filed: new york county clerk 07/01/2014 - DocumentCloud
INDEX NO. 652801/2013
FILED: NEW YORK COUNTY CLERK 07/01/2014 NYSCEF DOC. NO. 58
RECEIVED NYSCEF: 07/01/2014
Mark A. Berman, Esq. Kelly A. Zampino, Esq. HARTMANN DOHERTY ROSA BERMAN & BULBULIA, LLC 565 Fifth Avenue, 7th Floor New York, NY 10017 (212) 344-4619 Attorneys for Defendant Raza Khan SUPREME COURT OF THE STATE OF NEW YORK, COUNTY OF NEW YORK EMBARK CORP.,
Index No.
652801/2013
Plaintiff, ANSWER TO AMENDED COMPLAINT AND COUNTERCLAIMS
- vs RAZA KHAN, Defendant.
Defendant RAZA KHAN (“KHAN”), by and through his attorneys, Hartmann
Doherty
Rosa
Berman
&
Bulbulia,
LLC,
Answers
the
Amended Complaint filed by Plaintiff EMBARK CORP. (“EMBARK”) on April 29, 2014, as follows: 1.
Admitted.
2.
Admitted.
3.
Admitted.
4.
Admitted.
5.
Admitted.
6.
Denied, except admitted that KHAN was one secretary
and Vishal Garg was CEO. 7.
Admitted.
8.
Denied.
9.
Denied.
10.
Denied.
11.
Denied.
12.
Denied.
13.
Denied.
14.
Denied,
except
admitted
that
EMBARK
shared
office
space with EIFC until approximately June 20, 2013, and that some of EMBARK’s servers and computers that were not utilized were in this shared space. 15.
Denied.
16.
Denied.
17.
Denied.
18.
Denied.
19. - 35. No response is required because the allegations were struck by the Court. 36.
Denied. FIRST CAUSE OF ACTION (Improper EMBARK Payments of EIFC Obligations)
37.
KHAN incorporates by reference his prior responses.
38.
Denied.
39.
Denied.
40.
Denied.
- 2 -
SECOND CAUSE OF ACTION (Conversion) 41.
KHAN incorporates by reference his prior responses.
42.
Denied.
43.
Denied.
44.
Denied.
45.
Denied. THIRD CAUSE OF ACTION (Conversion)
46.
KHAN incorporates by reference his prior responses.
47.
Denied. FOURTH CAUSE OF ACTION (Conversion)
48.
KHAN incorporates by reference his prior responses.
49.
Denied.
50.
Denied.
51.
Denied.
52.
Denied. FIFTH CAUSE OF ACTION (Intentional Interference with EMBARK’s Business)
53.
KHAN incorporates by reference his prior responses.
54.
Denied.
55.
Denied.1
1
Plaintiff’s Amended Complaint contains two paragraphs numbered “54.” - 3 -
AFFIRMATIVE DEFENSES (1) The Amended Complaint fails to state claim upon which relief can be granted. (2) KHAN did not breach or violate any legal duty owed to Plaintiff. (3)
Plaintiff’s
claims
are
barred
by
the
doctrines
of
waiver, laches, unclean hands and/or estoppel. (4) KHAN at all times acted in good faith. (5) Any damages suffered by Plaintiff were caused by the negligence,
breaches
of
fiduciary
duties
and/or
lack
of
due
diligence of Plaintiff and/or third parties. (6) Plaintiff’s alleged injuries, if any, are attributable, in whole or in part, to the actions of others, and not caused by KHAN. KHAN reserves the right to rely upon all defenses that may become available during discovery or at trial. WHEREFORE, KHAN demands the entry of judgment in his favor and against Plaintiff on each and every cause of action, and awarding to him attorneys’ fees and costs of suit. COUNTERCLAIMS Raza KHAN, by way of Counterclaims against EMBARK CORP., alleges as follows:
- 4 -
PARTIES 1.
Defendant
and
Counterclaim
Plaintiff
Raza
KHAN
(“KHAN”) is an individual residing at 55 Wall Street, Apartment 620, New York, NY. 2.
EMBARK
CORP.
(“EMBARK”)
is
a
Delaware
corporation
registered to do business in New York.
Upon information and
belief,
185
EMBARK’s
offices
are
located
at
Madison
Avenue,
Suite 700, New York, NY. BACKGROUND A.
Retaliation 3.
EMBARK had contractual relationships with colleges and
universities pursuant to which EMBARK collected application fees from student applicants.
EMBARK was obligated to pay all or
most of each application fee to the respective school. 4.
KHAN was a Director on EMBARK’s Board of Directors
from February 2009 until June 20, 2013. 5.
KHAN was terminated and/or constructively discharged
from the Board in retaliation for objecting to the mismanagement of EMBARK, including but not limited to the misuse by EMBARK of these student application fees, which were collected by EMBARK for the benefit of EMBARK’s client schools but improperly used to fund
EMBARK’s
operations, all
at the direction of
EMBARK
board member, CEO, and current Senior Vice President, Vishal Garg (“Garg”). - 5 -
6.
Peter Benz, Chairman of EMBARK Corp., was fully aware
of EMBARK’s usage of funds belonging to schools to fund EMBARK’s operations
and,
upon
information
and
belief,
perpetuated
the
usage of school funds. 7. known
Benz’s fund, Summerline Asset Management, previously as
Viking
Asset
Management,
is
EMBARK’s
largest
shareholder. 8. reflected schools. 9.
At the time of KHAN’s discharge, EMBARK’s own records that
it
owed
millions
of
dollars
to
its
client
See Exhibit A. Garg
prepared
and
circulated
false
financials
to
EMBARK’s client schools that directly contradict the financials Garg signed off on that were provided to the bankruptcy trustee of MRU Holdings, Inc. in connection with settlement discussions between EMBARK and MRU Holdings, Inc. 10. withheld
Garg and others at EMBARK intentionally delayed and EMBARK’s
payment
of
application
fees
due
to
client
schools so that those funds could be used to address EMBARK’s cash flow problems. 11.
As reflected in the correspondence attached as Exhibit
B, Garg and others at EMBARK, including Blake Avalone, EMBARK’s Director
of
Client
Relations
and
Sales,
caused
false
explanations to be concocted and then communicated to EMBARK’s
- 6 -
client schools regarding the cause of the
delay
in
EMBARK’s
payment of application fees. 12.
For
example,
one
such
false
explanation
was
that
EMBARK was experiencing delays with its payment processor when, in fact, EMBARK received funds from its payment processor in a timely manner. 13.
Garg and others at EMBARK caused EMBARK to delay in
providing schools with reconciliation reports and also provided reconciliation reports that intentionally
made it difficult for
schools to verify the amounts they were owed. 14.
EMBARK knew that it owed money to schools going back
for several years and Garg did not intend to cause EMBARK to pay such amounts owed unless and until the schools complained. 15.
Blake Avalone was paid $330,000 by EMBARK (instead of
the $30,000 owed under his commission agreement), and promoted by Garg to Managing Director, in exchange for his assisting Garg in EMBARK’s conduct described above. 16.
Also, under Garg’s management, EMBARK
rehired Imran
Qamar to be CTO. 17.
Imran Qamar
had been demoted by KHAN
to a project
manager due to Qamar’s negligence with respect to EMBARK’s 1.0 product and his material failure to maintain the hardware and software
environment,
in
spite
resources, resulting in client loss. - 7 -
of
having
the
available
18.
Upon
information
and
belief,
one
year
later,
Imran
Qamar had failed to deliver an upgrade 1.0 product, resulting in a near 3½ year period in which he had failed to do so. As a result, EMBARK has continued to lose clients. 19.
To create the false perception of a turn-around, Garg
hired his wife, Sarita James, to serve as EMBARK’s president. 20.
EMBARK
possesses
materials
that
evidence
that
its
lawsuit against KHAN is false. For example, EMBARK possesses numerous emails regarding EMBARK’s usage of VoltDB. Nonetheless Garg has falsely maintained that EMBARK has never used VoltDB. 21.
Garg
also
is
aware
of
the
limited
availability
of
resources for new product development as well as how critical new product development was to EMBARK’s clients. 22.
In fact, for years clients were leaving because of
EMBARK’s 1.0 product.
Garg previously had invested almost $5.5
million into EMBARK to upgrade 1.0, an effort led by him that failed and almost resulted in EMBARK’s bankruptcy in 2009, which would
have
applications
caused
hundreds
potentially
of
being
thousands
lost
or
of
admissions
inaccessible
at
a
critical time. 23.
Furthermore,
Garg
knows
the
role
new
product
development played in renewing client contracts preventing that revenue from leaving EMBARK.
- 8 -
24.
The new product was demonstrated to Garg and Benz and
they expressed to KHAN and the product team that they were happy with what they saw. In fact, Blake Avalone demonstrated the new product
to
Academic
Partners,
resulting
in
EMBARK’s
largest
executed contract, all as a result of KHAN’s efforts. 25. larger
Blake Avalone then re-executed with Garg as part of a
discussion
to
separate
KHAN
from
the
company
while
retaining the value KHAN had created. 26.
Avalone
was
paid
$330,000
Garg
and
for
his
cooperation
with
Garg. 27.
Ultimately,
Benz
deployment of the new product and, Qamar
who
would
be
loyal
to
failed instead,
their
overall
to
manage
the
relied on Imran strategy
of
not
restructuring the company. 28.
Had Garg and Benz proceeded with the restructuring,
EMBARK would have had no debts, it would have had the funds to pay schools the moneys owed to them, and it would have deployed a new product. 29.
In
retaliation
for
KHAN
objecting
to
all
of
this
conduct, he was terminated. B.
Abuse of Process 30.
EMBARK’s action also is a retaliatory response by Garg
to an ongoing dispute with KHAN which is already being litigated in
a
separate,
pending
lawsuit - 9 -
in
New
York
Supreme
Court,
captioned
Raza
652334/2013 31.
Khan
v.
Vishal
Garg
and
EIFC,
Index
No.
(“the EIFC action”).
Specifically, on July 1, 2013, KHAN filed an action
against Garg, which included allegations of misconduct by Garg in connection with his management of EMBARK and another company, EIFC, and Garg filed counterclaims alleging misconduct by KHAN in connection with his management of EMBARK, including claims of conversion by Khan of EMBARK’s property. 32.
The
Honorable
Jeffrey
K.
Oing
imposed
temporary
restraints against Garg in July 2013. 33.
Upon
information
and
belief,
Garg
caused
Embark
to
file this second action against KHAN to harm, injure, and harass KHAN, and to create leverage in the EIFC action, in retaliation for KHAN’s initiation, and because of his displeasure with the outcome, of the EIFC action. C. Indemnification 34.
EMBARK’s
Certificate
of
Incorporation
and
By-laws
provide that EMBARK shall indemnify an officer and/or director to
the
full
extent
permitted
by
Section
145
of
the
General
action
alleged
Corporation Law of the State of Delaware. 35.
EMBARK’s
original
Complaint
in
this
causes of action premised upon KHAN’s service as an officer and/or director of EMBARK.
- 10 -
36.
KHAN moved to dismiss EMBARK’s original Complaint and,
in response, EMBARK filed an Amended Complaint that dropped its Fourth, Fifth, Sixth, Seventh and Eighth causes of action, all of which related to and arose from KHAN’s service as an officer and/or director of EMBARK. 37.
EMBARK’s
Amended
Complaint
alleges
the
following
causes of action against KHAN: (1) Improper Payments of EIFC Obligations; (2) Conversion; and (3) Intentional Interference with EMBARK’s Business. 38.
EMBARK’s claims against KHAN in the Amended Complaint
relate to and arise from KHAN’s service as a director and/or officer of EMBARK. 39.
KHAN is entitled to indemnification from EMBARK of all
his defense costs and expenses related to opposing the original Complaint and the current Amended Complaint. D. Outstanding Board Fees 40.
In
or
around
June
2011,
EMBARK
was
experiencing
financial difficulties. 41.
Accordingly, KHAN and the other Board member, Vishal
Garg, agreed that they would postpone payment by EMBARK of Board fees otherwise due and owing to them. 42.
KHAN is owed Board fees in the amount of $10,000.00
per month for the time period of June 2011 to June 2013.
- 11 -
43. EMBARK
At one time, it was contemplated by KHAN and Garg that would
be
restructured
to
become
part
of
Education
Investment Finance Corporation (“EIFC”), another company owned by KHAN and Garg. 44. business
In March 2013, Garg removed $220,000.00 from an EIFC account
and
claimed
that
this
amount
represented
accrued board fees due and owing to him from EMBARK. 45.
EMBARK
owes
KHAN
at
least
$240,000.00
for
accrued
Board fees. FIRST COUNT (Indemnification) 46.
KHAN incorporates by reference all of the allegations
set forth above. 47.
KHAN
was
a
director
of
EMBARK
from
approximately
of
EMBARK
from
approximately
February 2009 to June 2013. 48.
KHAN
was
an
officer
February 2009 to June 2013. 49.
KHAN at all times acted in good faith as a director
and officer of EMBARK. 50.
KHAN at all times acted in a manner that he reasonably
believed to be in and/or not opposed to the best interests of EMBARK.
- 12 -
51.
EMBARK’s claims in its original Complaint relate to
and arise from KHAN’s service as an officer and/or director of EMBARK. 52. arise
EMBARK’s claims in its Amended Complaint relate to and
from
KHAN’s
service
as
an
officer
and/or
director
of
EMBARK. 53.
Accordingly, pursuant to EMBARK’s By-laws and Section
145 of The General Corporation Law of the State of Delaware, EMBARK is required to indemnify KHAN. SECOND COUNT (Breach of Contract) 54.
KHAN incorporates by reference all of the allegations
set forth above. 55.
KHAN
was
a
director
of
EMBARK
from
approximately
February 2009 to June 2013. 56.
EMBARK agreed to pay Board fees to KHAN in the amount
of $10,000.00 per month for the time period of June 2011 to June 2013. 57.
EMBARK has breached the agreement by failing to pay
KHAN accrued Board fees. 58.
As a result, KHAN has been damaged in the amount of
$240,000.00, plus interest, attorneys’ fees and costs.
- 13 -
THIRD COUNT (Quantum Meruit) 59.
KHAN incorporates by reference all of the allegations
set forth above. 60.
KHAN provided services to EMBARK possessing a fair and
reasonable value of $240,000.00, for which he has not been paid. 61.
KHAN’s services were accepted and used by EMBARK for
its own financial benefit. 62.
EMBARK, in accepting these services, was aware that
KHAN expected to be paid. 63.
EMBARK has not paid KHAN for these services.
64.
As a result, KHAN has been damaged in the amount of
$240,000.00, plus interest, attorneys’ fees and costs. FOURTH COUNT (Unjust Enrichment) 65.
KHAN incorporates by reference all of the allegations
set forth above. 66.
KHAN conferred a benefit upon EMBARK by serving as a
director on its Board of Directors. 67.
EMBARK appreciated and knew of the benefit conferred
by KHAN. 68.
Under the circumstances, it is unfair and unjust for
EMBARK to retain the benefit provided by KHAN without paying for it.
- 14 -
69.
As a result, KHAN has been damaged in the amount of
$240,000.00, plus interest, attorneys’ fees and costs. FIFTH COUNT (Retaliation Under Delaware Law) 70.
KHAN incorporates by reference all of the allegations
set forth above. 71.
EMBARK
is
a
Delaware
corporation
and
governed
by
Delaware law. 72.
KHAN
was
a
director
of
EMBARK
from
approximately
February 2009 to June 2013. 73.
As part of its business, EMBARK collected application
fees from students on behalf of EMBARK’s customer schools. 74.
EMBARK
was
legally
obligated
to
keep
the
school’s
portion of students’ application fees segregated and to hold those moneys for the benefits of the customer schools. 75.
Garg
caused
EMBARK
to
use
these
school
application
fees to fund EMBARK’s operations because EMBARK was experiencing cash flow problems. 76.
KHAN
objected
to
Garg
that
it
was
improper
and
unlawful for EMBARK to use the school’s application fees to fund EMBARK’s operations. 77. about
the
EMBARK terminated KHAN in retaliation for complaining conduct
described
above,
in
violation
of
common law and Delaware’s Whistleblower Protection Act.
- 15 -
Delaware
78.
KHAN
has
been
damaged
as
a
result
of
EMBARK’s
retaliatory conduct. SIXTH COUNT (Abuse of Process) 79.
KHAN incorporates by reference all of the allegations
set forth above. 80.
EMBARK caused regularly issued process to be served
upon KHAN in connection with its original Complaint and Amended Complaint. 81.
EMBARK caused its lawsuit to be filed, and process to
be served, against KHAN for the purpose of harming, harassing, oppressing, and injuring KHAN without economic or social excuse or justification. 82.
EMBARK caused its lawsuit to be filed, and process to
be served, against KHAN to obtain a
collateral advantage or
corresponding detriment to KHAN which is outside the legitimate ends of the process. 83.
EMBARK’s lawsuit was filed in retaliation for KHAN’s
objecting to Garg’s mismanagement of EMBARK and misuse of school application fees, and in retaliation for KHAN’s filing the EIFC action against Garg, as alleged above. 84.
As a result of EMBARK’s abuse of process, KHAN has
been suffered monetary damages.
- 16 -
PRAYER FOR RELIEF WHEREFORE, the
Court
to
Counterclaim enter
Plaintiff
judgment
against
KHAN
respectfully
Counterclaim
asks
Defendant
EMBARK CORP. as follows: (A)
Ordering Defendant EMBARK CORP. to indemnify RAZA KHAN pursuant to Section 145 of The General Corporation Law of the State of Delaware;
(B)
Ordering Defendant EMBARK CORP. to pay RAZA KHAN accrued Board Fees due and owing to him in the amount of $240,000.00;
(C)
Awarding Counterclaim Plaintiff compensatory damages, pre-judgment and post-judgment interest, costs, and attorneys’ fees;
(D)
Ordering such other relief as the Court deems just and proper.
____________________________ Mark A. Berman, Esq. Kelly A. Zampino, Esq. HARTMANN DOHERTY ROSA BERMAN & BULBULIA, LLC 565 Fifth Avenue, 7th Floor New York, NY 10017 (212)344-4619 Attorneys for Defendant Raza Khan Dated: June 16, 2014
- 17 -
EXHIBIT A
REDACTED
EXHIBIT B
FILED: NEW YORK COUNTY CLERK 07/01/2014 NYSCEF DOC. NO. 58
RECEIVED NYSCEF: 07/01/2014
Mark A. Berman, Esq. Kelly A. Zampino, Esq. HARTMANN DOHERTY ROSA BERMAN & BULBULIA, LLC 565 Fifth Avenue, 7th Floor New York, NY 10017 (212) 344-4619 Attorneys for Defendant Raza Khan SUPREME COURT OF THE STATE OF NEW YORK, COUNTY OF NEW YORK EMBARK CORP.,
Index No.
652801/2013
Plaintiff, ANSWER TO AMENDED COMPLAINT AND COUNTERCLAIMS
- vs RAZA KHAN, Defendant.
Defendant RAZA KHAN (“KHAN”), by and through his attorneys, Hartmann
Doherty
Rosa
Berman
&
Bulbulia,
LLC,
Answers
the
Amended Complaint filed by Plaintiff EMBARK CORP. (“EMBARK”) on April 29, 2014, as follows: 1.
Admitted.
2.
Admitted.
3.
Admitted.
4.
Admitted.
5.
Admitted.
6.
Denied, except admitted that KHAN was one secretary
and Vishal Garg was CEO. 7.
Admitted.
8.
Denied.
9.
Denied.
10.
Denied.
11.
Denied.
12.
Denied.
13.
Denied.
14.
Denied,
except
admitted
that
EMBARK
shared
office
space with EIFC until approximately June 20, 2013, and that some of EMBARK’s servers and computers that were not utilized were in this shared space. 15.
Denied.
16.
Denied.
17.
Denied.
18.
Denied.
19. - 35. No response is required because the allegations were struck by the Court. 36.
Denied. FIRST CAUSE OF ACTION (Improper EMBARK Payments of EIFC Obligations)
37.
KHAN incorporates by reference his prior responses.
38.
Denied.
39.
Denied.
40.
Denied.
- 2 -
SECOND CAUSE OF ACTION (Conversion) 41.
KHAN incorporates by reference his prior responses.
42.
Denied.
43.
Denied.
44.
Denied.
45.
Denied. THIRD CAUSE OF ACTION (Conversion)
46.
KHAN incorporates by reference his prior responses.
47.
Denied. FOURTH CAUSE OF ACTION (Conversion)
48.
KHAN incorporates by reference his prior responses.
49.
Denied.
50.
Denied.
51.
Denied.
52.
Denied. FIFTH CAUSE OF ACTION (Intentional Interference with EMBARK’s Business)
53.
KHAN incorporates by reference his prior responses.
54.
Denied.
55.
Denied.1
1
Plaintiff’s Amended Complaint contains two paragraphs numbered “54.” - 3 -
AFFIRMATIVE DEFENSES (1) The Amended Complaint fails to state claim upon which relief can be granted. (2) KHAN did not breach or violate any legal duty owed to Plaintiff. (3)
Plaintiff’s
claims
are
barred
by
the
doctrines
of
waiver, laches, unclean hands and/or estoppel. (4) KHAN at all times acted in good faith. (5) Any damages suffered by Plaintiff were caused by the negligence,
breaches
of
fiduciary
duties
and/or
lack
of
due
diligence of Plaintiff and/or third parties. (6) Plaintiff’s alleged injuries, if any, are attributable, in whole or in part, to the actions of others, and not caused by KHAN. KHAN reserves the right to rely upon all defenses that may become available during discovery or at trial. WHEREFORE, KHAN demands the entry of judgment in his favor and against Plaintiff on each and every cause of action, and awarding to him attorneys’ fees and costs of suit. COUNTERCLAIMS Raza KHAN, by way of Counterclaims against EMBARK CORP., alleges as follows:
- 4 -
PARTIES 1.
Defendant
and
Counterclaim
Plaintiff
Raza
KHAN
(“KHAN”) is an individual residing at 55 Wall Street, Apartment 620, New York, NY. 2.
EMBARK
CORP.
(“EMBARK”)
is
a
Delaware
corporation
registered to do business in New York.
Upon information and
belief,
185
EMBARK’s
offices
are
located
at
Madison
Avenue,
Suite 700, New York, NY. BACKGROUND A.
Retaliation 3.
EMBARK had contractual relationships with colleges and
universities pursuant to which EMBARK collected application fees from student applicants.
EMBARK was obligated to pay all or
most of each application fee to the respective school. 4.
KHAN was a Director on EMBARK’s Board of Directors
from February 2009 until June 20, 2013. 5.
KHAN was terminated and/or constructively discharged
from the Board in retaliation for objecting to the mismanagement of EMBARK, including but not limited to the misuse by EMBARK of these student application fees, which were collected by EMBARK for the benefit of EMBARK’s client schools but improperly used to fund
EMBARK’s
operations, all
at the direction of
EMBARK
board member, CEO, and current Senior Vice President, Vishal Garg (“Garg”). - 5 -
6.
Peter Benz, Chairman of EMBARK Corp., was fully aware
of EMBARK’s usage of funds belonging to schools to fund EMBARK’s operations
and,
upon
information
and
belief,
perpetuated
the
usage of school funds. 7. known
Benz’s fund, Summerline Asset Management, previously as
Viking
Asset
Management,
is
EMBARK’s
largest
shareholder. 8. reflected schools. 9.
At the time of KHAN’s discharge, EMBARK’s own records that
it
owed
millions
of
dollars
to
its
client
See Exhibit A. Garg
prepared
and
circulated
false
financials
to
EMBARK’s client schools that directly contradict the financials Garg signed off on that were provided to the bankruptcy trustee of MRU Holdings, Inc. in connection with settlement discussions between EMBARK and MRU Holdings, Inc. 10. withheld
Garg and others at EMBARK intentionally delayed and EMBARK’s
payment
of
application
fees
due
to
client
schools so that those funds could be used to address EMBARK’s cash flow problems. 11.
As reflected in the correspondence attached as Exhibit
B, Garg and others at EMBARK, including Blake Avalone, EMBARK’s Director
of
Client
Relations
and
Sales,
caused
false
explanations to be concocted and then communicated to EMBARK’s
- 6 -
client schools regarding the cause of the
delay
in
EMBARK’s
payment of application fees. 12.
For
example,
one
such
false
explanation
was
that
EMBARK was experiencing delays with its payment processor when, in fact, EMBARK received funds from its payment processor in a timely manner. 13.
Garg and others at EMBARK caused EMBARK to delay in
providing schools with reconciliation reports and also provided reconciliation reports that intentionally
made it difficult for
schools to verify the amounts they were owed. 14.
EMBARK knew that it owed money to schools going back
for several years and Garg did not intend to cause EMBARK to pay such amounts owed unless and until the schools complained. 15.
Blake Avalone was paid $330,000 by EMBARK (instead of
the $30,000 owed under his commission agreement), and promoted by Garg to Managing Director, in exchange for his assisting Garg in EMBARK’s conduct described above. 16.
Also, under Garg’s management, EMBARK
rehired Imran
Qamar to be CTO. 17.
Imran Qamar
had been demoted by KHAN
to a project
manager due to Qamar’s negligence with respect to EMBARK’s 1.0 product and his material failure to maintain the hardware and software
environment,
in
spite
resources, resulting in client loss. - 7 -
of
having
the
available
18.
Upon
information
and
belief,
one
year
later,
Imran
Qamar had failed to deliver an upgrade 1.0 product, resulting in a near 3½ year period in which he had failed to do so. As a result, EMBARK has continued to lose clients. 19.
To create the false perception of a turn-around, Garg
hired his wife, Sarita James, to serve as EMBARK’s president. 20.
EMBARK
possesses
materials
that
evidence
that
its
lawsuit against KHAN is false. For example, EMBARK possesses numerous emails regarding EMBARK’s usage of VoltDB. Nonetheless Garg has falsely maintained that EMBARK has never used VoltDB. 21.
Garg
also
is
aware
of
the
limited
availability
of
resources for new product development as well as how critical new product development was to EMBARK’s clients. 22.
In fact, for years clients were leaving because of
EMBARK’s 1.0 product.
Garg previously had invested almost $5.5
million into EMBARK to upgrade 1.0, an effort led by him that failed and almost resulted in EMBARK’s bankruptcy in 2009, which would
have
applications
caused
hundreds
potentially
of
being
thousands
lost
or
of
admissions
inaccessible
at
a
critical time. 23.
Furthermore,
Garg
knows
the
role
new
product
development played in renewing client contracts preventing that revenue from leaving EMBARK.
- 8 -
24.
The new product was demonstrated to Garg and Benz and
they expressed to KHAN and the product team that they were happy with what they saw. In fact, Blake Avalone demonstrated the new product
to
Academic
Partners,
resulting
in
EMBARK’s
largest
executed contract, all as a result of KHAN’s efforts. 25. larger
Blake Avalone then re-executed with Garg as part of a
discussion
to
separate
KHAN
from
the
company
while
retaining the value KHAN had created. 26.
Avalone
was
paid
$330,000
Garg
and
for
his
cooperation
with
Garg. 27.
Ultimately,
Benz
deployment of the new product and, Qamar
who
would
be
loyal
to
failed instead,
their
overall
to
manage
the
relied on Imran strategy
of
not
restructuring the company. 28.
Had Garg and Benz proceeded with the restructuring,
EMBARK would have had no debts, it would have had the funds to pay schools the moneys owed to them, and it would have deployed a new product. 29.
In
retaliation
for
KHAN
objecting
to
all
of
this
conduct, he was terminated. B.
Abuse of Process 30.
EMBARK’s action also is a retaliatory response by Garg
to an ongoing dispute with KHAN which is already being litigated in
a
separate,
pending
lawsuit - 9 -
in
New
York
Supreme
Court,
captioned
Raza
652334/2013 31.
Khan
v.
Vishal
Garg
and
EIFC,
Index
No.
(“the EIFC action”).
Specifically, on July 1, 2013, KHAN filed an action
against Garg, which included allegations of misconduct by Garg in connection with his management of EMBARK and another company, EIFC, and Garg filed counterclaims alleging misconduct by KHAN in connection with his management of EMBARK, including claims of conversion by Khan of EMBARK’s property. 32.
The
Honorable
Jeffrey
K.
Oing
imposed
temporary
restraints against Garg in July 2013. 33.
Upon
information
and
belief,
Garg
caused
Embark
to
file this second action against KHAN to harm, injure, and harass KHAN, and to create leverage in the EIFC action, in retaliation for KHAN’s initiation, and because of his displeasure with the outcome, of the EIFC action. C. Indemnification 34.
EMBARK’s
Certificate
of
Incorporation
and
By-laws
provide that EMBARK shall indemnify an officer and/or director to
the
full
extent
permitted
by
Section
145
of
the
General
action
alleged
Corporation Law of the State of Delaware. 35.
EMBARK’s
original
Complaint
in
this
causes of action premised upon KHAN’s service as an officer and/or director of EMBARK.
- 10 -
36.
KHAN moved to dismiss EMBARK’s original Complaint and,
in response, EMBARK filed an Amended Complaint that dropped its Fourth, Fifth, Sixth, Seventh and Eighth causes of action, all of which related to and arose from KHAN’s service as an officer and/or director of EMBARK. 37.
EMBARK’s
Amended
Complaint
alleges
the
following
causes of action against KHAN: (1) Improper Payments of EIFC Obligations; (2) Conversion; and (3) Intentional Interference with EMBARK’s Business. 38.
EMBARK’s claims against KHAN in the Amended Complaint
relate to and arise from KHAN’s service as a director and/or officer of EMBARK. 39.
KHAN is entitled to indemnification from EMBARK of all
his defense costs and expenses related to opposing the original Complaint and the current Amended Complaint. D. Outstanding Board Fees 40.
In
or
around
June
2011,
EMBARK
was
experiencing
financial difficulties. 41.
Accordingly, KHAN and the other Board member, Vishal
Garg, agreed that they would postpone payment by EMBARK of Board fees otherwise due and owing to them. 42.
KHAN is owed Board fees in the amount of $10,000.00
per month for the time period of June 2011 to June 2013.
- 11 -
43. EMBARK
At one time, it was contemplated by KHAN and Garg that would
be
restructured
to
become
part
of
Education
Investment Finance Corporation (“EIFC”), another company owned by KHAN and Garg. 44. business
In March 2013, Garg removed $220,000.00 from an EIFC account
and
claimed
that
this
amount
represented
accrued board fees due and owing to him from EMBARK. 45.
EMBARK
owes
KHAN
at
least
$240,000.00
for
accrued
Board fees. FIRST COUNT (Indemnification) 46.
KHAN incorporates by reference all of the allegations
set forth above. 47.
KHAN
was
a
director
of
EMBARK
from
approximately
of
EMBARK
from
approximately
February 2009 to June 2013. 48.
KHAN
was
an
officer
February 2009 to June 2013. 49.
KHAN at all times acted in good faith as a director
and officer of EMBARK. 50.
KHAN at all times acted in a manner that he reasonably
believed to be in and/or not opposed to the best interests of EMBARK.
- 12 -
51.
EMBARK’s claims in its original Complaint relate to
and arise from KHAN’s service as an officer and/or director of EMBARK. 52. arise
EMBARK’s claims in its Amended Complaint relate to and
from
KHAN’s
service
as
an
officer
and/or
director
of
EMBARK. 53.
Accordingly, pursuant to EMBARK’s By-laws and Section
145 of The General Corporation Law of the State of Delaware, EMBARK is required to indemnify KHAN. SECOND COUNT (Breach of Contract) 54.
KHAN incorporates by reference all of the allegations
set forth above. 55.
KHAN
was
a
director
of
EMBARK
from
approximately
February 2009 to June 2013. 56.
EMBARK agreed to pay Board fees to KHAN in the amount
of $10,000.00 per month for the time period of June 2011 to June 2013. 57.
EMBARK has breached the agreement by failing to pay
KHAN accrued Board fees. 58.
As a result, KHAN has been damaged in the amount of
$240,000.00, plus interest, attorneys’ fees and costs.
- 13 -
THIRD COUNT (Quantum Meruit) 59.
KHAN incorporates by reference all of the allegations
set forth above. 60.
KHAN provided services to EMBARK possessing a fair and
reasonable value of $240,000.00, for which he has not been paid. 61.
KHAN’s services were accepted and used by EMBARK for
its own financial benefit. 62.
EMBARK, in accepting these services, was aware that
KHAN expected to be paid. 63.
EMBARK has not paid KHAN for these services.
64.
As a result, KHAN has been damaged in the amount of
$240,000.00, plus interest, attorneys’ fees and costs. FOURTH COUNT (Unjust Enrichment) 65.
KHAN incorporates by reference all of the allegations
set forth above. 66.
KHAN conferred a benefit upon EMBARK by serving as a
director on its Board of Directors. 67.
EMBARK appreciated and knew of the benefit conferred
by KHAN. 68.
Under the circumstances, it is unfair and unjust for
EMBARK to retain the benefit provided by KHAN without paying for it.
- 14 -
69.
As a result, KHAN has been damaged in the amount of
$240,000.00, plus interest, attorneys’ fees and costs. FIFTH COUNT (Retaliation Under Delaware Law) 70.
KHAN incorporates by reference all of the allegations
set forth above. 71.
EMBARK
is
a
Delaware
corporation
and
governed
by
Delaware law. 72.
KHAN
was
a
director
of
EMBARK
from
approximately
February 2009 to June 2013. 73.
As part of its business, EMBARK collected application
fees from students on behalf of EMBARK’s customer schools. 74.
EMBARK
was
legally
obligated
to
keep
the
school’s
portion of students’ application fees segregated and to hold those moneys for the benefits of the customer schools. 75.
Garg
caused
EMBARK
to
use
these
school
application
fees to fund EMBARK’s operations because EMBARK was experiencing cash flow problems. 76.
KHAN
objected
to
Garg
that
it
was
improper
and
unlawful for EMBARK to use the school’s application fees to fund EMBARK’s operations. 77. about
the
EMBARK terminated KHAN in retaliation for complaining conduct
described
above,
in
violation
of
common law and Delaware’s Whistleblower Protection Act.
- 15 -
Delaware
78.
KHAN
has
been
damaged
as
a
result
of
EMBARK’s
retaliatory conduct. SIXTH COUNT (Abuse of Process) 79.
KHAN incorporates by reference all of the allegations
set forth above. 80.
EMBARK caused regularly issued process to be served
upon KHAN in connection with its original Complaint and Amended Complaint. 81.
EMBARK caused its lawsuit to be filed, and process to
be served, against KHAN for the purpose of harming, harassing, oppressing, and injuring KHAN without economic or social excuse or justification. 82.
EMBARK caused its lawsuit to be filed, and process to
be served, against KHAN to obtain a
collateral advantage or
corresponding detriment to KHAN which is outside the legitimate ends of the process. 83.
EMBARK’s lawsuit was filed in retaliation for KHAN’s
objecting to Garg’s mismanagement of EMBARK and misuse of school application fees, and in retaliation for KHAN’s filing the EIFC action against Garg, as alleged above. 84.
As a result of EMBARK’s abuse of process, KHAN has
been suffered monetary damages.
- 16 -
PRAYER FOR RELIEF WHEREFORE, the
Court
to
Counterclaim enter
Plaintiff
judgment
against
KHAN
respectfully
Counterclaim
asks
Defendant
EMBARK CORP. as follows: (A)
Ordering Defendant EMBARK CORP. to indemnify RAZA KHAN pursuant to Section 145 of The General Corporation Law of the State of Delaware;
(B)
Ordering Defendant EMBARK CORP. to pay RAZA KHAN accrued Board Fees due and owing to him in the amount of $240,000.00;
(C)
Awarding Counterclaim Plaintiff compensatory damages, pre-judgment and post-judgment interest, costs, and attorneys’ fees;
(D)
Ordering such other relief as the Court deems just and proper.
____________________________ Mark A. Berman, Esq. Kelly A. Zampino, Esq. HARTMANN DOHERTY ROSA BERMAN & BULBULIA, LLC 565 Fifth Avenue, 7th Floor New York, NY 10017 (212)344-4619 Attorneys for Defendant Raza Khan Dated: June 16, 2014
- 17 -
EXHIBIT A
REDACTED
EXHIBIT B
