EFiled: Sep 27 2021 03:50Peb
`Transaction ID 66967433
`“igh Nhe
`Case No. 2021-0816-JRS Ae
`
`CornS
`IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
`
`JULIUS W. ERVING II and DR.J
`ENTERPRISES,LLC,individually
`and derivatively on behalf of ABG-DR.J,
`LLC,
`
`Plaintiffs,
`
`V.
`
`: C.A. No. 2021-0816-JRS
`
`: Original Version Filed:
`: September 22, 2021
`
`Public Version Filed:
`September27, 2021
`
`: :
`
`:
`
`ABG INTERMEDIATE HOLDINGS2,
`LLC, AUTHENTIC BRANDS GROUP,
`LLC, and JAMES SALTER,
`
`Defendants,
`
`and
`
`ABG-DR.J, LLC,
`
`Nominal Defendant.
`
`VERIFIED COMPLAINT
`
`Plaintiffs Julius W. Erving II (“Mr. Erving”) and Dr. J Enterprises, LLC (“Dr.
`
`J Enterprises,” collectively, “Plaintiffs”), individually and derivatively on behalf of
`
`Nominal Defendant ABG-DR. J, LLC (“ABG-Dr. J” or the “Company”), by and
`
`through their undersigned counsel, as and for their Verified Complaint against
`
`Defendants ABG Intermediate Holdings 2, LLC (“ABG Intermediate”), Authentic
`
`Brands Group, LLC (“ABGParent”), and James Salter (collectively “Defendants”
`
`or “ABG”) allege as follows:
`
`EFiled: Sep 27 2021 03:50PM EDT
`Transaction ID 66967433
`Case No. 2021-0816-JRS
`
`
`Transaction ID 66967433
`“igh Nhe
`Case No. 2021-0816-JRS Ae
`
`CornS
`IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
`
`JULIUS W. ERVING II and DR.J
`ENTERPRISES,LLC,individually
`and derivatively on behalf of ABG-DR.J,
`LLC,
`
`Plaintiffs,
`
`V.
`
`: C.A. No. 2021-0816-JRS
`
`: Original Version Filed:
`: September 22, 2021
`
`Public Version Filed:
`September27, 2021
`
`: :
`
`:
`
`ABG INTERMEDIATE HOLDINGS2,
`LLC, AUTHENTIC BRANDS GROUP,
`LLC, and JAMES SALTER,
`
`Defendants,
`
`and
`
`ABG-DR.J, LLC,
`
`Nominal Defendant.
`
`VERIFIED COMPLAINT
`
`Plaintiffs Julius W. Erving II (“Mr. Erving”) and Dr. J Enterprises, LLC (“Dr.
`
`J Enterprises,” collectively, “Plaintiffs”), individually and derivatively on behalf of
`
`Nominal Defendant ABG-DR. J, LLC (“ABG-Dr. J” or the “Company”), by and
`
`through their undersigned counsel, as and for their Verified Complaint against
`
`Defendants ABG Intermediate Holdings 2, LLC (“ABG Intermediate”), Authentic
`
`Brands Group, LLC (“ABGParent”), and James Salter (collectively “Defendants”
`
`or “ABG”) allege as follows:
`
`EFiled: Sep 27 2021 03:50PM EDT
`Transaction ID 66967433
`Case No. 2021-0816-JRS
`
`
`
`PRELIMINARY STATEMENT
`
`L.
`
`In 2016, basketball legend Julius Erving agreed to sell a cad interest
`
`in his trademark andotherintellectual property to Defendant ABG Parent, a brand
`
`development, marketing, and entertainment company. ABG Parent owns a portfolio
`
`of global media, entertainment, and lifestyle brands, such as “Elvis Presley,”
`
`“Muhammad Ali,” and “Shaquille O’Neal.” ABG Parent and its controlling
`
`member, Defendant James Salter, approached Mr. Erving and pitched this
`
`opportunity, representing that they would grow his brand’s value by more than 500%
`
`in the first two years. Salter and employees of ABG Parentrepresentedthat they
`
`would identify and execute on new licensing agreements, promotional appearances,
`
`and other marketing opportunities to grow the value ofMr. Erving’s brand, returning
`
`more cash flow to Mr. Erving than he could generate by himself.
`
`2.
`
`In September 2016, Mr. Erving and his entity, Plaintiff Dr. J
`
`Enterprises, executed a series of agreements to place Mr. Erving’s intellectual
`
`property (the “Dr. J Brand”) underthe control of Defendants ABG Intermediate and
`
`its controller, ABG Parent (the “Transaction”). This included, but was notlimited
`
`to the trademark to “Dr. J” Erving, all name, image and likenessrights, all current
`
`and priorlicensing deals, all domain namesandsocial media accounts, the right to
`
`monetize business memorabilia, collectibles, and all goodwill in the brand “DrJ.”
`
`
`
`3.
`
`In the Transaction, Nominal Defendant ABG-DR.J, a limited liability
`
`company created by ABG Intermediate, acquired the Dr.
`
`J Brand.
`
`AB
`
`Q
`
`Intermediate is ABG-DR. J’s managing member. Mr. Erving, Dr. J Enterprises and
`
`two other non-parties are minority members of ABG-DR. J. Salter is the Chief
`
`Executive Officer (“CEO”) of both ABG Parent and ABG Intermediate and he
`
`executed the relevant agreements on behalf ofthoseentities.
`
`*
`
`a
`
`
`
`
`
`PARTIES
`
`9.
`
`Plaintiff, Julius W. ErvingII, is a United States citizen domiciled in the
`
`State of Georgia. Mr. Erving currently holds a membershipinterest in ABG-DR.J
`
`and has continuously held that interest throughout the period ofthe acts complained
`
`of herein.
`
`10.
`
`Plaintiff, Dr. J Enterprises, LLC,is a Georgia limitedliability company
`
`with its headquarters and principalplace ofbusinesslocated in Atlanta, Georgia. Dr.
`
`J Enterprises currently holds a membership interest
`
`in ABG-DR. J and has
`
`continuously held that interest throughout the period of the acts complained of
`
`herein.
`
`11. Upon information and belief, Defendant ABG Intermediate is a
`
`Delaware limited liability company with its headquarters and principal place of
`
`business located in the State of New York at 1411 Broadway, 21‘ Floor, New York,
`
`NY 10018. ABG Intermediate is a member and the designated manager of ABG-
`
`DR.J.
`
`12.
`
`Upon information and belief, Defendant ABG Parent is a Delaware
`
`limited liability company with its headquarters and principal place of business
`
`located in the State of New York at 1411 Broadway, 21* Floor, New York, NY
`
`10018. ABG Parentis the controlling member and manager of ABG Intermediate,
`
`the designated manager ofABG-DR.J.
`
`
`
`13. Upon information and belief, Defendant James Salter is a Canadian
`
`citizen residing in Toronto, Canada. Salter is chairman and CEO of ABG Parent and
`
`CEO of ABG Intermediate, and he controls ABG Intermediate. As such, he
`
`exercises control over ABG-DR.J.
`
`14. Upon information and belief, Nominal Defendant ABG-DR. J is a
`
`Delawarelimited liability company withits principal place ofbusiness locatedin the
`
`State of New York at 1411 Broadway, 21* Floor, New York, NY 10018.
`
`GENERAL ALLEGATIONS
`
`15.
`
`Plaintiff Julius Erving is a basketball legend, beloved by millions of
`
`fans across America and the world. Mr. Erving’s “brand” — his name, likeness,
`
`image, trademarksand other associated intellectual property, are extremely valuable.
`
`Prior to the Transaction, Mr. Erving established Dr. J Enterprises to exploit,
`
`promote, advertise and license the Dr. J Brand, promote and advertise the products
`
`or services of third Persons throughthe use or exploitation of the Dr. J Brand, and
`
`monetize the persona of Mr. Erving, including through personal appearances and
`
`speaking engagements.
`
`16.
`
`_ABG Parent is a brand development, marketing, and entertainment
`
`company, which ownsaportfolio of global media, entertainment, and lifestyle
`
`brands. ABG Parent markets and promotesits brands to increase the brands’ value
`
`and generate revenue streams.
`
`In general, ABG Parent generates value by
`
`
`
`identifying opportunities
`
`for brand licensing agreements
`
`and promotional
`
`appearances. For example, ABG Parent maylicense a brandedclothingitem ortype
`
`of sports equipment; or it may license a celebrity as a spokespersonfor a different
`
`brand or product.
`
`—eel90N
`
`— so
`
`|
`
`
`
`20.|ABG Parent proposeda transaction by which Plaintiffs would sell their
`
`The September 22, 2016, Transaction
`
`entire interest in the Dr. J Brand to a newly formed Delaware limited liability
`company, ABG-DR. J.[is
`
`|.(itSEeSeaeeySe
`
`22.
`
`23.
`
`On or about September19, 2016, the parties formed ABG-DR.J.
`
`On or about September 22, 2016, Plaintiffs and Defendants executed
`
`three agreements to effectuate the Transaction: (a) Limited Liability Company
`
`Agreement for ABG-DR. J, LLC (the “Operating Agreement’”);
`
`(b) Omnibus
`
`Agreement; and (c) Asset Purchase Agreementby and amongDr. J Enterprises LLC,
`
`as Seller, and ABG-DR.J, as Purchaser (the “Purchase Agreement’) (collectively,
`
`the “Transactional Agreements”),
`
`
`
`24.
`
`The Operating Agreement
`
`expressly
`
`and
`
`implicitly required
`
`Defendantsto use their reasonable andbest efforts to promote and exploit the Dr. J
`
`Brand. Plaintiffs entered into the Transactional Agreements based on Defendants’
`
`alleged expertise and resources and Defendants’ agreements, express and implied,
`
`to work on and develop the Dr. J Brand.
`
`a
`
`to n
`
`
`
`The Operating Agreement
`
`
`
`
`28.
`
`The followingsets forth the initial capital structure of ABG-DR.J:
`
`Membership Interest
`
`The Manager andits Duties
`
`29.
`
`The Operating Agreement appointed ABG Intermediate as ABG-DR.
`
`J’s managing member (“Manager”). Pursuant to the Operating Agreement, ABG
`
`Intermediate wasto, inter alia: (i) provide for the managementof the business and
`
`the affairs of the Company,theallocation of profits and losses, the distribution of
`
`cash of the Company among the Members, the rights, obligations, and interests of
`
`the Members to each other and to the Company, and(ii) provide for certain other
`
`matters.
`
`
`
`Leo So
`
`31.
`
`Except for certain enumerated matters that require approval by the
`
`Members, ABG Intermediate is empowered to make “all decisions concerning the
`
`management operation and policy of the Company’s business.”
`
`(OA § 5.1(a).)
`
`Section 5.2 identifies certain decisions that ABG Intermediate cannot make without
`
`the prior written consentofPlaintiffs and, in certain circumstances, other Members.
`
`Pursuant to Section 5.2(a), ABG Intermediate could not amend, modify or waive the
`
`Operating Agreement withoutPlaintiffs’ and other members’ prior written consent.
`
`32.
`
`Section 5.1(d) of the Operating Agreement acknowledges that ABG
`
`Intermediate has other business interests. However, the Operating Agreement
`
`expressly obligates ABG Intermediate to “devote to the Companysuchefforts as are
`
`reasonably necessary to manage the business and affairs of the Company.” Section
`
`5.1(d) further recognizes that ABG Intermediate and its employees mayact on behalf
`
`11
`
`
`
`of other “Persons”(i.e., manage otherbrands,etc.) “provided that such participation
`
`or involvement shall not interfere with theperformance by such Person ofits, his or
`
`her duties for the Company ... .” (Emphasis added.) As such, Defendants
`
`acknowledged that they would represent other brands, but only if doing so would
`
`notinterfere with its duties and obligations to ABG-DR.J and the Dr.J Brand.
`
`33.
`
`Section 5.1(e) sets forth the standard of performance that ABG
`
`Intermediateis required to meetin performing its duties to ABG-DR.J. Specifically,
`
`it must perform its duties:
`
`in a manner(i) consistent with the covenant of good faith and fair
`dealing generally applicable to parties to a contract and (ii) it believes
`to be in, or not opposedto, the best interests of the Company and the
`Business.
`
`34.
`
`Section 5.1(f) provides that ABG Intermediateshall not be liable to the
`
`Companyforacts or omissions, but onlyifit acts:
`
`consistent with the Manager’s duty to act in a mannerconsistent with
`the covenant of good faith and fair dealing and for a purpose believed
`by the Manager to be in, or not opposed to, the best interests of the
`Company,and pursuantto the authority granted to the Manager under
`this Agreement ....
`
`However, even where ABG Intermediate acts consistent with the above standard,it
`
`will be liable for acts “attributable to the Manager’s gross negligence or willful
`
`misconduct.”
`
`35.
`
`Section 5.7 purports to waive all fiduciary duties of ABG Intermediate
`
`to the fullest extent permitted by law, exceptfor the duties set forth in Article V,
`
`12
`
`
`
`provided that nothing in the agreement purports to waive the implied covenant of
`
`goodfaith and fair dealing.
`
`Distributions of Cash Flow to Plaintiffs and other Members
`
`36. As noted above, the Operating Agreement does not provide for a
`
`managementfee to be paid to ABG Intermediate, as Manager.
`
`37.
`
`Section 4.4 provides that the Manager mustdistribute “Net Cash Flow”
`
`for each taxable year no less than once per calendar quarter, in proportion to the
`
`Members’ Percentage Interests.
`
`3S.[eeSINRSSSSesENEseae
`
`30feaiaesoa
`
`13
`
`
`
`(Emphasis added).
`
`S=ai+++
`
`
`
`43.
`
`Plaintiffs’ Right to Inspect Books and Records
`
`44.
`
`Section 7.1 obligates ABG Intermediate to maintain proper and
`
`complete books of account, in which each Companytransaction shall be fully and
`
`accurately entered. Further, ABG Intermediate shall open such books and records
`
`to each Memberfor inspection and copying or copied anddeliveredto the requesting
`
`Member.
`
`45.
`
`Section 7.3 obligates ABG Intermediate to maintain certain books and
`
`records of the Company, including incometax returns, financial statements, and
`
`records relating the Company’s internalaffairs.
`
`46.
`
`Pursuant to Section 7.4, Plaintiffs have a right, upon request, to receive
`
`and inspect any documents required to be maintained pursuantto Section 7.4.
`
`
`
`47.
`
`Pursuant to the definition of “Net Cash Flow,”Plaintiffs have the right
`
`to approve the yearly legal budget and be consulted concerning any legal
`
`expenditures in excess of such budget.
`
`Forum Selection and Choice of Law
`
`48.
`
`Pursuant to Section 14.4 of the Operating Agreement, each Member
`
`consented to the exclusive jurisdiction of the federal andstate courts in the State of
`
`Delaware and agreed to the personal jurisdiction of such courts. Section 14.3
`
`provides that the Operating Agreement will be governed by and construed in
`
`accordance with the laws of the State of Delaware.
`
`49.
`
`The Operating Agreement contemplated that ABG Intermediate, ABG
`
`Parent and Salter would cause ABG Parent employees and contractors to work
`
`diligently and in goodfaith, free of conflict, to promote the Dr. J Brand. [eee
`
`50.
`
`As described above, Sections 5.1(d) and 5.1(e) of the Operating
`
`Agreement require that ABG Intermediate devote reasonably necessary time and
`
`effort to managingthe business, and thus promoting the Dr. J Brand.
`
`16
`
`
`
`=oi6stws
`YWWYWYY~Y
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`rei
`
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`
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`
`rei
`
`
`
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`
`re
`
`
`
`st“SCS\O-\o\O
`
`—N
`
`
`
`ooanS—\oOoO™tC
`
`_—N
`
`
`
`“ion+woé™é™~
`
`NN
`
`
`
`oOtS06™M~
`
`“N
`
`cy
`
`
`
`ON:S™oO
`
`A
`
`
`
`—cics+cocococo
`
`WYN
`
`
`
`aSo~o6oooOoooO
`
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`
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`a:.oSoOna
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`
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`
`\o N
`
`COUNTI
`
`Breach of the Operating Agreement Against ABG Intermediate
`(Derivatively on Behalf of ABG-DR. J)
`
`97.
`
`Plaintiffs hereby repeat and incorporate by reference allegationsin all
`
`prior paragraphsasif set forth herein.
`
`98.
`
`\oso
`
`ta ©
`
`
`
`Mhoc
`
`—
`
`104.
`
`30
`
`
`
`Ww6~oOSoO———
`
`31
`
`
`
`06fonSo—A©CS—__4——~=—a
`
`cy
`
`
`
`3.aa,
`
`COUNT I
`
`Breach of the Operating Agreement Against ABG Intermediate
`(Individually On Behalf of Mr. Erving and Dr. J Enterprises)
`
`114. Plaintiffs hereby repeat and incorporate by reference allegationsin all
`
`prior paragraphsasif set forth herein.
`
`115. Mr. Erving and Dr. J Enterprises are each signatories to the Operating
`
`Agreement with the right and authority to enforce its terms.
`
`————_a
`
`33
`
`
`
`—_—PanN—os—=
`
`
`
`CNenws“NNNN_—_—c“
`
`
`
`——_ne—NotoNi)soge~On
`
`COUNT III
`
`Tortious Interference Against ABG Parentand Salter
`(Individually On Behalf of Mr. Erving and Dr. J Enterprises and Derivatively
`on Behalf of ABG-DR.J)
`
`130. Plaintiffs hereby repeat and incorporate by reference allegationsin all
`
`36
`
`
`
`prior paragraphsasif set forth herein.
`
`131.
`
`—_— Uo N
`
`— oe) WW
`
`37
`
`
`
`134.
`
`— GW WC
`
`COUNTIV
`
`Specific Performance of the Operating Agreement Against ABG Intermediate
`Individually On Behalf of Mr. Erving and Dr. J Enterprises and Derivativel
`on Behalf of ABG-DR.J)
`
`136. Plaintiffs hereby repeat and incorporate by reference allegationsin all
`
`prior paragraphsasif set forth herein.
`
`_— ww =~
`
`38
`
`
`
`139. Section 14.7 ofthe Operating Agreement acknowledgesthe availability
`
`of injunctive relief and specific performance as a remedy for breach:
`
`Injunctive Relief; Performance. The parties hereby agree and
`acknowledge that a breach of any material
`term, condition or
`provision of this Agreementthat provides for an obligation other than
`the payment of money wouldresult in severe and irreparable injury to
`the other party, which injury could not be adequately compensated
`by an award of money damages, and theparties therefore agree and
`acknowledge that they shall be entitled to injunctiverelief in the event
`of any breach of any material term, condition or provision of this
`Agreement, or to enjoin or prevent suchabreach, including without
`limitation an action for specific performance hereof, and the parties
`hereby irrevocably consent to the issuance of any such injunction.
`The parties further agree that no bond or surety shall be required
`in connection therewith.
`VtmaeRMaal|
`
`COUNT V
`
`Fraud, Gross Negligence and Willful Misconduct
`(Individually on behalf of Mr. Erving and Dr. J Enterprises)
`141. Plaintiffs hereby repeat and incorporate by reference allegationsin all
`
`prior paragraphsas if set forth herein.
`
`39
`
`
`
`q<6+m_—ro——
`
`o
`
`
`
`41
`
`
`
`ZOnonstw«wmwo«”wy-”rewore—_——_—
`
`N+
`
`
`
`156.
`
`157.
`
`COUNTVI
`
`Unjust Enrichment
`(Individually on Behalf of Mr. Erving and Dr. J Enterprises and Derivatively
`on Behalf of ABG-DR.J)
`
`158. Plaintiffs hereby repeat and incorporate by reference allegationsin all
`
`prior paragraphsas if set forth herein.
`
`43
`
`
`
`159,
`
`160.
`
`161.
`
`162.
`
`163. Plaintiffs do not have an adequate remedyatlaw.
`
`PRAYER FOR RELIEF
`
`WHEREFORE,Plaintiffs pray for judgmentandrelief as follows:
`
`A._Directing Defendants to account to ABG-DR.J, Mr. Erving and
`
`Dr. J Enterprises for all damages ABG-DR.J, Mr. Erving and Dr.J Enterprises
`
`
`
`have suffered and for all profits and any special benefits Defendants have
`
`obtained asa result of the wrongs complainedofherein.
`
`B._Directing Defendants to pay money damages, disgorge and make
`
`restitution to ABG-DR.J, Mr. Erving and Dr. J Enterprises forall money or
`
`other things of value by which they have been unjustly enriched at the
`
`Plaintiffs’ expense.
`
`C.—For an order directing that Defendantsspecifically perform their
`
`obligations under the Operating Agreement and accountto Plaintiffs for all
`
`damagesandlossesas a result of Defendants’ misconduct.
`
`D.
`
`In the alternative, for an order granting the following:
`
`a. paymentto Plaintiffs of 50% of the proceeds earned through
`
`any current and pending venturesofthe parties; and
`
`b. directing Defendants to issue payment to Plaintiffs of all
`
`monies retained by Defendants.
`
`45
`
`
`
`E.
`
`F.
`
`Anaward ofPlaintiffs’ costs and reasonable attorneys’ fees; and
`
`For such other andfurtherrelief as may bejust and proper.
`
`HEYMANENERIO
`GATTUSO & HIRZEL LLP
`
`/s/ Kurt M. Heyman
`Kurt M. Heyman (# 3054)
`Gillian L. Andrews (# 5719)
`300 Delaware Avenue, Suite 200
`Wilmington, DE 19801
`(302) 472-7300
`Attorneysfor Plaintiffs
`
`OF COUNSEL
`
`DANIEL R. MEACHUM & ASSOCIATES, LLC
`Daniel R. Meachum
`260 Peachtree Street, Suite 502
`Atlanta, GA 30303
`(704) 430-6300
`
`BRAGAR EAGEL & SQUIRE,P.C.
`Lawrence P. Eagel
`David J. Stone
`810 Seventh Avenue, Suite 620
`New York, NY 10019
`(212) 308-5858
`
`Dated: September 22, 2021
`
`46
`
`
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