In Re Michael G. Tyson
| Decision Date | 26 July 2010 |
| Docket Number | 09 Civ. 9967(DLC),No. 09 Civ. 9966(DLC),10 Civ. 313(DLC).,09 Civ. 9966(DLC) |
| Citation | 433 B.R. 68 |
| Parties | In re Michael G. TYSON, Debtor (Three cases). |
| Court | U.S. District Court — Southern District of New York |
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J. Bruce Miller, Norma C. Miller, J. Bruce Miller Law Group, Louisville, KY, for Chris Webb and Straight-Out Promotions, LLC.
Howard Karasik, Sherman, Citron & Karasik, P.C., New York, NY, for Frank Warren.
Jethro M. Eisenstein, Profeta & Eisenstein, New York, NY, for Edward Simons.
Robert J. Feinstein, Alan J. Kornfeld, Beth E. Levine, Pachulski Stang Ziehl & Jones LLP, New York, NY, for R. Todd Neilson, Plan Administrator.
These three bankruptcy appeals arise out of a professional boxing match featuring bankruptcy debtor Mike Tyson (“Tyson”), a former world heavyweight champion. The principal issue on appeal is whether English law permits piercing the veil of a Gibraltar corporation, Brearly (International) Ltd. (“Brearly”), which breached its contracts with Tyson and Straight-Out Promotions, LLC (“Straight-Out”) in connection with a boxing match held in Louisville, Kentucky on July 30, 2004 (the “Fight”). Following trial, the Honorable Allan L. Gropper, United States Bankruptcy Judge, concluded that appellants Frank Warren (“Warren”) and Edward Simons (“Simons”), two British boxing promoters, were liable under English law for Brearly's breaches of contract. For the following reasons, the Bankruptcy Court's holding of liability on the veil-piercing claims is reversed, the judgment of the Bankruptcy Court is vacated in part, and the case is remanded for further proceedings.
The following facts, which are undisputed unless otherwise indicated, are taken from the record on appeal, the submissions of the parties, and the Bankruptcy Court's August 19, 2009 opinion. See Neilson v. Straight-Out Promotions, LLC (In re Tyson), 412 B.R. 623 (Bankr.S.D.N.Y. Aug.19, 2009) (). Only those facts relevant to the issues on appeal are discussed below.
On August 1, 2003, Tyson and his wholly owned corporation, Michael Mike Tyson Enterprises Inc., each filed a voluntary petition for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Southern District of New York (“Bankruptcy Court”). Their joint bankruptcy reorganization plan (the “Chapter 11 Plan”)-which was filed in June 2004, confirmed in September 2004, and made effective in November 2004-created a liquidating trust (the “Liquidating Trust”) and named R. Todd Neilson as plan administrator (the “Plaintiff”). 1 The Chapter 11 Plan contemplated that Tyson would pay his creditors, in part, by participating in a series of boxing matches and evenly splitting the proceeds with his creditors.
In May 2004, while the Chapter 11 Plan was taking shape, Tyson's manager reached agreement with Chris Webb (“Webb”) to have Tyson fight in a boxing match in Kentucky that Webb and his company, Straight-Out (collectively, the “Kentucky Defendants”), would arrange and promote. This match, the Fight, was the first in a series of bouts in which Tyson fought pursuant to his Chapter 11 Plan.
On June 10, 2004, Webb's friend, the matchmaker Sampson Lewkowicz (“Lewkowicz”), attended a promotional event in Manchester, England hosted by Sports Network, PLC (“Sports Network”), a partnership between Warren and his minority partner, Sports & Leisure Boxing, Ltd. (“Sports & Leisure”).2 At the Manchester event, Lewkowicz ran into Stephen Heath (“Heath”), an attorney for Sports Network, and began talking business. In particular, Lewkowicz asked Heath whether Warren would be interested in acquiring the international pay-per-view rights to the Fight (the “International Rights”) from Straight-Out and then selling the International Rights to distributors or business partners on a country-by-country basis.
Heath got Warren on the phone, and Warren said that he was not interested in selling the International Rights.3 After this conversation, however, Warren instructed his business partner, Simons,4 to follow up with Lewkowicz about the possibility of arranging for Danny Williams (“Williams”), an English boxer for whom Warren acted as an agent, to be Tyson's opponent in the Fight. After Simons, Heath, and Lewkowicz met in person, Simons called Webb to propose that Tyson fight Williams and that the Kentucky Defendants sell the International Rights for $2 million.
Webb was receptive to this proposal. Direct negotiations then ensued between Webb, acting for Straight-Out, and Heath, purportedly acting for Sports & Leisure. After several weeks of negotiation, the parties reached an agreement (the “Distribution Agreement”) along the following lines: (1) Tyson's opponent in the Fight would be Williams; (2) the International Rights would be assigned to Brearly, which would then coordinate the sale of the International Rights in foreign countries; (3) before the Fight, Brearly would pay Straight-Out a “minimum guaranteed compensation” of $2.7 million as an advance against Straight-Out's negotiated share of Brearly's proceeds (the “International Proceeds”) from selling the International Rights; and (4) after payment of commissions and overhead, all International Proceeds above $2.7 million would be split 45/45/10 among Brearly, Straight-Out, and Lewkowicz. Brearly was a Gibraltar shell company incorporated by Peter Abbey (“Abbey”), an English investor acquainted with Simons.5 The decision to introduce Brearly into the transaction, filling the role that the parties had previously contemplated for Sports & Leisure, lies at the heart of these appeals.
On or about June 30, Heath flew to Louisville to meet with Webb and reduce the Distribution Agreement to written form. Final agreement could not be reached, however, on whether the $2.7 million minimum guarantee was to be secured by a letter of credit or deposited in an escrow account, nor on whether the forum for litigating any disputes arising under the contract would be Kentucky or Gibraltar. Nevertheless, the parties proceeded to carry out their respective tasks under the Distribution Agreement as it then existed. Beginning in mid-June and continuing until the end of July, Simons and others, acting on Brearly's behalf, sold the International Rights to distributors, broadcasters, or business partners in some three dozen countries or groups of countries throughout Europe, Asia, and Latin America.
On July 16, two weeks before the Fight, Straight-Out and Tyson signed a contract (the “Event Agreement”) under which Straight-Out agreed to pay Tyson a total purse of $7.2 million and to secure that purse with a series of letters of credit before the Fight. Also on July 16, Straight-Out reached an agreement with Showtime, a premium television network, under which Showtime would broadcast the Fight in the United States and Straight-Out would pay Showtime's marketing expenses. Straight-Out was required to immediately post a $1.3 million letter of credit to secure that obligation.
Only five days later, on July 21, the Fight was put in jeopardy when Straight-Out failed to meet certain deadlines with respect to its payment obligations. In particular, Straight-Out failed to provide Showtime its $1.3 million letter of credit and failed to provide Tyson a letter of credit for the final $1.975 million installment of his purse. According to the Kentucky Defendants, they experienced a funding shortfall only because Brearly had not yet paid Straight-Out its $2.7 million minimum guarantee under the Distribution Agreement.
On July 26, four days before the Fight, Straight-Out and Brearly reached an assignment agreement (the “July 26 Assignment”) that enabled the Fight to proceed.6 The July 26 Assignment provided that the first $1.3 million of the International Proceeds would be paid to Showtime on Straight-Out's behalf, and Warren also provided a personal guarantee that Showtime would be paid. The July 26 Assignment also assigned to Tyson certain rights to payment held by Straight-Out under the latter's...
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