Keith Brackpool, who resigned as chairman of the California Horse Racing Board in January 2013 to join The Stronach Group as chairman of operations of its California racetracks, is suing the company and its founder, Frank Stronach, claiming he is owed at least $40 million from an equity agreement.
Brackpool filed the eight-count complaint on April 11 in Los Angeles Superior Court, claiming negligent misrepresentation, breach of written contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, constructive fraud, fraudulent concealment, quantum meruit, and accounting.
According to published reports, Brackpool resigned as chairman of California operations earlier this week and he is no longer listed as a member of the The Stronach Group's executive board on the company's website. The Stronach Group's racing and gaming assets include California racetracks Santa Anita Park and Golden Gate Fields, Gulfstream Park in Florida, Pimlico and Laurel Park in Maryland, Portland Meadows in Oregon and the Xpressbet advance deposit wagering platform.
Brackpool claims he was approached in late 2012 by Frank Stronach to become an equity partner in the company's Racing Gaming Group, which the complaint said was then valued at $993 million.
The terms of the offer were spelled out in a one-page document entitled “Basic Terms,” entered into the record as Exhibit A in the lawsuit. Brackpool, according to the document, “shall acquire from TSG, 5% of Racing Group for a purchase price of 5% of the book value on Dec. 31, 2012. Loan is secured by interest in the Racing Gaming Group.”
The “Basic Terms” said 50% of profit distribution would go to Brackpool, with the remainder going to repay the loan. Brackpool said as an equity partner he received no salary.
According to the “Basic Terms,” upon exiting the company after five years, Brackpool would be entitled to the greater of “adjusted book value” or 10 times company profits.
The complaint states the value of the company has increased significantly during the five years Brackpool served as a member of the executive board.
“During his tenure, Plaintiff has been instrumental in generating incredible value for Racing Gaming Group,” the complaint reads. “The current value of RGG is approximately $1.7 billion, increasing by over $700 million during the Plaintiff's five-year term.”
The “Basic Terms” document also states that “parties shall negotiate in good faith a binding agreement. Target date for the agreement is 60 days: if the parties are unable to arrive at an agreement prior to 180 days, and such term is not extended, Partner shall be entitled to an additional retroactive monthly fee of $85,000 per month and neither party shall have any further obligations to each other.”
Brackpool's complaint states that “the day before Plaintiff was to exit Racing Gaming Group, Defendants suddenly changed course and claimed there was never an agreement between Plaintiff and Defendants. While it is true that the Agreement contemplated the parties could enter into a long-form agreement, it was not required – the timeline for executing a long-form agreement could be extended, or the provision could be waived entirely. And that's what happened here. Defendants and Plaintiff agreed through words and conduct over five years that the terms of the Agreement would continue to govern in lieu of any long-form versions of the Agreement, especially since all material terms were set forth in the signed Agreement and Plaintiff fully performed under the Agreement.
“Defendants have breached the terms of the Agreement by refusing to repurchase Plaintiff's 5% interest. It is reprehensible that The Stronach Groupo has now decided to claim the ignorance of the Agreement at the eleventh hour when the parties met to finalize Plaintiff's exit.”
Brackpool is seeking actual and compensatory damages, attorney fees and punitive damages in a jury trial.
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