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NASSO v. SEAGAL

April 11, 2003

JULIUS R. NASSO, ETC., PLAINTIFF,
v.
STEVEN SEAGAL ET ANO., DEFENDANTS.



The opinion of the court was delivered by: Charles Sifton, Senior District Judge

MEMORANDUM AND ORDER

Plaintiff Julius R. Nasso, individually and derivatively as a shareholder of Seagal-Nasso Productions, Inc. ("Productions"), brings this action against Steven Seagal and Steamroller Productions, Inc. ("Steamroller"), alleging breach of contract, breach of fiduciary duty, seizure of corporate opportunities, misrepresentation, conversion, and unjust enrichment. Defendants move to dissolve orders entered by the state court from which this action was removed and to dismiss the complaint pursuant to Rules 12(b)(2) and 12(b)(6) of the Federal Rules of Civil Procedure for lack of personal jurisdiction and failure to state a claim, respectively. Plaintiffs cross-move for a remand of this action to the state court. For the reasons set forth below, the motions to dismiss are denied in part and granted in part and the cross-motion for remand is denied.

BACKGROUND

The following facts are taken from the papers submitted by the parties in connection with the present motions and, except as otherwise noted, are undisputed.

Underlying Dispute*fn1

Steamroller, a California corporation with its principal place of business in California, is a "loan out" company, which employs Seagal, its sole shareholder, and provides his services as an actor. (Am. Compl. ¶ 21.)

In early 1987, Nasso, a producer, met Seagal through a mutual acquaintance. Both of them were residents of Staten Island at the time.*fn2 On July 12, 1990, after Nasso and Seagal had worked together on several films, they organized Productions, a New York corporation with its principal place of business in Brooklyn, for the purpose of developing, producing, owning, and distributing motion pictures. Each of them owns half of the shares and serves as an officer of the corporation.

The amended complaint states that, sometime in 1997, Seagal-Nasso Distribution LLC (the "LLC") was organized for the purpose of distributing Productions' films and collecting foreign licensing fee advances, and Seagal-Nasso Films Inc. ("Films") was incorporated in California for the purpose of funding the activities of the LLC.*fn3 Both entities maintained their principal places of business in Los Angeles.

In November 1997, Nasso and Seagal "agreed that [Productions] would develop, produce and market television and film projects." (Am. Compl. ¶ 32.) They agreed that Nasso would develop, produce, and distribute films, that Seagal would star in them, and that Productions would own them. They also agreed that Nasso would be paid a production fee of $250,000 for each film and that Seagal would be paid the market value of his services.

According to the amended complaint, Seagal promised to "star" in four "feature films" — "Blood on the Moon," "Genghis Khan," "Smash and Grab," and "Prince of Central Park" — which were to be released as part of a package deal.*fn4 (Am. Compl. ¶¶ 1-3, 41, 72-75, 87, 89, 91, 93.) As a result of these promises, Nasso spent at least three years and approximately $2.4 million acquiring literary rights, hiring employees, obtaining options for talent, paying for scripts, and attending film festivals to pre-sell foreign distribution rights for these films. In May 1998 and May 1999, he placed ten advertisements in different trade, which confirmed Seagal's participation in the four films. The LLC, "through Phillip Goldfine, as the agent, representative or employee of Seagal, or his related companies, entered into at least [thirty-one] foreign license agreements with the consent, knowledge and approval of Seagal, all of which stated that he (Seagal), was to be the star of the particular movie." (Am. Compl. ¶ 63.) Productions, Films, and the LLC (collectively, the "Nasso-Seagal Entities") incurred costs of at least $1.45 million in connection with the four films.*fn5

On or about October 15, 1999, Nasso loaned $500,000 to Seagal to help Seagal satisfy his tax obligations. The loan was payable on demand. Nasso later demanded payment, but Seagal. failed to make it. Seagal also entered or caused others to enter false entries in the accounting records of the Nasso-Seagal Entities concerning the respective contributions of Nasso and Seagal.

Seagal failed to appear in the four films. As a result, the Nasso-Seagal Entities lost between $21 million and $39 million in anticipated profits, Instead of appearing in these films, "Seagal, while working under the Seagal-Nasso Productions banner, and with the help of Nasso, who personally approached and had meeting(s) with Avi Lerner of Nu-Image Productions, Inc." and Joel Silver of Warner Brothers, appeared in "Ticker" and "Exit Wounds." (Am. Compl. ¶ 108.) Seagal never shared with Nasso or the Nasso-Seagal Entities any of the $12.5 million in compensation that he received for his work on these two films.

Procedural History

On March 20, 2002, Nasso commenced the present action in the New York Supreme Court for Richmond County on his own behalf and on behalf of the Nasso-Seagal Entities. In his amended complaint, Nasso alleges on behalf of the Nasso-Seagal Entities that Seagal*fn7 (1) breached his contractual obligations to the Nasso — Seagal Entities by failing to star in the four films, (2) breached the fiduciary duty of good faith and fair dealing by failing to star in the four films, (3) seized corporate opportunities by appearing in "Ticker" and "Exit Wounds," and (4) converted corporate documents. Nasso alleges on his own behalf that Seagal (1) converted Nasso's personal items, (2) misrepresented the respective contributions of Nasso and Seagal by entering false entries in the accounting records of the Nasso-Seagal Entities, (3) was unjustly enriched when he accepted Nasso's services in connection with the four films without giving Nasso the expected compensation, (4) breached the fiduciary duty of good faith and fair dealing that he owed to Nasso as a business partner and equal shareholder by failing to star in the four films and by refusing to share the compensation he received in exchange for his work on "Ticker" and "Exit Wounds," (5) breached the ...


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