PSD Wins Forum Fight in Federal Court in Michigan Sending Former Employee’s Action to Maine

On April 2, 2020, PSD won a motion to transfer federal court claims from Michigan to Maine. In the case, a former employee sued Legacy Global Sports, LP and Premier Sports Events, LLC. By his complaint, the employee sought millions of dollars from PSD’s clients, PSE and Legacy. The former employee claimed he had been discriminated against as a male. Furthermore, he alleged breaches of certain employment and bonus agreements. Prior to the events he complained about, this employee joined the business as part of a buyout of a company he started.

Forum Selection Clause

Importantly, the Purchase & Sale Agreement contained a forum selection clause requiring the resolution of any dispute between the parties in a Maine court. By contrast, the employee signed that agreement for the corporate seller. With respect to the P&S Agreement, he did not sign in his individual capacity. His employment and bonus agreements contained choice-of-law provisions that provided for the application of Maine law. Those agreements lacked forum selection clauses.

Ruling

Despite the presence of individual claims, the federal court found the former employee “closely related” to the selling party and personally bound by the forum selection clause in the P&S Agreement. The ruling applied even for claims arising under his employment agreement and bonus agreement.

The federal court explained:

Lukasak did not personally sign the P&S Agreement. However, he admits that he was intimately related to the P&S Agreement: He signed the P&S Agreement twice, in his capacity as representative of both Premier Sports Events, Inc, and Premier Sports Events, LLC. In doing so, Lukasak represented the entirety of the seller side of the agreement. He was closely involved in the buyout deal, as evidenced by the fact that he negotiated the deal on the seller side. The buyout was the sole motivating factor for the creation of both his Employment Agreement and his Bonus Incentive Agreement: Without the buyout, the supplemental contracts that bind Lukasak personally would not exist. Taking all these facts together, it is clear to the Court that all of the contracts signed on February 1, 2014 were part of the same transaction and that they form one agreement.

As a result, the case will proceed if at all in Maine. Click here for a copy of the decision.

PSD lawyers Barry Pollack, Phil Rakhunov, Ashly Scheufele and Lauren Riddle represented PSE and Legacy.

PSD Attorneys Barry Pollack, Peter Duffy and Lauren Riddle successfully defended a New York private equity fund and its North Carolina portfolio company. The North Carolina business court tossed a lawsuit brought by Aym Technologies. The plaintiff claimed that CBC, LLC, a behavioral care company, hired a contractor who helped Aym attempt a vertical integration plan focused on a roll-up of North Carolina healthcare companies. According to Aym’s theories, Aym and a private equity fund managed by Scopia Capital Management then proceeded successfully implement a roll-up strategy. Aym claimed more than $20 million in damages.

The North Carolina business court agreed with CBC and Scopia that Aym failed to prove its plan constituted a trade secret, failed to prove the information was misappropriated, and failed to prove that it had any pertinent enforceable restrictions on the contractor who joined CBC.

The court issued a forty-page decision granting summary judgment.

Scopia and CBC have separate contract claims against Aym that remain pending in New York Supreme Court arising from a non-disclosure agreement that Aym’s principal signed when expressing interest in investing in CBC.

On August 2, 2019, PSD lawyers Barry Pollack, Ashly Scheufele and Lauren Riddle won a motion to dismiss in the United States District Court for the District of Massachusetts, in Newton Covenant Church versus Great American Insurance Company.

The Newton Covenant Church sued Great American, claiming that the insurance carrier failed to provide coverage when it and its members were sued by another faction of another church concerning which entity and individuals had the right to certain church property.

In a written opinion, the District Court agreed with PSD’s position that the plaintiffs did not constitute “Insureds” under the pertinent insurance policy because they were sued as trespassers not as directors or officers. The court also agreed that the “Insured versus Insured” clause would exclude coverage if any of the defendants constitutes an Insured.

In Carr v. New Enterprise Associates, et al., PSD represented Ken Carr, the founder of a medical technology company specializing in the use of ablation catheters for treatment of cardiac atrial fibrillation and high blood pressure. On April 4, 2019, the Delaware Court of Chancery approved a class action settlement in which PSD represented the lead plaintiff.

Carr alleged that New Enterprise Associates, certain of its funds and partners, and directors and officers of Advanced Cardiac Technologies, Inc., breached fiduciary duties to a class of minority stockholders by selling a warrant to Abbott Laboratories on the same day NEA completed two other transactions with Abbott involving two other portfolio companies. Carr alleged further that the defendants completed a financing round that diluted the class members’ interests just before engaging in the transaction with Abbott that they knew would happen but did not adequately disclose to the class members.

Chancellor Bouchard found that Carr was not just an adequate class representative, but an exemplary one. Chancellor Bouchard also found that PSD was not just an adequate lead counsel, but also provided “excellent” and “outstanding” representation generating a $9 million dollar settlement for the class that represented what they would have received if the company had been sold pre-dilution for $375 million. The class members also retained their stock interests in the settlement. Chancellor Bouchard also approved the class as defined in the settlement and issued Judgment granting Carr’s request for an extra incentive fee of $175,000 and an award of attorneys’ fees and costs.

When approving the substantial fee award for PSD, Chancellor Bouchard said, with respect to “the Pollack firm, they did — I’ll just say this very bluntly — an outstanding job in this case pursuing their clients’ interest in an aggressive but balanced manner.”

Barry Pollack and Josh Solomon served as lead counsel of record for the class.

On March 18, 2019, PSD Partner Barry Pollack spoke on NBC News about the source of the tipster leading to the nationwide college admissions scam charges.

On March 19, 2019, a federal appellate court issued a decision affirming a sanctions award against opposing counsel in the full amount of $422,433.

PSD Discovers Misappropriation of Documents

During two related employment lawsuits in the Southern District of Florida, PSD represented a health care company, EDCare Management. In the course of discovery, it became clear that the plaintiff, a former Executive Assistant, had removed and retained documents that belonged to EDCare. As the appellate court described: “Although the defendants had sent Eldredge a written request for the return of company property and the Amlong firm [which represented her] a civil-theft demand letter, Eldredge and
her lawyer failed to disclose the EDCare documents in their possession and then used some of these confidential records during a deposition. … [The trial court] ordered Eldredge to conduct a diligent search, to return to the defendants all company property in her possession, and to provide an affirmative statement that she has turned over all company property in
her possession. In response to the magistrate judge’s order, Eldredge produced three boxes of documents, two thumb drives, and a disk, almost all of which contained confidential EDCare information.”

PSD Lawyers Obtain Waiver of Privilege from Plaintiff

PSD lawyers negotiated the dismissal of claims against EDCare and exchanges of releases with Eldredge, while she also waived her attorney-client privilege so that sanctions could be pursued against her counsel. The waiver resulted in a massive unraveling of case-long scheme by Eldredge and her counsel to withhold a massive amount of materials that she had retained.

PSD WINS $422,433 IN SANCTIONS AGAINST OPPOSING COUNSEL

PSD persuaded the trial court that the cases were essentially frivolous ab initio and that misconduct so permeated the case that an award of fees from near the outset of the action was appropriate. The Eleventh Circuit Court of Appeals affirmed the entirety of the award issued by the trial court.

LAW360 reported the successful appellate win by PSD and EDCare. Lead counsel on the case, founding PSD partner Barry Pollack, was quoted in the article: “Today’s decision makes clear what most people learn in kindergarten. You are not allowed to take what belongs to others. Especially if you are a lawyer.”

PSD represented a corporation in the District of Massachusetts accused of False Claims Act violations and retaliation under federal and state laws. The Complaint alleged that plaintiff was hired by the corporation, which was in turn allegedly compensated through Medicare, Medicaid and Mass Health. Plaintiff further alleged that assessments were not done, were done less often than required for the patients for at minim the last three years and potentially longer.

PSD successfully argued that the plaintiff failed to state a claim under federal or state law. A copy of the federal court opinion dismissing the False Claims Act and retaliation claims can be found at this link: Federal Court Dismissal Order

PSD represented a former employer in the District of Maryland. The former employee brought claims that the employer violated the False Claims Act, that certain officers conspired to violate the False Claims Act, and that the employer fired the employee in retaliation for her reporting wrongdoing and refusing to violate the law herself. The federal court dismissed all claims with prejudice. A copy of the opinion can be found at this link: 181028 Memorandum Opinion and Order Dismissing with Prejudice

PSD made a novel argument over the language in the specific claim forms and focused on the lack of quality of the plaintiff’s reporting of the issue.

In a 5-page decision, a federal judge in the Southern District of New York dismissed two individual defendants from a complex commercial litigation. An underlying dispute arose from a sale of an 81% interest in a company holding certain railway property and assets with an enterprise value of more than $180 million. An affiliate of the seller has a separate pending action against the buyer based on allegations that the buyer has knowingly aided and abetted breaches of fiduciary duty. In a separate action, Plaintiffs brought certain claims against a Canadian citizen and a Florida citizen who were the indirect beneficial owners of the seller.  The federal court granted the individuals’ motion to dismiss on personal jurisdiction grounds. The court explained:

“Plaintiffs misleadingly suggest that the SPA was ‘the genesis of all the disputes between the parties.’ (Pl.’s Opp’n 10). Yes, the SPA is the ‘genesis’ of all Plaintiffs’ claims insofar as it is how CMC Acquisition acquired an interest in CMC Industries. But that aside, CMC Industries’s claim against the Individual Defendants has nothing to do with the SPA. The claim does not involve the parties to the SPA, it does not allege breach of the SPA, and it does not call for interpretation of the SPA; instead, it involves an internal corporate governance dispute between a Texas corporation and foreign shareholders of that corporation governed by Texas law. Notably, elsewhere, CMC Acquisition itself has conceded that ‘the SPA includes no provision concerning the post-acquisition management of CMC or TRT LeaseCo,’ (Docket No. 54, at 17), rendering it irrelevant to the corporate governance dispute underlying the claim against the Individual Defendants. That is correct — and defeats Plaintiffs’ reliance on the SPA for personal jurisdiction over the Individual Defendants. ‘Where, as in the present action, the rights being asserted do not originate from the contract containing the forum selection clause, the clause does not apply.’”

PSD’s clients’ claims related to corporate governance and contract issues remain pending in both federal actions. A copy of the September 14, 2018 decision can be found here: 180914 Memorandum Opinion and Order