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What changed 10-K

Item 3. Legal Proceedings

2023-03-20 compared with 2022-04-15 · 76 added, 151 removed, 12 unchanged (95% of the section changed)

1 unchanged sentence

From time to time, we become involved in litigation and arbitrations in the ordinary course of business.

Legal fees and other costs associated with such actions are expensed as incurred.

addition, we assess the need to record a liability for litigation and contingencies.

Legal fees and other costs associated with such actions are expensed

In addition, we assess the need to record a liability for litigation and contingencies.

We reserve for costs relating to these matters when a loss is probable, and the amount can be reasonably estimated.

Merger-Related Shareholder Litigation

Brooklyn (then known as NTN Buzztime, Inc.) and its former directors were named as defendants in ten substantially similar actions arising out of the Merger that were brought by purported

pre-Merger stockholders of Brooklyn:

NTN Buzztime, Inc., et al., No.

1:20-cv-08663-LGS (S.D.N.Y.);

NTN Buzztime, Inc., et al., No.

1:20-cv-08755-LGS (S.D.N.Y.);

NTN Buzztime, Inc., et al., No.

1:20-cv-08747-LGS

NTN Buzztime, Inc., et al., No.

1:21-cv-00047-LGS (S.D.N.Y.);

NTN Buzztime, Inc., et al., No.

1:21-cv-00728-LGS (S.D.N.Y.);

NTN Buzztime, Inc., et al., No.

1:20-cv-05106-EK-SJB (E.D.N.Y.);

Buzztime, Inc., et al., No.

3:20-cv-02123-BAS-JLB (S.D.

NTN Buzztime, Inc., et al., No.

3:21-cv-00157-WQH-AGS (S.D.

NTN Buzztime, Inc., et al., No.

1:20-cv-01401-CFC (D.

and Nicosia v.

NTN Buzztime, Inc.,

1:21-cv-00125-CFC (D.

Del.) (collectively, the “Stockholder Actions”).

Only two of the Stockholder Actions (the Chinta and Nicosia cases) also named Brooklyn LLC.

These actions asserted claims alleging violations of Sections 14(a)

and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder and both the Chinta and Nicosia cases alleged that Brooklyn LLC is a controlling person of Brooklyn.

The complaints generally alleged that the defendants failed to disclose

allegedly material information in a Registration Statement on Form S-4 filed on October 2, 2020, including:

(1) certain details regarding any projections or forecasts of Brooklyn or Brooklyn LLC may have made, and the analyses performed by

Brooklyn’s financial advisor, Newbridge Securities Corporation;

(2) conflicts concerning the sales process;

and (3) disclosures regarding whether or not Brooklyn entered into any confidentiality agreements with standstill and/or “don’t ask, don’t

waive” provisions.

The complaints generally alleged that these purported failures to disclose rendered such Registration Statement on Form S-4 false and misleading.

The complaints requested:

preliminary and permanent injunction of the Merger;

rescission of the Merger if executed and/or rescissory damages in unspecified amounts;

direction to the individual directors to disseminate a compliant Registration Statement on Form S-4;

an accounting by Brooklyn for all alleged damages

a declaration that certain federal securities laws had been violated;

and reimbursement of costs, including attorneys’ and expert fees and expenses.

On or about February 26, 2021, in order to render moot certain of the disclosure claims

asserted in the Stockholder Actions, to avoid nuisance, potential expense, and delay, and to provide additional information to Brooklyn’s stockholders, Brooklyn determined to voluntarily supplement the Form S-4 with certain additional

In exchange for those disclosures, the plaintiffs in each of the Stockholder Actions agreed to voluntarily dismiss their claims.

As of the date of this Annual Report on Form 10-K all ten actions have been dismissed.

Following the

dismissal the parties amicably resolved plaintiffs’ counsel’s request for an award of attorneys’ fees and expenses based on the purported benefit contented to be conferred on Brooklyn’s stockholders as a result of the supplemental disclosures.

Dhesh Govender v.

Brooklyn Immunotherapeutics, LLC, et al., Index No.

650847/2021 (N.Y.

On or about February 5, 2021, Dhesh Govender, a former short-term consultant of Brooklyn LLC, filed a complaint against Brooklyn LLC and

certain individuals that plaintiff alleges were directors of Brooklyn LLC.

The complaint is captioned, Dhesh Govender v.

Brooklyn Immunotherapeutics, LLC, et al., Index No.

Eterna Therapeutics LLC, et al., Index No.

650847/2021 (N.Y.

Plaintiff alleges that

Brooklyn LLC and certain of its officers engaged in unlawful and discriminatory conduct based on race, national origin and hostile work environment.

Plaintiff also asserts various breach of contract, fraud and quantum meruit claims based on

an alleged oral agreement pursuant to which he alleges Brooklyn LLC agreed to hire him as an executive once the Merger was completed.

In particular, plaintiff alleges that, in exchange for transferring an opportunity to obtain an agreement to

acquire a license from Novellus for its mRNA-based gene editing and cell reprogramming technology to Brooklyn LLC, he was promised a $500,000 salary and 7% of the equity of Brooklyn LLC.

Based on these and other allegations, plaintiff seeks

damages of not less than $10 million, a permanent injunction enjoining Brooklyn LLC from exercising the option to acquire such license from Novellus or completing the proposed Merger.

On or about February 19, 2021, an amended complaint was

filed asserting the same causes of action but withdrawing the request for injunctive relief.

On June 6, 2021, defendants filed a motion to compel arbitration or,

in the alternative, for partial dismissal of the complaint for failure to state viable fraud, quantum meruit and employment discrimination claims.

After obtaining extensions of time to respond, plaintiff opposed the defendants’ motion on

August 9, 2021.

The defendants filed their reply on September 3, 2021.

The Court heard oral argument on the motion to compel arbitration and/or dismiss and the motion to seal on October 13, 2021 .

By Order dated November 10, 2021, the Court granted defendants’ motion to compel Govender to arbitrate all of his claims against them, based on the arbitration clause of his consulting agreement with Brooklyn

Govender thereafter filed his Statement of Claim (the “Demand”) with the American Arbitration Association (“AAA”), Case No.

01-21-0017-9417, on December 15, 2021 against the same defendants, and served it on defendants’ counsel on

February 3, 2022.

In his Demand, Govender continues to assert statutory discrimination claims against all defendants, claims against Brooklyn LLC premised on the breach of an alleged oral promise to issue Govender 7% of the equity of

Brooklyn LLC and to employ Govender at a $500,000 annual salary in exchange for allegedly arranging and negotiating the Novellus license, common law fraud claims against the Company and Cherington based on the breach of these same promises

and a claim for quantum meruit against the Brooklyn LLC.

In his Demand, Govender now claims that the fair and reasonable value of his services on the quantum meruit claim exceeded $100 million and is seeking damages in an amount to be

determined at the hearing.

Defendants filed an answering statement to the Demand on February 28, 2022 and the parties are in the process of conferring on the selection of a three-member arbitration panel.

At this stage in the

litigation, the Company is not able to predict the probability of a favorable or unfavorable outcome.

Allen Wolff, Michael Gottlieb, Richard Simtob, Susan Miller, and NTN Buzztime, Inc., C.A.

2021-0193-KSJM (Del.

On or about March 12, 2021, Douglas Carlson, a purported stockholder of Brooklyn (then known as NTN Buzztime, Inc.), filed a verified

class action complaint against Brooklyn and its then current members of the board of directors, for allegedly breaching their fiduciary duties and violating Section 211(c) of the Delaware General Corporation Law.

In particular, plaintiff

seeks to compel the defendants to hold an annual stockholder meeting.

Plaintiff also moved for summary judgment at the same time that he filed his complaint.

In order to moot the claim addressed in the complaint, Brooklyn agreed to hold its

annual meeting on June 29, 2021, which date was subsequently rescheduled to August 20, 2021.

On or about May 6, 2021, the parties entered into a stipulation, which was “so ordered” by the court, extending defendants’ time to respond to the

complaint and to file their answering brief in opposition to plaintiff’s motion for summary judgment on or before July 16, 2021 and providing that plaintiff’s reply brief in support of his motion for summary judgment is due on or before

August 20, 2021.

On or about July 12, 2021, the parties entered in a further amended scheduling order, which provided that defendants were to respond to the complaint and file their answering brief in opposition to plaintiff’s motion for

summary judgment on or before September 16, 2021 and plaintiff was to file its reply brief in support of his motion for summary judgment on or before October 20, 2021.

On August 20, 2021, Brooklyn convened its 2021 annual meeting.

lack of a required quorum, the meeting was adjourned to September 3, 2021.

Thereafter, Brooklyn obtained a quorum, and the annual meeting was held on September 3, 2021.

On September 10, 2021, Brooklyn filed a report on Form 8-K with the SEC

announcing the results of the annual meeting.

On September 16, 2021, the parties filed a stipulation seeking voluntary dismissal of the complaint as moot.

The Court entered the dismissal on September 16, 2021 with prejudice as to the named

plaintiff and without prejudice as to other members of the purported class and retained jurisdiction for the purpose of determining any fee application to the extent it cannot be resolved amicably the parties.

Thereafter, on or about November 12, 2022, the parties resolved plaintiff’s counsel’s request for an award of fees and expenses for the purported benefit that Carlson contended was received by

stockholders as a result of his action.

Edmund Truell Matter

On May 14, 2021, Edmund Truell, a stockholder of Brooklyn, alleged that he sustained a loss because he was unable to sell shares of common stock timely due to a delay caused by Brooklyn’s

issuance of stock certificates in lieu of electronic book entry.

Emerald Private Equity Fund, LLC Matter

By a letter dated July 7, 2021, Emerald Private Equity Fund, LLC (“Emerald”), a stockholder of Brooklyn, made a demand pursuant to 8

220 to inspect certain books and records of Brooklyn.

The stated purpose of the demand is to investigate possible wrongdoing by persons responsible for the implementation of the Merger and the issuance of paper stock certificates,

including investigating whether:

(i) Brooklyn’s stock certificates were issued in accordance with the Merger Agreement;

(ii) certain restrictions on the sale of Brooklyn common stock following the Merger were proper and applied without

(iii) anyone received priority in post-Merger issuances of Brooklyn’s stock certificates that allowed them to benefit from an increase in the trading price of Brooklyn’s common stock;

and (iv) it should pursue remedial measures

and/or report alleged misconduct to the SEC.

Brooklyn has responded to the demand letter and has produced certain information to Emerald in connection with the demand, which is subject to the terms of a confidentiality agreement entered

into among the parties, including certain additional stockholders who have subsequent joined as parties to such agreement.

In October 2021, Emerald requested that Brooklyn produce additional information related to the authority, purpose

and justification for the restriction imposed on the sale of Brooklyn common stock following the Merger and the timing of share delivery to Brooklyn stockholders, following which request Brooklyn agreed to produce certain additional

information and emails relating to these topics.

On March 30, 2022, counsel to Emerald advised the Company that it was prepared to file suit against the Company, certain current and

former directors of the Company, and the Company’s financial advisor in connection with the Merger, on behalf of Emerald and a class of similarly situated stockholders with respect to some or all of the foregoing matters, alleging claims

for breach of fiduciary duty, conversion and aiding and abetting breach of fiduciary duty.

Emerald’s counsel has expressed a willingness to engage in private pre-suit early resolution discussions with the Company and its financial advisor

on behalf of individual stockholders whom counsel represents in addition to Emerald;

and the Company has agreed to respond to Emerald’s counsel by April 22, 2022.

The Company can provide no assurance that such pre-suit early resolution

discussions will be successful or that suit will not ultimately be filed against the Company, nor can the Company currently predict the outcome of any such suit, if filed.

The Company intends to defend itself vigorously against any and all

Additionally, on April 7, 2022, the Company received a demand for indemnification from its financial advisor as it relates to the aforementioned potential lawsuit.

On or about February 5, 2021, Dhesh Govender, a former short-term consultant of Eterna LLC, filed a complaint against Eterna LLC and certain individuals that plaintiff

alleged were directors of Eterna LLC.

Plaintiff alleged that Eterna LLC and certain of its officers and directors (“Govender defendants”) engaged in unlawful and discriminatory conduct based on race, national origin and hostile work environment.

Plaintiff also asserted various breach of contract, fraud and quantum meruit claims based on an alleged oral agreement pursuant to which he alleged Eterna LLC agreed to hire him as an executive once the Merger was completed.

On December 15, 2022,

the parties executed a Confidential Settlement Agreement and Release of All Claims.

On January 11, 2023, the parties filed a Stipulation to Discontinue in the Court action.

Also on January 11, 2023, Govender voluntarily dismissed the arbitration.

John Westman v.

2 unchanged sentences

On or about September 7, 2021, John Westman, a former employee of Novellus, Inc.

filed a Complaint in Middlesex County (Massachusetts)

Superior Court against Novellus, Inc.

and the company’s founders and former executives, Christopher Rohde and Matthew Angel (collectively, “Defendants”).

Brooklyn acquired Novellus, Inc.

filed a Complaint in Middlesex County (Massachusetts) Superior Court against Novellus, Inc.

Novellus, Inc.’s founders and former executives, Dr.

Christopher Rohde and Dr.

Matthew Angel.

The case includes allegations that Novellus, Inc.

violated the Massachusetts Wage Act (“Wage Act”).

Eterna acquired Novellus, Inc.

on July 16, 2021.

Westman’s claims relate to

alleged conduct that took place before Brooklyn acquired Novellus, Inc.

Pursuant to the July 16, 2021 Agreement and Plan of Acquisition, as well as a separate agreement among Brooklyn, Novellus, Inc., Mr.

Rohde, and Mr.

Angel are essentially assuming the defense of and paying the fees associated with defending against these claims.

To that end, on September 10, 2021, Morgan Lewis accepted service on behalf of all defendants.

On December 24, 2021,

Westman dismissed the case without prejudice so the parties could mediate the matter.

The parties’ February 2022 mediation was unsuccessful, but Mr.

Westman has not refiled suit.

Westman’s claims relate to alleged conduct that took place before Eterna acquired Novellus, Inc.

Westman agreed to dismiss the lawsuit and proceed with his claims in arbitration.

Following mediation, the parties settled this dispute in

December 2022.

The aggregate settlement amount payable by the Company for the two matters discussed above is approximately $0.5 million.

Novellus, Inc.

Sowyrda et al., C.A.

2184CV02436-BLS2

On October 25, 2021 Novellus, Inc.

filed a complaint in the Superior Court of Massachusetts, Suffolk County, against former Novellus, Inc.

employees Paul Sowyrda and John Westman

and certain other former investors in Novellus LLC (Novellus, Inc.’s former parent company prior to our acquisition of Novellus, Inc.), alleging breach of fiduciary duty, breach of contract and civil conspiracy.

Eterna acquired Novellus, Inc.

July 16, 2021.

On May 27, 2022 Novellus, Inc.

amended the complaint to withdraw all claims against all defendants except Paul Sowyrda and John Westman.

On July 1, 2022, Westman filed a motion to compel arbitration or in the alternative, to stay

the litigation pending the disposition of certain litigation in the Court of Chancery for the State of Delaware filed by Mr.

Sowyrda against Novellus LLC, Dr.

Christopher Rohde, Dr.

Matthew Angel, Leonard Mazur and Factor Bioscience, Inc.

captioned Zelickson et al., v.

Angel et al., C.A.

2021-1014-JRS and by Westman against Novellus LLC captioned Westman v.

Novellus LLC , C.A.

2021-0882-NAC (the

“Delaware Actions”).

On July 1, 2022, Sowyrda answered the complaint and asserted counterclaims against Novellus, Inc, and third-party defendants Dr.

Matthew Angel and Dr.

Christopher Rohde alleging violations of the Massachusetts Wage Act,

Massachusetts Minimum Fair Wage Law, the Fair Labor Standards Act, breach of contract, unjust enrichment and quantum meruit.

Sowyrda also joined in Westman’s motion to stay the case pending the Delaware Actions.

Novellus, Inc.’s claims and Mr.

Sowyrda’s counterclaims relate to alleged conduct that took place before Eterna acquired Novellus, Inc.

On November 15, 2022, prior to a decision on Westman’s and Sowyrda’s motion to compel or stay, the Parties agreed to voluntarily dismiss and

consolidate the Delaware Actions with this action.

On December 15, 2022, Sowyrda filed an Amended Answer to the Amended Complaint, asserted affirmative defenses and filed Amended Counterclaims against Dr.

Rohde, Novellus LLC,

Novellus Inc., Factor Bioscience Inc., and Eterna Therapeutics Inc.

(“Counterclaim Defendants”) alleging against various Counterclaim Defendants breach of contract, breaches of the implied duty of good faith and fair dealing, breaches of

fiduciary duty, breaches of the operating agreement, aiding and abetting breaches of fiduciary duty, tortious interference with contract, equitable accounting, violations of the Massachusetts Wage Act, Massachusetts Minimum Fair Wage Law, the

Fair Labor Standards Act, unjust enrichment, and quantum meruit.

Also on December 15, 2022, Westman filed an answer to the Amended Complaint and asserted similar counterclaims against the same Counterclaim Defendants.

Westman and Sowyrda each

asserted claims for indemnification and/or advancement against Novellus, Inc.

On January 11, 2023, Westman and Sowyrda served a joint motion to enforce their advancement and/or indemnification rights against Novellus Inc.

Novellus Inc.

vigorously opposes this motion and served its opposition on January 27, 2023.

On February 8, 2023, Westman and Sowyrda served a reply in support of their motion to enforce indemnification/advancement rights, and submitted the motion to the

Novellus Inc.

answered Westman and Sowyrda’s counterclaims on January 27, 2023, denying liability.

The remaining Counterclaim Defendants served a motion to dismiss most of the remaining counterclaims on January 27, 2023.

Sowyrda’s and

Westman’s oppositions to the motion to dismiss were served on March 3, 2023, and Counterclaim Defendants’ reply is due March 24, 2023, at which point the motion to dismiss will be fully briefed.

The Court announced that it would hold oral

argument on April 5, 2023 on (a) the Counterclaim Defendants’ motion to dismiss, and (b) Sowyrda’s and Westman’s motion to enforce.

The parties attended an initial status and scheduling conference with the Court on February 7, 2023.

Court deferred entering a case scheduling until after the April 5 hearing.

Mine Safety Disclosures

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.