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Schulman Bhattacharya Defeats Preliminary Injunction Motion, Then Wins Summary Judgment Dismissing, With Prejudice, More Than $50 Million in Counterclaims in Petroleum Company Dispute

Sep 30

Schulman Bhattacharya recently secured a pair of major victories for Andrew Sachs, Sachs Capital, LLC, and its related entities in their ongoing litigation with EM Group, LLC, Eli Kimel, Barclay Booth, and Travis Booth.

First, on September 10, 2020, Judge Ronald B. Rubin of the Circuit Court for Montgomery County, Maryland entered a memorandum and order, which can be read here, denying Defendants’ motion for a preliminary injunction.  The injunction sought by Defendants would have held up millions of dollars in funds that are set to be distributed in the near future and altered the previous injunctive relief the Court had entered on behalf of Plaintiffs.  Then, on September 28, 2020, Judge Rubin granted the firm’s motion for summary judgment as to 10 of the 11 counterclaims brought by EM Group, LLC against the firm’s clients.  The decision, which can be found by clicking here, disposed of all affirmative claims against Sachs and his entities.  The lone remaining counterclaim is a “mirror image” of one of the claims Sachs and his entities brought in their complaint, seeking a declaration from the Court regarding the distribution of certain funds.

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 are set to receive a preferred return on their investment as the sale of the company’s assets approaches closing.  Despite the clear language of governing agreements, EM Group, the Sachs entities’ partner in the deal, has refused to provide assurances that it would follow the required payment “waterfall” for distribution and 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.

After that initial defeat, Defendants went on the offensive, filing counterclaims and, on August 14, 2020, a motion for preliminary injunction, seeking to alter what they had consented to previously based upon apparent new information.  Plaintiffs 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.  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 counterclaims pending in this case.  EM Group and Kimel had filed two sets of counterclaims against the Sachs entities, which Schulman Bhattacharya 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, Schulman Bhattacharya responded aggressively, 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 Schulman Bhattacharya 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.

Also, importantly, 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.”

Schulman Bhattacharya will continue to aggressively protect the Sachs entities’ interest in the deal and looks forward to a full and final resolution of this case in favor of Sachs. The legal team handling this matter consists of Jeremy Schulman, Koushik Bhattacharya, Jake Schaller, Sabina Schiller and Sandra Schiller.