Complaint for Damages and Injunctive Relief
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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
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Complaint for Damages and Injunctive Relief
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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.
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Complaint for Damages and Injunctive Relief
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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
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Complaint for Damages and Injunctive Relief
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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.
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Complaint for Damages and Injunctive Relief
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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
By Plaintiffs against Defendants
23. Plaintiffs incorporate by this reference the paragraphs alleged above as though
fully set forth herein.
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Complaint for Damages and Injunctive Relief
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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
By Plaintiffs against Defendants
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
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Complaint for Damages and Injunctive Relief
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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.
/ / /
/ / /
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Complaint for Damages and Injunctive Relief
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Fourth Cause of Action Unfair Competition (Bus. & Prof. C. §§17200 et seq.)
By Plaintiffs against Defendants
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
By Plaintiffs against Defendants
40. Plaintiffs incorporate by this reference the paragraphs above as though fully set
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
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Complaint for Damages and Injunctive Relief
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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
By Plaintiffs against Defendants
43. Plaintiffs incorporate by this reference the paragraphs above as though fully set
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;
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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:
1. General, special and consequential damages in excess of $5 million and according
to proof;
2. Interest permitted by law;
3. Costs of suit;
4. Any and all additional relief deemed just and proper by this Court.
UNDER THE THIRD CAUSE OF ACTION:
1. General, special and consequential damages in excess of $5 million and according
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;
6. Interest permitted by law;
7. Any and all additional relief deemed just and proper by this Court.
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;
5. Interest permitted by law;
6. Any and all additional relief deemed just and proper by this Court.
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