Seth Freedman Litigation Crab Key Holding

________________________
Leiderman Shelomith, P.A., Attorneys at Law

2699 Stirling Road, Suite C401, Ft. Lauderdale, FL 33312 Tel. (954) 920-5355 Fax (954) 920-5371
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF FLORIDA
Fort Lauderdale Division
www.flsb.uscourts.gov

In re:

SETH FREEDMAN and LAURA FREEDMAN,

Debtors.
____________________________________/
Case No. 08-28599-BKC-RBR

Chapter 7

CRAB KEY HOLDINGS, LLC, a Florida limited
liability company,

Plaintiff,
vs.

SETH FREEDMAN,

Defendant.
____________________________________/

Adv. Case No.

COMPLAINT OBJECTING TO DISCHARGEABILITY OF DEBT
PURSUANT TO 11 U.S.C. 523

Crab Key Holdings, LLC, a Florida limited liability company (CKH or Plaintiff), by
counsel, brings this Complaint Objecting to Dischargeability of Debt Pursuant to 11 U.S.C.
523, against Seth Freedman (Freedman or the Debtor), and in support thereof alleges as
follows:
Jurisdiction and Venue
1. This case was commenced by the filing of a voluntary Chapter 7 petition on
December 5, 2008 (the Petition Date).
2. This is an action to determine the dischargeability of a debt, pursuant to 11
U.S.C. 523.
3. This is a core proceeding and this Court has jurisdiction over this action
pursuant to 28 U.S.C. 157 and 1334 and Fed. R. Bankr. P. 7001.
4. Venue is proper herein pursuant to 28 U.S.C. 1408 and 1409.
Parties
5. Seth Freedman is the debtor of the above-referenced bankruptcy proceeding.
Case 09-01254-RBR Doc 1 Filed 03/16/09 Page 1 of 33
Complaint
Page 2 of 8

________________________
6. Crab Key Holdings, LLC is a Florida limited liability company and is a creditor
of the Debtor, as more particularly set forth below.
General Allegations
7. Pre-petition, the Debtor was an officer and director of Image Marketing
Enterprises, Inc. (Image), a Florida corporation.
8. On or about J une 14, 2006, Image entered into a contract (the Contract)
with Patrick Nemeth (Nemeth) for the purchase and sale by Image to Nemeth of the
assets of the business known as Image Marketing Associates (the Business). A copy of
the Contract is attached hereto as Exhibit A and is incorporated herein by reference.
9. On or about J uly 28, 2006, Nemeth assigned to Plaintiff all of his rights and
obligations under the Contract. A copy of the Assignment is attached hereto as Exhibit B
and incorporated herein by reference.
10. On or about J uly 28, 2006, Plaintiff and Image closed on the Contract. A
copy of the closing statement for the purchase and sale of the Business is attached hereto
as Exhibit C and incorporated herein by reference.
11. Plaintiff has fully performed its obligations under the Contract.
12. Plaintiff has performed all conditions precedent to the bringing of this action
or all such conditions have been waived or otherwise legally excused.
13. The actual gross profits for 2006 of the Business during the time of operation
by Plaintiff was $154,820.38.
14. Image has materially breached the Contract existing between the parties.
Images material breaches of the Contract include, but are not limited to, the following:
a. The supply to Nemeth and Plaintiff through its principal shareholder, officer
and director, the Debtor, of false financial information as to the condition and
results of operation of the Business in violation of the warranty obligations of
Image contained in Section 25 of the Contract;
Complaint
Page 3 of 8

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b. Failure to deliver to Plaintiff all customer accounts, records and documents
pertinent to operation of the business as required in Section 20 of the
Contract; and
c. Failure to pay Plaintiff an amount necessary to make the actual 2006 gross
profit equal to $600,000.00 as required in the Addendum to the Contract.
15. As a direct and proximate result of the foregoing, Plaintiff has suffered, and
will continue to suffer both general and special damages, including, but not limited to, a
reduced value of the Business and increased costs associated with maintenance and
operation of the Business.
16. Furthermore, the Debtor made false statements and representations
concerning material facts to Nemeth and Plaintiff with regard to:
a. The financial condition and results of operation of the Business, specifically
including but not limited to (1) the then existing status of payment by the
Business of vendor accounts and liabilities; (2) the then existing status and
value of the Businesss account for services with Naples Community Hospital;
and (3) the then existing status and value of the Businesss account for
services with J oseph Scott Financial;
b. The existence and status of an employment agreement between Image and
Phyllis Ershowsky; and
c. The existence and status of a phantom stock agreement between Image and
Phyllis Ershowsky.
17. Image and the Debtor knew that the above-referenced statements and
representations made by themselves with regard to the financial condition and results of
operation of the Business, the assets of the Business, the existence of an employment
agreement between Image and Phyllis Ershowsky, ownership by the Debtor of Image and
Complaint
Page 4 of 8

________________________
its assets and interests, the liabilities of the Business, and the existing client and customer
relations of the Business were false inasmuch as:
a. The Business was not current on its payment of vendor accounts and
liabilities;
b. The status and value of the Businesss account for services with Naples
Community Hospital was significantly less and more uncertain than had been
represented by Image and the Debtor;
c. The status and value of the Businesss account for services with J oseph Scott
Financial was significantly less and more uncertain than had been
represented by Image and the Debtor;
d. The purported employment agreement between Image and Phyllis Ershowsky
represented by Image and the Debtro to be in existence and valid was not
recognized or acknowledged by Phyllis Ershowsky as being duly executed by
herself or binding upon her; and
e. There existed a phantom stock agreement between Image and Phyllis
Ershowsky whose existence was not disclosed by Image or the Debtor to the
Plaintiff.
18. Image and the Debtor intended in making the false statements and
representations to induce Nemeth to enter into the Contract and Plaintiff to accept
assignment of the Contract and close the Contract.
19. Nemeth and the Plaintiff reasonably relied upon the above-referenced
statements and representations made by Image and the Debtor with regard to the financial
condition and results of operation of the Business, the assets of the Business, the existence
of an employment agreement between Image and Phyllis Ershowsky, ownership by the
Debtor of Image and its assets and interests, the liabilities of the Business, and the existing
client and customer relations of the Business.
Complaint
Page 5 of 8

________________________
20. Plaintiff has suffered, and will continue to suffer both general and special
damages, including, but not limited to, a reduced value of the Business and increased costs
associated with maintenance and operation of the Business as a result of its reasonable
reliance on the false statements and representations of Image and the Debtor.
21. As a result of the foregoing, on or around October 30, 2006, the Plaintiff
commenced an action against Image and the Debtor in the Lee County Circuit Court, Case
No. 06-CA-4883, for damages due to breach of contract and fraud on the part of Image and
the Debtor (the State Court Action). A copy of the Second Amended Complaint and
Demand for J ury Trial in the State Court Action is attached hereto as Exhibit D (without
exhibits) and incorporated herein by reference.
22. The Debtor received notice of the State Court Action and participated in the
defense of the State Court Action.
23. On or around October 16, 2007, the Plaintiff, Image and the Debtor entered
into a Mediated Settlement Agreement (attached hereto as Exhibit E), whereby Image and
the Debtor agreed to pay the Plaintiff $200,000.00, according to the payment schedule set
forth therein.
24. The Debtors promise to pay the Plaintiff $200,000.00 induced the Plaintiff
into entering into the Mediated Settlement Agreement.
25. Thereafter, Image and the Debtor breached the Mediated Settlement
Agreement, by failing to make one or more payments that were due.
26. As a result, the Court in the State Court Action entered a Final J udgment on
J une 3, 2008, in favor of the Plaintiff and against Image and the Debtor, for the amount of
$239,014.18. A true and correct copy of the Final J udgment is attached hereto as Exhibit
F.
27. Based on the entry of the Final J udgment, the allegations of fraud contained
in the Second Amended Complaint and Demand for J ury Trial are conclusively proven, and
Complaint
Page 6 of 8

________________________
the Debtor is collaterally estopped from disputing them, especially considering the fact that
the only count against the Debtor was for fraud.
28. The Contract and the Mediated Settlement Agreement both provide that the
prevailing party is entitled to payment of its attorneys fees and costs.
29. The Plaintiff has retained the undersigned attorneys to represent it in this
case and is entitled to recover its attorneys fees from the Debtor.
Count 1 Non-Dischargeability of Final Judgment (11 U.S.C. 523(a)(2)(A))

30. The Plaintiff re-alleges all of the allegations set forth in each of the
paragraphs above.
31. This is an action requesting a determination that the debt owed by the Debtor
to the Plaintiff, as reflected in the Final J udgment, is excepted from the Debtors discharge
and is not dischargeable, should the Debtor receive a discharge, pursuant to 11 U.S.C.
523(a)(2)(A).
32. The Plaintiff is a creditor of the Debtor.
33. The Debtor incurred the debt to the Plaintiff under false pretenses, false
misrepresentations, and/or actual fraud.
34. The Final J udgment precludes the Debtor from arguing that the debt was not
incurred due to false pretenses, a false misrepresentations, and/or actual fraud.
35. Alternatively, the Debtor fraudulently induced the Plaintiff into entering into
the Mediated Settlement Agreement, and the Debtors representations set forth in the
Mediated Settlement Agreement contained false misrepresentations.
36. The debt incurred by the Debtor includes the Plaintiffs attorneys fees in
prosecuting this action.
WHEREFORE, the Plaintiff respectfully requests that the Court enter a judgment
determining that the debt(s) owed to the Plaintiff by the Debtor are non-dischargeable, in
Complaint
Page 7 of 8

________________________
the amount of $239,014.18, plus interest, costs and attorneys fees, and for such other and
further relief as the Court deems just and proper.
Count 2 Non-Dischargeability of Final Judgment (11 U.S.C. 523(a)(2)(B))

paragraphs above.
38. This is an action requesting a determination that the debt owed by the Debtor
to the Plaintiff, as reflected in the Final J udgment, is excepted from the Debtors discharge
and is not dischargeable, should the Debtor receive a discharge, pursuant to 11 U.S.C.
523(a)(2)(B).
39. The Debtor obtained money, property and/or services from Patrick Nemeth
and/or the Plaintiff by use of a statement or statements in writing that were materially false,
respecting the Debtors or an insiders financial condition, on which Patrick Nemeth and/or
the Plaintiff reasonably relied, and which the Debtor caused to be made or published with
intent to deceive.
40. The Final J udgment precludes the Debtor from arguing that he did not obtain
money, property and/or services from Patrick Nemeth and/or the Plaintiff by use of a
statement or statements in writing that were materially false, respecting the Debtors or an
insiders financial condition, on which Patrick Nemeth and/or the Plaintiff reasonably relied,
and which the Debtor caused to be made or published with intent to deceive.

Complaint
Page 8 of 8

________________________
Count 3 Non-Dischargeability of Final Judgment (11 U.S.C. 523(a)(19))

paragraphs above.
43. The Debtor engaged in common law fraud, deceit, and/or manipulation in
connection with the sale of a security, with regard to the sale of the Business, which
resulted in the Mediated Settlement Agreement and also the Final J udgment.
44. The Final J udgment precludes the Debtor from arguing that he did not
engage in common law fraud, deceit, and/or manipulation in connection with the purchase
of securities in the sale of the Business.
I HEREBY CERTIFY that I am admitted to the Bar of the United States District Court for the
Southern District of Florida and I am in compliance with the additional qualifications to practice in this
Court set forth in Local Rule 2090-1(A).

Dated this 16
th
day of March, 2009. LEIDERMAN SHELOMITH, P.A.
Counsel for the Plaintiffs
2699 Stirling Road, Suite C401
Ft. Lauderdale, Florida 33312
Telephone: (954) 920-5355
Facsimile: (954) 920-5371

By:_________/s/______________
ZACH B. SHELOMITH
Florida Bar No. 0122548
zshelomith@lslawfirm.net

Exhibit "D"
Exhibit "D"
Exhibit "D"
Exhibit "D"
Exhibit "D"
Exhibit "D"
Exhibit "D"
Exhibit "E"
Exhibit "E"
Exhibit "E"
Exhibit "E"
Exhibit "E"
Exhibit "F"
Exhibit "F"

Seth Freedman Litigation Crab Key Holding

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Leiderman Shelomith, P.A., Attorneys at Law

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