Lawsuit Accusing SFX Chairman and CEO Robert Sillerman of Cutting Out Early Partners to Move Ahead
Plaintiffs allege Sillerman created a partnership, but never gave ownership stakes in SFX Entertainment.
A U.S. District Court judge in California denied Robert Sillerman's request for summary judgment in the lawsuit filed last year by three men claiming Sillerman took their idea and work toward building SFX Entertainment before cutting them out. The July 29 ruling means the lawsuit against the SFX chairman and CEO can move forward. Sheldon Finkel, SFX's chairman of strategy and development, is also named as a defendant.
The lawsuit was filed by three plaintiffs: Paolo Moreno, a manager at Disco Donnie Presents; artist manager Lawrence Vavra; and Moreno's brother, Gabriel Moreno. They claim to have entered into a joint venture/partnership agreement with Sillerman and "identified and facilitated" the acquisitions of seven of the eight principal assets identified in SFX in its IPO filing with the Securities Exchange Commission.
Then, the plaintiffs claim, Sillerman reneged on an agreement to provide them equity in the new company. Emails from January 2012 presented as evidence show Sillerman agreeing to Paolo Moreno's suggested terms for the plaintiff's compensation and ownership interests. "We have a deal," Sillerman replied. SFX later raised $260 million in its October 2013 IPO. SFX did not immediately respond to a request for comment.
This is just the latest setback for SFX. Doubts have been growing that Sillerman has secured financing for his proposal -- accepted by an SFX special committee -- to take the company private. Sillerman's offer is $5.25 per share. SFX shares closed at $3.17 on Monday, a price that suggests investors don't expect the proposed buyout to materialize.
Last week the company gave Sillerman two weeks to secure financing. No other bidder has emerged, although SFX has received interest in some of its individual assets.
SFX will announce its second-quarter earnings on August 10. However, the company does not intend to host a conference call or webcast that usually accompany its earnings releases.