Dickinson Sues Keeneland: Alleges 'Sham Corporation,' Failure To Pay - Horse Racing News | Paulick Report

Dickinson Sues Keeneland: Alleges ‘Sham Corporation,’ Failure To Pay

Keeneland replaced its Polytrack surface with dirt in 2014

Trainer Michael Dickinson has sued Keeneland Association in an attempt to collect $395,874.18 a federal judge ruled Dickinson is owed by Martin Collins Surfaces & Footings, the company that manufactured and sold the synthetic racing surface known as Polytrack and alleged in the lawsuit to be the “alter ego and sham corporation” of Keeneland, the Lexington, Ky., Thoroughbred auction house and racetrack.

The case revolves around a February 2008 “non-exclusive” license agreement between Dickinson's company (Michael W. Dickinson Inc.) and Martin Collins Surfaces & Footings, Keeneland Association, Martin Collins Enterprises and Martin Collins International. The agreement, which was to end a dispute between the two sides, recognized Dickinson as the owner of a 1999 U.S. patent for “Sport and Recreational Surface,” and permitted Martin Collins Surfaces & Footings to “use, manufacture, import, market, offer for sale and sell” a synthetic surface product based on the patent's formula. The agreement was signed by Dickinson, Martin Collins, and Nick Nicholson, then president and CEO of Keeneland.

Martin Collins Surfaces & Footings was a Kentucky limited liability company owned by Martin Collins International and Keeneland Ventures PT, LLC.

The agreement released all parties from previous litigation, including lawsuits filed by Martin Collins Surfaces & Footings against Dickinson in California and Kentucky alleging the patent should be declared invalid and unenforceable because Martin Collins developed Polytrack in the mid-1980s, years before Dickinson applied for and was approved as owner of the U.S. patent.

As part of the license agreement, Martin Collins Surfaces & Footings was to pay Dickinson $1.25 million in 10 equal installments of $125,000 per year, with the first payment due Sept. 1, 2008, and subsequent payments due Sept. 1 of the following years.

The agreement provided Martin Collins Surfaces & Footings a termination option if it “ceases to make, use, sell, offer to sell and import synthetic surfaces.” Voluntary or involuntary dissolution of Martin Collins Surfaces & Footings would terminate the agreement, though it would not absolve the company of payment obligations prior to termination.

According to court documents, Martin Collins Surfaces & Footings made just one payment of $125,000 on Sept. 1, 2008. In May 2011, after Martin Collins Footings & Surfaces failed to pay its 2009 and 2010 installment payments, Dickinson sued. In November 2011, Judge Joseph M. Hood in U.S. District Court for the Eastern District of Kentucky, entered a judgment in favor of Dickinson and against Martin Collins Surfaces & Footings for $395,874.18.

Dickinson is seeking declaratory judgment in a jury trial
Dickinson is seeking declaratory judgment in a jury trial

In between the filing of the suit and the judgment, however, on Sept. 23, 2011, Martin Collins Surfaces & Footings was dissolved as a limited liability company by its manager, William W. Thomason Jr., then Keeneland vice president and chief financial officer who would succeed Nicholson as president and CEO in September 2012. The dissolution of the company came more than 2 ½ years before Keeneland announced it was removing Polytrack as its primary racing surface.

After Dickinson failed to receive payment for the judgment in his favor, he unsuccessfully fought to “pierce the corporate veil” of Martin Collins Surfaces & Footings in several discovery filings with the court.

Since a final ruling in that case on Nov. 20, 2012, attorneys for Dickinson were introduced to Anthony Paul James, a former employee of Martin Collins International who was subject to a non-disclosure agreement that expired in February 2015.  James made a written declaration Aug. 6, 2015, an exhibit in the latest legal action filed by Dickinson against Keeneland.

James said in his declaration that he was hired to “salvage” Martin Collins International (MCI)'s interest in Martin Collins Surfaces & Footings (MCSF).

He also stated:

–“I discovered that Keeneland Association Inc. treated MCSF as its alter ego.”

–“I discovered that even though MCI was a 50 percent member and was supposed to have two named managing members that Keeneland did not hold directors or member meetings as evidenced by the fact that I requested and could not find nor received any meeting minutes.”

–“Keeneland utilized its own employees to handle all aspects of MCSF's business.”

–“Keeneland's management controlled MCSF.”

–“Keeneland's management also took steps to pay off all creditors except (Dickinson).”

James also said Keeneland Association guaranteed a loan from Central Bank & Trust made to Martin Collins Surfaces & Footings for $5 million executed in 2008.

Dickinson is seeking declaratory judgment in a jury trial to “pierce the corporate veil” of Martin Collins Surfaces & Footings in order to “enforce its existing judgment…for the full judgment value of $395,874.18, plus interest.”

Keeneland has yet to file a response to the complaint, filed Oct. 27, 2015, in U.S. District Court for the Eastern District of Kentucky (Lexington division).

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