Denise M. Graves, OSB # 98236 dgraves@schwabe.com Patchen M. Haggerty, OSB # 01054 phaggerty@schwabe.com SCHWABE, WILLIAMSON & WYATT, P.C. Pacwest Center, Suites 1600-1900 1211 S.W. Fifth Avenue Portland, OR 97204-3795 Telephone (503) 222-9981 Fax (503) 796-2900 Of Attomeys for Plaintifis IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON ROBERT AND EUGENIA CERBONE, Individuals; ACTION WASHINGTON, INC., a Washington corporation, and ACTION OREGON, INC., an Oregon corporation, Plaintifis, vs. BRAD SUGARS ACTION INTERNATIONAL, INC., a Nevada corporation, ACTION INTERNATIONAL PTY LTD, an Australian Private Company, VIC CIUFFETELLI, an Individual, and JOHN DOES 1-5, Defendants. No. 04-CV-280-BR, FIRST AMENDED COMPLAINT FOR COMMON LAW MISREPRESENTATION, NEGLIGENT. MISREPRESENTATION, UNJUST ENRICHMENT, VIOLATIONS OF THE OREGON UNFAIR TRADE PRACTICES ACT, SLANDER PER SE, VIOLATIONS OF THE WASHINGTON FRANCHISE INVESTMENT PROTECTION ACT, VIOLATIONS OF THE OREGON FRANCHISE ACT DEMAND FOR JURY TRIAL JURISDICTION 1. Plaintiffs, Robert and Eugenia Cerbone (“the Cerbones”), are individuals residing in the state of Oregon. Plaintiff Action Washington, Inc. (“Action Washington”) is a Washington corporation having its principal place of business in the State of Oregon. Plaintiff Action Oregon, Inc. (“Action Oregon”) is an Oregon corporation having its principal place of business in the State of Oregon. Page 1- FIRST AMENDED COMPLAINT PDX 10084/136468PMH176566.1 sons. gus sara nue eae, SSS2, Defendant Brad Sugars Action International, Inc. (“BSAI") is a Nevada corporation having its principal place of business in the State of Nevada and conducting business in Oregon, Defendant Action Intemational Pty Ltd (“Action”) is an Australian Private Company having its principal place of business in Queensland, Australia and conducting business in the state of Oregon. Defendant Vic Ciuffetelli (“Ciuffetelli") is an individual residing in Las Vegas, Nevada and in Australia and conducting business in Oregon. John Does 1-5 are unidentified parties. 3, The matter in controversy exceeds, exclusive of interest and costs, the sum specified by 28 U.S.C. § 1332. 4. Venue is appropriate pursuant to 28 U.S.C. § 1391 as this is the jurisdiction in which the transaction and the dispute arises and a substantial part of the events or omissions siving rise to the claims occurred. PARTIES 5. The Cerbones are individuals residing in the State of Oregon. 6. Action Washington, Inc. is a Washington corporation and is a party to the Washington Master License Agreement (“Washington ML Agreement”) with BSAIL. 7. Action Oregon, Inc. is an Oregon Corporation that was formed for the purpose of entering into an Oregon Master License Agreement (“Oregon ML Agreement”) with BSAI. 8 BSAIis a Nevada corporation engaged in the sale of Master Licenses and business coaching franchises geared toward personal motivation and improvement and assisting business owners with maximizing the performance of their businesses. The BSAl Master License Agreement authorizes the Master Licensee (“MI”) to sell Licensed Consultant Licenses to coaches (“Coaches”), who then work with business owners in enhancing personal and business performance. 9. Action is the Australian parent company of BSAI, and has been internationally franchising BSAI Master License Agreements since 1997. Action has group offices located in Page2- FIRST AMENDED COMPLAINT sommar unegnsyar.?e PDX/I10084/136468M11176966.1Las Vegas, Nevada; Brisbane, Australia; Singapore; and London, England, and has conducted franchising activities in Oregon and Washington through its agents and representatives, including Brad Sugars, President, Ciusfetell, Chief Executive Officer for Action; lan Johnson (“Johnson”), Chief Operating Officer (“COO”) for Action; and Shane Burke (“Burke”), Action’s in-house Global Legal & Accounts Manager. 10. Ciuffetelli is an owner of BSAI and the Chief Executive Officer of Action. GENERAL ALLEGATIONS 11. Onor around August of 2002, the Cerbones began discussions with Ciuffetelli, who was then the Global Director of Master Licensees for Action, regarding the purchase of a Master License to sell Licensed Consultant Licenses to Coaches in Oregon and Washington. As condition of pursuing negotiations for, and the ultimate sale of Oregon and Washington Master Licenses, Ciuffetelli required the Cerbones to review and agree to follow Action’s “12 Points of Culture” published on Action’s web site, or to “look elsewhere.” Ciuffetelli represented to the Cerbones that the 12 Points of Culture were an integral part of the Action philosophy and business methods. The Cerbones agreed to follow Actions 12 Points of Culture and have at all material times honored their agreement, 12. Johnson represented to the Cerbones that Action was the “#1 white collar franchise,” and that it consisted of proprietary marketing and business development techniques, as well as proprietary training materials, methods and systems (“Action System”). Johnson told the Cerbones that because of the proprietary nature of the Action System, they would not be provided with the Action System materials until after they entered into an ML Agreement with BSAL. The proprietary nature of the Action System was material to the Cerbones’ decision to begin negotiations for, and ultimately enter into, ML Agreements with BSAI for the Oregon and Washington territories, and they relied heavily on Johnson’s representations that the Action System was proprietary. Page 3- FIRST AMENDED COMPLAINT Sc, Rusa BATE. PG pirlena Om Bras 38s FOO tay ess aet PDR/110084/136468/PMI176966.1