Mason – Complaint
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EFiled: Apr 09 2018 01:50PM EDT Transaction ID 61891536 Case No. 2018-0263- IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE ROGER MASON, ) ) Plaintiff, ) ) v. ) C.A. No. 2018-____-___ ) BIG3 BASKETBALL, LLC, ) ) Defendant. ) VERIFIED COMPLAINT FOR INSPECTION OF BOOKS AND RECORDS Plaintiff, Roger Mason (“Mason”), by and through his undersigned counsel, alleges his Verified Complaint for Inspection of Books and Records against defendant BIG3 Basketball, LLC (the “Company” or “BIG3”) as follows: Nature of the Action 1. This is an action under 6 Del. C. § 18-305 (“Section 18-305”) to compel the Company to provide Mason certain books and records. 2. On March 21, 2018, Mason, a member of the Company, delivered a written demand (the “Demand”) to the Company seeking to inspect certain books and records of the Company. Indeed, the Company did not even respond to Mason’s Demand. A true and correct copy of the Demand is attached hereto as Exhibit 1. RLF1 19114768v.1 3. The Company has failed to comply with its obligations and has refused to allow Mason to inspect the requested books and records. Mason therefore requires this Court’s assistance. The Parties 4. Mason, a New Jersey resident, has been a member of the Company at all relevant times. 5. The Company is a limited liability company organized under the laws of the State of Delaware, with its principal place of business in California. The Company operates a 3-on-3 basketball league, BIG3 Basketball (the “League”), from June through August, featuring numerous retired National Basketball Association (“NBA”) players. 6. Non-parties Jeffrey Kwatinetz (“Kwatinetz”) and O’Shea Jackson a/k/a Ice Cube (“Jackson”) serve on the Company’s Board of Managers (“Board”) and are co-founders and members of the Company. Introduction 7. This action arises in the context of a dispute between Kwatinetz and Mason related to Kwatinetz’s mismanagement of the Company and his scheme to make Mason the scapegoat for his alleged fraud on the largest investor in the 2 RLF1 19114768v.1 Company, breaches of his fiduciary duties of loyalty and care, mismanagement of the Company’s operations, willful violations of the Company’s operating agreement and Delaware law, intentional participation in improper related-party transactions, usurpation of the authority of the Company’s carefully hired management team, and creation of a hostile work environment at the Company, as confirmed by several employees, by, among other things, using horrible racial slurs to disparage the League’s African-American players and the Company’s investors from the Middle East. Kwatinetz’s actions have caused the departure of the Company’s President, Chief Financial Officer, and Chief Creative Officer, amongst others, and are subjecting the Company to potential damages in excess of a hundred million dollars in pending and likely-to-be-filed actions, including for fraud, breach of contract and the defamation of Mason, a former NBA player and Players’ Association executive, whose substantial future prospects have been materially and irrevocably injured by Kwatinetz’s scheme and lies. 8. As more fully explained below, as part of that scheme Kwatinetz and his longtime lawyer Mark Geragos, himself a member of and advisor to the Company, manufactured a sham “independent investigation” to be conducted by an associate of Geragos’s. Kwatinetz and Gergaos then relied on Mason’s fictitious refusal to cooperate with the investigation to terminate Mason as 3 RLF1 19114768v.1 President of the Company and Commissioner of the League. In doing so, Kwatinetz sought to make Mason the scapegoat for his own wrongdoing, outrageously blaming Mason for jeopardizing the League’s financial success and ability to enter into professional relationships. As a result of this scurrilous, unjustified attack, Mason, whose record as a staunch, dedicated player advocate is well established, promptly filed an action for defamation and breach of contract against Kwatinetz and the Company seeking in excess of one hundred million dollars for damage to his reputation and future prospects. 9. In commencing this action, Mason seeks to enforce his rights as a member of the Company to review the books and records appropriately demanded pursuant to Section 18-305. Factual Background 10. In 2016, Mason, Kwatinetz and Jackson commenced working together to establish the League, which had its first season in 2017. A. League Hires Former NBA Player and Deputy Executive Director of the NBPA, Roger Mason, Jr., as President and Commissioner to Establish Credibility 11. As a highly respected member of the basketball community, Mason’s involvement was critical to the establishment and development of the League. 4 RLF1 19114768v.1 12. In addition to playing in the NBA for 11 years, he is the former Deputy Executive Director of the NBA players’ union, the National Basketball Players Association (“NBPA”). Mason is the first former player to achieve such a high ranking position with the NBPA. 13. In his capacity as Deputy Executive Director of the NBPA, Mason played an integral role in negotiations between players, owners and league executives in two collective bargaining agreements. Among his major accomplishments in that role was securing lifetime healthcare for all retired players. 14. As a former player and NBPA executive, Mason possessed the credibility and relationships necessary to recruit former NBA stars for the League. Indeed, Mason was instrumental in signing the players and coaches who participated in the League’s inaugural season and many of the players and coaches who will be participating in the League’s second season this summer. Among the former NBA players that Mason recruited for the League’s 2017 season were Allen Iverson, Charles Oakley, Rashard Lewis, Kenyon Martin, Stephen Jackson, DeShawn Stevenson, DerMarr Johnson, and Xavier Silas. For the League’s upcoming 2018 season, former NBA players successfully recruited by Mason 5 RLF1 19114768v.1 include Amar’e Stoudemire, Chris “Bird Man” Anderson, Drew Gooden, Glen “Big Baby” Davis, Carlos Boozer, Greg Oden, and Eddy Curry. 15. In addition to recruiting numerous well-known players necessary to publicize the League, Mason also ensured a credible league by helping develop the League’s official rules, organizing a combine and draft format for players to be selected by League teams, and hiring the League’s Director of Referees and referees. 16. Beyond Mason’s basketball-related contributions, Mason also played a significant role in identifying investors and potential investors in the Company. 17. In recognition of his contributions and critical role with the League, as memorialized in a written Executive Employment Agreement, dated as of November 24, 2016 (the “Employment Agreement”), Mason was hired to serve as President of the Company and Commissioner of the League, and awarded 5% of the Class “A” Units in the Company, all of which have vested. Mason was also made a member of the League’s Board. B. Kwatinetz’s History of Failed Businesses and Erratic Behavior 18. Between 2008 and 2017, Kwatinetz ran numerous businesses that failed spectacularly and was repeatedly involved in nasty public disputes with 6 RLF1 19114768v.1 partners and investors in those businesses. Among the businesses that Kwatinetz has been involved with that have been unsuccessful are The Firm, Prospect Park Networks, Overbrook Entertainment, and The Firm again. 19. As a result of Kwatinetz’s lengthy history of failed businesses, disputes with partners and public reports of erratic behavior,1 the Company would have been unable to attract necessary investors and marketing partners without assurances that it would be operated by a professional management team subject to appropriate oversight established by a carefully designed governance structure. 1 The Firm, for example, a company co-founded by Kwatinetz, failed in 2008 after executives departed en masse. Jeff Leeds & James Ulmer, “Departures Cool Off Agency’s Hot Start,” THE NEW YORK TIMES, August 11, 2005. Following The Firm’s collapse, Kwatinetz was criticized for his lack a business plan and “overly ambitious projections.” See Michael Fleming, “Firm departure for its founder,” DAILY VARIETY, November 11, 2008. Kwatinetz then founded another company, Prospect Park. Not long thereafter, Prospect Park filed for bankruptcy, reportedly due to a lack of funding and logistical issues. See Meg James, “Prospect Park files for bankruptcy; The production firm tried to revive two canceled ABC soap operas online.” LOS ANGELES TIMES, March 11, 2014; see also Justin Oppelaar, “Firm backs down on Sillerman suit,” DAILY VARIETY, August 16, 2001 (detailing the collapse of a proposed merger involving The Firm as a result of Kwatinetz’s reportedly erratic behavior); Sharon Waxman, “Firm Believer,” THE WASHINGTON POST, July 8, 2002 (same). Kwatinetz’s alleged mismanagement, erratic behavior and personal troubles have been detailed in numerous published articles about his failed business ventures. See Sharon Waxman, “Firm Believer,” THE WASHINGTON POST, July 8, 2002; Bryan Burrough, “Ovitz Agonistes,” VANITY FAIR, August 2002; “Hollywood madam Michelle Braun cozies up to federal agents” NEW YORK DAILY NEWS, May 9, 2009. 7 RLF1 19114768v.1 C. Professional Management Team and Carefully Designed Governance Structure 20. Accordingly, along with Mason being hired as President and Commissioner, Amy Trask (“Trask”), the former President of the Oakland Raiders, was hired as Chief Executive Officer, Kai Henry (“Henry”) as Chief Creative