HHSE Uptone Act II - He Reality

Case 2:18-cv-02433-SVW-JPR Document 1 Filed 03/26/18 Page 1 of 23 Page ID #:1
1 Marc Y. Lazo, SBN 215998

WILSON KEADJIAN BROWNDORF LLP
2 1900 Main Street, Suite 600
Irvine, CA 92614
3 Phone No.: (949) 407-5029
Fax No.: (949) 234-6254
4
5 Attorneys for Plaintiffs MICHAEL DAVIS and UPTONE PICTURES, INC.
6
UNITED STATES DISTRICT COURT
7
FOR THE CENTRAL DISTRICT OF CALIFORNIA
8
9
MICHAEL DAVIS, an individual; and COMPLAINT FOR:
10 UPTONE PICTURES, INC., a North
Carolina corporation 1. BREACH OF CONTRACT
11
Plaintiffs, 2. TORTIOUS BREACH OF IMPLIED
12 COVENANT OF GOOD FAITH AND
v. FAIR DEALING
13
ERIC PARKINSON, an individual; 3. FRAUD BY FALSE PROMISE
14 HANNOVER HOUSE, INC., a
Wyoming corporation; TRUMAN 4. FRAUD BY CONCEALMENT
15 PRESS, INC. (d/b/a “HANNOVER
HOUSE”), an Arkansas corporation, 5. UNFAIR COMPETITION IN
16 VIOLATION OF CAL. BUS. & PROF.
CRIMSON FOREST CODE SEC 17200, ET SEQ
ENTERTAINMENT GROUP, INC., a
17
Nevada Corporation; HINDS & 6. UNJUST ENRICHMENT
18 SHANKMAN, a California Limited
Liability Partnership, and MEDALLION 7. ACCOUNTING
19 RELEASING, INC., an Arkansas
8. VIOLATION OF CA CIV. CODE SEC.
corporation, and DOES 1-10; 1719
20 Defendants.
21 DEMAND FOR JURY TRIAL
22
23 COMES NOW, Plaintiffs MICHAEL DAVIS and UPTONE PICTURES, INC.,

24 (hereinafter collectively referred to as “PLAINTIFFS”) allege against Defendants ERIC
25 PARKINSON, HANNOVER HOUSE, INC., TRUMAN PRESS, INC., MEDALLION
26 RELEASING, INC., HINDS & SHANKMAN, LLP, and CRIMSON ENTERTAINMENT
27 GROUP, INC. (hereinafter collectively referred to as “DEFENDANTS”) as follows:
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COMPLAINT
1 NATURE OF THIS ACTION

2
In violation of the express terms of a Settlement Agreement (“SA”) entered into in
3
September 2017, DEFENDANTS have embarked on a deliberate campaign to financially injure
4
PLAINTIFFS and foment further litigation.
5
1. Plaintiff MICHAEL DAVIS (“DAVIS”) is, and at all times mentioned in this
6
Complaint an individual residing in the State of North Carolina and president of UPTONE
7
PICTURES, INC.
8
9 2. Plaintiff UPTONE PICTURES, INC. (“UPTONE”) is, and at all times mentioned
10 in this Complaint was, a North Carolina corporation organized under the laws of the State of
11 North Carolina.
12 3. PLAINTIFFS are informed and believe that at all times mentioned in this
13 Complaint, Defendant ERIC PARKINSON (“PARKINSON”) was and is an individual residing
14 in the State of Arkansas. Plaintiffs are further informed and believe that PARKINSON was the
15 principal and managing agent of Defendants HANNOVER HOUSE, INC., TRUMAN PRESS,
16 INC., and MEDALLION RELEASING, INC., identified below.
17
4. PLAINTIFFS are informed and believe and that at all times mentioned herein,
18
Defendant HANNOVER HOUSE, INC. (“HANNOVER”) was and is a Wyoming corporation.
19
20 5. PLAINTIFFS are informed and believe that at all times mentioned herein,
21 Defendant MEDALLION RELEASING, INC. (“MEDALLION”) was and is an Arkansas
22 corporation.
23 6. PLAINTIFFS are informed and believe that at all times mentioned herein,
24 Defendant TRUMAN PRESS, INC. (“TRUMAN”) was and is an Arkansas corporation.
25
7. PLAINTIFFS are informed and believe that at all times mentioned herein,
26
Defendant CRIMSON ENTERTAINMENT GROUP, INC. (“CRIMSON”) was and is a Nevada
27
Corporation which transacts business in the State of California. Further, PLAINTIFFS are
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COMPLAINT
1 informed and believe that in or about May 2017 HOUSE and CRIMSON entered into a Stock-
2 for-Stock purchase deal, where CRIMSON became primarily responsible as the new merged
3 company for HANNOVER’S current or remaining liabilities and business deal commitments.
4
8. PLAINTIFFS are informed and believe that at all times mentioned herein,
5
Defendant HINDS & SHANKMAN, LLP (“H&S”) was and is a law firm structured as a Limited
6
Liability Partnership, and organized under the laws of the State of California.
7
9. Each of the PLAINTIFFS is unaware of true names and capacities of DOES 1 -
8
10, inclusive, and these Defendants are therefore sued under fictitious names. PLAINTIFFS will
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seek leave of this Court to amend this COMPLAINT to show the true names and capacities of
10
the Defendants named as DOES 1 - 10 when those names and capacities have been determined.
11
PLAINTIFFS are informed and believe and based thereon allege that each person and/or entity
12
sued herein by a fictitious name was in some manner legally responsible for the occurrences
13
herein alleged, and that PLAINTIFFS’ damages as herein alleged were caused by such
14
Defendants, and each of them.
15
16 10. PLAINTIFFS are informed and believe that at all times mentioned herein that
17 there was such a unity of interests between each of the individuals and corporate
18 DEFEENDANTS named herein, that the separate corporate entities should be disregarded, and
19 the corporate entities of the DEFENDANTS should be treated merely as the alter-ego of the
20 respective individual DEFENDANTS. Adherence to the fiction of separate existence of the
21 corporate and entity DEFENDANTS as an entity distinct from the respective individual
22 DEFENDANTS would permit an abuse of the corporate provision, would sanction injustice in
23 that the individual DEFENDANTS would evade personal responsibility for their wrongdoing
24 alleged in this COMPLAINT and could and would continue in the corporate name to perpetuate
25 the scheme and device alleged in this COMPLAINT to financially injure PLAINTIFFS.
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COMPLAINT
1 JURISDICTION AND VENUE
2 11. This Court has Subject Matter jurisdiction over this action pursuant to
3 28 USC §1332, because a diversity of citizenship exists between the parties. PLAINTIFFS are
4 residents of and doing business in North Carolina and the DEFENDANTS are residents of and
5 doing business in Nevada, Arkansas, Wyoming, and California.
6 12. On information and belief, this Court has personal jurisdiction over
7 DEFENDANTS for these reasons: (i) DEFENDANTS conduct and transact business in
8 California by marketing to potential commercial clients in California; and (ii) DEFENDANTS
9 have entered into contracts within the State of California with distributors and licensees. (iii) The
10 Contract that makes up the crux of PLAINTIFFS’ claims of this Complaint includes a Forum
11 Selection Clause that all of parties to this lawsuit, with the exception of CRIMSON and H&S,
12 explicitly agreed for this Court to adjudicate these matters. Moreover, each of the
13 DEFENDANTS, excepting CRIMSON, engaged in negotiations and otherwise interacted with
14 PLAINTIFF DAVIS while he was in California. As such, DEFENDANTS’ contacts with the
15 State of California have been systematic and continuous in DEFENDANTS’ related business
16 dealings to PLAINTIFFS.
17
13. Accordingly, Venue is proper in this district pursuant to 28 USC § 1391 (b) and
18
(c) because a substantial part of the events giving rise to PLAINTIFFS’ claims occurred in this
19
judicial district, including the negotiations and contract into which PLAINTIFFS entered with
20
DEFENDANTS.
21
FACTUAL ALLEGATIONS
22
14. This legal dispute primarily centers around DEFENDANTS’ refusal, excepting
23
H&S, to perform under the terms of a Settlement Agreement (“SA”) even though PLAINTIFFS
24
have fulfilled their obligations under the contract. Despite the repeated demands by
25
PLAINTIFFS, DEFENDANTS, excepting H&S, refuse to abide by the required terms of the SA
26
15. For, Plaintiff UPTONE is the authorized distribution agency and proprietor, as
27
well as the licensing source for the feature film, Union Bound (“Picture.”) Plaintiff DAVIS acted
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COMPLAINT
1 as the principal of the Picture and maintained exclusive control and creative responsibility for
2 developing, producing and directing the Picture, and at all times alleged herein owned all rights
3 to the Picture.
4 16. Defendants HANNOVER and MEDALLION and TRUMAN are commercial
5 business entities in the market of film distribution and campaign – advertisement for television
6 programs in all applicable formats; and additionally, relating to media for theatrical releases,
7 home video and video-on-demand markets in the territory of the United States of America and
8 English-speaking provinces of Canada.
9 17. Defendant PARKINSON is an individual with managerial responsibility and
10 ownership interests in HANNOVER, TRUMAN, and MEDALLION.
11 18. Defendant H&S, is a California law firm that was retained by the other
12 Defendants to consult, negotiate, and advocate for HANNOVER, TRUMAN, MEDALLION,
13 CRIMSON, and PARKINSON in their business dealings with PLAINTIFF.
14 19. In or around mid-2015, Defendant PARKINSON and Defendant H&S entered
15 into preliminary discussions with Plaintiff DAVIS. The negotiations concentrated on a potential
16 agreement for Defendants HANNOVER, TRUMAN, MEDALLION, and PARKINSON to
17 market and distribute the Picture prior to its release.
18 20. On or about January 12, 2016, PLAINTIFFS and DEFENDANTS, excepting
19 CRIMSON and H&S, reached a final and fully executed Sales Agreement, whereby
20 DEFENDANTS received the exclusive right to advertise, market, license, and distribute the
21 Picture in set geographic areas. Under the Sales Agreement, PLAINTIFFS received a cash
22 amount calculated from the prospective gross revenue of the Picture.
23 21. Despite the Sales Agreement, DEFENDANTS, excepting CRIMSON and H&S,
24 manifestly failed to use commercially reasonable standards to perform. DEFENDANTS,
25 excepting, CRIMSON and H&S, refused to make the agreed-on Sales Agreement expenditures
26 for adequate advertising; failed to provide suitable documentation to evidence the placement of
27
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COMPLAINT
1 the Picture in agreed-upon market areas in the United States; and otherwise refused to perform
2 its obligations.
3 22. Upon PLAINTIFFS making demand for assurances of contract performance and
4 explanations for DEFENDANTS’ non-performance, excepting CRIMSON’S and H&S’, no
5 suitable response was received.
6 23. On March 12, 2017, PLAINTIFFS initiated a lawsuit in federal court, stemming
7 from DEFENDANTS’, excepting CRIMSON’S and H&S’, total breach of obligations under the
8 original Sales Agreement. The anticipated lawsuit sought damages for Breach of Contract;
9 Breach of Covenant of Good Faith and Fair Dealing; Breach of Fiduciary Duty; False Promise;
10 Unjust Enrichment; Intentional Misrepresentation; Fraudulent Concealment; Unfair Business
11 Practices, and Accounting.
12 24. On or about May 10, 2017, Defendant PARKINSON and Defendant
13 HANNOVER entered into a Stock-for-Stock Swap with CRIMSON, whereby the companies
14 took the initial steps to merge the business entities into one. PLAINTIFFS were never informed
15 of this business development, and DEFENDANTS intentionally withheld all information related
16 to this event. PLAINTIFFS willingness and business decision to enter in to the SA would have
17 been altered had such information been given to them. Moreover, this action of not informing
18 PLAINTIFFS is exactly synonymous to PARKINSON’S, HANNOVER’S, MEDALLION’S,
19 and TRUMAN’S previous conduct under the Sales Agreement.
20 25. In or about September 2017, PLAINTIFFS and DEFENDANTS entered into the
21 SA for the federal lawsuit to be dismissed with prejudice. (A true and correct copy of such
22 Settlement Agreement is attached hereto as Exhibit A and incorporated by reference.) To date,
23 PLAINTIFFS have abided by the confidentiality terms of the SA, but this present and pending
24 legal dispute obligates PLAINTIFFS to provide this Court with copy for adjudication and
25 enforcement purposes. The SA called for DEFENDANTS to, among other bargained-for duties
26 and obligations, provide the previously breached advertising, promotional, and distribution
27
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COMPLAINT
1 services to PLAINTIFFS in furtherance of the commercial marketing of the Picture they had
2 originally agreed to undertake.
3 26. As a material inducement of PLAINTIFFS entering into the SA, PLAINTIFFS
4 required verified documentation detailing the financial health of HANNOVER, MEDALLION,
5 and TRUMAN, such as current and recent business transactions. The required documentation
6 resulted from DEFENDANTS’ counsel’s verbal and written representations that his clients were
7 financially destitute, and in fact owed him several thousand dollars in attorney’s fees.
8 27. The disclosure of financial documents from Defendant H&S to PLAINTIFFS and
9 their attorneys served the purpose of informing PLAINTIFFS to what degree PARKINSON
10 HANNOVER, MEDALLION, and TRUMAN could ever satisfy a monetary judgment, and thus
11 whether pursuing the same would ever be fruitful. Upon review of the verified financial
12 documentation, PLAINTIFFS determined that DEFENDANTS would never be able to satisfy a
13 monetary judgment – even a nominal one – which H&S confirmed on numerous occasions.
14 28. DEFENDANTS, particularly H&S, never disclosed – and PLAINTIFFS are
15 informed and believe actively and fraudulently concealed – the existence of the stock purchase
16 agreement and merger between Defendant CRIMSON and Defendant HANNOVER. The May
17 2017 Stock-for-Stock Purchase was purposely and entirely withheld by H&S in the negotiation
18 discussions with PLAINTIFFS, and H&S made representations to the contrary in furtherance of
19 their fraudulent inducement efforts to procure dismissal with prejudice of the underlying federal
20 case.
21 29. The lack of full disclosure of the merger and Stock-for-Stock Purchase between
22 Defendant HANNOVER and Defendant CRIMSON is direct evidence that the verified
23 information disclosed to PLAINTIFFS during the negotiations were incomplete and inaccurate.
24 Current financial schedules were not actually current because statements did not reflect
25 Defendant CRIMSON’S existing operations and outstanding liabilities. PLAINTIFFS lacked full
26 and complete knowledge of the degree to which PARKINSON, HANNOVER, TRUMAN and
27
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COMPLAINT
1 MEDALLION could commit to the Picture, particularly because of the merger information that
2 was withheld.
3 30. While Defendant H&S is not a nominal party to the SA, H&S’s
4 misrepresentations were reasonably relied upon by PLAINTIFFS as being true and accurate,
5 particularly due to the following provisions in the SA that imputed an affirmative duty upon
6 H&S to have provided honest and accurate information to PLAINTIFFS, upon which H&S knew
7 PLAINTIFFS would be relying in agreeing to settle the underlying matter under the terms and
8 conditions set forth in the SA as the following:
9
10 In the event the Parties hereto breach any of the provisions, covenants or promises set
forth herein, to the extent that any representation made by any Party hereto or by any
11 Parties’ counsel should prove to be materially false, in addition to other relief to which
the other Party may be entitled hereunder, the other Party shall also be entitled to
12 injunctive relief from a court of competent jurisdiction, to enforce the terms of this
Settlement Agreement and obtain the benefits intended between the Parties. (SA, page
13
(“pg.”), 11, paragraph (“¶”)14.)
14
This Settlement Agreement, and all the terms and provisions hereof, shall be binding on
15 the Parties and their respective heirs, legal representatives, successors and assigns, and
shall inure to the benefit of the Parties and their respective heirs, legal representatives,
16 successors, and assigns. (SA, pg. 11, ¶ 15.)
17
This Settlement Agreement in all respects has been voluntarily and knowingly executed
18 by the Parties on advice and with approval of their respective legal counsel. (SA, pg. 11,
¶ 16.)
19
31. Unaware of the extent of DEFENDANTS’ business dealings, excepting H&S,
20
PLAINTIFFS filed their Request for Dismissal under Federal Rules of Civil Procedure 41 (a) or
21
(c) on October 2, 2017. Since that time, all actions taken by Defendants HANNOVER,
22
MEDALLION, TRUMAN, and PARKINSON have been in contravention of the SA and in a
23
manner exactly similar to conduct regarding the previous Sales Agreement.
24
32. Under Paragraph 2 of the SA et seq., “Settlement Terms,” Defendant
25
PARKINSON is required to issue a signed statement under penalty of perjury attesting to
26
DEFENDANTS’ compliance under the SA. On or about December 21, 2017, Defendant
27
PARKINSON issued a sworn affidavit and declaration detailing his version of the events and his
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COMPLAINT
1 belief of DEFENDANTS’ completed obligations under the SA. (Attached as Exhibit B is a true
2 and correct copy of PARKINSON’S affidavit, and it is incorporated by reference.) In effect,
3 however, PARKINSON’S sworn affidavit and declaration directly points out to this Court
4 DEFENDANTS’ breaches, excepting H&S, given the explicit contradictions between the terms
5 of the SA and Defendant PARKINSON’S recitation of the “terms.”
6 33. DEFENDANTS, excepting H&S, materially breached the terms of the SA by
7
intentionally misquoting the division of the Picture’s home video revenues to recoup overall
8
costs. The SA states DEFENDANTS, excepting H&S, and PLAINTIFFS will divide video
9
revenue proceeds according to 60% to PLAINTIFFS and 40% to DEFENDANTS’ split,
10
excepting H&S. (SA, pg. 3, ¶ 2.) Yet, PARKINSON’S affidavit lists the division between the
11
parties as an equal “fifty-fifty division.” (PARKINSON Affidavit (“Aff.”), Paragraph, (“¶”), 4.)
12
As a result, PLAINTIFFS only received $2,539 as their portion in revenue from a total $5,078 of
13
proceeds. In actuality, PLAINTIFFS should have received $3,046.80, pursuant to the SA. This is
14
the first blatant instance of DEFENDANTS, excepting H&S, manifestly breaching the SA and
15
16 trying to insert their own terms.
17 34. DEFENDANTS, excepting H&S, further materially breached the terms of the SA
18 by intentionally ignoring the required accounting to accompany the Sales Proceeds: “A full
19 accounting of said sales proceeds[of the Picture] shall be completed by
20 Defendants[DEFENDANTS, discluding H&S] and given to Plaintiffs[PLAINTIFFS.]”(SA, pg.
21 3, ¶ 2.) Under the SA, the accounting was due by the 46th day since the full execution of the
22 agreement. (SA, pg. 3, ¶2.) DEFENDANTS have neither provided an accounting nor given an
23 explanation for the lack of this contractual term being met.
25 refusing to make good faith attempts to resell the existing inventory. Under the SA, by the 46 th
26 day after full execution, DEFENDANTS, excepting H&S, are to attempt to sell-off remaining
27 inventory at Wal-Mart and other similar retailers through Budget/Value Bin selection. (SA, pg.
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COMPLAINT
1 3-4, ¶ 3.) The SA further anticipates that the duration and coordination of this placement process
2 may extend to possibly June 1, 2018. And, absent the successful implementation of a
3 Budget/Value Bin option, a third-party may be selected to sell-off the remaining inventory. (SA,
4 pg. 4, ¶ 3.) Yet, Defendant PARKINSON’S declaration does not specify any “good faith” efforts
5 by DEFENDANTS, excluding H&S, to sell-off the remaining Picture inventory; and instead
6 states: “With Walmart and Best Buy formally “passing” on a reissue / repriced release of video
7 units…” (PARKINSON Aff., pg. 3, ¶ 7.)
8 36. DEFENDANTS, excluding H&S, additionally materially breached the terms of
9 the SA by refusing to return the unsold Picture inventory cost-free to PLAINTIFFS. For, the SA
10 mandates “All copies of the [Picture] will not be destroyed… [but] delivered to Plaintiff
11 Uptone[UPTONE] at Hannover House’s [HANNOVER’S] expense…” within 45 days of
12 execution of the SA (SA, pg. 7, ¶ 9.) However, PARKINSON’S Affidavit for DEFENDANTS,
13 excepting H&S, entirely refuses this obligation and instead unilaterally subverts the language to
14 state that HANNOVER “is prepared to either destroy all inventory…” or return such inventory
15 under the provision that UPTONE must pay $.10 per Picture unit for “strip and spindle” services.
16 (PARKINSON Aff. pg. 3, ¶7.) DEFENDANTS’ unilateral decision, excepting H&S, to either
17 destroy the remaining product or charge Plaintiff UPTONE a fee per unit for return is contrary to
18 the SA’s terms and is a material breach.
20 by refusing to carry out commercially reasonable methods to carry out third-party collection
21 services for PLAINTIFFS. Under the SA, DEFENDANTS, excepting H&S, must make best
22 efforts to procure sale proceeds from third parties, such as Cinedigm, INC. or Technicolor, INC.,
23 in accordance with the 60% - PLAINTIFFS, 40% - DEFENDANTS’ division of revenue,
24 excepting H&S. (SA, pg. 5, ¶ 4.) However, Defendant PARKINSON on behalf of
25 DEFENDANTS, excepting H&S, blatantly misstates the contractual requirement and says “fifty
26 percent of this new revenue would be due and payable to Uptone [UPTONE.] (PARKINSON
27 Aff., pg. 3, ¶6.) The division of sales proceeds was previously bargained for and agreed to
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COMPLAINT
1 between PLAINTIFFS and DEFENDANTS, excepting H&S, to be set at 60% for PLAINTIFFS
2 and 40% for DEFENDANTS, excepting H&S. The attempts of DEFENDANTS, excepting H&S,
3 to re-state the terms to their benefit in such a manner is a material breach of the SA.
5 providing a check with insufficient funds to PLAINTIFFS. On or about November 20, 2017,
6 DEFENDANTS, excepting H&S, remitted a check for “$2,539” to PLAINTIFFS for the 50%
7 share of the Picture sale proceeds. Despite the fact that this check amount of “$2,539 was only
8 50%” of the current total sales proceeds when it should have been “3,046.80, [60%]” the partial
9 payment did not even clear when cashed. DEFENDANTS, excepting H&S, knowingly submitted
10 a bad check to PLAINTIFFS, and this conduct amounts to one more action in a history of
11 deceptive conduct.
12 39. DEFENDANTS, excepting H&S, have materially violated the terms of the SA by
13 their blatant attempt to unload costs from third-party Cinedigm, INC. onto PLAINTIFFS.
14 Pursuant to the SA, any money due to third-party Cinedigm is to be entirely borne from
15 DEFENDANTS, excepting H&S. (SA, pg. 6, ¶5.) Yet, PARKINSON’S Affidavit violates the SA
16 terms by re-stating the provisions to be “Cinedigm [INC] is authorized to withhold from payment
17 the sum of thirty-percent (30%) of each title[unit] sold.” (PARKINSON Aff. pg. 2, ¶6.)
18 40. DEFENDANTS’ actions, excepting H&S, have violated PLAINTIFFS’ rights
19 under the SA, and this Court is asked to hold them accountable.
20 FIRST CAUSE OF ACTION
21 (BREACH OF CONTRACT Against HANNOVER, PARKINSON, TRUMAN,
22 CRIMSON, and MEDALLION)
23 41. PLAINTIFFS repeat and reallege each and every foregoing and subsequent
24 allegation contained in the Complaint, as though said paragraphs were set forth in full herein.
25 42. The SA, a valid and enforceable contract, existed between PLAINTIFFS and
26 DEFENDANTS, excluding H&S.
27 ////
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COMPLAINT
1 43. PLAINTIFFS performed as promised under the SA, and to the utmost extent
2 possible, fulfilled each and every term of the contract.
3 44. However, as described herein, DEFENDANTS, excepting H&S, materially
4 breached the contract in the following ways:
6 intentionally misquoting the division of the Picture’s home video revenues to recoup costs. The
7 SA states DEFENDANTS, excepting H&S, and PLAINTIFFS will divide video revenue
8 proceeds according to 60% to PLAINTIFFS and 40% to DEFENDANTS, excepting H&S. (SA,
9 pg. 3, par. 2.) Yet, PARKINSON’S affidavit lists the split between the parties as a “fifty-fifty
10 division.” (PARKINSON Aff. ¶4.) As a result, PLAINTIFFS only received $2,539 as their
11 portion in revenue from a total $5,078. In actuality, PLAINTIFFS should have received
12 $3,046.80, pursuant to the SA.
14 by intentionally ignoring the required accounting to accompany Sales Proceeds: “A full
15 accounting of said sales proceeds[of the Picture] shall be completed by
16 Defendants[DEFENDANTS] and given to Plaintiffs[PLAINTIFFS.]”(SA, pg. 3, ¶2.) Under the
17 SA, the accounting was due by the 46th day since the full execution of the agreement. (SA, pg. 3,
18 ¶2.) DEFENDANTS have neither provided an accounting nor given an explanation for the lack
19 of this contractual term being met.
21 refusing to make good faith attempts to resell the existing inventory. Under the SA, on the 46th
22 day after full execution, DEFENDANTS, excepting H&S, are to attempt to sell-off remaining
23 inventory at Wal-Mart and other similar retailers through Budget/Value Bin selection. (SA, pg.
24 3-4, ¶3.) The SA further anticipates that the duration and coordination of this placement process
25 may extend to possibly June 1, 2018. And, absent the successful implementation of a
26 Budget/Value Bin option, a third-party may be selected to sell-off the remaining inventory. (SA,
27 pg. 4, ¶3.) Yet, the PARKINSON’S declaration does not specify any “good faith” efforts by
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COMPLAINT
1 DEFENDANTS, excepting H&S, to sell-off the remaining Picture inventory; and instead states:
2 “With Walmart and Best Buy formally “passing” on a reissue / repriced release of video units…”
3 (PARKINSON Aff. pg. 3, ¶par. 7.)
4 48. DEFENDANTS, excepting H&S, additionally materially breached the terms of
5 the SA by refusing to return the unsold Picture inventory cost-free to PLAINTIFFS. For, the SA
6 mandates “All copies of the [Picture] will not be destroyed… [but] delivered to Plaintiff
7 Uptone[UPTONE] at Hanover House’s [HANNOVER’S] expense…” within 45 days of
8 execution of the SA (SA, pg. 7, par. 9.) However, PARKINSON’S Affidavit for
9 DEFENDANTS, excepting H&S, entirely refuses this obligation and instead unilaterally inverts
10 the language and states that HANNOVER “is prepared to either destroy all inventory…” or
11 return such inventory under the provision that UPTONE must pay $.10 per Picture unit for “strip
12 and spindle” services. (PARKINSON Aff., pg. 3, par. 7.)
14 refusing to carry out commercially reasonable methods to carry out third-party collection
15 services for PLAINTIFFS. Under the SA, DEFENDANTS must make best efforts to procure sale
16 proceeds from third parties, such as Cinedigm, INC. or Technicolor, INC. in accordance with the
17 60% - PLAINTIFFS, 40% - DEFENDANTS’ division of revenue, excepting H&S. (SA, pg. 5,
18 Par. 4.) However, Defendant PARKINSON on behalf of DEFENDANTS, excepting H&S,
19 blatantly misstates the contractual requirement and states “fifty percent of this new revenue
20 would be due and payable to Uptone [UPTONE.] (PARKINSON Affidavit, pg. 3, ¶ 6.) In the
21 same vein of Cinedigm, INC., DEFENDANTS violate the SA by shifting costs they are
22 ultimately obligated for to PLAINTIFFS. (SA, pg. 6, ¶5; (PARKINSON Aff. pg. 2, ¶6.)
24 refusing to complete the required accounting for PLAINTIFFS. Under the SA, upon the 46 th day
25 of the full execution of the SA, DEFENDANTS, excepting H&S, will complete and provide a
26 full accounting of revenue / proceeds and unit catalogue of the Picture to date: “A full accounting
27
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COMPLAINT
1 of said sales proceeds shall be completed by Defendants[DEFENDANTS, discluding H&S] and

2 given to Plaintiffs[PLAINTIFFS.] (SA, pg. 3, ¶2.)
3 51. DEFENDANTS, excluding H&S, materially breached the terms of the SA by
4 providing a check with insufficient funds to PLAINTIFFS. On or about November 20, 2017,
5 DEFENDANTS, excluding H&S, remitted a check for “$2,539” to PLAINTIFFS for the 50%
6 share of the Picture sale proceeds under the SA. Despite the fact that this check amount of
7 “$2,539 was only 50%” of the current total sales proceeds when it should have been “3,046.80,
8 [60%]” the partial payment did not even clear when cashed. DEFENDANTS, excluding H&S,
9 knowingly submitted a bad check to PLAINTIFFS.
10 52. As a proximate result of DEFENDANTS’ conduct, excluding H&S,
11 PLAINTIFFS have suffered damages believed to be in excess of this Court’s jurisdictional
12 minimum, with the exact amount to be proven at trial.
13
14 SECOND CAUSE OF ACTION

15 (TORTIOUS BREACH OF COVENANT OF GOOD FAITH AND FAIR
16 DEALING – against HANNOVER, PARKINSON, TRUMAN, CRIMSON, and
17 MEDALLION)
18 53. PLAINTIFFS re-allege and incorporate by reference the allegations contained in
19 the preceding paragraphs, as though fully set forth herein.
20 54.. PLAINTIFFS, on the one hand, and DEFENDANTS, on the other, are in contract
21 with one another concerning the obligations for payment of sale proceeds; an accurate
22 accounting; collection of revenue from third-parties; and the return of unused/unsold inventory
23 of the Picture.
24 55. Each and every contract imposes the duty of good faith and fair dealing upon the
25 parties in performance of the contract.
26 56. DEFENDANTS, excepting H&S, and each of them acted in bad faith by not
27 giving equal consideration to the interests of PLAINTIFFS as they did to their own interests.
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COMPLAINT
1 DEFENDANT, excluding H&S, have wrongfully and intentionally breached the duty of good
2 faith and fair dealing by denying PLAINTIFFS the benefits to which they were entitled to and
3 bargained for under the SA.
4 57. The breaches of the covenant of good faith and fair dealing, by DEFENDANTS,
5 excepting H&S, have proximately and directly caused damages to PLAINTIFFS.
6 THIRD CAUSE OF ACTION
7 (FRAUD BY FALSE PROMISE – AGAINST ALL DEFENDANTS)
9 the preceding paragraphs, as though fully set forth herein.
10 59. DEFENDANTS made false representations and false promises, including that (a)
11 stating HANNOVER was in a sound financial condition and able to complete the contract terms
12 it would be entering into with PLAINTIFFS regarding the promotion, marketing, and distribution
13 of the Picture. In truth, HANNOVER’S financial situation was so precarious it had to engage in a
14 Stock-for-Stock purchase deal with Defendant CRIMSON, without PLAINTIFFS’ knowledge, in
15 order stay afloat; (b) DEFENDANTS further promised that they would split the Picture’s
16 revenues according to a 60%-40% division; (c) DEFENDANTS promised that within 46 days of
17 the full execution of the SA they would provide an accurate and complete accounting; (d)
18 DEFENDANTS promised that they would make good-faith efforts to re-sell the remaining
19 Picture inventory and further return any unsold inventory cost-free to PLAINTIFFS; (e)
20 DEFENDANTS promised that they would pursue collection actions against Cinedigm, INC. or
21 Tehnicolor, INC. as necessary and in accordance with the 60%-40% division that similarly
22 applied to revenue sales.
23 60. At the times DEFENDANTS made the aforementioned false representations and
24 promises, they knew that their representations and promises were false, made them without
25 belief in their veracity, without intention of fulfilling them and/or with reckless disregard as to
26 their truth.
27
28
- 15 -
COMPLAINT
1 61. DEFENDANTS made these false representations and promises with the intent to
2 induce PLAINTIFFS acceptance of the SA. Yet, prior to the full execution of the SA, not one of
3 the DEFENDANTS disclosed or informed PLAINTIFFS regarding Defendant HANNOVER’S
4 financial situation. In actuality, DEFENDANTS were no in position to commercially fulfill the
5 promises it made to PLAINTIFFS. DEFENDANTS had essentially bluffed to buy time and make
6 appearances seem good, in order to have PLAINTIFFS dismiss the federal suit. Such information
7 was intentionally withheld because had PLAINTIFFS been informed of DEFENDANTS’
8 weakened financial situation, no dismissal of the federal suit would occur. For, PLAINTIFFS
9 had sought reassurance from DEFENDANTS, excepting CRIMSON, prior to the full execution
10 of the SA.
11 62. DEFENDANTS made these false representations and promises with the intent to
12 induce PLAINTIFFS to accept the SA.
13 63. PLAINTIFFS relied on DEFENDANTS’ false representations and promises to
14 their detriment. Among other things, PLAINTIFFS decided to dismiss the federal lawsuit with
15 prejudice under the express promise that DEFENDANTS would entirely fulfill their obligations
16 under the SA, as fully aforementioned above. Moreover, PLAINTIFFS’ reliance was reasonable
17 under the circumstances as DEFENDANTS had indicated both their ability and preference to
18 continue to transact business with PLAINTIFFS. At the time of the full execution of the SA,
19 PLAINITTFS had no information available to them regarding DEFENDANTS’ true intention.
20 64. By the aforesaid acts and omissions of DEFENDANTS, and each of them,
21 PLAINTIFFS have been directly and legally caused to suffer actual damages including, but not
22 limited to, reliance damages, costs of suit and other pecuniary loss in an amount not presently
23 ascertained, but to be proven at trial.
24 65. PLAINTIFFS have been generally damaged in an amount within the jurisdictional
25 limits of this Court.
26 66. PLAINTIFFS are informed and believe and thereon allege that the
27 DEFENDANTS, and each of them, by engaging in the aforementioned acts and/or in authorizing
28
- 16 -
COMPLAINT
1 and/or ratifying such acts, engaged in willful, malicious, intentional, oppressive and despicable
2 conduct, and acted with willful and conscious disregard of the rights of PLAINTIFFS, thereby
3 justifying the award of punitive and exemplary damages in an amount to be determined at trial.
4 FOURTH CAUSE OF ACTION
5 (FRAUD BY CONCEALMENT – AGAINST ALL DEFENDANTS)
7 the preceding paragraphs of this Complaint, as though fully set forth therein.
8 68. Prior to entering into the SA, DEFENDANTS had an affirmative and on-going
9 duty to apprise PLAINTIFFS of facts and circumstances that would affect any potential deal or
10 contract.
11 69. Specifically, DEFENDANTS had a duty to disclose the current state of their
12 business operations, as such material facts would impact and affect DEFENDANTS’ abilities,
13 excluding H&S, to fulfill contractual obligations to PLAINTIFFS. Defendant H&S initiated the
14 role of negotiating on behalf of PARKINSON, HANNOVER, TRUMAN, and MEDALLION,
15 and in doing so undertook the lead part of misleading PLAINTIFFS and their attorneys.
16 70. DEFENDANTS’ failure to disclose the state of its current financials and a Stock-
17 for-Stock purchase was a material misrepresentation because the knowledge of such facts would
18 have affected PLAINTIFFS’ decision-making for: (1) entering into the dismissal of the previous
19 complaint; and (2) continuing to use DEFENDANTS’ services for Picture.
20 71. DEFENDANTS further calculated that PLAINTIFFS would have no reasonable
21 way of discovering the deal with Defendant CRIMSON nor otherwise gain knowledge of
22 DEFENDANTS’ poor financial situations. Even worse, DEFENDANTS knew that the absence
23 of the Defendant CRIMSON / Defendant HANNOVER business merger/stock agreement in the
24 provided financial documentation would ensure that no questions would be asked by
25 PLAINTIFFS.
26 72. DEFENDANTS additionally intended that PLAINTIFFS’ reasonable lack of
27
28
- 17 -
COMPLAINT
1 knowledge and lack of awareness of the deal with Defendant CRIMSON, tied to DEFENDANTS
2 overarching financial difficulties, would result in PLAINTIFFS’ reliance.
3 73. PLAINTIFFS reasonably relied on DEFENDANTS’ active concealment of the
4 Defendant CRIMSON transaction and serious financial troubles when entering into the SA. The
5 lack of accurate information as to DEFENDANTS’ poor or negative cash-flow and inability to
6 perform under the SA deprived PLAINTIFFS of the benefits they bargained for under the
7 agreement.
8 74. As a result of PLAINTIFFS’ reliance on DEFENDANTS’ active concealment,
9 PLAINTIFFS have incurred substantial damages relating to unrealized revenue from Picture
10 sales; attorney’s fees related to the negotiation and memorialization of the SA; and other
11 damages.
12 75. PLAINTIFFS have been generally damaged in an amount within the jurisdictional
13 limits of this Court.
14 76. PLAINTIFFS are informed and believe and thereon allege that the
15 DEFENDANTS, and each of them, by engaging in the aforementioned acts and/or in authorizing
16 and/or ratifying such acts, engaged in willful and malicious conduct, thereby justifying the award
17 of punitive and exemplary damages in an amount to be determined at trial.
18
19 FIFTH CAUSE OF ACTION

20 (UNFAIR COMPETITION IN VIOLATION OF CAL. BUS. & PROF. CODE
21 §17200 ET SEQ. – against ALL DEFENDANTS)

23 the preceding paragraphs of this Complaint, as though fully set forth therein.
24 78. DEFENDANTS have engaged in a pattern and practice of acts of unfair
25 competition in violation of the UCL, including the practices alleged herein.
26 79. Cal. Bus. & Prof. Code §17200 provides:
27 As used in this chapter, unfair competition shall mean and include any unlawful
or fraudulent business act or practice and unfair, deceptive, untrue, or misleading
28
- 18 -
COMPLAINT
1 advertising and any act prohibited by Chapter 1 (commencing with section 17500
of Part 3 of Division 7 of the Business and Professions Code. (CA Bus. & Prof.
2 Code §17200.)
3
80. Cal. Bus & Prof. Code §17204 provides that an action for violation of California’s
4
Unfair Competition Law may be brought by persons who have suffered injury in fact and have
5
lost money or property as a result of such unfair competition; and Cal. Bus. & Prof. Code §17203
6
provides that a court may grant injunctive and equitable relief to such persons.
7
8 81. The unlawful conduct of DEFENDANTS alleged herein, are acts of unfair
9 competition under California Business and Professions Code § 17200, et. Seq. for which
10 Defendants are liable and for which this Court should issue equitable and injunctive relief,
11 including restitution, pursuant to Cal. Bus. & Prof. Code § 17203.
12 82. Through its conduct, DEFENDANTS have engaged in unfair business practices in
13 California by employing and utilizing the practices complained of herein. DEFENDANTS’ use
14 of such unfair business practices constitutes unfair competition as provided and continues to
15 provide DEFENDANTS with an unfair advantage over its competitors.
16 83. DEFENDANTS’ practices as described herein are unlawful, unfair, and
17 fraudulent.
18 84. DEFENDANTS’ conduct as alleged herein is “unlawful” in that it violates the
19 contractual obligations it owes to PLAINTIFFS under the SA.
20 85. DEFENDANTS’ conduct as alleged herein as “unfair” because, among other
21 things, it violates the terms of the SA, including the duty to act in good faith.
22 86. DEFENDANTS’ scheme, as alleged herein, is also “fraudulent,” in that they
23 knowingly calculated to mislead PLAINTIFFS. DEFENDANTS had actual knowledge of their
24 contractual obligations, weakened financial situation, and their potential for breaches, but took
25 steps and continued to conceal their lack of adequate funding and/or capital to perform under the
26 SA. DEFENDANTS further attempted to subvert the terms of the SA to unilaterally prefer
27 themselves to the detriment of PLAINTIFFS.
28
- 19 -
COMPLAINT
1 87. Unless acted upon by this Court, DEFENDANTS will continue to harm
2 PLAINTIFFS.
3 88. PLAINTIFFS have suffered injuries in fact and lost money as a result of
4 DEFENDANTS’ conduct as more specifically alleged above.
5 SIXTH CAUSE OF ACTION
6 (UNJUST ENRICHMENT– AGAINST HANNOVER, PARKINSON, TRUMAN,
8 89. PLAINTIFFS reallege and incorporate by reference the allegations contained in
9 the preceding paragraphs of this Complaint, as though fully set forth herein.
10 90. DEFENDANTS, excepting H&S, have been unjustly enriched as a result of
11 withholding excessive revenue and proceeds as they were legally entitled to under the SA. Still,
12 and to this date, DEFENDANTS have improperly retained monies due to PLAINTIFFS pursuant
13 to the SA signed by all parties. Consequently, DEFENDANTS, excepting H&S, have unfairly
14 and unreasonably received a benefit to the detriment and at the expense of PLAINTIFFS.
15 91. As a result, PLAINTIFFS are entitled to recover the value of the benefits
16 conferred as damages.
17 SEVENTH CAUSE OF ACTION
18 (ACCOUNTING – HANNOVER, PARKINSON, TRUMAN, CRIMSON,
19 and MEDALLION)
22 93. Pursuant to the SA between the parties, DEFENDANTS, excepting H&S, have a
23 duty to properly report, account for, and distribute revenue from the Picture.
24 94. DEFENDANTS have almost exclusive control over and access to the information
25 related to the Picture and its current inventory, revenue stream, etc. To the extent that
26 PLAINTIFFS have any information or right of access to any information related to the
27
28
- 20 -
COMPLAINT
1 determination of the revenue division, DEFENDANTS have engaged in a fraudulent plan and
2 scheme to re-write and subvert the actual terms of the SA.
3 95. As alleged above, a dispute exists between PLAINTIFFS and DEFENDANTS
4 respecting DEFENDANTS’ performance, excepting H&S, of its obligations under the SA and
5 the manner and method by which DEFENDANTS, excepting H&S, are entitled to calculate
6 revenue paid and payable to PLAINTIFFS.
7 96. DEFENDANTS have failed to provide access to the books kept by
8 DEFENDANTS in relation to the amount and character of the revenue and sales from the
9 Picture’s distribution. Therefore, the amount of money due from DEFENDANTS to
10 PLAINTIFFS is unknown to PLAINTIFFS and cannot be ascertained without an accounting of
11 the receipts and disbursement of transactions required for DEFENDANTS to undertake under the
12 SA.
13 97. Accordingly, it is necessary and appropriate for this Court to order an accounting
14 in order to determine the amount of money due under the SA.
15 EIGHTH CAUSE OF ACTION
16 (VIOLATION OF CA CIV. CODE SEC. 1719 –
AGAINST HANNOVER, PARKINSON, TRUMAN,
20 99. On or about November 20, 2017, DEFENDANTS, excepting H&S, remitted a
21 check for “$2,539” to PLAINTIFFS for the purported 50% share of the Picture sale proceeds,
22 which as reiterated above, was a gross misrepresentation of the amount of monies due
23 PLAINTIFFS under the SA.
24 100. On or about January 10, 2018, Plaintiff DAVIS attempted to cash such check.
25 101. Upon attempt to cash the check, Plaintiff DAVIS was informed that the check
26 could not be cashed due to insufficient funds.
27
28
- 21 -
COMPLAINT
1 102. As a result of DEFENDANTS, excluding H&S, remitting a dishonored [“bad”]

2 check to PLAINTIFFS, they have violated California Civil Code section 1719. California Civil
3 Code 1719 provides that “any person who passes a check on sufficient funds shall be liable to the
4 payee for damages… which shall not be less than one hundred dollars ($100) nor more than one
5 thousand five hundred ($1,500) dollars…” if certain conditions are met. (CA Civ. Code § 1719,
6 subd. (a)(2).)
7 103. In order for a plaintiff to be entitled to up to $1,500.00 in damages, it must be the
8 case that the plaintiff (1) made a written demand re. the “bad” check to the defendant; (2)
9 informed the defendant of CA Civil Code section 1719; further, (3) provided defendant the
10 service charge plaintiff had to pay for the bad check; and (4) waited for thirty days after
11 completing requirements (1)-(3). (CA Civ. Code § 1719, subd. (a)(2).)
12 104. Here, PLAINTIFFS provided written demand to DEFENDANTS, excepting
13 H&S, more than 30 days prior to bringing suit, and otherwise satisfied the requirements of
14 California Civil Code section 1719. Despite such efforts, DEFENDANTS, excepting H&S, have
15 refused to comply. Neither a replacement check nor a reimbursement for service charge has been
16 received by PLAINTIFFS. Therefore, PLAINTIFFS are entitled to damages in the amount or
17 $1,500.
18 105. Accordingly, PLAINTIFFS request this Court to order DEFENDANTS, excepting
19 H&S, to jointly and severally pay $1,500 in damages to PLAINTIFFS because of their violation.
20
21
22 PRAYER FOR RELIEF

23 WHEREFORE, PLAINTIFFS pray for judgment against DEFENDANTS as follows:
24 ON THE FIRST CAUSE OF ACTION
25 1. For attorneys’ fees and costs incurred herein.
26 ON THE THIRD AND FOURTH CAUSES OF ACTION
27 1. For exemplary and punitive damages in amounts that are yet to be ascertained.
28
- 22 -
COMPLAINT
1 ON THE FIFTH AND SIXTH CAUSES OF ACTION

2 1. Disgorgement of gains unjustly obtained and/or a constructive trust imposed for the
3 benefit of PLAINTIFFS.
4 ON THE SEVENTH CAUSE OF ACTION
5 1. For an accounting from DEFENDANTS, excepting H&S, to PLAINTIFFS; and
6 2. For the amount found to be due from DEFENDANTS, excepting H&S, to
7 PLAINTIFFS as a result of the accounting.
8 ON THE EIGHTH CAUSE OF ACTION
9 1. For an award of damages in the amount of $1,500.
10 ON ALL CAUSES OF ACTION:
11 1. For general and special damages according to proof; including but not limited to all
12 out of pocket losses incurred by PLAINTIFFS;
13 2. For recovery of costs and expenses of suit as allowed by law; and
14 3. For such other and further relief as the Court deems just and proper.
15
DEMAND FOR JURY TRIAL
16
PLAINTIFFS hereby demand a jury trial on all of the claims herein.
17
18
19
Respectfully Submitted
20 Dated: March 26, 2018 WILSON KEADJIAN BROWNDORF LLP
21
22
23 By: _______
MARC LAZO
24 Attorneys for Plaintiffs,
25 MICHAEL DAVIS and UPTONE
PICTURES, INC.
26
27
28
- 23 -
COMPLAINT

HHSE Uptone Act II - He Reality

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Case 2:18-cv-02433-SVW-JPR Document 1 Filed 03/26/18 Page 1 of 23 Page ID #:1

1 Marc Y. Lazo, SBN 215998

5 Attorneys for Plaintiffs MICHAEL DAVIS and UPTONE PICTURES, INC.

23 COMES NOW, Plaintiffs MICHAEL DAVIS and UPTONE PICTURES, INC.,

1 NATURE OF THIS ACTION

21 Defendant MEDALLION RELEASING, INC. (“MEDALLION”) was and is an Arkansas

1 JURISDICTION AND VENUE

5 doing business in Nevada, Arkansas, Wyoming, and California.

16 trying to insert their own terms.

19 accounting of said sales proceeds[of the Picture] shall be completed by

20 Defendants[DEFENDANTS, discluding H&S] and given to Plaintiffs[PLAINTIFFS.]”(SA, pg.

23 explanation for the lack of this contractual term being met.

24 35. DEFENDANTS, excepting H&S, materially breached the terms of the SA by

1 of said sales proceeds shall be completed by Defendants[DEFENDANTS, discluding H&S] and

14 SECOND CAUSE OF ACTION

19 FIFTH CAUSE OF ACTION

22 77. PLAINTIFFS re-allege and incorporate by reference the allegations contained in

11 including restitution, pursuant to Cal. Bus. & Prof. Code § 17203.

15 provide DEFENDANTS with an unfair advantage over its competitors.

16 83. DEFENDANTS’ practices as described herein are unlawful, unfair, and

18 84. DEFENDANTS’ conduct as alleged herein is “unlawful” in that it violates the

19 contractual obligations it owes to PLAINTIFFS under the SA.

20 85. DEFENDANTS’ conduct as alleged herein as “unfair” because, among other

22 86. DEFENDANTS’ scheme, as alleged herein, is also “fraudulent,” in that they

23 knowingly calculated to mislead PLAINTIFFS. DEFENDANTS had actual knowledge of their

27 themselves to the detriment of PLAINTIFFS.

18 98. PLAINTIFFS reallege and incorporate by reference the allegations contained in

20 99. On or about November 20, 2017, DEFENDANTS, excepting H&S, remitted a

23 PLAINTIFFS under the SA.

26 could not be cashed due to insufficient funds.

1 102. As a result of DEFENDANTS, excluding H&S, remitting a dishonored [“bad”]

22 PRAYER FOR RELIEF

1 ON THE FIFTH AND SIXTH CAUSES OF ACTION

9 1. For an award of damages in the amount of $1,500.

10 ON ALL CAUSES OF ACTION:

12 out of pocket losses incurred by PLAINTIFFS;

13 2. For recovery of costs and expenses of suit as allowed by law; and

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