Seth Freedman Litigation Crab Key Holding

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Leiderman Shelomith, P.A., Attorneys at Law

2699 Stirling Road, Suite C401, Ft. Lauderdale, FL 33312 Tel. (954) 920-5355 Fax (954) 920-5371

UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF FLORIDA

Fort Lauderdale Divisionwww.flsb.uscourts.gov

In re:

SETH FREEDMAN and LAURA FREEDMAN,

Debtors.____________________________________/

Case No. 08-28599-BKC-RBR

Chapter 7

CRAB KEY HOLDINGS, LLC, a Florida limitedliability company,

Plaintiff,vs.

SETH FREEDMAN,

Defendant.____________________________________/

Adv. Case No.

COMPLAINT OBJECTING TO DISCHARGEABILITY OF DEBTPURSUANT TO 11 U.S.C. 523

Crab Key Holdings, LLC, a Florida limited liability company (CKH or Plaintiff), by

counsel, brings this Complaint Objecting to Dischargeability of Debt Pursuant to 11 U.S.C.

523, against Seth Freedman (Freedman or the Debtor), and in support thereof alleges as

follows:

Jurisdiction and Venue

1. This case was commenced by the filing of a voluntary Chapter 7 petition on

December 5, 2008 (the Petition Date).

2. This is an action to determine the dischargeability of a debt, pursuant to 11

U.S.C. 523.

3. This is a core proceeding and this Court has jurisdiction over this action

pursuant to 28 U.S.C. 157 and 1334 and Fed. R. Bankr. P. 7001.

4. Venue is proper herein pursuant to 28 U.S.C. 1408 and 1409.

Parties

5. Seth Freedman is the debtor of the above-referenced bankruptcy proceeding.

Case 09-01254-RBR Doc 1 Filed 03/16/09 Page 1 of 33


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ComplaintPage 2 of 8

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6. Crab Key Holdings, LLC is a Florida limited liability company and is a creditor

of the Debtor, as more particularly set forth below.

General Allegations

7. Pre-petition, the Debtor was an officer and director of Image Marketing

Enterprises, Inc. (Image), a Florida corporation.

8. On or about June 14, 2006, Image entered into a contract (the Contract)

with Patrick Nemeth (Nemeth) for the purchase and sale by Image to Nemeth of the

assets of the business known as Image Marketing Associates (the Business). A copy of

the Contract is attached hereto as Exhibit A and is incorporated herein by reference.

9. On or about July 28, 2006, Nemeth assigned to Plaintiff all of his rights and

obligations under the Contract. A copy of the Assignment is attached hereto as Exhibit B

and incorporated herein by reference.

10. On or about July 28, 2006, Plaintiff and Image closed on the Contract. A

copy of the closing statement for the purchase and sale of the Business is attached hereto

as Exhibit C and incorporated herein by reference.

11. Plaintiff has fully performed its obligations under the Contract.

12. Plaintiff has performed all conditions precedent to the bringing of this action

or all such conditions have been waived or otherwise legally excused.

13. The actual gross profits for 2006 of the Business during the time of operation

by Plaintiff was $154,820.38.

14. Image has materially breached the Contract existing between the parties.

Images material breaches of the Contract include, but are not limited to, the following:

a. The supply to Nemeth and Plaintiff through its principal shareholder, officer

and director, the Debtor, of false financial information as to the condition and

results of operation of the Business in violation of the warranty obligations of

Image contained in Section 25 of the Contract;



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b. Failure to deliver to Plaintiff all customer accounts, records and documents

pertinent to operation of the business as required in Section 20 of the

Contract; and

c. Failure to pay Plaintiff an amount necessary to make the actual 2006 gross

profit equal to $600,000.00 as required in the Addendum to the Contract.

15. As a direct and proximate result of the foregoing, Plaintiff has suffered, and

will continue to suffer both general and special damages, including, but not limited to, a

reduced value of the Business and increased costs associated with maintenance and

operation of the Business.

16. Furthermore, the Debtor made false statements and representations

concerning material facts to Nemeth and Plaintiff with regard to:

a. The financial condition and results of operation of the Business, specifically

including but not limited to (1) the then existing status of payment by the

Business of vendor accounts and liabilities; (2) the then existing status and

value of the Businesss account for services with Naples Community Hospital;

and (3) the then existing status and value of the Businesss account for

services with Joseph Scott Financial;

b. The existence and status of an employment agreement between Image and

Phyllis Ershowsky; and

c. The existence and status of a phantom stock agreement between Image and

Phyllis Ershowsky.

17. Image and the Debtor knew that the above-referenced statements and

representations made by themselves with regard to the financial condition and results of

operation of the Business, the assets of the Business, the existence of an employment

agreement between Image and Phyllis Ershowsky, ownership by the Debtor of Image and



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its assets and interests, the liabilities of the Business, and the existing client and customer

relations of the Business were false inasmuch as:

a. The Business was not current on its payment of vendor accounts and

liabilities;

b. The status and value of the Businesss account for services with Naples

Community Hospital was significantly less and more uncertain than had been

represented by Image and the Debtor;

c. The status and value of the Businesss account for services with Joseph Scott

Financial was significantly less and more uncertain than had been

represented by Image and the Debtor;

d. The purported employment agreement between Image and Phyllis Ershowsky

represented by Image and the Debtro to be in existence and valid was not

recognized or acknowledged by Phyllis Ershowsky as being duly executed by

herself or binding upon her; and

e. There existed a phantom stock agreement between Image and Phyllis

Ershowsky whose existence was not disclosed by Image or the Debtor to the

Plaintiff.

18. Image and the Debtor intended in making the false statements and

representations to induce Nemeth to enter into the Contract and Plaintiff to accept

assignment of the Contract and close the Contract.

19. Nemeth and the Plaintiff reasonably relied upon the above-referenced

statements and representations made by Image and the Debtor with regard to the financial

condition and results of operation of the Business, the assets of the Business, the existence

of an employment agreement between Image and Phyllis Ershowsky, ownership by the

Debtor of Image and its assets and interests, the liabilities of the Business, and the existing

client and customer relations of the Business.



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20. Plaintiff has suffered, and will continue to suffer both general and special

damages, including, but not limited to, a reduced value of the Business and increased costs

associated with maintenance and operation of the Business as a result of its reasonable

reliance on the false statements and representations of Image and the Debtor.

21. As a result of the foregoing, on or around October 30, 2006, the Plaintiff

commenced an action against Image and the Debtor in the Lee County Circuit Court, Case

No. 06-CA-4883, for damages due to breach of contract and fraud on the part of Image and

the Debtor (the State Court Action). A copy of the Second Amended Complaint and

Demand for Jury Trial in the State Court Action is attached hereto as Exhibit D (without

exhibits) and incorporated herein by reference.

22. The Debtor received notice of the State Court Action and participated in the

defense of the State Court Action.

23. On or around October 16, 2007, the Plaintiff, Image and the Debtor entered

into a Mediated Settlement Agreement (attached hereto as Exhibit E), whereby Image and

the Debtor agreed to pay the Plaintiff $200,000.00, according to the payment schedule set

forth therein.

24. The Debtors promise to pay the Plaintiff $200,000.00 induced the Plaintiff

into entering into the Mediated Settlement Agreement.

25. Thereafter, Image and the Debtor breached the Mediated Settlement

Agreement, by failing to make one or more payments that were due.

26. As a result, the Court in the State Court Action entered a Final Judgment on

June 3, 2008, in favor of the Plaintiff and against Image and the Debtor, for the amount of

$239,014.18. A true and correct copy of the Final Judgment is attached hereto as Exhibit

F.

27. Based on the entry of the Final Judgment, the allegations of fraud contained

in the Second Amended Complaint and Demand for Jury Trial are conclusively proven, and



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the Debtor is collaterally estopped from disputing them, especially considering the fact that

the onlycount against the Debtor was for fraud.

28. The Contract and the Mediated Settlement Agreement both provide that the

prevailing party is entitled to payment of its attorneys fees and costs.

29. The Plaintiff has retained the undersigned attorneys to represent it in this

case and is entitled to recover its attorneys fees from the Debtor.

Count 1 Non-Dischargeabi lity of Final Judgment (11 U.S.C. 523(a)(2)(A))

30. The Plaintiff re-alleges all of the allegations set forth in each of the

paragraphs above.

31. This is an action requesting a determination that the debt owed by the Debtor

to the Plaintiff, as reflected in the Final Judgment, is excepted from the Debtors discharge

and is not dischargeable, should the Debtor receive a discharge, pursuant to 11 U.S.C.

523(a)(2)(A).

32. The Plaintiff is a creditor of the Debtor.

33. The Debtor incurred the debt to the Plaintiff under false pretenses, false

misrepresentations, and/or actual fraud.

34. The Final Judgment precludes the Debtor from arguing that the debt was not

incurred due to false pretenses, a false misrepresentations, and/or actual fraud.

35. Alternatively, the Debtor fraudulently induced the Plaintiff into entering into

the Mediated Settlement Agreement, and the Debtors representations set forth in the

Mediated Settlement Agreement contained false misrepresentations.

36. The debt incurred by the Debtor includes the Plaintiffs attorneys fees in

prosecuting this action.

WHEREFORE, the Plaintiff respectfully requests that the Court enter a judgment

determining that the debt(s) owed to the Plaintiff by the Debtor are non-dischargeable, in



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the amount of $239,014.18, plus interest, costs and attorneys fees, and for such other and

further relief as the Court deems just and proper.

Count 2 Non-Dischargeabi lity of Final Judgment (11 U.S.C. 523(a)(2)(B))


paragraphs above.

38. This is an action requesting a determination that the debt owed by the Debtor

to the Plaintiff, as reflected in the Final Judgment, is excepted from the Debtors discharge

and is not dischargeable, should the Debtor receive a discharge, pursuant to 11 U.S.C.

523(a)(2)(B).

39. The Debtor obtained money, property and/or services from Patrick Nemeth

and/or the Plaintiff by use of a statement or statements in writing that were materially false,

respecting the Debtors or an insiders financial condition, on which Patrick Nemeth and/or

the Plaintiff reasonably relied, and which the Debtor caused to be made or published with

intent to deceive.

40. The Final Judgment precludes the Debtor from arguing that he did not obtain

money, property and/or services from Patrick Nemeth and/or the Plaintiff by use of a

statement or statements in writing that were materially false, respecting the Debtors or an

insiders financial condition, on which Patrick Nemeth and/or the Plaintiff reasonably relied,

and which the Debtor caused to be made or published with intent to deceive.









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Count 3 Non-Dischargeabi lit y of Final Judgment (11 U.S.C. 523(a)(19))


paragraphs above.

43. The Debtor engaged in common law fraud, deceit, and/or manipulation in

connection with the sale of a security, with regard to the sale of the Business, which

resulted in the Mediated Settlement Agreement and also the Final Judgment.

44. The Final Judgment precludes the Debtor from arguing that he did not

engage in common law fraud, deceit, and/or manipulation in connection with the purchase

of securities in the sale of the Business.







I HEREBY CERTIFY that I am admitted to the Bar of the United States District Court for theSouthern District of Florida and I am in compliance with the additional qualifications to practice in thisCourt set forth in Local Rule 2090-1(A).

Dated this 16thday of March, 2009. LEIDERMAN SHELOMITH, P.A.Counsel for the Plaintiffs2699 Stirling Road, Suite C401Ft. Lauderdale, Florida 33312Telephone: (954) 920-5355Facsimile: (954) 920-5371

By:_________/s/______________ZACH B. SHELOMITHFlorida Bar No. [email protected]



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Exhibit "D"



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Exhibit "D"



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Exhibit "D"



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Exhibit "D"



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Exhibit "D"



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Exhibit "D"



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Exhibit "E"



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Exhibit "E"



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Exhibit "E"



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Exhibit "E"



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Exhibit "E"



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Exhibit "F"



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Seth Freedman Litigation Crab Key Holding

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