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Commitments and Contingencies
6 Months Ended
Jun. 30, 2011
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Disclosure [Text Block]
Note 6. Commitments and Contingencies

On March 22, 2010, Russell Whelchel, who performed work as a hair and makeup stylist at the Scores West nightclub located at 536 West 28th Street, New York, NY, filed a civil lawsuit against the Company in the S.D.N.Y.   The plaintiff subsequently amended the complaint on July 30, 2010.  The plaintiff is seeking to recover under federal and New York labor laws minimum wages, unlawful deductions, misappropriated gratuities and other wages for the period of his “employment” with Scores West between May 2009 and February 13, 2010.  Additionally, the plaintiff is seeking pre-judgment and post-judgment interest, liquidated damages and injunctive relief.  The Company disputes that it was an employer of the plaintiff; contends that the plaintiff was not an “employee” but rather an independent contractor of Scores West and denies all allegations seeking damages under federal and state wage and hour laws. The Company intends to vigorously defend against all claims in the plaintiff’s complaint.  The Company is currently engaged with the plaintiff in the exchange of discovery.

On March 16, 2010, Charles Braden, who claims he performed work as a hair and makeup stylist at the Scores New York nightclub located at 536 West 28th Street, New York, NY, filed a civil lawsuit against the Company in the S.D.N.Y.   The plaintiff is seeking to recover under federal and New York labor laws minimum wages, unlawful deductions, misappropriated gratuities and other wages for the period of his “employment” with “Scores New York” between approximately January 2005 and September 2010.  Additionally, the plaintiff is seeking pre-judgment and post-judgment interest, liquidated damages, reasonable attorneys’ fees and costs of the action and other relief as the S.D.N.Y. deems just and reasonable.  The Company disputes that it was an employer of the plaintiff, contends that the plaintiff was not an “employee” but rather an independent contractor of Scores West and denies all allegations seeking damages under federal and state wage and hour laws. The Company intends to vigorously defend against all claims in the plaintiff’s complaint.

In mid-March 2010, the Company was named by Nichole Hughes in a complaint filed with the SCNY.  Ms Hughes is suing the Company for an unspecified amount of damages in connection with an alleged unauthorized use of her image in the Company’s advertising materials.  On June 20, 2010, the Company filed a pre-answer motion to dismiss the complaint, which was denied on December 17, 2010.  The Company then filed an answer and affirmative defenses and a third party complaint against IMO, owner and operator of the club where Ms. Hughes was employed.  The case is now in discovery. The Company will vigorously defend itself in this litigation and does not expect that the outcome will be material.

On January 14, 2010, the Company was named in a complaint filed with the SCNY in connection with an alleged assault on the plaintiff by an agent of the Company’s New York affiliated club. The Company filed a motion to dismiss this complaint and, on December 15, 2010, the plaintiff stipulated to discontinue the case against the Company.

On June 23, 2009, the Company filed a complaint with the SCNY against Silver Bourbon, Inc., its licensee in New Orleans and operator of Scores New Orleans, for breach of contract.  At the time of the filing, Silber Bourbon, Inc. owed the Company $70,000 in unpaid royalties.  We have settled this matter with Silver Bourban, Inc. and the court action has been discontinued.

On September 5, 2008, Ruth Fowler, a former cocktail waitress at Scores West, filed a civil lawsuit against the Company in the Federal District Court for the Southern District of New York (the “Court”).  The plaintiff is seeking to recover damages for alleged illegal deductions take from her salary and monies due her and for sexual harassment under the New York City and New York State Human Rights Laws.  On May 7, 2009, the Company filed a motion to dismiss the action against it but that motion was denied by the Court with possible leave to renew the motion at a future date after the completion of discovery proceedings.  In the meanwhile, counsel for plaintiff filed an amended complaint on February 26, 2010 to add as additional parties to the action Go West and EMS.  On March 1, 2010, the Company filed affirmative defenses and an amended response asserting cross-claims for judgment against both Go West and EMS. On September 13, 2010, the SDNY denied plaintiff’s application for further discovery and on October 18, 2010, the Company filed a motion to dismiss, which has yet to be decided on.  Although the outcome of this action is uncertain, the Company believes that any outcome will not have a material effect on it, since the plaintiff was only employed by Scores West for less than four months.

In early March 2008, the Company received notice that DIF&B, owner of the Las Vegas club, would be canceling its sublicense with EMS effective on or before May 6, 2008. The Company was notified that DIF&B would be making final royalty payments to EMS totaling $60,000 at the rate of $10,000 per week starting the first week of March 2008. The Las Vegas club ceased operating and, as of December 31, 2008, EMS had received only one such $10,000 payment from DIF&B. EMS commenced an action against DIF&B and filed a complaint and affidavit of service with the SCNY, on July 23, 2008. DIF&B was required to file an answer by August 23, 2008, but did not do so. As a result, EMS filed an application for a default judgment and the SCNY appointed a referee to determine damages. The referee determined that damages in the amount of $216,000, with interest, should be paid to EMS and a default judgment totaling $230,557 was entered by the Clerk of the SCNY.  The Company will attempt to collect on this judgment.  The Company will be entitled to all monies so collected, pursuant to the Assignment Agreement with EMS and 333.
 

On December 11, 2007, Francis Vargas, a former cocktail waitress at Scores West located in New York, NY, filed a civil lawsuit against the Company and Go West in the SCNY, alleging violations of the New York State Human Rights Law, New York Executive Law, New York City Human Rights Law, and the New York City Administrative Code, based upon allegations of sexual discrimination and sexual harassment. The lawsuit further alleges that at all material times both the Company and Go West were employers of Ms. Vargas, the plaintiff. The law suit seeks unspecified compensatory damages for plaintiff’s alleged loss of past and future earnings and benefits, emotional distress, humiliation and loss of reputation. The Company disputes that it was an employer of the plaintiff and categorically denies all allegations of sexual discrimination and sexual harassment. The Company filed its verified answer in the Supreme Court of the State of New York on February 12, 2008 to contest and defend against these accusations and it is currently engaged in discovery. On April 18, 2008, co-defendant Go West filed for bankruptcy and the case was stayed.  On July 23, 2009, the bankruptcy petition was dismissed and, as a result, the automatic stay was lifted. The Company subsequently filed an amended response asserting cross-claims for judgment against both Go West and EMS and recently filed a motion to compel discovery which was approved.  The Company is currently preparing for the plaintiff’s deposition and a compliance conference which are scheduled for the end of April.

On October 9, 2007, former Go West bartender Siri Diaz filed a purported class action and collective action on behalf of all tipped employees against the Company and other defendants alleging violations of federal and state wage/hour laws (Siri Diaz et al. v. Scores Holding Company, Inc.; Go West Entertainment, Inc. a/k/a Scores West Side; and Scores Entertainment, Inc., a/k/a Scores East Side , Case No. 07 Civ. 8718 (Southern District of New York (the “Court”), Judge Richard M. Berman)). On November 6, 2007, plaintiffs served an amended purported class action and collective action complaint, naming dancers and servers as additional plaintiffs and alleging the same violations of federal and state wage/hour laws. On or about February 21, 2008, plaintiffs served a second amended complaint adding two additional party defendants, but limiting the action to persons employed in the New York Scores’ clubs. The amended complaint alleged that the Company and the other defendants were “an integrated enterprise” and that the Company jointly employed the plaintiffs, subjecting all of the defendants to liability for the alleged wage/hour violations. On behalf of the Company and the other defendants the Company filed a motion to dismiss that portion of the Complaint that asserted State law class action allegations; the Company also moved to dismiss the claims of two of the named plaintiffs for failure to appear for depositions. At the same time plaintiffs moved for conditional certification under the federal law for a class of the servers, bartenders and dancers; the Company opposed that motion. On May 9, 2008, the Court issued its decision, denying the motion to dismiss and granting conditional certification for a class of servers, cocktail waitresses, bartenders and dancers who have worked at Scores East since October 2004.  On May 29, 2008, the Company filed an answer to plaintiff's’ second amended complaint.  On or about September 5, 2009, plaintiffs served their third amended complaint adding in two individual defendants who are alleged to be employers under the state and federal wage claims.  The Company disputes that it is a proper defendant in this action and it disputes that it violated the federal and state labor laws, and further disputes that the dancers are “employees” subject to the federal and state wage and hour laws. The Company has recorded a $450,000 estimate to settle this lawsuit, as the legal fees defending the Company’s position during the year has amounted to approximately $80,000.

On March 30, 2007, the Company, along with several of its affiliates, were named in a suit in connection with an alleged assault by an employee of an affiliate and one of the Company’s stockholders and former officer and director.  The Company has answered a third amended complaint and completed discovery.  The Company has filed a note of issue with the court and is waiting for a court date on which the trial will begin. The Company will vigorously defend itself in this litigation and does not expect that the outcome will be material.

There are no other material legal proceedings pending to which the Company or any of its property is subject, nor to our knowledge are any such proceedings threatened.