FloSports hit with shareholder suit

[tikk10]

The link is paywalled so I'll paste the meat of the article. The stuff I snipped out is background stuff. The complaint isn't yet available.

Without knowing the facts and specific allegations, corporations must hold annual meetings and make their books available to minority shareholders under certain conditions, so I imagine plaintiffs (yet more Floreanis) are going to get what they're asking for from the court. This doesn't mean we'll get to see anything but it's still interesting.

FloSports Hit With Shareholder Suit In Chancery​

By Emilie Ruscoe ·

Law360 (July 6, 2023, 4:47 PM EDT) -- Four stockholders have sued sports streaming company FloSports Inc. in Delaware's Court of Chancery, seeking corporate books and records and alleging it had been years since they'd gotten financial updates from the company.

FloSports investors MMF Family Partners Ltd., Christina Floreani, Charlene Floreani and John Joseph Williamson launched the action Wednesday. It's currently under seal alongside a motion to expedite the proceedings.

The investors also filed as an exhibit the November 2022 books and records request they sent Austin, Texas-based FloSports, and said in their motion to expedite that they'd sent a follow-up request in June that has since been refused by the company.

"Since 2018, the company has failed to provide the holders with any financial reports or other disclosures," the investors said in their November letter to the company. "Additionally, there have been no shareholder meetings since 2018."

[....]

The investors are represented by Emanuel Grillo of Allen & Overy LLP and Scott J. Leonhardt of The Rosner Law Group LLC.

Counsel information for the company wasn't immediately available Thursday.

The case is MMF Family Partners Ltd. et al. v. FloSports Inc., case number 2023-0684, in the Court of Chancery of the State of Delaware.

--Additional reporting by Leslie Pappas, Brian Dowling and Renee Hickman. Editing by Daniel King.

 

[Raw Daddy]

Just the lawyers get rich here.

 

[tikk10]

Just the lawyers get rich here.

This likely isn't an instance where lawyers are getting rich. They're just seeking an injunction to get access to the books, it's as straightforward and fundamental as corporate litigation gets, and the Delaware Chancery Court doesn't entertain bs, as Elon Musk found out.

 

[Raw Daddy]

Just the lawyers get rich here

This likely isn't an instance where lawyers are getting rich. They're just seeking an injunction to get access to the books, it's as straightforward and fundamental as corporate litigation gets, and the Delaware Chancery Court doesn't entertain bs, as Elon Musk found out.

Ok, lawyer. 😀

 

[El-Jefe]

Flo must have streamed the reports.

 

[GogglesPaizano]

Flo is hiding the books to prevent the shareholders from finding out their largest annual expense is legal fees.

 

[creamery freak]

I'm hoping the suit includes refunds for the Oklahoma State & PSU match debacle. One can hope, can't he? Maybe force Flo to replay it. 😉

 

[Phantom of the Palestra]

I'm hoping the suit includes refunds for the Oklahoma State & PSU match debacle. One can hope, can't he? Maybe force Flo to replay it. 😉

All you had to do was ask. And not nicely. I got mine right after it happened.

 

[nittinsc]

Another case of Flo failing to deliver?

 

[tikk10]

Another case of Flo failing to deliver?

Maybe the shareholders tried to get the books but they'd accidentally left checked the "I waive all my rights" box and every year it just auto-renewed.

This dispute is purely about corporate governance, this has nothing to do with account holders, to address an above point.

MMF Family Partners Ltd is a company belonging to Martin. I'll take an educated guess, given their ages, that Christina and Charlene Floreani are sisters of Mark and Martin (maybe one is Martin's wife? Someone reading this probably knows). Not clear who the only non-family member is, John Joseph Williamson, other than an investor/shareholder. Mark surely owns a majority share or this dispute wouldn't exist.

The rights of minority shareholders to inspect books may be addressed in the articles of incorporation or, more likely, the bylaws. It would be contrary to public policy for the articles or bylaws to abolish the shareholders' right to inspect.

That said, minority shareholders don't get to access to the books just for asking. They need to assert a proper purpose and the demand must be made in good faith. Lucky for the minority shareholders that shouldn't be hard to show here, given that there's been no annual meeting since 2018 per their claim. Shareholders can compel a meeting if one hasn't been held in 15 months. In most small corporations, if a shareholder owns at least 10% he/she can compel a special meeting. (Since they didn't ask I'll guess none of the plaintiffs are 10% owners). Even more important than the lack of any meeting is the claim that FloSports hasn't disclosed any financial reports since 2018, yet hasn't lacked revenue.

It's hard to imagine a scenario where the court doesn't give them exactly what they're asking for because what they're asking for is fundamental to all corporations.

 

[smalls103]

Not clear who the only non-family member is, John Joseph Williamson,

Joe Flo

 

[smalls103]

It's hard to imagine a scenario where the court doesn't give them exactly what they're asking for because what they're asking for is fundamental to all corporations.

literally s.o.p. that they are denying

 

[Raw Daddy]

Maybe the shareholders tried to get the books but they'd accidentally left checked the "I waive all my rights" box and every year it just auto-renewed.

This dispute is purely about corporate governance, this has nothing to do with account holders, to address an above point.

MMF Family Partners Ltd is a company belonging to Martin. I'll take an educated guess, given their ages, that Christina and Charlene Floreani are sisters of Mark and Martin (maybe one is Martin's wife? Someone reading this probably knows). Not clear who the only non-family member is, John Joseph Williamson, other than an investor/shareholder. Mark surely owns a majority share or this dispute wouldn't exist.

The rights of minority shareholders to inspect books may be addressed in the articles of incorporation or, more likely, the bylaws. It would be contrary to public policy for the articles or bylaws to abolish the shareholders' right to inspect.

That said, minority shareholders don't get to access to the books just for asking. They need to assert a proper purpose and the demand must be made in good faith. Lucky for the minority shareholders that shouldn't be hard to show here, given that there's been no annual meeting since 2018 per their claim. Shareholders can compel a meeting if one hasn't been held in 15 months. In most small corporations, if a shareholder owns at least 10% he/she can compel a special meeting. (Since they didn't ask I'll guess none of the plaintiffs are 10% owners). Even more important than the lack of any meeting is the claim that FloSports hasn't disclosed any financial reports since 2018, yet hasn't lacked revenue.

It's hard to imagine a scenario where the court doesn't give them exactly what they're asking for because what they're asking for is fundamental to all corporations.

Not to get argumentative, but my experience here is that while this may be an isolated claim based on the litigation the shareholders likely feel there is something wrong and they can't make a further claim without financials. As the guy who was responsible for sending f/s to hundreds of LPs in my life, this could have been resolved in 5 minutes. Someone is being told not to do something for some reason. This may be hole 7 of a sour relationship. Nobody wins in these deals except for the lawyers.

 

[tikk10]

Not to get argumentative, but my experience here is that while this may be an isolated claim based on the litigation the shareholders likely feel there is something wrong and they can't make a further claim without financials. As the guy who was responsible for sending f/s to hundreds of LPs in my life, this could have been resolved in 5 minutes. Someone is being told not to do something for some reason. This may be hole 7 of a sour relationship. Nobody wins in these deals except for the lawyers.

Well, yeah, obviously there's a lot more going on, but this court's only concern will be whether FloSports can withhold the financial statements from the minority shareholders. Clearly they didn't get to this point without making a request first (your proposed 5-minute, no-lawyers resolution) and having that request denied; in fact if they hadn't made the request the judge would likely rip the lawyer's head off.

And if, after shareholders' review of the financial statements, there's an additional claim to be made, that's another issue entirely.

 

[Chickenman Testa]

Well, yeah, obviously there's a lot more going on, but this court's only concern will be whether FloSports can withhold the financial statements from the minority shareholders. Clearly they didn't get to this point without making a request first (your proposed 5-minute, no-lawyers resolution) and having that request denied; in fact if they hadn't made the request the judge would likely rip the lawyer's head off.

And if, after shareholders' review of the financial statements, there's an additional claim to be made, that's another issue entirely.

It appears that the GC for Flo is quite the prick. First, his idiotic and mean-spirited jihad against Willie, and now this crap.

 

[tikk10]

Okay, I know you've all been on pins and needles waiting for more info here, but you're finally in luck, the court's gears have finally turned.

On April 12 the magistrate issued a 31-page report that gets into the legal particulars of the Martin v Flosports (Mark Floriani) dispute. The report is mostly concerned with mundane procedural details, but the upshot is that Martin made a legitimate request to access Flo's books for the purpose of seeking to sell his shares, Mark obstinately refused, claiming that Martin's request was pretextual and made in bad faith, arguing that Rokfin is a competitor to Flosports. The court found, after trial, that Martin's purpose was proper and Flo has to give Martin most of what he asked.

I'll quote the magistrate's introduction in the report b/c it summarizes it nicely:

This is a rather contentious books and records dispute that involves a private Delaware entity, owned by family members. Coloring this matter and atypical in Section 220 cases, there has been a profusion of bickering related to familial hostility and certain disclosed actions by family members—matters which I don’t find relevant here. Petitioners seek to sell their shares of the company, FloSports, Inc. It is based in Austin, Texas and streams live “niche”1 sports to its subscribers. To sell their shares of the private company, the Plaintiff stockholders need certain information from the company. The Plaintiffs want to first, value their shares, and then they want to communicate some of the company’s information to potential buyers to effectuate a sale. FloSports has denied their requests, in part. They’ve given the Plaintiffs what they think is needed and contested the Plaintiffs’ right to share the information with potential buyers.

FloSports has withheld certain information from the Plaintiffs amid concerns that the former CEO, the current CEO’s brother, will use the company’s information to compete using his new company, Rofkin. Because I find that the alleged competition between the companies does not negate the Plaintiffs’ proper purpose to value their shares under section 220, I recommend FloSports to produce some of the requested document sets as explained herein. I also impose a reasonable confidentiality agreement in accordance with certain terms discussed herein.

In finding that that Flo and Rokfin don't compete, the magistrate cited in a footnote Martin's interesting testimony at trial comparing the two:

"The analogy I give is we're a supermarket. We sell beef. FloSports is McDonald's. There may be sometimes where a customer is shared between McDonald's and a supermarket, but they're not competitors. And it's really two different experiences. If you want to go out and grow your -- grill a hamburger and make it yourself, and – you would go to a supermarket and buy that beef. But if you're just looking for a quick -- if you want an all-encompassing solution for your live rights, you're going to go to FloSports. FloSports helps with the production, they -- they execute with the marketing. It's a full-service execution, in terms of what they do with live rights. Live rights, if a creator posts live rights on our platform, what they're doing it on their own basis. It's kind of like more like YouTube."

But the magistrate also strongly hinted that it hardly mattered if they did compete, b/c the starting and usually endpoint for analysis is whether they had rights as ordinary shareholders to the books (they did) and whether those shareholder had checked the right boxes in making the request. You need a lot more than Flo brought to the table in order to overcome that presumption. I basically predicted this outcome in post #10 upthread.

Further, in an additional opinion filed a short time later, Martin successfully requested leave to file for attorneys fees from Flosports, with the magistrate suggesting bad faith is present for Flosports' part in this dispute. Martin had asked for additional discovery toward this end but the court denied that, suggesting that they already have everything they need to successfully make that argument. Arguably, that language is probably scarier for Flo than if the judge had ordered discovery of their emails.

In sum, Martin and his sisters got nearly everything they asked for, and Flo is on the clock to comply. Further, they also appear to be on the verge of getting an assload of attorneys fees for having to had to sue for what was a routine request.

 

[Psalm 1 guy]

Okay, I know you've all been on pins and needles waiting for more info here, but you're finally in luck, the court's gears have finally turned.

On April 12 the magistrate issued a 31-page report that gets into the legal particulars of the Martin v Flosports (Mark Floriani) dispute. The report is mostly concerned with mundane procedural details, but the upshot is that Martin made a legitimate request to access Flo's books for the purpose of seeking to sell his shares, Mark obstinately refused, claiming that Martin's request was pretextual and made in bad faith, arguing that Rokfin is a competitor to Flosports. The court found, after trial, that Martin's purpose was proper and Flo has to give Martin most of what he asked.

I'll quote the magistrate's introduction in the report b/c it summarizes it nicely:

This is a rather contentious books and records dispute that involves a private Delaware entity, owned by family members. Coloring this matter and atypical in Section 220 cases, there has been a profusion of bickering related to familial hostility and certain disclosed actions by family members—matters which I don’t find relevant here. Petitioners seek to sell their shares of the company, FloSports, Inc. It is based in Austin, Texas and streams live “niche”1 sports to its subscribers. To sell their shares of the private company, the Plaintiff stockholders need certain information from the company. The Plaintiffs want to first, value their shares, and then they want to communicate some of the company’s information to potential buyers to effectuate a sale. FloSports has denied their requests, in part. They’ve given the Plaintiffs what they think is needed and contested the Plaintiffs’ right to share the information with potential buyers.

FloSports has withheld certain information from the Plaintiffs amid concerns that the former CEO, the current CEO’s brother, will use the company’s information to compete using his new company, Rofkin. Because I find that the alleged competition between the companies does not negate the Plaintiffs’ proper purpose to value their shares under section 220, I recommend FloSports to produce some of the requested document sets as explained herein. I also impose a reasonable confidentiality agreement in accordance with certain terms discussed herein.

In finding that that Flo and Rokfin don't compete, the magistrate cited in a footnote Martin's interesting testimony at trial comparing the two:

"The analogy I give is we're a supermarket. We sell beef. FloSports is McDonald's. There may be sometimes where a customer is shared between McDonald's and a supermarket, but they're not competitors. And it's really two different experiences. If you want to go out and grow your -- grill a hamburger and make it yourself, and – you would go to a supermarket and buy that beef. But if you're just looking for a quick -- if you want an all-encompassing solution for your live rights, you're going to go to FloSports. FloSports helps with the production, they -- they execute with the marketing. It's a full-service execution, in terms of what they do with live rights. Live rights, if a creator posts live rights on our platform, what they're doing it on their own basis. It's kind of like more like YouTube."

But the magistrate also strongly hinted that it hardly mattered if they did compete, b/c the starting and usually endpoint for analysis is whether they had rights as ordinary shareholders to the books (they did) and whether those shareholder had checked the right boxes in making the request. You need a lot more than Flo brought to the table in order to overcome that presumption. I basically predicted this outcome in post #10 upthread.

Further, in an additional opinion filed a short time later, Martin successfully requested leave to file for attorneys fees from Flosports, with the magistrate suggesting bad faith is present for Flosports' part in this dispute. Martin had asked for additional discovery toward this end but the court denied that, suggesting that they already have everything they need to successfully make that argument. Arguably, that language is probably scarier for Flo than if the judge had ordered discovery of their emails.

In sum, Martin and his sisters got nearly everything they asked for, and Flo is on the clock to comply. Further, they also appear to be on the verge of getting an assload of attorneys fees for having to had to sue for what was a routine request.

Thanks tikk. Not just specifically related to this case, but as a lay person, it seems to me that some solid legal advice up front could save either party in a lawsuit from heading down a legal path that will only harm them, especially financially, in the end. I was wondering your thoughts on this point. I see some possibilities: the law is unclear on the question at hand, and both parties think they have a solid shot of winning, incompetent legal counsel, unethical attorneys who mislead their clients on the merits of their position so as to gain billable hours, clients driven by emotion who refuse to follow sound legal advice and clients trying to hide things from discovery that might be embarrassing or illegal.

 

[tikk10]

Thanks tikk. Not just specifically related to this case, but as a lay person, it seems to me that some solid legal advice up front could save either party in a lawsuit from heading down a legal path that will only harm them, especially financially, in the end. I was wondering your thoughts on this point. I see some possibilities: the law is unclear on the question at hand, and both parties think they have a solid shot of winning, incompetent legal counsel, unethical attorneys who mislead their clients on the merits of their position so as to gain billable hours, clients driven by emotion who refuse to follow sound legal advice and clients trying to hide things from discovery that might be embarrassing or illegal.

Well, yes, but your "rational litigant" ideal is often not realized. I began my career doing matrimonial law and I was constantly in the position of telling clients that "it will cost you $10,000 to make this motion and the most you can benefit is $2,000, so..." and the answer is typically "because f*** [her/him], that's why." The Flo brothers are operating on that same level. And Mark is clearly the less rational spouse.

 

[Sleepylion]

Thanks tikk. Not just specifically related to this case, but as a lay person, it seems to me that some solid legal advice up front could save either party in a lawsuit from heading down a legal path that will only harm them, especially financially, in the end. I was wondering your thoughts on this point. I see some possibilities: the law is unclear on the question at hand, and both parties think they have a solid shot of winning, incompetent legal counsel, unethical attorneys who mislead their clients on the merits of their position so as to gain billable hours, clients driven by emotion who refuse to follow sound legal advice and clients trying to hide things from discovery that might be embarrassing or illegal.

As you suggested, often, solid legal advice usually takes a back seat when...
"there has been a profusion of bickering related to familial hostility and certain disclosed actions by family members—matters which I don’t find relevant here."