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Plaintiff,
v.
Cardtronics USA, Inc., a Delaware
Corporation; Cardtronics, Inc., a Delaware
Corporation; and Phillip A. Rock, an
Individual,
Defendants.
COMPLAINT AND
JURY TRIAL DEMAND
COMPLAINT
Plaintiff Greene Holcomb & Fisher LLC (GHF) states and alleges as follows:
PARTIES
1.
offices located at 90 South 7th Street, 54th Floor, Minneapolis, Minnesota 55402.
2.
Plaintiff is an eight-member LLC and seven of its members are citizens of the
principal place of business at 3250 Briarpark Drive, Suite 400, Houston, Texas 77042.
5.
Defendants Cardtronics USA, Inc. and Cardtronics, Inc. are known herein
collectively as Cardtronics.
7.
Rock was, at all times relevant, the president, CEO, and sole shareholder of
ATM Network, Inc., a Minnesota corporation with its principal place of business in
Minnesota.
10.
ATM Network, Inc. (ATM) changed its name to Bon Voyage Network
Services, Inc. on August 14, 2012 and again changed its name to I LOVE YOU ATM
SERVICES, INC. on September 14, 2012, as filed with the Minnesota Secretary of State.
Exhibit A.
11.
In September 2010, Rock sought to sell his company, ATM, and entered into
a contract with Plaintiff whereby Plaintiff was to act as ATMs exclusive agent and
investment broker regarding the sale of ATMs stock or assets.
12.
On August 7, 2012, ATMs assets were sold to Cardtronics, but Plaintiff was
never paid the fee for its service or its costs, as detailed herein.
13.
On March 27, 2013, Plaintiff initiated arbitration with the Financial Industry
Regulatory Authority (FINRA) against, among others, ATM, Rock, Cardtronics, Inc. and
Cardtronics USA, Inc.
2
14.
Cardtronics, Inc., Cardtronics USA, Inc. and Rock opted out of the
arbitration proceeding.
15.
Plaintiff and against ATM in an amount that currently exceeds $1,200,000 with costs,
interest and attorney fees awarded by the arbitration panel. Exhibit B.
16.
This Complaint does not join as a party ATM because, pursuant to the
contract between ATM and Plaintiff, the claims against ATM were litigated in FINRA
Arbitration.
SUBJECT MATTER JURISDICTION
17.
The amount in controversy, without interest and costs, exceeds the sum or
value of $75,000.
18.
19.
22.
23.
This Court has Subject Matter Jurisdiction over the parties pursuant to 28
The nature and quality of the Defendants contacts with Minnesota are
3
substantial.
25.
assets of ATM Network, Inc., a Minnesota Corporation with its principal place of
business in Minnesota.
26.
27.
Cardtronics, Inc.s website states, Please visit one of our 53,900 ATMs
Wholesale, CVS/Pharmacy, Target, and Walgreens, which all have operations in the
State of Minnesota. http://www.cardtronics.com/about/top-customers.asp.
29.
cities and towns in the state of Minnesota where Cardtronics ATMs can be found.
http://locator.cardtronics.com/local/minnesota/atm-locations/index.html.
30.
Cardtronics with its office located at 10749 Bren Road E, Minnetonka, Minnesota
55343. http://www.cardtronics.com/about/atmnetwork.asp.
31.
under Minnesota Statute ch. 303 with its registered agent listed as Capital Corporate
4
Services, Inc. and its registered office at 402 21st Str S, Moorhead, Minnesota 56560.
Exhibit C.
32.
According to the Cardtronics, Inc. 2013 10-K Annual Report filed with the
Securities and Exchange Commission, Cardtronics USA, Inc. is the primary domestic
operating subsidiary of Cardtronics, Inc. Exhibit D.
33.
On or about August 14, 2012, Cardtronics USA, Inc. assumed the name of
ATM Network, Inc., as filed with the Minnesota Secretary of State. Exhibit E.
34.
At all times relevant and at the time this cause of action arose, Rock was
sole shareholder, president and CEO of ATM, a Minnesota corporation with its principal
place of business in Minnesota.
36.
During the term of the contract between Plaintiff and ATM, Rock visited the
Rock reaped the economic benefits of ATM as the sole shareholder, president
and CEO.
38.
Rock reaped the economic benefits from the sale of ATM as he received the
Rock further reaped economic benefits from the sale of ATM when he, on
information and belief, made distributions to himself, with outstanding debt owed to
Plaintiff that was never paid.
40.
Through his actions as shareholder, president and CEO of ATM and through
5
his dealings with Plaintiff, Rock purposefully availed himself to the benefits and
protections of the laws of Minnesota. The extensive contacts were more than random,
fortuitous, or attenuated.
41.
company with its offices in Minnesota, which was the victim of substantial wrongful
behavior while conducting business in the State of Minnesota.
42.
As articulated below, the injury giving rise to this lawsuit occurred within
State of Minnesota and Plaintiffs injury and its claims arose out of and relate to those
activities.
44.
Defendants in this case under Fed. R. Civ. P. 4(k) and Minn. Stat. 543.19, subd. 1.
VENUE
45.
47.
providing superior investment banking services to business owners desiring to sell their
companies. Plaintiffs website is: www.ghf.net. Plaintiff provides strategic services to
evaluate and properly position companies, value them, market them, and find potential
6
purchasers; and it further assists in all aspects of the sale through the closing.
48.
ATMs exclusive agent to find a purchaser for ATM on behalf of ATM and himself.
49.
Rock, on behalf of ATM and himself, agreed to compensate Plaintiff for its
Rock derived a direct benefit from the agreement between Plaintiff and
51.
Before Rock contacted Plaintiff, Rock and officers from Cardtronics had
ATM.
developed a personal relationship, as both are involved in the automated teller machine
industry.
52.
agent for the sale of ATM (Engagement Letter), Rock attempted to convince Plaintiff
to add language to the agreement that would prevent Plaintiff from earning any fee, or
else receiving a reduced fee, if ATM was sold to Cardtronics.
53.
Cardtronics.
54.
James Hovland, ATMs attorney, and Plaintiff drafted the Engagement Letter
57.
Under the terms of the Engagement Letter, ATM was to reimburse Plaintiff
Performance Fee of 3.75% on the first $25,000,000 and 5% on all amounts over
$25,000,000. Id. at 3.
59.
Through the Engagement Letter, ATM granted Plaintiff the exclusive right
to find a purchaser from the date you sign this letter until notice of termination is given
by either party upon thirty days prior written notice to the other party (the Exclusive
Period). Id. at 1.
60.
The Engagement Letter further requires that ATM represents and warrants
to GH&F that it has informed GH&F of all parties with whom it has had contact
regarding the potential sale of the Company and will inform GH&F of any party or
parties that contact the Company regarding the potential sale of the Company. Id. at
5.
62.
The Engagement Letter requires that ATM also represents to GH&F that
any information provided to GH&F does not and will not at any time contain any
misstatement or untrue statements of a material fact or omit to state any and all material
facts necessary to make the statements not false or misleading in light of the
8
inform GH&F of any material developments or matters that occur or come to the
attention of the Company, its shareholders, directors, officers, members, employees or
affiliates. Id.
65.
contribution obligations of the Company under this agreement shall be in addition to any
liability which the Company may otherwise have, shall survive any notice of termination
and shall be binding upon and extend to the benefit of any successors, assigns, heirs and
personal representatives of the Company and GH&F. Id.
66.
At all times material hereto, Plaintiff acted diligently and in good faith, and
invested substantial time, effort and costs as ATMs exclusive agent to prepare, promote
the sale of, create a market for, find a buyer for, and close the sale of ATM.
67.
Plaintiff also invested substantial time, effort and costs in preparing ATM
and its management team for the sale process, including the creation of substantial
marketing materials (work product) regarding ATM.
68.
buyers, and worked with them to generate interest among the potential buyers in
furtherance of the sale of ATM.
9
69.
Plaintiff created and employed the unique name of Project Surf for the sale
of ATM.
70.
Plaintiffs entire work product and services related to the sale of ATM were
included in Project Surf, and both ATM and Plaintiff referred to the sale of ATM as
Project Surf.
71.
on October 18, 2010, which provides extensive historical and prospective financial data
for ATM, a preliminary valuation analysis, analyses of comparable companies, analyses
of comparable transactions, and other detailed information. Cardtronics is included as a
comparable public company.
72.
Presentation presented to ATM November 10, 2010, which laid out the entire sales
process to ATM, including the approximately 30 steps taken to sell the company,
explanation of the due diligence process, and review of the issues involved and
contemplated when attempting to sell ATM.
73.
Plaintiffs work product includes a potential buyer list, which includes the
potential buyers which includes financial data about ATM, investment considerations,
and general information about ATM.
75.
which is a 73 page document sent to every potential buyer that signed a confidentiality
agreement. The Confidential Information Memorandum includes an executive summary,
investment considerations, business overview, information about management and
employees, select financial information, industry overview, review of financial
statements, company timeline, advertisements, website landing pages, and other
information relevant to ATM.
76.
Plaintiff also devoted substantial time and effort in creating and maintaining
an on-line (Internet) Data Room with password-protected access for potential buyers,
which contained significant and substantial materials for potential buyers review and
evaluation of ATM.
78.
The Data Room was a valuable sales tool at all-times material hereto.
79.
Plaintiff kept ATM informed of its efforts and progress throughout, and
periodically provided ATM with a Process Summary regarding its efforts. Numerous
Process Summaries were sent to ATM which included potential buyers contacted,
Confidentiality Agreements distributed, Confidential Memoranda distributed, and bid
request letters distributed.
80.
For more than eight months, Plaintiff contacted 271 potential buyers and
11
potential buyers and various initial indications of interest received from potential buyers.
82.
In March 2011, Plaintiff made authorized initial contact with and solicited
advised Plaintiff that Cardtronics was not interested in purchasing ATM at that time.
85.
By May 2011, Plaintiff had received eight initial indications of interest from
Plaintiff and ATM selected five of the eight potential buyers to attend
On or about July 14, 2011, Hovland sent ATMs required 30-day notice of
termination of the Engagement Letter which established a termination date of August 13,
2011.
89.
Engagement Letter, with the tail period expiring on August 13, 2012.
90.
Plaintiff re-engage as ATMs exclusive sales agent and continue in its efforts to find a
purchaser for ATM, and indicated that Rock and ATM were interested in the previously
discussed offer of $16,500,000 from a potential purchaser.
91.
Plaintiff orally agreed to continue its efforts to find a purchaser for ATM as
ATMs exclusive sales agent, and ATM agreed to pay Plaintiff its costs and also its
Performance Fee upon the sale of ATM.
92.
The September 2011 oral agreement included, but was not limited to, the
terms of the Engagement Letter, and Plaintiff immediately began working again as
ATMs exclusive sales agent.
93.
previously expressed an interest in purchasing ATM and also new potential buyers.
94.
Seven Bank regarding its interest in purchasing ATM, just as Rock was required to do
13
under the terms of the Engagement Letter and oral agreement with Plaintiff.
96.
Upon information and belief, Seven Bank is an affiliate of an entity that owns
Plaintiff contacted Seven Bank and exerted substantial time and effort to
prepare and present ATM to officials from Seven Bank. Plaintiff also provided Seven
Bank with the Confidentiality Agreement, Confidential Overview, Confidential
Memorandum, and other relevant information.
98.
sent Seven Bank and email stating, In my discussion this morning with Mr. Rock, he
asked me to share with you that Mr. Jevnick is fully authorized to speak to our mutual
interests and that further, Mr. Jevnick should become your primary point of contact for all
communication and arrangements regarding ATM Network.
99.
100. This email confirmed the oral agreement that Plaintiff was ATMs exclusive
agent.
101. On October 10, 2011, Plaintiff held a meeting at its offices in Minneapolis,
Minnesota between officials of Seven Bank and ATM. Rock and other officers of ATM
attended.
102. Plaintiff also exerted substantial time and effort to prepare and present ATM
104. Plaintiff, under the direction of Rock and ATM, continued its substantial
efforts to find a buyer for ATM with the understanding that Plaintiff was ATMs
exclusive agent, and that Plaintiff would be paid its costs and its Performance Fee upon
the sale of ATM.
105. Rock then directed Plaintiff to negotiate the sale of ATM to Seven Bank, and
on November 4, 2011, ATM and Seven Bank signed an Exclusivity Agreement. See
Exhibit H.
106. The Exclusivity Agreement prohibited Seven Bank and ATM from having
divulge, to any third party the content or existence of [the] agreement and the
transaction or any or all confidential and proprietary information received for a period of
two years. Id.
108. On or about November 4, 2011, ATM and Plaintiff drafted an Amendment to
between ATM and Plaintiff to writing, but renewed and revived the obligations,
protection for Plaintiff, and terms of the Engagement Letter.
110. The actions of the parties, agreements (both oral and written), and
understanding between ATM and Plaintiff provided that ATM would pay Plaintiff its
costs and its Performance Fee upon the sale of ATM, that ATM would adhere to
Plaintiffs exclusive agency rights and use Plaintiff to negotiate and close the sale of
15
ATM, and that ATM would not circumvent Plaintiffs exclusive agency rights or use
Plaintiff to merely provide a stalking horse for ATM.
111. On December 6, 2011, Plaintiff sent Rock an email saying that Plaintiff had
not yet received a signed copy of the Amendment to Engagement Letter; on December
12, 2011, ATM faxed Rocks signature page to the Amendment to Engagement Letter.
112. From November 4, 2011 through March 2012, Plaintiff engaged in extensive
Michael Clinard, President of Global Services and former Chief Operating Officer of
Cardtronics.
117. On information and belief, during that meeting, Rock informed Mr.
Rathgaber that Seven Banks purpose in purchasing ATM was to displace Cardtronics as
the ATM provider at 7-Eleven stores in the United States by acquiring a U.S.-based ATM
business that it could use to provide ATM services itself, rather than contracting through
Cardtronics.
16
118. The information regarding Seven Banks plans to displace Cardtronics was
obtained by Rock from Seven Bank and was subject to confidentiality as part of the
Exclusivity Agreement between ATM and Seven Bank.
119. The Cardtronics, Inc. 2013 10-K Annual Report states, 7-Eleven, which
represents the single largest merchant customer in the Companys portfolio, comprised
24.0% and 26.9% of the Companys unaudited pro forma revenues for the years ended
December 31, 2013 and 2012, respectively. Accordingly, a significant percentage of the
Companys future revenues and operating income will be dependent upon the successful
continuation of its relationship with these merchants. See Exhibit D.
120. The Cardtronics, Inc. 2013 10-K Annual Report states that no other merchant
substantial portion of our revenue from devices placed with a small number of merchants.
If one or more of our top merchants were to suffer a material deterioration of their
business and cease doing business with us, or to substantially reduce its dealings with us,
our revenues could decline. Id.
122. On information and belief, the confidential information provided by Rock to
Mr. Rathgaber regarding Seven Banks plans to displace Cardtronics as the ATM
provider for 7-Eleven stores motivated Mr. Rathgaber and Cardtronics to purchase ATM
in order to preserve its valuable business relationship with 7-Eleven.
123. Immediately after Rock met with Mr. Rathgaber at the ATMIA Conference,
and while negotiations with Seven Bank regarding the sale of ATM were still on-going
17
faith with Seven Bank and reneged on his own counter-offer that had been orally
accepted by Seven Bank.
125. At some point in time, and after receiving the full benefit of Plaintiffs efforts
and utilizing Plaintiffs work product for more than twelve months, including the
negotiated sale of ATM to Seven Bank for $20,500,000 and use of the Data Room
created by Plaintiff, Rock devised a scheme in an attempt to hinder, delay, defraud and
avoid paying Plaintiff its claim for the Performance Fee and costs by circumventing
Plaintiffs agreements and selling ATM directly to Cardtronics, which constitutes a
material breach of the agreement.
126. On information and belief, ATM and Rock authorized the use of Plaintiffs
work product, including access to the confidential Data Room and confidential materials
prepared by Plaintiff which were all relevant to the sale of ATM, and either authorized
Cardtronics access to the confidential Data Room or sent the work product directly to
Cardtronics without Plaintiffs authority, consent, or informing Plaintiff, for Cardtronics
analysis and review regarding Cardtronics purchase of ATM.
127. On Monday, March 5, 2012, officers from ATM returned to Minnesota from
clearance and permissions for four employees of Cardtronics to access the on-line Data
Room for Project Surf. See Exhibit I.
18
129. On June 6, 2012, after Cardtronics was given access to the Data Room for
almost three months, ATM documents show, Edits to data room documents to remove
Seven Bank name. Id.
130. On information and belief, while ATM and Plaintiff were negotiating a sale
made aware that Plaintiff was ATMs exclusive sales agent in March 2011 and again in
February and/or March 2012.
133. Cardtronics failed to contact Plaintiff regarding its interest as a potential
purchaser of ATM despite being aware that Plaintiff was ATMs exclusive sales agent.
134. Without Plaintiffs knowledge, on or about August 7, 2012, all or
substantially all of the assets of ATM were sold and transferred to Cardtronics for a
purchase price of approximately $20,500,000 or more.
135. The sale of ATM to Cardtronics closed on or about August 7, 2012, which
was within the tail period as defined by the Engagement Letter, and within the
timeframe that the oral agreement designated Plaintiff as ATMs exclusive agent.
136. Plaintiff sent an invoice to ATM and Rock for $788,750 after learning of the
sale of ATM to Cardtronics, with $768,750 being for the Performance Fee for said sale
and $20,000 being for costs.
19
137. Neither ATM nor Rock paid the amount due in the invoice.
138. ATM, its shareholder, directors, officers, and employees breached their
all or substantially all of ATMs assets directly to Cardtronics in an effort to hinder, delay
and defraud Plaintiff from receiving its Performance Fee and costs.
140. ATM, Rock and Cardtronics concealed the transfer of assets and did not
Stat. 513.41(12).
143. According to the terms of the Engagement Letter, Plaintiff has a claim for the
entire fee payable to Plaintiff and it shall be paid in cash to GHF at closing. See
Exhibit F.
144. ATM failed to pay Plaintiff its claim for out-of-pocket costs or its
calculated to be $768,750, with out-of-pocket expenses are capped at $20,000, for a total
20
of $788,750.
146. On information and belief, the purchase price for ATMs assets paid by
distributions to Rock as ATMs sole shareholder, and to other officers and employees of
ATM pursuant to individual agreements, of the total purchase price paid for ATM, except
an amount that was held by Cardtronics as a hold-back.
150. There was a hold-back of a portion of the purchase money for the said sale
21
naming, among others, ATM, Rock, Cardtronics, Inc. and Cardtronics USA, Inc. as
Respondents.
155. ATM was required to and agreed to participate in the FINRA proceeding per
the Engagement Letter and the FINRA Arbitration Submission Agreement signed by
ATM counsel on May 30, 2013.
156. Rock, Cardtronics, Inc. and Cardtronics USA, Inc. chose to opt out of the
arbitration proceeding.
157. A FINRA Arbitration Panel consisting of three arbitrators (Arbitration
counsel.
160. Rock testified at the arbitration hearing.
161. On September 24, 2014, the Arbitration Panel unanimously ruled in favor of
Plaintiff.
162. In a November 6, 2014 award issued by the Arbitration Panel (Award),
Plaintiff was awarded $788,750 for the Performance Fee for said sale to Cardtronics that
was not paid by ATM, $20,000 in out of pocket expenses that ATM did not pay, interest
at 10% per annum, and attorney fees and costs totaling $257,348.01. The total due
pursuant to the Award with interest, costs and attorney fees awarded by the Arbitration
Panel currently exceeds $1,200,000. See Exhibit B.
22
163. On November 12, 2014, Plaintiff filed a motion in Hennepin County District
Court in Minnesota to have the Award confirmed as a judgment against I LOVE YOU
ATM SERVICES, INC, formerly known as Bon Voyage Network Services, Inc.,
formerly known as ATM Network, Inc.
164. Pursuant to 9 U.S. Code 13, a judgment confirming an arbitration award
shall have the same force and effect, in all respects, as, and be subject to all the
provisions of law relating to, a judgment in an action; and it may be enforced as if it had
been rendered in an action in the court in which it is entered.
165. On information and belief, Cardtronics still holds $1,000,000 in holdback,
of at least $1,000,000.
168. On information and belief, ATM currently does not have sufficient funds to
FINRA Arbitration Statement of Claim on March 27, 2013 and was put on notice of the
23
August 7, 2015.
175. Plaintiff is or will be entitled to the holdback funds held by Cardtronics
after the Award is confirmed by the Minnesota District Court or entry of judgment in this
case, or otherwise adjudicated herein.
177. Plaintiff will be irreparably harmed if the holdback funds are released prior
to entry of judgment in this case or confirmation of the Award in the state court
proceeding because there is a significant probability that ATM will not be able to satisfy
the Award once confirmed.
178. An actual and substantial controversy exists between parties with adverse
legal interests, Plaintiff and Cardtronics, with respect to the $1,000,000 in holdback.
Cardtronics, Inc. and Cardtronics USA, Inc. are still collectively known herein as
Cardtronics.
24
179. The immediacy and reality of the situation warrants a declaratory judgment
because Cardtronics will or may release the holdback funds to ATM, itself, or another
business or individual on or before August 7, 2015, denying Plaintiff the ability to collect
the Award from ATM, a company that, on information and belief, currently has no assets,
no business operations and operates as an alter ego of Rock.
180. Practicality and wise judicial administration warrant a declaratory judgment
in this case because a judicial determination of the respective rights and interests of the
parties declaring Plaintiffs rights to the holdback funds would simplify and resolve
most, if not all, of the claims in this lawsuit.
181. Plaintiff seeks specific relief in the form of a declaration that it has a lawful
right to the $1,000,000 in holdback so that there will be no controversy clouding the
Plaintiffs right in and to the funds, a declaration prohibiting Cardtronics from releasing
the $1,000,000 in holdback to ATM, Rock, Cardtronics or any other entity or
individual, and a declaration requiring Cardtronics to pay to Plaintiff the $1,000,000 in
holdback to satisfy part the Award upon its confirmation or to satisfy all or part of a
judgment in this case.
COUNT II
INJUNCTIVE RELIEF PURSUANT TO FEDERAL
RULE OF CIVIL PROCEDURE 65
(Cardtronics, Inc. and Cardtronics USA, Inc.)
182. Paragraphs 1 through 181 as set forth above are incorporated herein by
25
approximately $1,000,000.
188. On information and belief, the $1,000,000 holdback is set to be released to
released to ATM, Rock, Cardtronics or any other person or business at any time during
this lawsuit, or if the funds are used to offset Cardtronics losses, because there is a
significant probability that ATM will not be able to satisfy the Award once confirmed by
the District Court.
191. The threatened injury caused by release of the $1,000,000 holdback is real
and substantial.
192. More harm will result from the denial of the injunction than its issuance
because the $1,000,000 holdback may be Plaintiffs only chance of recovering any
26
money owed by ATM and its successor Cardtronics, and the impact on Cardtronics is
minimal as it is merely maintaining the status quo and continuing to hold the funds it has
had in its possession for over two years.
193. Plaintiff has a reasonable probability of success in a trial on the merits as
outlined in the facts section and the counts below and has already been unanimously
awarded $1,200,000 by the Arbitration Panel.
194. The public interest is served by the injunction because actual enforcement of
court judgments enhances the credibility and effectiveness of the rule of law in the State
of Minnesota.
195. Pursuant to Federal Rule of Civil Procedure 65, Plaintiff is entitled to an
injunction that prevents Cardtronics from releasing the holdback to ATM, Rock,
Cardtronics, or any other person or entity, and that prevents Cardtronics from using the
holdback funds to offset its losses, until ordered by the Court.
COUNT III
TRANSFEREE/SUCCESSOR LIABILITY UNDER
MINNESOTA STATUTE 302A.661
(Cardtronics, Inc. and Cardtronics USA, Inc.)
196. Paragraphs 1 through 195 as set forth above are incorporated herein by
the debts, obligations, and liabilities of the transferor to the extent provided in the
contract or agreement between the transferee and the transferor, or to the extent provided
by this chapter or other statutes of this state.
27
to purchase all or substantially all the assets of ATM, the transferor, for a price equal to
or greater than $20,500,000.
199. On information and belief, Cardtronics assumed debts, obligations and
liabilities of ATM in the contract or agreement when it purchased all or substantially all
the assets of ATM on August 7, 2012.
200. The Engagement Letter between Plaintiff and ATM states, The fees,
successor/transferee Cardtronics and transferor ATM, Cardtronics is liable for the debts,
obligations and liabilities of ATM, including the entire Award.
202. Plaintiff is entitled to recover from ATMs successor Cardtronics the entire
$1,200,000 Award, including the damages, interest, attorney fees and costs awarded by
the Arbitration Panel, plus statutory interest and costs.
COUNT IV
TRANSFEREE/SUCCESSOR LIABILITY UNDER MINNESOTA STATUTE
513.41-51, MINNESOTA UNIFORM FRAUDULENT TRANSFER ACT
(Cardtronics USA, Inc. and Cardtronics, Inc.)
203. Paragraphs 1 through 202 as set forth above are incorporated herein by
28
all or substantially all the assets of ATM for a price equal to or greater than $20,500,000.
206. ATM concealed the transfer of ATMs assets to Cardtronics from Plaintiff to
with Plaintiff while negotiating the transfer of assets with Cardtronics and following the
transfer of the assets.
209. On information and belief, ATM became insolvent shortly after the sale of
ATMs assets to Cardtronics by Rocks siphoning of all funds from the corporation.
210. The transfer to Cardtronics was made and the debt to Plaintiff was incurred
simultaneously.
211. The transfer of ATMs assets was a fraudulent transfer under the Uniform
Stat. 513.41(3), which is defined as, [A] right to payment, whether or not the right is
29
brought a claim against ATM, Cardtronics and Rock under Minn. Stat. 513.41-.51,
with Count VI stating in part: Here, the transfer of the assets of ATM to successor-ininterest Cardtronics (as to the entity ATM), and to Respondents Rock, Hovland,
Woolson, Duhn, James, and Poluha were fraudulent as to GHF, because ATM made the
transfer or incurred the obligation with the actual intent to hinder, delay or defraud GHF
and to not pay GHF any fee.
216. The Award issued by the Arbitration Panel is binding and conclusively
relief afforded in the statute and to recover from ATMs successor/transferee Cardtronics
the entire $1,200,000 Award, including the damages, interest, attorney fees and costs
awarded by the Arbitration Panel, plus statutory interest and costs.
30
COUNT V
TRANSFEREE AND TRANSFEROR LIABILITY UNDER MINNESOTA
STATUTE 513.47 (a)(3)(iii) and (b)
(Phillip A. Rock, Cardtronics USA, Inc. and Cardtronics, Inc.)
219. Paragraphs 1 through 218 as set forth above are incorporated herein by
on a claim against the debtor, the creditor, if the court so orders, may levy execution on
the asset transferred or its proceeds.
224. Minnesota Statute 513.47(a)(3)(iii) states, In an action for relief against a
Rock as the sole shareholder and CEO of ATM and Cardtronics as transferee/successor,
31
principles of equity dictate and Minn. Stat. 513.47(a)(3)(iii) and (b) allow Plaintiff to
recover the proceeds from the sale of the assets of ATM to satisfy the Award of
approximately $1,200,000.
226. The $1,000,000 currently in the possession of Cardtronics in holdback, is
recover from Cardtronics and Rock the proceeds from the sale of ATMs assets to
Cardtronics in an amount up to the entire $1,200,000 Award, including the damages,
interest, attorney fees and costs awarded by the Arbitration Panel, plus statutory interest
and costs.
COUNT VI
VIOLATIONS OF MINN. STAT. 302A.551 and 302A.557
(Phillip A. Rock)
229. Paragraphs 1 through 228 as set forth above are incorporated herein by
states that: A shareholder who receives a distribution made in violation of the provisions
of section 302A.551 is liable to the corporation, its receiver or other person winding up
its affairs.
32
231. Minn. Stat. 302A.551 sets forth the criterion for permitted distributions to
shareholders, which may occur when the corporation will be able to pay its debts in the
ordinary course of business after making the distribution and the board does not know
before the distribution is made that the determination was or has become erroneous.
232. Thus, the corporation may make the distribution if it is able to pay its debts in
to Plaintiff on August 7, 2012 and, on information and belief, received and continues to
receive distributions from the corporation thereafter without first paying Plaintiff and
without leaving enough assets available in ATM to pay Plaintiff.
234. Rock is personally liable as a shareholder of ATM pursuant to Minn. Stat.
302A.557.
235. As a direct and proximate result of Rocks conduct, Plaintiff suffered
including the damages, interest, attorney fees and costs awarded by the Arbitration Panel,
plus statutory interest and costs, up to the amount he received in distributions from ATM
in violation of Minn. Stat. 302A.551 and 302A.557.
COUNT VII
EQUITABLE RELIEF TO PIERCE CORPORATE VEIL AND HOLD
SHAREHOLDER LIABLE AS ALTER EGO
(Phillip A. Rock)
237. Paragraphs 1 through 236 as set forth above are incorporated herein by
33
of its corporate undertaking and is not engaged in any business operations at this time.
239. On information and belief, ATM does not observe corporate formalities and
dominant shareholder Rock can siphon funds from when Cardtronics makes deferred
installment payments due from the sale proceeds that were used as holdback from the
sale of ATM.
242. On information and belief, the officers and directors of ATM perform no
functions at this time and ATM does not currently engage in any business operations.
243. On information and belief, ATM currently exists for the sole purpose of
allowing Rock to collect holdback payments from Cardtronics making the corporation
merely a faade for Rocks individual dealings.
244. It will be an injustice and fundamentally unfair if Rock is permitted to siphon
funds from ATM as its alter ego while Plaintiff is denied its right to the approximately
$1,200,000 in debt it is owed by ATM.
245. Minnesota law dictates that with the characteristics of ATM identified above,
it is proper to pierce the corporate veil to hold shareholder Rock liable for the debts of
ATM where Rock is the alter ego of the corporation and piercing the corporate veil is
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entitled to recover from Rock the entire $1,200,000 Award, including the damages,
interest, attorney fees and costs awarded by the Arbitration Panel, plus statutory interest
and costs.
COUNT VIII
FRAUDULENT MISREPRESENTATION
(Phillip A. Rock)
247. Paragraphs 1 through 246 as set forth above are incorporated herein by
of knowledge, specifically, that Plaintiff would be ATMs exclusive agent, ATM would
be sold through the efforts of Plaintiff, ATM would pay Plaintiff its Performance Fee and
costs, and ATM would abide by the Exclusivity Agreement with Seven Bank.
250. Rock continued for an extended period of time to express interest in selling
ATM to Seven Bank, but such representations were false as Rock was merely using ATM
as a stalking horse so that he could obtain valuable confidential information from
Seven Bank and sell ATM to Cardtronics and in doing so used confidential information
about Seven Banks plans to displace Cardtronics as the provider of ATM services for 7Eleven stores.
251. Rock knew the representations made were false as he orchestrated the plan to
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use Seven Bank as a stalking horse and use confidential information obtained through
Plaintiffs efforts in order to sell ATM to Cardtronics at a premium.
252. He further knew of and orchestrated the plan to obtain confidential
information from Seven Bank and make false representations that Plaintiff would be
ATMs exclusive agent, ATM would be sold through Plaintiff, ATM would pay Plaintiff
its performance fee, and ATM would abide by the exclusively agreement with Seven
Bank.
253. Rock intended to induce Plaintiff to act in reliance on his representations.
254. Rock orchestrated the plan to induce Plaintiff to work for more than twelve
months to create a market for the sale of ATM and prepare ATM and its management
team for ATMs sale, identify and contact hundreds of potential buyers, and negotiate
with Seven Bank to provide a bona fide purchaser with a maximum purchase price for
ATM.
255. Rock orchestrated and executed this plan so that he could use Seven Bank as
a stalking horse to establish the minimum sales price when Rock sold ATM to
Cardtronics and to avoid paying Plaintiff its costs and Performance Fee.
256. Rock further intended to induce Plaintiff to continue its actions and
negotiations with Seven Bank while also negotiating with Cardtronics which is evidenced
by Rock withholding the material fact of his negotiations with Cardtronics, secretly
giving Cardtronics access to the Data Room, and providing confidential information to
Cardtronics that Seven Bank intended to displace Cardtronics as the provider of ATMs in
7-Eleven stores.
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257. The representations by Rock caused Plaintiff to rely thereon and such
reliance was justified because it is standard in the industry for a broker to be an exclusive
agent and this is the relationship outlined in the Engagement Letter, oral agreement
between ATM and Plaintiff and the actions of the parties
258. The representations by Rock caused Plaintiff to rely thereon and such
reliance was justified because it is standard in the industry for a broker to be the exclusive
agent of an entity and receive material information relating to sales activities while it is
being marketed and negotiations between buyer and seller are taking place.
259. The representations by Rock caused Plaintiff to rely thereon and such
reliance was justified because it is standard in the industry for a corporation, such as
ATM, to pay its exclusive agent, such as Plaintiff, a Performance Fee and costs following
the sale of the corporation.
260. The representations by Rock caused Plaintiff to rely thereon and such
reliance was justified because the Exclusivity Agreement between ATM and Seven Bank
and confidentiality provisions continuing two years thereafter, which was an essential
part of the sales process, caused Plaintiff to believe that ATM would not conceal its
negotiations with Cardtronics and would not disclose to Cardtronics that Seven Bank
planned to displace Cardtronics as the provider of ATMs in 7-Eleven stores.
261. Rocks representation that he intended to sell ATM to Seven Bank, even
making a counteroffer that was accepted, further caused Plaintiff to rely and act on these
representations because the agreements between ATM and Plaintiff and industry standard
do not allow a corporation to use an exclusive agent, such as Plaintiff, and another
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company, such as Seven Bank, as a stalking horse in order to receive a premium sale
price from another company, such as Cardtronics, and to avoid paying its costs and
Performance Fee to Plaintiff.
262. All or substantially all the assets of ATM were sold to Cardtronics and
Plaintiff was never paid its Performance Fee or costs which caused pecuniary damage as
a result of the reliance on Rocks false representations.
263. As an officer and shareholder of ATM and as a result of his fraudulent
misrepresentations, Rock is liable for damages suffered by Plaintiff which include the
entire $1,200,000 Award, including the damages, interest, attorney fees and costs
awarded by the Arbitration Panel, plus statutory interest and costs.
COUNT IX
NEGLIGENT MISREPRESENTATION
(Cardtronics, Inc. and Cardtronics USA, Inc.)
264. Paragraphs 1 through 263 as set forth above are incorporated herein by
existence of its negotiations with ATM despite being aware of Plaintiffs exclusive
agency relationship with ATM and using the sales Data Room prepared by Plaintiff.
266. Cardtronics failed to make appropriate arrangements for payment of
inform Plaintiff that it received confidential information from ATM in the form of Seven
Banks plan to displace Cardtronics as the provider of ATMs in 7-Eleven stores.
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aware that the sensitive and highly valuable information about Seven Banks plans to
displace Cardtronics as the ATM provider for 7-Eleven was confidential.
269. The negotiations between Cardtronics and ATM and the breach of the
did not have access because Plaintiff could not have known about the secret negotiations
between Cardtronics and ATM until after the sale or known about the breach of the
Exclusivity Agreement.
271. Cardtronics intended that Plaintiff would rely on these misrepresentations
and omissions so that it could purchase ATM and preserve its valuable relationship with
7-Eleven.
272. Cardtronics also specifically withheld information from Plaintiff regarding
the sale of ATM and made misrepresentations in an attempt to avoid having to pay
Plaintiff its Performance Fee and costs.
273. Plaintiff relied on and was justified in relying on these misrepresentations
and omissions because Plaintiff had no reason to suspect these secret negotiations were
taking place and was at all times material acting in good faith when marketing and
preparing for the sale of ATM.
274. Cardtronics was made aware and knew or should have known that Plaintiff
was ATMs exclusive agent when it received the Confidential Overview in March 2011
which stated, Greene Holcomb & Fisher LLC (GH&F) has been retained on a
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it gained access to the Data Room in 2012, and, on information and belief, through its
relationship with and information supplied by Rock and ATM.
276. Cardtronics failed to use the care a reasonable business would use in the
same or similar circumstances because a reasonable business would have been aware of
and contacted ATMs exclusive agent, Plaintiff, if it was interested in purchasing ATM
and if it was provided with information it knows to be confidential and a reasonable
business would not have circumvented Plaintiffs right to the Performance Fee and costs.
277. Plaintiff suffered pecuniary damages as a result of its reliance as payments of
and Plaintiffs reliance upon them, Plaintiff has suffered substantial damages of at least
$788,750, or 3.75% of the actual sales price up to $25,000,000 and 5% on amounts over
$25,000,000, whichever is greater, plus statutory interest and costs.
COUNT X
NEGLIGENT MISREPRESENTATION
(Phillip A. Rock)
279. Paragraphs 1 through 278 as set forth above are incorporated herein by
280. Under Minnesota law, the officer and shareholder of a corporation are liable
for the torts of the corporation if he actually participated in or acquiesced to the tort.
281. Here, Rock actually participated in the negligent misrepresentation and was
including that ATM would pay Plaintiff its Performance Fee for its services as ATMs
exclusive agent upon the sale of ATM and that ATM would notify Plaintiff if there were
any parties interested in purchasing ATM.
283. Rock communicated such representations to Plaintiff knowing them to be
supplied Cardtronics with confidential information about Seven Bank, which were facts
that Rock had special knowledge of and facts Plaintiff could not have known.
285. Rock failed to use care that a reasonable person would use in the same or
Rock and his omissions, Plaintiff relied upon the information and invested significant
time, effort and resources.
287. Plaintiff was justified in relying upon the communications by Rock because
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Plaintiff had no reason to believe Rock would make such false representations and
omissions and the parties agreed that Rock would provide true and accurate information
and that Plaintiff was entitled to act on the information provided by Rock.
288. Further justifying Plaintiffs reliance is industry standard and prior dealings
by Plaintiff whereby its clients conveyed accurate and truthful information in the same or
similar circumstances.
289. As a direct result of Rocks conduct, Rock received millions of dollars from
the sale of ATM to Cardtronics, due in large part to the work and services performed by
Plaintiff and materials created by Plaintiff, but failed to pay Plaintiff its Performance Fee
and costs.
290. As an officer and shareholder of ATM and as a direct and proximate result
Rocks negligent representations and omissions and Plaintiffs reliance upon them, Rock
is liable for damages suffered by Plaintiff which include the entire $1,200,000 Award,
including the damages, interest, attorney fees and costs awarded by the Arbitration Panel,
plus statutory interest and costs.
COUNT XI
INTERFERENCE WITH CONTRACTUAL RELATIONSHIPS
(Phillip A. Rock, Cardtronics USA, Inc., Cardtronics, Inc.)
291. Paragraphs 1 through 290 as set forth above are incorporated herein by
substantial time and effort in preparing ATMs management team and marketing
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materials, and in locating potential buyers for ATM and generating their interest in ATM.
293. Under the agreements, Plaintiff was to be paid out of pocket costs capped at
March 2012, and, on information and belief, through its relationship with Rock and
ATM.
297. Rock and Cardtronics intentionally caused ATM to breach is contracts with
Plaintiff by, among other things, concealing the negotiations between ATM and
Cardtronics, sharing confidential information about Seven Banks intentions to displace
Cardtronics as the provider of ATMs in 7-Eleven stores, allowing Seven Bank
negotiations to continue while ATM secretly and simultaneously negotiated with
Cardtronics, and misleading Plaintiff through fraudulent and negligent misrepresentations
so that it could use Seven Bank as a stalking horse to sell ATM to Cardtronics.
298. On information and belief, Rock and Cardtronics each intentionally caused
ATM to breach its contract with Plaintiff so that, among other reasons, they could avoid
paying Plaintiff its costs and Performance Fee, so Rock could receive a premium
purchase price for ATM, and so that Seven Bank would not displace Cardtronics as the
supplier of ATMs in 7-Eleven stores.
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299. The actions of Rock and Cardtronics were not justified because Plaintiff
performed all of its legal duties in good faith and reasonably relied on the representations
and omissions by the Defendants and the Defendants actions were to hinder, delay and
defraud Plaintiff.
300. As a direct and proximate result of Rock and Cardtronics intentional
team and marketing materials, locating potential buyers for ATM, generating buyers
interest in purchasing ATM, and negotiating the sale of ATM to Seven Bank.
304. Because of this relationship with ATM, Plaintiff had a reasonable expectation
of economic advantage in the form of costs capped at $20,000 and the Performance Fee
upon the sale of ATM.
305. Rock had knowledge of this expectation through his status as president, CEO
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March 2012, and, on information and belief, through its relationship with Rock and
ATM.
308. Rock intentionally interfered with this reasonable expectation by, among
other things, engaging in the tortious conduct outlined in Count 8 for Fraudulent
Misrepresentation and Count 10 for Negligent Misrepresentation.
309. Cardtronics intentionally interfered with this reasonable expectation by,
among other things, engaging in the tortious conduct outlined in Count 9 for Negligent
Misrepresentation.
310. Absent the wrongful conduct by Rock and Cardtronics, it is reasonably
probable that Plaintiff would have realized its economic advantage through the receipt of
the costs and the Performance Fee.
311. As a direct and proximate result of Rock and Cardtronics tortious
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costs in the preparation, marketing and negotiation of the sale of ATM and Rock was
aware Plaintiff expected to be paid for those services.
314. Rock accepted and retained the benefits of Plaintiffs services and as a direct
result he received millions of dollars from the sale of ATM to Cardtronics, due in large
part to the work and services performed by Plaintiff and materials created by Plaintiff.
315. Although Rock received millions of dollars from the sale of ATM to
Cardtronics due in large part to the work and services performed by Plaintiff and
materials created by Plaintiff, Plaintiff has not received reasonable compensation for the
value of the benefit it conferred on Rock.
316. Rock knowingly received the value provided by Plaintiff that in equity and
good conscious he should pay for and he was unjustly enriched in a sense that his
behavior was illegal, unlawful or unconscionable.
317. Rock is not entitled to the benefit without just compensation paid to Plaintiff
and allowing Rock to retain the benefit under these circumstances is unjust.
318. Plaintiff is entitled to compensation for its damages measured by the value of
the benefit received by Rock which is at least $788,750, or 3.75% of the actual sales price
up to $25,000,000 and 5% on amounts over $25,000,000, whichever is greater, plus
statutory interest and costs.
DEMAND FOR JUDGMENT
1.
declaration that it has a lawful right to the $1,000,000 in holdback so that there will be
no controversy clouding the Plaintiffs right in and to the funds, a declaration prohibiting
Cardtronics from releasing the $1,000,000 in holdback to ATM, Rock, Cardtronics or
any other entity or individual, and a declaration requiring Cardtronics to pay to Plaintiff
the $1,000,000 in holdback to satisfy part the Award upon its confirmation or to satisfy
all or part of a judgment in this case.
2.
prevents Cardtronics from releasing the holdback to ATM, Rock, Cardtronics, or any
other person or entity, and that prevents Cardtronics from using the holdback funds to
offset its losses, until ordered by the Court.
3.
As to Count III:
Cardtronics for any and all the relief afforded in Minn. Stat. 513.41-.51 and in an
amount in excess of $1,200,000, plus interest and costs.
5.
For costs and disbursements and such attorney fees as are provided by
For such other and further relief as the Court shall deem just and proper.
DEMAND FOR JURY TRIAL
Pursuant to Rule 38 of the Federal Rules of Civil Procedure, Plaintiff
By:
s/ James H. Gilbert
James H. Gilbert (#34708)
Beverly J. Aho (#0386521)
Adam L. Sienkowski (#0395659)
Attorneys for Plaintiff Greene Holcomb &
Fisher LLC
James H. Gilbert Law Group P.L.L.C.
12700 Anderson Lakes Parkway
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