Professional Documents
Culture Documents
$703,125, with a credit of $85,000 for a payment made on November 11, 2012.
Shortly thereafter, Yippy CEO Rich Granville was told via telephone by
Hanover (Ari Sason) that no more invoices would follow and that Hanover did not
need anything further from Yippy because the value of the collateral significantly
exceeded the loan amount (i.e., Hanover was over-secured).
Granville asked Ari Sason why no more invoices would be sent. Ari Sason
stated the Magna Group (an affiliate of Hanover) had hedged against the 1,600,000
Yippy shares prior to those shares being transferred into the name of Hanover. Ari
Sason stated that any profits made from the hedging (short selling) activities or
direct sales of the collateral would be applied to Yippys balance.
On February 4, 2013, after many calls to Hanover (Ari Sason), Yippy
(Granville) asked Aegis Capital (the collateral agent in the transaction) to obtain a
statement from Hanover accounting for the disposition of the collateral.
In response, Yippy received an email from Hanover stating an outstanding
balance of $645,000 across all notes. This e-mail stated there was a 15% interest
rate on all notes, which was not accurate.
Between December 12, 2012 through February 2014, Yippy received no
additional invoices from Hanover.
that Hanover (or its affiliates) would not have to pull the shares out of DTC.
Abitebol stated that Hanover (or its affiliates) had shorted Yippy shares and that
closing that position would cause Hanover to lose money.
Over Granvilles
objections, Hanover refused to provide a payoff amount and refused to return the
remaining collateral shares.
To date, Yippy has never received an accounting from Hanover showing the
credits and debits to Yippys account based on the disposition or hedging of the
1,600,000 shares of Yippy stock.
Yippy believes that Hanover sold the collateral beyond the value of Yippys
notes, hedged against those shares, and failed to apply the full value of the
collateral against the notes in question.
ARGUMENT IN OPPOSITION
The sole question in this case is whether Hanover properly applied the
collateral sales and hedging proceeds against Yippys account balance. All of this
information is in Hanovers possession. For years, Yippy has been trying to get an
honest accounting. Instead, we get lawsuits and blind aggression.
Hanovers motion to compel should be denied.
First, many of Hanovers Requests seek discovery as to Yippys ability to pay
a hypothetical future judgment.
on part a motion to compel in a Title VII action, requiring the defendants to produce
their financial information so plaintiff could determine, relative to a claim for
punitive damages, whether defendants had attempted to transfer income or assets
to others to avoid potential liability if defendants lose the pending litigation); U.S.
for the Use and Benefit of P.W. Berry Co. v. Gen. Elec. Co., 158 F.R.D. 161, 164
(D.Or.1994) (granting motion for protective order in a breach of contract action,
precluding pre-judgment discovery of corporate and individual financial information
including tax returns and financial statements, because that information was not
relevant).
Moreover, Yippys Annual Reports contain detailed information as to Yippys
assets and liabilities. Even if Requests 28 and 29 were appropriate requests, the
information contained in the Annual Reports is sufficient.
32. All documents referring or relating to any stock splits
of Yippy common stock.
Request 32 is irrelevant to the question presented here, which is whether
Yippy owes Hanover money under the loan agreements and notes, after accounting
for Hanovers disposition and hedging of the collateral.
inquiry were relevant, the pertinent facts are set forth in Yippys public filings.
Yippys most recent Annual Report states:
9. Any past, pending or anticipated stock split, stock dividend,
recapitalization, merger, acquisition, spin-off, or reorganization.
nothing to do with this case. Requests 37 and 38 are also vastly overbroad.
42. All documents referring or relating to the issuance of
any Yippy common stock, restricted stock, options,
warrants or other convertible securities by Yippy to any
director, officer, employee, consultant, agent or investor
during the Relevant Period.
Request 42 is irrelevant to the issue of whether Yippy owes Hanover money
under the loan agreements and notes. Moreover, Yippys Annual Reports present
information concerning the beneficial ownership of the shares of Yippy common
stock by: (i) each of Yippys named executive officers and current directors, (ii) all of
Yippys current executive officers and directors as a group and (iii) each person
Yippy knows to be the beneficial owner of 5% of more of our outstanding shares of
common stock.
43. Copies of any and all shareholders' agreements,
including drafts, for Yippy.
45. All documents referring or relating to any elections
of a board of directors of Yippy.
47.
All
documents
referring
or
relating
to
communications between Yippy and any third-party
regarding the terms of any proposed shareholders'
agreement of Yippy.
48. All documents referring or relating to the sale,
transfer or assignment of shares of Yippy common stock.
Hanover claims that Requests 43, 45, 47 and 48 are probative of whether the
actions taken by Yippy were considered and approved by its Board of Directors, the
extent to which Defendant Granville caused this publicly-traded corporation to
willfully breach its contracts, and the extent to which Mahoma breached its pledges
and security agreement in favor of Plaintiff.
This is a contract action.
Hanovers brief does not explain the basis for Requests 50 or 51. Document
requests that seek tax returns are typically denied, where the requesting party
cannot show a very good reason for seeking those documents.
For instance, in
Muller v. Sorensen, 138 A.D.2d 683, 684 (2d Dept 1988), the Second Department
held:
Item No. 1 sought the appellant's tax returns for 1984 and
1985. The plaintiffs' rationale for seeking them was to
demonstrate that the appellant was not a general contractor on
the construction project where the injury-causing event occurred
and, therefore, the owners of the property in question were not
exempt from liability under Labor Law 240 and 241. We find
Item No. 1 to be palpably improper as it seeks information of a
confidential and private nature which does not appear relevant
to the issues in the case.
Request 50 and 51 should be denied.
53.
All documents referring or relating to the
organizational status of Mahoma, including, but not
limited to its standing, dissolution, suspension or
striking from the registry roll in the jurisdiction of its
formation and organization.
Hanover claims that Request 53 is relevant to determine whether Mahoma's
pledged collateral was lost, transferred, or assigned away in violation of the Pledge
and Security Agreement.
However, Mahomas 1,600,000 shares were transferred to Hanover in 2012.
Hanover then hedged against and sold some or all of that collateral. Whether or not
Mahoma maintained its business registration in the intervening three years is
completely beside the point.
52. All documents referring or relating to any disclosure
by any Defendant to any non-party investor of the
indebtedness of Yippy to Plaintiff under the June 2012
10
counsel:
11
Furst, would do well to dial down the uncivil accusations, especially where counsel
has offered to investigate any omissions (and Furst has neglected to take up the
offer).
CONCLUSION
Based on the foregoing, Hanovers motion to compel should be denied.
Dated:
___________________________
John H. Snyder, Esq.
Abaigeal Van Deerlin, Esq.
555 Fifth Avenue, Suite 1700
New York, New York 10017
Tel: (212) 856-7280
Fax: (646) 304-9230
john@jhsnyderlaw.com
Counsel to Defendants
12