Upper Deck Countersues Upper Deck International
A little over a month ago, I wrote about a lawsuit within the Upper Deck family. I compared the lawsuit to a Jerry Springer episode and predicted that there would be a “countersuit…for some unexpected reason and maybe even a surprise guest." Little did I know that the Upper Deck defendants (Upper Deck Nevada, Upper Deck California, and Mr. Richard McWilliam) would rise to my challenge, embrace the Jerry Springer experience, and expose more Upper Deck family secrets for the entire world's entertainment.
In their September 29 filings, the three Upper Deck defendants answered, and UD Nevada filed a countersuit. The answers from the three defendants simply deny everything that Upper Deck International (UDI), the plaintiff, pleaded. To summarize, they basically say, “Everything the plaintiff said is BS."
The Upper Deck defendants' answers are bare-bones, typical filings that do not give much detail about their defenses. At this point in the case, however, defendants do not need to do much more than deny. So, we'll have to wait a bit longer to learn about the Yu-Gi-Oh story, the alleged million dollar loan that wasn't repaid and everything else that was listed in the original suit.
The more interesting filing was UD Nevada's countersuit against the plaintiff UDI and its CEO Nico Blauw. It's got something for everyone. Do you want power struggles and corporate double dealings? That's in there. How about alleged addictions with prescription drugs and alcohol? Yep, that's in there, too. Surprise guest? Why not.
To drown you in legalese, here's UD Nevada's summary of the action:
1. This is a direct counterclaim by UD Nevada against UDI's Chief Executive Officer ("CEO"), Counterclaim Defendant Nico Blauw, seeking to remedy his breaches of fiduciary duty, breach of duty care, waste of corporate assets and fraudulent conversion, which damaged UDI and its shareholders. This action also seeks declaratory relief finding that a September 15, 2010 transfer of 52.5% of UDI, to an entity under Blauw's control, is invalid and unenforceable.
Legalese translation: UD Nevada alleges that UDI's CEO Nico Blauw is a bad guy. He screwed over the UDI shareholders, and basically stole 52.5% of UDI, which he should now give back.
Translation of the last part of the legalese translation: If you're confused about that 52.5% part or think the recitation of UDI three times is a typo, let me say it another way. One of the defendants (UD Nevada) is saying that the CEO (Nico Blauw) of the plaintiff (UDI) improperly obtained a 52.5% ownership stake of the plaintiff (UDI), and he should give it back.
Still confused? That's OK. I was too. Basically, though, what is alleged is that the surprise guest stole ownership of the plaintiff UDI.
How'd this happen? Enter the Jerry Springer interview.
According to UD Nevada, in June 2008, one of the three UD defendants, Mr. Richard McWilliam (a co-founder of Upper Deck), “underwent open heart surgery" and also “began battling an addiction to alcohol and prescription medication," which resulted in a rather sucky 2009 for Mr. McWilliam “filled with numerous hospital appointments, emergency room visits, and medical evaluations."
Because of Mr. McWilliam's health problems, the countersuit alleges that he “did not have the capacity to manage" the UD defendants (UD California and UD Nevada). So, Mr. McWilliam requested that Mr. Blauw manage and operate three separate Upper Deck entities: UD California, UD Nevada (the defendants) and UDI (the plaintiff).
At some point while he was running the Upper Deck family, Mr. Blauw “initiated discussions with Mr. McWilliam" to purchase 35 percent of UDI for 512,834 Euros. This offer was rejected, but Mr. Blauw, allegedly, “was unwilling to take ‘no' for an answer" and “repeatedly and continuously pressured" Mr. McWilliam to sell UDI, even during times when Mr. McWilliam was allegedly battling health problems.
Finally, the countersuit alleged that in September, 2010, “Blauw's wish to steal UDI from Mr. McWilliam was realized" when “in his impaired cognitive state" Mr. McWilliam sold 52.5% of UDI to Mr. Blauw's entity for 1 Euro.
Because viewers of Jerry Springer may not be fluent in the conversion rate between the Euro and the US dollar, the countersuit graciously informs us that 1 Euro is worth “about $1.35 today." Yes, that's less than the initial 512,834 Euro offer.
Who knew that for the price of some Upper Deck cards on eBay, you could have bought more than half of an Upper Deck company? Are we collecting cards wrong or what?
The countersuit continues that two days after the agreement was signed, “Mr. McWilliam was re-admitted into a rehabilitation center for substance abuse."
Legal translation of this cause of action (like one is needed): UD Nevada alleges that Mr. Blauw took advantage of Mr. McWilliam's condition and allegedly stole UDI out from underneath him.
How's that for a dysfunctional family? A sick family member asks for help with running the family store, only to have the family store allegedly sold out from underneath him for $1.35. I think I saw that Jerry Springer episode before.
The rest of the countersuit focuses on “Blauw's reign as CEO" where he allegedly “mis-managed UDI to the detriment of UDI shareholders." These allegations do not fall into the typical Jerry Springer show set up, so we'll skip over most of them. The most interesting claim, though, is that during the Konami v. Upper Deck lawsuits (that gave rise to this suit), Konami froze all of Mr. Blauw's assets and bank accounts.
UD Nevada alleges Mr. Blauw basically wrapped up the Konami lawsuit for his own betterment, at the expense of UDI. According to the countersuit, Mr. Blauw allegedly never disclosed his “conflict of interest" and agreed to “settlement terms…in excess of UDI's actual liability" so he could “shield himself from personal liability." UD Nevada alleges that by acting for “his own personal gain" he “entered into an extremely unfavorable settlement, which isolated him from any personal liability."
Legal translation: UD Nevada alleges that Mr. Blauw ignored the duty he had to the Upper Deck family and acted out of his own self-interest. In doing so, he allegedly forced the Upper Deck family to pay too much to end the suit, mainly so that Mr. Blauw could allegedly get his assets and bank accounts back.
Now that the battle lines have been drawn, what's going to happen?
UD Nevada's claims are very fact intensive, and unfortunately, it's likely that a lot of the facts and documents will be shielded from public view. However, if UD Nevada can show that Mr. McWilliam did not have the mental capacity to sell the company to Mr. Blauw, the deal could potentially be unwound.
We also haven't (yet) seen the defendants' defenses, so it's difficult to tell how strong UDI's original claims are. Regardless, if UD Nevada's counterclaims stick, UDI will have skin in the game. If UDI thinks there is risk because of this, it may be more inclined to settle (or settle for less).
The countersuit is still in the early stages, and later filings will help clear things up. UDI and Mr. Blauw's responses to the countersuit are due in 21 days, but they'll likely receive an extension. I would expect them to try to dismiss these claims. It's a bit awkward that UD Nevada is bringing a claim on behalf of the plaintiff's UDI shareholders when it's technically not one itself (family squabbles are always so complicated). Expect the next fight to be over whether UD Nevada is the proper party to bring this claim.
Given how slowly cases move, we really won't get into the meat of the case until next year. So, consider this the season finale of the Jerry Springer Upper Deck family squabbles. But don't worry, next season, I'm sure the excitement will begin again (unless, of course, the defendants settle, in which case, we can watch that Jurassic Park-meets-Lost show, if it isn't cancelled by then).
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