SUPREME COURT OF THE STATE OF NEW YORK

COUNTY OF NEW YORK

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THE PULLMAN GROUP, LLC,              :

 

                      Plaintiff,     :

 

           -against-                 :      

THE PRUDENTIAL INSURANCE COMPANY     :  Index No. 99/605210

OF AMERICA, PRUDENTIAL INVESTMENTS  

CORP., PRUDENTIAL SECURITIES         :

INCORPORATED, RASCOFF/ZYSBLAT                 VERIFIED

ORGANIZATION INC., WILLKIE FARR &    :        COMPLAINT

GALLAGHER, CAK/UNIVERSAL CREDIT                  

CORP., ENTERTAINMENT FINANCE         :

INTERNATIONAL, LLC and UCC LENDING  

CORPORATION,                         :

 

                       Defendants.   :

 

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Plaintiff, The Pullman Group, LLC, by and through its attorneys, Sullivan & Gallion, for its complaint against defendants, alleges upon knowledge with respect to its own acts and upon information and belief with respect to the acts of all others, as follows:

NATURE OF THE ACTION

1 .    In this action, plaintiff seeks redress against defendants for their willful and tortious conduct, including misappropriation of plaintiff's unique proprietary information, trade secrets and innovative expertise and flagrant breaches of fiduciary and contractual duties and obligations owed to plaintiff.

2 .     Defendants' treachery was perpetrated in the extremely competitive world of asset-backed securitization, where prospective properties sufficiently stable and lucrative to  provide the requisite dependable and high returns for such transactions -- in this instance, intellectual property, such as musical composition catalogues -- are extremely scarce and jealously guarded. 

3 .     Plaintiff's principal, David Pullman, has been universally acclaimed as an innovator who pioneered the marriage of asset-backed securitization with intellectual property royalties.  As with any visionary who creates a new and extremely profitable mode of doing business, plaintiff and its principal were zealously sought as potential partners and joint venturers by others who hoped to profit on the underlying trade secrets and methodology for creating intellectual property based securitizations, which plaintiff carefully and meticulously guarded.

4 .     Rather than deal fairly and honestly with plaintiff, however, certain of the defendants herein chose instead to:  (a) entice plaintiff to enter into sensitive and highly confidential negotiations to create an exclusive equal equity partnership crafted specifically to exploit plaintiff's pioneering and extremely lucrative concept of celebrity bonds; (b) extract every possible source of information and documentation provided by plaintiff under contractual protections of confidentiality; (c) attempt to exclude plaintiff from the resulting partnership by introducing eleventh hour draconian "new terms" after months of protracted and detailed negotiations; and (d) despite plaintiff's agreement to each and every demand, duplicitously repudiate their contractual and fiduciary obligations by simply turning their backs on plaintiff and, barely two weeks later, consummating precisely the same deal between themselves with the assistance of plaintiff's own attorneys, allegedly as a "new" transaction. 

5 .     Equally egregiously, certain other defendants misappropriated plaintiff's proprietary and confidential information to create yet another entity, which is designed to compete directly with plaintiff's business operations and to disrupt plaintiff's future business dealings in the highly specialized field of intellectual property securitization.

JURISDICTION AND VENUE

6 .     Jurisdiction is proper pursuant to CPLR 301 and 302 because all the defendants are either domestic or duly licensed foreign corporations, are doing business within the State of New York or transact business within the State of New York.

7 .     Venue is proper pursuant to CPLR  503 because the plaintiff resides in the City and State of New York, at 1370 Avenue of the Americas, New York, New York 10019.

 

 

PARTIES

8 .     Plaintiff, The Pullman Group, LLC, is a limited liability company ("LLC") organized and existing under the laws of the State of Delaware with its principal place of business at 1370 Avenue of the Americas, New York, New York 10019.  The Pullman Group was formed in January 1998 by David Pullman, who is its Chairman and Chief Executive Officer.  The Pullman Group became an LLC in July 1998.  Mr. Pullman began working on his concept for intellectual property securitization as a principal of the Structured Asset Sales Group of Gruntal & Co. ("Gruntal").  On or about January 1997, that group, headed by Mr. Pullman, became Fahnestock & Co., Inc.'s Structured Asset Sales Group ("Fahnestock").  Pursuant to the terms of an express assignment, dated August 19, 1998, Fahnestock assigned all of its "rights, titles, interests, causes of action, suits, sums of money, claims and demands arising out of, in connection with or relating to a certain Commitment Letter dated October 21, 1997, between and among [Fahnestock], Rascoff Zysblat Organization, Inc. and The Prudential Insurance Company of America" to The Pullman Group (the "Assignment Agreement") (the Assignment Agreements between Gruntal and Fahnestock and Fahnestock and The Pullman Group are  attached to this Complaint as Exhibit A and are incorporated herein by reference).  Gruntal, Fahnestock and The Pullman Group are sometimes referred to hereafter collectively as "Plaintiff".

9 .     Defendant The Prudential Insurance Company of America Inc. ("Prudential Insurance") is a corporation organized and existing under the laws of the State of New Jersey with its corporate headquarters at One Gateway Center, Newark, New Jersey 07102.  Prudential Insurance manages approximately $223 billion in assets for individuals and institutions.

10 .     Defendant Prudential Investments Corp. ("Prudential Investments") is a corporation organized and existing under the laws of the State of New Jersey with its principal place of business at One Gateway Center, Newark, New Jersey 07102. Prudential Investments is a subsidiary of, and purchases investments on behalf of, Prudential Insurance.

11 .     Defendant Prudential Securities Incorporated ("Prudential Securities") is a corporation organized and existing under the laws of the State of Delaware with its principal place of business at 199 Water Street, New York, New York 10292.  Prudential Securities sells and markets securities on behalf of Prudential Insurance.

12 .     Defendant Rascoff/Zysblat Organization Inc. ("RZO") is a corporation organized and existing under the laws of the State of New Jersey with its principal place of business at 110 West 57th Street, New York, New York 10019.  In or about March 1998, RZO was acquired by American Express and, upon information and belief, is now affiliated with Provident Financial Management, a division of American Express.

13 .     Defendant Willkie Farr & Gallagher ("WFG") is a New York law partnership with its principal place of business at 153 East 53rd Street, New York, New York 10022.

14 .     Defendant CAK/Universal Credit Corporation ("CAK/Universal" or "CAK") is a corporation organized and existing under the laws of the State of Delaware with its principal place of business at 1330 Avenue of the Americas, New York, New York 10019.  Upon information and belief, CAK/Universal was formed in connection with, and financed by, Prudential Insurance and Prudential Securities and is headed by Charles Koppelman.

15 .     Defendant Entertainment Finance International, LLC ("EFI") is a limited liability corporation organized and existing under the laws of the State of Delaware with its principal place of business at 110 West 57th Street, New York, New York 10019.  Upon information and belief, EFI is a partnership formed by defendant Prudential Securities and defendant RZO to finance cash flows and create asset-backed securitizations in the entertainment industry.

16 .     Defendant UCC Lending Corporation ("UCC Lending") is a corporation organized and existing under the laws of the State of Delaware with its principal place of business at 1330 Avenue of the Americas, New York, New York 10019.  Upon information and belief, defendant UCC Lending is a special purpose, bankruptcy remote subsidiary of defendant CAK/Universal that provides collateralized loans with respect to CAK/Universal's transactions.

     BACKGROUND FACTS

Pullman's Creation of the "Bowie Bonds"™[1]

17 .   In 1996, David Pullman astonished the investment world by innovating the securitization of the royalty stream generated by certain intellectual property.

18 .   Mr. Pullman introduced this innovative and unprecedented concept to William Zysblat ("Zysblat"), president of defendant RZO, which served as the business management firm for, among other musical superstars, David Bowie ("Bowie").  Bowie's music catalogue had a proven track record of generating a significant royalty stream, and Zysblat had solicited Pullman to propose some innovative financing concepts for Bowie.  After some discussion, Pullman stated that he could securitize Bowie's catalogue.  In response, Zysblat stated that he was completely unaware of the concept of "securitization," querying "What's securitization?"

19 .   Mr. Pullman explained that securitization involved repackaging assets that enjoyed predictable cash flow as bonds that would be repaid by future royalty earnings.  This principle previously had been applied to assets generated by automobile  loans, credit card and mortgage payments, but never before to intellectual property holdings, such as Bowie's music catalogue.

20 .   Mr. Pullman conceived of the idea of applying securitization to the projected royalty stream from Bowie's music catalogue, thus creating the first intellectual property securitization ever -- a concept that radically altered the market place for asset-backed securities by the creation of Acelebrity@ bonds, subsequently often referred to as "Bowie Bond™" or "Pullman Bonds" as a consequence of Pullman's unique and unprecedented innovation in this field.

21 .     Because of the necessity of a reliable royalty stream, asset-backed securitization of intellectual property is only possible with respect to a finite, unique and highly select group of rights holders with established careers and predictable future royalty revenue streams.  Enormous efforts and due diligence are undertaken in order to make royalty assets suitable for securitization.  Plaintiff spent millions of dollars tailoring legal structural documents for this purpose, created unique royalty cash flow models and spent years creating databases of information, all to be used to securitize intellectual property rights.  Moreover, plaintiff also expended vast amounts of time and money in developing highly confidential compendia that act as guides to securitizing intellectual property assets and as educational manuals for potential investors. 

22 .   Very broadly speaking, the original Bowie Bonds™ operated as follows:  in exchange for the right to receive income from his music catalogue for a fifteen-year period, Bowie was paid a lump sum in cash, which was widely reported in Time, among other publications, to be $55 million.  The bonds are self-liquidating, in that the royalty stream is applied to reduce principal and interest.

23 .     Pursuant to a written agreement, dated September 3, 1996, Mr. Pullman selected Richard D. Rudder, Esq. ("Rudder") and his law firm, defendant WFG, to represent Bowie, as issuer, and plaintiff, as underwriter.  At the time, neither Rudder nor WFG had any experience whatsoever in structured-asset financing in the entertainment or intellectual property fields.  Indeed, because the transaction was the first of its kind, no law firm or any financial institution had expertise of any kind in structured-asset financing of intellectual property.

24 .   Mr. Pullman arranged for Bowie's manager, defendant RZO, to function as "servicer" for the life of the Bowie Bonds™.

25 .     Prudential Insurance purchased the entire allotment of $55 million of the Bowie Bonds™, issued on January 30, 1997, from plaintiff.

26 .   The principal Prudential representatives who negotiated with plaintiff concerning the Bowie Bonds™ were John Wilson ("Wilson"), Managing Director at Prudential Insurance, Andrea B. Kutscher ("Kutscher"), Vice President of Prudential Investments' Structured Finance Group, Tom Terchek, Vice President of Prudential Investments' Structured Finance Group, and Richard D. Gorevitz, in-house counsel.

27 .   In connection with its investment in the Bowie Bond™ transaction, Prudential Insurance entered into a written confidentiality agreement with plaintiff on October 10, 1996, the terms of which prevented Prudential Insurance from disclosing any non-public or proprietary information furnished in the course of the transaction.  (A copy of the October 10, 1996 confidentiality agreement is attached to this Complaint as Exhibit B and is incorporated herein by reference.)

28 .   The Bowie Bonds™ were issued as a private placement and confidential written prospectuses were circulated only to the parties, their attorneys and the financial ratings agencies.

29 .   Mr. Pullman's successful adaptation of securitization to intellectual property assets through the Bowie Bonds™ was heralded in over 2,000 articles in national and international financial and general media, including, inter alia, American Banker, "If It Moves, David Pullman Might Securitize It" (Feb. 28, 1997), Music Copyright Matters, "David Pullman: 55 Million Dollar Man" (Oct. 1998), The New York Post, "Seinfeld Eyes Jump onto Bowie Bandwagon" (Apr. 20, 1998), Rolling Stone, "A Piece of the Rock" (Oct. 1, 1998), and Crains New York Business, "Will Bowie Banker Avoid Fall to Earth" (July 28, 1997).

30 .   As a result of this extraordinary press coverage, Mr. Pullman was approached by a large number of individual artists, potential investors and financial institutions, all of whom expressed interest in working with Mr. Pullman to structure similar securitizations and loans based upon various intellectual property assets that they owned or controlled. 

The RZO/Pullman Partnership

31 .   In January 1997, RZO and plaintiff entered into an oral partnership agreement (the "RZO/Pullman Partnership").  Pursuant to this partnership agreement, RZO agreed to provide plaintiff with exclusive rights to all of its music clients.  Plaintiff agreed to provide its services and investor base to the RZO/Pullman Partnership and, inter alia, to structure a securitization program for the issuance of royalty-backed securities and to structure and obtain a secured line of credit for such transactions through a revolving warehouse loan facility.

32 .   As part of their partnership agreement, plaintiff shared with its new partner, RZO, all types of confidential and propriety information, including, without limitation, client lists, the status of transactions then under negotiation for securitization, related cash flows, contact information of managers and attorneys for possible asset owners, legal documents necessary for the completion of these transactions, lists of possible asset types and how each might work for securitizations and marketing materials, and various other confidential and proprietary information.

33 .   As a result of the RZO/Pullman Partnership agreement, RZO owed plaintiff all of the duties of a fiduciary, including the duty of undivided loyalty, the duty to act in the best interests of the partnership and the duty to refrain from any act that would harm either plaintiff or the partnership. 

34 .   In blatant breach of its fiduciary obligations, however, RZO failed to disclose to plaintiff that it was in imminent danger of losing many of its most celebrated clients, including the Rolling Stones, Patti Smith and Paul Simon, because of growing dissatisfaction on the part of such clients with the manner in which RZO had been managing their business and related affairs.  Plaintiff only later learned that in past years RZO had lost prominent clients such as Duran Duran, the Elvis Presley Estate and Lieber & Stoller, for similar reasons.

35 .   In the absence of RZO's egregious breach of its fiduciary duties in failing to disclose the precarious status of its client base, plaintiff would not have offered RZO a full fifty percent partnership interest, but rather would either have offered RZO a significantly reduced position or would have chosen to forgo RZO's participation entirely and have merely retained an outside accounting firm to perform ministerial accounting, royalty auditing and administrative services on an hourly basis.

Plaintiff Proposes the RFA Joint Venture

36 .     After the success of the Bowie Bonds™ in early 1997, plaintiff was solicited by numerous potential investors who sought to serve as revolving warehouse lenders to provide financing for future securitized entertainment and intellectual property bond transactions, without requiring plaintiff to make any capital investment whatsoever.  In or about April 1997, Prudential's Kutscher advised Mr. Pullman that Prudential Investments was in the process of establishing a new high-yield fund and warehouse facility and was seeking investment opportunities to fund.

37 .   In or about June 1997, plaintiff, at Kutscher's request, provided Prudential Investments with a written proposal outlining the terms for the formation of an entity to be known as Royalty Finance Company of America ("RFA") (a name coined by Pullman) -- a joint venture in which Prudential Investments would be the exclusive revolving warehouse lender and provider of subdebt on future bond issues.      

38 .   As part of the written proposal for RFA -- and with Prudential's assurances of strict confidence -- plaintiff disclosed to Prudential representatives confidential and proprietary information concerning future bond deals, which at that time were actively being negotiating.  Plaintiff shared with Prudential representatives the nature of those potential deals on a no-name basis.

The RFA Agreement and Prudential's Commitment Letter

39 .   The original RFA deal contemplated that plaintiff  would act as the investment bank and the broker dealer that would originate and structure all future bond deals.  Because of their partnership, plaintiff brought RZO into RFA joint venture as plaintiff's equal (i.e., 50/50) partner, to service future bond deals by performing accounting, royalty auditing and administrative services.  While RZO and plaintiff would be equal partners in RFA, thus reducing plaintiff's one hundred percent equity, it was originally agreed that Prudential Insurance and one or more of its subsidiaries would serve as the warehouse and sub-debt provider, would be a non-equity partner and would receive a guaranteed minimum return on its investment.

40 .   Upon review by Prudential Insurance of the proposed deal, Prudential Insurance executive Tom Terchek expressed the view that RFA had the potential to garner "huge returns."  Prudential Insurance Managing Director John Wilson stated to Mr. Pullman:  "You're going to be very, very rich from this." Prudential's original projections concluded that RFA would net between $11 and $12 million after its second year of operation and $20 million by its third year.

41 .   Soon after Mr. Pullman presented to Prudential plaintiff's RFA proposal, he and Prudential entered into intense and protracted negotiations concerning the terms for the formation of RFA, which continued throughout the summer and early fall 1997.  During this period Prudential repeatedly and unequivocally expressed its intention to provide a warehouse facility and to purchase any and all of the bonds that plaintiff would structure, and RZO would service, through RFA.

42 .     While plaintiff was negotiating with Prudential, plaintiff continued to be approached by many other lenders and investors seeking its expertise to structure intellectual property asset-based securitizations.  Plaintiff, however, in direct reliance on Prudential's repeated misrepresentations that it was fully committed to the consummation of the warehouse facility and subordinated debt/equity facility joint venture, refused to pursue any other potential warehouse lenders or bond investors and refrained from entertaining their proposals.   

43 .     After nearly six months of negotiations, Prudential issued a commitment letter dated October 21, 1997 (the "Commitment Letter"), agreeing to virtually all of the material terms for the formation of RFA.  In the Commitment Letter, Prudential committed to provide a revolving $100 million (expandable to $250 million) warehouse facility and an additional $15 million (expandable to $45 million) in subordinated financing to RFA for the purpose of making entertainment asset-based loans for ultimate securitizations.  The Commitment Letter, drafted by Prudential, was executed by Prudential Investments, plaintiff (then known as Fahnestock) and RZO.

44 .     Under the terms of the Commitment Letter, plaintiff was to act as exclusive placement agent for the loans and securitizations completed through RFA.  At the time the Commitment Letter was executed, all parties and their representatives agreed that plaintiff was to act as the principal figure in the transaction because of its status as the creator of such financial instruments. 

45 .   As provided in the Commitment Letter, Prudential retained Cadwalader, Wickersham & Taft ("Cadwalader") as its counsel in connection with the RFA transaction.  Cadwalader immediately began to draft the documents necessary to effectuate the formation of RFA, along with the required warehouse facility and subordinated financing documentation.  At the time the Commitment Letter was executed, Prudential advised plaintiff that it wanted to close the deal by December 31, 1997, and Prudential proceeded to complete the due diligence contemplated under the terms of the Commitment Letter.

Pullman Retains WFG as Counsel to Plaintiff and RZO

46 .     After the Commitment Letter was issued, Mr. Pullman, on behalf of the RZO/Pullman Partnership, contacted Rudder at WFG and retained WFG to represent plaintiff and RZO, plaintiff's partner, in the formation of RFA.  Rudder met with Pullman at plaintiff's offices at 805 Third Avenue in New York;  at that meeting, plaintiff hired WFG and Rudder and the legal fees and costs were outlined and approved.

47 .     Following the execution of the Commitment Letter, and at all times relevant to this action, WFG and Rudder, along with WFG partner Richard C. Sammis, Esq. ("Sammis"), represented and advised plaintiff and RZO in all dealings with Prudential in connection with the formation of RFA.

48 .   WFG was advised that all of plaintiff's transactions were strictly confidential and private.  Rudder, on behalf of WFG, agreed to represent plaintiff exclusively in music and intellectual property securitizations and repeatedly advised plaintiff that he would not perform legal services for any other party in plaintiff's line of business.  Pursuant to this agreement, Rudder was specifically advised not to give interviews, hold media sessions, conduct workshops, write articles, speak to the press, or otherwise let it be publicly known for the purpose of soliciting other clients that he or WFG performed services for plaintiff's transactions.  Under both its ethical obligations and the terms of its engagement by plaintiff, WFG was prohibited from divulging any details of plaintiff's transactions to any third parties.

49 .     Although WFG had previously entered into written confidentiality agreements with respect to other of WFG client's transactions,  Rudder rejected Mr. Pullman's suggestion that WFG enter into a written confidentiality agreement with plaintiff.  Rudder advised Mr. Pullman that the firm's professional and ethical obligations provided far more stringent protections with respect to confidentiality and fiduciary obligations than any restrictions that might be imposed contractually and stated that it was an institutional policy of WFG not to enter into formal confidentiality agreements.  WFG, however, on October 5, 1998 eventually did enter into an extremely broad confidentiality agreement with plaintiff, the terms of which guaranteed strict confidentiality for all proprietary information conveyed to WFG by plaintiff in connection with all past, current and future deals, including the Holland/Dozier/Holland transaction, which are described more fully below.  (A copy of the October 5, 1998 confidentiality agreement is attached to this Complaint as Exhibit C and incorporated herein by reference.)

50 .   At all times relevant hereto, WFG was well aware of its solemn ethical and professional obligations to preserve the confidentiality of plaintiff's proprietary and innovative business models and information.  Specifically, WFG entered into an "exclusive" arrangement with plaintiff, pursuant to which WFG agreed to refrain from performing any services in connection with music royalty securitization transactions without the express permission of plaintiff and, indeed, WFG's Rudder provided such oral assurances to Mr. Pullman on several occasions.  Moreover, pursuant to express agreements between plaintiff and WFG, WFG was prohibited from indicating in any manner publicly that the firm had been involved in assisting with the Bowie Bonds™ transaction.

The December 24, 1997 Modification Letter

51 .   With the Commitment Letter in place, plaintiff  devoted its energies to perfecting the details of the RFA transaction.  From late October 1997 through March 20, 1998, when Prudential unilaterally terminated the Commitment Letter, plaintiff disclosed to Prudential vast amounts of highly confidential and complex details to serve as the blueprint for Prudential's warehouse facility funding of the RFA intellectual property based securitizations.  Plaintiff also furnished to Prudential and WFG trade secrets and proprietary documents that had been created by plaintiff specifically for intellectual property based securitizations, including details of specific projects in development for future securitization transactions and the compendia comprising a guide to intellectual property securitizations and an educational tool for potential investors.

52 .   By letter dated December 24, 1997 (the "Modification Letter"), Prudential, plaintiff and RZO modified certain terms of the Commitment Letter.  The Modification Letter provided, inter alia, that Prudential would be a one-third equity partner in the RFA joint venture and that an additional $15 million in subordinated debt financing (expandable to $250 million) would be made available by Prudential under certain conditions.  In addition, it was agreed that plaintiff and RZO would have autonomous control over any transaction worth up to $5 million that might be drawn from Prudential's warehouse facility line of credit.

The February 1998 ADrop Dead@ Demands

 

53 .     After the Modification Letter was executed, Mr. Pullman became increasingly concerned about Prudential's delay in closing the deal.  Pullman's concerns were addressed at a meeting in January 1998, which was attended, inter alia, by Mr. Pullman, Thomas Cyrana from RZO, and Rudder and Sammis from WFG, who were acting as counsel to the RZO/Pullman Partnership.  At the meeting, Prudential presented to plaintiff an additional series of unreasonable demands -- demands that directly contradicted the terms of the Commitment Letter, the Modification Letter and documents that had been drafted and previously agreed to by the parties.  The January 1998 meeting was highly contentious.  All issues, however, were resolved and the parties renewed their commitment to close the deal as soon as possible.

54 .   In February 1998, the parties to the RFA deal met once again.  At the meeting, Prudential again presented plaintiff with yet additional "new" terms concerning the parties' joint venture, this time also issuing an ultimatum:  either plaintiff  signed Prudential's non-negotiable modification letter incorporating Prudential's new terms (the "Drop Dead Memo") or the RFA deal would not be consummated.

55 .     Among Prudential's outrageous and onerous new demands was a provision that Prudential and RZO each receive one-third of plaintiff's fees as placement agent on any Pullman Bond™ issuance, regardless whether Prudential or RZO were involved in any capacity.  Such a demand violated the terms of the joint venture, which was not intended to encompass any deal that was not funded directly by Prudential's warehouse financing.  Mr. Pullman advised Prudential of his opinion that it was illegal to share underwriting fees with a firm that was not a securities dealer.  As provided in the preceding RFA agreements, any deal not funded by the warehouse was not part of RFA and, consequently, could not generate fees for Prudential and RZO.

56 .     Immediately following the February 1998 meeting, Rudder advised plaintiff not to sign the Drop Dead Memo that Prudential had prepared.  Rudder also advised plaintiff that, because the RFA transaction was now fully structured and documented, Prudential could close the deal without further assistance from plaintiff and might, in fact, approach RZO and exclude plaintiff from the deal entirely.

57 .   Also after the February 1998 meeting, RZO's Zysblat advised Mr. Pullman that Prudential had propositioned RZO to close the RFA deal without plaintiff, asking "Would you go ahead without Pullman?"  When Mr. Pullman responded that such an action would lead to a lawsuit, Zysblat tried to dissuade him from instituting litigation, stating that a lawsuit would severely damage plaintiff's and Mr. Pullman's reputations in the entertainment industry.  Mr. Pullman reminded Zysblat that he had created RFA and had brought both RZO and Prudential into the transaction and allowed them to become involved in the transaction.  In a separate conversation, Rudder also advised Mr. Pullman not to bring suit against Prudential because of Prudential's stature as a major lender.  (Rudder failed to disclose that Prudential was also a regular client of WFG.)

Plaintiff's Accession to Prudential's Demands

58 .   By letter dated March 13, 1998, Mr. Pullman outlined to Zysblat plaintiff's agreement to each of Prudential's new conditions as set forth in the Drop Dead Memo.

59 .     After several unproductive telephone conferences with Wilson to resolve what Prudential continued to insist on as non-negotiable amendments to the RFA deal, plaintiff requested a meeting with Prudential to resolve the issues set forth in Prudential's Drop Dead Memo.  At the meeting, which was held on March 20, 1998, Mr. Pullman, on behalf of plaintiff, emphatically and unequivocally agreed to all of Prudential's new conditions.  Rudder attended the meeting as plaintiff's counsel.  Neither Zysblat nor any other principal of RZO attended the meeting.

60 .     Prior to the March 20 meeting, Prudential and its attorneys had approved the venture, and Prudential had long before successfully completed the due diligence required under the Commitment Letter.

61 .   At the conclusion of the meeting, all parties agreed that a final deal had been reached on the revised terms and that they would proceed to close the RFA deal immediately.  Mr. Pullman advised Rudder that plaintiff wanted to move quickly to finalize and execute the closing documents.

Prudential's Repudiation of its Commitment

62 .     Despite its express accession to each of Prudential's demands, plaintiff received a letter from Wilson dated March 20, 1998 -- the same day as the meeting -- falsely stating that plaintiff had raised issues at the meeting that indicated that plaintiff "was not committed to the cooperative effort required to make a venture such as RFA successful."  Wilson closed the letter by stating that "Prudential has decided to end our consideration of joining with [plaintiff] in this joint venture."

63 .   Mr. Pullman called Wilson immediately to ask why he had sent a termination letter after plaintiff had acquiesced to all of Prudential's demands.  Mr. Pullman asked Wilson if Prudential was attempting to conclude the venture with RZO without plaintiff, as Rudder and Zyzblat clearly had insinuated earlier.  Wilson stated that Prudential had decided not to go forward with the deal with RZO or with anyone else, falsely adding that Prudential was "getting out of the entertainment and intellectual property securitization business."

64 .     Wilson's statement was swiftly contradicted when plaintiff received another draft of documents for the venture later that same week, documents that revealed Prudential's and RZO's determination to proceed with the RFA transaction without plaintiff.  The drafts were identical in form to the documents presented to plaintiff and reflected the agreement reached by plaintiff and RZO and Prudential Insurance, except that plaintiff's name was removed from the documents and the distribution list.  Prudential's attorneys at Cadwalader telephoned Mr. Pullman numerous times, frantically demanding the return of documents that erroneously -- and "inadvertently" -- had been sent to him.  Although Rudder and Zysblat denied receiving the draft documents for the joint venture that excluded plaintiff, they were named on the hand delivery distribution list accompanying the documents.

65 .   On April 15, 1998, a Reuters press release announced that RZO and Prudential had created a partnership, EFI, to finance cash flows and create new securitizations for asset-backed deals in the entertainment industry.  The newly announced enterprise mirrored precisely plaintiff's original business plan for RFA, which was provided to defendants on a confidential basis.  The only differences between RFA and EFI was the name of the enterprise and the absence of plaintiff, the key architect of the plan and innovator of the bonds to be marketed, from the new deal.

66 .     Having excluded plaintiff from the joint venture it originally proposed, and having misrepresented to plaintiff their determination to negotiate in good faith to consummate the transaction, defendants Prudential Insurance, Prudential Investments and RZO placed plaintiff in a significantly worse position than it had occupied prior to their duplicitous conduct.  Prior to and during the negotiations for the RFA joint venture, plaintiff repeatedly had been approached with offers for financing vehicles and joint venture partners, which plaintiff had in good faith rejected on the basis of Prudential's repeated assurances of its commitment to the consummation of the RFA venture. 

67 .     Because of the passage of such a long period of time before Prudential and RZO repudiated their agreement, international financial upheavals, including the Russian debt crisis, had rendered it impossible for plaintiff to secure replacement financing for the warehouse facility needed to fund the joint venture for the securitization project as conceived and negotiated in good faith by plaintiff.  Plaintiff was thus precluded from engaging in the types of transactions contemplated by the RFA deal, and consequently precluded from realizing the substantial revenues that would have been occasioned thereby.

WFG Breaches of Fiduciary and Contractual Duties

68 .   In blatant disregard of its fiduciary duties to plaintiff, defendant WFG represented defendant RZO in the formation of EFI, to the direct detriment of plaintiff, WFG's original client.  In breach of its obligations to preserve the secrets and confidences of plaintiff, WFG utilized plaintiff's proprietary and confidential documents and trade secrets to effectuate the creation of EFI.  At no time did Mr. Pullman, plaintiff, or any of its predecessor entities either orally or in writing waive any potential or actual conflict of interest.

69 .   In addition, WFG actively marketed itself to plaintiff's competitors, to the securitization community and to the public at large, improperly and unethically making use of confidential, proprietary information created and paid for by plaintiff and its clients and blatantly breaching WFG's promises and fiduciary duties to plaintiff not to market or publicize such sensitive information in any manner. 

70 .   One example of WFG's egregious disregard for its contractual, fiduciary and ethical obligations was Rudder's behavior at an Asset-Backed Securitization Conference in Scottsdale, Arizona, where he openly misappropriated and publicized plaintiff's proprietary information in an attempt to attract new business.

The Prudential/CAK/Universal Warehouse Facility and Equity Joint Venture

         

71 .   As part of the RFA negotiations and as part of the Bowie Bond™ transaction, Prudential Insurance and Prudential Investments had received certain proprietary, confidential information and trade secrets furnished by plaintiff.  John Wilson of Prudential Investments told Pullman that, on numerous occasions beginning prior to the close of the Bowie transaction in the fall and winter of 1996 into the fall of 1997, he received telephone calls from Vincent Pica, the President of Prudential Securities, asking Wilson to release to Pica the details of the David Bowie transaction.  In their quest for the know-how to do Pullman Bond™ deals, Prudential Securities violated the Chinese Wall that Prudential Insurance purportedly erected with respect to plaintiff's transactions, as well as applicable NASD and SEC rules.  

72 .   Mr. Pullman also learned from Wilson that, in further violation of Prudential's internal policies and applicable securities regulations, Murray Weiss, a Prudential Securities Vice President, undertook a day-long field trip to New Jersey in the fall of 1997 to seek and obtain from Prudential Insurance officers, including Tom Terchek and Andrea Kutscher, the confidential information and proprietary documents that had been disclosed to Prudential Insurance representatives by plaintiff in connection with the Bowie Bonds™ and RFA transactions.

73 .   Also in the fall of 1997, plaintiff was approached several times by Charles Koppelman, the former chairman of EMI Capitol Records ("Koppelman"), to form an alliance to securitize intellectual property assets.  Based on plaintiff's negotiations with Prudential Insurance, plaintiff declined Koppelman's invitation.  When rumors began circulating during that time period that Koppelman might be in negotiations with a Prudential entity to form an intellectual property securitization joint venture, plaintiff confronted John Wilson, who denied that Prudential was in discussions with Koppelman.

74 .     Despite Wilson's earlier protestations to the contrary, in January 1998 Wilson disclosed to Mr. Pullman that Prudential Securities was about to close an intellectual property asset backed securitization joint venture with Koppelman.  This joint venture later came to be called "CAK/Universal Credit Corporation" ("CAK").  Wilson explained that Prudential Securities was providing Koppelman with a $200 million line of credit as well as equity through a warehouse facility and was also granting Koppelman exclusive use of the Prudential name.  Consequently, despite the alleged "Chinese Wall" separating the activities of Prudential Securities and Prudential Insurance, the RFA venture would be precluded from utilizing the Prudential name in its marketing plan, as previously had been agreed to by all parties.

75 .   Upon information and belief, Prudential Securities  improperly made use of Pullman's proprietary information to structure its deal with CAK, an entity created and financed by Prudential Securities to compete directly with plaintiff.  As part of the CAK transaction, defendant UCC Lending was created as the vehicle to make collateralized loans.

76 .   At or about the time Koppelman and Prudential Securities were in discussions to form the CAK/Universal joint venture, plaintiff was in the process of finalizing another securitization transaction based on the royalty income stream generated by the composition catalogue of the famous Motown composers Brian Holland, Edward Holland, Jr. and Lamont Dozier ("Holland-Dozier-Holland").  After Prudential Insurance representatives approached plaintiff to express an interest in purchasing the bonds to be secured by the Holland-Dozier-Holland  catalogue, on February 12, 1998, Prudential Insurance and Prudential Investments executed another confidentiality agreement, pursuant to which they were required to protect the secrecy of all proprietary and non-public information provided by plaintiff.  (A copy of the February 12, 1998 confidentiality agreement is attached to this Complaint as Exhibit D and is incorporated by reference herein.) 

77 .   In blatant violation of the contractual obligations imposed by the confidentiality agreements concerning the Bowie and Holland-Dozier-Holland transactions, and by improperly disclosing the highly confidential and trade secret information that Prudential Insurance representatives had received from plaintiff in the course of negotiating the RFA venture, Pica, Murray Weiss and Richard Scurra, among other Prudential Securities investment bankers, were provided with this information for use in negotiating and consummating the joint venture with CAK.  

78 .     Further, Prudential Securities and CAK representatives proceeded knowingly, deliberately and tortiously to interfere with plaintiff's relationships with its clients, including the songwriting rhythm and blues legends Ashford & Simpson and Motown hit songwriters Brian Holland, Edward Holland, Jr. and Lamont Dozier, by attempting to entice them to violate their exclusive contractual commitments to Pullman -- agreements that were matters of public record and certainly were known to Prudential Securities and CAK.

79 .   On or about April 15 and 16, 1998, Mr. Pullman contacted Prudential Securities and CAK demanding that they cease and desist from such tortious interference.

80 .   In addition, upon information and belief, and as reported in the press, CAK recently has taken the further audacious step of drawing upon the proprietary information purloined from Mr. Pullman to expand its business operations into the field of bond deals securitized by apparel industry and sports team royalty payments.   

Additional Tortious Actions

81 .   As evidence of additional contractual breaches of the various confidentiality obligations willingly undertaken by Prudential entities, Prudential representatives recently have been improperly misrepresenting themselves to potential investors in royalty-backed securitization transactions as the originators of the Bowie Bond™ deal -- which Mr. Pullman alone conceived of and executed -- in a blatant attempt publicly to misappropriate and convert plaintiff's unique proprietary financing innovations for Prudential's benefit to the detriment of plaintiff. 

82 .   As a direct consequence of the misappropriation of plaintiff's proprietary and confidential trade secrets by defendants in this action, any number of transactions identified and/or under negotiation by plaintiff have been interfered with and/or stolen.  Among the transactions initiated by plaintiff that have been purloined or obstructed by the various defendants are securitization deals initiated by plaintiff involving  Holland-Dozier-Holland, Ashford and Simpson, TVT, SESAC, Barrett Strong and Leonard Cohen, among others.  None of the securitization transactions identified herein could be undertaken or contemplated by defendants in the limited time in which they have been conducting securitizations in the absence of the wrongful misappropriation and conversion of plaintiff's confidential and proprietary trade secrets. 

  COUNT I

BREACH OF CONTRACT

(AGAINST PRUDENTIAL INSURANCE AND PRUDENTIAL INVESTMENTS)

 

83 .     Plaintiff repeats and realleges each and every allegation contained in paragraphs 1 through 82 hereof, as if fully set forth herein.

84 .     Defendants Prudential Insurance and Prudential Investments, for good and valuable consideration, entered into valid and binding confidentiality agreements in connection with the Bowie transaction on October 10, 1996 and in connection with the Holland-Dozier-Holland transaction on February 12, 1998, pursuant to which defendants were prohibited from the unauthorized disclosure to any third party the extremely sensitive proprietary information and trade secrets that were provided to defendants by plaintiff under the terms of the confidentiality agreements.

85 .     Plaintiff fully performed its obligations under the agreements by providing to the defendants plaintiff's uniquely valuable proprietary information and trade secrets in connection with the Bowie and Holland-Dozier-Holland transactions.

86 .   The information that plaintiff disclosed was highly confidential and proprietary, in that it included, among other things, financial analyses and transactional precedents never used before in the financial industry, and was known only to plaintiff as the creator and innovator of the securitization of royalty-based income.

87 .     Defendants breached their obligations under the confidentiality agreements by improperly disclosing, without  authorization, plaintiff's proprietary information and trade secrets to third parties, specifically, by making use of such information and trade secrets in connection with the creation of EFI -- an entity created solely to compete against plaintiff -- which could not have been structured without the improper use of plaintiff's proprietary information.

88 .     Defendants further breached their obligations under the confidentiality agreements by improperly disclosing, without authorization, plaintiff's proprietary information and trade secrets to, among others, employees of defendant Prudential Securities, including Prudential Securities' employee Murray Weiss, who improperly made use of plaintiff's proprietary information to create and structure CAK/Universal -- an entity created solely to compete against plaintiff -- which could not have been created with the improper use of plaintiff's proprietary information.

89 .     Because of defendants' breach of the confidentiality agreements, plaintiff has been injured as a consequence of the fact that plaintiff's proprietary information and trade secrets have been disclosed to plaintiff's competitors.

90 .   As a result of defendants' breaches of the confidentiality agreements, plaintiff has been damaged in an amount to be determined at trial, but not less than $100 million, together with interest thereon.

COUNT II

BREACH OF CONTRACT

(AGAINST WILLKIE, FARR & GALLAGHER)

 

91 a      Plaintiff repeats and realleges each and every allegation contained in paragraphs 1 through 90 hereof, as if fully set forth herein.

92 a      Defendant WFG, for good and valuable consideration, entered into a valid and binding confidentiality agreement with plaintiff on October 5, 1998, which clearly prohibited WFG from disclosing, without plaintiff's express authorization, any proprietary information or trade secrets provided to it by plaintiff during the course of WFG's representation of plaintiff as its counsel.

93 a      Plaintiff fully performed all of its obligations under the agreement and in reliance thereupon disclosed unique and valuable proprietary information to WFG.

94 a    The information plaintiff disclosed to WFG was highly confidential in that it included, among other things,  financial analyses and transactional precedents never before used in the financial industry and known only to plaintiff as the creator of royalty income based securities.

95 a      Defendant WFG breached its obligations under the confidentiality agreement by making use of plaintiff's proprietary information and trade secrets, as discussed more fully supra, without plaintiff's authorization, during the course of its representation of RZO in connection with the completion of the transaction creating EFI -- an entity created solely to compete against plaintiff.

96 a      Defendant WFG has further breached its obligations under the confidentiality agreement by making use of, and disclosing to third parties, without plaintiff's authorization, plaintiff's proprietary information and trade secrets at various conferences, as discussed more fully supra, as a means of developing additional business opportunities for WFG with potential competitors of plaintiff, all to the detriment and injury of plaintiff.

97