of contract, and unjust enrichment arising from an investment by hkf17455

VIEWS: 0 PAGES: 18

									                                                           IN THE CIRCUIT COURT OF THE
                                                           ELEVENTH JUDICIAL CIRCUIT IN AND
                                                           FOR MIAMI-DADE COUNTY, FLORIDA

                                                           GENERAL JURISDICTION DIVISION

                                                           CASE NO.: 10-""Jt{t--6"J         9 0 2CA                lfv
JSSI CAPITAL ENTERPRISES, LLC,

a Delaware Limited Liability

Company, and THE FRANKLIN MINT,

LLC, a Delaware Limited Liability Company,


          Plaintiffs,

vs.

THE FRANKLIN MINT, J;N"C.,      ,
a New York Corporation,~HE MORGAN                                                                          ~
                                                                                                           ---­
                                                                                                           e:t

MINT, INC., a New York Corporation, ."
                                                                                                     :'{
                                                                                                           = ".
                                                                                                           ""T1
INTER-GOVERNMENTAL PHILATELIC                                                                   r;
                                                                                                           r.""'
                                                                                                           C:1
CORPORATION, a New York Corporation, /
                                                                                                           N
IDEAL STAf\jP CO., a New York
Corporation,1AOSHE MALAMUD, individually(
and SAMUEL MALAMUD, individually, /

         Defendants.
---------------_-.:/


                                                  COMPLAINT

         Plaintiffs, JSSI Capital Enterprises, LLC and The Franklin Mint, LLC, sue Defendants,

The Franklin Mint, Inc., The Morgan Mint, Inc., Inter-Goverinnental Philatelic Corporation,

Ideal Stamp Co., Moshe Malamud, and Samuel Malamud, and state as foUows:

                                             NATURE OF CLAIM

         This is an action for fraud in the inducement, negligent misrepresenta,ion, rescission,

breach of contract, and unjust enrichment arising from an investment scheme orchestrated by

Defendants that defrauded Plaintiffs out of over $16,000,000.




{M2902769;3 }

                AKERMAN SENTERFITI,   ONe SOUTHEAST THIRD AVENUE, SUITE 2500, MIAMI, FL 33131-1714
                                               THE PARTIES


          1.        Plaintiff, JSSI Capital Enterprises, LLC ("JSSI Capital"), is a Delaware Limited

Liability Company.

          2.       Plaintiff, The Franklin Mint, LLC ("Newco"), is a Delaware Limited Liability

Company fonned by JSSI Capital to acquire the assets of The Franklin Mint, Inc. and The

Morgan Mint, Inc.

          3.       Defendant, The Franklin Mint, Inc. ("The Franklin Mint"), is a New York

Corporation.

          4.       Defendant, The Morgan Mint, Inc. ("The Morgan Mint"), is a New York

Corporation.

          S.       Defendant, Inter-Governmental Philatelic Corporation ("IGPC"), is a New York

Corporation.

          6.       Defendant, Ideal Stamp Co. ("Ideal Stamp"), is a New York Corporation.

          7.       Defendant, Moshe Malamud ("M. Malamud"), is an individual sui juris and a

resident of the State of New York. M. Malamud is Samuel Malamud's son.

          8.       Defendant, Samuel Malamud ("S. Malamud"), is an individual sui juris and a

resident of the State of New York. S. Malamud is M. Malamud's father.

          9.       Upon information and belief, at all relevant times, M. Malamud controlled and

was the decision-maker for The Franklin Mint and The Morgan Mint, and S. Malamud controlled

and was the decision-maker for IGPC and Ideal Stamp.

          10.      M. Malamud was Plaintiffs' direct contact during negotiations for Plaintiffs to

acquire the assets and assume the debt of The Franklin Mint and The Morgan Mint.




{M2902769;3 }
                                                     -2­
                AKERMAN SEN~RFITT. ONE SOUTHEAST THIRD AVENUE, SUITE 2500, MIAMI, FL 33131-1714
                                       JURISDICTION AND VENUE


           11.       This Court has subject matter jurisdiction over this action inasmuch as the amount

in controversy exceeds the sum of$15,000, exclusive of interest and costs.

           12.       The Franklin Mint has committed a tort in the State of Florida and is, therefore,

subject to personal jurisdiction in this State.

           13.       The Morgan Mint has committed a tort in the State of Florida and is, therefore,

subject to personal jurisdiction in this State.

          14.       IOPC has committed a tort in the State of Florida and is, therefore, subject to

personal jurisdiction in this State.

          15.       Ideal Stamp has committed a tort in the State of Florida and is, therefore, subject

to personal jurisdiction in this State.

          16.       M. Malamud has committed a tort in the State of Florida and is, therefore, subject

to personal jurhldiction in this State.

          17.       S. Malamud has committed a tort in the State of Florida and is, therefore, subject

to personal jurisdiction in this State.

          18.       Venue is proper in this Court because a substantial part of the events or omissions

giving rise to the Plaintiffs' claims occurred in Miami-Dade County, Florida.

                                        GENERAL ALLEGATIONS

A.        The Asset Purchase Agreement

          19.       In or about April, 2009, M. Malamud began soliciting JSSI Capital to invest in

The Franklin Mint.

          20.       Relying on certain misrepresentations made by M. Malamud, and certain

knowingly wrongful omissions by S. Malamud, JSSI Capital agreed to invest in The Franklin




(M2902769;3 )
                                                      -3­
                 AKERMAN SENTERFITT, ONE SOUTHEAST THIRD AVENUE, SUITE   2500, MIAMI, FL 33131-1714

Mint, and on May 18, 2009, JSSI Capital formed Newco for the purpose of acquiring

substantially all the assets of The Franklin Mint and The Morgan Mint.

          21.      On June 9, 2009, JSSI Capital and Newco entered into an asset purchase

agreement (the "Asset Purchase Agreement") with The Franklin Mint and The Morgan Mint. A

true and correct copy of the Asset Purchase Agreement is attached as Exhibit "A."

          22.      Pursuant to the Asset Purchase Agreement, Newco purchased "substantially all of

the assets of The Franklin Mint and The Morgan Mint," including the right to use the name The

Franklin Mint and The Morgan Mint. See Asset Purchase Agreement at § A.

          23.      The closing of the transactions contemplated by the Asset Purchase Agreement

was held on June 9, 2009 in Miami, Florida. See Asset Purchase Agreement at § 2.01.

          24.      The provisions of the Asset Purchase Agreement and the documents delivered

pursuant thereto are "governed by and construed in accordance with the laws of the State of

Florida (excluding any conflict of law rule or principle that would refer to the laws of another

jurisdiction)." See Asset Purchase Agreement at § 8.06

          25.      Further, each party to the Asset Purchase Agreement irrevocably submitted "to the

jurisdiction of the Circuit Court of the State of Florida, Miami-Dade County, in any action or

proceeding arising out of or relating to this Agreement or any of the Collateral Agreements, and

each party hereby irrevocably agrees that all claims in respect of any such action or proceeding

must be brought and/or defended in such court; provided, however, that matters which are under

the exclusive jurisdiction of the Federal courts shall be brought in the Federal District Court for

the Southern District of-Florida." See Asset Purchase Agreement at § 8.06




{M2902769;3 }
                                                     -4­
                AKERMAN SENTERFITT. ONE SOUTHEAST THIRD AVENUE. SUITE   2500, MIAMI, FL 33131·1714
B.        JSSI Capital's and Newco's Investment

          26.       As described herein, the misrepresentations and wrongful omissions of M.

Malamud and S. Malamud, individually and on behalf of The Franklin Mint and The Morgan

Mint, induced JSSI Capital and Newco into investing over $16,000,000 in The Franklin Mint

venture.

          27.      In reliance on the misrepresentations and intentionally wrongful omissions, JSSI

Capital invested in excess of $12,600,000 in The Franklin Mint, as stated in a letter agreement

(the "Letter Agreement") executed by the parties on June 9, 2009 (the "Letter Agreement"). A

true and correct copy of the Letter Agreement is attached as Exhibit "B."

          28.      From the $12,600,000, JSSI Capital invested $3,225,000 in Newco as its capital

contribution.

          29.      JSSI Capital infused an additional $9,375,000 into Newco (the "JSSI Capital

Loan"), which is evidenced by a Promissory Note dated June 9, 2009 from Newco to JSSI

Capital (the "JSSI Capital Note"). A true and correct copy of the JSSI Capital Note is attached

as Exhibit "C."

          30.      Proceeds from the JSSI Capital Loan were used to pay $1,975,000 that The

Morgan Mint purportedly owed to S. Malamud ($1,856,649.28) and Steve Sisskind

($118,350.72).

          31.      Seizing the opportunity to further profit from the misrepresentations and

omissions described herein, M. Malamud and S. Malamud, individually and on behalf of the

corporate Defendants, wrongfully induced Newco to issue almost $4,000,000 more in

promissory notes to assume a debt purportedly owed by The Morgan Mint to S. Malamud,

individually, IGPC, and Ideal Stamp, as follows:




{M2902769;3 }
                                                    -5­
                AKERMANSENTERFITT, ONE SOUTHEAsr THIRD AVENUE, SUITE   2500, MIAMI, FL 33131-1714
          a.     Newco issued a subordinated promissory note in the amount of
          $1,071,477.30 in favor of S. Malamud (the "S. Malamud Subordinated Note") to
          assume a purportedly pre-existing loan in this amount from S. Malamud to The
          Morgan Mint. A true and correct copy of the S. Malamud Subordinated Note is
          attached hereto as Exhibit "D." When Plaintiffs requested the original note, S.
          Malamud advised that he purportedly lost the original note signed by The
          Morgan Mint and, instead, provided a lost note affidavit;

          b.      Newco issued a subordinated promissory note in the amount of
          $2,307,536.91 in favor of IGPC (the "IGPC Subordinated Note") to assume a
          purportedly pre-existing loan in this amount from IGPC to The Morgan Mint. A
          true and correct copy of the IGPC Subordinated Note is attached hereto as
          Exhibit "E." S. Malamud is the president of IGPC and again purportedly lost the
          original note signed by The Morgan Mint; and

          c.     Finally, Newco issued a subordinated promissory note in the amount of
          $589,258.66 in favor of Ideal Stamp (the "Ideal Stamp Subordinated Note") to
          assume a purportedly pre-existing loan in this amount from Ideal Stamp to The
          Morgan Mint. A true and correct copy of the Ideal Stamp Subordinated Note is
          attached hereto as Exhibit "F." S. Malamud, the president of Ideal Stamp, again
          purportedly lost the original note signed by The Morgan Mint.

          32.      The Morgan Mint, which upon information and belief is controlled by M.

Malamud, further benefited from Defendants' fraudulent scheme in that The Morgan Mint

received a 28.2% equity interest in Newco.

C.       JSSI Capital and Newco Learn of the Fraud

          33.      As alleged above, JSSI Capital and Newco agreed to purchase substantially all of

the assets of The Franklin Mint and The Morgan Mint and to satisfy with cash and promissory

notes the debt of The Morgan Mint, relying on a series of false representations and knowingly

wrongful omissions by M. Malamud. and S. Malamud, individually and on behalf of The

Franklin Mint and The Morgan Mint.

          34.      The fraud was premised on a wholly fabricated business plan that contained,

among other things, false financial statements about existing and projected revenue.




{M2902769;3 }


                AKERMAN SENTERFITI, ONE SOUTHEAST THIRD AVENUE, SUITE   2500, MIAMI, Fl 33131·1714
          35.       The fraudulent business plan was predicated on historical successes of The

Franklin Mint that M. "Malamud and S. Malamud knew were no longer accurate given the

company's then-current financial situation.

          36.       Indeed, within six months after closing the transactions, The Franklin Mint's

actual financial results reveal that Defendants, through M. Malamud and S. Malamud, grossly

inflated projected company revenue by over fifty percent (50%) to wrongfully induce Plaintiffs

to complete the transactions.

          37.      From about April to June, 2009, M. Malamud represented to Robert H. Book, an

executive of ~SI Capital and Newco, that The Franklin Mint had strong established business

relationships with a number of significant clients that were willing and able to expand their

business with The Franklin Mint. M. Malamud referred to these relationships as "low-hanging

fruit" ready to be exponentially developed with the infusion of more capital.

          38.      For example, M. Malamud misrepresented to Mr. Book that:

          a.     The Publisher's Clearing House "loved" The Franklin Mint and would order in
          excess of $12,000,000 in The Franklin Mint products. M. Malamud, however, knew that
          this representation was false when made since the Publisher's Clearing House had
          previously terminated its relationship with The Franklin Mint;

          b.     The Franklin Mint had a great business relationship with QVC and, based on past
          performance, the QVC account would generate from $35,000,000 to $60,000,000 per
          year. M. Malamud knew this representation was false when made because, at that time,
          QVC was dissatisfied with The Franklin Mint's purported inability to deliver products
          timely and that QVC had ordered only $250,000 in products;

         c.     That the a~counts with Harley-Davidson, and ShopNBC.com were expected to
         generate millions of dollars in revenue. Indeed, M. Malamud falsely represented that
         The Franklin Mint has exclusive distribution rights to Harley-Davidson's die-cast and
         jewelry products. M. Malamud knew these representations were false when made, as he
         was fully aware that The Franklin Mint did not have exclusive distribution rights to any
         of Harley-Davidson's products, and that such revenue projections were unrealistic under
         any scenario.




{M2902769;3 }
                                                      -7­
                AKERMAN SENTERFIIT, ONE SOUTHEAST THIRD AVENUE, SUITE 2500, MIAMI,   FL 33131-1714
           39.       M. Malamud further represented that The Franklin Mint would generate revenues

in excess of $20 million dollars from June, 2009 to December, 2009, and that such revenues

would skyrocket with Plaintiffs' infusion of additional capital. Indeed, M. Malamud represented

that he could get the Franklin Mint to generate in excess of $300,000,000 in annual sales by

2013. As confirmed by actual financial results, M. Malamud knew this representation was false

when made, but made it to induce Plaintiffs to enter into the subject transactions and to invest

over $16,000,000 in capital.

           40.      M. Malamud further misrepresented to Mr. Book that The Franklin Mint's

inventory was worth in excess of $5,000,000 when at the time of the statement, the value of the

inventory was no more than $2,500,000.

           41.       M. Malamud further misrepresented that The Franklin Mint had spent

approximately $570 million in advertising.                This misrepresentation grossly overstated the

advertising expense during M. Malamud's involvement with The Franklin Mint.

           42.      During negotiations, Plaintiffs inquired as to whether the Defendants had the

infrastructure in terms of information technology systems, operational processes, and financial

reporting systems to support the production required to generate the revenue stated and projected

by M. Malamud.             In response, and to further conceal the deceptive scheme, M. Malamud

represented that The Franklin Mint had existing efficient information technology systems,

operational processes, and financial reporting systems in place to increase its production and

respond to increased customer demand. This statement was false when made as M. Malamud

knew that the Franklin Mint did not have adequate systems in place for the management of the

company's (i) information technology, (ii) supply chain, (iii) inventory control, and (iv) financial

reports.




{M2902769;3}
                                                       -8­
                 AKERMAN SENTERFITT, ONE SOUTHEAST THIRD AVENUE, SUITE 2500, MIAMI,   FL 33131·1714

          43.       M. Malamud also falsely represented to Mr. Book that he had the experience and

preparation to successfully manage and operate The Franklin Mint.

          44.       These representations were made through various phone calls and meetings that

took place from April to May, 2009, including a number of phone calls directed to JSSI Capital

in Miami.

          45.       To conceal the fraud, M. Malamud directed employees of The Franklin Mint and

The Morgan Mint not to speak with Plaintiffs without M. Malamud's express approval and not to

provide any information to Plaintiffs during Plaintiffs' evaluation of the transactions, without M.

Malamud's express approval.

          46.      In fact, as part of the fraudulent scheme, M. Malamud asked internal staff

members to develop an improper scheme to provide payoffs to certain customers in exchange for

increased revenue.

          47.      S. Malamud was present at the time M. Malamud made the knowingly false

representations described in paragraphs 34 to 46 above, but deliberately omitted to disclose the

truth as part of Defendants' execution of the fraudulent scheme and in order to reap the fruits of

Defendants' deception.

          48.      After the transactions closed, JSSI Capital and Newco learned that the

representations and omissions by M. Malamud and S. Malamud, individually and on behalf of

The Franklin Mint, The Morgan Mint, IGPC, and the Ideal Stamp, were false at the time that

they were made.

         49.       All conditions precedent to the commencement of this action have either occurred,

been satisfied and/or have been waived.




{M2902769;3 }
                                                     - 9­
                AKERMAN SENTERFITT, ONE SOUTHEAST THIRD AVENUE, SUITE   2500, MIAMI, FL 33131-1714
          50.      As a result of Defendants' wrongful conduct described herein, Plaintiffs have been

required to retain the undersigned counsel to represent them in this action and are obligated to

pay them a reasonable fee for their services, for which Defendants may be liable.

                   COUNT I - FRAUD IN THE INDUCEMENT (By JSSI Capital)
                (The Franklin Mint, The Morgan Mint, M. Malamud, and S. Malamud)

          51.      JSSI Capital re-alleges paragraphs 1 through 50 and incorporates them by

reference as if fully set forth herein.

          52.      M. Malamud, individually and on behalf of The Franklin Mint and The Morgan

Mint, made the representations identified in paragraphs 34 to 46 above.

          53.      M. Malamud knowingly and willfully made the representations with the intent to

fraudulently induce JSSI Capital to purchase substantially all of the assets of The Franklin Mint

and The Morgan Mint and invest and lend money to Newco as described above.

          54.      S. Malamud was present at the time M. Malamud made the knowingly false

representations described in paragraphs 34 to 46 above, but deliberately omitted to disclose the

truth as part of Defendants' execution of the fraudulent scheme and in order to reap the fruits of

Defendants' deception.

          55.      M. Malamud, S. Malamud, The Franklin Mint and The Morgan Mint had actual

knowledge that the representations described in paragraphs 34 to 46 above were false and

misleading when made.

          56.      JSSI Capital justifiably relied on the misrepresentations and omissions.

          57.      Relying on the misrepresentations and omissions, JSSI Capital invested in excess

of$12,600,000 in The Franklin Mint.

          58.      The above misrepresentations and omissions proximately caused JSSI Capital

damages in an amount to be established at trial.



( M2902769;31
                                                    - 10­
                AKERMAN SENTERFITI, ONE SOUTHEAST THIRD AVENUE, SUITE   2500, MIAMI, FL 33131-1714
          59.      JSSI Capital reserves the right to seek punitive damages pursuant to Section

768.72, Florida Statute.

          WHEREFORE, JSSI Capital Enterprises, LLC demands judgment against The Franklin

Mint, Inc., The Morgan Mint, Inc., Moshe Malamud, and Samuel Malamud for damages, pre­

judgment and post-judgment interest and costs, and any other relief the Court deems appropriate.

                COUNT II - NEGLIGENT MISREPRESENTATION (By JSSI Capital)
                (The Franklin Mint, The Morgan Mint, M. Malamud, and S. Malamud)

          60.      JSSI Capital re-alleges paragraphs I through 50 and incorporates them by

reference as if fully set forth herein.

          61.      M. Malamud, individually and on behalf of The Franklin Mint and The Morgan

Mint, made the representations identified in paragraphs 34 to 46 above.

          62.      M. Malamud negligently made the representations with the intent to induce JSSI

Capital to purchase substantially all of the assets of The Franklin Mint and The Morgan Mint and

invest and lend money to Newco as described above.

          63.      S. Malamud was present at the time M. Malamud made the representations

described in paragraphs 34 to 46 above, but negligently omitted to disclose the truth.

          64.      M. Malamud, S. Malamud, The Franklin Mint and The Morgan Mint knew or

should have known that the representations described in paragraphs 34 to 46 above were false

and misleading when made.

         65.       JSSI Capital justifiably relied on the misrepresentations and omissions.

          66.      Relying on the negligent misrepresentations and omissions, JSSI Capital invested

in excess of $12,600,000 in The Franklin Mint.

         67.       The above negligent misrepresentations and omissions proximately caused JSSI

Capital damages in an amount to be established at trial.



{M2902769;3 }
                                                    - 11 ­
                AKERMAN SENTERFITI, ONE SOUTHEAST THIRD AVENUE, SUITE   2500, MIAMI, FL 33131·1714
         68.      JSSI Capital reserves the right to seek punitive damages pursuant to Section

768.72, Florida Statute.

         WHEREFORE, JSSI Capital Enterprises, LLC demands judgment against The Franklin

Mint, Inc., The Morgan Mint, Inc., Moshe Malamud, and Samuel Malamud for damages, pre­

judgment and post-judgment interest and costs, and any other 'relief the Court deems appropriate.

                    COUNT III - FRAUD IN THE INDUCEMENT (By Newco)

               (The Franklin Mint, The Morgan Mint, M. Malamud, and S. Malamud)


         69.      Newco re-alleges paragraphs 1 through 50 and incorporates them by reference as

if fully set forth herein.

         70.      M. Malamud, individually and on behalf of The Franklin Mint and The Morgan

Mint, made the representations identified in paragraphs 34 to 46 above.

         71.      M. Malamud knowingly and willfully made the representations with the intent to

fraudulently induce Newco to purchase substantially all of the assets of The Franklin Mint and

The Morgan Mint, and to pay and/or agree to pay the purported debt of Morgan Mint.

         72.      S. Malamud was present at the time M. Malamud made the knowingly false

representations described in paragraphs 34 to 46 above, but deliberately omitted to disclose the

truth as part of Defendants' execution of the fraudulent scheme and in order to reap the fruits of

Defendants' deception.

         73.      M. Malamud, S. Malamud, The Franklin Mint and The Morgan Mint had actual

knowledge that the representations described in paragraphs 34 to 46 above were false and

misleading when made.

         74.      Newco justifiably relied on the misrepresentations and omissions.

         75.      Relying on the misrepresentations and omissions, Newco (1) purchased

substantially all of the assets of The Franklin Mint and The Morgan Mint, (2) paid and/or agreed



{M2902769;3}
                                                    - 12­
               AKERMAN SENTERFITT, ONE SOUTHEAST THIRD AVENUE, SUITE 2500, MIAMI, FL 33131-1714
to pay $5,943,272.87 purportedly owed by The Morgan Mint to S. Malamud, Steve Sisskind,

IGPC, and Ideal Stamp.

          76.       The above misrepresentations and omissions proximately caused Newco damages

in an amount to be established at trial.

          77.      Newco reserves the right to seek punitive damages pursuant to Section 768.72,

Florida Statute.

         WHEREFORE, The Franklin Mint, LLC demands judgment against The Franklin Mint,

Inc., The Morgan Mint, Inc., Moshe Malamud, and Samuel Malamud for damages, pre-judgment

and post-judgment interest and costs, and any other relief the Court deems appropriate.

                 COUNT IV - NEGLIGENT MISREPRESENTATION (By Newco)
               (The Franklin Mint, The Morgan Mint, M. Malamud, and S. Malamud)

         78.       Newco re-alleges paragraphs 1 through 50 and incorporates them by reference as

if fully set forth herein.

         79.       M. Malamud, individually and on behalf of The Franklin Mint and The Morgan

Mint, made the representations identified in paragraphs 34 to 46 above.

         80.       M. Malamud negligently made the representations with the intent to induce

Newco to purchase substantially all of the assets of The Franklin Mint and The Morgan Mint,

and to pay and/or agree to pay the purported debt of Morgan Mint.

         81.       S. Malamud was present at the time M. Malamud made the negligent

representations described in paragraphs 34 to 46 above, but negligently omitted to disclose the

truth as part of Defendants' execution of the fraudulent scheme and in order to reap the fruits of

Defendants' deception.




{M2902769;31
                                                    - 13 ­
                AKERMAN SENTERFITT, ONE SOUTHEAST THIRD AVENUE, SUITE   2500, MIAMI, FL 33131-1714
          82.       M. Malamud, S. Malamud, The Franklin Mint and The Morgan Mint knew or

should have known that the representations described in paragraphs 34 to 46 above were false

and misleading when made.

          83.      Newco justifiably relied on these negligent misrepresentations and omissions.

          84.      Relying on the negligent misrepresentations and omissions, Newco (l) purchased

substantially all of the assets of The Franklin Mint and The Morgan Mint, (2) paid and/or agreed

to pay $5,943,272.87 purportedly owed by The Morgan Mint to S. Malamud, Steve Sisskind,

IGPC, and Ideal Stamp.

          85.      The above negligent misrepresentations and omissions proximately caused Newco

damages in an amount to be established at trial.

          86.      Newco reserves the right'to seek punitive damages pursuant to Section 768.72,

Florida Statute.

          WHEREFORE, The Franklin Mint, LLC demands judgment against The Franklin Mint,

Inc., The Morgan Mint, Inc., Moshe Malamud, and Samuel Malamud for damages, pre-judgment

and post-judgment interest and costs, and any other relief the Court deems appropriate.

                           COUNT V - RESCISSION OF PROMISSORY NOTES
                               (IGPC, Ideal Stamp, S. Malamud) .

          87.      Newco re-alleges paragraphs I through SO and incorporates them by reference as

if fully set forth herein.

          88.      On June 9, 2009, Newco executed the S. Malamud Subordinated Note in the

amount of$I,071,477.30 in favor of S. Malamud.

          89.      On June 9, 2009, Newco executed the IGPC Subordinated Note in the amount of

$2,307,536.91 in favor ofIGPC




{M2902769;3 }
                                                    - 14­
                AKERMAN SENTERFITT, ONE SOUTHEAST THIRD AVENUE, SUITE   2500, MIAMI, FL 33131-1714

           90.      On June 9, 2009, Newco executed the Ideal Stamp Subordinated Note in the

 amount of$589,258.66 in favor ofIdeal Stamp.

           91.      Newco executed the above referenced subordinated notes (collectively the

 "Subordinated Notes") in conjunction with the Asset Purchase Agreement and the Letter

 Agreement.

           92.      Newco was induced to execute the Subordinated Notes by a series of

, misrepresentations and omissions by M. Malamud and S. Malamud, on behalf of The Franklin

 Mint, The Morgan Mint, lOpe, and Ideal.

           93.      M. Malamud, individually and on behalf of The Franklin Mint and The Morgan

 Mint, made the representations identified in paragraphs 34 to 46 above.

           94.      M. Malamud knowingly and willfully made the representations with the intent to

 fraudulently induce Newco to purchase substantially all of the assets of The Franklin Mint and

 The Morgan Mint, and to pay and/or agree to pay the purported debt of Morgan Mint.

           95.      S. Malamud was present at the time M. Malamud made the knowingly false

 representations described in paragraphs 34 to 46 above, but deliberately omitted to disclose the

 truth as part of Defendants' execution of the fraudulent scheme and in order to reap the fruits of

 Defendants' deception.

           96.      M. Malamud, S. Malamud, The Franklin Mint and The Morgan Mint had actual

 knowledge that the representations described in paragraphs 34 to 46 above were false and

 misleading when made.

          97.       Newco would not have entered into the Subordinated Notes if it had known that

 the above representations were false and/or concealed material facts.




 (M2902769;3 }
                                                     - 15 ­
                 AKERMAN SENTERFITT, ONE SOUTHEAST THIRD AVENUE. SUITE   2500. MIAMI. FL 33131.1714
           98.       Newco has rescinded the Subordinated Promissory Notes, and has notified and

hereby notifies, S. Malamud, IOPC, and Ideal Stamp that the Subordinated Promissory Notes

have been rescinded.

          99.       Newco has no adequate remedy at law other than the rescission of the

Subordinated Promissory Notes.

          WHEREFORE, The Franklin Mint, LLC demands judgment against Intergovernmental

Philatelic Corporation, Ideal Stamp Co. rescinding the Subordinated Notes and granting any

other relief the Court deems appropriate.

                                     COUNT VI - Breach of Contract

                                  (The Franklin Mint, The Morgan Mint)


          100.      JSSI Capital and Newco re-allege paragraphs 1 through 50 and incorporate them

by reference as if fully set forth herein.

          101.      The Asset Purchase Agreement is a valid and enforceable contract between JSSI

Capital and Newco, on one part, and The Franklin Mint and The Morgan Mint, on the other.

          102.      The Franklin Mint and The Morgan Mint breached Sections 3.08, 3.09, 3.18 and

3.22 of the Asset Purchase Agreement by overstating the financial statements of The Franklin

Mint, Inc.

          103.      The Franklin Mint and The Morgan Mint further breached the Asset Purchase

Agreement by failing to disclose that The Morgan Mint was obligated to pay to certain

employees in excess of $275,000 pursuant to an annual bonus and profit sharing plan that was

never disclosed.

          104.      As a consequence of this breach, JSSI Capital and Newco have been damaged in

an amount to be established at trial.




{ M2902769;3}
                                                      - 16 ­
                 AKERMAN SENTERFITT, ONE SOUTHEAST THIRD AVENUE, SUITE 2500. MIAMI, FL 33131-1714

          WHEREFORE, JSSI Capital Enterprises, LLC and The Franklin Mint, LLC                         dem~d


judgment against The Franklin Mint, Inc., The Morgan Mint, Inc., Moshe Malamud, and Samuel

Malamud for damages, pre-judgment and post-judgment interest and costs, and any other relief

the Court deems appropriate.

                                    COUNT VII - Unjust Enrichment
                                    (The Morgan Mint, S. Malamud)

          105.     Newco re-alleges paragraphs 1 through SO and incorporate them by reference as if

fully set forth herein.

          106.      Newco has paid or has executed promissory notes obligating it to pay a total of

$3,968,272.87 in purported loans owed by The Morgan Mint pursuant to lost promissory notes.

          107.      Newco has paid S. Malamud a total of $1,856,649.28 purportedly owed by The

Morgan Mint pursuant to a lost promissory note.

          108.      The Morgan Mint and S. Malamud knowingly and voluntarily accepted Newco's

payment of, or promissory notes agreeing to pay for, The Morgan Mint's purported debt in

conjunction with Newco's purchase of substantially all ofthe assets of The Morgan Mint.

          109.     It would be unfair and unjust for The Morgan Mint and/or S. Malamud to retain

Newco's payment of, or agreement to pay for, The Morgan Mint's purported debt without due

compensation, particularly as Newco was induced by The Morgan Mint's own fraudulent

misrepresentations to payor agree to pay The Morgan Mint's purported debt.

          110.     S. Malamud was present at the time M. Malamud made the knowingly false

representations described in paragraphs 34 to 46 above, but deliberately omitted to disclose the

truth as part of Defendants' execution of the fraudulent scheme and in order to reap the fruits of

Defendants' deception.




{M2902769;3 }
                                                    - 17 ­
                AKERMAN SENTERFITT, ONE SOUTHEAST THIRD AVENUE, SUITE   2500, MIAMI, FL 33131-1714

          111.    Newco has no adequate remedy for the fraudulently induced payment of Morgan

Mint's purported debt.

         WHEREFORE, The Franklin Mint, LLC demands judgment against, The Morgan Mint,

Inc. and Samuel Malamud for damages, pre-judgment and post-judgment interest and costs, and

any other relief the Court deems appropriate.

                                         DEMAND FOR JURY TRIAL

         JSSI Capital Enterprises, LLC and The Franklin Mint, LLC demand a jury trial for all

claims so triable.

Dated: February 12,2010.

                                                   Respectfully submitted,



                                                   By:      ~ft{f;;i(ldO --­
                                                            Michael Marsh, Esq.
                                                                                                    ---......

                                                            Florida Bar No. 0072796
                                                            E-mail: michael.marsh@akerman.com
                                                            Francisco A. Rodriguez, Esq.
                                                            Florida Bar No. 0653446
                                                            E-mail: francisco.rodriguez@akerman.com
                                                            AKERMAN SENTERFITT
                                                            SunTrust International Center
                                                            One S.E. Third Avenue - 25th Floor
                                                            Miami, Florida 33131-1704
                                                            Telephone: (305) 374-5600
                                                            Facsimile: (305) 374-5095




(M2902769;3}
                                                   - 18 ­
               AKERMAN SENTERFITT, ONE SOUTHEAST THIRD AVENUE, SUITE   2500, MIAMI, FL 33131-1714

								
To top