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Schulman Bhattacharya Prevails in $65 Million Petroleum Company Dispute—Court Orders Immediate Distribution of More Than $13.8 Million to Firm’s Client and An Expected $30 Million in Additional Future Distributions, On Top of More Than $20 Million Already Ordered Paid Out

Jan 22

In two orders signed this week by Judge Ronald B. Rubin of the Circuit Court for Montgomery County, Maryland, Schulman Bhattacharya secured a major victory for its clients Andrew Sachs, Sachs Capital, LLC, and related entities in their ongoing litigation with EM Group, LLC, Eli Kimel, Barclay Booth, and Travis Booth.  In the first order, the Court directed that $6,641,070.89 be immediately paid over to the Sachs parties and that “as additional funds are deposited in the Court’s registry” from the sale of a major national petroleum company in which the Sachs parties hold interests, the Court’s Clerk shall “release such funds in a manner consistent with the sequence” required by the parties’ operating agreement.  In the second order, the Court directed that another $7,255,884.72 be immediately released to the Sachs parties.  As much as an additional $30 million is expected to be distributed pursuant to the Court’s orders that Schulman Bhattacharya has obtained, on top of more than $20 million that has already been released to a Sachs affiliate.  This brings to $65 million the total expected payout to Sachs and Sachs affiliates from the petroleum company transaction, based on court rulings secured by the Firm, over the Defendants’ vehement opposition.

Schulman Bhattacharya commenced this action on behalf of the Sachs entities to protect their interests in the proceeds of a $480 million sale of a major national petroleum company.  The Sachs entities invested more than $31 million in the petroleum company and were owed a preferred return on their investment as the sale of the company’s assets approached closing.  Despite the governing agreements, EM Group, the Sachs entities’ partner in the deal, refused to provide assurances that it would follow the required payment “waterfall” for distribution of sale proceeds.  After filing suit, the Sachs entities filed for a temporary restraining order, which the Court granted after argument, and then the order was converted into a preliminary injunction requiring Defendants to pay into the Court’s registry all proceeds received from the petroleum company’s sale.

After that initial determination, Defendants went on the offensive, filing counterclaims and, on August 14, 2020, a motion for preliminary injunction, seeking to alter the Court’s prior injunction based upon claimed new information.  We quickly filed an opposition and requested an expedited hearing.  After an evidentiary hearing on August 27, 2020, Judge Rubin entered a memorandum and order on September 10, 2020, denying Defendants’ motion in its entirety.  Judge Rubin stated that Defendants did “not carr[y] their burden of proof with respect to any of the four factors” considered in evaluating a motion for preliminary injunction.  Specifically, Judge Rubin found it “unlikely” Defendants would succeed on the merits of their claims.

Eighteen days later, Judge Rubin entered his order disposing of all but one of the Defendants’ counterclaims asserted in the case.  EM Group and Kimel had filed two sets of counterclaims against the Sachs entities, which we opposed, before EM Group filed a third version that included 11 separate causes of action.  Believing these claims to be meritless and designed merely to prolong litigation and drive up fees, we responded with a Motion to Dismiss and/or for Summary Judgment, seeking summary resolution of all of EM Group’s claims.  The Court held a telephonic hearing on September 14, 2020, and on September 28, 2020, released its 33-page Memorandum and Order.  In it, the Court refused to accept EM Group’s theory that it and the Defendants were victims of fraud, stating: “The claim that this was some arcane scheme to bring about a future default ignores the inherent risks of doing business, lets extremely sophisticated parties off the hook inappropriately, and completely ignores the rules of contract that govern limited liability companies.”

The Court also agreed with us that EM Group improperly brought claims that should have been derivative claims; several claims were barred by the statute of limitations; EM Group did not properly plead its allegations of fraud; EM Group did not take the proper steps to request indemnification; and EM Group did not timely take steps to rescind agreements it now challenged.

Finally, the Court disagreed with EM Group’s contention that summary judgment should not be awarded until after the parties had an opportunity for discovery.  The Court stated it had “sufficient information to rule on the legal issues that have been presented,” and that “the discovery sought would unduly delay the resolution of the pertinent issues.”