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Churchill Downs Inc. v. NLR Entertainment, LLC

United States District Court, D. New Jersey

September 25, 2018

CHURCHILL DOWNS, INC., Plaintiff,
v.
NLR ENTERTAINMENT, LLC AND NICHOLAS L. RIBIS, Defendants/Third-Party Plaintiffs,
v.
WILLIAM CARSTANJEN, Third-Party Defendant.

          OPINION

          Kevin McNulty United States District Judge.

         On February 25, 2014, plaintiff Churchill Downs, Inc. ("CDI") filed suit against defendants NLR Entertainment, LLC ("Entertainment LLC) and Nicholas Ribis, Entertainment LLC's purported principal. CDI alleged (1) a breach of contract claim against Entertainment LLC that arose from an agreement that was executed in 2013; and (2) a fraud claim against Ribis for making various representations to CDI regarding the status of negotiations with a third party.

         On March 6, 2017, this Court entered an order granting CDI's motion for summary judgment as to its breach of contract claim against Entertainment LLC. CDI's fraud claim against Ribis was dismissed. A final judgment in the amount of $2, 676, 763.70 was entered against Entertainment LLC on April 4, 2017.

         Now it turns out that Entertainment LLC, the judgment debtor, does not exist and never did. Before the court is CDI's motion to modify the Judgment under Federal Rule of Civil Procedure 60(b) to impose liability against NLR Ventures ("Ventures LLC") and Ribis individually.

         I. Background

         I relate the facts that are pertinent to resolving this motion only. On August 3, 2013, CDI and Ribis executed a "Binding Term Sheet" ("Term Sheet"). (ECF no. 90-3). Ribis executed the agreement on behalf of NLR Acquisitions, LLC ("Acquisitions LLC"), a "wholly owned subsidiary of NLR Entertainment, LLC." (Id.).

         Pursuant to the term sheet, CDI was to provide online gambling services to Showboat Atlantic City Hotel and Casino ("Showboat"), once Acquisitions/Entertainment LLC had purchased Showboat. (Id.) CDI was to make an initial payment of $2.5 million dollars, which eventually was supposed to be credited towards a $10 million dollars rights fee. (Id.). In the event that Acquisitions/Entertainment LLC failed to purchase Showboat, then it would be required to "repay the $2.5 million dollars." (Id.).

         Thereafter, on September 4, 2013, Acquisitions LLC and CDI entered into a License and Operating Agreement ("License Agreement"). (ECF no. 90-4). In contrast to the Term Sheet, the only party on Ribis's side of the License Agreement was Acquisitions LLC (which had been identified earlier as a subsidiary of Entertainment LLC). The terms of the License Agreement were substantially similar to the Term Sheet.

         On August 5, 2013, two days after the Term Sheet but before the execution of the License Agreement, CDI wired $2.5 million dollars to a TD bank account. The bank account was in Ribis's name, which would have been evident from the wiring instructions provided to CDI. (ECF no. 92-7). Post-judgment discovery revealed that in August 2013, after CDI had wired the money to Ribis's personal bank account, Ribis made a series of transfers to his wife, various country clubs, and utility services. (ECF nos. 90-3, 90-14, 90-15). He further transferred approximately $1.35 million to Ventures LLC, another entity controlled by him. (ECF nos. 90-16, 90-17, 90-18).

         CDI brought this against Ribis and Entertainment LLC as defendants, when Acquisitions/Entertainment LLC failed to acquire Showboat and did not return the $2.5 million dollars. (ECF no. 1-1).[1] In 2015, defendants produced documents in discovery related to Acquisitions LLC's formation, including Acquisitions LLC's certificate of formation, its LLC agreement, and certificate of good standing. (ECF nos. 92-2, 92-3, 92-5). Those documents revealed that Acquisitions LLC was not formed until December 12, 2013, months after the parties had executed the Term Sheet and License Agreement. (Id.). When asked during his deposition on May 26, 2016 when Entertainment LLC and Acquisitions LLC were formed, Ribis said that he did not know. (ECF no. 90-7, at 41:14-12). He further testified that he did not know whether Entertainment LLC or Acquisitions LLC still existed at the time of the deposition. [Id. at 42:6-11).

         On March 6, 2017, summary judgment was granted to CDI on its breach of contract claim. Entertainment LLC breached the contract, I found, when it failed to return CDI's $2.5 million dollars. (ECF nos. 69, 71 (corrected opinion)). A final judgment in the amount of $2, 676, 763.70 was entered on April 4, 2017. (ECF no. 76).

         Thereafter, CDI sought post-judgment discovery in aid of execution. On April 19, 2017, CDI served subpoenas on various NLR entities controlled by Ribis, including Ventures LLC (ECF no. 78-5); Acquisitions LLC (ECF no. 78-6); NLR Resort Management Co., LLC (ECF no. 78-7); and NLR Resorts International, LLC (ECF no. 78-8). CDI also served subpoenas on TD Bank (ECF no. 78-10) and on The Bancorp Bank (ECF no. 78-9), where, Ribis testified, the NLR entities maintain their accounts. Last, CDI served interrogatories on Ribis, seeking information about Ribis's own assets. It was during this post-judgment discovery that the Department of State for the State of Delaware advised CDI's counsel that it had no record of any entity named "NLR Entertainment LLC" ever being formed under the laws of the State. (ECF no. 90-8).

         On May 3, 2017, defendants moved to quash the subpoenas served on the four "non-party" NLR entities. Defendants also sought a protective order to strike the interrogatories served on Ribis, a non-judgment debtor. TD Bank apparently produced some responsive records anyway, which rendered part of the motion moot.

         On December 20, 2017, the Magistrate Judge issued a decision on the motion to quash, which was granted in part and denied in part. (ECF no. 89). Noting that there was no evidence that the 2013 transfers were made for the purpose of evading a judgment (which was not entered until 2017), the court granted the motion to quash the subpoenas on the ...


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