March 29, 2024

Iowa Speedway legal battle accelerating

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The legal battle between the two families involved in the Iowa Speedway purchase last summer has escalated with both sides threatening suit.

USMC Corp. has filed a lawsuit in Jasper County District Court against former Iowa Speedway owner Manaco and Manatt’s Inc., alleging those companies breached the agreement entered into when USMC bought the raceway on June 30, 2011.

In the lawsuit, USMC claims Manaco left about $1.2 million in debts and liabilities that should have been paid prior to the purchase taking effect and that Brooklyn-based construction company Manatt’s Inc. enjoyed more than $800,000 in advertising and other benefits after a sponsorship agreement expired on March 31 of last year.

According to court documents filed Jan. 24, USMC owners Stan and Conrad Clement allege that Manaco failed to disclose a March 8, 2010 sponsorship agreement between U.S. MotorSport Corp. and Manatt’s. That agreement granted advertising, naming and certain intellectual property rights associated with the speedway for an annual payment of about $1 million.

Stan Clement said in a brief phone interview Tuesday that the “Iowa Speedway does not comment on legal matters,” and that USMC did not have a statement on the pending litigation.

Attempts were made to reach Manatt’s President Brad Manatt, but a staff spokesperson said he was out of the office this week, and a message left on his home phone Tuesday was not returned before press time this morning.

Online court records show that lawyers from both companies met in civil court Feb. 1. No future court date was indicated.

According to the lawsuit, the sponsorship agreement in question expired on March 31, 2011.

“Nonetheless, Manatt’s had continued its use and enjoyment of the benefits of the Sponsorship Agreement, which would not have been possible without Manaco’s knowledge and concurrence, throughout the entire 2011 racing season,” the lawsuit says. “USMC calculated the value of Manatt’s use and enjoyment to $820,495.76 based upon the calculation methodology used in the Sponsorship Agreement.”

Additionally, a “lengthy and time-consuming” analysis completed in late 2011 is explained in the lawsuit claiming that about $1.2 million was “paid to vendors, trade creditors and other third parties for pre-closing accounts payable, liabilities and indebtedness” by USMC, but that those debts were the contractual obligations of Manaco and should have been paid before the purchase agreement was signed.

According to court documents filed Wednesday, Manatt’s is now threatening counter suit. The company claims that a second $4.27 million promissory note signed by Stan, Conrad, Tracy and Eric Clement is nearing default.

The former Speedway owners are also requiring payment of approximately $500,000 for management cost and track upkeep. Manatt’s said in the documents that it will file litigation if the payments are not received by Feb. 20.

A 91.57 percent controlling stake in the Speedway was purchased by the Clements in 2011 for $19.3 million. The remaining 8.43 percent of the company was still owned by track co-designer Rusty Wallace. USMC paid for the purchase with a $13 million mortgage issued in Conrad Clement’s name and two additional promissory notes, one for $2 million and another for $4.27 million dollars signed by Stan and Conrad Clement.

After the internal financial analysis, the court document states, USMC sent a letter to Manaco on Dec. 21 stating their intent to offset the costs against the $2 million promissory note. The Clements claim in the suit they have the contractual right to the financial recourse.

USMC alleges that Manaco then threatened legal action if the promissory note was not paid in full. A subsequent adjusted payment of about $152,600 was made on Dec. 30, but was rejected by Manaco on Jan. 3. The former Speedway owners threatened to consider the note in default if the full payment was not made, according to the court filing.

Mike Mendenhall can be contacted at 792-3121 ext. 422 or via e-mail at mmendenhall@newtondailynews.com..