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Belesis v. Waksal

United States District Court, S.D. New York

April 18, 2017

ANASTASIOS THOMAS BELESIS and ATB HOLDING COMPANY, LLC, Plaintiffs,
v.
SAMUEL D. WAKSAL, individually and as the Founder, Chief of Innovation, Science and Strategy, and Chairman of the Board of Kadmon Pharmaceuticals, LLC, and Kadmon Corporation, LLC, KADMON PHARMACEUTICALS, LLC, KADMON CORPORATION, LLC, KADMON HOLDINGS, LLC, and all other corporate entities operating under the KADMON name, and STEVEN GORDON, as Executive Vice President, General Counsel, and Chief Administrative, Compliance and Legal, Officer of Kadmon Pharmaceuticals, LLC, and Kadmon Corporation, LLC, Defendants.

          OPINION & ORDER

          PAUL A. ENGELMAYER, District Judge

         On September 29, 2016, the Court (per the Honorable Analisa Torres, to whom this matter was then assigned) dismissed, for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), the original complaint in this action, which brought three federal securities fraud claims and state law claims sounding in breach of contract, breach of the implied covenant of good faith and fair dealing, fraudulent inducement, unjust enrichment, misrepresentation, and tortious interference. See Dkt. No. 30 ("Sept. 29 Op."). Plaintiffs now move, under Federal Rule of Civil Procedure 15(a), for leave to file an amended complaint. Dkt. No. 35. Because amendment would be futile, the Court denies the motion.

         I. Background [1]

         A. The Parties

         Plaintiff Anastasios Belesis is a New York-based broker-dealer who was the CEO of John Thomas Financial ("JTF"), a financial services firm that closed in July 2013. Compl. ¶¶ 42, 59-60, Dkt. No. 35-1. On December 5, 2013, in an unrelated administrative action, the "SEC issued a ruling barring Belesis personally from, inter alia, associating with any 'broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization.'" Id. ¶ 61. Belesis is also the sole managing member of corporate plaintiff ATB Holding Company, LLC ("ATB"). Id. ¶¶ 10-11.

         Defendant Samuel Waksal is a scientist and entrepreneur. Waksal founded Kadmon Pharmaceuticals, LLC ("Kadmon"), a biotechnology company that produces innovative medical products. Id. at 2 & ¶ 12. On June 10, 2003, in an unrelated criminal action, Waksal pled guilty to perjury, obstruction of justice, bank fraud, wire fraud, conspiracy to obstruct justice, and conspiracy to commit wire fraud. United States v. Waksal, 02 Cr. 1041, Dkt. No. 61 (S.D.N.Y.June 6, 2013) (also filed in this case at Dkt. No. 27-1). As part of a civil settlement with the Securities and Exchange Commission ("SEC"), Waksal agreed to be permanently barred from being an officer or director in a public company. SEC v. Waksal, 2 Civ. 04407, Dkt. No. 41 (S.D.N.Y. Jan. 31. 2005); see also Compl. ¶¶ 28-30.

         Defendant Steven Gordon is executive vice president, general counsel, and chief administrative, compliance, and legal officer of Kadmon Pharmaceuticals and Kadmon Corporation. Compl. ¶¶ 14-19. Kadmon Corporation "is the parent corporation of Kadmon Pharmaceuticals"; Kadmon Holdings "is a Delaware limited liability company that is the previous name of Kadmon Corporation, LLC." Id. ¶¶ 16-17. The Court refers collectively to Kadmon Corporation, LLC, Kadmon Pharmaceuticals, and Kadmon Holdings, LLC, as the "Kadmon Defendants."

         B. The Securities Contracts

         Plaintiffs' proposed securities fraud claims arise from two separate contracts. The first contract allegedly occurred on July 12, 2010. It involved Waksal's agreeing to sell "1000 Class B (voting) units of Kadmon Pharmaceuticals LLC to ATB Holding Company, LLC for $1.00, " with the securities to be delivered "as soon as possible ... but no later than September 30, 2010" (the "2010 Agreement"). Compl. ¶¶ 21-24; accord Compl. Ex. A, Dkt. 35-2. Plaintiffs allege that at the time the contract was entered into, Waksal did not intend to honor this agreement. Compl. ¶ 73(i). The proposed complaint does not contain any allegations as to the context for, or the parties' motivations for entering into, this agreement.

         On March 15, 2012, Belesis contacted Waksal and asked to receive the securities that the 2010 Agreement had contemplated. Id. ¶ 31. In response, plaintiffs allege, "Kadmon"[2] issued Belesis a "membership certificate" for 120, 000 units of Kadmon Holdings, LLC, in satisfaction of the 2010 Agreement. Id. ¶¶ 32-33; Compl. Ex. C, Dkt. No. 35-2. Plaintiffs allege that Belesis refused to accept this certificate and told Waksal later that day that the proffered securities were worth less than the contracted-for amount. Compl. ¶¶ 34-35; see also Compl. Ex. B, Dkt. No. 35-2. The following day, March 16, 2012, Belesis emailed Kenneth Goodwin, Denis Dufresne, and Waksal, telling them he was returning the certificate and "requesting] that a corrected certificate be issued." Compl. ¶ 35. As in their initial Complaint, plaintiffs do not explain who Goodwin and Dufresne are. The Court, however, assumes from context that Goodwin was Belesis's attorney, and that Dufresne was Waksal and/or Kadmon's lawyer. See, e.g., Compl. Exs. B-E (exhibits containing email addresses indicative of law affiliations).

         As alleged, a series of negotiations regarding the securities to be issued followed. The proposed complaint alleges four events in detail.

         First, on June 29, 2012, Louis Lombardo allegedly emailed Avi Mirman, Goodwin, and Gordon, a proposed letter agreement reoffering 120, 000 Class A units in Kadmon Holdings, LLC to Belesis. Compl. ¶¶ 36-39. Belesis rejected that offer. M¶40. As in their initial Complaint, plaintiffs' proposed complaint does not explain who Mirman and Lombardo are. However, it appears from a publicly available newspaper article that Mirman was an investment banker working for Belesis, and Lombardo was counsel for Waksal and Kadmon.[3]

         Second, on June 30, 2012, Gordon emailed Robert Bursky (acting as counsel for Belesis), Mirman, Dufresne, and Lombardo, and opined that in connection with the issuance of a Kadmon private placement memorandum, Belesis's ownership interest in Kadmon "would have to be disclosed to our auditors." Compl. ¶¶ 41-43; accord Compl. Ex. E at 1. Gordon also stated that "in compensation for [Belesis's] personal assistance to [Waksal] in trying to work around [Waksal's] [Officer and Director Bar], " Waksal would pay Belesis $15 million, and Belesis would "sign some type of release" of his other securities rights. Compl. Ex. E at 1.

         Third, on July 2, 2012, Waksal sent Belesis a letter agreement in which Waksal set forth "the terms of the proposed agreement in detail." Compl. ¶ 44. The letter agreement stated that "[i]n consideration of the advisory services that [Belesis has] and will render to me personally, including your assistance and consultant regarding my director and officer bar and ability to maintain a role with Kadmon Holdings LLC, " Waksal would pay Belesis an "Advisory Fee" that "shall be equal to 10% of all cash proceeds received by [Waksal pursuant to various potential Kadmon liquidity events], subject to an aggregate cap of [$15 million]." See Compl. Ex. F at 1-2; accord Compl. ΒΆ 45. The letter agreement contemplated that Belesis and ATB will ...


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