.
USAG’s Chairman of the Board Paul Parilla repeated represented to the Karolyis that USAG
would “wrap their arms around” them and take care of them through this litigation.
5.24

In November of 2016, Steve Penny (President and CEO of USAG) wrote in an

email to the Karolyis, the director of the National Team Camps, and other USAG employees
regarding the septic issue: “our top priority is to finish the improvements to meet
inspections and close on the Ranch.” Steve Penny was intimately involved in the
negotiations regarding the septic system and USAG’s demands that Plaintiffs repair the
septic system before the sale could take place. Plaintiffs spent a substantial amount of time
and money repairing the septic system at the Karolyi Ranch based on repeated assurances
by USAG that USAG would follow through on its agreement to purchase the property.
5.25

In December of 2016, Larry Nassar was arrested on child pornography

charges and over the next few months, additional lawsuits were filed and various articles
began to come out which made clear that Larry Nassar’s conduct was not an isolated event.
Subsequently, on April 18, 2017, USAG sent Karolyis a Notice of Termination of Purchase
and Sale Agreement cancelling the Purchase Agreement. The termination letter read:
pursuant to Section 8[11] of the Purchase Agreement based upon all of the facts
11

Section 8 of the Purchase Agreement reads in relevant part:
In addition to any other conditions set forth in this Agreement, the obligation of Purchaser to

PLAINTIFFS’ ORIGINAL PETITION

PAGE 15 OF 32

 and circumstances, including but not limited to, the events that have
occurred, conditions that have been discovered and claims that have been
asserted since the effective date of the Purchase Agreement.
Specifically, in light of (a) the filing of the lawsuit currently pending against
Dr. Larry Nassar, USAG, the Karolyis, and others... [certain other noncompliance issues regarding the septic system on the Karolyi Ranch]
Furthermore, the pending litigation has materially affected both (i) USAG
sponsor relationships that provide vital funding to allow USAG to use the
Karolyi Ranch facilities as intended and (ii) the general perception of the
Karolyi Ranch as an appropriate venue for USAG’ activities, all of which will
undoubtedly adversely affect the ownership, operation and value of the
property going forward.
...
As you know, we genuinely appreciate the long-standing relationship between
USA Gymnastics and the Karolyis, and we regret that the events and
conditions described above have led us to make this difficult but necessary
business decision to terminate the Purchase Agreement.
5.26

The letter was signed by Paul Parilla—USAG’s Chairman. Paul Parilla also

acted as USAG’s attorney in negotiating certain real estate matters. In that role, Paul Parilla
drafted the NTTC Lease between USAG and Plaintiffs and (upon information and belief)
was directly involved in drafting the Purchase Agreement. USAG and Paul Parilla

consummate the transaction contemplated hereunder is conditioned upon the following: ... (d) as of
the Closing Date, no event shall have occurred, and no condition shall have been discovered by
Purchaser, with respect to or in connection with the Property which could reasonably be expected (1)
to have an adverse effect on the ownership, operation or value of the Property or on the use of the
Property for Purchaser’s intended use or (2) to result in Purchaser incurring costs to remedy, cure or
otherwise address such occurrence or condition that are not currently contemplated by Purchaser,
in each case as determined by Purchaser in its sole and absolute discretion.
... If one or more of the conditions set forth in (a) and (d) above is not satisfied as of the Closing Date
and the failure to satisfy such condition is not the result of an action, omission, breach or default by
a Seller after the date of this Agreement, then Purchaser may (A) waive such condition and proceed
to Closing, or (B) terminate this Agreement by delivering notice thereof to the Sellers, in which case
Purchaser shall pay to Sellers independent consideration of $100.00 and neither Purchaser nor
Sellers shall have any further rights or obligations hereunder, except those that by their terms survive
the termination of this Agreement. Sellers acknowledge and agree that the foregoing conditions are
for the benefit of Purchaser only... Sellers shall not have any right to terminate this Agreement or to
refuse to close the transaction contemplated by this Agreement if any of such conditions have not been
satisfied as of the Closing Date.

PLAINTIFFS’ ORIGINAL PETITION

PAGE 16 OF 32

 personally12 had knowledge of Larry Nassar’s conduct at the time the one-sided Section 8
escape-hatch was inserted into the Purchase Agreement. The Karolyis did not have any
knowledge.
5.27

Despite the termination of the sale, the parties still agreed to continue the

NTTC Lease going forward. This was until January 18, 2018, when USAG informed
Plaintiffs that it would be terminating the NTTC Lease in apparent response to immense
public pressure.
E.

USOC’s demand for indemnification.
5.28

The initial Nassar-lawsuits which were filed by gymnasts and others were

pointed at USAG, certain USAG officers and the Karolyis. However, as more facts were
uncovered by plaintiffs in the personal injury suits, the newer lawsuits began focusing on
Michigan State University, USAG and USOC while completely omitting the Karolyis or any
allegations of wrong-doing by the Karolyis. Two of these newer personal injury suits were
Jane PCNE Doe vs. USAG, et al., BC667053 (June 30, 2017) (the “PCNE Matter”) and
McKayla Maroney v. Michigan State University, et al., BC687396 (December 20, 2017)
(the “Maroney matter”).13 Both lawsuits alleged conduct occurring during the time period
of 2009 - 2013.

12

At this point in time, Paul Parilla had already visited the FBI offices with Steve Penny to discuss the
sexual misconduct of Larry Nassar.

13

Since USOC’s original request for indemnification was sent to the Karolyis, additional lawsuits have
been filed against USOC and USAG containing similar allegations of sexual assault by Larry Nassar
and a failure to supervise and put in place rules by USOC, USAG and USAG’s Chairman Paul Parilla.
See Alexandra Rose Raisman v. United States Olympic Committee, et al., 18CV323989 (Santa Clara
County) (February 28, 2018) (the “Raisman Matter”); Weiber v. United States Olympic Committee,
et al., BC702167 (Los Angeles County) (April 17, 2018) (the “Wieber Matter”). Neither the Karolyis
nor any of the entities included herein as plaintiffs, are named or alluded to in either of these lawsuits.
Plaintiffs anticipate there may also be a dispute as to who is owed indemnification in these additional
matters as well. Plaintiffs also anticipate that USOC will continue to be made a defendant in more and
more actions by amended complaint in previous complaints and by newly filed complaints across the
country.

PLAINTIFFS’ ORIGINAL PETITION

PAGE 17 OF 32

 5.29

Neither BMK Training nor the Karolyis were named as defendants in the

above two complaints.14 Further, the Complaints make no mention of any alleged wrongs
of Bela, Martha, Karolyi Camps or the BMK entities.15
5.30

Despite this, on February 6, 2018, USOC sent a request for indemnification

to BMK Training for the above two lawsuits based on the Licensing Agreement. See Request
for Indemnification attached as Exhibit A. In the request, USOC alleged that BMK Training
was required to indemnify USOC because the lawsuit arises out of the negligence or
intentional misconduct of BMK Training or its agents. Specifically, USOC alleged:
Although the Lawsuits do not allege any direct claims against BMK
Training, the Lawsuits allege employees and agents of BMK Training who
worked at the Karolyi Ranch, through their actions and inactions, were
negligent in their supervision of athletes, which cause the Plaintiffs in the
lawsuits to suffer bodily injury.
Exhibit A (emphasis added).
5.31

Plaintiffs have read the complaints filed in the PCNE Matter, Maroney Matter

and the multiple new complaints filed to date against USOC and no such allegations exist
in those pleadings. Instead, the crux of the complaints are that USAG and USOC—the
entities entirely in charge of overseeing operations at the NTTC and the National Team
Camps held thereon—repeatedly failed to put in place (or enforce) rules which would
protect young gymnasts from potential predators such as USAG’s agent Larry Nassar. For
example, the following excerpts are quoted from the Wieber Matter filed April 17, 2018:
¶8

Defendant USOC had a mandatory obligation to ensure that before granting

14

Nor were they alluded to as an obvious ‘John Doe’ as has been the case in certain other lawsuits filed.

15

Noticeably absent from the more recent complaints, are the completely false allegations that the
Karolyis physically abused the athletes participating in the National Team Camps. These defamatory
allegations were entirely made up and have no basis in reality.

PLAINTIFFS’ ORIGINAL PETITION

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 NGBs, including USAG, a sanction to host National or International events,
that they provide “proper medical supervision will be provided for athletes
who will participate in the competition.” 36 U.S.C §§ 220525(b)(4)(E).
¶ 10

During all relevant times during JORDYN WIEBER’s abuse, Defendant
USOC was responsible for ensuring that the Karolyi Ranch, provided
adequate supervision for the minors competing thereat, reasonable safety
protocols ensuring the safety of those minors, and reasonable supervision,
training, and oversight procedures for all medical care provided to gymnasts
at the Karolyi Ranch, including training of staff on identification of sexual
abuse, proper procedures, use of proper medical care, and staffing of ample
medical personnel to ensure proper care of all minor gymnasts, including the
Plaintiff JORDYN WIEBER.. Despite these duties under the law, Defendant
USOC implemented virtually no safety protocols or procedures at the Karolyi
Ranch, and failed to provide any supervision for minor gymnasts training at
the Karolyi Ranch.

¶ 11

At all times relevant to the Plaintiff’s sexual abuse at the hands of NASSAR,
Defendant USOC was responsible for the Plaintiff’s supervision while
competing at the Olympics, the Olympic Trials, and the World Artistic
Gymnastics Championships and trainings for such. Despite being the body
responsible for the Plaintiff’s safety during these events, including, being
responsible for her supervision, medical care, and well-being, Defendant
USOC provided entirely inadequate or [in]effective measures to ensure her
protection from the risk of sexual abuse, either at the events or in her living
quarters, where sexual abuse by NASSAR occurred.

¶ 15

Due to [USOC’]s systemic and knowing failure to enforce [safety] policies, the
Plaintiff was sexually harassed, abused, and molested by Defendant NASSAR;
an individual who was subject to these policies.

¶ 16

Defendant USOC was required to ensure that NGBs, including Defendant
USAG, ensure that “proper safety precautions have been taken to protect the
personal welfare of the athletics and spectators at the competition.” 36 U.S.C.
§§ 220525(b)(4)(F). Moreover, as part of an NGB's mandate from the
Defendant USOC, it was to, “encourage and support research, development,
and dissemination of information in the areas of sports medicine and sports
safety.” 36 U.S.C. § 220524(9). Had Defendant USOC performed its mandate
reasonably, diligently, and in accord with its duty to protect minor children
under both Federal and California Law, Defendant NASSAR would have been
investigated, sanctioned, and/or removed from Defendants USAG, USOC,
and others, and never have been placed in solitary contact or contact without

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 qualified supervision, with the Plaintiff. Defendant USOC never adequately
or reasonably enforced these policies, thus, the sexual abuse perpetrated by
Defendant NASSAR on the Plaintiff, as well as hundreds of other minor girls,
was a natural, probable and foreseeable outgrowth of Defendant USOC's
dereliction of its duties.
¶ 22

Defendant USAG was the NGB responsible for the supervision of the Plaintiff
while at both National and International events she attended as a minor
competitive gymnast; competitions in which she [was] molested at, by
NASSAR. For this reason, USAG had a duty to provide reasonable and
adequate supervision of the Plaintiff while she attended these events, while
she was travelling to and from these events, and during the times that the
Plaintiff was being treated for medical ailments. Despite having this duty, as
the Plaintiff was a minor at the time, entrusted to their custody, care and
control, Defendant USAG failed to adequately perform these duties, which
ultimately led to the molestation of the Plaintiff.

5.32

USOC’s request for indemnification from Plaintiffs has no basis in law or

reality and is merely USOC and USAG’s attempt sacrifice the Karolyis (after leading them
along for months) to shift blame off of themselves. Larry Nassar was at all times an agent
of USAG and subject to USAG’s control. Further, USOC was in control over USAG and had
full oversight over USAG’s operations, regulations and procedures which are alleged to be
absent or unenforced to the detriment of gymnasts present at the NTTC and otherwise
competing for the benefit of USOC and USAG.
5.33

USOC and USAG held exclusive control over the NTTC, their agents and

employees, the lodging, the gymnasiums (and attached training rooms), all medical or
physical treatment, competitions and travel. Moreover, USOC and USAG had exclusive
control over their agent Larry Nassar (who worked with them for decades) and had every
right to control the parameters of his work and conduct—the Karolyis did not. USOC has
no basis in law or fact to put blame on Plaintiffs for conduct which clearly does not
implicate Plaintiffs and for which, USAG and USOC’s agents and policies are primarily

PLAINTIFFS’ ORIGINAL PETITION

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 responsible.
6. PLAINTIFFS’ SUIT FOR DECLARATORY RELIEF
AGAINST ALL DEFENDANTS
A.
Declaration 1 - BMK Training does not owe any duty to indemnify USOC
or USAG under the Licensing Agreement.
6.1

The Licensing Agreement between BMK Training, USAG and USOC is a valid

contract which provides for indemnification.
6.2

There is a current dispute as to whether indemnification is owed to USOC in

the PCNE Matter and the McKayala Maroney Matter and who owes the duty to indemnify
USOC. USOC has sent a request for indemnification to BMK Training which is entirely
unjustified and which BMK Training will refuse to tender. This question of law constitutes
a real and substantial dispute and the dispute will be resolved by the declaration sought
herein.
6.3

BMK Training seeks a declaration that it is not required to indemnify USOC

for the above two lawsuits (or any other lawsuits of the same or similar nature) based on
the following undisputed facts: a) based on the face of the complaints, no wrongful conduct
is alleged against Bela, Martha, BMK Training, or any of their agents, b) Larry Nassar was
never the Karolyis’ agent and was never subject to their control, c) Larry Nassar was USAG’s
agent and subject to its control at all times, and d) Plaintiffs had no knowledge of Larry
Nassar’s sexual misconduct until 2016—which is years after the conduct complained of in
the aforementioned lawsuits ceased (2013).

PLAINTIFFS’ ORIGINAL PETITION

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 B.
Declaration 2 - Plaintiffs Bela, Martha and Karolyi Camps are all
owed full and complete indemnification by USAG and/or USOC for those
lawsuits and investigations which arise out of the conduct of USAG’s agent
Larry Nassar.
6.4

Plaintiffs Bela, Martha and Karolyi Camps have been named and served as

Defendants in the following personal injury suits arising out of Larry Nassar’s alleged
sexual assault of gymnasts:
a.
b.

6.5

Jane LM Doe v. Larry Nassar, BC-638724, Los Angeles County,
California (October 26, 2016); and
Jane AJ Doe v. Doe 1, 30-2017-00899357, Orange County, California
(January 24, 2017).

Plaintiffs have incurred legal fees in defending the above two lawsuits.

Further, Plaintiffs have incurred additional fees in: responding to Congressional subpoenas,
responding to various criminal and state investigations, and coordination with the media.
6.6

USAG had Plaintiffs Bela, Martha and Karolyi Camps named as additional

insured’s under USAG’s insurance policy and some, but nowhere close to all, of Plaintiffs’
defense costs have been reimbursed through this. However, USAG has still refused to
provide full indemnification of Bela, Martha and Karolyi Camps and a significant amount
of their legal expenses have yet to be reimbursed.
6.7

Plaintiffs Bela, Martha and Karolyi Camps are owed indemnification by USAG

pursuant to USAG’s by-laws which provide that:
The Corporation shall indemnify each of its present and former Directors,
Officers, employees, committee members and official representatives,
and any person who is or was serving another corporation or
other entity in any capacity at the written request of the
Corporation, and hold them harmless from all amounts actually and
reasonably incurred by such person (including, but not limited to, judgments,
costs and attorneys' fees) in connection with the defense of any pending or
threatened litigation to which such person is, or is threatened to be made, a

PLAINTIFFS’ ORIGINAL PETITION

PAGE 22 OF 32

 party because such person is or was serving in such capacity.
USAG by-laws, ¶ 13.1 (emphasis added). Plaintiffs have been brought into the above
litigation by reason of their positions as former official representatives and/or were serving
another corporation or entity at the written request of the Corporation.
6.8

Similarly, the by-laws of USOC read:

The corporation shall indemnify each of its present or former directors,
officers, employees, committee members or official representatives, or
any person who is or was serving another corporation or other
entity in any capacity at the request of the corporation, against all
expenses actually and reasonably incurred by such person (including, but not
limited to, judgments, costs and counsel fees) in connection with the defense
of any pending or threatened litigation to which such person is, or is
threatened to be made, a party because such person is or was serving in such
capacity. This right of indemnification shall also apply to expenses of
litigation that is compromised or settled, including amounts paid in
settlement, if the corporation shall approve such settlement as provided in
Section 17.2 of these Bylaws. Such person shall be entitled to be indemnified
if he/she acted in good faith and in a manner he/she reasonably believed to
be in, and not opposed to, the best interests of the corporation. The
termination of any litigation by judgment, order, settlements, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner
reasonably believed to be in, and not opposed to, the best interests of the
corporation.
USOC By-laws, ¶ 17.1 (emphasis added). Bela, Martha and Karolyi Camps are owed
indemnification as they were serving another corporation (USAG) at the request of USOC,
and they were made a party to litigation because of that relationship.
6.9

Further, Plaintiffs Bela, Martha and Karolyi Camps are owed indemnification

from USAG pursuant to the NTTC Lease because ‘Lessor’ (Karolyi Camps) and Lessor’s
officers or employees (Bela and Martha) are being sued because of the “negligence or
intentional misconduct of Lessee [USAG], or its agents and employees [Larry Nassar].”

PLAINTIFFS’ ORIGINAL PETITION

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 6.10

Plaintiffs are further due indemnification based on equity and common law

pursuant to their close personal relationship with Defendants and based on Defendants
repeated promises that they would indemnify Plaintiffs.
7. ADDITIONAL CAUSES OF ACTION FOR DAMAGES
A.
Breach of the Purchase Agreement - BMK Training, BMK Partners, Bela
Karolyi and Martha Karolyi against USAG.
7.1

On July 22, 2016, Plaintiffs BMK Training, BMK Partners, Bela and Martha

entered into a valid contract with USAG to sell a 36.2 acre portion of the Karolyi Ranch.
7.2

USAG agreed to purchase the property for the agreed upon price.

7.3

USAG has breached the contract by refusing to purchase the property without

a valid excuse for the same. USAG’s termination of the Purchase Agreement based upon
a stigma associated with the land is not a valid excuse for termination, because USAG knew
there were allegations that its agent, Larry Nassar, had sexually assaulted gymnasts at the
NTTC in 2015—a year before the contract was signed. USAG thus waived any objection to
the same. Moreover, the stigma was a direct result of USAG’s agent at the NTTC and other
locations where USAG invited and requested him to be. Nothing on the part of Plaintiffs
caused or contributed to cause any such stigma.
7.4

USAG’s failure to purchase the property based solely upon USAG’s own

stigmatization of the land (which they had full knowledge of at the time the agreement was
signed) constitutes a breach of the Purchase Agreement.
B.

Breach of the NTTC Lease - BMK Training and Karolyi Camps against
USAG.
7.5

At all relevant times, BMK Training and USAG had a valid contract in the

form of an agreement by BMK Training to lease a portion of the Karolyi Ranch to USAG for

PLAINTIFFS’ ORIGINAL PETITION

PAGE 24 OF 32

 the purposes of conducting the National Training Camps and other USAG events. Further,
Karolyi Camps was the assignee of the NTTC Lease (and thus, landlord) beginning in
January of 2011.
7.6

7.7

Pursuant to the NTTC Lease, USAG agreed:
a.

“Lessee shall not permit the Premises, or any part thereof, to be used
for any disorderly, unlawful or hazardous purpose, nor as a source of
annoyance or embarrassment to Lessor” ¶ 12.3;

b.

“not to violate applicable fire laws or regulations, or any applicable
statutes, rules or regulations now existing or subsequently enacted or
established by the local, state or federal governments, and Lessee shall
be answerable for all nuisances caused or suffered at the Premises, or
caused by Lessee at the Premises” ¶ 17.(a); and

c.

“not to suffer or permit any activities to be carried on or use made of
the Premises which shall be unlawful, noisy, offensive, or injurious to
any person or property” ¶ 17.(b).

USAG breached these covenants when it invited Larry Nassar to the NTTC,

upon which USAG’s agent then allegedly molested gymnasts.
C.

Tortious Interference - Plaintiffs against USOC
7.8

Plaintiffs had two valid contracts with Defendant USAG: a) the NTTC Lease;

and b) the Purchase Agreement.
7.9

Upon information and belief, Defendant USOC willfully, intentionally, and

with malice, interfered with both contracts by threatening USAG with the loss of its status
as a national governing body if USAG did not wrongfully terminate the contracts.
7.10

Defendant USOC’s pressure on USAG was a cause in fact for the termination

of the aforementioned contracts and Plaintiffs have been damaged by the same.
D.

Promissory Estoppel - Plaintiffs against USAG
7.11

USAG made repeated representations to Plaintiffs that it would purchase the

PLAINTIFFS’ ORIGINAL PETITION

PAGE 25 OF 32

 property.
7.12

Plaintiffs relied upon USAG’s representations in making the decision to

expend large sums of money to add improvements to the Karolyi Ranch.
7.13

Plaintiffs were injured by such reliance, because USAG terminated the

Purchase Agreement and such improvements were now lost as sunk costs. Moreover,
because of USAG’s agent Larry Nassar’s conduct at the NTTC, the Karolyi Ranch could no
longer be used as an Olympic Training Facility, therefore rendering such improvements
useless.
E.

Breach of Fiduciary Duty - Bela and Martha Karolyi against USAG.
7.14

The Karolyis and USAG had a close, long-lasting relationship of trust and

confidence. This is evidenced by the fact the parties maintained a verbal lease for over 10
years and spent the majority of their decades-long relationship acting on a ‘handshake’
basis and continued assurances by USAG that the organization would always take care of
two of the largest figures in the sport. Bela and Steve Penny (President of USAG) were close
personal friends and Steve Penny was directly involved in negotiating and closing the
Purchase Agreement and all steps leading up thereto. After litigation began and Plaintiffs
sought indemnification from USAG under the NTTC Lease (which Paul Parilla personally
drafted), Paul Parilla continued to represent to the Karolyis that USAG would “wrap their
arms” around Karolyis and take care of them.
7.15

The Karolyis entrusted USAG with using their name, reputation and likeness

to promote the sport of gymnastics and entrusted USAG with near full control of their most
valuable assets—their decades-long earned reputation as incredible gymnastics coaches.
7.16

When the litigation onslaught began, USAG promised once again to “wrap

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 their arms” around the Karolyis, to partner with them and defend them, to continue
forward with the purchase of their property, and informed the Karolyis that the allegations
regarding Larry Nassar were an isolated event and not a systematic failure of USAG’s
policies.
7.17

7.18

USAG, has breached its fiduciary duties owed to the Karolyis by:
a.

Failing to inform the Karolyis in 2015, or before, that sexual assault
and misconduct allegations had been made against Larry Nassar;

b.

Failing to inform the Karolyis in 2015 that Larry Nassar was being
asked to resign based on sexual misconduct;

c.

Negotiating the Purchase Agreement with the Karolyis while failing to
inform them of Larry Nassar’s alleged sexual misconduct which took
place at the NTTC and which USAG had knowledge of before July of
2016 when the Purchase Agreement was signed;

d.

Encouraging the Karolyis to incur costs to update and renovate the
Karolyi Ranch when USAG knew there was a substantial probability
it would not purchase the same because of Larry Nassar’s conduct;
and

e.

Continuing to use the Karolyis’ name, image and reputation to
promote the NTTC and gymnastics while failing to inform the Karolyis
of Larry Nassar’s alleged sexual misconduct and impending harm to
name and reputation.

USAG used the close relationship between itself and the Karolyis to its benefit

and then disregarded the Karolyis when they no longer felt it expedient to keep them close.
USAG’s breaches of their fiduciary duties were wilful, intentional and committed with
malice.
F.

Premises Defect - Plaintiffs against USAG.
7.19

At all relevant times, USAG held exclusive control of the premises where the

National Training Camps took place.

PLAINTIFFS’ ORIGINAL PETITION

PAGE 27 OF 32

 7.20

Plaintiffs, as well as hundreds of gymnasts, were invitee’s on the property.

7.21

USAG brought Larry Nassar to the NTTC where hundreds of young female

gymnasts would be located. By doing so, USAG created an unreasonably dangerous
condition on the premises which they knew or should have known of (whether through
imputed or direct knowledge).
7.22

USAG breached its duty of care by failing to warn anyone of the danger or

seeking to make the premises reasonably safe.
G.

Nuisance - Plaintiffs against USAG.
7.23

Plaintiffs have a private interest in the Karolyi Ranch and the Karolyi

residence located thereon.
7.24

While USAG was in control of a portion of the Karolyi Ranch, USAG created

a condition which now unreasonably interferes with Plaintiffs use and enjoyment of the
Karolyi Ranch as a whole. USAG maintained the condition on the premises either
negligently or through abnormally dangerous conduct. Specifically, USAG brought its
agent, Larry Nassar, to the property who allegedly molested dozens of women thereon and
then returned the property to the Karolyis with extreme stigma now associated therewith.
7.25

USAG’s conduct created a permanent stain on the land no different than if

toxic waste were spilled thereon, preventing the premises from being used as a U.S.
Olympic Training Facility and for which Plaintiffs have suffered damages.
H.

Negligence - Plaintiffs against all Defendants.
7.26

Defendants owed a duty to Plaintiffs to use ordinary care in conducting their

operations on the NTTC so as not to create any unreasonable risk of harm to the Karolyis
or their property while Defendants controlled the NTTC.

PLAINTIFFS’ ORIGINAL PETITION

PAGE 28 OF 32

 7.27

Defendants breached this duty by creating a dangerous condition on the

premises through bringing Larry Nassar to a location where hundreds of young women
would be and by putting no rules in place to prevent the danger from occurring. This was
done by Defendants while simultaneously promoting the Karolyi name and associating the
ranch with the Karolyis.
7.28

The risk of harm to the Karolyis’ reputation and health (not to mention the

well-being and health of the hundreds of gymnasts) was substantial and the utility of
Defendants’ actions were non-existent. Defendants thus breached their duty of care owed
to Plaintiffs and Plaintiffs were harmed thereby.
I.
Vicarious Liability for Aiding and Abetting, Principal-Agent Relationship
and Joint Venture.
7.29

USAG held the right to control the work of its agent Larry Nassar and

controlled the workspace, policies and tools he would follow when acting as a trainer and
National Medical Director for USAG.
7.30

USAG conferred actual or apparent authority on Larry Nassar to perform

osteopathic medical procedures on its behalf for the gymnasts it had brought to the NTTC
(under its exclusive control) and at other events under the control of USAG. Larry Nassar
was acting within the scope of his authority when he committed the relevant conduct
mentioned herein and therefore USAG is vicariously liable for the same.
7.31

At all relevant times, USOC held the right to assert control over the

operations, rules and conduct of USAG.
7.32

USOC conferred actual authority on USAG to oversee the operations at the

NTTC on its behalf. In the alternative, USOC conferred apparent authority on USAG by
allowing them to use Olympic marks and represent itself as an endorsed Olympic

PLAINTIFFS’ ORIGINAL PETITION

PAGE 29 OF 32

 organization. USAG was acting within the scope of its authority when it committed all of
the torts mentioned herein and therefore USOC is vicariously liable for the same.
7.33

USOC acted in concert of action with USAG in breaching USAG’s fiduciary

duties owed to the Karolyis. Specifically, USAG knew of Larry Nassar’s alleged sexual
misconduct conduct by at least 2015 and knew of USAG’s course of conduct with regards
to the Karolyis. USOC tacitly agreed to USAG’s tortious conduct by continuously
authorizing USAG to operate in the manner it did so. USOC’s own conduct in doing so was
itself independently wrongful.
7.34

Alternatively, USOC and USAG constituted a joint venture for the purpose of

overseeing activities at Official Olympic Training Centers such as the NTTC. Both parties
had an equal right to direct and control the venture. USAG committed all of the torts
mentioned herein while acting within the scope of the joint venture and therefore USOC is
jointly liable for the same.
8. ATTORNEYS’ FEES AND DAMAGES
8.1

Plaintiffs seek damages in the form of, but not limited to:
a.
b.
c.
d.
e.
f.
g.

8.2

Benefit of the bargain damages owed under the Purchase Agreement;
Stigma damages from the loss of market value of the Karolyi Ranch;
Damages for loss of use of the Karolyi Ranch;
Loss of good-will and harm to reputation;
Past and future mental anguish and pain and suffering of the Karolyis;
Punitive damages; and
Attorney’s fees.

Pursuant to the NTTC Lease between Karolyi Camps (as assignee) and USAG,

Plaintiffs seek attorneys’ fees based on paragraph 19.16 of the NTTC Lease.
8.3

Moreover, Plaintiffs are entitled to attorney’s fees for breach of contract under

Tex. Civ. Prac. & Rem. Code § 38.001.

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 8.4

Further, BMK Training seeks attorneys’ fees pursuant to paragraph 11.4 of the

Licensing Agreement between BMK Training, USAG and USOC.
9. JURY DEMAND
9.1

Plaintiffs hereby request a trial by jury and have tendered payment of the jury

fee.
10. PRAYER
10.1

Plaintiffs pray that Defendants be cited to appear and answer herein, and that

upon final hearing or trial, Plaintiffs have from Defendants the following, in the alternative
or cumulatively, as allowed by law:
a.

b.

c.
d.
e.
f.

Declarations that: i) BMK Training does not owe indemnification to
USOC, and ii) Bela, Martha and Karolyi Camps are owed
indemnification by USAG.
Judgment against Defendants for a sum within the jurisdictional
limits of this Court for all actual damages, both past and future, direct
and consequential, as described above;
Pre and post-judgment interest as provided by law;
All of Plaintiffs’ attorneys’ fees and litigation expenses;
Costs of suit; and
Such other and further relief, at law and in equity, to which Plaintiffs
may show themselves to be justly entitled.
Respectfully submitted,
CHRISTIAN, SMITH & JEWELL, L.L.P.
By: //s// Gary M. Jewell
GARY M. JEWELL
State Bar No. 10664800
JAMES “WES” CHRISTIAN
State Bar No. 04228700
JOE E. LUCE
State Bar No. 12665050
Timothy R. Cook
State Bar No. 24101646

PLAINTIFFS’ ORIGINAL PETITION

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 2302 Fannin, Suite 500
Houston, Texas 77002
Telephone: (713) 659-7617
Facsimile: (713) 659-7641
ATTORNEYS FOR PLAINTIFFS

PLAINTIFFS’ ORIGINAL PETITION

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