Dara Albright Complaint Response

8/12/2019 Dara Albright Complaint Response

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

__________________________________________ xGOODWORLDCREATIONS, LLC d/b/a :Crowdnetic, : 14-CV-3848-TPG

:Plaintiff and :Counterclaim :Defendant, :

ANSWER, AFFIRMATIVE

DEFENSES, COUNTERCLAIMS AND

THIRD PARTY COMPLAINT

- Against - :

: ECF CASE:

DARA ALBRIGHT, :Defendant, Counter-claim Plaintiff and :Third Party Plaintiff :

- Against - ::

LUAN COX, :

Third Party Defendant :__________________________________________ x

Defendant Dara Albright (Defendant) by and through her counsel, Guzik & Associates, as and

for her Answer to the Complaint, alleges as follows:

1. Admits that this is a declaratory judgment action. Denies the remaining allegations in

Paragraph 1 and respectfully refers the Court to the Purchase Agreement for the full and complete

contents thereof.

2. Admits the allegations contained in Paragraph 2 of the Complaint.

3. Denies knowledge or information sufficient to form a belief as to the truth of the

allegations contained in the first sentence of Paragraph 3. Denies the remaining allegations in Paragraph

3.


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allegations contained in the first sentence of Paragraph 4. Admits that defendant now claims a right to

rescind the Purchase Agreement and that the ownership of NowStreet is now in dispute, and denies the

remaining allegations in Paragraph 4.

5. Denies that Crowdnetic is the rightful owner of NowStreet and that the Defendant has no

right to rescind her sale of NowStreet to Crowdnetic. Admits the remaining allegations contained in

Paragraph 5.

6. Admits the allegations in Paragraph 6.






allegations contained in Paragraph 11.

12. Admits the allegations in the first sentence of Paragraph 12. Denies the remaining

allegations in Paragraph 12.



15. Admits that Defendant has been active actively involved in all aspects of NowStreets

business, including the LendIt Conference. Denies the remaining allegations in Paragraph 15.




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18. Admits that the parties ultimately agreed that Crowdnetic would purchase from Albright

100% of the membership interests in NowStreet LLC. Denies the remaining allegations in Paragraph

18.


20. Admits that the Purchase Agreement includes an integration clause and respectfully

refers the Court to the Purchase Agreement for the full and complete contents thereof, and denies the

remaining allegations in Paragraph 20.

21. Denies the allegations in Paragraph 21.

22. Denies the allegations in Paragraph 22 that the parties also discussed the possibility of

Albrights becoming an employee of Crowdnetic and being granted a stock option to purchase units in

Plaintiff.

23. Admits that in January 2014 Albright executed a Unit Option Agreement granting her

options to purchase a specified number of units in Crowdnetic, admits that vesting was contingent,

and denies the remaining allegations in Paragraph 23.


25. Denies that on March 27, 2014, Crowdnetic sent a draft Consulting Agreement and

revised Unit Option Agreement to Albright. Admits the remaining allegations in Paragraph 25.



28. Admits the allegations in the first sentence of Paragraph 28. Denies the remaining


29. Denies the allegations contained in Paragraph 29.



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31. Denies that Albright has since taken steps to interfere with Crowdnetics exercise of its

right as NowStreets owner. Admits that Albright has claimed to LendIt that she has the right to

rescind the sale of NowStreet to Crowdnetic, that she has elected to unwind the transaction, and that

ownership of NowStreet will be returned to her. Denies knowledge or information sufficient to form a

belief as to the truth of the remaining allegations contained in Paragraph 31.




34. Admits the allegations contained in Paragraph 34.

35. Defendant incorporates all of the foregoing statements and allegations as though fully

set forth herein.

36. Defendant denies the allegations in Paragraph 36.

37. Defendant admits the allegations in Paragraph 37.

38. Defendant admits the allegations in Paragraph 38.

39. Defendant admits that Crowdnetic seeks a declaratory judgment. Denies the remaining

allegations in Paragraph 39.

All other allegations in the Complaint which are not expressly admitted are hereby denied.

FIRST AFFIRMATIVE DEFENSE

(General Denial)

1. Any and all allegations contained within the Plaintiffs Complaint not expressly

admitted are denied.


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SECOND AFFIRMATIVE DEFENSE

(Fraudulent Inducement)

2. Defendant was fraudulently induced to enter into the Purchase Agreement based upon

certain misrepresentations and material omissions made by employees and agents of Plaintiff, as set

forth in the Counterclaim.

THIRD AFFIRMATIVE DEFENSE

(Laches and Unclean Hands)

3. The Plaintiffs claims and relief are barred by the equitable doctrines of laches and

unclean hands.

FOURTH AFFIRMATIVE DEFENSE

(Unjust enrichment)

4. Plaintiff would be unjustly enriched if it retains ownership of NowStreet.

FIFTH AFFIRMATIVE DEFENSE

(Breach by Plaintiff)

5. Plaintiffs prior breaches of and/or misrepresentations made in connection with any

agreements with Defendant excused any conduct by Defendant and/or bars

any recovery or relief to which Plaintiff may have been entitled (if any), in whole or in part.

SIXTH AFFIRMATIVE DEFENSE

(Failure to State a Cause of Action)

6. The allegations in the Complaint fail to state a cause of action.

SEVENTH AFFIRMATIVE DEFENSE

(Waiver and Estoppel)

7. Plaintiff expressly waived various provisions of the Purchase Agreement and is estopped

from seeking its enforcement.


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WHEREFORE, Defendant demands judgment dismissing the Complaint with prejudice and

awarding such other relief as this Court may deem just and proper.

Respectfully submitted,

June 16, 2014 /S/Los Angeles, California Samuel S. Guzik

Guzik & Associates1875 Century Park East, Suite 700Los Angeles, CA 90067-2508Telephone (310) 914-8600Facsimile (310) 914-8606Email: [email protected]

Attorneys for Defendant Dara Albright

COUNTERCLAIMS AND THIRD PARTY CLAIMS

AGAINST GOODWORLD AND COX

For its counterclaims against Plaintiff GoodWorldCreations, LLC d/b/a Crowdnetic

(Crowdnetic) and its Third Party Claim against Luan Cox (Cox or Counterdefendant Cox or

Third Party Defendant) (Crowdnetic and Cox hereinafter sometimes collectively referred to as

Counterdefendants), defendant, Counterclaimaint and Third Party Plaintiff Dara Albright

(Albright) alleges as follows.

PRELIMINARY STATEMENT

This is case about a betrayal of trust. Dara Albright, the defendant and counterclaimant, is a

Wall Street veteran with more than 20 years of capital markets experience. She was one of the first to

cover securities legislation first proposed in the U.S. House of Representatives in 2011, that was

ultimately enacted in April 2012 as The JOBS Act of 2012. As an advocate for greater democracy in

the equity and credit markets, Albright founded NowStreet in 2011 to provide education and insight

into the burgeoning industry of global crowdfinance (a term she coined in 2013).


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Luan Cox, the counterdefendant, is the CEO of Crowdnetic, a company she co-founded in 2012

in order to capitalize on the need for data and technology solutions in the rapidly growing Internet

based finance world.

Albright and Cox saw the huge potential synergies which could develop through a merger of

their respective companies, NowStreet and Crowdnetic. Soon it was agreed the companies would

merge.

The Press Release issued by Crowdnetic in July 2013 announcing the merger of Crowdnetic and

NowStreet (Exhibit A) marked what Albright expected would be the beginning of a long and

successful story. Cox touted this story to many people over the remaining months of 2013 including

prospective Crowdnetic investors in a written Private Placement Memorandum prepared by Crowdnetic

in October 2013 to raise $2.5 million.

It was to be a simple transaction: Albright was to merge her company, NowStreet, with

Crowdnetic; Albright was to receive founders shares in Crowdnetic; and Albright was to receive a

long term employment contract as a key executive of Crowdnetic. In this way Albright could both

contribute to the overall growth of Crowdnetic and oversee the operations of NowStreet.

What soon followed was a tale of deception and betrayal by Cox and Crowdnetic.

By years end, after months of Cox and Albright working together as co-executives of

Crowdnetic, Albright still without a formal written agreement, Cox provided Albright with drafts of

merger documents: a Purchase Agreement, providing for the transfer of NowStreet to Crowdnetic for

nominal consideration; and an Option Agreement, providing for the grant of Options to acquire 10%

ownership of Crowdnetic, vested over three years, with a below market exercise price. And although

an agreement had been reached on the terms of Albrights employment a number of months ago, no

draft written employment agreement accompanied the other merger documents. According to Cox,


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Crowdnetic did not want to spend the money to pay lawyers to draft it at least not until the private

placement funding was completed.

When the written employment agreement finally arrived in March 2014 after completion of the

funding nearly three months after title to Albrights business had been transferred to Crowdnetic - it

provided that Albright could be terminated by Crowdnetic at any time, for any reason, with or without

cause. Albright insisted that Cox honor their original agreement to have a long term employment

agreement, where Albright could only be terminated for cause. Cox refused. When Albright then asked

for her company back, she was terminated by Cox.

The next day the instant lawsuit for declaratory relief was both filed by Crowdnetic against

Albright and served upon Albright, at her home nearly 1,000 miles away from the Courthouse. The

Complaint bore no hint of malfeasance or misfeasance on the part of Albright. In fact, among many

achievements, Albright had just concluded organizing a highly successful industry conference attended

by nearly 1,000 people in May 2014.

But the dagger of betrayal was most painful when Albright read Paragraph 22 of Crowdnetics

Complaint: according to Cox, all that hadeverbeen discussed between Albright and Cox over a period

of six months following the July 2013 Press Release was the mere possibility of employment of

Albright by Crowdnetic a sharp contrast not only to the many promises and representations made by

Cox to Albright as a key inducement of combining her business with Crowdnetic but also to the many

statements made by Crowdnetic to the public, to management and investors.

Yet Paragraph 22 of the Complaint stands as a testament to the fraudulent state of mind of Cox

when she represented to Albright that her executive position at Crowdnetic would be safe for at least

three years so long as she continued to perform satisfactorily. Albright relied on Coxs representation

and agreement of long term employment when she transferred title to NowStreet in January 2014.


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However, as Albright found out too late, in Coxs mind Albrights employment was only a

possibility.

Hence, this Counterclaim and Third Party Complaint against Crowdnetic and Cox for fraud,

securities fraud and breach of contract.

JURISDICTION AND VENUE

1. This Courts jurisdiction is based upon diversity of citizenship pursuant to 28 U.S.C.

1332(a)(1) in that the matter in controversy exceeds the sum of $75,000, exclusive of interest and costs,

and there is diversity of citizenship between Counterclaimant Albright and the Counterdefendants.

2. This Court also has original jurisdiction over the claims in Count II pursuant to the

Securities Exchange Act of 1934, 15 U.S.C. 78aa. This Court has supplemental jurisdiction over the

remaining claims, Counts I, III and IV herein, under 28 U.S.C. 1367 in that these claims arise out of,

and are an integral part of, the same transactions as Count II

3. Joinder of the within claims against Plaintiff and Counterdefendant Crowdnetic is proper

under F.R.C.P. Rule 13(a) as these claims arise out of the transaction or occurrence that is the subject

matter of Crowdnetics claim. Joinder of Third Party Defendant Cox is proper under F.R.C.P. Rule

13(h) and F.R.C.P. Rule 20(a)(2) as Cox is jointly and/or severally liable with Crowdnetic with respect

to or arising out of the same transactions and occurrences.

4. Venue is proper in the United State District Court for the Southern District of New York

pursuant to 28 U.S.C 1391 because this is a judicial district in which a substantial part of the events

giving rise to the claims occurred, and in which one of the Counterdefendants, Crowdnetic, resides.

Many of the acts of the Counterdefendants charged in the Counterclaim, including the dissemination of

false and misleading statements, occurred in substantial part in this district.


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5. In connection with the acts transactions and conduct alleged in the Counterclaim,

Counterclaimants used the means and instrumentalities of interstate commerce, including the U.S

.Mails and interstate telephonic and electronic communications.

THE PARTIES

6. Counterclaimant Dara Albright is a resident of the State of Georgia who maintains her

principal residence at, Roswell, Georgia.

7. Counterdefendant Crowdnetic is a New York limited liability company with its principal

office in the Borough of Manhattan, State of New York.

8. Third Party Defendant Cox is a resident of the State of New York, and at all relevant

times was, the founder, controlling Member and Chief Executive Officer of Crowdnetic, a company

engaged in the business of providing technology and market data solutions to the global

crowdfinance market place. At all relevant times herein Cox was acting as Chief Executive Officer of

Crowdnetic and in the course and scope of her employment by Crowdnetic as their Chief Executive

Officer.

SUBSTANTIVE ALLEGATIONS

9. Crowdfinance refers to a relatively new funding approach intended to enable business

ventures to raise capital from a broader range of sources than has been possible in the past, including

through social media websites and financial network websites (platforms). The impetus for this new

and what has become a rapidly developing area came from the enactment by Congress of the Jumpstart

Our Business Jobs Act of 2012 (the JOBS Act). In particular, Title II of the JOBS Act made it lawful

for the first time for a business to generally solicit investors to purchase their securities without

registering the offer and sale with the U.S. Securities and Exchange Commission, so long as, among

other things, all of the investors who purchased securities were accredited investors.


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10. Crowdnetic was founded by Cox following the passage of the JOBS Act in order to

provide technology and market data products and services to this emerging industry. Crowdnetic

currently operates a service providing real-time market data from crowdfunding platforms and is

attempting to develop a platform for the p2p (peer-to-peer) and crowdlending industry.

11. Albright is the founder of NowStreet LLC, a Georgia limited liability company

(NowStreet) and, co-founded LendIt LLC, a limited liability company, in or about January 2013. At

all relevant times herein NowStreet was, and is, the owner of a One Third (1/3) Member Interest in

LendIt.

12. Since its inception, NowStreet has provided an informational platform for the

crowdfinance industry through various channels, including: Albrights NowStreet blog consisting of

leading-edge industry articles and industry-acclaimed conferences, including conferences through

LendIt. LendIt is the largest and most recognized global peer to peer (p2p) and online lending

conference organization, addressing both consumer and small business lending. Through these

conferences, NowStreet introduces people to the latest developments in crowdfinance, including the

latest online lending and equity platforms, the latest technology tools and solutions for this industry,

and the latest best practices in the industry. Albright is a recognized leader and pioneer in the

crowdfinance industry and has helped establish the industrys trade and leadership organizations.

13. Since LendIts inception, and at all relevant times herein, until May 28, 2014, Albright

was a Manager of LendIt, and was actively involved in all aspects of its business, including arranging

and implementing industry wide p2p lending conferences.

14. Albright was removed as Manager of LendIt on May 28, 2014 by the

Counterdefendants, when Albright was replaced by Cox, despite the admonitions of the other three

LendIt Managers, who represent the ownership of 2/3rds of the LendIt Member Interests.


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15. In or about July 2013, Cox and Albright entered into discussions whereby the operations

of Crowdnetic and NowStreet, including its subsidiary LendIt, would be merged. At the core of these

discussions: Crowdnetic would acquire the assets of NowStreet, including LendIt, Albright would be

brought on board as a key executive of Crowdnetic and co-founder, and Albright would receive a 15%

ownership interest, founders shares, in Crowdnetic.

On July 17, 2013, Cox advised the Crowdnetic management team, in an email with the Subject

LineWelcome Dara Albright as Chief Strategy Officer, which read in part:

It is with great honor and pleasure that I announce that we will be issuing a press release

announcing a merger of NowStreet Media (learn more at http://NowStreetjournal.com/) andCrowdnetic. NowStreet founder & CEO, Dara Albright (previously an advisor to us) will alsobe joining Crowdnetic as a co-founder and Chief Strategy Officer!!!

On July 30, 2013, Crowdnetic issued a Press Release announcing the acquisition of NowStreet and the

hiring of Albright as Crowdnetics Chief Strategy Officer. The headline read: Crowdnetic Acquires

NowStreet Journal and Strengthens its Management Team with Key Hire. The Press Release

read, in part: While the financial terms of the agreement were not disclosed, upon completion of the

acquisition, NowStreets Founder, Dara Albright, will join Crowdnetics management team as its Chief

Strategy Officer in her new role. A true and complete of Crowdnetics July 30, 2013 Press Release is

included as Exhibit A to this Counterclaim.

16. On August 12, 2013, Cox communicated with Douglas Ellenoff, a partner in the New

York law firm of Ellenoff Grossman and Schole to further discuss the structure and documentation of

the merger of Crowdnetic and NowStreet. Specifically, Cox wrote to attorney Ellenoff:

We agreed that all of the assets of NowStreet (but not actually NowStreet LLC. . . she willkeep that for tax and simplicity reasons) come over to Crowdnetic. So the website, brand blogs,event stuff, everything rolls into GoodWorldCreations LLC.

Her title: Chief Strategy Officer

Comp: Approximate salary to be paid once we raise a significant round/can afford it will be$120K base but this dependent on raise and other circumstances.


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She will receive founders shares (same dilution [sic] Sri and I would fall under). 15% total on athree year annual vest (5% after year one, 5% year two, 5% year 3.

She will also be eligible for any additional executive options plans we put in placeTBD.

Is this enough.

Attorney Ellenoff responded to Cox and Albright less than one hour later:

To structure this properly and have deferred tax consequences it will probably need to be anasset sale for stock unless Peter you think we can transfer the assets for nominal to luans and

simply have luans business then enter into an employment agreement with Dara for the cash

and contingent stock consideration.[Emphasis added].

Dara and Luan ideally we represent one of you and while we will structure and draft the otherperson should have their own counsel.

17. Albright is informed and believed that Ellenoff continued to represent Crowdnetic until

November or December 2013, when Ellenoff was terminated as Counsel to Crowdnetic, and the law

firm of Covington and Burling was then retained to represent Crowdnetic in the subject merger of

Crowdnetic and NowStreet effected in January 2014.

18. Between August 2013 and December 2013 Albright continued her full time role as an

officer of Crowdnetic (her title was changed by agreement from Chief Strategy Officer to Chief

Communications Officer of Crowdnetic in November 2013).

19. However during this time, neither Crowdnetic nor its counsel provided Albright with

any formal contracts memorializing their agreements. Albright continued to act as an executive officer

of Crowdnetic in reliance on the promises of, and out of trust in, Cox, which trust, as detailed below,

was in hindsight misplaced.

20. In or about October 2013 Crowdnetic commenced a private placement offering (the

Offering) to raise up to $2,500,00 through the sale to accredited investors of Member Interests in

Crowdnetic and Warrants to acquire Member Interests in Crowdnetic. The purchase price for these

securities was calculated based upon a pre-Offering valuation by Crowdnetic of $10,000,000.


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21. Albright is informed and believes that the documentation for the October 2013 Offering

was prepared by the law firm of Ellenoff Grossman and Schole. The Offering documentation comprised

a Confidential Private Placement Memorandum Subscription Booklet dated October 3, 2013 (the

PPM).

22. In the section of the PPM entitledManagement and Advisors, at Page 12 thereof

Albright was identified as Chief Strategy Officer. The PPM also read in part:

The Company is currently finalizing the acquisition of substantially all of the assets ofNowStreetMedia LLC in consideration of the issuance of fifteen percent (15%) of the outstanding Unitsof the Company vesting equally for a period for three (3) years and contingent upon Mr. Albrights [sic]

continued service as Chief Strategy Officer.

23. Section 6.1(b) of the Crowdnetic Amended and Restated Operating Agreement furnished

to prospective investors with the PPM dated October 3, 2013 identified Dara Albright as an Officer of

Crowdnetic, with the title Chief Strategy Officer.

24. Between August 2013 and December 2013, Albright performed many duties as Chief

Strategy Officer and then as Chief Communications Officer of Crowdnetic including introducing Cox

to numerous industry leaders and organizing and implementing a conference held in December 2013,

entitled Crowdfinance 2013. This conference was held on December 17, 2013, and was sold out. In

addition, the event gave Crowdnetic unparalleled visibility and credibility in the crowdfinance industry.

25. In or about December 2013, in Albrights capacity as Chief Communications Officer,

Albright commenced preparations for LendIt 2014, intended to be the largest conference of its kind

in the world, the second annual industry conference bringing together the leading p2p and online

lending platforms, investors capitalizing the industry, and companies providing technology and support

services to the emerging industry.


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The January 2014 Employment Agreement and Written Merger Documents

26. On December 30, 2013, Cox for the first time provided Albright drafts of two of the

agreements for the proposed merger of Crowdnetic and NowStreet, originally announced to the

management of Crowdnetic and the public in July 2013. These drafts comprised a Membership Interest

Purchase Agreement (the Purchase Agreement), and a Unit Option Agreement (Option

Agreement), each between Crowdnetic and Albright. The Purchase Agreement and the Option

Agreement are sometimes collectively referred to herein as the Written Merger Documents.

27. The Purchase Agreement provided for the purchase and sale of 100% of the member

interests of NowStreet by Crowdnetic for a stated consideration of $5,000. The Purchase Agreement

made no reference to the Option Agreement or any agreement to continue to employ Albright, as Chief

Communications Officer of Crowdnetic or otherwise. The Option Agreement provided for the grant to

Albright of Options to purchase Member Interests in Crowdnetic. Cox repeatedly represented to

Albright that Crowdnetic was not buying NowStreet, but rather she was buying Albright, and Cox

falsely represented to Albright that the deal needed to be structured in this manner for tax reasons.

28. On December 30, 2013, Cox informed Albright that the Purchase Agreement and the

Option Agreement had to be signed within the next three days, i.e.by January 2, 2014. Albright

informed Cox that this was not possible, as Albrights lawyer was on Christmas vacation. Upon Coxs

learning of this, Cox requested in writing that Albright use another attorney instead and then further

inquired in writing is he a labor lawyer.

29. In early January 2014, the Option Agreement draft was modified to provide that

Albright would receive options equal to 10% of the outstanding Crowdnetic Member Interests (the

Options): 1/4th of the Options would vest effective as of August 1, 2013, and the remaining Options

would vest over a three year period, on each of August 1, 2014, August 1, 2015 and August 1, 2016,

subject to termination of vesting under the conditions contained in the Option Agreement.


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30. At various times between December 30, 2013, when the initial drafts of the Written

Merger Documents were received by Albright, and January 8 and 9, 2014, when the Written Merger

Documents were signed, Cox and Albright discussed the terms of Albrights employment as Chief

Communications Officer of Crowdnetic. The following was agreed by Crowdnetic, and Albright as of

January 8, 2014 (the January 2014 Employment Agreement), in connection with the sale of

Crowdnetic under the Purchase Agreement and the grant of the Options under the Option Agreement:

Albright would continue to be employed by Crowdnetic as a key executive of Crowdnetic

throughout the term of her employment, and would focus the majority of her time on NowStreet

and LendIt operations.

Her base salary would be $120,000 per annum.

The stated term of the employment would continue until the end of the Option vesting period,

August 1, 2016, unless Albright was terminated by Crowdnetic terminated for cause.

In order to allay Albrights concerns that she not be wrongfully terminated without cause and

deprived of her unvested Options for 7.5% of Crowdnetic and related employment

compensation, Cox informed Albright that she would be protected so long as she performed

her duties. At one point Cox stated to Albright:

there is a minimum target that if hit would ensure that your contract / you wouldn't be let go,

etc. So, there is a performance metric to protect against your fear

Until the completion of the Offering under the PPM, in lieu of a base salary, Albright would

receive an agreed interest of 10% in new Crowdnetic business introduced by Albright and 40%

in the net profits from all events, including LendIt 2014.

Upon completion of the Offering, her base salary would commence and the commission

compensation would terminate.


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The foregoing terms of employment would be memorialized by a formal written agreement

entered into between Crowdnetic and Albright, but were binding as of when the NowStreet

ownership was transferred by Albright to Crowdnetic.

31. On January 8, 2014, the Option Agreement was executed by Albright and transmitted to

Cox. Upon receipt by Cox of the executed Option Agreement, Cox inquired about the signature page

for the Purchase Agreement, stating this doc and the other go together for tax reasons for you. Why

couldnt you send together? Albrights printer had run out of ink. The Executed Purchase Agreement

was furnished by Albright on January 9, 2014.

32. However, Cox delayed providing Albright with a written agreement of employment

memorializing the January 2014 Employment Agreement - instead telling Albright that the written

employment agreement would not be prepared until completion of the Offering, stating that Crowdnetic

did not want to spend any more money on legal fees until after the financing round was completed.

Unfulfilled Agreements and False Representations by Crowdnetic and Cox

33. Approximately one week after the Written Merger Documents were executed Cox

informed Albright that she would no longer have the title of Chief Communications Officer at

Crowdnetic. Instead she would be employed by NowStreet, as Editor-in-Chief.

34. On February 5, 2014, Cox furnished Albright with a document entitled Confidentiality,

Intellectual Property and Non-Competition Agreement (the Non-Compete Agreement) and

requested Albright to sign it. The Non-Compete Agreement referred to Albright throughout the

agreement as a consultant, and provided that Albright would not compete with Crowdnetic for a

period of two years following termination of Albrights employment.

35. Albright informed Cox that she would not sign the Non-Compete Agreement, as she still

did not have a formal employment agreement evidencing the January 2014 Employment Agreement,

and the proposed Non-Compete Agreement provided that if Albrights employment terminated for any


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reason, she would be barred from competing for two years. To this day, Albright has never signed the

Non-Compete Agreement as she has never been provided with a formal written agreement

memorializing the January 2014 Employment Agreement.

36. On or about February 15, 2014, the Offering was successfully completed. On February

20, 2014, Cox sent Albright a message insisting that the Non-Compete Agreement be signed. Again,

Albright refused to sign the Non-Compete Agreement, as she had yet to receive even a draft of an

employment agreement of any kind. Cox then stated that now having had a chance to look at the

confidentiality agreement again, and having a couple more bux in the bank, she would be willing to

send an employment agreement but that we would now need to refigure Albrights compensation as

her investors now feel Albrights compensation is too high. Revised compensation terms were never

agreed to by Albright. On March 21, 2014, Cox told Albright that her base salary was going to be

reduced from the agreed $120,000 per annum to $100,000 per annum. Albright advised Cox that she

would not agree to this change.

37. On March 26, 2014, Cox furnished Albright with a draft employment agreement,

entitled Consulting Agreement, which obligated Albright to provide services to Crowdnetic for not

less than 40 hours per week. Included with the Consulting Agreement was a revised Option Agreement.

38. On March 27, 2014, Albright advised Cox that the draft Consulting Agreement was not

acceptable, as it provided for a term of one year rather than the agreed term through August 1, 2016,

and also allowed Crowdnetic to terminate Albrights employment with or without cause, at any time,

upon 30 days notice. Cox refused to change these provisions, insisting that Crowdnetic needed the

flexibility to terminate Albright at will for any reason. To this date Cox has failed and refused to change

these provisions to conform to the January 2014 Employment Agreement.


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39. Between January and May 2014 Albright continued to perform her assigned duties for

Crowdnetic, spending the majority of her time on the LendIt 2014 Conference, held on May 4-6, 2014.

The event was extremely successful, with nearly 1,000 people in attendance.

40. On May 13, 2014, following the conclusion of the LendIt Conference, Albright advised

Cox that she was unwinding the transactions involving the sale of NowStreet to Crowdnetic as Cox

could no longer be trusted to perform or document the January 2014 Employment Agreement, and

requested that Crowdnetic return NowStreet to Albright and the Written Merger Documents unwound.

Cox adamantly refused.

41. On May 14, 2014, a majority-in-interest of the Members of LendIt advised Cox to

resolve Crowdnetics dispute with Albright over ownership of NowStreet, which in turn owned a 1/3

Member Interest in LendIt. The majority-in-interest of the Members of LendIt also reminded Cox that

Albright is a co-founder of LendIt and an integral part of the LendIt team. They further informed Cox

that if she attempted to remove Albright as manager, it would be a material setback to LendIt and that

the majority partners would reserve their right to repurchase Crowdnetics Member Interest in LendIt

owned by NowStreet pursuant to the provisions of Section 7.11 of the LendIt Operating Agreement.

Section 7.11 allows LendIt to repurchase a Member Interest for a purchase price equal to the available

cash of the company times the percentage of ownership interest.

42. On May 28, 2014, Cox advised LendIt in writing that Crowdnetic, as the owner of

NowStreet and its 1/3 Member interest in LendIt, was terminating Albright as a Manager of LendIt, and

replacing Albright with Cox. To this date Crowdnetic refuses to unwind the transactions between

Crowdnetic and Albright, i.e.unwinding the transfer of the NowStreet Member Interest to Crowdnetic,

and the related transactions.

43. On May 29, 2014, Crowdnetic instituted the subject proceeding, seeking a declaration

from this Court that it is the lawful owner of NowStreet and LendIt.


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COUNT I

(BREACH OF CONTRACT)

44. Albright re-alleges and incorporates by reference all preceding paragraphs of this

Counterclaim.

45. The Written Merger Documents and the January 2014 Employment Agreement were

integrated transactions and contractual agreements, entered into at the same time as part and parcel of

the sale by Albright of NowStreet. Crowdnetic has failed and refused to perform most of the terms of

the January 2014 Employment Agreement. Instead, in Paragraph 22 of Crowdnetics Complaint,

Crowdnetic refers to the employment relationship between Crowdnetic and Albright as a mere

possibility.

46. Albright intends that service of this Counterclaim to serve as notice of rescission of the

Written Merger Documents and the January 2014 Employment Agreement, and Albright offers to

restore to Counterdefendants all consideration furnished by them to Albright on the condition that

Counterdefendants restore to Albright all consideration furnished by Albright.

47. In the alternative to rescission, by reason of such breaches, Albright seeks

compensatory damages proximately caused thereby against Crowdnetic of not less than $1,000,000, in

an amount to be determined at trial.

COUNT II

(FRAUD)


Counterclaim.

49. As discussed above, Albright relied to her detriment on the false and misleading

statements, omissions, and actions of Counterdefendants, including:

Albright would continue to be employed by Crowdnetic as a key executive of Crowdnetic

throughout the term of her employment.


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Albrights base salary would be $120,000 per annum.

The stated term of Albrights employment would continue until the end of the Option vesting

period, August 1, 2016, unless Albright was terminated by Crowdnetic terminated for cause.

Albright would be protected against wrongful termination by Crowdnetic so long as she

performed her duties.

50. In addition, Albright is informed and believes that Counterdefendants attempted to

conceal their intent to have Albrights 727,500 unvested Options (approximately 7.5% of Crowdnetic)

terminate upon Albrights early termination by Crowdnetic without cause. This was done by drafting

the vesting provisions in the January 2014 Option Agreement in a deliberately vague and ambiguous

manner. Then, weeks later, after the Option Agreement was executed and delivered, along with 100%

of the Member Interests in NowStreet, Counterdefendants revealed their true intentions, by unilaterally

revising the signed Option Agreement and presenting it to Albright for re-signing, the changed

language making it crystal clear that Albrights unvested Options would terminate immediately if her

employment was terminated, with or without cause. Albright refused to sign the revised Option

Agreement.

51. Counterdefendants knew that these representations were false

and their actions were misleading and made such representations and took such actions with the express

intent to fraudulently to induce Albright to sell and transfer her 100% ownership interest in NowStreet

under the terms of the Purchase Agreement.

52. Albright reasonably relied on Counterdefendants misleading actions and false

representations in deciding to enter into the Written Merger Documents.




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54. The false representations and misleading actions were undertaken with spite and malice,

entitling Albright to an award of punitive and exemplary damages against Cox and Crowdnetic.

COUNT III

(Violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5)


Counterclaim.

56. The Member Interests in Crowdnetic are securities within the meaning of Section

10(b) and Rule 10b-5 of Securities Exchange Act of 1934 (the Exchange Act), 15 U.S.C. 78j(b)

and 17 C.F.R. 240.10b-5.

57. At all relevant times herein Cox was a controlling person of Crowdnetic under the

provisions of 15 U.S.C. 78t(a).

58. Counterdefendants have violated Section 10(b) of the Exchange Act and Rule 10b-5

promulgated under the Exchange Act in that from at least July 2013 through January 2014, and

continuing thereafter through May 2014, the Counterdefendants, directly or indirectly, willfully or

recklessly: (a) employed devices, schemes or artifices to defraud; (b) made untrue statements of

material facts and omitted to state material facts necessary in order to make the statements made, in the

light of the circumstances under which they were made, not misleading; and (c) engaged in acts,

practices and courses of business which operated as a fraud upon Albright, the purchaser of such

securities represented by the Unit Option Agreement.

59. Had Cox and Crowdnetic not made these fraudulent misrepresentations and omissions,

Albright would not have purchased the Options or entered into the other related transactions under the

Written Merger Documents or the January 2014 Employment Agreement.


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60. Neither Albrights execution of the Option Agreement and the related agreements (i.e.

the Purchase Agreement and the January 2014 Employment Agreement), nor Albrights consent

thereto, were made freely; thus, the documents are voidin that such execution and consent were

obtained by fraud, misrepresentations and concealment practiced by Cox and Crowdnetic on Albright.





COUNT IV

(Georgia Uniform Securities Code - O.C.G.A. 10-5-50)


Counterclaim.






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PRAYER FOR RELIEF

WHEREFORE, Albright prays that this Court enter judgment in her favor on each and every

Count set forth above, and award it relief, including:

A. As to Count I, the relief requested against Crowdnetic in Count I, as elected by Albright before

trial.

B. As to Counts II IV inclusive, the relief requested in such Counts or, alternatively,

compensatory damages jointly and severally against Crowdnetic and Albright, in an amount not

less than $1,000,000, as proven at trial.

C. As to Count II, punitive and exemplary damages against Crowdnetic and Cox.

D. As to Count IV, reasonable attorneys fees pursuant to the Georgia Uniform Securities Code.

E. As to all Counts, Pre-judgment and post-judgment interest as allowed by law.

F. Such other and further relief as the Court may deem just and proper.

Respectfully submitted,

Dated: June 16, 2014Los Angeles, CA /S/________________________________

Samuel S. Guzik (Cal Bar No. 97598)Guzik & Associates1875 Century Park East, Suite 700Los Angeles, CA 90067-2508Telephone (310) 914-8600Facsimile (310) 914-8606Email: [email protected]

Attorneys for Defendant, Counterclaimant and Third Party

Plaintiff Dara Albright

Dara Albright Complaint Response

Documents

Transcript of Dara Albright Complaint Response