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Item 3. Legal Proceedings

2022-12-16 compared with 2021-12-20 · 5 added, 141 removed, 2 unchanged (99% of the section changed)

Legal Proceedings

time to time, we are involved in various legal proceedings, lawsuits and claims incidental to the conduct of our business.

Our businesses

are also subject to extensive regulation, which may result in regulatory proceedings against us.

Except as described below, we are not

currently party to any material legal proceedings.

LLC, the Company, Medley Opportunity Fund II LP, Medley Management, Inc., Medley Group, LLC, Brook Taube, and Seth Taube were named as

defendants, along with other various parties, in a putative class action lawsuit captioned as Royce Solomon, Jodi Belleci, Michael Littlejohn,

and Giulianna Lomaglio v.

American Web Loan, Inc., AWL, Inc., Mark Curry, MacFarlane Group, Inc., Sol Partners, Medley Opportunity Fund,

II, LP, Medley LLC, Medley Capital Corporation, Medley Management, Inc., Medley Group, LLC, Brook Taube, Seth Taube, DHI Computing Service,

Inc., Middlemarch Partners, and John Does 1-100, filed on December 15, 2017, amended on March 9, 2018, and amended a second time on February

15, 2019, in the United States District Court for the Eastern District of Virginia, Newport News Division, as Case No.

4:17-cv-145 (hereinafter,

“Class Action 1”).

Medley Opportunity Fund II LP and the Company were also named as defendants, along with various other

parties, in a putative class action lawsuit captioned George Hengle and Lula Williams v.

Mark Curry, American Web Loan, Inc., AWL, Inc.,

Red Stone, Inc., Medley Opportunity Fund II LP, and Medley Capital Corporation, filed February 13, 2018, in the United States District

Court, Eastern District of Virginia, Richmond Division, as Case No.

3:18-cv-100 (“Class Action 2”).

Medley Opportunity Fund

II LP and the Company were also named as defendants, along with various other parties, in a putative class action lawsuit captioned John

Glatt, Sonji Grandy, Heather Ball, Dashawn Hunter, and Michael Corona v.

Mark Curry, American Web Loan, Inc., AWL, Inc., Red Stone, Inc.,

Medley Opportunity Fund II LP, and Medley Capital Corporation, filed August 9, 2018 in the United States District Court, Eastern District

of Virginia, Newport News Division, as Case No.

4:18-cv-101 (“Class Action 3”) (together with Class Action 1 and Class Action

2, the “Virginia Class Actions”).

Medley Opportunity Fund II LP was also named as a defendant, along with various other parties,

in a putative class action lawsuit captioned Christina Williams and Michael Stermel v.

Red Stone, Inc.

(as successor in interest to MacFarlane

Group, Inc.), Medley Opportunity Fund II LP, Mark Curry, Brian McGowan, Vincent Ney, and John Doe entities and individuals, filed June

29, 2018 and amended July 26, 2018, in the United States District Court for the Eastern District of Pennsylvania, as Case No.

(the “Pennsylvania Class Action”).

The Company and Medley Opportunity Fund II, LP were also named as defendants, along with

various other parties, in a putative class action lawsuit captioned Charles McDaniel v.

American Web Loan, Inc., AWL, Inc., Mark Curry,

Medley Capital Corporation, Medley Opportunity Fund II, LP, and Red Stone, Inc., filed on August 7, 2020 and amended on October 22, 2020

in the First Judicial Circuit of Ohio County, West Virginia, Case No.

20-C-169, which case was then removed to the United States District

Court for the Northern District of West Virginia on December 15, 2020 (the “West Virginia Class Action”

and together with

the Virginia Class Actions and the Pennsylvania Class Action, the “Class Action Complaints”).

The plaintiffs in the Class

Action Complaints filed their putative class actions alleging claims under the Racketeer Influenced and Corrupt Organizations Act, and

various other claims arising out of the alleged payday lending activities of American Web Loan.

The claims against Medley Opportunity

Fund II LP, Medley LLC, the Company, Medley Management, Inc., Medley Group, LLC, Brook Taube, and Seth Taube (in Class Action 1, as amended);

Medley Opportunity Fund II LP and Medley Capital Corporation (in Class Action 2 and Class Action 3);

Medley Opportunity Fund II LP (in

the Pennsylvania Class Action);

and Medley Opportunity Fund II LP and the Company (in the West Virginia Class Action), allege that those

defendants in each respective action exercised control over, or improperly derived income from, and/or obtained an improper interest

in, American Web Loan’s payday lending activities as a result of a loan to American Web Loan.

The loan was made by Medley Opportunity

Fund II LP in 2011.

orders dated August 7, 2018 and September 17, 2018, the Court presiding over the Virginia Class Actions consolidated those cases for

all purposes.

On October 12, 2018, Plaintiffs in Class Action 3 filed a notice of voluntary dismissal of all claims, and on October 29,

2018, Plaintiffs in Class Action 2 filed a notice of voluntary dismissal of all claims.

On October 30, 2020, Plaintiffs in the Pennsylvania

Class Action filed a Stipulation of Dismissal of all claims against all defendants with prejudice, and on November 2, 2020, the Court

presiding over the Pennsylvania Class Action ordered Plaintiffs’

claims dismissed with prejudice.

On January 29, 2021, Plaintiff

in the West Virginia Class Action filed a motion to stay proceedings to permit revision and final approval of a revised settlement agreement

in Class Action 1, and also on January 29, 2021, the Court presiding over the West Virginia Class Action granted that motion and stayed

the West Virginia Class Action.

April 16, 2020, the parties to Class Action 1 reached a settlement reflected in a Settlement Agreement (the “Settlement Agreement”)

that has been publicly filed in Class Action 1 (ECF No.

Among other things, upon satisfaction of the conditions specified in

the Settlement Agreement and upon the Effective Date, the Settlement Agreement (capitalized terms not otherwise defined have the meaning

set forth in the Settlement Agreement):

(1) requires Plaintiffs to seek certification of a nationwide settlement class of all persons

in the United States to whom American Web Loan lent money from February 10, 2010 through a future date on which the Court may enter a

Preliminary Approval Order as to the Settlement Agreement (which certification Defendants have agreed not to oppose);

(2) requires American

Web Loan, and only American Web Loan, to pay Monetary Consideration of $65,000,000 (none of Medley Opportunity Fund II LP, Medley LLC,

Medley Capital Corporation, Medley Management, Inc., Medley Group, LLC, Brook Taube, or Seth Taube are paying any Monetary Consideration

pursuant to the Settlement Agreement);

(3) requires American Web Loan, and only American Web Loan, to cancel (as a disputed debt) and

release all claims that relate to or arise out of the loans in its Collection Portfolio, which is valued at Seventy-Six Million Dollars

($76,000,000) and comprised of loans to more than 39,000 borrowers (none of Medley Opportunity Fund II LP, Medley LLC, Medley Capital

Corporation, Medley Management, Inc., Medley Group, LLC, Brook Taube, or Seth Taube have any interest in any of the loans that are being

(4) requires American Web Loan and Curry to provide certain Non-Monetary Benefits (none of Medley Opportunity Fund II LP,

Medley LLC, Medley Capital Corporation, Medley Management, Inc., Medley Group, LLC, Brook Taube, or Seth Taube are conferring any Non-Monetary

Benefits pursuant to the Settlement Agreement);

(5) fully, finally, and forever releases Medley Opportunity Fund II LP, Medley LLC, Medley

Capital Corporation, Medley Management, Inc., Medley Group, LLC, Brook Taube, and Seth Taube from any and all claims, causes of action,

suits, obligations, debts, demands, agreements, promises, liabilities, damages, losses, controversies, costs, expenses and attorneys’

fees of any nature whatsoever, whether arising under federal law, state law, common law or equity, tribal law, foreign law, territorial

law, contract, rule, regulation, any regulatory promulgation (including, but not limited to, any opinion or declaratory ruling), or any

other law, including Unknown Claims, whether suspected or unsuspected, asserted or unasserted, foreseen or unforeseen, actual or contingent,

liquidated or unliquidated, punitive or compensatory, as of the date of the Final Fairness Approval Order and Judgment, that relate to

or arise out of loans made by and/or in the name of AWL (including loans issued in the name of American Web Loan, Inc.

or Clear Creek

Lending) as of the date of entry of the Preliminary Approval Order (with the exception of claims to enforce the Settlement or the Judgment);

(6) provides for a mutual general release between Medley Opportunity Fund II LP, Medley LLC, Medley Capital Corporation, Medley Management,

Inc., Medley Group, LLC, Brook Taube, and Seth Taube on the one hand, and American Web Loan and Curry on the other hand;

and (7) provides

that, as of the future Effective Date, none of Medley Opportunity Fund II LP, Medley LLC, Medley Capital Corporation, Medley Management,

Inc., Medley Group, LLC, Brook Taube, and Seth Taube shall (i) be entitled to indemnification from AWL Defendants (as defined in the

Settlement Agreement) or (ii) bring any claim against any Released Parties, including American Web Loan and Curry, that relate to or

arise out of loans made by and/or in the name of AWL (including loans issued in the name of American Web Loan, Inc.

or Clear Creek Lending)

as of the date of entry of the Preliminary Approval Order (with the exception of claims to enforce the Settlement or the Judgment).

March 31, 2021, the parties to Class Action 1 and the Objectors filed a revised settlement agreement publicly in Class Action 1 (ECF

483-1) (the “Revised Settlement Agreement”).

As relevant to Medley LLC, the Company, Medley Opportunity Fund II LP, Medley

Management, Inc., Medley Group, LLC, Brook Taube, and Seth Taube, the terms of the Revised Settlement Agreement do not differ from the

terms of the original Settlement Agreement.

On April 7, 2021, the Court presiding over Class Action 1 held a hearing on Plaintiffs’

motion for preliminary approval of the Revised Settlement Agreement, and entered an order granting preliminary approval of the revised

settlement (the “Preliminary Approval Order”).

Pursuant to the Preliminary Approval Order, the Court held a Final Approval

Hearing relating to the Revised Settlement Agreement on July 9, 2021, and following the hearing, granted Final Approval of the Revised

Settlement Agreement and entered the Final Judgment.

The effective date of the Revised Settlement Agreement occurred on August 26, 2021.

or about January 28, 2021, a purported class action lawsuit, captioned Kahn v.

PhenixFIN Corporation, et al., was filed against the Company

and its directors in the Court of Chancery of the State of Delaware.

Plaintiffs allege that a provision in the Company’s bylaws,

which provides that directors may be removed from office for cause by the affirmative vote of 75% of capital stock entitled to vote,

is inconsistent with provisions of the Delaware General Corporate Law, which plaintiffs allege would permit removal for cause by a simple

majority of capital stock entitled to vote.

The plaintiffs seek a declaration that the bylaw provision is invalid and to enjoin the defendants

from enforcing it, as well as a reasonable allowance of attorneys’

On February 10, 2021, the Board of the Company approved

an amendment to the Company’s Bylaws, which, among other things, allows for the removal of directors for cause by affirmative vote

of the holders of a majority of the capital stock entitled to vote at an election of directors.

May 5, 2021, plaintiffs filed a notice and proposed order voluntarily dismissing the Action as moot and providing that jurisdiction would

be retained solely to resolve an anticipated application for attorneys’

fees and expenses, which proposed order was granted by

the Court of Chancery on May 5, 2021.

The parties to the Action subsequently agreed to a payment by PhenixFIN to plaintiffs’

of $25,000, in full satisfaction of their claim for attorneys’

fees, expenses and costs in connection with the Action.

of Chancery has not been asked to review or approve, and will pass no judgment on, this payment.

The Court of Chancery granted the proposed

order on July 28, 2021.

From time to time, we are involved in various

legal proceedings, lawsuits and claims incidental to the conduct of our business.

Our businesses are also subject to extensive regulation,

which may result in regulatory proceedings against us.

We are not currently party to any material legal proceedings.

Mine Safety Disclosures

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.

What changed 10-K

Item 3. Legal Proceedings