LOS ANGELES (CN) - An auction house lost $583,961 when NBA legend Kareem Abdul-Jabbar refused to hand over sports memorabilia he had agreed to consign, the auctioneer claims in court.
Julien Entertainment.com dba Julien's Auctions sued Abdul-Jabbar and his KAJ Lifetime Retirement Savings Plan on Jan. 28 in Superior Court. In the same court on the same day it filed a parallel lawsuit against Iconomy LLC and its owner, Deborah Morales.
Abdul-Jabbar is the NBA's all-time leading scorer. Since retiring he has written several well-received books.
Julien's Auctions, which specializes in celebrity memorabilia, claims it entered the consignment agreement with Abdul-Jabbar and Iconomy in October 2012, to consign 400 pieces of sports memorabilia, worth around $10 million, for an auction in June 2013.
Iconomy, owned by Abdul-Jabbar's longtime friend and business manager Deborah Morales, helps professional athletes create brand equity and expand their legacy beyond sports to support themselves after retirement, according to its website.
Iconomy CEO Deborah Morales called it "meritless litigation" in an email to Courthouse News.
"Julien's unilaterally dismissed the lawsuit it filed nearly two years ago against Ms. Morales and her company, Iconomy, which was based fundamentally the same allegations as the new lawsuits," Morales wrote.
Under the terms of the deal, Julien's agreed to make a nonrefundable $300,000 donation to Abdul-Jabbar's Skyhook Foundation and to reduce its sales commissions from around 25 percent to an "unprecedented" 7 percent, in return for the defendants' promise not to take back any of the items being consigned, according to the complaints.
Just before they completed the agreement, however, Morales insisted that the consignor on the agreement be changed from Abdul-Jabbar to his savings plan, so he could get a "more favorable tax treatment," according to the complaint.
Julien's claims that Morales assured it that Abdul-Jabbar was the sole owner of the plan, which she claimed was created specifically for the consignment agreement. She said that Abdul-Jabbar owned all of the property, so changing the consigning party "would have no effect whatsoever on the relationship between Julien's Auctions and Jabbar," the complaint states.
Julien's says that wasn't true.
"Before the auction, defendants and Jabbar attempted to withdraw several key, high-valued centerpiece items from the auction ('disputed items'), which would have destroyed the value of the remaining consigned property and would have resulted in a net loss to Julien's, after the donation and the expenses and costs incurred to put on the auction," the complaint states.
Julien's says it tried to resolve the dispute amicably, but the defendants refused to honor the terms of the consignment agreement and Julien's was forced to seek arbitration.
At a hearing in September 2014, the arbiter found that the memorabilia in question was owned by Abdul-Jabbar's Lifetime Retirement Plan and thus by Abdul-Jabbar as Trustee of the plan, and awarded Julien's $583,961.70 in damages for the defendants' breach of agreement, the complaint states.
Abdul-Jabbar and Morales countered by claiming that the savings plan is an ERISA-qualified plan, and as such is a separate legal entity in which Abdul-Jabbar has no ownership, according to the complaint. The defendants claimed that the plan never owned the consigned property, which they said belongs to Abdul-Jabbar.
Julien's claims the savings plan is a "sham company" and an "elaborate machination on the part of Jabbar and defendants to attempt to insulate Jabbar from any personal liability."
"The plan hatched by defendants and Jabbar is deliberately complicated and convoluted. They have attempted to build layer upon lawyer of dummy companies in order to avoid their liabilities to their creditors," the complaint states.
Julien's claims the defendants are using the dummy corporations to play an elaborate game of "three-card monte" to make sure that Julien's will never get the consigned property, to which it is entitled under the final award.
Julien's seeks $583.961.70 in compensatory damages, and punitive damages for breach of contract, fraudulent conveyance and fraud.
It also wants the court to void any transfer of assets or funds between the plan or any of the defendants' dummy corporations.
It is represented by Sonia Y. Lee with Raines Feldman of Beverly Hills.
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