Lawsuits and arbitrations involving BRC, its subsidiaries and officers

analysisOn January 24, 2024 a stockholder filed a putative class action in the U.S. District Court for the Central District of California against B. Riley Financial, Bryant Riley, Tom Kelleher and Phillip Ahn on behalf of purchasers of the company's common stock between May 10, 2023 and November 9, 2023 (Case No. 2:24-cv-00662). A second putative class action, filed on March 15, 2024 by a revocable trust, was consolidated with it on August 8, 2024, and on February 4, 2025 the court appointed that trust lead plaintiff. The amended complaint of April 21, 2025 asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act. It alleges that the company failed to disclose material financial details of the going-private transaction involving FRG and made false or misleading statements about its lending practices, its concentration of risk in transactions with Brian Kahn and his affiliates, its loan portfolio, its due diligence and risk management, and its scrutiny of Kahn after learning he was potentially implicated in a fraud involving an unrelated party. These are the plaintiffs' allegations: the court's order of December 12, 2025 on the motion to dismiss assessed only whether they were adequately pleaded, and no ruling on the merits has been made. The company states that it cannot estimate the potential liability, if any, that it believes these claims are meritless and that it intends to defend these actions. ^{1 2}

analysisIn that order Judge Sherilyn Peace Garnett granted in part and denied in part the defendants' motion to dismiss the consolidated amended complaint in In re B. Riley Financial, Inc. Securities Litigation. The plaintiffs had challenged 24 statements as false or misleading in light of the company's business relationship with Kahn; without parsing each one, the court held that they had sufficiently alleged that, at a minimum, the company's disclosures about the FRG buyout were materially misleading. The Section 10(b) claim survived against Bryant Riley and, through him, the company, and was dismissed as to Phillip Ahn and Thomas Kelleher because the plaintiffs had not sufficiently alleged that either acted with the required intent (scienter). The control-person claim under Section 20(a) of the Exchange Act proceeds against Riley, Ahn and Kelleher, because the plaintiffs alleged that Riley was directly involved in the FRG buyout and that all three signed financial statements addressing the equity investment in the buyout that omitted the loan to Vintage Capital Management (the VCM loan). The plaintiffs were given 21 days to file a second amended complaint. A ruling on a motion to dismiss tests only whether the allegations, taken as true, state a claim; it is not a finding that any statement was false or that any defendant is liable, and on the control-person claim no liability has been determined. The defendants answered the amended complaint on February 17, 2026, and the case moved into discovery and class certification. ^{3 4 1}

analysisFor purposes of the motion only, the court inferred that, given Riley's abrupt resignation from the FRG board, his personal involvement in the FRG buyout, the size of the buyout and Kahn's importance to the company's business, Riley was at least aware of public allegations that Kahn had engaged in fraud, and that the inference that he acted with deliberate recklessness was at least as compelling as any nonculpable explanation for the company's failure to disclose the VCM loan. That is a pleading-stage inference drawn from allegations the court had to accept as true, not a factual finding about Riley's state of mind; the company states that it believes the claims are meritless and intends to defend the actions. On June 18, 2026 the court set a final pretrial conference for November 3, 2027 and trial for January 4, 2028, and on September 1, 2026 the plaintiffs applied to file their motion for class certification under seal. These are scheduling entries in a pending case: the dates can change and no trial has taken place. ^{3 1 4}

analysisPurchasers of the company's bonds brought a separate claim under the Securities Act of 1933. On May 2, 2024 a putative class action was filed in the Superior Court of California, County of Los Angeles, on behalf of purchasers of the company's senior notes issued under its January 28, 2021 shelf registration and the prospectuses of August 4 and December 2, 2021, asserting claims under Sections 11, 12 and 15 of that Act against the company, some current and former officers and directors and the underwriters of those offerings. The amended complaint of September 27, 2024 alleges that the offering documents failed to tell investors that Brian Kahn or entities he controlled were engaged in illicit business activities, that the company nonetheless continued to finance Kahn's transactions, eventually enabling the FRG take-private, and that this was reasonably likely to draw regulatory scrutiny and reputational harm. These are allegations in a pending case and no ruling on them appears in the records reviewed; the company states that it believes the claims are meritless and intends to defend the action. ¹

analysisIn a derivative suit a stockholder sues on the company's behalf, here against its directors. The complaint filed on February 14, 2025 in the Delaware Court of Chancery (C.A. No. 2025-0164-LWW) on behalf of B. Riley Financial, as nominal defendant, against directors Bryant R. Riley, Robert L. Antin, Tammy Brandt, Robert D’Agostino, Thomas J. Kelleher, Renée E. LaBran, Randall E. Paulson, Michael J. Sheldon and Mimi K. Walters alleged breaches of fiduciary duty over the company's involvement with Brian Kahn, misconduct and waste, including improper compensation. In a memorandum opinion by Vice Chancellor Will, decided March 30, 2026, the court granted the defendants' motions to dismiss under Court of Chancery Rule 23.1: the plaintiff had not pleaded that a majority of the board was interested or lacked independence, so a pre-suit demand on the board was not excused, and the complaint was dismissed in full without reaching the merits. A dismissal for failure to make a pre-suit demand is not a ruling on whether the alleged breaches occurred. The opinion's cover page prints the decision date as March 30, 2025, but the matter was submitted on December 22, 2025, and the company's filings and the court's published listing give March 30, 2026. Bryant Riley told analysts after the ruling that the company believes the outcome reflects the integrity of its board and governance processes. On April 29, 2026 the plaintiff appealed to the Delaware Supreme Court. ^{1 2 3 4}

analysisPart of the complaint concerned the board's approval of the FRG take-private. As recited by the court from the complaint, B. Riley's board met on May 8, 2023 to consider the transaction, with co-CEO Bryant Riley presenting on the basis of January 2023 FRG projections that the plaintiff called stale and alleged concealed FRG's deteriorating condition; director Randall E. Paulson, who had joined the company's deal-team meetings with FRG, did not mention FRG's May 5 projections; no formal vote was taken at the meeting, and on May 9 the board approved B. Riley's participation by unanimous written consent. On May 10, 2023 FRG announced the $2.6 billion take-private, in which B. Riley and a private equity partner would acquire 64% of FRG's common stock at $30 per share. The characterizations of the projections are the plaintiff's allegations, which the court accepted only for the motion, and it dismissed the case without finding any breach. The court itself described the case as a hindsight critique of a business decision: B. Riley had invested hundreds of millions of dollars in 2023 to facilitate the take-private of Franchise Group, led by Brian Kahn, a friend of Bryant Riley; months later Kahn was implicated in a securities fraud that occurred not at B. Riley or Franchise Group but at Prophecy Asset Management, a third party with which Kahn was affiliated and B. Riley was not; and nothing suggested that the board knew about the wrongdoing at Prophecy at the time of the take-private. Those are the court's characterizations in ruling on demand futility; they bind only that case and are subject to the pending appeal. ²

analysisWhether a demand was excused turned on director independence. The court assessed only the five directors it called the demand majority, Tammy Brandt, Mimi K. Walters, Michael J. Sheldon, Robert D’Agostino and Renée E. LaBran, and held that the complaint lacked particularized facts showing that any of them faced a substantial likelihood of liability or lacked independence from Bryant Riley. It noted the defendants' concession that the independence of Thomas Kelleher and Robert Antin was “not meaningfully in play”, declined to address the remaining four directors, and described the plaintiff's case as relying almost exclusively on ordinary director compensation, stale business and personal ties and generic social relationships. The ruling concerns demand futility under Delaware pleading rules; it does not certify independence for any other purpose. ²

analysisThe ties the plaintiff alleged, as recited by the court, were these. For Sheldon: $627,812 of ordinary director compensation, his status as a Facebook friend of Riley, his disclosure of their friendship on a directors' and officers' questionnaire, and their service together on the board of Aldila, Inc. about fifteen years earlier. For D’Agostino, a board member since 2015 and Audit Committee member: a 20-year personal and professional relationship with Riley (the two attended Lehigh University, belonged to the same fraternity and meet socially, as acknowledged in a directors' and officers' questionnaire), $665,896 of ordinary director compensation, past service on other boards with Riley, and B. Riley's role as exclusive financial adviser to Q-Mation, Inc., where D’Agostino is President. For Walters: that she would not have been appointed to the board of Eos Energy Enterprises but for Riley and had acquiesced to him, and the roughly $1.3 million she received for serving on the Eos and B. Riley boards; the court held that being appointed by a person does not, without more, destroy independence. For Brandt: that she was a de facto employee of B. Riley because she had been Chief Legal Officer of FaZe Clan, which merged in 2022 with a B. Riley affiliate to form FaZe Holdings, so that about $3 million of payments to her from the post-merger company were effectively made by B. Riley; the court rejected that argument. For each of these four directors (Sheldon, D’Agostino, Walters and Brandt) the court held that the complaint did not show a lack of independence, and it dismissed the case under Rule 23.1; an appeal is pending. ²

analysisOther derivative suits over the same dealings are pending or stayed. On January 22, 2025 a stockholder filed a derivative complaint in the Superior Court for Los Angeles County against the company, certain executive officers and the members of its board, alleging breaches of fiduciary duty related to the company's involvement with Brian Kahn and subsequent legal issues, waste of corporate assets and unjust enrichment; no ruling on it appears in the records reviewed. Stockholders filed two further derivative complaints in the U.S. District Court for the Central District of California on January 2 and February 2, 2026 against the board members and certain executive officers, alleging that they damaged the company through false and misleading statements that omitted material adverse facts about Kahn's involvement in the Prophecy fraud and the regulatory scrutiny the company would face because of its entanglements with Kahn and Franchise Group; the claims include breach of fiduciary duty, unjust enrichment and, in one case, waste of corporate assets. The parties agreed to stay both federal actions pending decisions in the other derivative matters: by the company's report for the quarter ended June 30, 2026, the court had accepted the stipulation in the February 2 case and the stipulation in the January 2 case had been submitted to the court, and no ruling on the merits has been made. The company states that it believes the claims in the Los Angeles and federal derivative suits are meritless and intends to defend them. ^{1 2}

analysisA further stockholder suit, No. 2:26-cv-03419 in the same federal court, was filed on March 31, 2026 against BRC Group Holdings, Inc. (also named as B. Riley Financial, Inc.), Bryant R. Riley, Thomas J. Kelleher, Phillip J. Ahn and directors Robert L. Antin, Tammy Brandt, Robert D’Agostino, Renée E. LaBran, Randall E. Paulson, Michael J. Sheldon and Mimi K. Walters, citing the Securities Exchange Act (15 U.S.C. § 78m(a)). On May 28, 2026 the court granted the parties' stipulation to stay the case and ordered joint status reports every six months; no ruling on the allegations has been made. ³

analysisTwo stockholders have also pressed the board directly. On July 19, 2024 they demanded to inspect the company's books and records under Section 220 of the Delaware General Corporation Law, focusing on its dealings with Brian Kahn and the FRG take-private, and the company produced documents. On January 16, 2026 the same stockholders sent the board a pre-suit demand to pursue claims against certain officers and directors for alleged breaches of fiduciary duty, citing Kahn's December 2025 guilty plea, alleging that the board knew or should have known of Kahn's history, criticizing the company's internal investigations, and seeking disgorgement of compensation, personnel action and governance reforms without specifying damages. A demand is a request to the board, and no claim has been filed on it in the records reviewed; the company states that it believes any resulting claims would be without merit and that it intends to respond in due course. ²

analysisFormer FRG shareholders have sued over the take-private itself. On July 9, 2024 they filed a putative class action in the Delaware Court of Chancery against Freedom VCM, Brian Kahn, Andrew Laurence, Matthew Avril and the company, alleging that officers, directors and other participants breached fiduciary duties in the August 2023 management-led take-private of FRG and that the company aided and abetted those breaches; they seek unspecified, rescissory or quasi-appraisal damages, disgorgement of profits, fees and interest. These are allegations in a pending case and no ruling on them appears in the records reviewed; the company states that it believes the claims are meritless and intends to defend the action. ¹

analysisSeveral arbitrations concern investments connected with FRG. On July 11, 2025 B. Riley Securities, Inc. received a demand letter from investors in a special purpose vehicle that had invested in the August 2023 take-private of Franchise Group, and on October 10, 2025 those investors filed an arbitration demand with the American Arbitration Association against B. Riley Securities and related entities. They allege failure to disclose material facts about FRG and the transaction in violation of securities laws, fraud or civil conspiracy, and breach of and aiding and abetting breach of fiduciary duties, and seek rescission of the $37.5 million investment plus interest, fees and expenses. B. Riley Wealth Management's audited 2024 financial statements also disclose a FINRA arbitration by seven claimants against B. Riley Securities alleging securities-law violations; although B. Riley Securities is the named respondent, the firm stated that the claims appear to arise from the customer relationship between the claimants and B. Riley Wealth Management concerning FRG, and that the case was in discovery. The same statements also disclose an arbitration demand filed on June 11, 2024 by a private investor in the August 2023 FRG buyout naming B. Riley Wealth Management and B. Riley Financial, alleging that B. Riley Financial fraudulently induced the investment and asserting fraud, concealment and civil conspiracy claims. These are claimants' allegations, and no award appears in the records reviewed in any of these matters. The company states that it believes the investors' claims in the arbitration with the American Arbitration Association are meritless and intends to defend the action; B. Riley Wealth Management said it intends to defend the seven-claimant matter vigorously; and B. Riley Financial answered the investor's statement of claim on September 27, 2024 and its amended statement of claim on March 10, 2025. The broker-dealer had accrued about $125,000 for legal matters in total and nothing for the investor's demand. ^{1 2 3}

analysisOn August 18, 2026 the Franchise Group, Inc. Litigation Trust, acting through its litigation trustee, sued Brian Kahn, Matthew Avril, BRC Group Holdings, Inc. (formerly B. Riley Financial, Inc.), B. Riley Securities, Inc., GlassRatner Advisory & Capital Group, LLC (d/b/a B. Riley Advisory Services), Bryant Riley, Willkie Farr & Gallagher LLP and Jefferies LLC in the Delaware Court of Chancery (Case No. 2026-1076) over the 2023 take-private of FRG. The complaint describes GlassRatner as a Delaware limited liability company retained to provide FRG with financial advisory services on the consumer loan receivables originated and serviced by W.S. Badcock, and B. Riley Securities as a Delaware corporation and subsidiary of BRC; the engagement terms are not in the records reviewed. It asserts claims against BRC (as B. Riley Financial) and Bryant Riley for aiding and abetting Kahn's fraud and breaches of fiduciary duty and for unjust enrichment, and a civil conspiracy count against all defendants, and seeks damages of more than $700 million, calculated from the difference between FRG's enterprise value at the take-private ($2.7 billion) and at bankruptcy ($1.6 billion), adjusted for divestitures, plus advisers' fees, a $15 million exit payment to Kahn and about $42.3 million of funds allegedly up-streamed from Holdco to Topco. These are the plaintiff's allegations in a newly filed complaint; no defendant has been found liable and no ruling appears in the records reviewed. No answer by BRC, B. Riley Securities, GlassRatner or Bryant Riley to the complaint appears in the records either. In its quarterly report dated August 6, 2026, twelve days before the complaint was filed, BRC stated that it faced the risk of unasserted claims relating to Kahn and its investment in Freedom Holdings and that, if such claims were made, it believed it had valid defenses and any such claim would be without merit. Separately, BRC states that its Audit Committee review and an independent investigation found that the company and its executives, including Riley, had no involvement with, or knowledge of, any alleged misconduct concerning Kahn or his affiliates. ^{1 2}

analysisThe complaint's specific allegations against BRC and Riley are pleaded in counts XV, XVI and XVIII (aiding and abetting breach of fiduciary duty, aiding and abetting fraud, and unjust enrichment), with count IV (illegal dividends or unlawful distribution) pleaded against Kahn and Riley. The Trust alleges that B. Riley Financial and Riley knew of Kahn's breaches and that their assistance was wrongful: that B. Riley Financial held the pledge agreements securing more than $200 million of Kahn's concealed personal debt, that Riley and Kahn had discussed a take-private for months before the proposal presented as unsolicited, that B. Riley Financial was deeply embedded in FRG's operations, that its counsel raised Kahn's undisclosed pledges before the merger agreement was signed, and that the firm and Riley stood to gain non-ratable benefits. It alleges that on March 3, 2023 Kahn and Riley discussed B. Riley Financial buying $59.6 million of Badcock first-quarter receivables at an 85% price of $50.7 million while B. Riley Financial's stated decision to stop buying receivables was being used to justify the take-private; that Riley, when forwarded an email about going-private rumors, replied “Makes me want to buy more. Working perfectly into your hands.”; and that these private negotiations were not disclosed to FRG's board before the March 19, 2023 proposal. It further alleges that in November 2023 FRG's executive vice president Andrew Laurence learned of Kahn's personal borrowings of more than $200 million from B. Riley Financial and confronted Kahn, and that when another FRG executive asked Riley how he came to lend Kahn $200 million, Riley answered that he had made a lot of money with Kahn earlier on and conceded that Kahn had gone too far this time. All of these are the plaintiff's allegations, including its reading of quoted correspondence and its account of private conversations; no court has made findings on them. No answer by BRC, B. Riley Securities, GlassRatner or Riley to these allegations appears in the records reviewed either; the company's positions set out above apply to them as well: its August 6, 2026 statement that it would have valid defenses to any Kahn-related claims, which would be without merit, and its account that the Audit Committee review and the independent investigation found no involvement with, or knowledge of, Kahn's alleged misconduct by the company or its executives, including Riley. ^{1 2}

analysisSeveral records concern Willkie Farr & Gallagher LLP and its work for Kahn. The FRG Litigation Trust alleges that the SEC served FRG on January 23, 2023 with a subpoena seeking records on the issuance of Buddy's Home Furnishing preferred shares and that the Department of Justice served FRG on June 5, 2023 with a subpoena requesting documents related to Prophecy and communications with Kahn; it alleges that both were routed to Willkie, which was simultaneously advising Kahn on the take-private, that routing the SEC subpoena that way ensured the board would not learn its true significance, and that Willkie produced 43 documents to the DOJ on July 13, 2023. The subpoenas are requests for information, not findings of wrongdoing, and the account of how they were handled is the plaintiff's allegation. ¹

analysisA press report of January 31, 2025, citing another outlet, said that the U.S. Trustee, the bankruptcy division of the U.S. Department of Justice, had served Kahn with a subpoena about his interactions with Willkie, which represented FRG in its bankruptcy and had also advised or represented Kahn, B. Riley Financial and Vintage Capital Management, and that the U.S. Trustee was seeking to disqualify Willkie because the firm had advised B. Riley and Kahn in the 2023 buyout. A subpoena is a request for information; the subpoena itself is not in the records reviewed, and the report does not describe Kahn as a target of any proceeding. According to the Trust's complaint, on February 12, 2025 the Bankruptcy Court denied FRG's application to retain Willkie as debtor's counsel, finding an actual conflict. According to the complaint and a press report, the U.S. Bankruptcy Court in Delaware disqualified Willkie as FRG's bankruptcy counsel that day, noting that the firm had not set up ethical walls between its FRG and Kahn teams until after the take-private concluded, so that the knowledge it gained from representing Kahn in that transaction was imputed to the whole firm. The ruling itself is not in the records reviewed; its date and reasoning are as described in the complaint and the press report. According to the complaint, within hours of the ruling Willkie's chairman emailed a B. Riley affiliate employee who had urged him not to seek the retention, apologizing for what the complaint calls an error in judgment. ^{2 1 3}

analysisBRC has itself gone to court over the take-private. On January 20, 2026 BRC, with its subsidiaries B. Riley Principal Investments, LLC, B. Riley Private Shares 2023-2 QC, LLC, B. Riley Private Shares 2023-2 QP, LLC, BRF Finance Co., LLC and B. Riley Commercial Capital, LLC, sued Willkie Farr & Gallagher LLP, Brian Kahn and Lauren Kahn in the Supreme Court of the State of New York, New York County. The complaint asserts aiding and abetting fraud, civil conspiracy to defraud and aiding and abetting breach of fiduciary duty against Willkie; common-law fraud, fraudulent inducement and civil conspiracy against Brian Kahn; and breach of contract against both Kahns, and seeks more than $735 million in compensatory damages, punitive damages and disgorgement of Willkie's fees from the transaction. These are BRC's claims as plaintiff; no ruling on them and no response by the defendants appear in the records reviewed. ⁴

analysisAn older dispute followed B. Riley's acquisition of Wunderlich Investment Company and its operating subsidiary Wunderlich Securities, Inc., now B. Riley Wealth Management, Inc., under a merger agreement of May 17, 2017 that closed on July 3, 2017. In late July 2017 Dominick & Dickerman, LLC and another claimant brought a FINRA arbitration against Wunderlich Securities and its founder Gary Wunderlich, asserting fraud, negligent misrepresentation, securities fraud, breach of contract and FINRA-rule claims over Wunderlich Securities' 2015 acquisition of Dominick & Dickerman. An award of April 7, 2020 held Wunderlich Securities and Gary Wunderlich jointly and severally liable for about $10.5 million; the award is as described in the Court of Chancery's 2021 letter opinion, and the award document itself is not in the records reviewed. B. Riley petitioned the U.S. District Court for the Southern District of New York to vacate the award on behalf of itself and Gary Wunderlich. On June 3, 2020 the claimants, Wunderlich Securities and Gary Wunderlich signed a confidential settlement resolving all claims in the arbitration, under which the defendants agreed to pay an undisclosed amount. ¹

analysisOn June 10, 2020 Gary Wunderlich, a former director and officer of B. Riley, sued B. Riley Financial and Wunderlich Securities in the Delaware Court of Chancery (C.A. No. 2020-0453-PAF) seeking indemnification connected with the arbitration and a declaratory judgment. B. Riley and Wunderlich Securities moved to dismiss, arguing principally that Wunderlich had waived his indemnification rights when he signed his severance agreement, and that the declaratory-judgment count was not ripe because they had brought no contribution claim; during the arbitration settlement negotiations they had threatened to pursue claims against Wunderlich relating to the arbitration and to recover amounts paid under the settlement. In a letter opinion of March 24, 2021, Vice Chancellor Paul A. Fioravanti, Jr. denied the motion as to the indemnification counts (I, II and IV) and dismissed only the declaratory-judgment count (III) as unripe. The ruling allowed the indemnification claims to proceed without deciding whether indemnification was owed, and no later outcome appears in the records reviewed. ¹

analysisOn September 21, 2023 the company's wholly owned subsidiary B. Riley Commercial Capital, LLC received a demand alleging that about $32.2 million of payments made to it by Sorrento Therapeutics, Inc., a Chapter 11 debtor in the U.S. Bankruptcy Court for the Southern District of Texas, under a bridge loan agreement of September 30, 2022, were avoidable preferential transfers. On June 16, 2025 the liquidating trustee of the Sorrento Liquidating Trust sued in an adversary proceeding to avoid and recover them, and on September 12, 2025 the court denied the subsidiary's motion to dismiss. The preference claims are the trustee's allegations in a pending proceeding, and the denial of a motion to dismiss is not a ruling that the payments were preferential; the company states that it believes the trustee's claims lack merit and intends to continue to assert its statutory defenses. ¹

analysisB. Riley Securities, Inc. was a pre- and post-petition lender to Nogin Inc., which filed for Chapter 11 in Delaware on December 5, 2023. B. Riley Securities sponsored the plan, confirmed on March 28, 2024 and effective May 3, 2024, under which it acquired 100% of the reorganized company, Nogin Commerce LLC. After Nogin Commerce's business shut down on March 16, 2025, supplier creditors commenced an involuntary Chapter 7 case against it in the U.S. Bankruptcy Court for the Southern District of New York on April 24, 2025 (Case No. 25-10810). The petitioning creditors, owed at least $3.3 million, alleged that in the weeks before the shutdown the company diverted cash held for suppliers to other parties and said they believed substantially all of it went to B. Riley, Nogin Commerce's parent company, or to an alleged lender; they further alleged that B. Riley, among others, either knew or should have known that supplier proceeds were being diverted. A declaration filed for the assignee for the benefit of creditors stated that no money was paid by Nogin Commerce to B. Riley other than interest payments on post-emergence secured loans totaling about $125,000. On June 11, 2025 Chief Judge Martin Glenn denied the assignee's motion to dismiss the case or abstain, so the bankruptcy proceeded; the court did not rule on the alleged transfers, which the assignee's counsel told the court it would investigate. BRC's later reports state that an order for relief was entered, moving the assignment for the benefit of creditors to a liquidation. No ruling on the alleged diversion appears in the records reviewed. ^{1 2}