JMBT Live Moves to Dismiss Fraud Complaint and Its ‘Spurious Accusations’

The May 19 fraud complaint in which investor Locust Group alleges JMBT Live, owner of the Tilt entertainment platform, and its CEO, Michael Russell, “misrepresented” the status of the company’s contracts and negotiations with prospective content partners (see 2305220037), “should have never been filed,” said JMBT’s memorandum of law Tuesday (docket 1:23-cv-04203) in U.S. District Court for Southern New York in Manhattan in support of its motion to dismiss the complaint.

Locust was willing to make its “spurious accusations” in a public filing, but it “obviously had no factual basis to do so,” said the memorandum. It’s “not an exaggeration” to say Locust fails to offer factual allegations that support “even a single element of its claim” that JMBT “engaged in fraud,” it said.

That failure starts with Locust’s “inability to identify a single false statement purportedly made” by JMBT or Russell, said the memorandum. Locust instead “lards” its complaint “with only the most boilerplate, conclusory allegations imaginable,” it said. Its effort can’t “succeed,” it said.

The court should dismiss Locust’s fraud claim “for failing to assert any factual allegations in support of its claim,” said the memorandum. The complaint simply lists a handful of “updates” that Russell sent to JMBT shareholders about JMBT’s contract negotiations, it said. But the complaint can’t “actually say which, if any, of these statements was allegedly false,” it said.

The court should also dismiss Locust’s “derivative claim” for breach of fiduciary duty “because it suffers from the same fatal defects as the fraud claim plus a few others,” said the memorandum. The breach of fiduciary duty claim is premised on the “exact same” alleged misrepresentations that are the basis of Locust’s fraud claim, it said. Because Locust doesn’t adequately plead a fraud claim, it likewise can’t plead a breach of fiduciary duty claim based on that alleged fraud, it said.

“More fundamentally,” the court doesn’t even need to address the merits of the breach of fiduciary duty because it’s “not properly brought” before this curt. When Locust agreed to invest in JMBT, it also agreed to the provisions of JMBT’s “corporate charter,” which “plainly states” that any derivative claim alleging breach of fiduciary duty must be brought in Delaware Chancery Court, it said. That’s “the proper forum” for adjudicating Locust’s breach of fiduciary duty claim, it said.

In addition to bringing its case in the “wrong forum,” Locust failed “to satisfy the demand requirement for asserting a derivative claim on behalf of JMBT,” said the memorandum. A plaintiff wishing to bring a claim derivatively “must either first make a demand on the company board to bring the lawsuit or allege facts with particularity showing that such a demand would be futile,” it said. Locust attempts to allege demand futility, “but supports that claim with yet another purely conclusory allegation,” it said. That’s not “nearly enough,” it said.