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Commitments and Contingencies
9 Months Ended
Sep. 30, 2017
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

Note 10

Commitments and contingencies:

 

On June 22, 2017, the United States District Court for the Middle District of Florida, Orlando Division, dismissed the Company and Dr. Dolev Rafaeli, its former Chief Executive Officer, from the case of Linda Andrew v. Radiancy, Inc.; the Company (under the name Photomedex, Inc.); and Dolev Rafaeli. Ms. Andrew had filed a product liability suit alleging damages from her use of a no!no! hair device. The claims against the Company and Dr. Rafaeli were dismissed without prejudice. The Company’s subsidiary, Radiancy, Inc., remains a defendant in the suit.

  

As previously reported on Form 10-Q, Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the period ending March 31, 2017, and on the Forms 10-K, Current Report, filed on April 14, 2016 and May 31, 2016, the Company and its subsidiaries had entered into Agreements and Plans of Merger and Reorganization with DSKX and its subsidiaries, under which DSKX’s subsidiaries would merge with the Company’s subsidiaries, in exchange for which DSKX would issue stock in its company to the Company. On May 27, 2016, the Company and its subsidiaries terminated the Agreements and Plans of Merger and Reorganization with DSKX and filed suit against DSKX in the United States District Court for the Southern District of New York alleging that DSKX breached certain obligations under those Merger Agreements and asserted claims for declaratory judgment, breach of contract, seeking to recover a termination fee of $3.0 million, an expense reimbursement of up to $750,000 and its liabilities and damages suffered as a result of DSKX’s failures and breaches in connection with each of the Merger Agreements.

 

On June 23, 2017, the Company and its subsidiaries, Radiancy, Inc. (“Radiancy”) and PhotoMedex Technology, Inc. (“P-Tech”), entered into a Confidential Settlement and Mutual Release Agreement (the “DS Settlement Agreement”) with DS Healthcare Group, Inc. (“DSKX”) and its subsidiaries, PHMD Consumer Acquisition Corp. and PHMD Professional Acquisition Corp.

 

The terms of the DS Settlement Agreement are confidential; the parties dismissed the suit between them with prejudice on June 23, 2017.

 

During the three months ended September 30, 2017, Radiancy, Inc. (“Radiancy”), a subsidiary of the Company entered into a Settlement Agreement and Release (the “Mouzon Settlement Agreement”) with regard to Mouzon, et al. v. Radiancy, Inc., a civil action filed in the United States District Court for the District of Columbia.

 

The Mouzon civil action alleged certain marketing and warranty claims against Radiancy and its President, Dolev Rafaeli, who was earlier dismissed from the suit, on behalf of a purported class of individuals who had purchased the nono! Hair® removal product marketed and sold by Radiancy. The settlement also includes the potential plaintiffs under April Cantley v. Radiancy, Inc., a purported class action lawsuit originally filed in the Superior Court in the State of California, County of Kern, which was removed to the Federal Court system and consolidated with the Mouzon litigation. Additional information on these cases was previously reported in the Form 10-K, Annual Report Pursuant To Section 13 Or 15(D) Of The Securities Exchange Act Of 1934, filed for the year ending December 31, 2016, and in earlier filings on Forms 10-K; Forms 10-Q, Quarterly Report Pursuant To Section 13 Or 15(D) Of The Securities Exchange Act Of 1934; and Forms 8-K, Current Reports.

  

The terms and conditions of the Mouzon Settlement Agreement are also confidential; the parties will dismiss the suit between them with prejudice.

 

The Company is a party to JFURTI, LLC, et al v. Suneet Singal, et al, filed in the United States District Court for the Southern District of New York.  The suit names as Defendants Suneet Singal, an officer of various First Capital companies as well as the Chairman and President of the Company, Frank Grant and Richard Leider, board members of  First Capital Real Estate Investments, LLC, First Capital Real Estate Advisors, LP, Presidential Realty Corporation, Presidential Realty Operating Partnership, Downey Brand LLP and now the Company (under its previous name, Photomedex Inc., as well as nominal derivative defendants First Capital Real Estate Trust Incorporated and First Capital Real Estate Operating Partnership, L.P. 

The suit is the ninth filed by Jacob Frydman and/or JFURTI, LLC in a dispute between the plaintiffs and the First Capital group of companies, which entered into a series of agreements with Mr. Frydman beginning in September 2015.  Mr. Frydman had founded, sponsored, and taken public United Realty Trust Incorporated, a Real Estate Investment Trust (“REIT”).  Mr. Frydman was the CEO and Chairman of the REIT as well as the owner of various other United Realty branded companies affiliated with the REIT business.  In September 2015, Mr. Frydman and Singal negotiated and agreed to a transaction between various First Capital branded companies, on the one hand, and the United Realty branded companies affiliated with the REIT business, on the other hand, as a result of which the REIT was rebranded as First Capital REIT. 

 

After the September 2015 transaction was concluded, several disputes arose between the parties.  This suit is the ninth action brought by Mr. Frydman in state and federal courts relating to these disputes, and the second attempt by Mr. Frydman and JFURTI to bring federal claims derivatively in this Court against First Capital entities and other parties.  The first action, titled JFURTI, LLC and Jacob Frydman v. Forum Partners Investment Management LLC et al.,  No. 16 Civ. 8633 (the “Prior Action”), commenced on November 7, 2016 and asserted, inter alia, derivative RICO and securities fraud claims.  The Court dismissed the action in a decision and order dated April 27, 2017.

 

Following dismissal of the Prior Action, Mr. Frydman sent letters to each member of the REIT’s Board of Directors (the “Demand Letter”) demanding that the Board investigate and remediate the dissipation of assets as alleged by plaintiffs.  In particular, the Demand Letter questioned (i) a letter of intent with Presidential announced in an 8K filed by First Capital REIT on or about July 18, 2016; (ii) First Capital REIT’s use of funds raised between September 15, 2015 and February 28, 2016; (iii) an interest contribution agreement with Presidential entered into on or about December 16, 2016; (iii) the REIT’s failure to file quarterly and annual reports; (iv) an interest contribution agreement entered into on March 31, 2017 with Photomedex; and (v) other purportedly fraudulent acts such as publishing an artificially inflated NAV, defaulting on certain mortgage loans, misrepresentations by Singal with respect to certain properties contributed to the REIT through the Master Agreement executed on September 15, 2015, and various loan agreements with Forum Partners Investment Management LLC.   The Demand Letter also demanded inspection of certain corporate documents pursuant to Md. Code § 2-512. 

 

The REIT commenced such an investigation, and offered such an inspection, but Mr. Frydman and JFURTI failed to wait for the results of the investigation or make any inspection, and instead brought suit in the same court as the Prior Action.  The suit alleges, among other claims, violations of § 10(b) of the Exchange Act and Rule 10b-5 (1) against Singal and FCREI for misrepresentations in connection with the Master Agreement entered into on September 15, 2015 and related agreements; (2) against Downey Brand for failure to file certain deeds; (3) against the First Capital Defendants (except Grant and Leider), the Forum Defendants, and the Presidential Defendants for a fraudulent scheme to sell REIT assets to Presidential; and (4) against the First Capital Defendants, the Forum Defendants, and Photomedex for the transfer of First Capital REIT and First Capital OP assets to Photomedex in exchange for allegedly worthless shares.  There are also claims under state law for common law fraud, conversion, fraudulent conveyance, waste and mismanagement, accounting, injunctive relief, and violation of Cal. Bus. & Prof. Code § 17-200.  Many of the claims asserted in the Complaint, including the securities fraud claims, were never raised in the Demand Letter, as required by law.  The suit seeks damages against all defendants for the failure of the REIT to respond to the Demand Letter, and an injunction against the sale of the assets to the Presidential defendants.  

The parties submitted a motion for an order (i) staying all proceedings in this action for 60 days, or until the end of 2017, and (ii) extending the defendants time to respond to the Complaint, or to make a motion with respect to the Complaint, until 45 days after First Capital REIT’s response to the Demand Letter.  The Court granted that motion on October 31, 2017.  

 

The Company intends to defend itself vigorously against this suit. At this time, the amount of any loss, or range of loss, cannot be reasonably estimated as the case has only been initiated and no discovery has been conducted to determine the validity of any claim or claims made by plaintiffs. Therefore, the Company has not recorded any reserve or contingent liability related to these particular legal matters. However, in the future, as the cases progress, the Company may be required to record a contingent liability or reserve for these matters.

 

See Note 11, Commitments and Contingencies, in the Company’s Form 10-K for the year ended December 31, 2016 for further information on pending legal actions involving the Company and its subsidiaries. There have been no significant changes to the status of the items reported in the above Form 10-K.