STEINBERG MOORAD DUNN, INC. v. DUNN, (C.D.Cal. 2002)

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Docket Number

Case No. Cv 01-07009 RSWL (RZx)

Attorney(S)

Franklin Brockway Gowdy, Esq. and Salvatore Picariello, Esq., Brobeck, Phleger Harrison, LLP, San Francisco, CA, attorneys for plaintiff. Kent R. Raygor, Esq., Sheppard Mullin Richter Hampton, LLP, Los Angeles, CA and Joe Wolfson, Esq., Stevens Lee, Wayne, PA, attorneys for attorneys for defendant, Donald Housman, B.O.Y.Z. (local counsel). Lee J. Hutton, Esq., Duvin, Cahn Hutton, Cleveland, OH, attorneys for defendant Athletes First and David L. Dunn. Andrew Kim, Esq., Alschuler, Grossman, Stein Kahan, LLP, Santa Monica, CA, attorneys for defendant Athletes First, David L. Dunn, and third-party Brian Murphy. Alan Posner, Esq., Rubin Rudman, Boston, MA, attorneys for defendants David C. Hunnewell, an individual, and Centurion Capital Management, LLC. Ronald D. Reynolds, Esq., Kaye Scholer, LLP, Los Angeles, CA, attorneys of Intervenor, National Football League Players Assn., Inc. Aaron C. Gundzik, Cotton Gundzik, LLP, Los Angeles, CA, attorneys for David C. Hunnewell Centurion Capital Management, LLC. Jeffrey Kessler, Esq., Weil, Gotshall Manges LLP, New York, NY, attorneys for NFLPA.

Judges

Ronald S. W. Lew

Acts

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STEINBERG MOORAD DUNN, INC., a California corporation, Plaintiff, v. DAVID L. DUNN an indi

[Revised] FINDINGS OF FACT AND CONCLUSIONS OF LAW RE: DEFENDANT PLATINUM EQUITY LLC'S MOTION FOR SUMMARY JUDGMENT ON PLAINTIFF STEINBERG MOORAD DUNN, INC.'S CLAIMS [Fed.R.Civ.P. 56(b) and 56(c); C.D. Cal. Local Rule 56-1]

RONALD S.W. LEW, United States District Judge.

On July 29, 2002, defendant Platinum Equity, LLC filed a Motion for Summary Judgment on all claims for relief asserted against it in plaintiff Steinberg, Moorad Dunn's ("SMD") Second Amended Complaint in this action. This Court heard that Motion on August 19, 2002 and, having fully considered the papers, argument, and evidence submitted in connection with that Motion, hereby makes the following findings of fact and conclusions of law, pursuant to Fed.R.Civ.P. 56(b) and this Court's Local Rule 56-1:

FINDINGS OF FACT Background re Platinum

1. Platinum acts as a holding company through which it acquires high technology divestitures.

( Antoine Decl., ¶ 5, 3:20-21.)

2. Platinum's acquisitions are usually divisions or subsidiaries of distressed high technology companies.

( Antoine Decl., ¶ 5, 3:22-23.)

3. With few exceptions, Platinum acquires 100% ownership interest in the high technology companies it acquires.

( Antoine Decl., ¶ 5, 3:23-24; Gores Depo., 16:7-24, 19:4-8, 19:20-20:3.)

All references to deposition excerpts are attached as Exhibits to the Roman Declaration.

4. Upon acquisition of a high technology company, Platinum selects or approves its own management team, and otherwise takes an active role in managing the entity and attempting to make it more efficient to increase its value.

( Antoine decl., ¶ 5, 3:25-27; Antoine Depo., 32:10-35:12.)

5. Platinum currently owns a 100% interest in approximately 24 companies, all in the technology or telecommunications area.

( Gores Depo., 16:7-24, 19:4-8, 19:20-20:3.)

6. Platinum does have one investment in the high technology area in which it owns a 49% interest in the company.

( Gores Depo., 19:23-20:3.)

7. Platinum itself is a privately held company, and its CEO and President Tom Gores owns a 100% of the company.

( Gores Depo., 10:24-11:7.)

The potential investment in Athletes First First call

8. Tom Gores is a big football fan.

( Gores Depo., 25:21-26:5, 30:9-17.)

9. Lawrence Antoine has been employed by Platinum since 1999, and his current position is Vice President, Mergers and Acquisitions, and his duties are to perform financial analysis and due diligence in regard to acquisitions contemplated by Platinum.

( Antoine Decl., ¶ 1, 1:5-8; ¶ 5, 3:20.)

10. Before working for Platinum, Mr. Antoine worked for approximately 4 years for PricewaterhouseCoopers, where he spent two years in its accelerated partnership program and obtained enough experience to be a licensed as a certified public accountant and then two years in its Transaction Services Group performing financial due diligence for firm clients.

( Antoine decl. ¶ 4, 3:7-12.)

11. Joby Branion is a principal of Defendant Athletes First, LLC. ( Antoine Decl., ¶ 17, 9:9; Exh. G Antoine Decl., p. 129.)

12. Lawrence Antoine and Joby Branion were classmates at UCLA's Anderson Graduate School of Management between 1992 and 1994, each graduating with an MBA in 1994.

( Antoine Decl., ¶ 2, 2:16-18; ¶ 8, 5:3-5.)

13. After Mr. Antoine and Mr. Branion graduated from UCLA's Anderson Graduate School of Management in 1994, they stayed in periodic contact.

( Antoine Decl., ¶ 8, 5:3-5.)

14. In the first week of April, 2001, Mr. Branion informed Mr. Antoine that he (Mr. Branion) and others had left Plaintiff Steinberg, Moorad Dunn ("SMD") two months earlier and had started their own sports agency for NFL players.

( Antoine Decl., ¶ 9, 5:11-12.)

15. During this call, Mr. Branion explained that he, David Dunn, and Brian Murphy were in the process of seeking investors to help in the start-up of the new firm called Athletes First.

( Antoine Decl., ¶ 9, 5:16-18.)

16. Mr. Antoine agreed he would look at the potential investment and requested that Mr. Branion send materials relating to the potential investment

( Antoine decl., ¶ 10, 5:22-24.)

Preliminary qualification of the potential investment

17. Mr. Antoine received an investment packet totaling 31 pages that described the potential investment in Athletes First (the "Investment Packet").

( Antoine Decl., ¶ 10, 5:24-25; Exh,. A. Antoine Decl.)

18. In conjunction with receipt of the Investment Packet, and at the request of Athletes First, Mr. Antoine signed a confidentiality agreement relating to the Investment Packet, and that confidentiality agreement was similar to those signed by Mr. Antoine and others at Platinum as a regular business practice upon request when presented a business plan or investment memoranda to review and evaluate.

( Antoine Decl., ¶ 10, 5:27-6:5; Exh B. Antoine Decl.)

19. Mr. Antoine understood that he was to use the Investment Packet and information contained therein only for the purposes of evaluating the potential investment in Athletes First.

( Antoine Decl., ¶ 10, 6:5-7.)

20. Mr. Antoine learned that Athletes First was seeking an investor willing to commit as much as three million dollars over a period of time in return for which the investor would be repaid its capital with guaranteed interest payments of 8% and would also receive 15% of the equity of the company.

( Antoine Decl., ¶ 11, 6:9-14; Exh. A. Antoine Decl., pp. 56-63.)

21. Mr. Antoine also learned that since the Athletes First principals had left SMD two months earlier, they had signed a couple NFL players as clients and a number of others had expressed strong interest in Athletes First.

( Antoine Decl., ¶ 11, 6:14-16.)

22. Mr. Antoine also learned that Athletes First had no permanent offices or equipment in April, 2001, and needed capital to fund its startup.

( Antoine Decl., ¶ 11, 6:17-18.)

23. Mr. Antoine reviewed the Investment Packet upon receipt, in particular the pro forma cash flow projections, and performed some very rough financial analysis of the projections and concluded that the investment looked interesting but, as with most investment memoranda, additional financial analysis and scrutiny of the projections would be necessary.

( Antoine decl., ¶ 13, 7:10-16.)

24. Mr. Antoine also found the description of the business and backgrounds of the Athletes First principals interesting and worthy of further consideration.

( Antoine Decl., ¶ 13, 16-18.)

25. Over the course of his employment with Platinum, Mr. Antoine's duties included performing financial analysis and reviewing investment memoranda in regard to acquisitions and investments being pitched to Platinum with the purpose of determining whether the proposed acquisition or investment might be of some interest to Platinum and was worthy of further investigation and analysis.

( Antoine Decl., ¶ 6, 2-6; ¶ 7, 16-18.)

26. Platinum receives countless business plans and investment memoranda from individuals and entities seeking to interest Platinum in acquiring or investing in a business or venture, typically in the high technology area, but the majority of these business plans and investment memoranda are rejected after an initial review.

( Antoine Decl., ¶ 6, 6-10.)

27. The plans and memoranda that have some promise based on an initial review are presented to more senior people at Platinum, and if then approved for further investigation, a due diligence process is commenced.

( Antoine Decl., ¶ 6, 10-14.)

Antoine's initial thoughts on the potential investment

28. Mr. Antoine's initial thought after learning of the potential investment in Athletes First was not that the investment would be of interest to Platinum or its owner Tom Gores, but rather it might have an interest to Mr. Gores' brother, Sam Gores, because he is a principal with a talent agency called, Paradigm Talent Literary Agency.

( Antoine decl., ¶ 12, 6:21-25.)

29. Mr. Antoine had in the past worked on special projects with Paradigm, including one a year earlier when he as asked to evaluate a potential acquisition of a sports agency called the Beverly Hills Sports Council ("BHSC") by Sam Gores and Paradigm.

( Antoine Decl., ¶ 12, 6:26-7:3.)

30. Sam Gores did not end up purchasing the agency, but Mr. Antoine did perform a financial analysis in regard to the proposed acquisition that included reviewing and evaluating information presented by BHSC about its business; and other sports agencies.

( Antoine Decl., ¶ 12, 7:5-8.)

31. Based on his initial, rough financial analysis and his independent knowledge of the industry, Mr. Antoine determined that it would be appropriate to bring the potential investment to the attention of Tom Gores and inquire whether he should present it to his brother, Sam Gores for further review.

( Antoine Decl. ¶ 13, 7:13-21.)

First discussion with Tom Gores regarding potential investment

32. Within a few days after Mr. Antoine reviewed the Investment Packet, he presented the potential investment to Tom Gores and asked him if the investment opportunity should be presented to his brother Sam Gores.

( Antoine Decl., ¶ 14, 7:26-8:1.)

33. Tom Gores informed Mr. Antoine that he, Mr. Gores, might be interested in the investment given his interest in football.

( Antoine Decl., ¶ 14, 8:2-3; Gores Depo, 30:5-17.)

34. Mr. Gores told Mr. Antoine to further investigate the potential investment.

( Antoine Decl., ¶ 15, 8:9; Antoine 30(b)(6) Depo., 66:15-67:9.)

35. Mr. Antoine understood Mr. Gores' instruction to mean that he viewed this as more of a potential personal investment outside of Platinum's core business and that (i) he did not want resources needed for the core business diverted to this project and (ii) the amount of the proposed investment was relatively small compared to Platinum's acquisitions of high technology divestitures.

( Antoine Decl., ¶ 14, 8:2-7.)

Due diligence effort in regard to the potential investment

36. Platinum, through Mr. Antoine, proceeded to conduct due diligence regarding the potential investment in Athletes First starting after the first conversation with Mr. Gores in the first week in April 2001 lasting until through the signing of the term sheet between Platinum and Athletes First on April 24, 2001 (the "Term Sheet").

( Antoine Decl., ¶ 15, 8:11-20; Antoine 30(b)(6) Depo., 82:7-16, 83:12-84:5, 101:5-102:4; 105:18-106:9.)

Meeting with David Dunn and Athletes First

37. A focus of Platinum's efforts during the due diligence period was to confirm the independent information Mr. Antoine possessed regarding David Dunn.

( Antoine Decl., ¶ 16, 8:22-23; Foltz Decl., ¶ 4, 2:13-19.)

38. Prior to learning of the Athletes First investment, Mr. Antoine was aware of Mr. Dunn's prominence in the sports representation industry.

( Antoine Decl., ¶ 15, 8:14-17; ¶ 16, 8:27-9:1.)

39. For Platinum to make the proposed investment in Athletes First, it was important that both Mr. Gores and Mr. Antoine felt comfortable with and had confidence in Mr. Dunn because Platinum would essentially be investing in Mr. Dunn and his company with no control over management a very different scenario from Platinum's core business acquisitions of high tech divestitures.

( Antoine Decl., ¶ 16, 9:4-6; Gores Dep., 49:23-50:16.)

40. There was a meeting in early April, 2001 between the principals from Athletes First, David Dunn, Joby Branion, and Brian Murphy on the one hand, and Tom Gores and Lawrence Antoine, on the other hand, the primary purpose of which was for Mr. Dunn and Mr. Gores to meet and determine if they felt comfortable with each other and want to consider doing business together.

( Antoine Decl., ¶ 17, 9:8-13.)

41. During the first meeting with Athletes First's principals, they described their experiences in the sports industry and the formation of their new company. The Athletes First principals specifically referenced that they were looking for an investor with whom they would feel comfortable, because Mr. Dunn has an easy-going demeanor and wanted to feel comfortable "having a beer" with their investor.

( Antoine Decl., ¶ 17, 9:13-16; ¶ 18, 9:19-25.)

42. As a result of the meeting, it was determined that there was a personality fit between Mr. Dunn and the other principals of Athletes First, on the one hand, and Mr. Gores and Mr. Antoine, on the other hand.

( Antoine Decl., ¶ 18, 9:27-10:3.)

Antoine's prior knowledge of Dunn and Steinberg Randy Gordon

43. During each of his two years at UCLA Business School Mr. Antoine attended a speech given by Mr. Steinberg, including Mr. Antoine's second year in business school when he personally met and then introduced Mr. Steinberg as the speaker and observed what he considered were inconsistencies in Mr. Steinberg's speech from the prior year.

( Antoine decl., ¶ 30, 15:15-18; ¶ 31, 15:20-16:6.)

44. One of Mr. Antoine's acquaintances from UCLA Business School is Randy Gordon who graduated in 1993, a year ahead of Mr. Antoine, but they were both active in the UCLA Sports Business Association.

( Antoine Decl., ¶ 30, 15:12-15.)

45. Mr. Antoine stayed in contact with Mr. Gordon after his graduation from UCLA Business School in 1993, and learned that Mr. Gordon went to work as a special consultant for SMD in their role as a marketing agent for the 1994 United States World Cup Soccer team.

( Antoine Decl., ¶ 32, 16:8-11.)

46. Both during and shortly after Mr. Gordon's tenure with SMD, Mr. Gordon informed Mr. Antoine of the opinions and views he developed regarding some of the individuals he had met and worked with at SMD.

( Antoine Decl., ¶ 32, 16:11-13.)

47. Mr. Gordon made some very unflattering statements about Mr. Steinberg to Mr. Antoine and told Mr. Antoine that based on his experience at SMD he (Mr. Gordon) had a very low opinion of Mr. Steinberg and did not respect Mr. Steinberg.

( Antoine Decl., ¶ 32, 16:13-15; ¶ 33, 16:19-20.)

48. On the other hand, Mr. Gordon raved to Mr. Antoine about Dave Dunn, stating how much he liked Mr. Dunn, that Mr. Dunn had integrity, that he greatly respected Mr. Dunn, that the players, i.e., SMD's clients, really liked Mr. Dunn, and used the phrase "He's the man" when describing Mr. Dunn.

( Antoine decl., ¶ 33, 16:17-22.)

IMG

49. During the summer of 1993 while in business school, Mr. Antoine worked as an intern for International Management Group ("IMG"), which was one of the largest sports and entertainment representation firms in the country.

( Antoine Decl., ¶ 3, 2:22-26; Antoine Depo., 25:14-17, 26:21-23.)

50. Mr. Antoine had a very strong interest in the sports industry during business school, and he has continued to follow the sports industry after graduating from business school.

( Antoine decl., ¶ 3, 2:27-3:3.)

51. During his internship at IMG, Mr. Antoine met and assisted one of IMG's financial agents, John Palgutta, who was responsible for managing the finances the some of the high net-worth sports clients of IMG

( Antoine Decl., ¶ 35, 17:8-12.)

52. On one occasion, Mr. Palgutta introduced Mr. Antoine to Ken Kremer, a football agent employed by IMG, and Mr. Palgutta and Mr. Kremer expressed negative views and opinions of Leigh Steinberg describing him as all hype, among other things.

( Antoine decl., ¶ 35, 17:12-17.)

Joby Branion

53. During business school, Mr. Branion and Mr. Antoine took a number of the same classes, had a number of common friends and even worked as partners on a marketing project for one of their classes.

( Antoine Decl., ¶ 36, 17:25-18:1.)

54. After they graduated from business school, Mr. Branion and Mr. Antoine stayed in periodic contact.

( Antoine Decl., ¶ 36, 18:1-2.)

55. Based on their long term friendship, Mr. Antoine liked and respected Mr. Branion.

( Antoine Decl., ¶ 39, 19:9-11.)

56. On one occasion in the late-1990s, Mr. Antoine visited Mr. Branion at SMD's office in Newport Beach, and received a tour of the office.

( Antoine Decl., ¶ 37, 18:6-9.)

57. During the tour of SMD's office, Mr. Branion briefly introduced Mr. Antoine to Dave Dunn, who was casually practicing his golf swing in his bare feet, and Mr. Branion expressed a very positive view of Mr. Dunn.

( Antoine decl., ¶ 37, 18:9-12.)

58. That same evening as the tour of SMDs office, Mr. Branion and Mr. Antoine had dinner during which Mr. Branion explained his complaints towards his job and in particular Leigh Steinberg.

( Antoine Decl., ¶ 38, 18:17-18.)

59. The primary complaint Mr. Branion expressed to Mr. Antoine was that Mr. Steinberg gave little credit or appreciation for the work performed by Mr. Branion, and that Mr. Steinberg would take a great deal of credit within the SMD organization for Mr. Branion's effort in recruiting athletes.

( Antoine decl., ¶ 38, 18:18-22.)

60. Mr. Branion also explained to Mr. Antoine that Mr. Steinberg was always complaining and whinning about matters ranging from issues related to SMD and its business to private issues in Mr. Steinberg's life that had nothing to do with Mr. Branion.

( Antoine Decl., ¶ 38, 18:24-27.)

61. That evening at dinner, Mr. Branion described for Mr. Antoine the flaws of Mr. Steinberg that were in contrast to the image of the "superagent" that Mr. Steinberg portrayed publicly.

( Antoine decl., ¶ 38, 18:27-19:1.)

62. As part of his due diligence regarding the potential investment in Athletes First, Mr. Antoine contacted an acquaintance in the sports representation industry, Cory Clemetson, to inquire of David Dunn's reputation within the industry.

( Antoine Decl., ¶ 28, 14:5-7; Antoine 30(b)(6) Depo., 103:15-104:1; Antoine Depo., 101:14-102:6, 103:12-23.)

Additional diligence regarding Dave Dunn

62. Mr. Antoine and Mr. Clemetson met during Mr. Antoine's internship at IMG, and Mr. Antoine knew that Mr. Clemetson had some experience in representing football players but currently had a sports agency representing professional soccer players.

( Antoine Decl., ¶ 28, 14:5-10.)

63. Mr. Antoine was told by Mr. Clemetson that, "Dave Dunn had the most integrity" in compared to other agents listed by Mr. Antoine, that Mr. Dunn negotiates "ok" contracts that were neither the best nor worst in the industry, but he is well-respected in the industry.

( Antoine Decl., ¶ 29, 14:20-23; Antoine Depo., 102:4-6, 104:12-15.)

64. The information regarding Dave Dunn's reputation in the industry confirmed prior information already possessed by Mr. Antoine.

( Antoine decl., ¶ 29, 15:4-6.)

65. Regarding SMD and Leigh Steinberg, Mr. Clemetson expressed the opinion to Mr. Antoine that Mr. Steinberg was a fraud, meaning he was not the "superagent" that is portrayed by the media and that this was well known within the industry.

( Antoine Decl., ¶ 29, 14:23-26; Antoine Depo., 103:6-8.)

Private meeting between Mr. Dunn and Mr. Gores

67. There was a private meeting between Mr. Gores and Mr. Dunn, which was a private meeting between the two of them so that Mr. Gores could affirm his comfort and confidence in doing business with Mr. Dunn.

( Antoine decl., ¶ 19, 10:8-9; Gores Depo., 48:3-25, 50:4-17.)

68. As a result of the private meeting with Mr. Dunn, Mr. Gores confirmed his positive views of Mr. Dunn and his willingness to due business with him.

( Antoine decl., ¶ 19, 10:9-12; Gores Depo., 48:3-25, 50:5-16.)

Conclusions regarding Dave Dunn

69. Mr. Antoine's conversation with Mr. Clemetson, Mr. Antoine's own conversations with Mr. Dunn, Mr. Gores' conversations with Mr. Dunn, the prior industry information Mr. Antoine had, and Mr. Dunn's close association with Mr. Branion, all served to confirm positive views and opinions of Mr. Dunn and support doing business with him.

( Antoine Decl., ¶ 39, 19:7-11.)

70. The less than flattering information Mr. Antoine had received about Mr. Steinberg over the years and in his call with Mr. Clemetson confirmed to some degree in Mr. Antoine's mind the motivations expressed by Messrs. Dunn, Branion, and Murphy for leaving SMD and starting their own firm.

( Antoine Decl., ¶ 39, 19:11-14.)

Legal opinion from outside counsel

71. In the early discussions with Athletes First, it informed Platinum of threatened legal action by SMD and/or its parent company, Assante Corporation, stemming from the departure of Athletes First principals from SMD, two months earlier in February of 2001.

( Antoine decl., ¶ 20, 10:15-19.)

72. David Dunn's lawyer, Gerald Sauer, Esq. gave Mr. Antoine a brief explanation of the threatened claims, including that there was a threat that SMD or Assante may seek to enjoin Mr. Dunn from working as a sports agent based on an employment contract he had signed with SMD or Assante.

( Antoine Decl., ¶ 21, 10:24-11:3.)

73. To assist in the legal due diligence, Platinum retained outside legal counsel, Walter Cochran Bond, Esq. of Cochran-Bond, Connon Ben-Zvi, whose practice is focused on employment counseling and litigation.

( Antoine decl., ¶ 22, 11:15; Cochran-Bond Decl., ¶ 4, 4:26-5:6; Cochran-Bond Depo., 21:8-22:8.)

74. Mr. Cochran-Bond's assignment was to advise Platinum on how the threatened claims made by SMD and Assante against Athletes First and David Dunn that might affect Platinum's potential investment in Athletes First.

( Cochran-Bond decl., ¶ 4, 4:26-5:2; Cochran-Bond Depo., 45:20-25.)

75. Mr. Cochran-Bond's evaluation and analysis was based on the information provided by Mr. Dunn's legal counsel, Gerald Sauer, Esq. including: (a) a lengthy telephone conference call in which Mr. Sauer described the facts and circumstances surrounding Mr. Dunn's departure from SMD; (b) a copy of an employment contract between Mr. Dunn and Steinberg Moorad; and (c) a copy of a legal memorandum prepared by the law firm of Ropes Gray which analyzed legal aspects of the departure of Mr. Dunn and the other principals of Athletes First from SMD.

( Cochran-Bond decl., ¶ 5, 5:8-18; Cochran-Bond Depo., 60:1-25.)

76. Mr. Sauer told Mr. Cochran-Bond that Mr. Dunn had been a non-equity partner with SMD prior to his departure.

( Cochran-Bond decl., ¶ 6, 5:25-26; Cochran-Bond Depo., 50:5-6, 158:1-7.)

77. Mr. Sauer told Mr. Cochran-Bond that the Athletes First principals had been counseled not to take anything when leaving SMD including their rolodex and client information, and they followed that advice.

( Cochran-Bond Decl., ¶ 6, 6:15; Cochran-Bond Depo., 51:5-10, 90:5-93:11.)

78. Mr. Sauer told Mr. Cochran-Bond that the Athletes First principals were given a script to follow by legal counsel to announce their departure from SMD, and they followed that script and did not solicit SMD clients when announcing their departure.

( Cochran-Bond Depo., 91:2-92:3.)

79. Mr. Sauer told Mr. Cochran-Bond that NFL players had volunteered to go with Mr. Dunn when he announced his departure per instructions from legal counsel and that players had initiated contact with Athletes First after the departure spread by word of mouth through the NFL.

( Cochran-Bond Depo., 95:25-96:23.)

80. Mr. Sauer told Mr. Cochran-Bond that information about NFL players and their contracts is publicly available, and certainly available to competing agents.

( Cochran-Bond Depo., 65:15-70:11, 67:2-10, 159:20-25.)

81. Mr. Antoine similarly was told directly by Athletes First principals that they did not take anything from SMD when they left and did not solicit SMD clients, but rather the clients initiated contact with Athletes First as news of the departure from SMD spread by word of mouth among NFL players.

( Antoine decl., ¶ 24, 12:8-13; Antoine Depo., 144:17-145:1, 207:22-208:1.)

82. Mr. Cochran-Bond concluded and informed Platinum that it was unlikely that SMD would be able to enjoin Mr. Dunn from working as a sports agent and competing with SMD based on Mr. Dunn's former status with SMD as a non-equity partner because the non-competition provisions of Mr. Dunn's employment contract were likely not enforceable.

( Cochran-Bond Decl., ¶ 6, 5:23-6: Cochran-Bond Depo., 159:3-160:14.)

83. Mr. Cochran-Bond also informed Platinum that it was significant to his conclusion that an injunction was not likely because even though NFL player information was likely to be considered trade secrets, that Athletes First principals, including Mr. Dunn, were nonetheless advised by counsel not even to take their rolodexes or client lists with them when they departed from SMD, and that Athletes First principals had been counseled not to solicit the clients of SMD, but rather to announce their departure from SMD and allow players to initiate contact

( Cochran-Bond Decl., ¶ 6, 6:2-12; Cochran-Bond Depo., 96:4-9, 159:3-160:14.)

84. Mr. Cochran-Bond also told Platinum that not only were Athletes First and Mr. Dunn not likely to be enjoined from competing with SMD, but also that there was a low probability of any legal exposure to Athletes First and Mr. Dunn relative to his departure from SMD.

( Cochran-Bond Depo., 168:2-169:4.)

85. Mr. Cochran-Bond had no discussion with Mr. Antoine concerning potential legal exposure to Platinum, and Mr. Cochran-Bond did not ever suggest to Platinum or even consider this fact based on the facts he knew.

( Cochran-Bond Decl., ¶ 7, 6:21-27.)

86. At no time during his representation of Platinum relating to its potential investment in Athletes First did Mr. Cochran-Bond ever conclude that there was a potential or viable claim that could be asserted against Platinum.

( Cochran-Bond Decl., ¶ 8, 7:1-4.)

87. During the due diligence period lasting until the signing of the Term Sheet, Mr. Antoine was told by the Athletes First principals that they were in discussions with SMD and Assante in an attempt to resolve the threatened litigation.

( Antoine Decl., ¶ 27, 13:17-19.)

88. Mr. Antoine was never told by Athletes First principals that they had or were threatening to use salacious information about Leigh Steinberg, or anyone else with SMD, to obtain a settlement from SMD and Assante.

( Antoine Decl., ¶ 27, 13:19-22.)

89. Mr. Antoine was told by Athletes First principals that Assante had made an offer for Mr. Dunn to return, but that Mr. Dunn had rejected the offer.

( Antoine Decl., ¶ 27, 13:22-23.)

90. Mr. Antoine was told that Assante had told Athletes First that they have a war chest for litigation with which it was attempting to pressure Mr. Dunn into returning to Assante.

( Antoine Decl., ¶ 27, 13:24-25.)

91. Mr. Antoine ultimately concluded based on the advice of Mr. Cochran-Bond and Assante's attempt to pressure Dunn into returning based on the expense of litigation that Assante's litigation threats seemed rather specious.

( Antoine Decl., ¶ 27, 13:27-14:2.)

Financial due diligence and analysis Revenue projections

92. Based on Mr. Antoine's review of the Investment Packet and discussions early in the due diligence process with Athletes First's principals, Mr. Antoine understood that Athletes First had signed some clients, including one significant client in Drew Bledsoe.

( Antoine Decl., ¶ 40, 19:19-21.)

93. After reviewing the Investment Packet, Mr. Antoine requested additional information that would support the revenue projections made in the Investment Packet.

( Antoine Decl., ¶ 40, 19:21-24.)

94. Brian Murphy faxed and e-mailed to Mr. Antoine a spreadsheet listing contract values with revenue projections for unnamed NFL players (the "Projections").

( Antoine Decl., ¶ 40, 19:24-26; Exh. D, pp. 75-78.)

95. Mr. Antoine was told by Mr. Murphy that the listing of unnamed players in the Projections was not intended to represent actual clients of Athletes First, but rather a universe of potential clients, so that the Projections and the values of the contracts for unnamed players represented future, potential revenue.

( Antoine Decl., ¶ 40, 20:1-5; Antoine 30(b)(6) Depo., 115:4-116:17.)

96. Mr. Murphy and Mr. Dunn explained to Antoine that the agent's commission was a maximum of 3% of the player's salary and bonus, and that the agent of record for a player at the time the player signs a contract receives commission on the contract for the entire length of contract, even if the player changes agents during the term of the contract.

( Antoine Decl., ¶ 41, 20:7-12.)

97. Mr. Antoine was told that Athletes First would only earn revenue on new contracts signed by its clients, but Athletes First principals stated that they were nonetheless optimistic about their business.

( Antoine Decl., ¶ 41, 20:12-14.)

Expenses projected by Athletes First

98. Mr. Antoine understood the expenses and other information set forth in the financial projections in the Investor Packet was the combined best estimate of Mr. Murphy, Mr. Dunn, and Mr. Branion based on their knowledge and experiences of having worked in the industry.

( Antoine Decl., ¶ 42, 20:20-23.)

99. Mr. Antoine never asked for or required specific information from Athletes First's principals about SMD in order to evaluate the potential investment, but rather he sought "ballpark" estimates consistent with general industry standards for the purpose of testing their estimates and projections.

( Antoine Decl., ¶ 42, 20:23-27.)

100. Mr. Antoine did not accept as true the statements and numbers from the financial projections contained in the Investor Packet, but instead challenged, questioned, and critiqued the numbers, and he created his own projections and relied on his own industry information.

( Antoine Decl., ¶ 43, 21:1-14: Antoine 30(b)(6) Depo., 82:7-16; 83:12-84:5.)

101. Mr. Antoine understood that the ordinary or standard business expense items, including office supplies, travel, and client expenses, were estimated based on the general knowledge of Athletes First's principals as well as their past experiences at SMD and actual estimates they had obtained . . .

( Antoine Decl., ¶ 43, 21:9-13.)

102. Mr. Antoine created his own spreadsheets and made adjustments to the projections and estimates of Athletes First where he deemed it appropriate and necessary.

( Antoine Decl., ¶ 43, 21:14-17; Exh, F Antoine Decl.)

103. Mr. Antoine applied prior industry knowledge to his analysis and conclusions.

( Antoine Decl., ¶ 44, 21:20-21.)

104. Mr. Antoine had a year earlier reviewed and analyzed a proposed acquisition of a sports agency that represents baseball players, the BHSC, on behalf of Tom Gores' brother, Sam Gores.

( Antoine Decl., ¶ 44, 21:21-23.)

105. Mr. Antoine did not review the information from the proposed BHSC acquisition while evaluating the potential Athletes First investment, but he did recall and apply from that experience that a reasonable estimate of the percentage rate of return on revenue for a sports agency was from the high thirties to low forties.

( Antoine Decl., ¶ 44, 21:23-26.)

106. Mr. Antoine viewed a talent agency as a similar business to a sports agency, and Sam Gores confirmed with Mr. Antoine that in a talent agency a reasonable rate of return on revenue was between the high thirties to low forties percentile.

( Antoine Decl., ¶ 44, 21:27- 22:2.)

107. Based on Mr. Antoine's independently gained industry knowledge, he "concluded that Mr. Murphy estimated rate of return of 45 to 50%, based on what Mr. Antoine understood was Mr. Murphy's knowledge of the industry and his experiences at SMD, was optimistic but not far off the mark what Athletes First might be expected to return once it was established.

( Antoine Decl., ¶ 44, 22:2-6.)

108. Mr. Antoine's independently gained industry knowledge on the rate of return for sports or talent representation firms, not the estimate from Mr. Murphy, governed his decision to recommend that Platinum make the investment in Athletes First.

( Antoine Decl., ¶ 44, 22:7-9; Antoine 30(b)(6) Depo., 81:5-82:6.)

109. Mr. Antoine independently looked up the fact that last year Steinberg, Moorad Dunn was purchased for a reported $125 million by Assante Corporation.

( Antoine 30(b)(6) Depo., 209:3-25.)

110. Mr. Antoine never understood or had reason to believe that the information contained in the documents supplied by Athletes First, i.e., the Investor Packet and the Projections, contained confidential proprietary information or trade secrets of SMD or anyone else.

( Antoine Decl., ¶ 45, 22:11-13.)

111. Neither Mr. Antoine nor anyone else at Platinum has ever disseminated or used any information provided by Athletes First, i.e., the Investor Packet, the Projections, and conversations with Athletes First principals pertaining thereto, for any purpose other than to test the veracity of that information provided by Athletes First and evaluate the potential investment in Athletes First.

( Antoine Decl., ¶ 45, 22:15-18.)

Second meeting with Tom Gores

112. After performing the industry, legal, and financial due diligence, Mr. Antoine discussed the potential investment with Tom Gores in mid-April 2001 and informed him it appeared that the investment was worth further pursuing.

( Antoine Decl., ¶ 46, 22:24-27.)

113. Mr. Gores instructed Mr. Antoine to present the potential investment to Platinum's Chief Financial Officer Bill Foltz for his review.

( Antoine Decl., ¶ 46, 23:1.)

Discussion and analysis with Bill Foltz

114. Prior to becoming Platinum's CFO, Bill Foltz worked for 9 years in the sports industry as part of the financial management team of the Los Angeles Dodgers baseball organization, the last 3 years of which Mr. Foltz was the CFO of the Dodgers.

( Foltz Decl., ¶ 2, 1:15-18.)

115. Including 4 years with Ernst Young, Mr. Foltz has 18 years experience as an accountant or in a financial management position.

( Foltz Decl., ¶ 2, 1:13-15.)

116. In mid April 2001, Mr. Foltz had several discussions with Mr. Antoine regarding the potential investment in Athletes First during which they discussed and reviewed (i) Mr. Antoine's financial analysis in regard to the investment, (ii) the legal opinion Mr. Antoine had received from an outside counsel regarding certain legal risks Athletes First might face, (iii) the information Mr. Antoine had gathered or otherwise possessed about the sports agency industry, and (iv) the face-to-face meetings that took place between Mr. Antoine and Mr. Gores and the principals of Athletes First.

( Foltz Decl., ¶ 3, 2:1-8.)

117. In discussing the outside legal opinion Mr. Antoine received concerning the potential investment, Mr. Foltz commented to Mr. Antoine that even when there is no merit to a complaint companies often file lawsuits when they lose a valuable employee and customers or clients follow that employee to a competing business.

( Antoine Decl., ¶ 47, 23:4-11.)

118. After Mr. Antoine had detailed for Mr. Foltz the results of his due diligence, Mr. Foltz concluded that the decision whether to invest came down to whether the entity will be able to attract sufficient customers and revenue needed to sustain itself.

( Foltz Decl., ¶ 4, 2:10-13.)

119. Mr. Antoine explained to Mr. Foltz that industry sources were consistently positive about David Dunn, his reputation, and his integrity, and Mr. Antoine therefore believed that Mr. Dunn would be able to develop a sufficient client base and generate the necessary revenue.

( Foltz Decl., ¶ 4, 2:13-17.)

120. Because Platinum would have only a small passive, minority interest with no ability to run or control the entity, Mr. Dunn's reputation and integrity within the sport representation industry were highly significant to Mr. Foltz in making a decision on the investment.

( Foltz Decl., ¶ 6, 3:4-9.)

121. Mr. Foltz viewed the proposed investment as a hybrid in which Platinum would be repaid a portion of its capital contribution plus interest thereby acting akin to a lender — but would still retain a small amount of equity in the business.

( Foltz Decl., ¶ 5, 2:21-26.)

122. Based on the proposed structure, Mr. Foltz concluded that the investment was not likely to produce a significant return but also appeared to have a limited downside with the likelihood of providing a small return for Platinum.

( Foltz Decl., ¶ 5, 2:26-3:2.)

123. Protecting the downside, as opposed to seeking extraordinary returns, is a key tenet of Platinum and Tom Gores' business strategy for acquisitions and investments.

( Gores Depo., 142:14-144:8.)

125. Platinum's decision to invest in Athletes First was based on the conclusion that it was a sound financial investment with limited risk, even though it was not likely to produce a spectacular gain.

( Foltz Decl., ¶ 6, 3:12-15.)

126. Mr. Gores, Mr. Foltz, and Mr. Antoine had a high interest in the sports industry and football in particular, but the recommendation by Mr. Foltz and Mr. Antoine to Mr. Gores to invest in Athletes First was made only after finding a compelling business reason to do so.

( Foltz Decl., ¶ 6, 3:15-18.)

127. The Term Sheet signed on April 24, 2001 by Platinum and Athletes First proposed that Platinum make capital contributions in increments that total $2 million by January of 2002 and commit to make additional capital contributions of another $1 million if called by Athletes First over a period of five years. In return, Platinum's capital was to be repaid by Athletes First over a five year period, with interest, and Platinum was to receive a 15% interest in Athletes First.

( Antoine Decl., ¶ 48, 23:26-24:4; Exh. C, Antoine Decl., pp. 67-74.)

Structure and Terms of Investment

128. The terms of the investment as set forth in the Term Sheet were then formalized by the respective attorneys for Platinum and Athletes First, and the deal closed with the execution of an Amended and Restated LLC Agreement and related documents in May, 2001.

( Antoine Decl., ¶ 49, 24:6-9.)

129. During this formalization of the Termsheet, Athletes First's counsel provided Platinum's counsel with a written representation that Athletes First had not engaged in trade secret misappropriation.

( DuRocher Decl, ¶ 6, 38:15-39:1, Exh. B, DuRocher Decl., p. 40.)

130. A Second Amended and Restated LLC Agreement (the "LLC Agreement") and related documents were then executed by Platinum and Athletes First in June, 2001 to incorporate the agreement between Athletes First and its initial investor, defendant Broad Opportunity Yield Systems, LLC ("BOYS"). The LLC Agreement includes an indemnity from Athletes First to Platinum for any claims brought by SMD or Assante.

( Antoine Decl., ¶ 49, 24:9-14; Exh. G, Antoine Decl.)

131. The LLC Agreement is the operative agreement between Athletes First, Platinum, and BOYS.

( Antoine Decl., ¶ 49, 24:12-14; Exh. G, Antoine Decl.)

Athletes First start-up assistance

132. After Platinum agreed to invest in Athletes First and signed the Term Sheet on April 24, 2001, Platinum provided some initial financial assistance to Athletes First by purchasing computers and other equipment needed by Athletes First and supplying its principals credit cards so it had necessary funds to conduct its business.

( Antoine Decl, ¶ 50, 24:17-21.)

133. Some of this financial assistance occurred prior to the formal closing of the deal between Platinum and Athletes First in May, 2001, as no capital was paid in by Platinum until the deal formally closed.

( Antoine Decl., ¶ 50, 24:21-23.)

134. It was agreed and understood by Athletes First and its principals that the purchases, credit card charges, and other financial assistance provided to Athletes First would be reimbursed in full once the business was firmly established.

( Antoine Decl., ¶ 50, 24:23-26.)

135. Platinum later billed Athletes First for all of these purchases and credit card charges.

( Antoine Decl., ¶ 50, 24:26-27.)

136. Athletes First has reimbursed Platinum for all credit card statements paid by Platinum, including all travel expenses on the statements, and Athletes First's principals no longer have Platinum company credit cards.

( Antoine Decl., ¶ 51, 25:15-18.)

137. Athletes First is obligated to reimburse Platinum for all of the purchases advanced by Platinum, and Platinum expects full reimbursement when Athletes First has the financial means to do so.

( Antoine Decl., ¶ 50, 25:1-3.)

138. Platinum also advanced payment for certain public relations work and marketing consulting needed by Athletes First at its startup, and Athletes First is obligated to repay Platinum for the services provided by the public relations and marketing firms when Athletes First has the financial means to do so.

( Antoine Decl., ¶ 52, 26:1-3; ¶ 53, 26:13-17; ¶ 54, 27:1-5.)

Platinum has no role in Athletes First's management

139. Platinum has one of the five seats on Athletes First's Board of Managers, while Athletes First's principals, Mr. Dunn, Mr. Murphy, and Mr. Branion, having a majority of three of the five seats.

( Antoine Decl., ¶ 64. 31:14-16; Exh. G, Antoine Decl., ¶ 7.3, p. 146.)

140. Platinum has no ability to control or appoint Athletes First's management because the LLC Agreement states that Platinum's representative on the board has only 2 of the 13 total votes on the board, with Athletes First's principals controlling 10 of the 13 votes, thereby giving Platinum no ability to overrule or outvote Athletes First's principals.

( Antoine Decl., ¶ 65, 32:6-11; Exh. G, Antoine Decl., ¶ 7.5, pp. 146-148.)

141. Platinum has had no role in the day to day operations of Athletes First and no role in managing Athletes First.

( Antoine Decl., ¶ 65, 32:11-12.)

142. Mr. Antoine acts as Platinum's board designee on Athletes First's board, and Mr. Antoine requests and receives from Athletes First's principals updates regarding the company via telephone conversations and occasional in person meetings in order to keep track of Platinum's investment, but that is the extent of Platinum's involvement with Athletes First's business.

( Antoine Decl., ¶ 64, 31:14-21.)

143. Platinum agreed in making the investment in Athletes First that Athletes First's principals would retain control of and manage the company, thereby placing the fate of Platinum's investment in the hands of Athletes First's principals.

( Antoine Decl. ¶ 65, 32:12-15,.)

General Industry Knowledge and Public Disclosure of SMD's Trade Secrets

144. Richard Berthelsen is General Counsel of the National Football League Players Association ("NFLPA").

( Roman Decl., ¶ 5, Exh. A, p. 8.)

145. According to the NFLPA, there is nothing secret about the things a sports agent needs to do or to know to be successful.

(" Berthelsen Depo., 340:22-341:7.)

146. To assist Certified Contract Advisors in their negotiations with NFL teams, the NFLPA provides several resources to all Certified Contract Advisors via the NFLPA's website at http://www.nflpa.org.

( Roman Decl., ¶ 5, Exh. A, p. 9.)

147. The reports and information posted thereon are prepared by the NELPA's research department in the regular course of the NFLPA's business and are frequently updated to reflect current information.

( Roman Decl., ¶ 5, Exh. A, p. 9.)

148. The NELPA routinely posts material on the NFLPA's website to assist Certified Contract Advisors in their negotiations with NFL teams.

( Roman Decl., ¶ 5, Exh. A, p. 9.)

149. Information routinely posted on the NFLPA's website includes: Player Profiles, which include a player's position, current team, home town, year drafted, round drafted, position drafted, and the player's salary history detailing the player's salary per year for the remaining term of any current contract.

( Roman Decl., ¶ 5, Exh. A, p. 9.)

150. Information routinely posted on the NFLPA's website includes: Player and Agents Report, which details every player in the NFL, what team he plays for, and the name and phone number of the player's agent.

( Roman Decl., ¶ 5, Exh. A, pp. 9-10.)

151. Information routinely posted on the NFLPA's website includes: Top5/Top 10 Salary Report, which details the top five and top ten salary amounts at each position in the NFL. This report allows the reader to determine the amount of the tender which a franchise player or a transition player would receive under the NFL/NFLPA Collective Bargaining Agreement.

( Roman Decl., ¶ 5, Exh. A, p. 10.)

152. Information routinely posted on the NFLPA's website includes: League Wide Salary Cap Room Report, which displays Salary Cap Expenditures and Available Room left for NFL teams, including the current value in Salary Cap dollars of club expenditures, the current Salary Cap dollar room available, and the percentage of the club's Salary Cap limit that is still unspent.

( Roman Decl., ¶ 5, Exh. A, p. 10.)

153. Information routinely posted on the NFLPA's website includes: Team Salary Report, which displays the individual amount that players' contracts count against a club's Salary Cap during a specified season. The report includes both players on current rosters and players not currently active but with contracts affecting the specified season's Salary Cap.

( Roman Decl., ¶ 5, Exh. A, p. 10.)

154. Information routinely posted on the NELPA's website includes: Player Salary Details, which detail Salary Cap component values for each players contract for a given year.

( Roman Decl., ¶ 5, Exh. A, p. 10.)

155. Information routinely posted on the NFLPA's website includes: Rookie Pool Cap Room Report, which displays Rookie Pool Allocations for each club for those seasons starting in 1994 when the Rookie Pool took effect. For the current season the report shows the allocation level, the value of rookie contracts against that allocation and the amount of rookie pool room still available.

( Roman Decl., ¶ 5, Exh. A, p. 10.)

156. Information routinely posted on the NFLPA's website includes: Rookie Player Salary Report, which displays for any selected club how much each rookie contract counts against that club's Rookie Pool Allocation [for the current season].

( Roman Decl., ¶ 5, Exh. A, pp. 10-11.)

157. Information routinely posted on the NFLPA's website includes: Draftee Analyses, which include reports with detailed salary data for every player drafted from the 1995 season through the current season, information about the fate of all underclass players who Declared draft eligibility since 1990, a listing of current season draftees and their agents, and important pointers and analysis of draftee signing bonuses.