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PSG Poker, LLC v. DeRosa-Grund

January 22, 2008

PSG POKER, LLC, AND PHIL GORDON, PLAINTIFFS,
v.
TONY DEROSA-GRUND, PROJO POKER TOURNAMENT SERIES, LLC., PROJO POKER TOURNAMENT SERVICES, LLC., AND PROJO POKER TOURNAMENT SERVIES, LLC., DEFENDANTS.



The opinion of the court was delivered by: Denise Cote, District Judge

OPINION & ORDER

Plaintiffs PSG Poker, LLC ("PSG Poker") and its principal member Phil Gordon ("Gordon") bring this suit against the defendants for breach of contract and fraudulent inducement in connection with a contract for the production of a poker television program. On December 4, 2006, following the withdrawal of counsel for the individual defendant Tony DeRosa- Grund ("DeRosa-Grund") and the failure of counsel to appear on behalf of the corporate defendants, a default was entered against defendants Projo Poker Tournament Series, LLC ("Projo"), Projo Poker Tournament Services, LLC, and Projo Poker Tournament Servies, LLC. Plaintiffs moved for summary judgment on December 12, 2006, against DeRosa-Grund, the sole remaining defendant. On June 26, 2007, plaintiffs' motion was denied without prejudice to its renewal after additional discovery (the "June 2007 Opinion"). PSG Poker, LLC v. DeRosa-Grund, No. 06 Civ. 1104, 2007 WL 1837135 (S.D.N.Y. June 26, 2007). Plaintiffs have now filed their renewed motion. As in their previous motion, plaintiffs seek to pierce the corporate veil and hold DeRosaGrund personally liable on the breach of contract claim. DeRosa-Grund has not filed opposition to the motion. For the reasons stated below, the plaintiffs' renewed motion for summary judgment is granted.

BACKGROUND

I. Discovery and Litigation

As described in greater detail in the June 2007 Opinion, prior to the filing of the initial summary judgment motion DeRosa-Grund had failed to appear at his scheduled deposition or to produce more than a few documents in response to plaintiffs' discovery requests. As the Court noted in the June 2007 Opinion, DeRosa-Grund's failure to comply with his discovery obligations made it "difficult for plaintiffs to acquire and present" the facts necessary to support their motion. Thus, the initial motion was denied without prejudice, and DeRosa-Grund was "fully informed of the consequences of his noncompliance" --namely, the drawing of an adverse inference on the topics regarding which discovery was sought -- and given "one final opportunity to comply with his discovery obligations." PSG Poker, LLC, 2007 WL 1837135, at *6.

A June 26, 2007, Order accompanying the decision on the initial motion directed DeRosa-Grund to produce documents by July 11, 2007, and further directed that his deposition would take place the week of July 16, 2007. Both parties were also directed to submit status letters to the Court by July 27, 2007.

DeRosa-Grund did not submit a status letter. Plaintiffs' status letter reported that DeRosa-Grund did not produce documents prior to July 11, 2007, but that after subsequent requests, DeRosa-Grund did produce some documents and appear for a deposition on July 26, 2007. DeRosa-Grund did not provide, however, any corporate records relevant to the veil piercing issue or documents regarding the termination of the contract with CBS to air the proposed poker program on that network. DeRosa-Grund stated at his deposition that he did not retain paper copies of documents -- including receipts, bank statements, or other corporate records -- but rather scanned them onto a hard drive and shredded them. He further testified that the hard drive to which all his documents had been saved failed approximately eighteen months earlier, and that he had thus lost all of his documents. (He testified that he was able to recover the documents and emails that he did produce from a limited pool of backup files.) In light of these issues, plaintiffs requested an order granting leave for them to serve subpoenas directly upon the bank at which Projo had maintained an account, CBS Sports, and a colleague of DeRosa-Grund's identified during the deposition. An Order granting this request was issued on July 31, 2007, and documents received in response to those subpoenas have been submitted in support of the renewed motion for summary judgment.

The July 21, 2007, Order also directed DeRosa-Grund to produce any additional documents by August 17, 2007. Plaintiffs' motion papers indicate that a renewed request was made on August 2, 2007, for, inter alia, Projo's corporate records, documents related to the alleged loss of DeRosa-Grund's scanned documents,*fn1 and contracts and correspondence with CBS.

DeRosa-Grund did not produce documents in response to this request.

II. Factual Background

A. DeRosa-Grund's Initial Dealings with CBS and Gordon

The following facts are undisputed or are taken in the light most favorable to DeRosa-Grund, unless otherwise noted. Projo Poker Tournament Series, LLC*fn2 was incorporated in Delaware on August 18, 2005, and operated out of the Pennsylvania address where DeRosa-Grund resides. According to a press release issued by CBS Sports, "ProJo Poker Enterprises" reached an initial agreement with CBS Sports in July of 2005 to produce and televise "the ProJo Poker tournament series" and several related specials, including "The ProJo Christmas Poker Classic" (collectively, the "ProJo Programs"). As the press release describes, "[t]he series utilizes ProJo Poker's proprietary tournament format" in which poker "Pros" and "average Joes" compete against one another in a series of competitions.*fn3

In response to the subpoena issued following the July 31, 2007 Order, CBS Sports produced a copy of an agreement between it and "PROJO POKER ENTERPRISES, LLC" regarding the ProJo Poker Tournament Series (the "CBS Agreement"). The CBS Agreement is dated August 15, 2005, and was signed by DeRosa-Grund on behalf of ProJo Poker Enterprises, LLC on October 12, 2005.*fn4 Section III(b) of the Agreement provides that the ProJo poker programming will be produced by ProJo Poker Enterprises, but that CBS will be responsible for providing a "Coordinating Producer and On-Air Talent." Section IV(a) of the Agreement states that ProJo Poker Enterprises will pay $1,325,000 in "Program Fees" in exchange for CBS making available certain program time periods for the airing of the ProJo specials, and $2,700,000 for the program time periods for airing the "tournament series" programs. That section further provides that the $1,325,000 fee for the specials "will be paid to CBS no later than the first of October 2005." Section IV(b) states that, in turn, ProJo Poker Enterprises will have the right to sell twenty thirty-second commercial spots during each hour of broadcasting and to retain all revenue thereby obtained. Finally, Section V(m) of the Agreement states that if any breach of the Agreement is not cured "within fourteen (14) days after receipt of written notice from the other party, the non-breaching party shall have the right to terminate this Agreement."

Prior to the beginning of his relationship with DeRosaGrund, Gordon was the co-host and commentator for the program "Celebrity Poker Showdown" ("CPS") on the cable television station Bravo. The parties have disputed whether DeRosa-Grund or CBS first approached Gordon to act as on-air host for the ProJo Programs, but, in any event, emails submitted in connection with the initial motion for summary judgment demonstrate that as of September 30, 2005, DeRosa-Grund and Gordon were negotiating via email the terms of an agreement whereby Projo would pay Gordon $10,000 per episode to host the ProJo Tournament Series in addition to a fee that CBS would pay directly to Gordon. Gordon avers that in his discussions with DeRosa-Grund, the defendant "represented to me that the Projo Program would be shown on a major broadcast television network, including several prime time special presentations, and that I would receive compensation far greater than I was then making for the CPS show."

In one of the September 30, 2005, emails, DeRosa-Grund states that "CBS will land somewhere between $8-10K per show" in compensation, and that "I'll give you 10k per show for syndicated and an additional $10k to whatever CBS pays." Gordon responded to this email by writing that while he felt that his "analysis and hosting is worth significantly more," he was "worn down from the back and forth," and that he "need[ed] all remainin[g] available time to work with [B]ravo and help you with planning, scripts, etc." Gordon further wrote that he needed a signed letter reflecting their agreement, and that once he had one he would "move immediately toward getting out of my [Bravo] contract."*fn5 The agreement between Gordon and Projo is memorialized in an unexecuted draft letter attached to an email sent by DeRosa-Grund to Gordon via email on October 4, 2005, and reflects the terms discussed in the emails of September 30. Gordon avers that, in light of Gordon's CPS contract with Bravo, DeRosa-Grund would not execute a formal agreement until "any doubt as to [Gordon's] availability for the Projo Programs [was] removed."

Around the time of DeRosa-Grund's negotiations with Gordon, DeRosa-Grund, on behalf of "ProJo Poker Enterprises, LLC," also entered into an agreement with Interskills Games Limited ("Interskills"), dated and signed September 22, 2005, for Interskills to advertise on the various ProJo Programs (the "Interskills Agreement"). The Interskills Agreement provides that, in exchange for airing advertisements on each of the various ProJo Programs, Interskills would pay "ProJo Poker Enterprises" $50,000 upon execution of the Agreement, place $2,258,579 in escrow in the United Kingdom, and then authorize release of a certain amount of funds (between $100,000 and more than $200,000) each time Interskills received confirmation that its advertisements had aired in connection with a ProJo Program. The Interskills Agreement also provides that Interskills would release $118,390 from escrow upon receiving confirmation from CBS that the first ProJo Program would air as scheduled on December 25, 2005. Finally, the Interskills Agreement states that "it shall be a condition of this Agreement that the [advertisements] be aired on CBS Network and not any other network." DeRosa-Grund testified at his deposition that Projo ultimately received approximately $200,000 under this contract, and the bank records obtained by the plaintiffs reveal that the Projo account received a $50,000 wire transfer from an entity called Paytech International Limited on September 23, 2005 (the day after the execution of the Interskills Agreement), and a second transfer of $140,000 from that same source on November 30, 2005.*fn6

B. The Termination of the CBS Agreement

Shortly after the September 2005 agreements with Gordon and Interskills, Projo defaulted on its obligations under the CBS Agreement. As noted above, the initial $1,325,000 payment under the CBS Agreement was due on October 1, 2005. According to DeRosa-Grund's deposition testimony, however, on or before that date he had determined not to make that payment in light of an announcement made in September 2005 by the cable network Spike TV (an entity affiliated with CBS) stating that Spike TV would be airing shows using a "Pros v. Joes" format similar to that contemplated in the CBS Agreement.*fn7 DeRosa-Grund testified at his deposition that, as of September/October of 2005, he was simply withholding payment on the CBS Agreement while he was "trying to work it out with them."

Emails -- produced by CBS -- between DeRosa-Grund and CBS employees following Projo's failure to make the October 1, 2005, payment provide a different account. On October 11, 2005, Robert Correa ("Correa") of CBS wrote to DeRosa-Grund regarding the late payment, stating that "[w]e still have not received the payment . . . now 11 days late. . . . Our collection guys are nervous and are bugging me for a drop dead when we cancel the deal." DeRosa-Grund responded that day, stating that he was in London and that "it [i.e., the payment check] was sent to a CBS office in Chicago." The next day, DeRosa-Grund sent a follow-up email, which states that,

The payment was sent to your Chicago office via 'Surface Mail' through the 'Royal Mail.' Apparently they[*fn8 ] did not understand it was time of the essence and they were looking at the most economical means of sending it. I was told by our local post office that what little they know about 'Surface Mail' from the Royal Mail it takes about two weeks to two and a half weeks from the UK to reach a destination in the US, normally, but they have seen it take anywhere up to three. I think the end of this week is two and the end of next week would be three weeks.

Correa responded pointedly, "I have never heard of such a thing."

On or before October 19, 2005, Correa sent an email to DeRosa-Grund stating, "Still no check . . . deal is off next week if we don't receive the money." DeRosa-Grund replied on October 19 and offered that, "if you don't get the check by Royal Mail by Friday we'll stop payment on it and re-issue you a new payment upon confirmation the check wasn't negotiated." He further added that "you can't just say the deal is 'off'" in light of Section V(m) of the CBS Agreement, which provides for a fourteen-day cure period following written notification of a material breach. DeRosa-Grund concluded, however, that "I'm sure it won't come to that . . . . Have you checked with Chicago to see if they have received a payment for $1,300,000US and possibly not applied it or applied it to the wrong account?"

By a letter dated October 24, 2005, CBS Sports provided the written notice of breach called for under Section V(m), and stated that the CBS Agreement would be terminated effective November 7, 2005, if the $1.3 million payment was not made by that time. A letter from CBS dated November 9, 2005, recounts that DeRosa-Grund acknowledged receipt of the notice on October 28, 2008, and that the cure period would be extended to November 11, 2005.*fn9 A letter of November 14, 2005, from CBS to DeRosaGrund confirmed that, in light of the failure to make the initial ...


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