2013 8-20 Complaint for Damages and Injunctive Relief[3][2]

Complaint for Damages and Injunctive Relief

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

30

31

32

33

Mark C. Bailey, Esq. [SBN 128118] Sean T. McGee, Esq. [SBN 167809] CLINTONBAILEY, A Professional Corporation 8865 Research Drive, Suite 200 Irvine, CA 92618 Telephone: (949) 852-9899 Facsimile: (949) 852-8851 Attorneys for Plaintiff, Brian Alper, Brett Ballou, How Sweet It Is Partnership

SUPERIOR COURT OF THE STATE OF CALIFORNIA

COUNTY OF ORANGE

BRIAN ALPER, an Individual; BRETT BALLOU, an Individual; HOW SWEET IT IS PARTNERSHIP, a General Partnership, Plaintiffs, vs. PASQUALE ROTELLA, an Individual; INSOMNIAC INC., a California Corporation; DOES 1 - 50, inclusive, Defendants.

Case No. Assigned to Department COMPLAINT FOR DAMAGES AND INJUNCTIVE RELIEF:

1. Breach of Contract; 2. Breach of Covenant of Good Faith and Fair Dealing; 3. Breach of Fiduciary Duty; 4. Unfair Competition; 5. Expulsion from Partnership [Corp. C. §16601]; 6. Accounting Unlimited Jurisdiction- Exceeds $25,000 Jury Trial Demanded

2


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

30

31

32

33

Plaintiffs allege as follows:

Preliminary Allegations

1. Plaintiff, How Sweet It Is Partnership (“HSII Partnership”), is a general

partnership, formed on or about February 17, 2005, under the laws of the State of California.

HSII Partnership’s principal place of business in in the County of Orange, State of California.

HSII Partnership is in the business of putting on and promoting dance-music festivals at

concert halls and similar venues.

2. Plaintiff, Brian Alper (“Alper”), is an individual residing in the County of Orange,

State of California. At all times relevant, Alper was a partner in HSII Partnership.

3. Plaintiff, Brett Ballou (“Ballou”), is an individual residing in the County of

Orange, State of California. At all times relevant, Ballou was a partner in HSII Partnership.

4. Defendant, Insomniac, Inc. (“Insomniac”) is a corporation duly organized and

existing under the laws of the State of California since 1998. At all times relevant, Insomniac

was a partner in HSII Partnership.

5. Plaintiffs are informed and believe and thereupon allege that Defendant, Pasquale

Rotella, is an individual residing in the State of California. Plaintiff is further informed and

believes and thereupon alleges that Rotella is the sole or principal shareholder of Insomniac.

6. Plaintiffs are ignorant of the true names and capacities of Defendants sued herein

as DOES 1 through 50, inclusive, and therefore sue these Defendants by these fictitious names.

Plaintiffs will amend this Complaint to allege their true names and capacities when ascertained.

Plaintiffs are informed and believe and based thereon allege that each fictitiously named

Defendant is responsible for each act or omission herein alleged.

7. Plaintiffs are informed and believe and thereupon alleges that Defendants were

the agents, members, employees, co-venturers, partners, co-members, or representatives for

each other and were acting within the course and scope of their agency, membership or

employment, or where acting under apparent/ostensible authority, in doing all of those acts or

omissions alleged hereinafter. In addition, Defendants and/or Does 1 through 50 authorized,

adopted, ratified and/or should be estopped from denying responsibility for their agents’

conduct complained of herein.

3


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

30

31

32

33

8. Plaintiffs are informed and believe, and thereupon allege, that Defendant,

Rotella, and DOES 1-50, are liable for the acts of Defendant, Insomniac, described in this

Complaint, as Insomniac’s alter ego. Recognition of the privilege of separate existence would

promote injustice and/or sanction fraud because Defendant, Rotella, and DOES 1-50

dominated and controlled Insomniac in bad faith, including, but not necessarily limited to

commingling funds and assets with Insomniac, diverting funds and assets from Insomniac for

other than corporate purposes and treating the assets of Insomniac as if such funds were their

own to the detriment of corporate creditors, including Plaintiffs. In addition, Plaintiffs are

informed and believe, and thereupon allege, that Rotella and DOES 1-50 failed to maintain

adequate corporate records and minutes, failed to adequately capitalize Insomniac and in effect

used Insomniac as a mere shell, instrumentality, or conduit for Defendants’ personal business.

9. Venue is appropriate in the County of Orange, State of California, because the

Agreement(s) at issue herein were entered into in the County of Orange and Plaintiff are

informed and believe that one or more Defendants reside in the County of Orange.

Background Facts

10. The event, How Sweet It Is (“HSII”), is an annual dance-music festival that was

inaugurated in 1998. At the outset, HSII was produced and promoted by Plaintiffs Alper and

Ballou, and another shareholder through a company known as B3 Productions, Inc. From 1998

through 2001, HSII was a successful event, steadily increasing its yearly draw from

approximately 6000 paying attendees in 1998, to more than 40,000 paying attendees in 2001.

11. Over the course of the formative years of HSII, Defendants Rotella and his

company, Insomniac, were competitors of Plaintiffs in producing dance-music events.

However, in 2002 through 2004 the dance-music event industry in Southern California in

general experienced a decline. As a result, in early 2005, Plaintiffs and Defendants decided to

join forces and form a new partnership to jointly put on the HSII event. On or about February

17, 2005, the parties formalized their relationship under a written HSII Partnership Agreement.

12. The HSII Partnership Agreement expressly stated that it would remain in force

until terminated by a unanimous vote of the partners. Under the terms of the Partnership

Agreement, the purpose of the HSII Partnership was to finance and operate the annual How

4


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

30

31

32

33

Sweet It Is festival. The duties of the partners were to fund and operate the event. All net

profits from the event were to be shared equally between the partners.

13. Under the Agreement, the partnership could only be dissolved by unanimous

vote of the partners. Upon dissolution, all assets would be divided equally. Notwithstanding the

foregoing, the partners were entitled to quit the HSII Partnership voluntarily via written notice

of the Request to Dissolve Partnership, or be removed for cause. In either event, the remaining

partners were granted the right to buy out the exiting partner pursuant to two different set

formulas. Furthermore, regardless of whether the partner’s departure was voluntary or

involuntary, the departing partner expressly agreed to exclusively license to the remaining

partners all right in the trademark and/or service-mark, “How Sweet It Is,” for $1.

14. From 2005 through 2009, the HSII Partnership was a success, with the HSII

event drawing approximately 5,500 paid attendees in 2005, up to 8,000 paid attendees by 2007

and more than 20,000 total patrons in 2009. However, after the 2009 event, when it was

apparent that HSII was on the verge of once again becoming a preeminent event in the dance

festival industry, Defendants initiated a plan without Plaintiffs’ knowledge to misappropriate all

of the anticipated future business of the HSII Partnership for themselves.

15. In this regard, in 2010, Defendants Insomniac and Pasquale breached the HSII’s

Partnership Agreement, and improperly usurped a partnership opportunity, by holding a

competing dance-music event known as “Beyond Wonderland” at the same time that HSII

Partnership held its annual event. Moreover, Insomniac and Pasquale booked their new event at

the same venue that HSII held How Sweet It Is, thereby excluding HSII from holding its event

as contemplated by the Partnership. Defendants took these actions all without the knowledge of

consent of Plaintiffs. Furthermore, Insomniac and Pasquale thereafter failed and refused to

assist the HSII Partnership in realizing its purpose of holding an annual dance event.

16. At no time has a vote been held to dissolve the HSII Partnership. Furthermore,

neither Insomniac, nor Pasquale, have ever provided the written Request to Dissolve

Partnership necessary and required under the HSII Partnership Agreement. As a result, the

HSII Partnership is still in existence.

5


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

30

31

32

33

17. Defendants have continued to usurp partnership opportunities and hold their

Beyond Wonderland event each year since 2010, all to the significant damage of HSII and the

other partners of HSII. In addition, Defendants have used the success of the Beyond

Wonderland event to expand the brand into new venues. Moreover, Defendants in part used

the Beyond Wonderland event to leverage the sale of a portion of Defendant, Insomniac, to a

large, national event promoter (Live Nation), all to the damage of Plaintiffs, and each of them.

First Cause of Action Breach of Written Contract

By Plaintiffs against Defendants

18. Plaintiffs reallege and incorporate by reference the allegations in the paragraphs

above.

19. On or about February 17, 2005, Plaintiffs and Defendant, Insomniac, entered

into a written agreement as more fully described hereinabove.

20. Plaintiffs have performed all of their contractual obligations under the parties’

agreement, except those obligations that have been excused, waived, released or otherwise

affected, or from which Defendants are estopped from asserting.

21. Defendant, Insomniac, has breached the parties’ agreement by acting, and failing

to act, as described above in the Background Facts. Defendant, Rotella, is liable for Insomniac’s

breach as the alter ego of Insomniac.

22. As a proximate result of said breach on the part of Defendants, and each of

them, herein, Plaintiffs have been damaged in a sum in excess of $5 million, the exact amount

to be proven at the time of trial. Plaintiffs claim this amount together with prejudgment

interest pursuant to Civil Code section 3287 and pursuant to any other provision of law

providing for prejudgment interest.

Second Cause of Action Breach of Good Faith and Fair Dealing


23. Plaintiffs incorporate by this reference the paragraphs alleged above as though

fully set forth herein.

6


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

30

31

32

33

24. Every contract imposes an implied obligation of good faith and fair dealing

between the parties in its performance and its enforcement. The implied covenant of good

faith and fair dealing requires that neither party do anything which injures the right of the other

to receive the benefits of the agreement.

25. Plaintiffs have performed all of their contractual obligations under the parties’

Partnership Agreement, except those obligations that have been excused, waived, released or

otherwise affected, or from which Defendants are estopped from asserting.

26. Defendant, Insomniac, has breached the covenant of good faith and fair

dealings by, among other things, acting in an objectively unreasonable manner in (a) usurping

partnership opportunities, (b) booking the newly organized Beyond Wonderland event at the

venue utilized by Plaintiffs and on the same date contemplated by Plaintiffs, (c) refusing to

assist in the promotion and production of the HSII event, and (d) seeking to ruin the ongoing

business of the HSII Partnership. Defendant, Rotella, is liable for Insomniac’s breach as the

alter ego of Insomniac.

27. Defendants’ breach of the covenant of good faith and fair dealing was a

substantial factor in causing damage and injury to Plaintiffs. As a proximate result of the

Defendants’ breach of the Agreement, Plaintiffs have been damaged in a sum in excess of $5

million, the exact amount to be proven at the time of trial. Plaintiff claims this amount

together with prejudgment interest pursuant to Civil Code section 3287 and pursuant to any

other provision of law providing for prejudgment interest.

Third Cause of Action Breach of Fiduciary Duty


28. Plaintiffs incorporate by this reference the paragraphs alleged above as though

fully set forth herein.

29. As a partner, Insomniac owed fiduciary duties to Plaintiffs of loyalty, candor,

communication, full and fair disclosure, utmost good faith and fair dealing and to exercise due

care. In addition, Defendant owed a fiduciary obligation not to engage in self-dealing or

7


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

30

31

32

33

compete against the parties’ partnership and/or usurp partnership opportunities. Defendant

also acted as an agent and trustee with regard to all partnership transactions.

30. Defendant, Insomniac, breached its fiduciary duties to Plaintiffs by, among

other things, usurping partnership opportunities, engaging in self-dealing, improperly

competing with HSII, failing to exercise due care, seeking to deny Plaintiffs the benefits of the

parties’ partnership, seeking to enrich itself at the expense of Plaintiffs, and otherwise failing to

meet its obligation of loyalty, good faith and fair dealing and duty of care owing to Plaintiffs.

Defendant, Rotella, is liable for Insomniac’s breach as the alter ego of Insomniac.

31. As a proximate result of Defendants’ breach of fiduciary duties, Plaintiffs have

suffered general, special and consequential damages in an amount in excess of $5 million, the

exact amount to be proven at the time of trial.

32. By virtue of Defendants’ violation of the relationship of trust and confidence

existing with Plaintiffs, Defendants hold secret profits gained at the expense of Plaintiffs as

constructive trustees for Plaintiffs’ benefit and Plaintiffs request that the Court impose a

constructive trust relative to these assets.

33. Defendants’ conduct herein alleged was intentional and despicable, willful,

fraudulent and oppressive and committed by Defendant with malice and intent to cause injury

to the Plaintiffs, and to enrich themselves at the expense of Plaintiffs, so as to entitle Plaintiff

to an award of punitive and exemplary damages, in excess of $15 million and according to

proof.

34. Unless and until enjoined by order of this court, Defendants’ wrongful conduct

in breaching their fiduciary duties will cause great and irreparable injury to Plaintiffs for which

no adequate remedy at law exists, in that (a) the amount of damages may be extremely difficult

or impossible to ascertain, and (b) Defendants will continue to perpetrate their wrongful

interference and Plaintiffs would be required to maintain a multiplicity of judicial proceedings

to protect their interests.

/ / /

/ / /

8


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

30

31

32

33

Fourth Cause of Action Unfair Competition (Bus. & Prof. C. §§17200 et seq.)


35. Plaintiffs incorporate by this reference the paragraphs above as though fully set

forth herein.

36. Defendants and each of their conduct of breaching the Partnership Agreement,

breaches of fiduciary duty, intentionally interfering with Plaintiffs’ prospective economic

advantage, and other culpable conduct alleged hereinabove, constitute unfair, unlawful,

fraudulent and/or deceptive business practices within the meaning of Business and Professions

Code sections 17200 et seq. Accordingly, Defendants, and each of them, have engaged in unfair

competition within the meaning of said statutes.

37. As a direct and proximate result of the Defendants’ conduct, Defendants have

been unjustly enriched at the expense of Plaintiffs in an amount not yet fully ascertained.

38. Unless and until enjoined by order of this court, Defendants’ wrongful conduct

of breaching the Partnership Agreement, breaches of fiduciary duty, intentionally interfering

with Plaintiffs’ prospective economic advantage, and other culpable conduct alleged

hereinabove will cause great and irreparable injury to Plaintiffs for which no adequate remedy

at law exists, which would require Plaintiffs to maintain a multiplicity of judicial proceedings to

protect their interests.

39. Defendants’ conduct was done knowingly, willfully, and with malicious intent,

and Plaintiffs are entitled to punitive damages in an amount to be determined by proof at trial.

Fifth Cause of Action Expulsion from Partnership



forth herein.

41. Corporations Code §16601 permits a partner to apply for the expulsion of another

partner by judicial determination based on the fact that: (a) the partner engaged in wrongful

conduct that adversely and materially affected the partnership business (§16601(5)(A)), (b) the

partner willfully or persistently committed a material breach of the partnership agreement or of

9


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

30

31

32

33

a duty owed to the partnership or the other partners under Section 16404 (§16601(5)(B)),

and/or (c) the partner engaged in conduct relating to the partnership business that makes it not

reasonably practicable to carry on the business in partnership with the partner (§16601(5)(C)).

See also Corporations Code §16405(b)(2)(B).

42. Defendants’ conduct, as described hereinabove, qualifies Defendants for

expulsion from HSII under each of the three criteria described in the preceding paragraph and

the Court is requested to adjudicate and determine that Defendants are expelled from HSII.

Sixth Cause of Action Accounting



forth herein.

44. As a fiduciary, Defendant, Insomniac, owes an obligation to Plaintiffs for the

profits and benefits realized by Defendant in connection with partnership business and

partnership opportunities. In addition, Corporations Code §16405(b) permits a partner to

maintain an action against another partner for an accounting as to partnership business. In

undertaking the actions giving rise to the present action, Insomniac has received money

and/or other assets and benefits, a portion of which are due to Plaintiffs. Defendant, Rotella,

is also obligated to account, reimburse and/or compensate Plaintiffs the sums owing as

Insomniac’s alter ego.

45. The exact amount of money due from Defendants is unknown to Plaintiffs and

cannot be ascertained without an accounting and an accounting is necessary and appropriate at

this time.

WHEREFORE, Plaintiffs pray for judgment against Defendants, and each of them, as

follows:

UNDER THE FIRST CAUSE OF ACTION:

1. General, special and consequential damages in excess of $5 million and according

to proof;

10


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

30

31

32

33

2. Interest permitted by law;

3. Costs of suit;

4. Any and all additional relief deemed just and proper by this Court.

UNDER THE SECOND CAUSE OF ACTION:


to proof;


3. Costs of suit;


UNDER THE THIRD CAUSE OF ACTION:


to proof;

2. Constructive trust;

3. Punitive damages in excess of $15 million;

4. Issuance of a temporary restraining order, preliminary injunction and permanent

injunction;

5. Costs of suit;



UNDER THE FOURTH CAUSE OF ACTION:

1. Restitution;

2. Punitive damages in excess of $15 million;

3. Issuance of a temporary restraining order, preliminary injunction and permanent

injunction;

4. Costs of suit;



2013 8-20 Complaint for Damages and Injunctive Relief[3][2]

Documents

Transcript of 2013 8-20 Complaint for Damages and Injunctive Relief[3][2]