Case 1:16-cv-03680-RMB-KMW Document 1 Filed 06/23/16 Page 1 of 7 PageID: 1 KROVATIN KLINGEMAN LLC Kristen M. Santillo, Esq. 60 Park Place, Suite 1100 Newark, New Jersey 07102 (973) 424-9777 Attorneys for Plaintiff Michael Shane Enterprises LLC UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY MICHAEL SHANE ENTERPRISES LLC -v- Document Electronically Filed Civil Action No. HOLLYGOLD ASSOCIATES, INC., NETCAST BPO, INC., NETCAST BP0 SERVICES, LLC, WARREN GOLDEN, JOHN CIARMELLA, DAVID CHADWICK, GARDEN STATE INCENTIVES GROUP, LLC, and MICHAEL MCCANN, : COMPLAINT AND JURY DEMAND Defendants, and ATLANTIC CITY CONTACT CENTER LLC, Nominal Defendant. Plaintiff Michael Shane Enterprises LLC ("MSE"), through its attorneys, Creizman PLLC, for its complaint, allege as follows: INTRODUCTION 1. This action represents an effort to put an end to fraud, self-dealing, and gross mismanagement of the Atlantic City Contact Center LLC ("ACCC") by its majority members, which those members have accomplished with the assistance of their controlling shareholders and third parties, to the detriment of the limitedl'ability company and Plaintiff. Case 1:16-cv-03680-RMB-KMW Document 1 Filed 06/23/16 Page 2 of 7 PageID: 2 PARTIES I. Plaintiff 2. Plaintiff MSE is a limited liability company duly organized under the laws of the State of Florida and maintains its principal place of business in Florida. MSE owns 20% of the membership interests in ACCC. Michael Shane is the President of MSE. 11. Defendants 3. Defendant Hollygold Associates, Inc. ("Hollygold") is a corporation duly organized under the laws of the State of New York and maintains its principal place of business in New York. Hollygold owns 70% of the membership interests in ACCC. 4. Defendants Netcast BPO, Inc. and Netcast BPO Services, LLC (collectively, "Netcast BPO) are corporations duly organized under the laws of the State of Nevada and operate offshore call center services based in the Philippines. The Netcast BPO entit. es are subsidiaries of Hollygold. 5. Defendant Warren Golden is an owner and principal of Hollygold, and serves as an officer of ACCC. Golden is a resident of the State of New York. 6. Defendant John Ciarmella owns 10% of the membership interests in ACCC and serves as its principal officer. He is also a shareholder of Hollygold and of Netcast BPO. Ciarmella is a resident of the State of New Jersey. 7. Defendant David Chadwick is an owner and principal officer of Netcast BPO. He is a resident of the State of Califomia. 8. Defendant Garden State Incentives Group, LLC ("GSIG") is a corporation duly organized under the laws of the State of New Jersey and maintains its principal place of bus ness in the State of New Jersey. GSIG provides consulting services to companies in New Jersey regarding securing, managing, purchasing, and selling tax credits. 2 Case 1:16-cv-03680-RMB-KMW Document 1 Filed 06/23/16 Page 3 of 7 PageID: 3 9. Defendant Michael McCann is a principal of GSIG. 10. Defendant ACCC is a limited liability company organized under the laws of the State of Delaware and maintains its principal place of business in the State of New Jersey. ACCC is a nominal Defendant herein, whose participation is only necessary to effect the fall relief sought in this action. JURISDICTION AND VENUE 11. Jurisdiction is conferred over this action pursuant to 28 U.S.C. ยง 1332(a)(1) because the amount in controversy exceeds $75,000 and the Plaintiff and Defendants (excluding the Nominal Defendant, ACCC) are citizens of different states. 12. Venue is proper in this District because the acts and omissions of the Defendants giving rise to the claims herein were directed towards and causecl serious injury to a resident of this District, including Nominal Defendant ACCC. STATEMENT OF FACTS 13. ACCC operates a call center in Atlantic City, New Jersey. As an incentive for employing over a thousand local residents, ACCC was awarded a 10-year, $32.7 million tax credit by the State of New Jersey. Loan Transaction with GSIG 14. In late 2015, Defendants Golden and Ciarmella told Shane that they were seeking to obtain a loan from GSIG, purportedly for ACCC, using ACCC's tax credits as collateral. Golden and Ciarmella invited Shane to attend a meeting with a representative of GSIG to discuss the terms of the loan transaction. 15. In December 2015, Golden and Ciarmella provided Shane with draft loan transaction documents with GSIG, including a Tax Credit Funding Agreement, a Promissory 3 Case 1:16-cv-03680-RMB-KMW Document 1 Filed 06/23/16 Page 4 of 7 PageID: 4 Note, and a Commercial Security Agreement and Guaranty (the "Draft Agreements"). The Draft Agreements provided that GSIG would lend ACCC $600,000, which would be repaid from the sale of tax credits that were anticipated to be issued by the State of New Jersey (the "Loan Transaction"). The Draft Agreements included a guarantee that the members of ACCC, including MSE, would execute a guarantee "in their proportionate ownership interests." 16. After Shane received the Draft Agreements, he contacted Defendant McCann to request that GSIG permit him and MSE 's attorneys to review and comment on the Draft Agreements. McCann assured Shane that MSE would be given a reasonable opportunity to review the Draft Agreements. Nevertheless, the Loan Transaction closed abruptly and without MSE's approval soon thereafter. 17. Months later, Plaintiff discovered that, at the direction of Golden and Ciannella, GSIG transferred the loan proceeds from the Loan Transaction not to ACCC, but directly to Hollygold or Netcast BPO. That transfer was not only made without MSE's approval or knowledge, but in violation of the terms of the Draft Agreements, which provided that until the $600,000 loan was repaid in full, "except for payments of salary and reasonable operating expenses paid in the ordinary course" of ACCC's business (not to exceed the amount of the loan remaining unpaid), "no payment will be made to any party in any way related to [ACCC], or any of its principals, without the prior written consent of [GSIG] . ." And although MSE made repeated demands in April 2016 that GSIG provide MSE with records of the Loan Transaction, GSIG has ignored those demands. Unlawful or Unethical Business Practices 18. On a separate occasion prior to the Loan Transaction, Golden suggested to Shane that in order to increase revenues for ACCC, Golden would pay a bribe or kickback to a principal 4 Case 1:16-cv-03680-RMB-KMW Document 1 Filed 06/23/16 Page 5 of 7 PageID: 5 officer of Company A, a potential ACCC customer whom Golden knew Shane told Golden that he would not tolerate those kinds of business practices at ACCC. Months later, Shane leamed that Company A became a customer of Netcast BPO. FIRST CLAIM FOR RELIEF Breach of Fiduciary Duty of Due Care (Against Defendants Hollygold, Golden, and Ciarmella) 19. Plaintiff realleges each and every prior allegation herein. 20. As members of ACCC, under Delaware Limited Liability Act Section 18-1104, Defendants Hollygold, Golden, and Ciarmella owed ACCC and MSE a duty to conduct the business of ACCC with that degree of care that an ordinarily prudent person in a similar position would use under similar circumstances. 21. Defendants Hollygold, Golden, and Ciarmella have violated their duty of due care to ACCC and to MSE by engaging in self-dealing transactions, mismanaging the company, and neglecting to consult with MSE relating to the conduct of ACCC's business. 22. Specifically, Hollygold, Golden, and Ciarmella caused loan proceeds to be unlawfully diverted to Hollygold and NetCast BPO, and ACCC to unnecessarily incur a debt. 23. Upon information and belief, Defendants Hollygold, Golden, and Ciarmella continue to violate their duties of care to ACCC and to MSE by engaging in self-dealing transactions, rnisrnanaging the company, and neglecting to consult with MSE relating to the conduct of ACCC's business. SECOND CLAIM FOR RELIEF Aiding and Abetting (Against Defendants Netcast BPO, Chadwick, GSIG, and McCann) 24. Plaintiff realleges each and every prior allegation herein. 5 Case 1:16-cv-03680-RMB-KMW Document 1 Filed 06/23/16 Page 6 of 7 PageID: 6 25. Defendants Netcast BPO, Chadwick, GSIG, and McCann knowingly and intentionally aided and abetted Defendants Hollygold, Golden, and Ciannella's breach of their fiduciary duties to ACCC and to MSE, and continue to do so. 26. Unless enjoined, Defendants will continue to engage in the unlawful acts described above. Plaintiffs ACCC and MSE have no adequate remedy at law. Plaintiffs suffer and will continue to suffer irreparable injury from Defendants acts and practices unless relief is provided by this Court. PRAYER FOR RELIEF WHEREFORE, Plaintiff seeks the following relief: A. Compensatory damages to ACCC in the amount of the proceeds unlawfully diverted from ACCC to Hollygold or Netcast BPO in the Loan Transaction and any other proceeds unlawfully diverted from ACCC or ACCC funds wasted by Defendants. B. Compensatory damages to MSE in the amount of any distributions owing to MSE unlawfully diverted by Defendants, to be determined at trial. C. A preliminary injunction: (1) requiring Defendants Hollygold, Golden, and Ciarmella to provide MSE a full and complete accounting of ACCC, and enable MSE and their auditors to examine ACCC's books and records; (2) prohibiting any further transfers of funds, directly or indirectly, from the Loan Transaction to Hollygold, Netcast BPO, Golden, Ciarmella, or Chadwick; (3) prohibiting any transfers of funds, directly or indirectly, from ACCC to Hollygold, Netcast BPO, Golden, Ciarmella, or Chadwick; (4) requiring Defendants and all other persons in active concert or participation with them in ACCC's affairs from continuing to participate in any way in the management of ACCC; or in the alternative, (5) appointing a receiver pendite lite for ACCC whose responsibilities would include ensuring that Defendants Hollygold, Golden, and Ciarmella comply with 6 Case 1:16-cv-03680-RMB-KMW Document 1 Filed 06/23/16 Page 7 of 7 PageID: 7 their fiduciary duties to ACCC and to MSE, with such costs to be paid by Defendants Hollygold, Golden, and Ciarmella, jointly and severally. D. A permanent injunction removing and prohibiting Hollygold, Golden, Ciarmella, Netcast BPO, and Chadwick from participating in the management of ACCC's affairs. E. An order awarding MSE the costs of this suit, including attomey's fees. F. An order awarding such other and further relief that this Court deems necessary and appropriate. DEMAND FOR JURY TRIAL Pursuant to Rule 38 of the Federal Rules of Civil Procedure, MSE demands trial by jury in this action of all issues so triable. Respectfully submitted, /s/ Kristen M. Santiilo KROVATIN KLINGEMAN LLC 60 Park Place, Suite 1100 Newark, New Jersey 07102 (973) 424-9777 ksantillo@krovatin.com Eric M. Creizman* CREIZMAN PLLC 565 Fifth Avenue, Fl. 7 New York, New York 10017 Tel.: (212) 972-0200 Fax: (646) 200-5022 Email: ecreiz creizmanlIc.com Attorneys for Plaintiff Michael Shane Enterprises LLC Dated: June 23, 2016 * Motions for admissionpro hac vice to be filed. 7