bankers trust supp memo

Ralph R. Mabey (2036) [email protected] R. Willis Orton (2484) [email protected] Ryan B. Frazier (9007) [email protected] Kirton McConkie Kirton McConkie Building 50 East South Temple, Suite 400 Salt Lake City, Utah 84111 Telephone: 801-328-3600 Fax: 801-321-4893 Attorneys for Defendant Bankers Trust Company of South Dakota

Scott S. Morrisson, pro hac vice [email protected] Jeffrey C. McDermott, pro hac vice [email protected] Krieg DeVault LLP 12800 North Meridian Street, Suite 300 Carmel, Indiana 46032 Telephone: 317-566-1110 Fax: 317-636-1507 Jude Anne Carluccio, pro hac vice [email protected] Krieg DeVault LLP 60 South 6th Street, Suite 2310 Minneapolis, Minnesota 55402 Telephone: 612-564-1924 Fax: 612-326-0996

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH CENTRAL DIVISION

KELLEY JESSOP, an individual, on behalf of himself and all others similarly situated, Plaintiff, v. DALLIN LARSEN, an individual, HENRY MARSH, an individual, RANDY LARSEN, an individual, MACHIEL KENNEDY, an individual, DOES 1-10, and BANKERS TRUST COMPANY, a Delaware corporation, Defendants.

BANKERS TRUST COMPANYS RESPONSE TO SUPPLEMENTAL MEMORANDUM IN SUPPORT OF

PRELIMINARY INJUNCTION

Civil No. 2:14-cv-00916

Honorable Bruce S. Jenkins

Defendant Bankers Trust Company of South Dakota, improperly named in the Complaint

as Bankers Trust Company, a Delaware Corporation, (BTC), by counsel, hereby submits this

Memorandum in Response to Plaintiffs Supplemental Memorandum in Support of Motion for

Case 2:14-cv-00916-BSJ Document 68 Filed 04/10/15 Page 1 of 13

Preliminary Injunction filed March 26, 2015 (Supplemental Memorandum) (Doc. 65), as

follows:

RELEVANT BACKGROUND AND SUMMARY OF ARGUMENT

The fundamental basis of plaintiff Kelley Jessops (Plaintiff) Supplemental

Memorandum is flawed. (Doc. 65). Plaintiff claims newly-discovered evidence supports his

request for preliminary injunction. (Doc. 65). Yet, most of Plaintiffs newly claimed facts are

simply incorrect.

Plaintiffs alleged new reason why he should be granted preliminary injunctive relief

concerns his claim that in March 2015 Jeunesse Global, LLC (Jeunesse) completed an

acquisition of Mona Vie and that BTC knew about it but did nothing to advise the ESOP

participants before it closed. (Doc. 58, 58-1, 65). In reality, however, the Jeunesse transaction

was not an acquisition, but rather was a promissory note sale. TSG-MV Financing, LLC

(TSG) sold the promissory notes it held with Mona Vie, Inc.1 to Jeunesse (the Note Sale).

Neither Mona Vie nor TSG provided BTC with any notice of the Note Sale until after the sale

had been concluded, despite Mona Vies promise it would keep BTC apprised of any potential

transfer or sale.

Plaintiff also claims BTC failed to fulfill certain obligations regarding Mona Vies ESOP

(the ESOP) participants, overlooking that the responsibilities Plaintiff complains about are

those of Mona Vie or the ESOP Administrative Committee, not BTC. Plaintiff has hastily

filed his Supplemental Memorandum without any verified evidence and based on a

misunderstanding of the facts.

1 The notes were held with Mona Vie, Inc., but Plaintiff references Mona Vie, LLC in his Complaint.

2


STATEMENT OF FACTS

In detail, the facts are as follows. TSG has held certain senior secured promissory notes

from Mona Vie, Inc. since 2010. These notes had been issued pursuant to a November 17, 2010

Note Purchase Agreement (the Agreement) between Mona Vie, Inc., Mona Vie LLC, TSG,

and certain investors (the 2010 Note Holders). The original aggregate principal amount of the

Notes was $182,000,000 (the Notes) and the 2010 Note Holders contributed the Notes to TSG

on November 17, 2010 pursuant to the Agreement. On March 13, 2015, TSG sold these Notes to

Jeunesse. TSG also assigned its first priority perfected security interest in the assets of Mona Vie

to Jeunesse in connection with the Note Sale. In effect, the 2010 Note Holders have simply been

replaced by Jeunesse as the holder of the Notes. (Storjohann Supp. Decl., 6).2

TSG did not advise BTC of the Note Sale. Mona Vie did not advise BTC of the Note

Sale until after the Note Sale had occurred. BTC first learned of the Note Sale on the evening of

Monday, March 16, 2015, by an e-mail from Mona Vies President/CEO to Mona Vies

shareholders. (Storjohann Supp. Decl., 7). In this e-mail Mona Vies president Mauricio

Bellara forwarded to BTC an attachment with an announcement to Dear Shareholder stating

On March 13, 2015 TSG-MV Financing, LLC (TSG) informed the officers and directors of

Mona Vie, Inc. (the Company) that it has sold the Promissory Note dated November 17, 2010

to Jeunesse. (Storjohann Supp. Decl., 8, Ex. A). The next day, on March 17, 2015, BTC

received another e-mail from Mona Vie, this time from Daren Haws, Mona Vies corporate

controller, providing a Mona Vie press release discussing the Note Sale. (Storjohann Supp.

Decl., 9, Ex. B).

2 The Supplemental Declaration of Scot Storjohann is attached hereto as Exhibit 1.

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All communications to BTC concerning the Notes has been from Mona Vies

management (MV Management). BTC has never had any contact with TSG or its advisors

since before the ESOP was formed. (Storjohann Supp. Decl., 10). BTC has maintained

periodic communication with MV Management concerning the status of the Notes. BTCs most

recent discussion regarding the Notes was on January 21, 2015, during BTCs on-site due

diligence meeting at Mona Vie with Chartwell, Inc., the ESOPs valuation company

(Chartwell). BTC asked MV Management for an update on the Notes. MV Management

advised their understanding was that TSG was in the process of seeking to sell the Notes for less

than full value, that TSG hoped for several offers, but that a requirement of the transaction would

be a cash infusion into Mona Vie. (Storjohann Supp. Decl. 11). BTC and Chartwell questioned

MV Management further but were told Mona Vie did not have further information. BTC briefed

MV Management at this meeting on the ESOPs requirements for pass-through voting in the

event that the TSG transaction gave rise to the need for shareholder approval. BTC specifically

asked MV Management (Jim Marsh (CFO/COO) and Daren Haws (Controller)) to keep BTC

advised on TSGs potential sale of the Notes. MV Management promised to do so. (Storjohann

Supp. Decl. 11).

Following the January 21, 2015 meeting with Mona Vie, BTC had additional

communications with MV Management, but Mona Vie never mentioned anything further

regarding TSGs potential sale of the Notes. Likewise, BTCs attorneys had been in direct

communication with Mona Vies attorneys before the Note Sale, but who never made any

reference to the sale. (Storjohann Supp. Decl., 11). Mona Vies general counsel, Graden

Jackson, verbally indicated to BTCs counsel after the sale that the Note Sale did not require

notice to or approval by Mona Vies shareholders. (Storjohann Supp. Decl., 12). BTC

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understands the Notes were sold by TSG to Jeunesse at less than full face value. (Storjohann

Supp. Decl., 13).

Sections 2.48 and 13.01 of the MV ESOP plan document requires that the ESOP

Administrative Committee manage and administer [the] Plan in accordance with [its]

provisions. It is the ESOP Administrative Committee, not BTC, who is responsible for

issuing MV ESOP participant statements and overseeing participant access to their online MV

ESOP services. (Storjohann Supp. Decl., 14). Preparation and filing of Mona Vies 2013 Plan

Year Form 5500 is the responsibility of Mona Vie, Inc. in its capacity as Plan Sponsor of the

MV ESOP, not BTC. Mona Vie advised BTC on February 2, 2015 that Mona Vie was still in the

process of completing the 2013 Plan Year Form 5500. (Storjohann Supp. Decl., 14).

ARGUMENT AND RESPONSE

A. Plaintiff has still not provided this Court with any actual evidence supporting his Motion.

Plaintiff has still not provided any evidence to support his request for preliminary

injunction. Plaintiff has not verified any allegations or submitted any declarations. Rather than

submitting evidence, Plaintiff resorts to asking rhetorical questions wondering what BTC may

have or may not have done regarding the circumstances Plaintiff now raises. (Doc. 65, p. 5).

BTC noted this defect in its initial Memorandum in Opposition to Motion for Preliminary

Injunction (Doc. 38, p. 4). E.g., Dominion Video Satellite, Inc. v. Echostar Satellite Corp., 356

F. 3d 1256, 1261 (10th Cir. 2005) (holding that the lack of admissible evidence precludes the

issuance of a preliminary injunction). Plaintiff has done nothing to remedy this inadequacy.

And now, as support for Plaintiffs new supplemental reason for injunctive relief, Plaintiff still

does not provide a declaration, affidavit or any other verified or admissible evidence supporting

a claim that the ESOP has been damaged. Instead, Plaintiff cites only a YouTube video. See

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Wastach Equality v. Alta Ski Lifts Co., 2014 WL 4743837 *14 (D. Utah 2014) (stating in dicta

that YouTube is hearsay); Randazza v. Cox, 2014 WL 1407378 *4 (D. Nev. 2014) (holding that a

YouTube video was not admissible without proper authentication).

B. Plaintiffs Newly Discovered Evidence does not support the granting of a Preliminary Injunction.

The parties have previously briefed why a preliminary injunction should or should not be

granted focusing on Plaintiffs arguments made in its December 18, 2014 filing (Doc. 3, 38, 44).

Now, Plaintiff submits an additional claimed reason why a preliminary injunction should be

granted, -- pointing to the TSG-Jeunesse Note Sale. But, a preliminary injunction can only be

granted upon a clear and unequivocal showing that all four prerequisites to injunctive relief

have been established. Dominion Video, 356 F. 3d at 1260-61. Preliminary injunctive relief is

an extraordinary remedy that should not be granted lightly. General Motors Corp. v. Urban

Gorilla, LLC, 500 F. 3d 1222, 1226 (10th Cir. 2007). Similarly stated, as a preliminary

injunction is an extraordinary remedy, the right to relief must be clear and unequivocal. SCFC

ILC, Inc. v. Visa USA, Inc., 936 F. 2d 1096, 1098 (10th Cir. 1991).

1. Plaintiff does not demonstrate a substantial likelihood of success on the merits that BTC breached its fiduciary duty.

Nothing about Plaintiffs supplemental new evidence demonstrates a substantial

likelihood of success on the merits. Plaintiff argues its understanding of claimed new facts.

(See Doc. 65, p. 4-5). Yet, as detailed above, Plaintiff misunderstands what actually occurred.

This was not a stock acquisition as Plaintiff contends. It was a Note Sale. TSG, who held the

Notes with Mona Vie, sold the Notes to Jeunesse. In effect, TSG has simply been replaced by

Jeunesse as a holder of the Notes.

Plaintiff complains that BTC did not consider or notify the ESOP participants before the

sale occurred, incorrectly assuming that BTC was advised of the Note Sale before it occurred. In

6


reality, Mona Vie did not advise BTC of the Note Sale until after the Note Sale concluded. BTC

provides documentation and sworn testimony showing that BTC first learned of the Note Sale on

the evening of Monday, March 16, 2015 by an e-mail from Mona Vies President/CEO to all

Mona Vie shareholders, and then from a follow-up e-mail from Mona Vies Corporate Controller

on March 17, 2015.

Still operating from the same misunderstanding that BTC received prior notice, Plaintiff

continues his argument by claiming the ESOP requires pass-through voting, implying BTC failed

to allow the ESOP participants to vote. But, again, BTC did not oversee ESOP participant

voting because neither TSG or Mona Vie advised BTC that Mona Vie was entering into a

transaction with TSG that required Mona Vie shareholder approval or of the Note Sale before it

occurred. In Mona Vies case, Mona Vie actually hid from BTC that the Note Sale was

occurring. Despite BTCs request and Mona Vies promise to do so, Mona Vie did not keep

BTC apprised of any potential Note sale.3

Alternatively, Plaintiff argues that BTC breached its fiduciary duty to Plaintiff and the

ESOP participants because it must have been completely oblivious or asleep at the wheel to

not know the Note Sale was about to occur. But, as shown above, BTC sought and had periodic

communications with MV Management concerning the status of the Notes and Mona Vies

business in general. On January 21, 2015, BTC traveled on-site to Mona Vie with Chartwell.

MV Management advised BTC at that time that TSG was in the process of seeking to sell the

Notes, but said they had little further information concerning TSGs activities on this issue, other

than that Mona Vie expected a cash infusion as a result of any sale. BTC asked MV

3 Ironically, had Plaintiff named Mona Vie as a necessary party as BTC has urged, there is less likelihood the Note Sale would have occurred without prior notice. However, Plaintiff resisted and argued against adding Mona Vie as a party and failed to name Mona Vie as a party from the beginning.

7


Management, both the CFO/COO, and the Controller, to keep BTC advised on anything to do

with TSGs potential Note sale, who promised to do so. But as it turns out, MV Management did

not, failing to advise BTC what was really going on. Similarly, BTCs attorneys had been in

communication with both Mona Vies inside and outside counsel before the announcement of the

Note Sale, who gave no warning of the Note Sale at all. BTC even advised MV Management at

their January 21, 2015 meeting of the requirements for ESOP pass-through share voting in a true

acquisition setting (if that were to occur).

Plaintiff lastly claims a preliminary injunction should be granted because BTC is not

providing Plaintiff and other participants with access to their ESOP accounts. Yet, Plaintiff

ignores the fact that this is Mona Vies responsibility, not BTCs. Pursuant to the ESOP Plan

document, Mona Vies ESOP Administrative Committee is the party responsible for managing

and administering the ESOP, for issuing the ESOP participant statements, and for overseeing

participant access to their online ESOP accounts. Likewise, Plaintiff is critical of BTC, claiming

that the 2013 Plan Form 5500 has not been filed, but the Form 5500 filing is Mona Vies

responsibility in its capacity as Plan Sponsor, not BTCs.

Plaintiff must establish that he is likely to succeed on the merits in order to obtain a

preliminary injunction. The Village of Logan v. U.S. Dept. of Interior, 577 F. Appx 760, 766

(10th Cir. 2014). Not only does Plaintiff fail to clearly enunciate what relief he seeks by way of

his motion for preliminary injunction, but he does not satisfy this burden based on his claimed

new supplemental evidence. Plaintiff cites no new case law to support his arguments, and

much of Plaintiffs claimed evidence is simply wrong.

8


2. Plaintiff and the other ESOP participants will not suffer irreparable harm in the absence of preliminary injunctive relief.

Plaintiff points to the Note Sale as an additional reason to require preliminary injunctive

relief, without explaining how that constitutes irreparable harm now requiring an injunction. The

Note Sale has already occurred. The fact that the circumstance that forms the basis for a request

for preliminary injunctive relief has already occurred means that the issue is largely moot. The

purpose of a preliminary injunction is not to remedy past harm but to protect plaintiffs from

irreparable injury that would surely result without their issuance. Schrier v. University of

Colorado, 427 F. 3d 1253, 1267 (10th Cir. 2005) (declining to issue an injunction to reinstate a

terminated professor). One cannot say it any better than Plaintiff himself, who states, There is

no longer a potential harm because now the harm has already occurred . . . . (Doc. 65, p. 3).

As previously noted by BTC, Mona Vie has recently unilaterally terminated the ESOP.

(See Doc. 40, p. 8, n. 6). The ESOP is therefore frozen pending its termination liquidation. (Id.)

Plaintiffs request for a preliminary injunction is thus largely moot for that reason as well. (Id).

Plaintiff ignores this and continues to press for injunctive relief. Even if injunctive relief were

merited, which it is not, there is no need for injunctive relief at this point in time because there is

no pending irreparable harm. BTC, one of the most well respected ESOP fiduciaries in the

country, continues to actively oversee the ESOP notwithstanding Mona Vies unforeseen

economic downturn and is in the best position to oversee the ESOP termination liquidation.

BTC should continue to oversee the termination liquidation, as it seeks to achieve maximum

ESOP termination benefits for the ESOP participants in its negotiations with Mona Vie

concerning the liquidation of the ESOP trust.

9


Plaintiff does not explain what irreparable harm will occur in the future, what transaction

BTC needs to be barred from conducting, or what the status quo should be given the ESOPs

termination. Nothing about the present circumstances suggests Plaintiff will suffer any

irreparable harm absent an injunction.

3. The balance of equities and harms does not weigh in favor of granting Plaintiff a preliminary injunction.

There is also nothing about Plaintiffs new supplemental evidence that has significance to

the balance of harm consideration. Plaintiff baldly argues that the balance of harms supports an

injunction. (Doc. 65, p. 3). In support, Plaintiff states only that the Jeunesse transaction means

there is no assurance of future contributions to the ESOP. This argument confuses the Notes

held by Jeunesse in Mona Vie in general with amounts and notes owed the ESOP by Mona Vie,

Inc. The Jeunesse Note Sale has little or nothing to do with future contributions to the ESOP and

liquidation of the ESOP. It has nothing to do with the balance of harms.

There is harm, however, to removing BTC and preserving Plaintiffs claimed status

quo. BTC has been actively engaged with Mona Vie on behalf of the ESOP for five years and

is in the best position to handle the remaining ESOP termination issues. It should not be

precluded from overseeing the ESOP termination.

4. There is no public policy consideration that favors granting a preliminary injunction in these circumstances.

Public policy does not support the granting of the preliminary injunction. Plaintiff claims

the reason public policy favors a preliminary injunction is because the ESOP participants were

locked out of receiving information on their accounts for the better part of the last year, and

continue to be locked out today. (Doc. 65, p. 5). How that supports a preliminary injunction is

not explained and illogical. More importantly, Plaintiff incorrectly asserts it was BTCs

responsibility to see that the participants have access to their accounts. Plaintiff is incorrect. It is

10


the Mona Vies ESOP Administrative Committee that is required to oversee participant

statements and participant access to their online ESOP accounts. This responsibility is expressly

stated in the ESOP plan document. Plaintiff should name the Mona Vie Administrative

Committee, an ERISA fiduciary, as a defendant in this case to obtain the relief he seeks. There

simply is no public policy argument that favors a preliminary injunction in Plaintiffs favor.

C. Plaintiff is inconsistent and unclear what he actually wants in terms of a Preliminary Injunction.

Plaintiffs request for a preliminary injunction is a moving target. Plaintiff first states the

requested preliminary injunction is to maintain the status quo and preserve whatever limited

value may still exist in the ESOP. (Doc. 3, p. 2). 4 Plaintiff next states he requests an Order

freezing the ESOP funds, which will temporarily prevent Bankers Trust from making loan

payments to the founders and original shareholders of Mona Vie . . . or from paying itself

professional fees for acting as a trustee, . . . 5/6 (Doc. 3, p. 2-3). Plaintiff concludes by

requesting that the Court issue a preliminary injunction holding the ESOP assets in temporary

stasis and barring Bankers Trust from engaging in any transaction impacting the ESOPs assets

or liabilities.7 (Doc. 3, p. 13).

In Plaintiffs Supplemental Motion Plaintiff claims a need for injunctive relief so that

Plaintiff and his counsel may assess the current financial state of the ESOP and what impact the

Jeunesse buy-out may have on the ESOP. (Doc. 65, p. 2-3). Plaintiff next requests an

injunction so that the ESOP participants can finally get some answers. (Doc. 65, p. 5).

4 Plaintiff does not explain what the status quo is. In any event, termination of the ESOP by Mona Vie largely maintains the status quo. 5 As stated previously, no payment has ever been made to the founders and original shareholders of Mona Vie by BTC. 6 BTC receives no professional fees from the ESOP for acting as trustee. Rather, the fees are paid by Mona Vie. 7 Plaintiff fails to explain what temporary stasis means with respect to the ESOP.

11


Plaintiff concludes his Supplemental Memorandum by claiming a preliminary injunction should

be granted to preserve the status quo, maintain whatever value may be left in the ESOP, and

obtain a current accounting. (Doc. 65, p. 6).

In the present circumstances, however, there is no need to issue a preliminary injunction

under any of these stated reasons given by Plaintiff. Maintaining whatever value may be left in

the ESOP and the status quo has now largely occurred given the termination of the Plan.

Plaintiff has no consistency with what he wants the preliminary injunction to provide, but there is

no need for a preliminary injunction to be entered. Plaintiffs inconsistent, conflicting requests

support denial of a preliminary injunction.

CONCLUSION

For all the foregoing reasons, Plaintiffs Motion for Preliminary Injunction should be

denied.

Respectfully submitted,

By /s/ R. Willis Orton Ralph R. Mabey R. Willis Orton Ryan B. Frazier KIRTON McCONKIE Kirton McConkie Building 50 East South Temple, Suite 400 Salt Lake City, Utah 84111

Scott S. Morrisson Jeffrey C. McDermott KRIEG DeVAULT LLP 12800 North Meridian Street, Suite 300 Carmel, Indiana 46032 Jude Anne Carluccio KRIEG DEVAULT LLP 60 South 6th Street, Suite 2310 Minneapolis, Minnesota 55402

12


CERTIFICATE OF SERVICE

I hereby certify that on the 10th day of April, 2015, a copy of the foregoing was filed

electronically. Notice of this filing will be sent to all parties by operation of the Courts

electronic filing system. Parties may access this filing through the Courts system.

Gregory Y. Porter [email protected]

James L. Kauffman [email protected]

James E. Magleby [email protected]

Martin R. Denney [email protected]

Jennifer Fraser Parrish [email protected]

Evan A. Schmutz [email protected]

/s/ Teena Sanders KD_7175665_1.docx 4838-6337-2323.v1

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Case 2:14-cv-00916-BSJ Document 68-1 Filed 04/10/15 Page 1 of 13


68-main68-1

bankers trust supp memo

Documents

plaintiff references

plaintiff claims

acquisition of mona

responsibilities plaintiff

llc jeunesse

promissory note sale

pro hac vice

llc tsg