[Updated, 4:52 p.m. Tuesday:]
The winner of a $300 million judgment against Nashville entrepreneur Greg Daily has asked Nashville's U.S. Bankruptcy Court to hold an expedited hearing over Daily's Chapter 11 petition, claiming that it is "a bad faith filing" intended to keep the Los Angeles Superior Court from proceeding with a hearing on punitive damages set for later this week.
Nashville attorney Bob Mendes, representing plaintiff Douglas Shooker, filed a motion this afternoon to exempt Shooker from the automatic protection against litigation that comes into effect when a bankruptcy case is filed. Mendes asked the court to hold a hearing on the request no later than 9 a.m. Thursday so that the jury in the L.A. case can get on with the punitive damage phase of its deliberations.
Without such permission from the bankruptcy court, the punitive phase cannot proceed, Mendes argues. As a result, "the entire State Court action, which commenced nearly seven years ago, may be entirely re-litigated in bankruptcy court," according to today's motion. And the jurors – who have endured a four-month trial – might trigger a mistrial by refusing to show up again, Mendes says.
The motion, together with extensive exhibits illustrating Shooker's arguments in the case, is available at this link.
Also filed today was a disclosure by Daily's bankruptcy attorney, Bill Norton of Bradley Arant Boult Cummings, showing that Daily paid nearly $46,000 in legal fees before his case was filed.
As initially posted:
Greg Daily, one of the most successful entrepreneurs currently active in Nashville, filed for bankruptcy protection yesterday after losing an epic legal battle in California earlier in the day.
A Los Angeles Superior Court jury awarded $300 million in compensatory damages to Douglas Shooker, a California businessman who had tried to purchase Nashville-based iPayment Inc. in 2000, when it was an early-stage venture. The jury found in favor of Shooker and against Daily on 27 out of 28 questions posed in the verdict form. It will reconvene later this week to decide on punitive damages.
Shooker filed suit in 2002, alleging that Daily schemed to deny him a majority stake in iPayment after he had furnished the company with information about his plans to develop a system to process online payments.
iPayment went on to become a publicly traded company before Daily led an investment group that took it private again in 2005. The company rang up 2008 profits of $14.3 million on sales of $800 million.
Earlier in his career, Daily teamed with Rich Roberts to create PMT Services Inc. That payment-processing firm started out with less than $2,000 in capital in 1984, went public in 1994 and sold out to Atlanta-based Nova Information Systems Inc. for $1.3 billion in 1998.
The Shooker case went to trial in January. It included deposition testimony from iPayment co-founder and president Carl Grimstad and Nashville entrepreneur Tom Black. Black's testimony, available at this link, details how he made an early investment in the company that would become iPayment. Shooker sought testimony from David Wilds of Nashville's First Avenue Partners as well, though the record is unclear as to whether he testified.
Jim Penrod of the national law firm Morgan, Lewis & Bockius represents Daily. He said today that the defendant plans to appeal. Penrod declined to comment further, but he furnished a copy of his opening statement as a summary of his case; it is available at this link.
In the statement, Penrod said the crux of the case was who said what in a 20- or 30-minute meeting between Daily, Grimstad and Shooker on Aug. 30, 2000. "Greg Daily is being sued individually on the basis of an oral agreement that Mr. Shooker says was formed at the Polo Lounge out at the Beverly Hills Hotel," Penrod told the jury.
The attorney poured scorn on Shooker's claim that his "unique ideas about credit-card processing" made Daily eager to partner with him. "Two CEOs that had been in this industry for 20 or 25 years are talking to someone they've never heard of before in this industry, never had a job in this industry, saying, 'Gee, maybe you've thought of something that nobody else has thought of,'" Penrod said.
Daily's attorneys sought unsuccessfully to show the jury evidence that Shooker was a "litigious individual," as argued in the motion at this link. In 2004, he settled a lawsuit against former Global Crossing Ltd. CEO Gary Winnick just before a jury was about to award Shooker $116 million, according to a Los Angeles Times story.
Daily's legal team also tried to get the court to keep Shooker from presenting what he claimed was evidence that Daily defrauded the shareholders of iPayment. Court records do not make clear whether the motion, available here, was granted.
Bill Norton of Bradley Arant Boult Cummings filed the Chapter 11 petition on behalf of Daily. It states that Daily has personal assets in the $10 million - $50 million range and liabilities – presumably including yesterday's judgment – of between $100 million and $500 million. None of the required financial disclosures and other schedules have yet been filed in the case. Norton could not be reached this afternoon.
iPayment continues to make filings with the Securities and Exchange Commission because some of its debt is publicly held. According to its most recent annual report, Daily has drawn no salary from iPayment for the past two years. The report makes no mention of the Shooker litigation in its section on pending legal proceedings; the company itself was not a defendant in it.