Michael Kong, the former CEO of Modern Luxury Media, along with ex-CFO Jeff Goldstein, are suing the magazine publisher, which could throw a monkey wrench into the Dickey family’s planned buy of the company.
According to court documents filed in Los Angeles Superior Court on Aug. 5, both Kong and Goldstein are claiming that Modern Luxury has breached their employment agreements and has failed to indemnify and defend them against lawsuits stemming from their actions on behalf of the company.
In June, Juli Benlevi-Zeff and JBA Holdings sued Kong, Goldstein, Modern Luxury and other defendants, in a separate Delaware complaint, for $8.5 million in damages. (It’s unclear why Benlevi-Zeff is suing although Modern Luxury acquired her company, JuliB Inc., a publisher of twice weekly e-newsletters, in 2008.)
Kong co-founded Modern Luxury in 1993. Both he and Goldstein left the company in early 2010. The Kong/Goldstein lawsuit lists Modern Luxury Media as a defendant, as well as various directors including Kevin Flannery and William Cobert. See lawsuit here.
Kong and Goldstein have repeatedly tried to get Modern Luxury to defend them in the Benlevi-Zeff lawsuit, according to court documents obtained by peHUB. On July 20, Modern Luxury informed Kong and Goldstein that their demands for indemnification and reimbursement were “worthless” because the company intended to sell its assets in 10 days.
The sale apparently took much longer. The Dickey family agreed in late August to buy Modern Luxury Publishing. It’s not clear when the deal will close. Michael Dickey, president and publisher of Dickey Publishing, told peHUB Tuesday he was aware of the lawsuit. He referred questions to Berkery Knoyes & Co., the investment bank advising Modern Luxury on its sale.
Modern Luxury was controlled by its lenders, GE Business Financial Services and NewStar financial, before its sale to Dickey. However, they weren’t named in the lawsuit.
In the lawsuit, Kong claims that he loaned Modern Luxury about $600,000 from June 2007 to July 2008. He wants Modern Luxury to reimburse him these funds and pay all fees and costs he has incurred to defend himself in the Benlevi-Zeff lawsuit. The execs also want an injunction preventing the defendants from distributing proceeds of the Modern Luxury sale until funds have been set aside to defend them in the Benlevi-Zeff lawsuit. Alternatively, Kong wants an injunction to stop the sale or transfer of assets during the pendency of the Benlevi-Zeff lawsuit.
Kong also claims that he wasn’t paid his $400,000 yearly salary from July 1, 2008 to June 30, 2009. The execs want any unpaid wages due them.
GE declined comment. Officials for Kong, JuliB Inc., Berkery and NewStar could not be reached for comment.