The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A new front has opened in the legal war over Jamie Dingman’s failed Nassau restaurant empire, as the Lyford Cay resident moves to dismiss continuing “garden-variety fraud and contract” claims.

The son of world-renowned entrepreneur, Michael Dingman, is now fighting a ‘battle on two fronts’ after former partners/associates initiated litigation in the New York State Supreme Court this summer alongside their existing federal court action.

Erik Gordon and Ryan Giunta, both US citizens, appear to have ‘hedged their bets’ in anticipation that Mr Dingman will succeed in having their appeal of the southern New York federal court’s original verdict thrown out.

The duo are alleging that their action, claiming fraud against Mr Dingman for supposedly breaching agreements to provide them with an equity interest in his Nassau-based Out West Hospitality venture, was wrongly deemed a foreign securities transaction.

The southern New York court found that the deal between Dingman and Gordon/Giunta was never legally binding because it failed to obtain approval from the Bahamian authorities - the Central Bank and Investments Board - under this country’s Exchange Control Regulations.

Out West Hospitality was the Bahamian holding company for a planned Nassau restaurant, hotel and bar conglomerate that included the iconic Traveller’s Restaurant and several other properties, but the venture fell apart and collapsed in 2014.

Gordon is insisting that the equity deal was a US domestic securities deal because the transaction took place in New York. “The District Court erroneously concluded that because actual issuance of the securities to Gordon depended on the approval of certain Bahamian authorities, the parties did not incur irrevocable liability in the United States,” his appeal alleges.

“The need for Bahamian approval, however, did not alter Gordon’s liability to take and pay for the securities. Gordon could not have backed out of the transaction without breaching the agreement.

“As a result, the approval requirement did not change the fundamentally domestic nature of the transaction: An American citizen fraudulently contracted to sell securities to an American citizen in the United States.”

Gordon alleged that he paid $250,000 to Mr Dingman in exchange for a 50 per cent equity stake in Out West Hospitality, but never received the shares. He is arguing that “the only foreign component to the transaction was the formal approval of certain Bahamian authorities, which Dingman represented that he would obtain”.

“As a matter of New York contract law, Gordon and Dingman were irrevocably bound by contract to the sale of the subject stock despite the fact that the transaction contemplated Bahamian approval for the issuance of the stock to a non-Bahamian,” Gordon’s appeal alleged.

“Here, the relevant actions are not predominantly foreign: Dingman marketed the securities to an American investor while both were in New York, made material misrepresentations in New York and contracted to sell the securities in New York.

“Appellees [Dingman] have not identified any actual inconsistency with Bahamian law that would result from the application of the Exchange Act to Appellees’ conduct. In fact, the only issue of Bahamian law that appellees have identified is the approval requirement, which hardly renders this fraudulent securities transaction in the United States so predominantly foreign as not to be the concern of the federal securities laws.”

Mr Dingman, though, is countering that Bahamian law is “incompatible” with US legislation, and that applying the latter to Gordon’s case “places it in conflict with the regulatory laws of the Bahamas”.

Describing Gordon’s action as “impermissibly extraterritorial”, he conceded: “Several investors banded together with Dingman to build and operate a network of restaurants, bars, hotels and other venues in the Bahamas, but the venture failed.

“Gordon now attempts to make a federal case out of his garden-variety fraud and contract claims by alleging securities fraud arising from Dingman’s alleged failure to deliver shares in Out West, and arguing that this claim is governed by the Exchange Act because his arrangements with Dingman were made in the United States and constituted a domestic transaction.”

Mr Dingman alleged that Gordon was seeking to invest in Out West Hospitality as part of an investment strategy to obtain Bahamian permanent residence, and argued his opponents were seeking to “mask the fact that this case always has been about parties, events and claims in the Bahamas, which should be governed by Bahamian law”.

“The parties always understood that shares in a Bahamian entity could not be issued to Gordon, a non-resident, without approvals from the necessary Bahamian authorities,” Mr Dingman’s legal filings alleged. 

“Any contract for the sale of such securities would be revocable if approval was not forthcoming, and appellants have acknowledged this condition by their allegation that ‘if approval was not forthcoming, Dingman was bound to return to Gordon all funds paid by Gordon’. Thus, there would be no irrevocable liability for the purchase or sale of the securities in issue unless and until the Bahamian authorities had given their approvals, at the earliest.

“Where Bahamian law prohibits any Bahamian investment by Gordon without approval from the Bahamian government, any determination by a US court that Gordon has claims with respect to an investment in a Bahamian company for which he never obtained approval may be ‘incompatible’ with Bahamian law.”

Mr Dingman alleged that Bahamian approvals were “a condition precedent” for Gordon’s Out West Hospitality investment, and added: “Gordon’s claims will implicate incompatible US and foreign laws.

“A US court cannot direct Dingman or Out West to issue shares to Gordon in contravention of Bahamian regulations prohibiting the issuance of shares without the necessary Bahamian approvals, and a US court should not be adjudicating claims which are based on the alleged failure of Dingman and Out West to issue such shares.”

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