Case 1:17-cv-04831-WHP Document 1 Filed 06/27/17 Page 1 of 11 UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK POWER PLAY 1 LLC, and ADMIRALS ECHL HOCKEY, LLC, v. Plaintiffs, NORFOLK TIDE BASEBALL CLUB, LLC A/K/A and/or D/B/A TIDES BASEBALL CLUB, L.P., Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) CIVIL ACTION NO.: 17-CV-4831 COMPLAINT The Plaintiffs, Power Play 1 LLC and Admirals ECHL Hockey, LLC, by their attorneys, Morea Law LLC and Burns & Levinson LLP, complaining of the Norfolk Tide Baseball Club, LLC A/K/A and/or D/B/A Tides Baseball Club, L.P., upon information and belief, allege and state as follows: JURISDICTION AND VENUE 1. This is a civil action where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between citizens of different states. Federal jurisdiction therefore exists under 28 U.S.C. 1332. 2. At all relevant times: (a) Plaintiff Power Play 1 LLC ( Power Play ) is and was a limited liability company organized and existing under the laws of Delaware, with its main office and principal place of business located in Bronx, New York; (b) Power Play s high-level officers have been and are primarily located in New York, and such officers direct, control, and coordinate Power Play s activities primarily from its headquarters in New York; and (c) Power Play s
Case 1:17-cv-04831-WHP Document 1 Filed 06/27/17 Page 2 of 11 members reside in, and are and were, citizens of New York. Power Play is considered a citizen of New York for purposes of diversity jurisdiction under 28 U.S.C. 1332. 3. At all relevant times: (a) Plaintiff Admirals ECHL Hockey, LLC (the Operating Company ) (together with Power Play, the Plaintiffs ), is and was a limited liability company organized and existing under the laws of Virginia, with its main office and principal place of business located in Norfolk, Virginia; (b) the Operating Company is and was a single member LLC, whose sole member is Power Play; and (c) Power Play s members reside and resided in, and are and were, citizens of New York. The Operating Company is considered a citizen of New York for purposes of diversity jurisdiction under 28 U.S.C. 1332. 4. At all relevant times Tides Baseball Club, L.P. is and was a Virginia limited partnership based in Norfolk, Virginia. Tides Baseball Club, L.P. is also known as and/or has done business as Norfolk Tide Baseball Club, LLC and, together, they are referred to herein as the Defendant. (Norfolk Tide Baseball Club, LLC held itself out as a Virginia LLC and executed the agreement by and among the parties giving rise to the present action (and related agreements) under that name.) The Defendant is considered a citizen of Virginia for purposes of diversity jurisdiction under 28 U.S.C. 1332. 5. As more fully set forth herein, the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs. 6. This Court has personal jurisdiction over the Defendant because at all relevant times: (a) the Defendant has and/or had sufficient minimum contacts with the forum as a result of contracting with Power Play in New York; and (b) the Defendant agreed and consented to exclusive jurisdiction in the federal and state courts of New York pursuant to a jurisdiction / venue clause in the agreement by and among the parties giving rise to the present action. 2
Case 1:17-cv-04831-WHP Document 1 Filed 06/27/17 Page 3 of 11 agreement. 7. Venue is proper pursuant to 28 U.S.C. 1391 and per the terms of the subject Nature of Action FACTS 8. The Plaintiffs seek damages from the Defendant arising from, and related to, the Defendant s misrepresentations in connection with and breaches of a certain agreement dated as of September 28, 2016 (the Agreement ), whereby the Defendant sold its interests in the Operating Company to Power Play. Power Play Acquires A Mid-Level Professional Hockey Team, The Norfolk Admirals, As Well As The Operating Company 9. Prior to September 30, 2016, KG (US) Oilers Corp. (the Edmonton Oilers ) owned an ECHL team based in Norfolk, Virginia named the Norfolk Admirals (the ECHL Team ). 10. Prior to September 30, 2016, the Defendant owned the Operating Company, which managed the ECHL Team for the Edmonton Oilers pursuant to a certain management services agreement dated October 1, 2015 (the MSA ). As part of the management services Defendant provided under the MSA, the Operating Company was responsible for acquiring and maintaining all equipment used in connection with the operation of the ECHL Team, namely all uniforms, hockey sticks, hockey pads, helmets, as well as all medical and training equipment used by the ECHL Team. Additionally, the Operating Company was also responsible for all back office needs of the ECHL. 11. After months of negotiation with the Edmonton Oilers in 2016, satisfying various ECHL league requirements, and securing the City of Norfolk s consent to the Edmonton Oiler s assignment of certain interests and assets to Power Play, Power Play acquired the ECHL Team 3
Case 1:17-cv-04831-WHP Document 1 Filed 06/27/17 Page 4 of 11 from the Edmonton Oilers. That acquisition was made pursuant to a certain September 30, 2016 Asset Purchase Agreement by and between the Edmonton Oilers and Power Play (the ECHL Team APA ). 12. Power Play agreed to and did pay the Edmonton Oilers substantial sums pursuant to the ECHL Team APA (the ECHL Team Purchase Price ). 13. Power Play agreed to and did pay the Edmonton Oilers the ECHL Team Purchase Price in reliance upon, among other material things, the Defendant s disclosures concerning obligations the Operating Company owed in connection with and on behalf of the ECHL Team, which Defendant disclosures the Edmonton Oilers were aware of and did not object to. The Defendant made such disclosures verbally and in writing on, among other occasions in September 2016, September 20, 21, 22 and 23, 2016. 14. On September 30, 2016, the Edmonton Oilers terminated the MSA. 15. On September 30, 2016, Power Play, the Operating Company (then owned by Defendant) and Defendant entered into a certain Membership Interest Purchase Agreement by which the Defendant sold the Operating Company to Power Play (the MIPA ). A true and accurate copy of the MIPA is appended hereto as Exhibit 1. After September 30, 2016, The Plaintiffs Discovered That The Defendant Had Materially Misrepresented The Operating Company s Obligations, Converted Operating Team Monies And Property And Misappropriated The ECHL Team s Funds Through Comingling 16. Prior to Power Play s election to execute and actual execution of the ECHL Team APA and the MIPA, Power Play specifically requested from the Defendant, among other data, all Operating Company-related contracts. As the Edmonton Oilers and the Defendant knew, Power Play intended to use such data to determine (i) whether to proceed with the ECHL Team APA and MIPA and (ii) the corresponding purchase prices. 4
Case 1:17-cv-04831-WHP Document 1 Filed 06/27/17 Page 5 of 11 17. The Defendant represented to Power Play, both affirmatively and via omission, that the Defendant had disclosed all data Power Play requested, including all Operating Companyrelated contracts. 18. After execution of the ECHL Team APA and the MIPA on September 30, 2016, the Plaintiffs discovered that the Defendant had failed to disclose certain Operating Companyrelated contracts. 19. After execution of the ECHL Team APA and the MIPA, the Plaintiffs also discovered that the Defendant had obligated the Operating Company to certain contracts with entities related to the Defendant and/or entities with which the Defendant had a beneficial relationship. One such undisclosed contract formed the basis of a lawsuit brought against the Operating Company in the Virginia Beach General District Court (the Landlord Suit ). Power Play was required to expend significant funds to defend the Operating Company in connection with the Landlord Suit. 20. In addition, after execution of the ECHL Team APA and the MIPA, the Plaintiffs discovered that the Defendant had converted Operating Company monies and property. More specifically, the Plaintiffs discovered that the Defendant converted monies that were to remain in the Operating Team bank accounts after the MIPA closing. The Plaintiffs also discovered that the Defendant had entered the ECHL Team s facility post-closing, uninvited, and removed certain merchandise and/or memorabilia that the Plaintiffs owned and had the right to possess by operation of the MIPA. The Defendant took the monies and merchandise and/or memorabilia intending to deprive the Plaintiffs of their rights to possess same. 21. Further yet, after execution of the ECHL Team APA and the MIPA, the Plaintiffs discovered that the Defendant, who also managed a minor league baseball team, had comingled 5
Case 1:17-cv-04831-WHP Document 1 Filed 06/27/17 Page 6 of 11 team monies and been running various baseball team-related expenses through the ECHL Team when managing for the Edmonton Oilers. By doing so, the Defendant misappropriated the ECHL Team s funds. Power Play would have been entitled to such funds by operation of the MIPA. Power Play Made Demand Upon The Defendant For Itself And The Operating Company 22. On February 3, 2017, and in accordance with the terms of the MIPA, Power Play demanded that the Defendant indemnify Power Play for, among others, damages the Plaintiffs suffered as direct and proximate result of the Defendant s failure to disclose all Operating Company-related contracts. At that time, Power Play demanded indemnification in the amount of $255,220.92 (exclusive of lost business opportunity and business impact-related damages). Via that February 3, 2017 correspondence, Power Play also demanded return of the converted monies and merchandise and/or memorabilia. A true and accurate copy of the February 3, 2017 demand is appended hereto as Exhibit 2. 23. On February 17, 2017, the Defendant rejected Power Play s demand for indemnification and refused to return Power Play s converted property. 24. On March 22, 2017, Power Play renewed its demand, amending the monetary indemnification component of the demand to $267,848.47 (exclusive of lost business opportunity and business impact-related damages). A true and accurate copy of the March 22, 2017 demand is appended hereto as Exhibit 3. 25. On May 18, 2017, the Defendant again rejected Power Play s full demand for indemnification. 26. Thus, on May 22, 2017, the Plaintiffs notified the Defendant of its intent to file suit and inquired, via their counsel, whether the Defendant s counsel was authorized to accept service of process. Defendant s counsel did not respond. Instead, and despite New York Federal and 6
Case 1:17-cv-04831-WHP Document 1 Filed 06/27/17 Page 7 of 11 State Courts having exclusive jurisdiction per the MIPA, on May 23, 2017, the Defendant filed an improper declaratory judgment action in the United States District Court for the Eastern District of Virginia (Norfolk Division) in bad faith. 27. The Plaintiffs have been damaged by the Defendant in excess of $500,000 on account the undisclosed Operating Company-related contracts, the converted monies and merchandise and/or memorabilia, the Landlord Suit defense, lost business opportunity and business impact-related damages and incurred attorneys fees. 28. The Plaintiffs have satisfied all conditions precedent to filing this lawsuit. FIRST CAUSE OF ACTION (Breach of Contract) 29. The Plaintiffs repeat each allegation in Paragraphs 1 through 28 of this Complaint as if each such allegation had been pleaded here in full. 30. The Plaintiffs are entitled to judgment against the Defendant for all Losses -- as such term is defined by the MIPA -- that they each and/or jointly suffered as a direct and proximate result of the Defendant s breach of the MIPA, which Losses total in excess of $500,000 (the exact amount of which continues to accrue and will be determined at trial), plus interest from September 30, 2016. SECOND CAUSE OF ACTION (Breach of Implied Covenant of Good Faith and Fair Dealing) 31. The Plaintiffs repeat each allegation in Paragraphs 1 through 30 of this Complaint as if each such allegation had been pleaded here in full. 32. The controlling law recognizes an implied covenant of good faith and fair dealing in every contract. 33. The Defendant has violated the duty of good faith and fair dealing inherent in the 7
Case 1:17-cv-04831-WHP Document 1 Filed 06/27/17 Page 8 of 11 MIPA in the manners described above, and has damaged the Plaintiffs in manners separate and distinct from those harms it caused by breaching the MIPA itself. 34. The Plaintiffs are entitled to judgment against the Defendant for all damages that they each and/or jointly suffered as a direct and proximate result of the Defendant s breach of the subject implied covenant, which damages continue to accrue and will be determined at trial, plus interest from September 30, 2016. THIRD CAUSE OF ACTION (Conversion) 35. Plaintiffs repeat each allegation in Paragraphs 1 through 34 of this Complaint as if each such allegation had been pleaded here in full. memorabilia. 36. The Defendant converted the aforementioned monies and merchandise and/or 37. The value of the converted monies is $53,892. 38. The value of the converted merchandize and/or memorabilia is $10,000. 39. The damages the Plaintiffs suffered as a direct and proximate result of the subject conversion are separate and distinct from those harms caused by the Defendant s breach of the MIPA itself. 40. The Plaintiffs are entitled to judgment against the Defendant for all damages that they each and/or jointly suffered as a direct and proximate result of the Defendant s conversion, the principle amount totaling $63,892, plus interest from October 11, 2016. FOURTH CAUSE OF ACTION (Misrepresentation / Fraud) 41. Plaintiffs repeat each allegation in Paragraphs 1 through 40 of this Complaint as if each such allegation had been pleaded here in full. 8
Case 1:17-cv-04831-WHP Document 1 Filed 06/27/17 Page 9 of 11 42. The Defendant misrepresented to Power Play the type, number and scope of the Operating Company-related contracts and Operating Company-related obligations that Plaintiffs would assume after the parties closed on the MIPA. 43. The Defendants committed such misrepresentations both affirmatively (e.g., in discussions, emails, and pre-closing data exchanges) and via omission (e.g., by failing to disclose altogether). 44. The misrepresentations were material in terms of dollar value and being key to Power Play s election to close on the ECHL Team APA at the ECHL Team Purchase Price and close on the MIPA generally. 45. The Defendant, who had superior knowledge of the Operating Company s obligations, knew that its affirmative representations were false at the time Defendant made them. 46. The Defendant elected to purposefully omit certain Operating Company-related contracts and Operating Company-related obligations from its disclosures to Power Play. 47. The Defendant made its misrepresentations intending to defraud Power Play or otherwise conceal material matters that, if known to Power Play, would have impacted the ECHL Team APA and MIPA negotiations materially. 48. Having received the Defendant s repeated assurance that the Defendant had disclosed all Operating Company-related contracts and obligations, Power Play reasonably relied on the Defendant s (then unknown) misrepresentations and proceeded with the ECHL Team APA and the MIPA. 49. The Plaintiffs have been damaged by the Defendant s misrepresentations in two primary manners. First, but for the Defendant s misrepresentations, Power Play would not have closed on the ECHL Team APA at the ECHL Team Purchase Price. In essence, the Defendant s 9
Case 1:17-cv-04831-WHP Document 1 Filed 06/27/17 Page 10 of 11 misrepresentations caused Power Play to over pay for the ECHL Team. Second, but for the Defendant s misrepresentations, Power Play would not have entered into the MIPA and subjected itself and the Operating Company to unforeseen obligations associated with the undisclosed Operating Company-related contracts, some of which have resulted in vendor disputes like the Landlord Suit. 50. The Defendant s misrepresentations and/or fraud has damaged the Plaintiffs in manners separate and distinct from those harms caused by the Defendant s breach of the MIPA itself. 51. The Plaintiffs are entitled to judgment against the Defendant for all damages that they each and/or jointly suffered as a direct and proximate result of the Defendant s misrepresentation and/or fraud, which damages continue to accrue and will be determined at trial, plus interest from September 30, 2016. WHEREFORE, the Plaintiffs demand judgment against the Defendant as follows: A. On the first, second, third and fourth causes of action, in the principle amount(s) to be proven at trial, plus the appropriate interest thereon; B. The costs, attorneys fees and disbursements of this action; and C. Such further relief as justice requires. 10
Case 1:17-cv-04831-WHP Document 1 Filed 06/27/17 Page 11 of 11 Dated: June 27, 2017 Respectfully submitted, POWER PLAY 1 LLC and ADMIRALS ECHL HOCKEY, LLC By its attorneys, /s/ Michael N. Morea Michael N. Morea Morea Law LLC 345 Route 17, Suite 31 Upper Saddle River, NJ 07458 p: 201.345.5412 f: 201.345.4853 michael.morea@morealaw.com Thomas T. Reith, BBO #648671 (pro hac vice pending) treith@burnslev.com Laura Lee Mittelman, BBO #689752 (pro hac vice pending) lmittelman@burnslev.com BURNS & LEVINSON LLP 125 Summer Street Boston, MA 02110 Tel. 617-345-3000 Fax 617-345-3299 11
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