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UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK Chaya R. Denciger, individually and on behalf of all others similarly situated, Civil Action No: 1:19-cv-4581 ____________ Plaintiff, JURY DEMAND -v.- First Credit Incorporated, and John Does 1-25. Defendant(s) CLASS ACTION COMPLAINT Plaintiff Chaya R. Denciger (hereinafter, “Plaintiff”), a New York resident, brings this Class Action Complaint by and through her attorneys, against Defendant First Credit Incorporated (hereinafter “Defendant”), individually and on behalf of a class of all others similarly situated, pursuant to Rule 23 of the Federal Rules of Civil Procedure, based upon information and belief of Plaintiff’s counsel, except for allegations specifically pertaining to Plaintiff, which are based upon Plaintiff's personal knowledge. INTRODUCTION/PRELIMINARY STATEMENT 1. Congress enacted the Fair Debt Collection Practices Act (hereinafter “FDCPA”) in 1977 in response to the "abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors." 15 U.S.C. §1692(a). At that time, Congress was concerned that "abusive debt collection practices contribute to the number of personal bankruptcies, to material instability, to the loss of jobs, and to invasions of individual privacy." Id. Congress concluded that "existing laws…[we]re inadequate to protect consumers," and that "'the effective collection of debts" does not require "misrepresentation or other abusive debt collection practices." 15 U.S.C. §§ 1692(b) & (c). 2. Congress explained that the purpose of the Act was not only to eliminate abusive debt collection practices, but also to "insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged." Id. § 1692(e). After determining that the existing consumer protection laws ·were inadequate Id § l692(b), Congress gave consumers a private cause of action against debt collectors who fail to comply with the Act. Id. § 1692k. JURISDICTION AND VENUE 3. The Court has jurisdiction over this class action pursuant to 28 U.S.C. §1331 and 15 U.S.C. § 1692 et. seq. The Court has pendent jurisdiction over any State law claims in this action pursuant to 28 U.S.C. § 1367(a). 4. Venue is proper in this judicial district pursuant to 28 U.S.C. § 1391(b)(2) as this is where the Plaintiff resides as well as where a substantial part of the events or omissions giving rise to the claim occurred. NATURE OF THE ACTION 5. Plaintiff brings this class action on behalf of a class of New York consumers under § 1692 et seq. of Title 15 of the United States Code, commonly referred to as “the FDCPA”, and 6. Plaintiff is seeking damages and declaratory relief. PARTIES 7. Plaintiff is a resident of the State of New York, County of Kings, residing at 1336 58th St. Apt. #1 Brooklyn, New York 11219-4564. 8. Defendant is a "debt collector" as the phrase is defined in 15 U.S.C. § 1692(a)(6) and used in the FDCPA with an address at for service in New York. c/o CT Corporation, 28 Liberty St., New York, NY, 10005. 9. Upon information and belief, Defendant is a company that uses the mail, telephone, and facsimile and regularly engages in business the principal purpose of which is to attempt to collect debts alleged to be due another. 10. John Does l-25, are fictitious names of individuals and businesses alleged for the purpose of substituting names of Defendants whose identities will be disclosed in discovery and should be made parties to this action. CLASS ALLEGATIONS 11. Plaintiff brings this claim on behalf of the following case, pursuant to Fed. R. Civ. P. 23(a) and 23(b)(3). 12. The Class consists of: a. all individuals with addresses in the State of New York; b. to whom Defendant sent a collection letter attempting to collect a consumer debt; c. that imposed an additional fee for credit card payments; d. which letter was sent on or after a date one (1) year prior to the filing of this action and on or before a date twenty-one (2l) days after the filing of this action. 13. The identities of all class members are readily ascertainable from the records of Defendants and those companies and entities on whose behalf they attempt to collect and/or have purchased debts. 14. Excluded from the Plaintiff Class are the Defendants and all officers, members, partners, managers, directors and employees of the Defendants and their respective immediate families, and legal counsel for all parties to this action, and all members of their immediate families. 15. There are questions of law and fact common to the Plaintiff Class, which common issues predominate over any issues involving only individual class members. The principal issue is whether the Defendants' written communications to consumers, in the forms attached as Exhibit A, violate 15 U.S.C. §§ l692e and 1692f. 16. The Plaintiff’s claims are typical of the class members, as all are based upon the same facts and legal theories. The Plaintiff will fairly and adequately protect the interests of the Plaintiff Class defined in this complaint. The Plaintiff has retained counsel with experience in handling consumer lawsuits, complex legal issues, and class actions, and neither the Plaintiff nor her attorneys have any interests, which might cause them not to vigorously pursue this action. 17. This action has been brought, and may properly be maintained, as a class action pursuant to the provisions of Rule 23 of the Federal Rules of Civil Procedure because there is a well-defined community interest in the litigation: a. Numerosity: The Plaintiff is informed and believe, and on that basis allege, that the Plaintiff Class defined above are so numerous that joinder of all members would be impractical. b. Common Questions Predominate: Common questions of law and fact exist as to all members of the Plaintiff Class and those questions predominance over any questions or issues involving only individual class members. The principal issue is whether the Defendants' written communications to consumers, in the forms attached as Exhibit A violate 15 § l692e and §1692f. c. Typicality: The Plaintiff’s claims are typical of the claims of the class members. The Plaintiff and all members of the Plaintiff Class have claims arising out of the Defendants' common uniform course of conduct complained of herein. d. Adequacy: The Plaintiff will fairly and adequately protect the interests of the class members insofar as Plaintiff has no interests that are adverse to the absent class members. The Plaintiff is committed to vigorously litigating this matter. Plaintiff has also retained counsel experienced in handling consumer lawsuits, complex legal issues, and class actions. Neither the Plaintiff nor her counsel have any interests which might cause them not to vigorously pursue the instant class action lawsuit. e. Superiority: A class action is superior to the other available means for the fair and efficient adjudication of this controversy because individual joinder of all members would be impracticable. Class action treatment will permit a large number of similarly situated persons to prosecute their common claims in a single forum efficiently and without unnecessary duplication of effort and expense that individual actions would engender. 18. Certification of a class under Rule 23(b)(3) of the Federal Rules of Civil Procedure is also appropriate in that the questions of law and fact common to members of the Plaintiff Class predominate over any questions affecting an individual member, and a class action is superior to other available methods for the fair and efficient adjudication of the controversy. 19. Depending on the outcome of further investigation and discovery, Plaintiff may, at the time of class certification motion, seek to certify a class(es) only as to particular issues pursuant to Fed. R. Civ. P. 23(c)(4). FACTUAL ALLEGATIONS 20. Plaintiff repeats, reiterates and incorporates the allegations contained in paragraphs numbered above herein with the same force and effect as if the same were set forth at length herein. 21. Some time prior to December 18, 2018, an obligation was allegedly incurred to “Cleveland Clinic Main Campus/Family Heath.” (“Clinic”) 22. The obligation arose out of a transaction involving medical services allegedly provided to Plaintiff by the Clinic and which was incurred primarily for personal, family or household purposes. 23. The alleged Clinic obligation is a "debt" as defined by 15 U.S.C.§ 1692a(5). 24. Clinic is a "creditor" as defined by 15 U.S.C.§ 1692a(4). 25. Clinic contracted with the Defendant to collect the alleged debt. 26. Defendant collects and attempts to collect debts incurred or alleged to have been incurred for personal, family or household purposes on behalf of creditors using the United States Postal Services, telephone and internet. Violation I – December 18, 2018 Collection Letter 27. On or about December 18, 2018, Defendant sent the Plaintiff a collection letter (the “Letter”) regarding the alleged debt owed to the Clinic. See December 18, 2018 Collection Letter – Attached hereto as Exhibit A. 28. The collection letter indicated that Defendant charges a $3.50 fee for payment via credit card. 29. Plaintiff did not agree to such a collection charge. 30. The addition of this collection fee by Defendant was not authorized by the agreement creating the debt. 31. The addition of this collection fee also runs afoul of New York State Law. N.Y. Gen. Bus. Law § 601(2) specifically prohibits this type of action insomuch as the law states that “No principal creditor, as defined by this article, or his agent shall…Knowingly collect, attempt to collect, or assert a right to any collection fee, attorney’s fee, court cost or expense unless such changes are justly due and legally chargeable against the debtor. 32. Defendant misled and deceived Plaintiff into the belief that she falsely owed an additional $3.50 if she elected to pay by credit card, when this charge is a violation of the FDCPA. 33. Plaintiff incurred an informational injury as Defendant provided her with false information as to the amount she actually owed on the alleged debt. 34. As a result of Defendant’s deceptive misleading and false debt collection practices, Plaintiff has been damaged. COUNT I VIOLATIONS OF THE FAIR DEBT COLLECTION PRACTICES ACT 15 U.S.C. §1692e(2)(A) 35. Plaintiff repeats, reiterates and incorporates the allegations contained in paragraphs above herein with the same force and effect as if the same were set forth at length herein. 36. Defendant’s debt collection efforts attempted and/or directed towards the Plaintiff violated various provisions of the FDCPA, including but not limited to 15 U.S.C. §1692e(2)(A). 37. Pursuant to 15 U.S.C. §1692e(2)(A), a debt collector may not mischaracterize the character, amount or status of a debt in connection with the collection of any debt. 38. Defendant violated said section by: a. Falsely charging a processing fee which altered the amount of the debt violation of §1692e(2)(A). 39. By reason thereof, Defendant is liable to Plaintiff for judgment that Defendant's conduct violated Section 1692e(2)(A) of the FDCPA, in the form of actual damages, statutory damages, costs and attorneys’ fees. COUNT II VIOLATIONS OF THE FAIR DEBT COLLECTION PRACTICES ACT 15 U.S.C. §1692e(10) 40. Plaintiff repeats, reiterates and incorporates the allegations contained in paragraphs above herein with the same force and effect as if the same were set forth at length herein. 41. Defendant’s debt collection efforts attempted and/or directed towards the Plaintiff violated various provisions of the FDCPA, including but not limited to 15 U.S.C. § 1692e. 42. Pursuant to 15 U.S.C. §1692e, a debt collector may not use any false, deceptive, or misleading representations or means in connection with the collection of any debt. 43. Defendant violated said section by: b. Making a false and misleading representation in violation of §1692e(10). 44. By reason thereof, Defendant is liable to Plaintiff for judgment that Defendant's conduct violated Section 1692e(10) of the FDCPA, in the form of actual damages, statutory damages, costs and attorneys’ fees. COUNT III VIOLATIONS OF THE FAIR DEBT COLLECTION PRACTICES ACT 15 U.S.C. §1692f (1). 45. Plaintiff repeats, reiterates and incorporates the allegations contained in paragraphs above herein with the same force and effect as if the same were set forth at length herein. 46. Defendant’s debt collection efforts attempted and/or directed towards the Plaintiff violated various provisions of the FDCPA, including but not limited to 15 U.S.C. § 1692f. 47. Pursuant to 15 U.S.C. §1692f, a debt collector may not use any unfair or unconscionable means in connection with the collection of any debt. 48. Defendant violated this section by a. unfairly advising Plaintiff that she owed Defendant more money than the amount of her debt; and b. attempting to collect an amount not expressly authorized by the underlying agreement creating the debt or permitted by law in violation of § 1692f(1). 49. By reason thereof, Defendant is liable to Plaintiff for judgment that Defendant's conduct violated Section 1692f(1) of the FDCPA, in the form of actual damages, statutory damages, costs and attorneys’ fees. DEMAND FOR TRIAL BY JURY 50. Pursuant to Rule 38 of the Federal Rules of Civil Procedure, Plaintiff hereby requests a trial by jury on all issues so triable. PRAYER FOR RELIEF WHEREFORE, Plaintiff Chaya R. Denciger, individually and on behalf of all others similarly situated, demands judgment from Defendant FirstCredit Incorporated as follows: 1. Declaring that this action is properly maintainable as a Class Action and certifying Plaintiff as Class representative, and David P. Force, Esq. as Class Counsel; 2. Awarding Plaintiff and the Class statutory damages; 3. Awarding Plaintiff and the Class actual damages; 4. Awarding Plaintiff costs of this Action, including reasonable attorneys’ fees and expenses; 5. Awarding pre-judgment interest and post-judgment interest; and 6. Awarding Plaintiff and the Class such other and further relief as this Court may deem just and proper. Dated: Hackensack, New Jersey Respectfully Submitted, August 8, 2019 /s/ David Force Stein Saks, PLLC By: David Force 285 Passaic Street Hackensack, NJ 07601 Phone: (201) 282-6500 ext. 107 Fax: (201)-282-6501 [email protected]

consumer fraud

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS GEORGE JONES, on behalf ) of himself and all others similarly situated ) ) Plaintiff ) ) Case No.: v. ) ) AD ASTRA RECOVERY SERVICES, ) INC. ) ) Defendant. ) INTRODUCTION 1. GEORGE JONES (“Plaintiff”) brings this Class Action Complaint for damages, injunctive relief, and any other available legal or equitable remedies, resulting from the illegal actions of AD ASTRA RECOVERY SERVICES, INC. (“Defendant” or “Ad Astra”), in negligently and/or willfully contacting Plaintiff on Plaintiff’s cellular telephone, in violation of the Telephone Consumer Protection Act, 47 U.S.C. § 227 et seq., (“TCPA”), thereby invading Plaintiff’s privacy. Plaintiff alleges as follows upon personal knowledge as to themselves and their own acts and experiences, and, as to all other matters, upon information and belief, including investigation conducted by his attorneys. 2. The TCPA was designed to prevent calls and text messages like the ones described herein, and to protect the privacy of citizens like Plaintiff. “Voluminous consumer complaints about abuses of telephone technology – for example, computerized calls dispatched to private homes – prompted Congress to pass the TCPA.” Mims v. Arrow Fin. Servs., LLC, 132 S. Ct. 740, 744 (2012). 3. In enacting the TCPA, Congress intended to give consumers a choice as to how corporate similar entities may contact them, and made specific findings that “[t]echnologies that 1 unlikely to be enforced, or place an inordinate burden on the consumer. TCPA, Pub.L. No. 102–243, § 11. In support of this, Congress found that [b]anning such automated or prerecorded telephone calls to the home, except when the receiving party consents to receiving the call or when such calls are necessary in an emergency situation affecting the health and safety of the consumer, is the only effective means of protecting telephone consumers from this nuisance and privacy invasion. Id. at § 12; see also Martin v. Leading Edge Recovery Solutions, LLC, 2012 WL 3292838, at* 4 (N.D.Ill. Aug. 10, 2012) (citing Congressional findings on TCPA’s purpose). 4. Congress also specifically found that “the evidence presented to the Congress indicates that automated or prerecorded calls are a nuisance and an invasion of privacy, regardless of the type of call….” Id. at §§ 12-13. See also, Mims, 132 S. Ct. at 744. 5. As Judge Easterbrook of the Seventh Circuit recently explained in a TCPA case regarding calls similar to this one: The Telephone Consumer Protection Act … is well known for its provisions limiting junk-fax transmissions. A less-litigated part of the Act curtails the use of automated dialers and prerecorded messages to cell phones, whose subscribers often are billed by the minute as soon as the call is answered—and routing a call to voicemail counts as answering the call. An automated call to a landline phone can be an annoyance; an automated call to a cell phone adds expense to annoyance. Soppet v. Enhanced Recovery Co., LLC, 679 F.3d 637, 638 (7th Cir. 2012). JURISDICTION AND VENUE 6. This Court has federal question jurisdiction because this case arises out of violations of federal law. 47 U.S.C. §227(b); Mims v. Arrow Fin. Servs., LLC, 132 S. Ct. 740 (2012). 7. Venue is proper in the United States District Court for the District of Kansas pursuant to 18 U.S.C. § 1391(b) and 1441(a) because Defendant is subject to personal jurisdiction in the County of Sedgwick, State of Kansas, as not only does Defendant regularly 2 Sedgwick within the State of Kansas. PARTIES 8. Plaintiff is, and at all times mentioned herein was, a citizen and resident of the State of Kansas. Plaintiff is, and at all times mentioned herein was a “person” as defined by 47 U.S.C. § 153 (39). 9. Plaintiff is informed and believes, and thereon alleges, that Defendant is, and at all times mentioned herein was, a corporation whose corporate headquarters is in Wichita, Kansas. Defendant, is and at all times mentioned herein was, a corporation and is a “person,” as defined by 47 U.S.C. § 153 (39). Plaintiff alleges that at all times relevant herein Defendant conducted business in the State of Kansas and in the County of Sedgwick, and within this judicial district. FACTUAL ALLEGATIONS 10. At all times relevant, Plaintiff was a citizen of the State of Kansas. Plaintiff is, and at all times mentioned herein was, a “person” as defined by 47 U.S.C. § 153 (39). 11. Defendant is, and at all times mentioned herein was, a Corporation and a “person,” as defined by 47 U.S.C. § 153 (39). 12. At all times relevant Defendant conducted business in the State of Kansas and in the County of Sedgwick, within this judicial district. 13. Beginning on or around July 17, 2014, Defendant began to utilize Plaintiff’s cellular telephone number, ending in 6177, to place automated calls to Plaintiff pertaining to an alleged debt owed by another person named “Shay” or “Shea”. 14. Plaintiff did not provide Defendant with his cellular telephone at any time. 15. During this time, an agent of Defendant placed numerous calls to Plaintiff even though Plaintiff told Defendant that he was not that person (“Shay”/ “Shea”) and requested that 3 16. Plaintiff also works as a truck driver, whereby he is prohibited from talking on the phone during work, and likewise related this to the agent of Defendant. The calls did not stop. 17. Plaintiff noticed that, before Defendant’s representative answered, there were several seconds of pauses before being connected to the agent(s) of Ad Astra. 18. The calls Defendant placed to Plaintiff’s cellular telephones were placed via an “automatic telephone dialing system,” (“ATDS”) as defined by 47 U.S.C. § 227 (a)(1) as prohibited by 47 U.S.C. § 227 (b)(1)(A). 19. This ATDS has the capacity to store or produce telephone numbers to be dialed, using a random or sequential number generator. 20. The telephone numbers that Defendant, or its agents, called was assigned to cellular telephone services for which Plaintiff incurs a charge for incoming calls pursuant to 47 U.S.C. § 227 (b)(1). 21. These telephone calls constituted calls that were not for emergency purposes as defined by 47 U.S.C. § 227 (b)(1)(A)(i). 22. Plaintiff has never provided any personal information, including his cellular telephone number, to Defendant for any purpose. As such, neither Defendant nor its agents were provided with prior express consent to place calls via its ATDS to Plaintiff’s cellular telephone, pursuant to 47 U.S.C. § 227 (b)(1)(A). 23. These telephone calls by Defendant, or its agents, violated 47 U.S.C. § 227(b)(1). CLASS ACTION ALLEGATIONS 24. Plaintiff brings this action on behalf of himself and on behalf of and all others similarly situated (“the Class”). 25. Plaintiff represents, and is a member of, the Class, consisting of: All persons within the United States who received any telephone call/s from Defendant or 4 its agent/s and/or employee/s to said person’s cellular telephone made through the use of any automatic telephone dialing system within the four years prior to the filling of the Complaint. 26. Defendant and its employees or agents are excluded from the Class. Plaintiff does not know the number of members in the Class, but believes the Class members number in the thousands, if not more. Thus, this matter should be certified as a Class action to assist in the expeditious litigation of this matter. 27. Plaintiff and members of the Class were harmed by the acts of Defendant in at least the following ways: Defendant, either directly or through its agents, illegally contacted Plaintiff and the Class members via their cellular telephones, thereby causing Plaintiff and the Class members to incur certain cellular telephone charges or reduce cellular telephone time for which Plaintiff and the Class members previously paid, and invading the privacy of said Plaintiff and the Class members. Plaintiff and the Class members were damaged thereby. 28. This suit seeks only damages and injunctive relief for recovery of economic injury on behalf of the Class, and it expressly is not intended to request any recovery for personal injury and claims related thereto. Plaintiff reserves the right to expand the Class definition to seek recovery on behalf of additional persons as warranted as facts are learned in further investigation and discovery. 29. The joinder of the Class members is impractical and the disposition of their claims in the Class action will provide substantial benefits both to the parties and to the court. The Class can be identified through Defendant’s records or Defendant’s agents’ records. 30. There is a well-defined community of interest in the questions of law and fact involved affecting the parties to be represented. The questions of law and fact to the Class predominate over questions which may affect individual Class members, including the following: a. Whether, within the four years prior to the filing of this Complaint, Defendant or 5 with the prior express consent of the called party) to a Class member using any automatic dialing system to any telephone number assigned to a cellular phone service; b. Whether Plaintiff and the Class members were damaged thereby, and the extent of damages for such violation; and c. Whether Defendant and its agents should be enjoined from engaging in such conduct in the future. 31. As a person that received numerous calls from Defendant via an automated telephone dialing system, Plaintiff is asserting claims that are typical of the Class. Plaintiff will fairly and adequately represent and protect the interests of the Class in that Plaintiff has no interests antagonistic to any member of the Class. 32. Plaintiff and the members of the Class have all suffered irreparable harm as a result of the Defendant’s unlawful and wrongful conduct. Absent a class action, the Class will continue to face the potential for irreparable harm. In addition, these violations of law will be allowed to proceed without remedy and Defendant will likely continue such illegal conduct. Because of the size of the individual Class member’s claims, few, if any, Class members could afford to seek legal redress for the wrongs complained of herein. 33. Plaintiff has retained counsel experienced in handling class action claims and claims involving violations of the Telephone Consumer Protection Act. 34. A class action is a superior method for the fair and efficient adjudication of this controversy. Class-wide damages are essential to induce Defendant to comply with federal and Kansas law. The interest of Class members in individually controlling the prosecution of separate claims against Defendant is small because the maximum statutory damages in an individual action for violation of privacy are minimal. Management of these claims is likely to present significantly fewer difficulties than those presented in many class claims. 6 appropriate final injunctive relief and corresponding declaratory relief with respect to the Class as a whole. FIRST CAUSE OF ACTION NEGLIGENT VIOLATIONS OF THE TELEPHONE CONSUMER PROTECTION ACT 47 U.S.C. § 227 ET SEQ. 36. Plaintiff incorporates by reference all of the above paragraphs of this Complaint as though fully stated herein. 37. The foregoing acts and omissions of Defendant constitute numerous and multiple negligent violations of the TCPA, including, but not limited to, each and every one of the above- cited provisions of 47 U.S.C. § 227 et seq. 38. As a result of Defendant’s negligent violations of 47 U.S.C. § 227 et seq, Plaintiff and The Class are entitled to an award of $500.00 in statutory damages, for each and every violation, pursuant to 47 U.S.C. § 227(b)(3)(B). 39. Plaintiff and the Class are also entitled to and seek injunctive relief prohibiting such conduct in the future. SECOND CAUSE OF ACTION KNOWING AND/OR WILLFUL VIOLATIONS OF THE TELEPHONE CONSUMER PROTECTION ACT 47 U.S.C. § 227 ET SEQ. 40. Plaintiff incorporates by reference all of the above paragraphs of this Complaint as though fully stated herein. 41. The foregoing acts and omissions of Defendant constitute numerous and multiple knowing and/or willful violations of the TCPA, including, but not limited, to each and every one of the above-cited provisions of 47 U.S.C. § 227 et seq. 42. As a result of Defendant’s knowing and/or willful violations of 47 U.S.C. § 227 et seq, Plaintiffs and The Class are entitled to an award of $1,500.00 in statutory damages, for each 7 43. Plaintiff and the Class are also entitled to and seek injunctive relief prohibiting such conduct in the future. PRAYER FOR RELIEF Wherefore, Plaintiff respectfully requests the Court grant Plaintiff and The Class members the following relief against Defendant: FIRST CAUSE OF ACTION FOR NEGLIGENT VIOLATIONS OF THE TCPA, 47 U.S.C. § 227 ET SEQ. 44. As a result of Defendant’s negligent violations of 47 U.S.C. § 227(b)(1), Plaintiff seeks for himself and each Class member $500.00 in statutory damages, for each and every violation, pursuant to 47 U.S.C. § 227(b)(3)(B). 45. Pursuant to 47 U.S.C. § 227(b)(3)(A), injunctive relief prohibiting such conduct in the future. 46. Any other relief the Court may deem just and proper. SECOND CAUSE OF ACTION FOR KNOWING AND/OR WILLFUL VIOLATIONS OF THE TCPA, 47 U.S.C. § 227 ET SEQ. 47. As a result of Defendant’s knowing and/or willful violations of 47 U.S.C. § 227(b)(1), Plaintiff seeks for himself and each Class member $1,500.00 in statutory damages, for each and every violation, pursuant to 47 U.S.C. § 227(b)(3)(C). 48. Pursuant to 47 U.S.C. § 227(b)(3)(A), injunctive relief prohibiting such conduct in the future. 49. Any other relief the Court may deem just and proper. DESIGNATION OF PLACE OF TRIAL 50. Plaintiff designates Wichita, Kansas as the place of trial. 8 DEMAND FOR JURY TRIAL COMES NOW the Plaintiff and demands a jury trial on all issues so triable pursuant to Federal Rule of Civil Procedure 38(b). Respectfully submitted, /s/ Bryce B. Bell Bryce B. Bell KS # 20866 Bell Law, LLC 2029 Wyandotte, Ste. 100 Kansas City, Missouri 64108 Telephone: 816-221-2555 Facsimile: 816-221-2508 [email protected] Nicholas J. Bontrager (To be admitted Pro Hac Vice) Martin & Bontrager, APC 324 S. Beverly Dr. #725 Beverly Hills, CA 90212 Phone: (877) 206-4741 Fax: (866)633-0228 [email protected] Derek H. DePetrillo (To be admitted Pro Hac Vice) Consumer Rights Law Firm, PLLC 133 Main Street, 2nd Floor North Andover, MA 01845 Main: (978) 212-3300 Fax: (978) 409-1846 Email:attorneyderekd@consumerlawfirmce nter.com ATTORNEYS FOR PLAINTIFF 9

privacy

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IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA PITTSBURGH DIVISION ________________________________________ MARK FITZHENRY, individually and on behalf of a class of all persons and entities similarly situated, Plaintiff Case No. CLASS ACTION COMPLAINT GUARDIAN PROTECTION SERVICES, INC., and SECURITY FORCE, INC. Defendants. CLASS ACTION COMPLAINT 1. Plaintiff Mark Fitzhenry (“Plaintiff”), brings this action under the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227, a federal statute enacted in response to widespread public outrage about the proliferation of intrusive, nuisance telemarketing practices. See Mims v. Arrow Fin. Servs., LLC, 132 S. Ct. 740, 745 (2012). 2. “Month after month, unwanted robocalls and texts, both telemarketing and informational, top the list of consumer complaints received by” the Federal Communications Commission.1 3. The TCPA is designed to protect consumer privacy by prohibiting unsolicited, autodialed calls, unless the caller has the “prior express written consent” of the called party. 1 Omnibus TCPA Order, GC Docket 02-278, FCC 15-72, 2015 WL 4387780, ¶1 (July 10, 2015). 4. Plaintiff alleges that Defendant Security Force, Inc. (“Security Force”) commissioned an automated telephone call using equipment prohibited by the TCPA to send a robocall that promoted its services without the Plaintiff’s prior express written consent. 5. Security Force commissioned the pre-recorded call in its role as an authorized dealer for Guardian Protection Services, Inc. (“Guardian”). 6. Because the call to the Plaintiff was transmitted using technology capable of generating thousands of similar calls per day, Plaintiff brings this action on behalf of a proposed nationwide class of other persons who were sent the same illegal telemarketing call. 7. A class action is the best means of obtaining redress for the Defendant’s illegal telemarketing, and is consistent both with the private right of action afforded by the TCPA and the fairness and efficiency goals of Rule 23 of the Federal Rules of Civil Procedure. PARTIES 8. Plaintiff Mark Fitzhenry is a resident of the state of South Carolina. 9. Defendant Guardian Protection Services, Inc. is a Pennsylvania corporation that has its principal place of business in this District. 10. Defendant Security Force, Inc. is a North Carolina corporation. JURISDICTION & VENUE 11. This Court has subject matter jurisdiction pursuant to the Class Action Fairness Act of 2005 (“hereinafter referred to as CAFA”) codified as 28 U.S.C. 1332(d)(2). The matter in controversy exceeds $5,000,000.00, in the aggregate, exclusive of interest and costs, as each member of the proposed Class of at least tens of thousands is entitled to up to $1,500.00 in statutory damages for each call that has violated the TCPA. Further, Plaintiff alleges a national class, which will likely result in at least one Class member from a different state. 12. The Court has subject-matter jurisdiction under 28 U.S.C. § 1331 because the Plaintiff’s claims arise under federal law. Mims v. Arrow Financial Services, LLC, 132 S. Ct. 740 (2012). 13. Venue is proper under 28 U.S.C. § 1391(b)(2) because a substantial part of the events or omissions giving rise to the claim occurred in this District, as the contract between Guardian and Security Force was entered into in this District. Furthermore, Defendants are deemed to reside in any judicial district in which they are subject to personal jurisdiction at the time the action is commenced, and because Defendants’ contacts with this District are sufficient to subject them to personal jurisdiction. See 28 U.S.C. § 1391. TCPA BACKGROUND 14. In 1991, Congress enacted the TCPA to regulate the explosive growth of the telemarketing industry. In so doing, Congress recognized that “[u]nrestricted telemarketing . . . can be an intrusive invasion of privacy.” Telephone Consumer Protection Act of 1991, Pub. L. No. 102-243, § 2(5) (1991) (codified at 47 U.S.C. § 227). 15. Unlike many federal statutes, Congress embedded the reasons for the TCPA into the statute itself with explicit Congressional Findings. 105 Stat. 2394, §§ 10, 12, 14 (notes following 47 U.S.C. § 227). 16. Mims explicitly cited these Congressional Findings in noting that “‘automated or prerecorded telephone calls’ . . . were rightly regarded by recipients as ‘an invasion of privacy.’” Id. (citing 105 Stat. 2394). Accordingly, Congress found that: Banning such automated or prerecorded telephone calls to the home, except when the receiving party consents to receiving the call or when such calls are necessary in an emergency situation affecting the health and safety of the consumer, is the only effective means of protecting telephone consumers from this nuisance and privacy invasion. Id. at § 14 (emphasis added). 17. According to findings by the FCC, the agency Congress vested with authority to issue regulations implementing the TCPA, such calls are prohibited because, as Congress found, automated or prerecorded telephone calls are a greater nuisance and invasion of privacy than live solicitation calls, and such calls can be costly and inconvenient. 18. The FCC also recognized that wireless customers are charged for incoming calls whether they pay in advance or after the minutes are used.2 19. Indeed, as the United States Supreme Court recently held in a different context, “Modern cell phones are not just another technological convenience. With all they contain and all they may reveal, they hold for many 2 In re Rules and Regulations Implementing the TCPA, CG Docket No. 02-278, Report and Order, 18 FCC Rcd 14014, 14115 (¶ 165) (2003). Americans ‘the privacies of life.’” Riley v. California, __ U.S. __, 134 S.Ct. 2473, 2494-95, 189 L.Ed.2d 430 (2014). 20. As such, the TCPA’s most stringent restrictions pertain to computer-generated telemarketing calls placed to cell phones. 21. The TCPA categorically bans entities from initiating telephone calls using an automated telephone dialing system (or “autodialer”) to any telephone number assigned to a cellular telephone service. See 47 C.F.R. § 64.1200(a)(1)(iii); see also 47 U.S.C. § 227(b)(1). 22. On January 4, 2008, the FCC released a Declaratory Ruling wherein it confirmed that autodialed and prerecorded message calls to a wireless number are permitted only if the calls are made with the “prior express consent” of the called party.3 FACTUAL ALLEGATIONS 23. Plaintiff is, and at all times mentioned herein was, a “person” as defined by 47 U.S.C. § 153(39). 24. The Plaintiff acquired the cellular telephone number, (843) 637- XXXX that got the pre-recorded message calls in October 2015. 25. The Plaintiff has used the cellular telephone number for both personal reasons, as well as to attempt to collect rent in arrears from tenants in the properties he owns. 26. As discussed in more detail below, the Defendants use telemarketing to promote the goods and services of Guardian. 3 In re Rules and Regulations Implementing the TCPA, CG Docket No. 02-278, Declaratory Ruling, 23 FCC Rcd 559, 564-65 (¶ 10) (2008) (“2008 FCC Declaratory Ruling”). 27. The Defendants telemarketing efforts include the use of automated dialing equipment to send text messages. 28. On August 12, 2016, the Plaintiff received a call on his cellular telephone. 29. The Caller ID for the number that called the Plaintiff was (720) 634-7479. 30. When the Plaintiff answered the call there was a distinctive click and pause, then a pre-recorded message that advertised a home security system. 31. These facts, as well as the geographic distance between the Plaintiff and the Defendant, as well as the fact that this call was part of a nationwide telemarketing campaign demonstrate that the call was made using an automatic telephone dialing system (“ATDS” or “autodialer”) as that term is defined in 47 U.S.C. § 227(a)(1). 32. When Mr. Fitzhenry was able to connect with a live individual, they attempted to sell him a home alarm system that would have been monitored by Guardian. 33. Mr. Fitzhenry was harmed by the pre-recorded calls because they were unwelcome intrusions on his privacy and because they occupied his telephone line from legitimate communications. 34. Defendants did not have the Plaintiff’s prior express written consent to make this call, and the Plaintiff has never done any business with the Defendants. GUARDIAN’S AUTHORIZED DEALER PROGRAM AND LIABILITY FOR THE AUTOMATED ROBOCALLS 35. Under the TCPA, a seller of a product or service may be vicariously liable for a third-party marketer’s violations of Section 227(b), even if the seller did not physically dial the illegal call, and even if the seller did not directly control the marketer who did. In re Joint Pet. filed by Dish Network, LLC, FCC 13-54 ¶ 37, 2013 WL 193449 (May 9, 2013) (“FCC Ruling”). 36. A seller is liable under Section 227(b) when it has authorized a telemarketer to market its goods or services. Id. ¶ 47. 37. Additionally, a seller may be vicariously liable for a Section 227(b) violation under principles of apparent authority and ratification. Factors relevant to a finding of vicarious liability include: a. Whether “the seller allows the outside sales entity access to information and systems that normally would be within the seller’s exclusive control, including . . . access to detailed information regarding the nature and pricing of the seller’s products and services or to the seller’s customer information; b. Whether the outside sales entity can “enter consumer information into the seller’s sales or customer systems; c. Whether the outside sales entity has “the authority to use the seller’s trade name, trademark and service mark; d. Whether “the seller approved, wrote or reviewed the outside entity’s telemarketing scripts”; and e. “Whether the seller knew (or reasonably should have known) that the telemarketer was violating the TCPA on the seller’s behalf and the seller failed to take effective steps within its power to force the telemarketer to cease that conduct.” Id. ¶ 46. 38. The May 2013 FCC Ruling further held that, even in the absence of evidence of a formal contractual relationship between the seller and the telemarketer, a seller is liable for telemarketing calls if the telemarketer “has apparent (if not actual) authority” to make the calls. 28 F.C.C.R. at 6586 (¶ 39. The May 2013 FCC Ruling further clarifies the circumstances under which a telemarketer has apparent authority: [A]pparent authority may be supported by evidence that the seller allows the outside sales entity access to information and systems that normally would be within the seller’s exclusive control, including: access to detailed information regarding the nature and pricing of the seller’s products and services or to the seller’s customer information. The ability by the outside sales entity to enter consumer information into the seller’s sales or customer systems, as well as the authority to use the seller’s trade name, trademark and service mark may also be relevant. It may also be persuasive that the seller approved, wrote or reviewed the outside entity’s telemarketing scripts. Id. at ¶ 46. 40. Finally, the May 2013 FCC Ruling states that called parties may obtain “evidence of these kinds of relationships . . . through discovery, if they are not independently privy to such information. “ Id. at 6592-93 (¶ 46). Moreover, evidence of circumstances pointing to apparent authority on behalf of the telemarketer “should be sufficient to place upon the seller the burden of demonstrating that a reasonable consumer would not sensibly assume that the telemarketer was acting as the seller's authorized agent.” Id. at 6593 (¶ 46). 41. The FCC had previously explained that its “rules generally establish that the party on whose behalf a solicitation is made bears ultimate responsibility for any violations.” See In re Rules & Regulations Implementing the TCPA, CC Docket No. 92-90, Memorandum Opinion and Order, 10 FCC Rcd 12391, 12397 (¶ 13) (1995). 42. Security Force commissioned the autodialed and prerecorded message calls described herein “on behalf of” Guardian within the meaning of the FCC’s Declaratory Rulings. 43. Guardian was legally responsible for ensuring that Security Force complied with the TCPA, even if Guardian did not themselves make the calls. 44. Guardian self-proclaims to be the nation’s largest privately-held security company, and that it provides security and monitoring services to more than a quarter-million residential and commercial customers. 45. Guardian markets and distributes products via a distribution network of authorized dealers. 46. Guardian compensates each authorized dealer through a structure of commission payments based upon the amount of product and services sold. 47. Guardian allows its authorized dealers to market Guardian’s products and services, to display the Guardian logo and to market using the Guardian trade name. 48. In fact, as Guardian advertises on its website, authorized dealers are a “partner” of Guardian. See http://www.guardianprotection.com/become- a-dealer/dealer-program-details.aspx (Last Visited August 18, 2016). 49. Guardian also offers to “finance your business” for its authorized dealers. Id. 50. Guardian authorized dealers promotes these systems through a variety of marketing methods, including telemarketing. 51. Guardian provides its authorized dealers with sales techniques and training, which were implemented in the telemarketing calls that are the subject of this complaint. 52. Guardian sells its security alarm systems through these authorized dealers and allows its dealers to hold themselves out to public as authorized Guardian dealers. 53. Guardian gives their authorized dealers substantial power to affect their legal relations with third parties, including with consumers generally. 54. One of Guardian’s authorized dealers is Security Force, Inc., the same entity that commissioned the pre-recorded telemarketing call to the Plaintiff. 55. By hiring Security Force as an authorized dealers to generate customers through telemarketing Guardian “manifest[ed] assent to another person . . . that the agent shall act on the principal’s behalf and subject to the principal’s control” as described in the Restatement (Third) of Agency. Similarly, by accepting these contacts, Security Force “manifest[ed] assent or otherwise consent[ed] . . . to act” on behalf of Guardian, as described in the Restatement (Third) of Agency. As such, Security Force is an agent of Guardian. 56. Guardian cloaked their authorized dealers in apparent authority specifically as to legal relations between their authorized dealers and the public, and to hire third parties such as Security Force to perform telemarketing, sufficient to support vicarious liability pursuant to the TCPA. 57. Guardian knew (or reasonably should have known) that Security Force was violating the TCPA on its behalf, and failed to take effective steps within their power to force them to cease that conduct. 58. Guardian is also liable for the autodialed and prerecorded message calls because it installed security services and knowingly and actively accepted business that originated through the illegal telemarketing calls. 59. Security Force transferred customer information directly to Guardian. Thus, Security Force has the “ability . . . to enter consumer information into the seller’s sales or customer systems,” as discussed in the May 2013 FCC Ruling. As such, Security Force is an apparent agent of Guardian. 60. Security Force was also granted access to the “Dealer Automated Real Time” (DART) program, a password-protected program through which they received updates on accounts and distributed customer information to Guardian. Class Action Statement Pursuant to LCvR 23 61. As authorized by Rule 23 of the Federal Rules of Civil Procedure and LCvR 23 of the Local Rules for the Western District of Pennsylvania, Plaintiff brings this action on behalf of all other persons or entities similarly situated throughout the United States. 62. The class of persons Plaintiff proposes to represent include: All persons within the United States whom Defendants, directly or through any third parties, initiated a telephone call with the same or similar dialing system as was used to call plaintiff to a number registered as a cellular telephone line within four years before this Complaint was filed through the date of class certification. 63. Excluded from the classes are the Defendants, any entities in which the Defendants have a controlling interest, the Defendants’ agents and employees, any Judge to whom this action is assigned, and any member of the Judge’s staff and immediate family. 64. The proposed class members are identifiable through phone records and phone number databases. 65. The potential class members number in the thousands, at least. Individual joinder of these persons is impracticable. 66. Plaintiff is a member of the class. 67. There are questions of law and fact common to Plaintiff and to the proposed class, including but not limited to the following: a. Whether the Defendants’ used an automatic telephone dialing system to make the calls at issue; b. Whether the Defendants’ placed telemarketing calls without obtaining the recipients’ valid prior express written consent; c. Whether the Defendants’ violations of the TCPA were negligent, willful, or knowing; and d. Whether the Plaintiff and the class members are entitled to statutory damages as a result of the Defendants’ actions. 68. Plaintiff’s claims are based on the same facts and legal theories as the claims of all class members, and therefore are typical of the claims of class members, as the Plaintiff and class members all received telephone calls through the same or similar dialing system on a cellular telephone line. 69. Plaintiff is an adequate representative of the class because his interests do not conflict with the interests of the class, he will fairly and adequately protect the interests of the class, and he is represented by counsel skilled and experienced in class actions, including TCPA class actions. In fact, the Plaintiff has foregone a simpler path to recovery by filing this matter as a putative class action, as opposed to an individual claim. 70. The actions of the Defendant are generally applicable to the class as a whole and to Plaintiff. 71. Common questions of law and fact predominate over questions affecting only individual class members, and a class action is the superior method for fair and efficient adjudication of the controversy. The only individual question concerns identification of class members, which will be ascertainable from records maintained by Defendant and/or its agents. 72. The likelihood that individual class members will prosecute separate actions is remote due to the time and expense necessary to prosecute an individual case, and given the small recoveries available through individual actions. 73. Plaintiff is not aware of any litigation concerning this controversy already commenced by others who meet the criteria for class membership described above. CAUSES OF ACTION FIRST COUNT STATUTORY VIOLATIONS OF THE TELEPHONE CONSUMER PROTECTION ACT 47 U.S.C. § 227 ET SEQ. 74. Plaintiff incorporates by reference the foregoing paragraphs of this Complaint as if fully set forth herein. 75. The foregoing acts and omissions of the Defendants constitute numerous and multiple violations of the TCPA, including but not limited to each of the above cited provisions of 47 U.S.C. § 227 et seq. 76. As a result of the Defendants’ violations of 47 U.S.C. § 227 et seq., Plaintiff and Class members are entitled to an award of $500 in statutory damages for each and every call in violation of the statute, pursuant to 47 U.S.C. § 227(b)(3)(B). 77. Plaintiff and Class members are also entitled to and do seek injunctive relief prohibiting the Defendants’ violation of the TCPA in the future. SECOND COUNT KNOWING AND/OR WILLFUL VIOLATIONS OF THE TELEPHONE CONSUMER PROTECTION ACT, 47 U.S.C. § 227 ET SEQ. 78. Plaintiff incorporates by reference all other paragraphs of this Complaint as if fully stated herein. 79. The foregoing acts and omissions of the Defendants constitute numerous and multiple knowing and/or willful violations of the TCPA, including but not limited to each of the above-cited provisions of 47 U.S.C. § 227 et seq. 80. As a result of the Defendants’ knowing and/or willful violations of 47 U.S.C. § 227 et seq., Plaintiff and each member of the Class is entitled to treble damages of up to $1,500 for each and every call in violation of the statute, pursuant to 47 U.S.C. § 227(b)(3). 81. Plaintiff and all Class members are also entitled to and do seek injunctive relief prohibiting such conduct violating the TCPA by the Defendants in the future. PRAYER FOR RELIEF WHEREFORE, Plaintiff respectfully requests that the Court grant Plaintiff and all Class members the following relief against the Defendants: A. Injunctive relief prohibiting such violations of the TCPA by the Defendants in the future; B. As a result of the Defendants’ willful and/or knowing violations of 47 U.S.C. § 227(b)(1), Plaintiff seeks for himself and each Class member treble damages, as provided by statute, of up to $1,500 for each and every call that violated the TCPA; C. As a result of Defendants’ statutory violations of 47 U.S.C. § 227(b)(1), Plaintiff seek for himself and each Class member $500 in statutory damages for each and every call that violated the TCPA; D. An award of attorneys’ fees and costs to counsel for Plaintiff and the Class; E. An order certifying this action to be a proper class action pursuant to Federal Rule of Civil Procedure 23, establishing an appropriate Classes the Court deems appropriate, finding that Plaintiff is a proper representative of the Class, and appointing the lawyers and law firms representing Plaintiff as counsel for the Class; F. Such other relief as the Court deems just and proper. Dated: August 18, 2016 By: /s/ Clayton S. Morrow Clayton S. Morrow Email: [email protected] Morrow & Artim, PC 304 Ross Street, 7th Floor Pittsburgh, PA 15219 Telephone: (412) 209-0656 Edward A. Broderick Email: [email protected] Anthony Paronich Email: [email protected] BRODERICK LAW, P.C. 99 High St., Suite 304 Boston, Massachusetts 02110 Telephone: (617) 738-7080 Subject to Pro Hac Vice Matthew P. McCue Email: [email protected] THE LAW OFFICE OF MATTHEW P. MCCUE 1 South Avenue, Suite 3 Natick, Massachusetts 01760 Telephone: (508) 655-1415 Subject to Pro Hac Vice

privacy

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Case No. _______________ CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT, THE OHIO CORRUPT ACTIVITY ACT, AND CIVIL CONSPIRACY JURY TRIAL DEMANDED IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO EASTERN DIVISION BRIAN HUDOCK and CAMEO COUNTERTOPS, INC., individually and on behalf of other persons similarly situated Plaintiff, v. FIRSTENERGY CORP., FIRSTENERGY SERVICE COMPANY, CHARLES E. JONES, JAMES F. PEARSON, STEVEN E. STRAH, K. JON TAYLOR, AND DOES 1-10, Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) INTRODUCTION AND SUMMARY OF ALLEGATIONS Plaintiffs, Brian Hudock and Cameo Countertops, Inc., individually and on behalf of a proposed Class of all other persons similarly situated, hereby file their Class Action Complaint (hereinafter the “Complaint”) against Defendants, FirstEnergy Corp. (“FirstEnergy”), a public utility holding company; FirstEnergy Service Company (“FirstEnergy Service”), a subsidiary of FirstEnergy which provides legal, financial, and other corporate support services to FirstEnergy; and Charles E. Jones, James F. Pearson, Steven E. Strah, and K. Jon Taylor (collectively the “Individual Defendants”), who are the hands-on managers of and oversee FirstEnergy’s operations, business practices, and finances. As alleged in this Complaint, during the Class Period, FirstEnergy, FirstEnergy Services, and the Individual Defendants knowingly and intentionally acted in concert and conspired with Larry Householder, Jeffrey Longstreth, Neil Clark, Matthew Borges, Juan Cespedes, and Generation Now (collectively the members of the “Householder Enterprise”), and other persons and entities known and unknown, being persons employed by and associated with an “enterprise,” which engaged in, and the activities of which affected interstate commerce, and did knowingly and intentionally act in concert and conspire with each other and others known and unknown to violate the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962(c) and (d), and the equivalent provisions of the Ohio Corrupt Activity Act, Ohio Rev. Code § 2923.31 et seq., that is, to conduct and participate directly and indirectly, in the conduct of the affairs of the enterprise through a “pattern of racketeering activity,” as that term is defined in 18 U.S.C. §§ 1961(1) and (5), and a “pattern of corrupt activity,” as that term is defined in Ohio Rev. Code §§ 2923.31(E) and (I), consisting of multiple wrongful acts under 18 U.S.C. §§ 1343 and 1346 (relating to honest services wire fraud); 18 U.S.C. § 1951 (relating to interference with commerce, robbery, or extortion); 18 U.S.C. § 1952 (relating to racketeering, including multiple acts of bribery under Ohio Rev. Code § 3517.22(a)(2)); 18 U.S.C. § 1956 (relating to the laundering of monetary instruments); 18 U.S.C. § 1957 (relating to engaging in monetary transactions in property derived from specified unlawful activity); and multiple acts involving bribery, that are chargeable under Ohio Rev. Code § 2921.02. It was part of the conspiracy that Defendants, FirstEnergy and FirstEnergy Service, and the Individual Defendants agreed that a conspirator would commit at least two acts of racketeering activity in the conduct of the affairs of the enterprise, all in violation of 18 U.S.C. § 1962(c) and (d) and Ohio Rev. Code § 2923.32(A)(1). In support of their claims for relief, as alleged in this Complaint, Plaintiffs further state as follows: THE PARTIES 1. Plaintiff Brian Hudock (“Hudock”), is a legal resident of the State of Ohio and resides in Lucas County, who has been injured by the Defendants by his payment of monthly surcharges, as set forth in Ohio House of Representatives Bill 6 (“HB 6”), which provided massive customer/ratepayer subsidies for FirstEnergy’s Davis-Besse and Perry Nuclear Power Plants. Hudock owns the home with his wife in whose name service is placed. Hudock pays the electric bill and, therefore, is the party who has been injured. 2. Plaintiff Cameo Countertops, Inc. (“Cameo”) is a for profit, active corporation incorporated in the State of Ohio and whose principal place of business and headquarters is in Lucas County, Ohio. Cameo has been injured by the Defendants by Cameo’s payment of monthly surcharges, as set forth in HB 6. 3. Defendant FirstEnergy is a public utility holding company which directs and controls various subsidiary entities organized under the laws of the State of Ohio with its principal place of business located in Akron, Ohio. FirstEnergy is involved in the generation, transmission, and distribution of electricity. This Defendant’s agent for service of process is CT Corporation System, 4400 Easton Commons Way, Suite 125, Columbus, Ohio 43219. 4. Defendant FirstEnergy Service, is organized under the laws of the State of Ohio with its principal place of business located in Akron, Ohio. FirstEnergy Service provides legal, financial, and other corporate support services to affiliated companies, including First Energy. It is under the control of FirstEnergy’s management. It does not have its own Chief Executive Officer or Board of Directors. This Defendant’s agent for service of process is CT Corporation System, 4400 Easton Commons Way, Suite 125, Columbus, Ohio 43219. 5. At all relevant times, the Individual Defendants ran FirstEnergy as hands- on managers, overseeing FirstEnergy’s operations, business practices, and finances. During the Class Period, Defendant Charles E. Jones served as Chief Executive Officer (“CEO”) and as a Director of FirstEnergy. Defendant James F. Pearson served as Chief Financial Officer (“CFO”) of First Energy until March 2018, at which time he transitioned to Vice President of Finance until his retirement in April 2019. Defendant Steven E. Strah is President of FirstEnergy. He previously served as CFO from March 2018 until he transitioned to his current position in May 2020. Defendant K. Jon Taylor took over as CFO from Defendant Strah. Prior to assuming this position, he was the company’s Controller and Chief Accounting Officer until March 2018, after which he became President of FirstEnergy’s Ohio Operations and, in 2019, its Vide President of Utilities Operations. At all times relevant to this case, the Individual Defendants had intimate knowledge about the core aspects of FirstEnergy’s financial and business operations, including the company’s nuclear operations and the wrongful activities alleged in the related criminal proceedings that are pending in this District. JURISDICTION AND VENUE 6. This Court has jurisdiction over Plaintiffs’ federal law claims pursuant to 28 U.S.C. § 1331, and 18 U.S.C. §§ 1961-68. Declaratory relief is available pursuant to 28 U.S.C. §§ 2201 and 2202. Venue is proper in this Court because this is a District in which a substantial part of the events giving rise to the claim occurred. 28 U.S.C. § 1391(b)(2). Venue is further proper because this is a District in which the Defendants’ agent, CT Corporation System, 4400 Easton Commons Way, Suite 125, Columbus, Ohio 43219, is found or transacts affairs, as provided in 18 U.S.C. §1965(a). GENERAL STATEMENT OF THE LAW 7. Section 1962(c) and (d) of RICO provide as follows: (c) It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity . . . (d) It shall be unlawful for any person to conspire to violate any of the provisions of subsection . . . . (c) of this section. The equivalent provisions of the Ohio Corrupt Activity Act may be found in Ohio Rev. Code §2923.32(A)(1). Section 1961 of RICO, in turn, defines the terms “enterprise” and “pattern of racketeering activity,” as used in Section 1962, as follows: (4) “enterprise” includes any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity; (5) “pattern of racketeering activity” requires at least two acts of racketeering activity, one of which occurred after the effective date of this chapter and the last of which occurred within ten years (excluding any term of imprisonment) after the commission of a prior act of racketeering activity. The equivalent provisions of the Ohio Corrupt Activity Act may be found in Ohio Rev. Code § 2923.31(C) and (E). Section 1961(1) of RICO defines “racketeering activity”, in relevant part, as follows: (A) [A]ny act or threat involving . . . bribery[,] . . . which is chargeable under State law and punishable by imprisonment for more than one year; (B) any act which is indictable under . . . title 18, United States Code: . . . section 1343 (relating to wire fraud) . . . section 1951 (relating to interference with commerce, robbery, or extortion), section 1952 (relating to racketeering) . . . section 1956 (relating to the laundering of monetary instruments), section 1957 (relating to engaging in monetary transactions in property derived from specified unlawful activity) . . . . The equivalent provisions of the Ohio Corrupt Activity Act may be found in Ohio Rev. Code § 2923.31(I). 8. On or about July 21, 2020, a Complaint was filed by the United States of America against the members of the “Householder Enterprise” – namely, Larry Householder, Jeffrey Longstreth, Neil Clark, Matthew Borges, Juan Cespedes, and Generation Now I in this District, Case No. 1:20-MJ-00526 (the “Criminal Complaint”), alleging that they violated 18 U.S.C. §1962(d) by conspiring to participate, directly or indirectly, in the conduct of an enterprise’s affairs through a pattern of racketeering activity. The Criminal Complaint was supported by an 81-page Affidavit in Support of a Criminal Complaint (the “Affidavit”) executed by an agent of the Federal Bureau of Investigation. Based upon information and belief, Plaintiffs allege that Defendant, FirstEnergy, is “Company A Corp.” identified in the Affidavit and that Defendant FirstEnergy Service is “Company A Service Co.” identified in the Affidavit. On July 30, 2020, the members of the Householder Enterprise who were identified in the Criminal Complaint and the Affidavit were charged in a federal Indictment for violations of RICO. (Note: The members of the Householder Enterprise are not named as Defendants in this Complaint; however, consistent with the provisions of Rule 15 of the Federal Rules of Civil Procedure, Plaintiffs reserve the right, after appropriate and sufficient fact discovery has been conducted, to seek leave of Court to name additional Defendants in this case.) FACTUAL ALLEGATIONS 9. Plaintiffs incorporate by reference the factual allegations set forth in the Affidavit. 10. From March 2017 to March 2020, the Householder Enterprise, as described and defined in the Affidavit and in this Complaint, received approximately $60 million from FirstEnergy and/or FirstEnergy Service paid through Generation Now and controlled by Householder and the members of the Householder Enterprise. In exchange for these illicit and unlawful payments, the Householder Enterprise helped pass HB 6, described by a Householder Enterprise member as a billion-dollar “bailout” that saved from closure two failing nuclear power plants in Ohio affiliated with FirstEnergy. The members of the Householder Enterprise then worked to corruptly ensure that HB 6 went into effect by defeating a ballot initiative. To achieve these ends, and to conceal the scheme, the Householder Enterprise passed money received from FirstEnergy and/or FirstEnergy Service through multiple entities that it controlled. The Householder Enterprise then used these bribe payments to further the goals of the Enterprise, which include (a) obtaining, preserving, and expanding Householder’s political power in the State of Ohio through the receipt and use of secret payments; (b) enriching and benefitting the Householder Enterprise, its members, and associates; and (c) promoting, concealing, and protecting purposes (a) and (b) from public exposure and possible criminal prosecution. BACKGROUND FACTS 11. In 2016, FirstEnergy’s nuclear generation future looked grim. In its November 2016 Annual Report to Shareholders, FirstEnergy and its affiliates reported a weak energy market, poor forecast demands, and hundreds of millions of dollars in losses, particularly from its nuclear energy affiliate. Given this backdrop, FirstEnergy announced future options for its energy generation portfolio as follows: “legislative and regulatory solutions for generation assets”; asset sales and plant deactivations; restructuring debt; and/or seeking protection under U.S. bankruptcy laws for its affiliates involved in nuclear generation. 12. Consistent with this forecast, FirstEnergy actively sought a “legislative solution” for its two affiliated nuclear power plants in Ohio. For example, during FirstEnergy’s fourth-quarter 2016 earnings conference call, its President and CEO stated: In Ohio, we have had meaningful dialogue with our fellow utilities and with legislators on solutions that can help ensure Ohio’s future energy security. Our top priority is the preservation of our two nuclear plants in the state and legislation for a zero emission nuclear program is expected to be introduced soon. The ZEN program is intended to give state lawmakers greater control and flexibility to preserve valuable nuclear generation. We believe this legislation would preserve not only zero emission assets but jobs, economic growth, fuel diversity, price stability, and reliability and grid security for the region. We are advocating for Ohio’s support for its two nuclear plants, even though the likely outcome is that FirstEnergy won’t be the long-term owner of these assets. We are optimistic, given these discussions we have had so far and we will keep you posted as this process unfolds. 13. However, attempts to obtain a legislative solution had failed to pass, including the ZEN (Zero-Emissions Nuclear Resource Program) energy proposals outlined in House Bill 178, Senate Bill 128, and House Bill 381 in 2017. 14. While FirstEnergy was in search of a solution to its nuclear energy problem, Householder was re-entering politics, winning back his State House seat in Perry County, Ohio, with the goal of winning back the Speakership of the House in January 2019. Following his January 2017 trip on FirstEnergy’s private jet, in March 2017, Householder began receiving quarterly $250,000 payments from FirstEnergy and/or FirstEnergy Service into a bank account in the name of a Section 501(c)(4) entity secretly controlled by Householder called Generation Now. During 2017 and 2018, the Householder Enterprise received into Generation Now, and the entities it controlled, over $2.9 million from FirstEnergy and/or FirstEnergy Service. Members of the Householder Enterprise used these payments for their own personal benefit and to gain support for Householder’s political bid to become Speaker of the House. During the Spring and Fall of 2018, the Householder Enterprise spent millions of dollars of FirstEnergy’s money to support House candidates involved in primary and general elections whom the Householder Enterprise believed both would vote for Householder as Speaker and, ultimately, would follow his lead as Speaker and vote for bailout legislation for FirstEnergy. 15. Householder-backed candidates that benefitted from FirstEnergy’s money received by Generation Now (described throughout this Complaint and the Affidavit as “FirstEnergy-to-Generation Now” payments) helped elect Householder as the Speaker of the House in January 2019. Householder fulfilled his end of the corrupt bargain shortly thereafter. Just three months into his term as Speaker, HB 6 was introduced to save from closure FirstEnergy’s two failing nuclear power plants. Specifically, HB 6 subsidized nuclear energy operations in Ohio through a monthly charge on all Ohio residents’ energy bills. Neil Clark described the legislation as a “bailout” for FirstEnergy’s nuclear assets, worth at least $1.3 billion to FirstEnergy. 16. After the introduction of the bailout legislation, FirstEneergy, which was under the management and control of the Individual Defendants, began increasing its payments into Generation Now for the benefit of the Householder Enterprise. On April 30, 2019, roughly two weeks after introduction of the legislation, the Individual Defendants caused FirstEnergy to wire transfer $1.5 million to Generation Now. During the month of May 2019, while the controversial legislation was pending before Ohio lawmakers, the Individual Defendants caused FirstEnergy to wire transfer four additional payments totaling $8 million. The Householder Enterprise used some of that money for mailers and media advertisements to pressure members to support the legislation; the Householder Enterprise members also used FirstEnergy’s money for their personal benefit, as described in this Complaint and in the Affidavit. In the same month that the Householder Enterprise received $8 million from Defendants, Householder and other Householder Enterprise members pressured House members to vote for HB 6, and instructed at least one representative to destroy text messages sent by Householder after Householder’s attempt to gain support for HB 6 from that representative. 17. On May 29, 2019, HB 6 passed the House, and after Householder Enterprise members exerted pressure on the Senate, the legislation was passed and was signed into law by Governor DeWine. That process took just two months; however, the law would not go into effect until October 22, 2019. Shortly after the Governor signed the legislation, a campaign began, to organize a statewide ballot-initiative referendum (the “Ballot Campaign”) to overturn the legislation. This effort required Ballot Campaign organizers to collect the signatures of registered voters in order to put the referendum of HB 6 on the 2020 ballot. 18. In response, the Individual Defendants caused accounts controlled by FirstEnergy to wire transfer over $38 million into Generation Now to defeat the ballot initiative so that HB 6 would go into effect. The members of the Householder Enterprise funneled the money to various accounts and entities that they controlled in order to purchase media advertisements and mailers against the ballot initiative, to conflict out signature-collection firms, and to pay off and bribe signature collectors who were seeking signatures to support the referendum. The members and associates of the Householder Enterprise also used FirstEnergy’s money to enrich themselves and further their own personal interests. 19. The Individual Defendants caused FirstEnergy and/or FirstEnergy Service to transfer to the Householder Enterprise a total of $60,886,835.86 in secret payments over the approximately three-year period in exchange for the billion-dollar-bailout. The Individual Defendants and the members of the Householder Enterprise concealed the payments by using a Section 501(c)(4) “charitable” organization to receive the bribe money, and then transferring the payments internally to a web of related entities and accounts. The millions paid into the entity are akin to bags of cash; unlike campaign contributions or political action committee (“PAC”) contributions, they were not regulated, not reported, not subject to public scrutiny, and the members of the Householder Enterprise freely spent the bribe payments to further their political interests and to enrich themselves. As Neil Clark stated in a 2019 recorded conversation that was reproduced in the Affidavit, “Generation Now is the Speaker’s (c)(4),” and FirstEnergy’s “deep pockets,” and the money that was wire transferred to the Householder Enterprise through Generation Now was “unlimited.” Matthew Borges similarly described FirstEnergy’s illicit payments to the Enterprise as “Monopoly money.” 20. The members of the Householder Enterprise used some of FirstEnergy’s money to help enact the bailout legislation. Additionally, the Householder Enterprise used millions of dollars of FirstEnergy’s bribe money to further Householder’s political ambitions by funding his political campaign, and the campaigns of members and candidates who would eventually support Householder’s election for Speaker. FirstEnergy’s illicit payments funded the operating costs of the Householder Enterprise and paid for Householder’s political and campaign staff. Larry Householder, Jeffrey Longstreth, Neil Clark, Matthew Borges, Juan Cespedes, and/or Generation Now also paid themselves personally millions of dollars in bribe payments, funneled through Generation Now and other entities controlled by the Householder Enterprise. This includes allowing for the payment of at least $500,000 in what appears to be personal benefits to Householder that was passed through Longstreth-controlled bank accounts. In addition, the members of the Householder Enterprise had over $8 million of FirstEnergy’s money in their controlled bank accounts at the end of 2019, which represents further profit to the members of the Householder Enterprise. THE HOUSEHOLDER ENTERPRISE 21. Until he was removed from that position by a unanimous vote on July 30, 2020, Larry Householder was the current Speaker of the Ohio House of Representatives at all times relevant. He previously served as a House member representing Ohio’s 72nd District from 1997 to 2004, including as Speaker of the House from 2001 to 2004. Householder resigned from office after reports of alleged corrupt activity surfaced in the media and were publically referred to the FBI; however, he was not charged at that time. Householder won his House seat back in the Fall of 2016. He was elected Speaker again in January 2019, after what the Ohio media described as a bitter leadership battle that lasted nearly a year. 22. Householder’s path to the Speakership was unusual. Householder and another representative, both of whom are Republicans, were candidates to be Speaker of the House for the 133rd General Assembly. After the then-Speaker’s resignation in May 2018, a protracted conflict began to select a Speaker for the remainder of the 132nd General Assembly. Ultimately, the other representatives became Speaker pending the upcoming 2018 election, after the unprecedented conflict that was resolved using a House rule that could only be employed after ten failed attempts to select a Speaker. Despite the other representatives’ selection in mid-2018 to serve as House Speaker for the remainder of the 132nd General Assembly, Householder aggressively sought support for his candidacy for Speaker. He did so in a number of ways, including by providing financial support, paid for in large part by FirstEnergy, to certain candidates running for House seats in the Spring 2018 primary and the November 2018 general election. In the end, his strategy was successful as he won the Speakership despite another representative serving in that role prior to the 2018 election. 23. The Householder Enterprise had several purposes, one of which was to increase Larry Householder’s political power through corrupt means. In his role, Larry Householder solicited and accepted payments from FirstEnergy into his Section 501(c)(4) account; he used the bribe payments to further his political interests, enrich himself and other members and associates of the Householder Enterprise, and to assist in passing and preserving the bailout legislation; and, in return for the benefits received, he coordinated passage of HB 6 and attempted to influence legislators to support the bailout, among other things. 24. Larry Householder benefitted personally from the activities of the Householder Enterprise. For example, while funded by FirstEnergy-to-Generation-Now bribe money, at least $300,000 passed through and funded bank accounts controlled by Jeff Longstreth, which the Householder Enterprise used to pay legal fees and settle a lawsuit against Larry Householder. Over $100,000 of the FirstEnergy-to-Generation- Now bribe money was passed through bank accounts controlled by Jeff Longstreth and used to pay costs associated with Larry Householder’s Florida home. In addition, at least $97,000 of the FirstEnergy-to-Generation-Now bribe money was used to pay expenses for Larry Householder’s 2018 political campaign. 25. Jeff Longstreth is Larry Householder’s longtime campaign and political strategist. Neil Clark identified Jeff Longstreth as Larry Householder’s “political guy,” his “implementer,” and one of his “closest advisors,” who was instrumental to the Householder Enterprise’s efforts to pass HB 6. 26. Although Jeff Longstreth is not employed by the State of Ohio, he has been Larry Householder’s chief political strategist. He ran Larry Householder’s political campaign, and he and his staff managed the 2018 campaigns for the Householder Enterprise-backed candidates (at times internally referred to by members of the Householder Enterprise as “Team Householder” candidates). Larry Householder and Jeff Longstreth shared office space that was rented from their Political Advertising Agency. In addition, Jeff Longstreth led the messaging efforts both in the campaign to pass HB 6 and to defeat the referendum, and was a point of contact for FirstEnergy and the Individual Defendants. 27. Jeff Longstreth also played a critical role with respect to the the Householder Enterprise’s finances. He was a signatory on both of the Generation Now bank accounts and the person who transferred money out of the accounts to other entities to further the Householder Enterprise. Jeff Longstreth also controlled entities that receive FirstEnergy-through-Generation Now payments to further the Householder Enterprise. Among these entities, Jeff Longstreth owns and operates JPL & Associates. Throughout the relevant period, Jeff Longstreth transferred over $10.5 million of FirstEnergy’s bribe payments directly from Generation Now’s primary bank account to JPL & Associates’ primary bank account. In addition, Jeff Longstreth received indirectly another $4.4 million, which was transferred from the Generation Now account through another entity and then into bank accounts that he controlled. Jeff Longstreth then used FirstEnergy’s payments funneled through Generation Now to further Larry Householder’s and FirstEnergy’s interests and to pay personal benefits to members and associates of the Householder Enterprise. Jeff Longstreth benefitted personally through the conspiracy’s actions, receiving over $5 million in FirstEnergy-to-Generation-Now money during the relevant period, including at least $1 million, which he transferred to his brokerage account in January 2020. 28. Neil Clark owns and operates Grant Street Consultants, an Ohio-based lobbying firm that focuses on legislative, regulatory, and procurement lobbying at the Ohio Statehouse. Prior to becoming a lobbyist, Neil Clark served as a budget director for the Ohio Senate Republic Caucus. During the relevant period, Neil Clark worked as a lobbyist for various political interest groups. 29. Along with Jeff Longstreth, Neil Clark is, in his own words, one of Larry Householder’s “closest advisors.” According to Neil Clark’s admissions, made during recorded conversations in 2019, he served as Larry Householder’s “proxy” in the Householder Enterprise’s efforts to further the enactment of HB 6 an ensure HB 6 went into effect in October 2019 by defeating the subsequent ballot-initiative challenge. Neil Clark also communicated directly with House members to further the Householder Enterprise. In 2019, Neil Clark described himself in recorded communications as Larry Householder’s “hit man” who will do the “dirty shit.” Clark stated that “when [Householder’s] busy, I get complete say. When we’re working on stuff, if he says, ‘I’m busy,’ everyone knows. Neil has the final say, not Jeff. Jeff is his implementer.” Matthew Borges confirmed Neil Clark’s role, and similarly described Neil Clark as Larry Householder’s “proxy” relating to FirstEnergy matters. Neil Clark benefitted personally from FirstEnergy’s payments to the Householder Enterprise, receiving at least $290,000 in FirstEnergy-to-Generation-Now money. 30. Matthew Borges is a registered lobbyist for a subsidiary of FirstEnergy. He was a key middleman and was at the center of the effort to thwart the referendum to stop HB 6 from taking effect through a ballot-initiative drive. On August 5, 2019, shortly after the Ballot Campaign was announced, Matthew Borges incorporated 17 Consulting Group. Two days later, Matthew Borges opened a bank account for 17 Consulting Group, and that same day Generation Now wired $400,000 into the account. Over the next few months, Generation Now wired a total of $1.62 million into the account. 31. Approximately one month after Generation Now began wire transferring money into Matthew Borges’ 17 Consulting Group’s account, he paid $15,000 in exchange for inside information about the Ballot Campaign, which Matthew Borges would use to help defeat the Ballot Campaign. Bank account records show that the $15,000 paid came from the 17 Consulting Group account, which was funded by Generation Now wire transfers. Matthew Borges also paid Juan Cespedes $600,000 of Generation Now money from his account. With the money wire transferred from Generation Now, Matthew Borges also paid a private investigator during this period, which, as described below, is consistent with the Householder Enterprise’s strategy of investigating the signature collectors that worked for the Ballot Campaign. 32. Matthew Borges had contact with Larry Householder in January 2019 and April 2019 – key time-periods, as described below, involving official action by Larry Householder. Matthew Borges benefitted directly from the $1.62 million from Generation Now wire transfers. Specifically, he paid himself over $350,000 from FirstEnergy-to-Generation-Now proceeds. 33. Juan Cespedes served as a key middleman, participating in strategy meetings and communicating with Householder Enterprise members and associates regarding strategic decisions. Juan Cespedes is a multi-client lobbyist, whose services were retained by a subsidiary of FirstEnergy. He was central to this company’s efforts to get the bailout legislation passed in Ohio. As explained in this Complaint and in the Affidavit, a contract between this company and Juan Cespedes’ lobbying company, the Oxley Group, shows this company hired Juan Cespedes to pursue the bailout legislation starting in the Spring of 2018. Consistent with this, records show that Juan Cespedes was the “lead consultant” relating to attempts to pursue legislation would save FirstEnergy’s failing nuclear power plants. In internal documents, Juan Cespedes tracked “Householder camp” candidates who later received FirstEnergy-to-Generation- Now money, and he advised that if Larry Householder became the Speaker, the nuclear energy bailout “will likely be led from his Chamber.” 34. Juan Cespedes received approximately $600,000 from the Householder Enterprise and $227,000 from FirstEnergy in 2019. He also was in regular contact with both the Individual Defendants and Householder Enterprise members during the relevant period. As set forth below, Juan Cespedes and Jeff Longstreth communicated regularly through text messages discussing the coordination of millions of dollars in FirstEnergy’s payments to the Householder Enterprise, attaining public officials’ support for the bailout, sending media and mailers supporting the bailout legislation, and hiring signature firms to defeat the ballot campaign, among other things. Juan Cespedes coordinated the timely payment of $15 million from FirstEnergy to Generation Now. 35. Generation Now, Inc. received approximately $60 million from FirstEnergy and/or FirstEnergy Service during the relevant period. As set forth more fully below, Generation Now registered with the Internal Revenue Service (“IRS”) as a Section 501(c)(4), which is an IRS designation for a tax-exempt social welfare organization. Pursuant to federal law, the names and addresses of contributors to Section 501(c)(4) organizations are not made available for public inspection. The members of the Householder Enterprise concealed the bribery scheme by funneling the money through Generation Now, which hid the payments and the scheme from public scrutiny. Generation Now’s accounts had a combined balance of approximately $1.67 million as of January 1, 2020, money that is a direct benefit to the Householder Enterprise. As described in this Complaint and in the Affidavit, after making wire transfers to Coalition in early 2020, the Generation Now accounts were replenished by a $2 million wire from Energy Pass-Through (a non-profit Section 501(c)(4) organization that was incorporated in Ohio on February 28, 2017, two days after Generation Now was incorporated in Delaware) in March 2020, bringing the combined balance of the accounts to approximately $2.9 million, again, money that is a direct benefit to the Householder Enterprise. RELATED ENTITIES CONTROLLED BY THE HOUSEHOLDER ENTERPRISE 36. The Householder Enterprise used and relied on a number of different entities to further the conspiracy alleged in this Complaint. The following entities were controlled by, worked directly with, or funneled payments for the benefit of the Householder Enterprise: a. JPL & Associates LLC is controlled by Longstreth. Longstreth is the signor on five different bank accounts that have received money directly from Generation Now, including two JPL business accounts, one personal account, and two accounts named “Constant Content.” Numerous internal money transfers to Generation Now money were made among Longstreth-controlled accounts. In total, JPL’s main business account received over $10.5 million in FirstEnergy-to-Generation-Now wire transfers during the relevant period, which Longstreth then transferred internally to his other accounts. Longstreth also received indirectly $4.4 million, which had been funneled from Generation Now, through another entity (the “Front Company” discussed below) and into Longstreth’s Constant Content accounts. Analysis of the accounts by the FBI shows that the money was used to pay benefits directly to Householder Enterprise members and to further the Householder Enterprise’s interests by paying campaign staff for preferred Householder Enterprise political candidates, among other things. After the ballot initiative campaign failed and HB 6 became law for the benefit of FirstEnergy, Longstreth consolidated most of the Householder Enterprise funding into JPL-controlled accounts. As of January 1, 2020 that total balances within JPL- controlled accounts exceeded $6.5 Million. This money is a direct benefit to the Householder Enterprise. b. “PAC” is a federal PAC through which Generation Now funneled FirstEnergy payments in furtherance of the conspiracy. The Householder Enterprise primarily used the PAC during the May 2018 primary election as a way to conceal the source of media buys for “Team Householder” candidates. The attorney who is listed as the treasurer for Generation Now and who is a signatory on the Generation Now accounts along with Jeff Longstreth, is the treasurer and a signor of the PAC account. c. Although Longstreth was not a signor on the PAC bank account, documents obtained by the FBI confirm Longstreth’s control over the PAC. For example, a Word document titled “Client Information Request Form,” last modified by Longstreth in October 2016, listed Longstreth as the “Executive Director or President” of the PAC. In addition, Longstreth’s resume, created by Longstreth in November 2016, states that Longstreth oversees political activities for the PAC. Contribution forms for the PAC list Longstreth as the “Contact” and include Longstreth’s e-mail address and telephone number. Toll call records corroborate Longstreth’s role, showing frequent contact with the attorney when Generation Now needed to move money to and from d. In early 2018, the PAC bank account was funded almost entirely by a $250,000 wire transfer and a $750,000 wire transfer from Generation Now made on April 2 and April 12, 2018, respectively. By April 30, 2018, nearly all of the one million dollars was paid to two media services firms, which spent the money on media buys and other efforts to benefit Householder political candidates, including Larry Householder himself, in advance of the May 8, 2018, Ohio primary election. e. The account was unused until Generation Now wired an additional $50,000 to the account in September 2018, in advance of the Fall 2018 election. Close to $40,000 of that wire transfer was paid to a political strategy group within weeks of the wire transfer. Aside from payments to the attorney’s law firm, the balance remained in the account. f. The account remained largely inactive from October 2018 until January-February 2020, when the Householder Enterprise wired $1,010,000 of money from Defendants to the “Coalition” (described below), which passed through to PAC roughly the same amount of money over the next two months. Expenditures from the PAC in Federal Election Commission filings, along with media purchased by PAC, show that the Householder Enterprise used FirstEnergy’s money funneled to the PAC to benefit Team Householder candidates for the 2020 primary election. g. “Coalition” is another 501(c)(4) non-profit entity for which the attorney who is treasurer and signor for the PAC is the signor on the Coalition’s bank account. The attorney incorporated Coalition in Delaware one day after he incorporated PAC. Longstreth’s resume states that he oversees political activities for the Coalition. An FBI investigation indicated that Longstreth possessed a copy of the W-9 taxpayer identification form for the Coalition. He also saved Word documents characterized as “scripts” to use when soliciting money from donors to the Coalition. h. For calendar years 2017 through 2019, the Coalition was funded almost exclusively through (1) $90,000 from First Energy, (2) $300,000 from “Energy Pass-Through” (a FirstEnergy pass-through, as set forth below), and (3) $200,000 from an interest group that was funded exclusively by $13 million from another energy company that supported HB 6 and separately paid $150,000 to Generation Now during the relevant period. Outgoing payments from the Coalition account were over $100,000 in two wires to JPL & Associates; $54,000 wired to Generation Now; $191,000 wired to Media Placement Company 1; and $200,000 wired to a public relations firm. i. The Coalition account was largely unused from August 2018 until January 2020 when, as described directly above, the Householder Enterprise used the Coalition as a pass-through for FirstEnergy-to-Generation-Now money to PAC, which the Householder Enterprise then used to support Larry Householder-backed candidates in the 2020 primary election. The benefit of passing the money through the Coalition was that the PAC listed the Coalition as the source of the $1,010,000 million in FEC filings, not Generation Now. The Householder Enterprise sought to conceal Generation Now as the source of PAC funds in 2020 for numerous reasons, including, as explained in this Complaint and in the Affidavit, Generation Now had generated negative media publicity in 2019 and candidates expressed concern to Larry Householder about their association with it. j. Thus, this account is a mechanism for Generation Now to spend secret money for the benefit of Larry Householder and the Householder Enterprise. k. “Dark Money Group 1” is an entity used by Householder Enterprise conceal the source of media buys during the 2018 general election, similar to the way the Householder Enterprise used PAC for the primaries in 2018 and 2020. An Ohio lobbyist incorporated Dark Money Group 1 in Ohio on September 21, 2018, and opened its bank account on September 25, 2018. l. The majority of activity in the account occurred roughly one month later, between October 2018 and Election Day on November 6, 2018. From October 19 to October 29, 2018, Generation Now wired $670,000 into the account; FirstEnergy wired $500,000 into the account; and other corporate interests wired $300,000 into the account, totaling $1,470,000. From October 22 to November 2, 2018, Media Placement Company 2 then spent $1,438,510 on media buys for advertisements paid for by Dark Money Group 1 that generally targeted rivals of candidates aligned with Larry Householder. Since Election Day in 2018, the account has been largely unused. m. “Front Company” is a pass-through entity used by the Householder Enterprise to fund the campaign against the referendum in furtherance of the conspiracy. The for-profit entity was organized in Ohio on July 30, 2019, just days after the Ballot Campaign to overturn HB 6 began. n. From August 1, 2019 through October 2019, FirstEnergy controlled accounts wired Generation Now $38 million; Generation Now then wired $23 million from those payments to Front Company, the vast majority of which was used to pay signature collection firms to fight against the Ballot Campaign and to pay for media opposing the Ballot Campaign. Generation Now was the sole source of money deposited into the Front Company account. By November 2019, less than $5,000 remained in the Front Company account. THE USE OF GENERATION NOW TO RECEIVE BRIBE PAYMENTS FROM FIRST ENERGY 37. On or about February 6, 2017, Generation Now, Inc. was incorporated in Delaware, and two bank accounts were opened at Fifth Third Bank (account numbers 3310 and 6847). Bank records show that an attorney and Jeff Longstreth were signatories on both accounts. On or about July 26, 2017, Generation Now registered with the Ohio Secretary of State as a foreign nonprofit corporation “organized exclusively for the promotion of social welfare and economic development purposes within the meaning of Section 501(c)(4) of the Internal Revenue Code (“the Code”), or the corresponding section of any future federal tax code.” The attorney signed the application as the treasurer of Generation Now. 38. Although Larry Householder was not listed on registration documents or in account records for Generation Now, the Householder Enterprise used Generation Now to receive secret payments for Larry Householder. 39. At that time, there was aggressive lobbying for legislative action to save FirstEnergy’s two nuclear power plants. Table One in Paragraph 47 of the Affidavit lists each of FirstEnergy’s illicit payments received by Generation Now during the period from March 2017 until March 2020, totaling $59,996.835.86. 40. In addition to the $59,996.835.86 that FirstEnergy paid directly to Generation Now, FirstEnergy made $890,000 in other timely payments to the Householder Enterprise, including payments of $500,000 to Dark Money Group 1 and $90,000 to Coalition, and an Energy Pass-Through payment of $300,000 to Coalition, all of which are detailed in the Affidavit. These payments bring the total amount of direct payments from FirstEnergy to the Householder Enterprise during the relevant period as $60,886,835.86. During the scheme and conspiracy described in this Complaint, other entities besides FirstEnergy deposited money into Generation Now; the amounts of those deposits, however, are dwarfed by FirstEnergy’s payments. 41. Although Larry Householder’s name is not on Generation Now’s paperwork, an FBI investigation concluded, based on Larry Householder’s statements, Neil Clark’s statements, and a review of documentation obtained pursuant to search warrants and grand jury subpoenas, that Larry Householder controls Generation Now to further the Householder Enterprise’s goals. 42. FirstEnergy and FirstEnergy Service funded Householder’s Speakership bid in exchange for a legislative fix for its nuclear power plants. 43. The volume of FirstEnergy’s payments, the timing of these payments, communications and coordination amongst co-conspirators and the Individual Defendants, the official action(s) taken by Larry Householder, and the actions to maintain the official action, show the corrupt arrangement of FirstEnergy’s funding of Larry Householder’s speakership bid in exchange for a legislative fix. 44. As described in this Complaint and in the Affidavit, the vehicle to collect the vast amounts of money needed for Larry Householder’s Speakership bid was Generation Now. From the time the Generation Now bank accounts were opened in 2017 through the November 2018 general election, the Householder Enterprise received approximately $4.6 million into Generation Now. More than one-half of that money came from FirstEnergy, FirstEnergy Service, or the Energy Pass-Through, fully funded by FirstEnergy. More than one-half million of the remaining money came from energy-related entities that either had a relationship with FirstEnergy or an interest in the bailout legislation. The remaining amount of money (approximately $1.6 million) came from approximately 31 other interest groups. 45. The Individual Defendants caused FirstEnergy to make regular, quarterly payments of $250,000 into Generation Now’s main bank account almost immediately after Jeff Longstreth opened that account in 2017. But, in March 2018, approximately two weeks before FirstEnergy’s corporate affiliates filed for bankruptcy, FirstEnergy began funneling payments to Generation Now through Energy Pass-Through. The payments wired from FirstEnergy Service into the Energy-Pass-Through originated from account number 6496, the same account used to wire transfer payments directly from FirstEnergy Service into Generation Now. In the final month before the 2018 general election, FirstEnergy deposited another $500,000 into the Generation Now account. This time the money was paid by check from account number 4788. The payments from FirstEnergy during 2017-2018 are summarized in Paragraph 82 of the Affidavit. Other payments are described in Paragraph 83 of the Affidavit. The close coordination of activities between FirstEnergy, the Individual Defendants, and Larry Householder is set forth in Paragraphs 84-86 of the Affidavit. 46. On or about July 24, 2018, a few months after the primary elections, $215,000 was wire transferred from Jeff Longstreth-controlled accounts to settle a personal lawsuit against Larry Householder. On August 1, 2018, the same day that Larry Householder was meeting with FirstEnergy executives in Columbus, according to documents in Juan Cespedes’ possession, a court filing in Franklin County Court “released and forever discharged” the judgment against Larry Householder and Householder Ltd. The main JPL account was funded with wire transfers from Generation Now, which was funded in large part by FirstEnergy wire transfers. In addition, bank records will show that JPL’s main account also paid the fees of Larry Householder’s attorneys involved in the lawsuit in May 2017 via two checks totaling $60,000. At the time JPL made those payments, it had received more than $78,000 from Generation Now, which had been funded in part by a $250,000 wire from FirstEnergy and a deposit from Longstreth on the date he opened the account. JPL also paid the same law firm additional fees totaling $25,308.43 in 2018. BAILOUT LEGISLATION PASSED FOR FIRST ENERGY 47. The Householder Enterprise transitioned quickly to fulfilling its end of the corrupt bargain with FirstEnergy by passing nuclear bailout legislation. In fact on January 7, 2019, the day he was elected Speaker of the House, Larry Householder pledged to create a standing subcommittee on energy generation. Larry Householder then followed through shortly after his election as Speaker by passing the HB 6 legislation and defending the bill against the ballot initiative challenge. 48. The Householder Enterprise's efforts to pass the legislation and preserve it against the Ballot Campaign challenge were funded entirely by FirstEnergy and/or FirstEnergy Service, through illicit payments to Generation Now. While HB 6 was pending in the House, FirstEnergy wire transferred Generation Now the sum of $9,500,000. When the bill was pending in the Senate, FirstEnergy wire transferred Generation Now the sum of $7,358,255. And, to fund its efforts to defeat the Ballot Campaign, FirstEnergy wire transferred an additional $38,000,000 to Generation Now. The volume and frequency of these payments provide further evidence of the Householder Enterprise's corrupt arrangement with FirstEnergy and the Individual Defendants. These facts, including the Householder Enterprise's passage of HB 6, its efforts to defeat the subsequent Ballot Campaign, and FirstEnergy’s involvement and coordination funding these efforts, are set forth in this Complaint and in the Affidavit. HOUSE BILL 6 49. Consistent with their unlawful scheme, the Householder Enterprise implemented a strategy to pass a legislative fix for FirstEnergy and its related entities shortly after Larry Householder was selected Speaker. The strategy involved ramming a sweeping piece of legislation – HB 6 – through the House and pushing the Senate to agree. First, Larry Householder picked freshman representatives, which he had helped to elect by using FirstEnergy-to-Generation-Now dollars for their benefit in the 2018 election, to sponsor the bill that he helped draft. Second, Larry Householder created a new subcommittee to hear the bill, which was comprised mostly of his political supporters. Third, the Householder Enterprise engaged in an expensive media blitz, funded by FirstEnergy-to-Generation-Now payments, to pressure public officials to support the bill. Fourth, Larry Householder strong-armed House members, particularly the opponents of the bill. Finally, Larry Householder and the Householder Enterprise pressured Senators to pass the legislation. The expediency and funding of this legislative effort and the tactics used by the Householder Enterprise, along with timely communications between Householder Enterprise members and agents of FirstEnergy, including the Individual Defendants, are further evidence of the unholy and illicit agreement between Larry Householder and FirstEnergy. 50. On April 12, 2019, roughly three months after Larry Householder became Speaker, HB 6 was introduced. Although the bill was entitled “Ohio Clean Air Program,” the FBI investigation shows that HB 6 was conceived to prevent the shutdown of FirstEnergy’s nuclear power plants as explained in Paragraphs 111-186 of the Affidavit. 51. HB 6 was important to the Householder Enterprise because it received millions of dollars into Generations Now from FirstEnergy in exchange for enactment of the bailout legislation. And, thus, the repeal of HB 6, which would prevent HB 6 from taking effect in October 2019, was viewed as a threat to the Householder Enterprise. 52. FirstEnergy and/or FirstEnergy Service funded and/or participated in the funding of the Householder Enterprise to defeat the Ballot Campaign to repeal HB 6, as alleged in Paragraphs 187-215 of the Affidavit. The efforts to prevent the repeal of HB 6 included bribing an employee of the Ballot Initiative to gain inside information, and bribes to signature collectors, as detailed in Paragraphs 216-239 of the Affidavit. 53. The members of the Householder Enterprise worked closely with FirstEnergy and the Individual Defendants to defeat the repeal of HB 6. During this period, the Individual Defendants caused FirstEnergy to pay the Householder Enterprise over $38 million. For example, on October 10, 2019, FirstEnergy wire transferred $10 million to Energy Pass-Through, which then wired $10 million to Generation Now, as detailed in Paragraphs 169-170 of the Affidavit. 54. The efforts to prevent a repeal of HB 6 were successful. On October 21, 2019, the Ballot Campaign failed to collect enough signatures and HB 6 went into effect.. 55. The Ohio Legislature may well repeal and replace HB 6. But having hijacked Ohio’s democracy and damaged Ohio’s trust of an elected government, FirstEnergy, FirstEnergy Service, and the Individual Defendants are not entitled to “keep the change” of their ill-gotten gains. CLASS ACTION ALLEGATIONS 56. Plaintiffs bring this action under Rules 23(a), (b)(1)(A), (b)(2), and (b)(3) of the Federal Rules of Civil Procedure, on behalf of themselves and the other members of the Class, which is defined as: All persons and entities resident in the State of Ohio who have and/or will have to pay a monthly surcharge for electric service pursuant to 57. Based on information and belief, the members of the Class exceed tens of several million, making joinder of all Class members impracticable. 58. The claims set forth in this Complaint are common to each member of the Class. Plaintiffs and each Class member are subject to the same rate increases set forth in HB 6. 59. There are questions of law and/or fact common to the Class which predominate over any questions effecting individual members of the Class. These include: (a) whether the Defendants bribed the members of the Householder Enterprise to obtain bailout nuclear power plant legislation, HB 6; (b) whether the conduct set forth in this Complaint violated RICO and/or the Ohio Corrupt Activity Act; (c) whether the Class members are entitled to actual damages, punitive damages, statutory damages, or both; and (d) whether Defendants’ conduct entitles the Class to recovery of attorneys’ fees and expenses. 60. Plaintiffs are adequate representatives of the Class members because they are members of the Class, the claims they assert in the Complaint are typical of the claims of the Class members, Plaintiffs’ claims are not subject to any unique defenses, and Plaintiffs’ interests do not conflict with those of any other Class member. 61. Plaintiffs will fairly and adequately protect the interests of the Class. Plaintiffs’ interests do not conflict with any interest of the Class. 62. The federal and state law claims set forth in this Complaint are proper for certification as a class action under the provisions of Rule 23. 63. After addressing the questions common to the Class, only the determination of individual damages will remain, and that calculation is one of simple mathematics using the records maintained by the Defendants. 64. This class action is superior to other available methods for the fair and efficient adjudication of the claims asserted herein because there are tens of thousands of members in the proposed Class and repeated individual discovery and litigation of the common issues shared by all Class members would needlessly waste judicial resources. The names and addresses of Class members will be readily identifiable from records of Defendants and through discovery of this action. 65. The Class members’ interests in individually controlling the prosecution of separate actions do not outweigh the benefits of class-based litigation on those issues. 66. It is desirable to concentrate the litigation of these claims in one forum. Any difficulty in managing this case as a class action is outweighed by the immense benefits the class action has in efficiently disposing of common issues of law and fact among the large number of litigants. Moreover, no Class member has enough at stake to warrant individual litigation against these obviously well-funded and ruthless defendants. 67. The prosecution of this civil action by all Class members individually in separate actions would create a risk of inconsistent or varying adjudications of claims by the individual Class members that would establish incompatible standards of conduct for Defendants, could be dispositive of interests of other Class members not parties to the adjudications, or substantially impair or impede Class members ability to protect their interests. 68. Further, Plaintiffs have retained competent counsel experienced in class action litigation to further insure such representation and protection of the Class. Plaintiffs and their counsel intend to vigorously prosecute this action. 69. Managing this case as a Class Action should not present any particular difficulty. VIOLATIONS OF FEDERAL RICO AND OHIO CORRUPT ACTIVITY ACT (18 U.S.C. § 1962(c) & (d) AND OHIO REV. CODE § 2923.32(A)(1)) 70. Paragraphs 1-69 of this Complaint are realleged and incorporated by reference. This claim is asserted against each of the Individual Defendants, FirstEnergy, and FirstEnergy Service for violations of RICO and the Ohio Corrupt Activity Act. 71. Hudock is a natural person and, as such, is a “person” within the meaning of 18 U.S.C. § 1961(3) and Ohio Rev. Code § 2923.31(G). 72. Cameo is a corporate entity and, as such, is a “person” within the meaning of 18 U.S.C. § 1961(3) and Ohio Rev. Code § 2923.31(G). 73. Defendants FirstEnergy and FirstEnergy Service are corporate entities and, as such, are “persons” within the meaning of 18 U.S.C. § 1961(3) and Ohio Rev. Code § 2923.31(G). Each of the Individual Defendants is a natural person and, as such, each of them is a “person” within the meaning of 18 U.S.C. § 1961(3) and Ohio Rev. Code § 2923.31(G). 74. At all times relevant to this case, FirstEnergy and FirstEnergy, as corporate entities, both individually and acting together, constituted an “enterprise,” as that term is defined in 18 U.S.C. § 1961(4) and Ohio Rev. Code § 2923.31(C). This enterprise is referred to herein as the “FirstEnergy Enterprise.” The Individual Defendants, and each of them, as individual persons and as corporate officers, are separate and distinct from the FirstEnergy Enterprise. At all times relevant to this case and for the reasons set forth in the Criminal Complaint, the Householder Enterprise also constituted an “enterprise.” As alleged in this Complaint, FirstEnergy, FirstEnergy Service, and the members of the Householder Enterprise constituted a group of persons associated in fact, and this enterprise is referred to herein as the “FirstEnergy- Householder Enterprise.” 75. In violation of Section 1962(c) & (d) of RICO, and in violation of Section 2923.32(A)(1) of the Ohio Corrupt Activity Act, the Individual Defendants conducted the affairs of the FirstEnergy Enterprise through a pattern of racketeering activity and a pattern of corrupt activity and/or conspired to do so. In violation of the same statutory provisions, FirstEnergy and FirstEnergy Service conducted the affairs of the FirstEnergy-Householder Enterprise through a pattern of racketeering activity and a pattern of corrupt activity and/or conspired to do so. 76. The purpose of the FirstEnergy Enterprise and the FirstEnergy- Householder Enterprise was to secure legislation favorable to FirstEnergy and FirstEnergy Service through the use of bribes that the Individual Defendants caused FirstEnergy and/or FirstEnergy Service to pay, as alleged in this Complaint. 77. The FirstEnergy Enterprise and the FirstEnergy-Householder Enterprise have been engaged in (since approximately 2017) and continue to be engaged in, activities that affect interstate commerce. These enterprises have been and remain longstanding, continuous, and open-ended. The Individual Defendants, FirstEnergy, and FirstEnergy Service have engaged in a pattern of racketeering activity and a pattern of corrupt activity, as described in this Complaint, in the Criminal Complaint, and in the Affidavit including, but not limited to, the extensive use of the U.S. mails and/or interstate wire facilities on different dates, to bribe Larry Householder and/or other elected representatives to pass nuclear plant bailout legislation (HB 6), defeat the Ballot Campaign (anti-HB 6 referendum effort), and expand Larry Householder’s power to enable HB 6 to be passed and the Ballot Campaign defeated. PATTERN OF RACKETEERING ACTIVITY 78. The Individual Defendants, acting individually and collectively and/or in conjunction with and/or coordinated with the members of the Householder Enterprise, have engaged, directly or indirectly, in a pattern of racketeering activity and a pattern of corrupt activity. 79. The Individual Defendants, acting individually and collectively and/or in conjunction with others, devised a scheme to obtain legislation and prevent the repeal of legislation by means of false or fraudulent pretenses and representations, and through the payment of bribes. 80. The Individual Defendants used the U.S. mails and/or interstate wire facilities and have caused the mails and wires to be used, or reasonably knew the mails and wires would be used, in furtherance of their fraudulent scheme(s) and the payment of bribes in return for the passage of nuclear plant bailout legislation (HB6) and to prevent its repeal. 81. The Individual Defendants have used the mails and wires in connection with the payment of bribes for the passage of bailout legislation (the passage of HB 6), fraudulently obtained, and through the use of the mails and wires which has furthered this illegal scheme and enabled FirstEnergy and/or FirstEnergy Service to take money and property from Plaintiffs and Class members by means of false pretenses and representations and the payment of bribes, to obtain the passage of bailout legislation (HB 6) and preventing its repeal. 82. On information and belief, each and every one of the Individual Defendants has specific knowledge that the mails and wires are/were being utilized in furtherance of the overall purpose of executing the illegal scheme, and/or it was reasonably foreseeable that the mails and wires would be so used. 83. Each of the mails and wires in connection with the scheme(s) described in this Complaint, in the Criminal Complaint, and in the Affidavit, spanning a period from 2017 to the present, constitutes a separate instance of mail and/or wire fraud and, thus, is also a predicate act of racketeering activity and/or corrupt activity which, taken together, constitute a pattern of racketeering activity and/or a pattern of corrupt activity within the meaning of RICO and/or the Ohio Corrupt Activity Act. Other predicate acts, including payment of bribes for the passage of HB6 and the payment of bribes to prevent its repeal are set forth in this Complaint, in the Criminal Complaint, and in the Affidavit. 84. In addition, as alleged in this Complaint, in the Criminal Complaint, and in the Affidavit, the Individual Defendants, FirstEnergy and/or FirstEnergy Service have engaged in a variety of wrongful acts that constitute racketeering activity and/or corrupt activity, including (a) violations of 18 U.S.C. § 1951, relating to interference with commerce, robbery, or extortion; (b) violations of 18 U.S.C. § 1952 relating to racketeering, including multiple acts of bribery in violation of Ohio Rev. Code § 3517.22(a)(2); (c) violations of 18 U.S.C. §1956, relating to money laundering; (d) violations of 18 U.S.C. § 1957, relating to engaging in monetary transactions in property derived from specified unlawful activity; and (e) multiple acts involving bribery that are chargeable under Ohio Rev. Code § 2921.02. RELATIONSHIP OF PATTERN OF RACKETEERING ACTIVITY AND/OR CORRUPT ACTIVITY TO THE ENTERPRISE(S) 85. As described in this Complaint, the goal of the FirstEnergy Enterprise and the FirstEnergy-Householder Enterprise was to obtain the passage of HB 6 through fraudulent, illegal means, through the payment of bribes to extract money and property from Plaintiffs and Class members by requiring them to pay a surcharge on their electric utility bills. 86. The pattern of racketeering activity and the pattern of corrupt activity described herein was integral to Defendants’ scheme. Without engaging in mail and wire fraud, and the payment of bribes, FirstEnergy, FirstEnergy Service, and the Individual Defendants would be unable to obtain passage of HB 6. 87. As a direct and proximate result of the violations of RICO and/or the Ohio Corrupt Activity Act described in this Complaint, Plaintiffs and Class members have suffered substantial injuries. Plaintiffs and Class members have and/or will pay monthly surcharges that range from 85 cents per month for residential customers to $2,400 per month for commercial customers operating large industrial plants, thus constituting an injury to Plaintiffs and Class members within the meaning of 18 U.S.C. § 1964(c) and/or Ohio Rev. Code § 2923.34(E). CIVIL CONSPIRACY 88. Paragraphs 1-69 of this Complaint are realleged and incorporated by reference. This claim is asserted against each of the Defendants. 89. Defendants have engaged in a civil conspiracy to unlawfully injure Plaintiffs and Class members. Their actions evidence a malicious combination with the purpose of causing injury to the property of Plaintiffs and Class members in a way not competent for one alone, resulting in actual damages. 90. Apart from liability for a conspiracy to engage in racketeering or corrupt practices violations, and independent of those violations, the actions of Defendants previously described demonstrate a civil conspiracy with one or more members of the Householder Enterprise under state law to commit fraud, theft, and the other illegal activities previously described, including the scheme to obtain legislation and prevent the repeal of legislation by means of false or fraudulent pretenses and representations, and through the payment of bribes. 91. The unlawful or tortious acts of the Defendants are attributable to one another. All Defendants have agreed to and acted in pursuance of a common plan or design to commit unlawful or tortious acts, actively took part in it, and ratified and adopted the wrongdoer’s act done for their benefit. 92. Plaintiffs and Class Members have been proximately injured as a result of Defendants’ civil conspiracy. DEMAND FOR JURY TRIAL Plaintiffs demand a trial by jury for all claims in this Complaint so triable. PRAYER FOR RELIEF WHEREFORE, Plaintiffs, individually and on behalf of the members of the Class, respectfully request that the Court enter judgment in their favor and against each of the Defendants, jointly and severally, as follows: A. Declaring that this action is a Rule 23 class action, certifying the Class as requested herein, designating Plaintiffs as Class Representatives, and appointing Plaintiffs’ counsel as Class Counsel for the Class; B. Declaring that HB6 is illegal and invalid legislation; C. Ordering that any and all charges sought to be collected pursuant to HB6 be enjoined; D. Ordering Defendants to render an accounting for all fees and charges collected from the Class; E. Ordering Defendants to pay actual damages to Plaintiffs and the other members of the Class; F. Ordering Defendants to pay treble damages, as allowable by law, to Plaintiffs and the other members of the Class; G. Ordering Defendants to pay statutory damages, as provided by law; H. Ordering Defendants to pay attorneys’ fees and litigation costs to Plaintiffs and other members of the Class; I. Ordering Defendants to pay both pre and post-judgment interest on any amounts awarded; and J. Ordering such other and further relief as may be just and proper. Dated: August 5, 2020 Respectfully submitted, THE KERGER LAW FIRM By: Richard Kerger RICHARD KERGER 4159 N. Holland Sylvania Road Toledo, OH 43623 Telephone: (419) 255-5990 [email protected] Marvin A. Miller* Andrew Szot* MILLER LAW, LLC 115 South LaSalle Street, Suite 2910 Chicago, IL 60603 Telephone: (312) 332-3400 [email protected] [email protected] Kevin P. Roddy* WILENTZ, GOLDMAN & SPITZER, P.A. 90 Woodbridge Center Drive, Suite 900 Woodbridge, NJ 07095 Telephone: (732) 636-8000 [email protected] Attorneys for Plaintiffs and the Members of the Class (* - attorneys to be admitted pro hac vice)

criminal & enforcement

lELw_IgBF5pVm5zYONwC

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK 1:21-cv-06866 Bobby Phillips, individually and on behalf of all others similarly situated, Plaintiff, - against - Class Action Complaint Johnson & Johnson Consumer Inc., Jury Trial Demanded Defendant Plaintiff alleges upon information and belief, except for allegations pertaining to plaintiff, which are based on personal knowledge: 1. Johnson & Johnson Consumer Inc. (“defendant”) manufactures, labels, markets, and sells herbal mint mouthwash under its Listerine brand represented as “Listerine Naturals” (“Product”). 2. The relevant front label claims include “Listerine Naturals,” “99% Naturally Derived Formula,” and “Free of Artificial Sweeteners & Dyes.” I. CONSUMERS VALUE NATURAL PRODUCTS DESCRIBED 3. Consumers are increasingly conscious of the products they buy, from food to cosmetics and to oral care. 4. Numerous surveys reveal that “natural” – and its variations, i.e., “naturals,” “naturally,” etc. – is one of the top descriptors consumers consider. 5. Consumers purchase products described as natural based on beliefs they are conducive to and promote health and are made in ways that does not harm the environment. 6. Reasonable consumers understand “natural” and its variations to mean free from synthetic ingredients and ingredients made in non-natural, synthetic methods. II. PRODUCT’S INGREDIENTS ARE NOT NATURAL 7. The representations are misleading because the Product’s ingredients – even if they begin with natural raw materials – undergo significant alterations through non-natural process like chemical reactions and the use of catalysts. 8. The ingredients are separated into “Active” and “Inactive.” Active ingredient Sodium Fluoride 0.02% (0.01% w/v Fluoride Ion) Inactive ingredients Water, Alcohol (21.6% v/v), Sorbitol, Poloxamer 407, Eucalyptol, Methyl Salicylate, Thymol, Stevia Rebaudiana Leaf Extract, Phosphoric Acid, Menthol, Flavor, Disodium Phosphate A. Active Ingredients 9. Sodium fluoride, the Product’s active ingredient, is a byproduct of the phosphate fertilizer industry. 10. Sodium fluoride is made through reacting hydrofluoric acid with sodium carbonate or sodium hydroxide, and the resulting salt is centrifuged and dried. 11. Sodium fluoride is used for water fluoridation, to treat metal surfaces, etch glass and adjust pH in industrial textile processing. 12. Sodium fluoride is toxic and can severely irritate the skin or eyes. B. Inactive Ingredients i. Sorbitol 13. Sorbitol is a naturally occurring sweetener (“sugar alcohol”), found in fruits such as apples and plums. 14. However, the sorbitol in the Product is not from fruits, but from corn starch, subject to hydrolysis and hydrogenation, with chemical catalysts, under high pressure. ii. Poloxamer 407 15. Poloxamers are nonionic compounds made from synthetic materials and chemical processes. 16. To produce poloxamers, propylene and ethylene oxide are added to propylene glycol in the presence of chemical catalysts, at high temperatures and under high pressure. 17. According to scientific studies and dentists, poloxamer 407 is believed to be highly toxic and linked to breast cancer. 18. Poloxamer 407 is used in mouthwash to blend immiscible liquids. iii. Methyl Salicylate 19. Methyl salicylate, or wintergreen oil, comes from the wintergreen plant. 20. Presently, methyl salicylate used commercially is produced through synthetic means by esterifying salicylic acid with methanol. iv. Thymol 21. Thymol is a phenol and found in thyme, oregano, and basil. 22. Thymol can be extracted from these natural sources using aqueous sodium hydroxide and acidification. 23. However, natural thymol typically contains carvacrol, a malodorous substance which spoils the sweeter, herbal, and medicinal odors of this compound. 24. Almost all thymol is entirely synthetic, produced from the precursor compound meta-cresol, an organic chemical extracted from coal tar. 25. Meta-cresol is mixed with iso-propyl alcohol, resulting in alkylation, forming pure thymol. v. Stevia Rebaudiana Leaf Extract 26. The use of stevia originates with indigenous Guarani peoples, who use leaves from the Stevia rebaudian plant to sweeten Yerba mate and other foods. 27. Commercial use of stevia focuses on steviol glycosides extracted from the stevia leaf (mainly stevioside and rebaudioside), which is 30 to 150 times sweeter than sugar. 28. Stevia is produced commercially in two ways. 29. In the first method, steviol glycosides are extracted from the stevia leaf and harshly purified through chemical processes, filtered with an ion-ex-change resin to remove salts and ionic molecules. 30. The ion-exchange process and resin remove the color from the aqueous solution. 31. The resin is washed with solvents and re-crystallized from methanol, resulting in highly purified steviol glycosides. 32. The second method involves genetic engineering and synthetic biology which are euphemisms for genetically modified organisms or “GMOs.” 33. The result is a substance that mimics the taste of stevia but has no relation to stevia. 34. Regardless of the method used, the claim that the Product is free from artificial sweeteners is misleading because stevia is made through an artificial process. vi. Phosphoric Acid 35. While phosphatic ores have geological origins in mines, phosphoric acid is a synthetic chemical. 36. To produce phosphoric acid, tricalcium phosphate is converted through reactions with sulphuric acid and calcium sulphate. 37. The calcium sulphate is separated by filtration from the phosphoric acid. 38. The result is an ingredient reasonable consumers would not consider “natural” or naturally derived. vii. Menthol 39. The two most important commercial sources of menthol are Mentha arvensis (corn mint) and Mentha piperita (peppermint). 40. Natural l-menthol is obtained by freezing essential oil from these plants. 41. The resultant crystals are then separated by filtration. 42. Impurities in the crystals give a slight peppermint aroma to the crystallized l- menthol. 43. The Mint Growers Association of India, the largest producer of natural menthol, says that many oral care products use the synthetic version of menthol. 44. The largest producer of synthetic l-menthol is Symrise, a global flavor company. viii. Disodium Phosphate 45. Sodium phosphate is a generic term for any sodium salts of phosphoric acid. 46. Sodium phosphate is manufactured by treating phosphoric acid with sodium, such as sodium bicarbonate, and is recognized as synthetic. 7 C.F.R. § 205.605(b). 47. Disodium phosphate is used in oral care products to control acidity. III. “NATURALS,” “99% NATURALLY DERIVED” AND “FREE FROM ARTIFICIAL SWEETENERS” CLAIMS ARE MISLEADING 48. The Product’s natural claims are false, deceptive, and misleading. 49. The representations, “LISTERINE NATURALS,” “99% naturally derived,” and “Free from Artificial Sweeteners,” are false, deceptive, and misleading. 50. Reasonable consumers understand the prominent statement of “Listerine Naturals” to mean most or all the ingredients are natural and made through processes which do not involve chemical reactions. 51. No uniform standard or definition exists with respect to cosmetic (and oral care) products. 52. In this gap, various organizations have promulgated criteria under which a product may use terms such as “natural.” 53. The International Standards Organization (“ISO”) developed a standard entitled, “Guidelines on technical definitions and criteria for natural and organic cosmetic ingredients and products.” ISO 16128. 54. This standard has numerous weaknesses and loopholes, which enable its use to mislead consumers. 55. Additionally, consumers cannot even review this standard because it is locked behind paywalls. 56. The publisher does not even allow sharing a purchased copy with the public. 57. The standard’s two parts deal with “Definitions for Ingredients” and “Criteria for ingredients and products.” 1 1 ISO 16128-1 and ISO 16128-2. A. Inconsistent with Consumer Expectations 58. A reasonable consumer understands a natural product to be one that does not contain man-made, synthetic ingredients, is not subject to harsh chemical processes, and is only minimally processed. 59. Synthetic is defined as of, relating to, or produced by chemical or biochemical synthesis and encompasses substances produced artificially. 60. Consumers understand that cosmetic products do not exist in nature, and raw ingredients must be transformed until they can be combined and eventually sold at stores. 61. Natural processing methods include distillation, fermentation, and extraction. 62. Even where the Product’s ingredients may be derived from a natural source, they are subject to processing methods which use chemical catalysts and chemical reactions. 63. ISO 16128 allows processes that are not considered natural and has no limitation on using catalysts or auxiliaries if they are removed from the final product. 64. ISO 16128 has no prohibition against any specific ingredient or class of ingredients. 65. Consumers do not expect products touting their “natural qualities” to contain ingredients derived from petrochemicals, silicone, or GMOs. 2 B. Ingredients in Product are not Natural 66. According to ISO 16128, a natural ingredient is one obtained from plants, animals, or minerals. 67. However, the standard permits an ingredient to be considered “natural” or “derived natural” if more than 50% of its molecular weight is from a natural source or through a process 2 Silicone, a silicon-oxygen chain which does not exist in nature, is considered natural under ISO 16128, since it comes from sand and can therefore be of natural origin. permitted by the standard. 68. Even where the ingredients are from a natural source, they undergo synthetic processes which fundamentally change their nature and/or function, so that they have no relation to the original source material and are considered synthetic. 69. ISO 16128 is inconsistent with consumer expectations that do not expect products made with synthetic ingredients and through chemical processes to prominently proclaim they are “natural,” “naturally derived” or made with “natural ingredients.” C. “99% Naturally Derived Formula*” is Misleading 70. The front label contains small print – “99% Naturally Derived Formula*” – which purports to qualify the prominent description of the Product as “[Listerine] Naturals.” 71. The back label contains a definition from the front label asterisk: *LISTERINE NATURALS Enamel Repair formula is over 99% naturally derived (using ISO 16128 average cumulative volume, water included) with mineral Fluoride and sweetened with plant derived stevia leaf extract. The remaining 1% includes a flavor and other ingredients essential for blending to achieve product efficacy. To learn more, visit www.listerine.com/naturals. 72. This “99%” claim is misleading for several reasons. 73. First, the ISO 16128 standard arrives at a “natural origin index,” which appears to be the basis for the 99% claim, based on criteria which are inconsistent with how reasonable consumers understand “natural.” 74. The criteria for a product’s “natural origin content” is based on “the mass percentage, between 0 % and 100 %, of all natural ingredients and natural portions of derived natural ingredients in that product.” 3 75. This calculation is misleading because it is based upon how this standard defines natural and natural derived ingredients. 76. The ISO 16128 standard is not intended to facilitate the types of natural claims made by the Product. 77. Second, ISO 16128 permits a product to include formulation water in its natural origin content calculation, which is how it arrived at the 99% claim by including. 78. If water was excluded, the percentage – even when using the above-criticized ISO 16128 standard for evaluating ingredients – would be significantly less than 99%. 79. Most independent certification standards for natural products exclude water because its use results in inflating the percent of the total mass of the product which is natural. 80. No reasonable consumer would consider Coca-Cola as a drink containing substantially natural ingredients because it has a high-water content. IV. CONCLUSION 81. Consumers lack the meaningful ability to test or independently ascertain the truthfulness of labeling claims, especially at the point of sale. 82. Consumers would not know the true nature of the ingredients or final product merely by reading the ingredient label. 83. Reasonable consumers must and do rely on a company to honestly identify and describe the components and features of their products. 84. The value of the Product that plaintiff purchased was materially less than its value as represented by defendant. 85. Defendant sold more of the Product and at higher prices than it would have in the absence of this misconduct, resulting in additional profits at the expense of consumers. 86. Had Plaintiff and proposed class members known the truth, they would not have bought the Product or would have paid less for it. 87. The Product is sold for a price premium compared to other similar products, approximately than $4.49 per 500 mL, a higher price than it would otherwise be sold for, absent the misleading representations and omissions. Jurisdiction and Venue 88. Jurisdiction is proper pursuant to Class Action Fairness Act of 2005 (“CAFA”). 28 U.S.C. § 1332(d)(2). 89. Upon information and belief, the aggregate amount in controversy exceeds $5 million, including any statutory damages, exclusive of interest and costs. 90. Plaintiff Bobby Phillips is a citizen of New York. 91. Defendant Johnson & Johnson Consumer Inc. is a New Jersey corporation with a principal place of business in Skillman, Somerset County, New Jersey. 92. The parties are citizens of different states. 93. Venue is proper because plaintiff resides in this district and a substantial portion of the events giving rise to the claims occurred in this district. Parties 94. Plaintiff Bobby Phillips is a citizen of Bronx, Bronx County, New York. 95. Defendant Johnson & Johnson Consumer Inc., is a New Jersey corporation with a principal place of business in Skillman, New Jersey, Somerset County. 96. Defendant is one of the largest manufacturers of oral care products in the world. 97. The Listerine brand was the first over-the-counter consumer mouthwash, and its yearly sales are over $1 billion. 98. snacks and cookies in the United States. 99. The Product is sold to consumers from retail and online stores of third-parties. 100. Plaintiff would not have purchased the Product, or would have paid less for it, if he knew the truth. 101. During the relevant statutes of limitations, plaintiff purchased the Product within her district and/or State for personal and household consumption and/or use in reliance on the representations of the Product. 102. Plaintiff purchased the Product on one or more occasions, during the relevant period, at stores including but not necessarily limited to, Rite Aid, 1510 St Nicholas Ave, New York, NY 10033, between May and June 2021, among other times. 103. Plaintiff bought the Product at or exceeding the above-referenced prices because he wanted a product that contained mostly or all natural ingredients, understood as being derived from natural raw materials and not made through processes understood to be artificial, including chemical reactions. 104. Plaintiff chose between Defendant’s Product and other similar products which were represented similarly. 105. The Product was worth less than what Plaintiff paid and he would not have paid as much absent Defendant's false and misleading statements and omissions. 106. Plaintiff intends to, seeks to, and will purchase the Product again when he can do so with the assurance that Product's representations are consistent with its composition. Class Allegations 107. The class will consist of all New York residents who purchased the Product during the statutes of limitations for each cause of action alleged. 108. Common questions of law or fact predominate and include whether defendant’s representations were and are misleading and if plaintiff and class members are entitled to damages. 109. Plaintiff's claims and basis for relief are typical to other members because all were subjected to the same unfair and deceptive representations and actions. 110. Plaintiff is an adequate representative because his interests do not conflict with other members. 111. No individual inquiry is necessary since the focus is only on defendant’s practices and the class is definable and ascertainable. 112. Individual actions would risk inconsistent results, be repetitive and are impractical to justify, as the claims are modest relative to the scope of the harm. 113. Plaintiff's counsel is competent and experienced in complex class action litigation and intends to protect class members’ interests adequately and fairly. 114. Plaintiff seeks class-wide injunctive relief because the practices continue. New York General Business Law (“GBL”) §§ 349 & 350 (Consumer Protection Statute) 115. Plaintiff incorporates by reference all preceding paragraphs. 116. Plaintiff and class members desired to purchase a Product that contained mostly or exclusively natural ingredients and did not contain ingredients made through artificial processes. 117. Defendant’s false and deceptive representations and omissions are material in that they are likely to influence consumer purchasing decisions. 118. Defendant misrepresented the Product through statements, omissions, ambiguities, half-truths and/or actions. 119. Plaintiff relied on the representations. 120. Plaintiff and class members would not have purchased the Product or paid as much if the true facts had been known, suffering damages. Breaches of Express Warranty, Implied Warranty of Merchantability and Magnuson Moss Warranty Act, 15 U.S.C. §§ 2301, et seq. 121. The Product was manufactured, marketed, and sold by defendant and expressly and impliedly warranted to plaintiff and class members that it contained mostly or exclusively natural ingredients and did not contain ingredients made through artificial processes. 122. Defendant had a duty to disclose and/or provide non-deceptive descriptions, and marketing of the Product. 123. This duty is based on Defendant’s outsized role in the market for this type of Product. 124. Plaintiff provided or will provide notice to defendant, its agents, representatives, retailers, and their employees. 125. Defendant received notice and should have been aware of these issues due to complaints by regulators, competitors, and consumers, to its main offices. 126. The Product did not conform to its affirmations of fact and promises due to defendant’s actions and were not merchantable because it was not fit to pass in the trade as advertised. 127. Plaintiff and class members would not have purchased the Product or paid as much if the true facts had been known, suffering damages. Negligent Misrepresentation 128. Defendant had a duty to truthfully represent the Product, which it breached. 129. This duty is based on defendant’s position, holding itself out as having special knowledge and experience this area. 130. The representations took advantage of consumers’ cognitive shortcuts made at the point-of-sale and their trust in defendant. 131. Plaintiff and class members reasonably and justifiably relied on these negligent misrepresentations and omissions, which served to induce and did induce, their purchase of the Product. 132. Plaintiff and class members would not have purchased the Product or paid as much if the true facts had been known, suffering damages. Fraud 133. Defendant misrepresented and/or omitted the attributes and qualities of the Product, that it contained mostly or exclusively natural ingredients and did not contain ingredients made through artificial processes. 134. Defendant’s fraudulent intent is evinced by its knowledge that the Product was not consistent with its representations. Unjust Enrichment 135. Defendant obtained benefits and monies because the Product was not as represented and expected, to the detriment and impoverishment of plaintiff and class members, who seek restitution and disgorgement of inequitably obtained profits. Jury Demand and Prayer for Relief Plaintiff demands a jury trial on all issues. WHEREFORE, Plaintiff prays for judgment: 1. Declaring this a proper class action, certifying plaintiff as representative and the undersigned as counsel for the class; 2. Entering preliminary and permanent injunctive relief by directing defendant to correct the challenged practices to comply with the law; 3. Injunctive relief to remove, correct and/or refrain from the challenged practices and representations, and restitution and disgorgement for members of the class pursuant to the applicable laws; 4. Awarding monetary damages, statutory damages pursuant to any statutory claims and interest pursuant to the common law and other statutory claims; 5. Awarding costs and expenses, including reasonable fees for plaintiff's attorneys and experts; and 6. Other and further relief as the Court deems just and proper. Dated: August 15, 2021 Respectfully submitted, Sheehan & Associates, P.C. /s/Spencer Sheehan 60 Cuttermill Rd Ste 409 Great Neck NY 11021-3104 Tel: (516) 268-7080 Fax: (516) 234-7800 [email protected]

consumer fraud

0MayDYcBD5gMZwczBOeL

KIRA M. RUBEL [CALIF. STATE BAR NO. 253970] ALANNA J. PEARL [CALIF. STATE BAR NO. 256853] LAW OFFICES OF KIRA M. RUBEL [email protected] 555 West Beech Street, Suite 230 San Diego, California 92101 Telephone: (800) 836-6531 Attorney for Representative Plaintiff STEVEN WATERBURY UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA '15CV2824 RBB L STEVEN WATERBURY, on behalf of himself and all others similarly situated, Plaintiff, vs. Hi Tech Remodeling, Group, Inc., a California Company; Does 1 – 10; Defendants. CASE NO. CLASS ACTION Complaint for Damages and Injunctive Relief Pursuant To The Telephone Consumer Protection Act, 47 U.S.C § 227 Jury Trial Demanded ) ) ) ) ) ) ) ) ) ) ) ) Introduction 1. This is a class action against Defendant Hi Tech Remodeling, Group, Inc. (“Defendant”) for violations of the Telephone Consumer Protection Act, 47 U.S.C. § 227 et seq. (“TCPA”) with respect to Defendant’s illegal, nationwide telemarketing campaign. Specifically, from September to October, 2015, Plaintiff STEVEN WATERBURY (“Plaintiff”) received no less than eight (8) telemarketing calls on his residential telephone from Defendant’s agent in its effort to sell him home remodeling services, despite the fact that Plaintiff’s number has been on the National Do-Not-Call registry since 2003. 2. Plaintiff brings this class action lawsuit for damages, injunctive relief, and any other available legal or equitable remedies, resulting from the illegal actions of Defendant, including attorneys’ fees. 3. Plaintiff alleges as follows upon personal knowledge as to himself, his own acts and experiences, and as to all other matters, upon information and belief, including investigation conducted by his counsel. Parties 4. Plaintiff is, and at all times mentioned herein was, a citizen and resident of the State of California who resides in San Diego, California. 5. Defendant is a home remodeling company which performs tasks such as installing or fixing roofs, bathroom remodeling, kitchen remodeling, room additions and similar home improvement projects. Plaintiff is informed and believed, and thereon alleges, that Defendant is, and at all times mentioned herein was, a corporation founded under the laws of the State of California, whose primary corporate office is located at 23679 Calabasas Road Suite 1101Calabasas, California 91302. Plaintiff alleges that at all times relevant herein Defendant conducted business in the State of California, in the County of San Diego, and within this judicial district. On information and belief, Defendant attempts to sell its services to thousands of residents of California and other states either directly through its website or other methods, or through the telemarketing efforts of its agent – Eco California. 6. Eco California [“Eco”] is a telemarketing company, form unknown, which made calls on behalf of Defendant during all times relevant to this complaint. Plaintiff is unable to locate the business address of Eco. Eco operated as Defendant’s agent in the illegal telemarketing campaign which resulted in Plaintiff’s receipt of multiple calls in violation of §227(c) of the TCPA. 7. The true names and capacities of the Defendants sued herein as DOE 1 through 10, inclusive, are currently unknown to Plaintiff, who therefore sues such Defendants by fictitious names. Each of the Defendants designated herein as a DOE is legally responsible for the unlawful acts alleged herein. Plaintiff will seek leave of Court to amend the Complaint to reflect the true names and capacities of the DOE Defendants when such identities become known. 8. Plaintiff is informed and believes and thereon alleges that at all relevant times, each and every Defendant was acting as an agent and/or employee of each of the other Defendants and was the owner, agent, servant, joint venturer and employee, each of the other and each was acting within the course and scope of its ownership, agency, service, joint venture and employment with the full knowledge and consent of each of the other Defendants. Plaintiff is informed and believes and thereon alleges that each of the acts and/or omissions complained of herein was made known to, and ratified by, each of the other Defendants. 9. At all times mentioned herein, each and every Defendant was the successor of the other and each assumes the responsibility for each other’s acts and omissions. Jurisdiction and Venue 10. Jurisdiction is proper under 28 U.S.C. § 1331 as the case involves a cause of action for violations of the TCPA, a federal law of the United States, which grants this Court with federal question jurisdiction. The Court has personal jurisdiction over Defendants because they conduct significant business transactions within this District, solicit consumer sales in this District, and committed tortious acts in this District. Jurisdiction is also proper under 28 U.S.C. § 1332(d)(2) because Plaintiff alleges a national class, which will result in at least one class member belonging to a different state than that of Defendant. Plaintiff seeks up to $1,500.00 (one-thousand-five- hundred dollars) in damages for each call in violation of the TCPA, which, when aggregated among a proposed class numbering in the tens of thousands, or more, exceeds the $5,000,000.00 (five-million dollars) threshold for federal court jurisdiction under the Class Action Fairness Act (“CAFA”). Therefore, both the elements of federal and CAFA jurisdiction are present. 11. Venue is proper in the United States District Court for the Southern District of California pursuant to 28 U.S.C. § 1391(b)(2) because a substantial part of the events or omissions giving rise to the claim occurred in this judicial district. On information and belief, in addition to the calls made to Plaintiff, Defendant has also made the same or similar calls complained of by Plaintiff to others within this judicial district. The Telephone Consumer Protection Act of 1991 12. In 1991, Congress enacted the Telephone Consumer Protection Act, 47 U.S.C. § 227 (TCPA),1 in response to a growing number of consumer complaints regarding abusive telemarketing practices. 13. 47 U.S.C. §227(c) provides that any person who has received more than one telephone call within any 12-month period by or on behalf of the same entity in violation of the regulations prescribed under this subsection may bring a private action based on a violation of the TCPA. Subsection (c) was established to protect telephone subscribers' privacy rights and help them to avoid receiving unwanted telephone solicitations. 2 14. The TCPA's implementing regulation, 47 C.F.R. § 64.1200(c), provides that "No person or entity shall initiate any telephone solicitation" to " . . . (2) A residential telephone subscriber who has registered his or her telephone number on the national do-not-call registry of persons who do not wish to receive telephone solicitations that is maintained by the federal government." 15. 47 C.F.R. § 64.1200 (d) further provides that "No person or entity shall initiate any call for telemarketing purposes to a residential telephone subscriber unless such person or entity has instituted procedures for maintaining a list of persons who request not to receive telemarketing calls made by or on behalf of that person or entity. The procedures instituted must meet the following minimum standards”: (1) Written policy. Persons or entitles making calls for telemarketing purposes must have a written policy, available upon demand, for maintaining a do-not-call list. (2) Training of personnel engaged in telemarketing. Personnel engaged in any aspect of telemarketing must be informed and trained in the existence and use of the do-not-call list. (3) Recording, disclosure of do-not-call requests. If a person or entity making a call for telemarketing purposes (or on whose behalf such a call is made) receives a request from a residential telephone subscriber not to receive calls from that person or entity, the person or entity must record the request and place the subscriber's name, if provided, and telephone number on the do-not-call list at the time the request is made. Persons or entities making calls for telemarketing purposes (or on whose behalf such calls are made) must honor a residential subscriber's do-not-call request within a reasonable time from the date such request is made. This period may not exceed thirty days from the date of such Request. (4) Identification of sellers and telemarketers. A person or entity making a call for telemarketing purposes must provide the called party with the name of the individual caller, the name of the person or entity on whose behalf the call is being made, and a telephone number or address at which the person or entity may be contacted. The telephone number provided may not be a 900 number or any other number for which charges exceed local or long distance transmission charges. (5) Affiliated persons or entities. In the absence of a specific request by the subscriber to the contrary, a residential subscriber's do-not-call request shall apply to the particular business entity making the call (or on whose behalf a call is made), and will not apply to affiliated entities unless the consumer reasonably would expect them to be included given the identification of the caller and the product being advertised. (6) Maintenance of do-not-call lists. A person or entity making calls for telemarketing purposes must maintain a record of a consumer's request not to receive further telemarketing calls. A do-not-call request must be honored for 5 years from the time the request is made. 16. 47 C.F.R. § 64.1200 (e), provides that §§ 64.1200 (c) and (d) are applicable to any person or entity making telephone solicitations or telemarketing calls to wireless telephone numbers as well, ‘to the extent described in the Commission's Report and Order, CG Docket No. 02-278, FCC 03-153, Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991.’ 17. The term “telephone solicitation” is defined as “the initiation of a telephone call or message for the purpose of encouraging the purchase or rental of, or investment in, property, goods, or services…” at §64.12000(f)(14). 18. Defendant violated § 64.1200 (c) by initiating telephone solicitations to Plaintiff’s phone number, even though that number was registered on the National Do- Not-Call Registry. 19. Plaintiff also specifically requested not to receive calls from Defendant, as set forth in § 64.1200 (d)(3) and requested a copy of Defendant’s do-not-call policy, as set forth in § 64.1200 (d)(1). His requests were denied and ignored. 20. Defendant and/or its agents made more than one unsolicited telephone call to Plaintiff within a 12-month period without his prior express consent and, in fact, made eight (8) such calls. Plaintiff never provided any form of consent to receive telephone calls of this nature from Defendant, let alone prior express consent. 21. Defendant violated § 64.1200 (d) by initiating calls for telemarketing purposes to Plaintiff’s phone number without instituting procedures that comply with the regulatory minimum standards for maintaining a list of persons who request not to receive telemarketing calls from them. 22. Defendant also violated § 64.1200 (d) by spoofing its name which appeared on Plaintiff’s caller ID. Factual Allegations 23. At all relevant times, Plaintiff was a citizen of the State of California. Plaintiff is, and at all times mentioned herein was, a “person” as defined by 47 U.S.C. § 153 (39). 24. Defendant, at all times mentioned herein, was an entity that meets the definition of “person,” as defined by 47 U.S.C. § 153 (39). 25. Eco is an entity which makes telemarketing calls to telephone numbers for which it has no prior express consent in order to sell home remodeling services. 26. On information and belief, Eco was hired by Defendant to make calls on its behalf and in order to increase its sales to new customers. 27. Plaintiff also alleges on information and belief that Eco might be more than a third party telemarketer for Hi-Tech. In fact, Plaintiff believes that Eco might be Hi-Tech’s own telemarketing company, and simply claims it is a referral company for “high quality home remodeling services” in order to better sell Hi-Tech’s services. 28. Plaintiff was able to learn, through various conversations with Eco representatives, that Eco makes calls for Defendant and sets up appointments on behalf of Defendant, such that Defendant would then visit the consumer and attempt to sell a home remodeling or upgrade. Eco always called Plaintiff from the same number – (858) 483-5954 – and called Plaintiff a minimum of eight (8) times. The substance of these conversations are as follows: 29. Plaintiff received his first telemarketing call from Eco on September 24, 2015. Plaintiff missed this initial call and when he called back, received a busy signal. In fact, Plaintiff called Eco’s number on several occasions and, each time, received a busy signal. 30. On October 13 and 20, 2015, Plaintiff answered calls from Eco. Although no one spoke to him on either occasion, he could hear the hum of many voices in the background and believes it sounded like a telemarketing “boiler room.” Plaintiff stated loudly, “DO NOT CALL ME AGAIN” before he hung up the phone. During the call on October 20, 2015, he also requested Defendant’s do-not-call policy. No one responded. 31. Plaintiff answered a call from Eco on October 22, 2015 and was able to speak with an Eco representative. The caller stated his name was “James” and that he was calling from “Eco California.” He asked for a Mr. or Mrs. Waterbury. “James” asked Plaintiff if he needed any work done around his house because he represented several quality home remodeling companies. “James” stated that his manager, David, would call back later to confirm the time of the sales rep’s visit to Plaintiff’s home. As promised, “David” called Plaintiff that same day and stated that he was calling from his company, Hi Tech Remodeling, and gave the company’s website (www.high- tech-remodeling-group.com) and its contractor’s license (#986591). Plaintiff told David that he was not interested in receiving a quote for services. A review of Hi- Tech’s website reveals the same contractor’s license that David gave to Plaintiff. 32. On October 26, 2015, Mr. Waterbury received two phone calls from Eco, the second of which he answered. This time, Plaintiff spoke with a manager named “Dennette,” who asked whether he needed any construction work done. Dennette stated she worked for Eco and that Eco represented a couple of different companies. Dennette gave Plaintiff an accurate phone number at which to reach her and set up an appointment for a Hi-Tech sales person to come to Plaintiff’s home for an inspection. 33. On October 28, 2015, a salesman, “Dan”, from Hi-Tech Remodeling came to Plaintiff’s house to inspect the home for possible remodeling jobs. Plaintiff asked “Dan” for a business card, but he stated he did not have any. Instead, “Dan” gave Plaintiff a copy of Hi-Tech’s contractor’s license detail. A true and correct copy of this document is attached hereto at Exhibit “A”. 34. When Plaintiff inquired who “Eco” was, “Dan” stated that Eco made calls on behalf of Defendant in order to set up appointments for Defendant. 35. Plaintiff has never had any business relationship with Defendant and is unaware of how Eco could have located his telephone number. Regardless, he has been called many times in violation of the TCPA. 36. Defendant never obtained Plaintiff's prior express consent to receive telemarketing calls of this nature. Notwithstanding the fact that Plaintiff did not provide Defendant with his telephone number at any time, Defendant, or its agents, have called Plaintiff on his residential telephone for the purposes of telemarketing, even though Plaintiff’s phone number has been on the national do-not-call registry since 2003. 37. Plaintiff never, during any of these phone calls, gave consent to receive continued telemarketing calls from Defendant. 38. Defendant made more than one telemarketing call to Plaintiff within a 12-month period, in violation of §227(c). 39. Defendant has not implemented reasonable practices or procedures to prevent telephone solicitations in violation of the TCPA, pursuant to §227(c). 40. Defendant provided a spoofed caller ID during its illegal telemarketing calls and failed to identify itself during these calls, all while making continued unsolicited telemarketing calls to Plaintiff, in violation of §64.1200(d). Class Action Allegations 41. Plaintiff brings this action on behalf of himself and on behalf of all others similarly situated (“the Class”). 42. Plaintiff represents, and is a member of, the Class, which is defined as follows: All persons within the United States who received more than one unsolicited telemarketing call in a 12-month period from Defendant Eco on behalf of Hi-Tech Remodeling to his or her residential or wireless telephone, who did not provide prior express consent or prior express written consent, and/or was on the National do-not-call registry, within the four years prior to the filing of the Complaint in this action. 43. Excluded from the Class are Defendant and any entities in which Defendant has a controlling interest, Defendant’s agents and employees, the Judge to whom this action is assigned and any member of the Judge’s staff and immediate family, and claims for personal injury, wrongful death, and/or emotional distress. 44. Plaintiff does not know the number of members in the Class, but believes the Class members number in the hundreds or thousands. Thus, this matter should be certified as a class action to assist in the expeditious litigation of this matter. 45. Plaintiff and his fellow members of the Class were harmed by the acts of Defendant in, but not limited to, the following ways: Defendant, either directly or through its agents, illegally contacted Plaintiff and the Class members by calling their telephones more than one time in a 12-month period, to telemarket its goods or services and invading the privacy of Plaintiff and the Class members. Plaintiff and the Class members were damaged as a result. 46. This suit seeks only damages and injunctive relief for recovery of economic injury on behalf of the Class and it expressly is not intended to request any recovery for personal injury and claims related thereto. Plaintiff reserves the right to expand the Class definition to seek recovery on behalf of additional persons as warranted as facts are learned in further investigation and discovery. 47. The joinder of all Class members is impracticable and the disposition of their claims in the class action will provide substantial benefits both to the parties and to the court. The disposition of the claims in a Class Action will provide substantial benefit to the parties and the Court in avoiding a multiplicity of identical suits. The Class can be identified through Defendant’s or its agents’ records. 48. There is a well-defined community of interest in the questions of law and fact involved affecting the parties to be represented. The questions of law and fact to the Class predominate over questions that may affect individual Class members, including the following: a. Whether, within the four years prior to the filing of this Complaint, Defendant and/or its agents made more than one telemarketing call to a Class Member with his or her prior express consent and in violation of the TCPA; b. Whether Defendant and/or its agents can meet its burden of showing it obtained prior express written consent to make such calls; c. Whether Defendant and/or its agents maintains an internal do-not- call list; d. Whether Defendant and/or its agents maintains a do-not-call policy; e. Whether Defendant’s conduct, or that of its agents, was knowing and/or willful; f. Whether Defendant and/or its agents are liable for damages, and the extent of statutory damages for such violation; AND g. Whether Defendant and/or its agents should be enjoined from engaging in such conduct in the future. 49. As a person that received numerous calls in violation of the national do- not-call registry in a 12-month period, Plaintiff is asserting claims that are typical of the Class. Plaintiff will fairly and adequately represent and protect the interests of the Class in that Plaintiff has no interests antagonistic to any member of the Class. 50. Plaintiff and the members of the Class have all suffered irreparable harm as a result of the Defendant’s unlawful and wrongful conduct. Absent a class action, the Class will continue to face the potential for irreparable harm. In addition, these violations of law would be allowed to proceed without remedy and Defendant would undoubtedly continue such illegal conduct. Because of the size of the individual Class members’ claims, few Class members could afford to seek legal redress for the wrongs complained of herein. 51. Plaintiff has retained counsel experienced in handling class action claims and claims involving violations of the Telephone Consumer Protection Act. 52. A Class action is the superior method for the fair and efficient adjudication of this controversy. Class-wide damages are essential to induce Defendant to comply with federal law. The interest of Class members in individually controlling the prosecution of separate claims against Defendant is small because the maximum statutory damages in an individual action for a violation of this statute is minimal. Management of these claims as a class action is likely to present significantly fewer difficulties than those presented in many individual claims. Defendant has acted on grounds generally applicable to the Class, thereby making appropriate final injunctive relief with respect to the Class as a whole. First Cause Of Action Negligent Violations Of The Telephone Consumer Protection Act (47 U.S.C. § 227) 53. Plaintiff incorporates by reference all of the above paragraphs of this Complaint as though fully stated herein. 54. The foregoing acts and omissions of Defendant constitute numerous and multiple negligent violations of the TCPA, and specifically, 47 U.S.C. § 227(c), as further defined at C.F.R. § 64.1200(c), (d), and (e). 55. As a result of Defendant’s negligent violations of § 64.1200(c), (d), and (e), Plaintiff and the class is entitled to an award of $500.00 in statutory damages for each and every violation, pursuant to 47 U.S.C. § 227(c). 56. Plaintiff is also entitled to injunctive relief prohibiting such conduct in the future 47 U.S.C. §227(c)(5)(A). 57. Plaintiff and Class members are also entitled to an award of attorneys’ fees and costs. Second Cause Of Action Knowing and/or Willful Violations Of The Telephone Consumer Protection Act (47 U.S.C. § 227) 58. Plaintiff incorporates by reference all of the above paragraphs as though fully stated herein. 59. The foregoing acts and omissions of Defendant constitute numerous and multiple willful violations of the TCPA, and specifically, 47 U.S.C. §227(c), as further defined at C.F.R. § 64.1200(c), (d), and (e). 60. At all times, Defendant knew that it was telemarketing to Plaintiff and the Class members without regard to whether the call recipients’ numbers were on the National Do-Not-Call registry, and in spite of requests to be removed from the telemarketing list, as evidenced by Defendant providing a spoofed name on the caller ID in order to mask its illegal conduct. 61. As a result of Defendant’s knowing and/or willful violations of 47 U.S.C. § 227(c), (d), and (e), Plaintiff and the Class are entitled to treble damages, as provided by statute, up to $1,500.00, for each and every violation. 62. Plaintiff and the Class members are also entitled to and seek injunctive relief prohibiting such conduct in the future pursuant 47 U.S.C. §227(c)(5)(A). 63. Plaintiff and Class members are also entitled to an award of attorneys’ fees and costs. Prayer For Relief WHEREFORE, Plaintiff respectfully requests the Court grant Plaintiff and the Class members the following relief against Defendant: First Cause of Action for Negligent Violation of the TCPA 1. As a result of Defendant’s negligent violations of 47 U.S.C. § 227(c), Plaintiff seeks $500.00 (five-hundred dollars) in statutory damages, for each and every violation against him and every Class member; 2. Injunctive relief prohibiting such conduct in the future; 3. An award of attorneys’ fees and costs paid from the common fund provided for the Class; 4. An order certifying this action to be a proper class action pursuant to Federal Rule of Civil Procedure 23, establishing an appropriate Class and any Subclasses the Court deems appropriate, finding that Plaintiff is a proper representative of the Class, and appointing the lawyer and law firm representing Plaintiff as counsel for the Class; and 5. Any other relief the Court may deem just and proper. Second Cause of Action for Knowing and/or Willful Violation of the TCPA 1. As a result of Defendant’s willful and/or knowing violations of 47 U.S.C. § 227(c), Plaintiff seeks treble damages, as provided by statute, of $1,500.00 (one- thousand-five-hundred dollars) for each and every violation against him and every Class member; 2. Injunctive relief prohibiting such conduct in the future; 3. An award of attorneys’ fees and costs paid from the common fund provided for the Class; 4. An order certifying this action to be a proper class action pursuant to Federal Rule of Civil Procedure 23, establishing an appropriate Class and any Subclasses the Court deems appropriate, finding that Plaintiff is a proper representative of the Class, and appointing the lawyer and law firm representing Plaintiff as counsel for the Class; and 5. Any other relief the Court may deem just and proper. Trial By Jury Demanded Pursuant to the Seventh Amendment of the Constitution of the United States of America, Plaintiff is entitled to, and demands, a trial by jury on all counts so triable. Date: December 16, 2015 LAW OFFICES OF KIRA M. RUBEL ____/s/ Kira M. Rubel_______________ By: Kira M. Rubel, Esq. Attorney for Representative Plaintiff Steven Waterbury EXHIBIT “A” Business Entity Detail Dala. is updated to the California Business Se~rch on Wednesday and Saturday mornings. Results reflect work processed through Tuesday, October 27, 2015. Please refer :0 :::T:')''':I·,~.':,:',:iJI,q r'1\.i.1:\(:~::' for the received dates of filings currently being processed. The data. provided i.s not i'i complete or cerl.ified record of an entity. HT·~·'T'E:CJl FEWJDr.:.:L·:'~K';, f:~F:{)I.!t), ,J.NC.':' Entity NalJl@: Entity Numb6:t'~ Dat", 11i..l .. d, Status; ACTIVE Ci\Ll ~'(IRNIA Ju:t"i adiction: Entity Address: 2]G7~' CALABASAS Rn ;~T~ '1101 Ent~ty City, State, Zip' Agent Address: Agant CitYt Sta~Q, Zip: • Indicates the information is not oontained in the California Secretary of State's database. If the status of ~he corporation is "Surrender,!1 the agent for service of prOcess is automatical1,y IRvokcd. Please refer to California CorporatJons Code ~e,;'t,tGrl ::t'),4 for information relating to service upon corporations that h~ve surrendered. For information on checking or reserving a name, ref~r to Njnl0 Av~i j,ability . • F01' information on ordering certificates, copies of documents and/or st;JtUfl reports or to request a more extensive search, refer to Tl'11 ,,:,rmi:d:il:I]"1 r\r:qu(~~;t~;1. For help witt: searchi~g an entity name, r@fer to Sl~i!l'cll 'l·,~p~ . • For descriptions of tr.e various fields and statu!J types, .refer to ,ml1 ;)\';::: I': 1:' ,J., t:' t J.. ') n .~:j ;;J.nd ::.; I.: -:;\:.: Uti u";~ f J, 1 ~ j" t.. i, i) II ;,~: • copyright 0 2015 california secretary of BtClte

privacy

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UNITED STATES DISTRICT COURT DISTRICT OF UTAH CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL Plaintiff, SECURITIES LAWS JURY TRIAL DEMANDED Case No.: Judge: Defendants. Plaintiff Patrick Lentsch ("Plaintiff"), by and through his attorneys, alleges the following 1 NATURE OF THE ACTION AND OVERVIEW 1. This is a class action on behalf of persons and entities that acquired Vista's 2. Vista is purportedly a designer, manufacturer and marketer of consumer products 3. Throughout the Class Period, Defendants made materially false and/or misleading 2 4. On January 11, 2017, the Company issued a press release entitled "Vista Outdoor 3 5. On this news, shares of Vista fell $8.21 per share, or 21.7%, to close at $29.58 per 6. Then, on January 13, 2017, Vista disclosed that Kelly Grindle was being replaced 7. On this news, shares of Vista fell $0.88 per share, to close at $28.70 per share on 8. As a result of Defendants' wrongful acts and omissions, and the precipitous decline JURISDICTION AND VENUE 9. The claims asserted herein arise under Sections 10(b) and 20(a) of the Exchange 10. This Court has jurisdiction over the subject matter of this action pursuant to 28 11. Venue is proper in this Judicial District pursuant to 28 U.S.C. § 1391(b) and Section 412. In connection with the acts, transactions, and conduct alleged herein, Defendants PARTIES 13. Plaintiff Patrick Lentsch, as set forth in the accompanying certification, 14. Defendant Vista Outdoor Inc. is a Delaware corporation headquartered in 15. Defendant Mark W. DeYoung ("DeYoung") was, at all relevant times, the 16. Defendant Stephen M. Nolan ("Nolan") was, at all relevant times, the Senior Vice 17. Defendant Kelly T. Grindle ("Grindle") was, at all relevant times, the President of 5 18. Defendants DeYoung, Nolan, and Grindle (collectively the "Individual SUBSTANTIVE ALLEGATIONS Background 19. Vista is purportedly a designer, manufacturer and marketer of consumer products Materially False and Misleading Statements Issued During the Class Period 20. The Class Period begins on August 11, 2016, on that day the Company issued a 6 Farmington, Utah, August 11, 2016 - Vista Outdoor Inc. (NYSE: VSTO) today reported operating results for the first quarter of its Fiscal Year 2017 (FY17), which ended on July 3, 2016. "Vista Outdoor continues to execute on its growth strategy," said Vista Outdoor Chairman and Chief Executive Officer Mark DeYoung. "Early in the quarter, Vista Outdoor completed the acquisition of Action Sports, which has enhanced our market offerings in cycling, snow sports and powersports, and the integration is on track. Including recent acquisitions, both sales and gross profit increased 23 percent over the prior-year period. We, like other consumer products companies, experienced a soft retail environment in the first quarter. Additionally, we were impacted by a shift in consumer spending from accessories to firearms platforms outside our portfolio, and the timing of international orders from the first quarter to later in our fiscal year. We expect a recovery in the second half of the fiscal year due to sell through of new products, increased international sales, the continued improvement in the retail environment, and seasonal upside in the shooting sports market." For the first quarter ended July 3, 2016: Sales were $630 million, up 23 percent from the prior-year quarter, including $134 million from the recent acquisitions, and down 4 percent on an organic basis. Gross profit was $171 million, up 23 percent from the prior-year quarter. The increase includes $42 million of gross profit from the recent acquisitions, partially offset by a 7 percent decrease in organic gross profit. Operating expenses were $112 million, compared to $80 million in the prior-year quarter. The increase primarily reflects additional expenses generated by the acquisitions, as well as previously announced ongoing investments in SG&A and R&D. The tax rate for the quarter was 38.2 percent down from 39.9 percent in the prior-year quarter. The decrease was primarily caused by a true-up of assets in the prior year, partially offset by non-deductible acquisition costs in the current quarter. Fully diluted earnings per share (EPS) was $0.48, compared to $0.53 in the prior-year quarter. Adjusted EPS was $0.48, compared to $0.54 in the prior- year quarter. 7Cash flow use for operating activities was $22 million compared to a use of $42 million in the prior-year period. Year-to-date free cash flow use was $41 million, compared to a use of $52 million in the prior-year period. The company repurchased approximately 462,000 shares for $22 million. Since July 3, 2016, Vista Outdoor repurchased approximately 159,000 additional shares for $8 million. "With expected improved performance in the second half of the year, the company reaffirms its financial guidance in fiscal year 2017, as we anticipate an improved retail landscape and a return to spending on hunting and shooting accessories to complement the growing firearms installed base," said Vista Outdoor Chief Financial Officer Stephen Nolan. "We will also continue to leverage the strength of our portfolio, including new capabilities and talent from recent acquisitions, to improve performance and achieve execution excellence." Reaffirmed Outlook for Fiscal Year 2017 Vista Outdoor reaffirms FY17 financial guidance: Sales in a range of $2.72 billion to $2.78 billion. Interest expense of approximately $45 million. Tax rate of approximately 37 percent. Adjusted EPS in a range of $2.65 to $2.85. Capital expenditures of approximately $90 million. Free cash flow in a range of $130 million to $160 million. The guidance above does not include the impact of any future strategic acquisitions, divestitures, investments, business combinations or other significant transactions, nor the impact of contingent consideration revaluation, transition expenses or inventory step-ups for already-completed acquisitions. 21. On August 12, 2016, the Company filed its Quarterly Report on Form 10-Q with 8 22. On November 10, 2016, the Company issued a press release entitled "Vista Outdoor Farmington, Utah, November 10, 2016 - Vista Outdoor Inc. (NYSE: VSTO) today reported operating results for the second quarter of its Fiscal Year 2017 (FY17), which ended on October 2, 2016. "Vista Outdoor delivered solid second quarter results, including an increase of 24 percent in both sales and gross profit over the prior-year period as a result of acquisitions and strong performance in our Shooting Sports segment," said Vista Outdoor Chairman and Chief Executive Officer Mark DeYoung. "Year over year, our Outdoor Products and Shooting Sports segments delivered organic sales growth for the quarter. During the quarter, we also welcomed Camp Chef to the Vista Outdoor family of brands. Camp Chef is a leading provider of outdoor cooking solutions and provides Vista Outdoor with a foothold in one of the camping market's most attractive categories." For the second quarter ended October 2, 2016: Sales were $684 million, up 24 percent from the prior-year quarter, including $106 million from the recent acquisitions, and up 5 percent on an organic basis. Gross profit was $185 million, up 24 percent from the prior-year quarter. The increase includes $32 million of gross profit from the recent acquisitions, and a 3 percent increase in organic gross profit. Operating expenses were $81 million, compared to $88 million in the prior- year quarter. The decrease primarily reflects an acquisition claim settlement gain related to the Bushnell acquisition, partially offset by additional expenses generated by the acquisitions, as well as previously announced ongoing investments in selling, marketing and R&D activities. The tax rate for the quarter was 22.4 percent down from 39.7 percent in the prior-year quarter. The decrease was primarily caused by the nontaxable treatment of the legal claim settlement noted above and settlement of the IRS examination of the fiscal 2013 and 2014 tax returns in the current quarter. 9 Fully diluted earnings per share (EPS) was $1.22, compared to $0.52 in the prior-year quarter. Adjusted EPS was $0.74, compared to $0.63 in the prior- year quarter. Cash flow provided by operating activities was $10 million compared to $17 million in the prior-year period. Year-to-date free cash flow use was $48 million, compared to free cash flow generation of $5 million in the prior-year period. The company repurchased approximately 1,074,000 shares for $44 million. Since October 2, 2016, Vista Outdoor repurchased approximately 724,000 additional shares for $28 million. "We remain confident in our strategy, and we are reaffirming our FY17 guidance," said Vista Outdoor Chief Financial Officer Stephen Nolan. "Our second quarter results have improved over our reported first-quarter levels. We saw increased promotional activity in the Outdoor Products segment and, due to the ongoing challenging retail environment, this will likely continue in the second half of the fiscal year. The promotional activity also resulted in some acceleration of revenue from the third quarter into the second quarter." Reaffirmed Outlook for Fiscal Year 2017 Vista Outdoor reaffirms FY17 financial guidance: Sales in a range of $2.72 billion to $2.78 billion. Interest expense of approximately $45 million. Tax rate of approximately 37 percent. Adjusted EPS in a range of $2.65 to $2.85. Capital expenditures of approximately $90 million. Free cash flow in a range of $130 million to $160 million. The guidance above includes the previously announced Camp Chef acquisition but does not include the impact of any future strategic acquisitions, divestitures, investments, business combinations or other significant transactions, nor the impact of contingent consideration revaluation, transition expenses, the acquisition legal claim settlement or inventory step-ups for already-completed acquisitions. 1023. On the same day, November 10, 2016, the Company filed its Quarterly Report on 24. The above statements identified in TT20-23 were materially false and/or misleading, Disclosures at the End of the Class Period 25. On January 11, 2017, the Company issued a press release entitled "Vista Outdoor Farmington, Utah, January 11, 2017 - Vista Outdoor Inc. ("Vista Outdoor" or the "Company") (NYSE: VSTO), announced today that it expects to record a material, non-cash intangible asset impairment charge in its Hunting and Shooting 11 Accessories reporting unit (archery/hunting accessories, golf, optics, shooting accessories, and tactical products) in the third quarter of its Fiscal Year 2017 (FY17). The Company does not expect the impairment charge to have any impact on future operations, affect its liquidity, affect cash flows from operating activities, or affect compliance with the financial covenants set forth in its debt instruments. In accordance with Accounting Standards Codification (ASC) 350 "Intangibles Goodwill and Other," the Company is required to test its goodwill and other indefinite-lived intangible assets for impairment annually or when a triggering event has occurred that would indicate that it is more likely than not that the fair value of the reporting unit is less than the book value, including goodwill and intangibles. In Vista Outdoor's assessment, a triggering event for the Company's Outdoor Products segment occurred during the third quarter of FY17 due to an acceleration of the trends seen during the first and second quarters, which included a softening retail environment and increased promotional activity. These factors required the Company to begin the impairment assessment for that segment's reporting units at that time, rather than waiting for the normal process that would ordinarily be completed in conjunction with the preparation of the Company's FY17 annual financial statements. Vista Outdoor's Shooting Sports segment will be tested during the normal process and management is confident there will not be an impairment in the segment's Ammunition and Firearms reporting units. Based on the initial assessment conducted using a measurement date of November 28, 2016, there was no indication of any impairment of Vista Outdoor's intangible assets associated with either the Company's Outdoor Recreation (camping, hydration, and watersports) or Sports Protection (cycling and winter sports accessories) reporting units; however, the assessment did indicate that the above mentioned impairment may have occurred in the Company's Hunting and Shooting Accessories reporting unit. While the analysis to finalize the actual amount of the impairment charge has not yet been completed, Vista Outdoor believes that there is sufficient evidence for the Company to conclude that this impairment occurred. During the Company's FY17 second quarter earnings call and its subsequent 2016 Investor Day, Vista Outdoor disclosed it has experienced both revenue and gross margin declines that were driven by a variety of factors. These factors include a challenging retail environment that resulted in a deeper discounting of its accessories products, as well as a shift in the consumers' share of wallet from hunting and shooting accessories products to certain firearms platforms outside the Company's firearms offerings. These sales and gross margin trends accelerated during the Company's recently completed third quarter to the point where this impairment charge is necessary to comply with accounting standards. Although 12 Vista Outdoor is in the process of finalizing the actual amount of the impairment, the Company's preliminary analysis indicates the impairment charge will be in the range of $400 million to $450 million. The Company expects that the analysis supporting the impairment will be completed in time to allow for its recording in the third quarter of FY17. "We believe this non-cash impairment charge is a result of challenging market conditions, which worsened as the third quarter progressed, and required discounting of product for Vista Outdoor to remain competitive," said Vista Outdoor Chief Financial Officer Stephen Nolan. "We still expect long-term growth in all of our reporting units, including Hunting and Shooting Accessories. We remain committed to, and confident in, our growth strategy and we are optimistic about our businesses and our future opportunities." Due to the ongoing analysis, management will be unable to provide further details on the impairment charge, the impact of current market conditions on business performance, and annual guidance until the Company's regularly scheduled third quarter earnings call on February 9, 2017. 26. On this news, shares of Vista fell $8.21 per share, or 21.7%, to close at $29.58 per 27. Then, on January 13, 2017, Vista disclosed that Kelly Grindle was being replaced Farmington, Utah, January 13, 2017 - Vista Outdoor Inc. (NYSE:VSTO), a leading global designer, manufacturer and marketer of consumer products in the outdoor sports and recreation markets, has named Dave Allen as President of its Outdoor Products segment, which includes Hunting and Shooting Accessories, Outdoor Recreation, and Sports Protection. As segment president, Allen will have responsibility for segment-level financial performance, strategic planning, innovation and new products, brand management and marketing, product line management, sourcing and supply chain management, capital expenditures and R&D investment and returns, and talent management. Allen joined Vista Outdoor as Senior Vice President (SVP), Sales in 2016. He has over 23 years of experience in consumer products and has strong experience in the outdoor industry. Allen previously served as the President of Coleman USA for the 13Jarden Corporation, and he has held domestic and international leadership positions with Alberto Culver and Unilever. "Dave's strategic leadership capabilities, experience leading a large P&L, and a solid track record in both sales and marketing, have prepared him for this role," said Vista Outdoor Chairman and CEO Mark DeYoung. "Dave's performance, skills and relationships have established him as a well-respected leader within Vista Outdoor and the outdoor recreation industry. Given his demonstrated focus on strategic planning, accountability, delivering results, and creating shareholder value, he is the right person to lead the Outdoor Products segment and deliver improved performance and future growth." Allen replaces Kelly Grindle, who has left Vista Outdoor to pursue other opportunities. "I want to thank Kelly for his efforts and wish him well," said DeYoung. 28. On this news, shares of Vista fell $0.88 per share, to close at $28.70 per share on CLASS ACTION ALLEGATIONS 29. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil 30. The members of the Class are SO numerous that joinder of all members is 14 31. Plaintiff's claims are typical of the claims of the members of the Class as all 32. Plaintiff will fairly and adequately protect the interests of the members of the Class 33. Common questions of law and fact exist as to all members of the Class and (a) whether the federal securities laws were violated by Defendants' acts as alleged (b) whether statements made by Defendants to the investing public during the Class 15 (c) to what extent the members of the Class have sustained damages and the proper 34. A class action is superior to all other available methods for the fair and efficient UNDISCLOSED ADVERSE FACTS 35. The market for Vista's securities was open, well-developed and efficient at all 36. During the Class Period, Defendants materially misled the investing public, thereby 1637. At all relevant times, the material misrepresentations and omissions particularized LOSS CAUSATION 38. Defendants' wrongful conduct, as alleged herein, directly and proximately caused 39. During the Class Period, Plaintiff and the Class purchased Vista's securities at 17 SCIENTER ALLEGATIONS 40. As alleged herein, Defendants acted with scienter since Defendants knew that the APPLICABILITY OF PRESUMPTION OF RELIANCE (FRAUD-ON-THE-MARKET DOCTRINE) 41. The market for Vista's securities was open, well-developed and efficient at all 18 42. During the Class Period, the artificial inflation of Vista's stock was caused by the 43. At all relevant times, the market for Vista's securities was an efficient market for (a) Vista stock met the requirements for listing, and was listed and actively traded on (b) As a regulated issuer, Vista filed periodic public reports with the SEC and/or the (c) Vista regularly communicated with public investors via established market 19 (d) Vista was followed by securities analysts employed by brokerage firms who wrote 44. As a result of the foregoing, the market for Vista's securities promptly digested 45. A Class-wide presumption of reliance is also appropriate in this action under the 20NO SAFE HARBOR 46. The statutory safe harbor provided for forward-looking statements under certain FIRST CLAIM Violation of Section 10(b) of The Exchange Act and Rule 10b-5 Promulgated Thereunder Against All Defendants 47. Plaintiff repeats and realleges each and every allegation contained above as if fully 48. During the Class Period, Defendants carried out a plan, scheme and course of 21 49. Defendants (i) employed devices, schemes, and artifices to defraud; (ii) made 50. Defendants, individually and in concert, directly and indirectly, by the use, means 51. Defendants employed devices, schemes and artifices to defraud, while in 22 52. Each of the Individual Defendants' primary liability and controlling person liability 53. Defendants had actual knowledge of the misrepresentations and/or omissions of 2354. As a result of the dissemination of the materially false and/or misleading 55. At the time of said misrepresentations and/or omissions, Plaintiff and other 24 56. By virtue of the foregoing, Defendants violated Section 10(b) of the Exchange Act 57. As a direct and proximate result of Defendants' wrongful conduct, Plaintiff and the SECOND CLAIM Violation of Section 20(a) of The Exchange Act Against the Individual Defendants 58. Plaintiff repeats and realleges each and every allegation contained above as if fully 59. Individual Defendants acted as controlling persons of Vista within the meaning of 25 60. In particular, Individual Defendants had direct and supervisory involvement in the 61. As set forth above, Vista and Individual Defendants each violated Section 10(b) PRAYER FOR RELIEF WHEREFORE, Plaintiff prays for relief and judgment, as follows: (a) Determining that this action is a proper class action under Rule 23 of the Federal (b) Awarding compensatory damages in favor of Plaintiff and the other Class members (c) Awarding Plaintiff and the Class their reasonable costs and expenses incurred in (d) Such other and further relief as the Court may deem just and proper. 26JURY TRIAL DEMANDED Plaintiff hereby demands a trial by jury. DATED this 25th day of January, 2017. GOEBEL ANDERSON PC /s/ Heidi G. Goebel Heidi G. Goebel Attorneys for Plaintiff 27 SWORN CERTIFICATION OF PLAINTIFF VISTA OUTDOOR INC. SECURITIES LITIGATION I, Patrick Lentsch individually, and/or in my capacity as trustee and/or principal for accounts listed on 1. I have reviewed the Complaint and authorize its filing and/or the filing of a Lead Plaintiff motion on my behalf. 2. I did not purchase Vista Outdoor Inc. the security that is the subject of this action, at the direction of plaintiff's counsel or in order to participate in any private action arising under this title. 3. I am willing to serve as a representative party on behalf of a class and will testify at deposition and trial, if necessary. 4. My transactions in Vista Outdoor Inc. during the Class Period set forth in the Complaint are as follows: (See attached transactions) 5. I have not served as a representative party on behalf of a class under this title during the last three years, except for the following: 6. I will not accept any payment for serving as a representative party, except to receive my pro rata share of any recovery or as ordered or approved by the court, including the award to a representative plaintiff of reasonable costs and expenses (including lost wages) directly relating to the representation of the class. I declare under penalty of perjury that the foregoing are true and correct statements. DocuSigned by: 1/19/2017 6971EE4DFCD4476. Date Patrick Lentsch Patrick Lentsch's Transactions in Vista Outdoor, Inc. (VSTO) Date Transaction Type Quantity Unit Price 01/13/2017 Bought 2,000 $28.9200 01/13/2017 Bought 1,000 $28.4400

securities

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IN THE UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN DETROIT DIVISON ANGELA R. CROCKETT, individually and on behalf of all others similarly situated, Plaintiff, v. Case No.: GENERAL MOTORS, LLC, Defendant. __________________________________/ CLASS ACTION COMPLAINT Plaintiff, Angela Crockett (“Plaintiff”), brings this Class Action Complaint against Defendant, General Motors, LLC (“Defendant”), alleging that Defendant failed to provide her and the putative class adequate notice of their right to continued health care coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”). 1. Defendant, the plan sponsor of the General Motors Health Care Program Plan (“Plan”), has repeatedly violated ERISA by failing to provide participants and beneficiaries in the Plan with adequate notice, as prescribed by COBRA, of their right to continue their health insurance coverage following an occurrence of a “qualifying event” as defined by the statute. 2. Defendant’s COBRA notice violates 29 C.F.R. § 2590.606– 4(b)(4)(viii) because it fails to include a termination date for COBRA coverage if elected. The notice also violates COBRA because it fails to sufficiently identify the Plan Administrator. 3. Because Defendant’s COBRA notice omits these critical items, it collectively violates 29 C.F.R. § 2590.606–4(b)(4), which requires the plan administrator of a group-health plan to provide a COBRA notice “written in a manner calculated to be understood by the average plan participant.” Without information on when COBRA coverage ends, and who is the Plan Administrator, the notice is not written in a manner calculated to be understood by the average plan participant. 4. As a result of these violations, which threaten Class Members’ ability to maintain their health coverage, Plaintiff seeks statutory penalties, injunctive relief, attorneys’ fees, costs and expenses, and other appropriate relief as set forth herein and provided by law. JURISDICTION AND VENUE 5. Venue is proper in the United States Court for the Eastern District of Michigan because the events giving rise to these claims arose in this district. 6. Plaintiff is a Michigan resident, resides in this district and was a participant in the Plan prior to her termination, a qualifying event within the meaning 2 of 29 U.S.C. § 1163(2). 7. Defendant is a Michigan corporation with its headquarters in Detroit, Michigan, and employed more than 20 employees who were members of the Plan in each year from 2012 to 2018. 8. Defendant is the Plan sponsor within the meaning of 29 U.S.C. §1002(16)(B), and the administrator of the Plan within the meaning of 29 U.S.C. § 1002(16)(A). 9. The Plan provides medical benefits to employees and their beneficiaries, and is an employee welfare benefit plan within the meaning of 29 U.S.C. § 1002(1) and a group health plan within the meaning of 29 U.S.C. § 1167(1). FACTUAL ALLEGATIONS COBRA Notice Requirements 10. The COBRA amendments to ERISA included certain provisions relating to continuation of health coverage upon termination of employment or another “qualifying event” as defined by the statute. 11. Among other things, COBRA requires the plan sponsor of each group health plan normally employing more than 20 employees on a typical business day during the preceding year to provide “each qualified beneficiary who would lose coverage under the plan as a result of a qualifying event … to elect, within the election period, continuation coverage under the plan.” 29 U.S.C. § 1161. 3 (Emphasis added). 12. Notice is of enormous importance. The COBRA notification requirement exists because employees are not presumed to know they have a federally protected right to continue healthcare coverage subsequent to a qualifying 13. COBRA further requires the administrator of such a group health plan to provide notice to any qualified beneficiary of their continuation of coverage rights under COBRA upon the occurrence of a qualifying event. 29 U.S.C. § 1166(a)(4). This notice must be “[i]n accordance with the regulations prescribed by the Secretary” of Labor. 29 U.S.C. § 1166(a). 14. The relevant regulations prescribed by the Secretary of Labor concerning notice of continuation of coverage rights are set forth in 29 C.F.R. § 2590.606-4 as follows: (4) The notice required by this paragraph (b) shall be written in a manner calculated to be understood by the average plan participant and shall contain the following information: (i) The name of the plan under which continuation coverage is available; and the name, address and telephone number of the party responsible under the plan for the administration of continuation coverage benefits; (ii) Identification of the qualifying event; (iii) Identification, by status or name, of the qualified beneficiaries who are recognized by the plan as being entitled to elect continuation coverage with respect to the 4 qualifying event, and the date on which coverage under the plan will terminate (or has terminated) unless continuation coverage is elected; (iv) A statement that each individual who is a qualified beneficiary with respect to the qualifying event has an independent right to elect continuation coverage, that a covered employee or a qualified beneficiary who is the spouse of the covered employee (or was the spouse of the covered employee on the day before the qualifying event occurred) may elect continuation coverage on behalf of all other qualified beneficiaries with respect to the qualifying event, and that a parent or legal guardian may elect continuation coverage on behalf of a minor child; (v) An explanation of the plan's procedures for electing continuation coverage, including an explanation of the time period during which the election must be made, and the date by which the election must be made; (vi) An explanation of the consequences of failing to elect or waiving continuation coverage, including an explanation that a qualified beneficiary's decision whether to elect continuation coverage will affect the future rights of qualified beneficiaries to portability of group health coverage, guaranteed access to individual health coverage, and special enrollment under part 7 of title I of the Act, with a reference to where a qualified beneficiary may obtain additional information about such rights; and a description of the plan's procedures for revoking a waiver of the right to continuation coverage before the date by which the election must be made; (vii) A description of the continuation coverage that will be made available under the plan, if elected, including the date on which such coverage will commence, either by providing a description of the coverage or by reference to the plan's summary plan description; (viii) An explanation of the maximum period for which 5 continuation coverage will be available under the plan, if elected; an explanation of the continuation coverage termination date; and an explanation of any events that might cause continuation coverage to be terminated earlier than the end of the maximum period; (ix) A description of the circumstances (if any) under which the maximum period of continuation coverage may be extended due either to the occurrence of a second qualifying event or a determination by the Social Security Administration, under title II or XVI of the Social Security Act (42 U.S.C. 401 et seq. or 1381 et seq.) (SSA), that the qualified beneficiary is disabled, and the length of any such extension; (x) In the case of a notice that offers continuation coverage with a maximum duration of less than 36 months, a description of the plan's requirements regarding the responsibility of qualified beneficiaries to provide notice of a second qualifying event and notice of a disability determination under the SSA, along with a description of the plan's procedures for providing such notices, including the times within which such notices must be provided and the consequences of failing to provide such notices. The notice shall also explain the responsibility of qualified beneficiaries to provide notice that a disabled qualified beneficiary has subsequently been determined to no longer be disabled; (xi) A description of the amount, if any, that each qualified beneficiary will be required to pay for continuation coverage; (xii) A description of the due dates for payments, the qualified beneficiaries' right to pay on a monthly basis, the grace periods for payment, the address to which payments should be sent, and the consequences of delayed payment and non-payment; (xiii) An explanation of the importance of keeping the 6 administrator informed of the current addresses of all participants or beneficiaries under the plan who are or may become qualified beneficiaries; and (xiv) A statement that the notice does not fully describe continuation coverage or other rights under the plan, and that more complete information regarding such rights is available in the plan's summary plan description or from the plan administrator. 15. To facilitate compliance with these notice obligations, the United States Department of Labor (“DOL”) has issued a Model COBRA Continuation Coverage Election Notice (“Model Notice”), which is included in the Appendix to 29 C.F.R. § 2590.606-4. The DOL website states that the DOL “will consider use of the model election notice, appropriately completed, good faith compliance with the election notice content requirements of COBRA.” 16. In the event that a plan administrator declines to use the Model Notice and fails to meet the notice requirements of 29 U.S.C. § 1166 and 29 C.F.R. § 2590.606-4, the administrator is subject to statutory penalties of up to $110.00 per participant or beneficiary per day from the date of such failure. 29 U.S.C. § 1132(c)(1). Additionally, the Court may order such other relief as it deems proper, including but not limited to injunctive relief pursuant to 29 U.S.C. § 1132(a)(3) and payment of attorneys’ fees and expenses pursuant to 29 U.S.C. § 1132(g)(1). Such is the case here. 17. Here, Defendant failed to use the Model Notice and failed to meet the 7 notice requirements of 29 U.S.C. § 1166 and 29 C.F.R. § 2590.606-4, as set forth below. Defendant’s Notice Is Inadequate and Fails to Comply with COBRA 18. Defendant did not use the Model Notice to notify plan participants of their right to continuation coverage. 19. Rather than use the Model Notice, Defendant authored and disseminated a notice which omitted critical information required by law. The information Defendant omitted from its notice is information that is included in the Model Notice. 20. Defendant’s Notice violates several key COBRA requirements, specifically: a. The Notice violates 29 C.F.R. § 2590.606-4(b)(4)(viii) because it fails to provide an explanation of the continuation coverage termination date; b. The Notice violates 29 C.F.R. § 2590.606-4(b)(4)(i) because it fails to provide the name, address and telephone number of the party responsible under the plan for administration of continuation coverage benefits; and, finally, c. The Notice violates 29 C.F.R. § 2590.606-4(b)(4) because Defendant has failed to provide a notice written in a manner calculated to be understood by the average plan participant. 21. Defendant’s COBRA Notice confused Plaintiff and resulted in her inability to make an informed decision as to electing COBRA continuation coverage. 8 22. Based, in part, on the deficiencies identified above as to Defendant’s COBRA notice, Plaintiff did not elect COBRA continuation coverage. 23. As a result of Defendant’s deficient COBRA notice, Plaintiff suffered a tangible injury in the form of economic loss, specifically the loss of health insurance coverage for herself and her son. Insurance coverage is an employer subsidized benefit of employment of monetary value, the loss of which is a tangible injury. 24. Plaintiff also suffered a tangible economic loss, as she was forced to pay for medical expenses for both herself and her son after she lost her health insurance. 25. Plaintiff suffered an additional concrete harm in the form of stress and anxiety caused by the loss of her health insurance. 26. Additional time was spent trying to figure out which providers would treat her now that she lacked health insurance. 27. Defendant’s deficient COBRA Notice caused Plaintiff an informational injury when Defendant failed to provide her with information to which she was entitled to by statute, namely a compliant COBRA election notice containing all information required by 29 C.F.R. § 2590.606-4(b)(4) and 29 U.S.C. § 1166(a). 28. Through ERISA and then COBRA, Congress created a right—the right to receive the required COBRA election notice—and an injury—not receiving a 9 proper election notice with information required by 29 C.F.R. § 2590.606-4(b)(4) and 29 U.S.C. § 1166(a). Defendant injured Plaintiff and the class members she represents by failing to provide the information required by COBRA. Plaintiff Angela Crockett 29. Plaintiff was employed by Defendant as a Design Release Engineer, during which time she obtained medical insurance for herself and her son through Defendant’s group health plan. 30. On or around February 3, 2020, Plaintiff’s employment was terminated. Plaintiff was not terminated for “gross misconduct” and was, therefore, eligible for continuation coverage. 31. Plaintiff’s termination was a qualifying event (termination of employment), which triggered Defendant’s COBRA obligations. 32. On or around February 3, 2020, Defendant mailed Plaintiff the deficient COBRA notice. 33. The COBRA notice was not written in a manner calculated to be understood by the average plan participant. 34. The COBRA notice did not provide Plaintiff (nor her son) with the substantive information required by federal law, as explained below. 35. Because this is not an ERISA benefits case, Plaintiff was not required to exhaust any administrative remedies through Defendant prior to bringing suit. 10 36. Any attempts to exhaust the administrative remedies would have been futile as this is not an ERISA benefits case. In fact, exhaustion of administrative remedies is not required because Plaintiff was not provided with proper notice of his rights in the first instance. Violation of 29 C.F.R. § 2590.606-4(b)(4)(viii) Failure to provide an explanation of the continuation coverage termination date 37. The governing statute requires Defendant to provide a COBRA election notice that discloses “an explanation of the maximum period for which continuation coverage will be available under the plan” and “an explanation of the continuation coverage termination date.” 29 C.F.R. § 2590.606-4(b)(4)(viii). Defendant violated the regulation by failing to include in the notice the specific date coverage will end. 38. This information not only informs Plaintiff of the length of coverage, if elected, but also the specific date on which such coverage will terminate. This information is very important for deciding whether to elect coverage. 39. Continuation coverage is not designed to be permanent. Traditionally, continuation coverage is used as a temporary solution until a qualifying participant obtains new coverage under a different group health plan. Thus, election notices must be sufficient to permit the discharged employee to make an informed decision whether to elect coverage. 40. Here, Defendant’s notice merely states that coverage may generally last for up to 18 months. Although the 18–month language arguably satisfies the 11 requirement that an employer include an “explanation of the maximum period for which continuation coverage will be available,” the regulation’s inclusion of the phrase “termination date” requires the employer to also identify the day on which coverage ends. See 29 C.F.R. § 2590.606-4(b)(4)(viii). 41. Plaintiff cannot truly make an informed decision regarding continuation coverage without knowing the specific date when coverage will end and when they will be uninsured. 42. Here Plaintiff was only provided with the length of continuation coverage, but was never notified when the coverage, if elected, would terminate. 43. Even if Plaintiff had tried to use a calendar to determine the termination date, using an 18-month window, she would not be able to determine whether this monthly coverage would terminate at the beginning of the 18th month, the end of the 18th month or 18 months to the day of eligibility. 44. The statute requires these disclosures specifically to avoid this type of confusion surrounding a matter as important as electing health insurance. 45. Furthermore, a fiduciary breaches its duties by materially misleading plan participants, regardless of whether the fiduciary's statements or omissions were made negligently or intentionally. Without the required disclosures, Defendant’s notice does not permit Plaintiff to make an informed decision and is therefore deficient. 12 Violation of 29 C.F.R. § 2590.606-4(b)(4)(i) Failure to Identify Plan Administrator 46. Defendant was required to provide “in a manner calculated to be understood by the average plan participant ... the name, address and telephone number of the party responsible under the plan for administration of continuation coverage benefits.” 29 C.F.R. § 2590.606- 4(b)(4)(i). Defendant’s Notice failed to comply with this fundamental requirement. 47. Identifying the Plan Administrator is critical because the plan administrator bears the burden of proving that adequate COBRA notification was given to the employee. 48. Nowhere throughout the entire COBRA election notice does Defendant identify affirmatively identify itself as the Plan Administrator. COBRA requires the administrator of a group health plan to provide notice to any qualified beneficiary of their continuation of coverage rights under COBRA upon the occurrence of a qualifying event. 29 U.S.C. § 1166(a)(4). 49. Consistent with Judge Martinez’s recent landmark COBRA notice case decision from Bryant v. Wal-Mart Stores, Inc., No. 16-24818-CIV, 2019 WL 3542827, at *5 (S.D. Fla. Apr. 18, 2019), Defendant’s COBRA form violates 29 C.F.R. § 2590.606–4(b)(4)(vi) because it fails to sufficiently identify the Plan Administrator. 50. As Judge Martinez opined in Bryant, Defendant’s inclusion of the 13 COBRA administrator’s (instead of the plan administrator’s) name, address, and telephone number does not satisfy the election notice requirements of section 2590.606-4(b)(4)(i). And without the plan administrator’s name, address, and telephone number, Defendant’s notice is not “sufficient to permit the discharged employee to make an informed decision whether to elect coverage.” Violation of 29 C.F.R. § 2590.606-4(b)(4) Failure to Provide COBRA Notice Written in a Manner Calculated “To Be Understood By the Average Plan Participant” 51. Because Defendant’s COBRA notice omits these critical items, it collectively violates 29 C.F.R. § 2590.606–4(b)(4), which requires the plan administrator of a group-health plan to provide a COBRA notice “written in a manner calculated to be understood by the average plan participant.” 52. Without information on when COBRA coverage ends, and who is the Plan Administrator, the notice is not written in a manner calculated to be understood by the average plan participant. 53. This particular section, 29 C.F.R. § 2590.606–4(b)(4), mandates employers provide notice of continuation coverage written in a manner calculated “to be understood by the average plan participant.” 54. Whether a defendant’s COBRA notification complies with the law turns on whether the notice is understandable by an average plan participant. This requirement has been interpreted as an objective standard rather than requiring an 14 inquiry into the subjective perception of the individual plan participants. 55. 29 U.S.C. § 1166(a)(4)(A) requires plan administrators to notify the former employee of their right to receive continuation coverage with a notice that must be sufficient to permit the discharged employee to make an informed decision whether to elect coverage. 56. By omitting critical information, like when COBRA coverage ends, and who is the Plan Administrator, the notice is not written in a manner calculated to be understood by the average plan participant. 57. Therefore, Defendant’s notice violates 29 C.F.R. § 2590.606- 4(b)(4)(v). CLASS ACTION ALLEGATIONS 58. Plaintiff brings this action as a class action pursuant to Rule 23 Fed.R.Civ.P. on behalf of the following persons: All participants and beneficiaries in the Defendant’s Health Plan who were sent a COBRA notice by Defendant during the applicable statute of limitations period as a result of a qualifying event, as determined by Defendant, who did not elect COBRA. 59. No administrative remedies exist as a prerequisite to Plaintiff’s claim on behalf of the Putative Class. As such, any efforts related to exhausting such non- existent remedies would be futile. 60. Numerosity: The Class is so numerous that joinder of all Class 15 members is impracticable. On information and belief, hundreds or thousands of individuals satisfy the definition of the Class. 61. Typicality: Plaintiff’s claims are typical of the Class. The COBRA notice that Defendant sent to Plaintiff was a form notice that was uniformly provided to all Class members. As such, the COBRA notice that Plaintiff received was typical of the COBRA notices that other Class Members received, and suffered from the same deficiencies. 62. Adequacy: Plaintiff will fairly and adequately protect the interests of the Class members; she has no interests antagonistic to the class, and has retained counsel experienced in complex class action litigation. 63. Commonality: Common questions of law and fact exist as to all members of the Class and predominate over any questions solely affecting individual members of the Class, including but not limited to: a. Whether the Plan is a group health plan within the meaning of 29 U.S.C. § 1167(1); b. Whether Defendant’s COBRA notice complied with the requirements of 29 U.S.C. § 1166(a) and 29 C.F.R. § 2590.606- 4; c. Whether statutory penalties should be imposed against Defendant under 29 U.S.C. § 1132(c)(1) for failing to comply with COBRA notice requirements, and if so, in what amount; d. The appropriateness and proper form of any injunctive relief or other equitable relief pursuant to 29 U.S.C. § 1132(a)(3); and 16 e. Whether (and the extent to which) other relief should be granted based on Defendant’s failure to comply with COBRA notice requirements. 64. Class Members do not have an interest in pursuing separate individual actions against Defendant, as the amount of each Class Member’s individual claims is relatively small compared to the expense and burden of individual prosecution. Class certification will also obviate the need for unduly duplicative litigation that might result in inconsistent judgments concerning Defendant’s practices and the adequacy of its COBRA notice. Moreover, management of this action as a class action will not present any likely difficulties. In the interests of justice and judicial efficiency, it would be desirable to concentrate the litigation of all Class Members’ claims in a single action. 65. Plaintiff intends to send notice to all Class Members. The names and addresses of the Class Members are available from Defendant’s records, as well as from Defendant’s third-party administrator, WageWorks. CLASS CLAIM I FOR RELIEF Violation of 29 U.S.C. § 1166(a) and 29 C.F.R. § 2590.606-4 66. The Plan is a group health plan within the meaning of 29 U.S.C. § 1167(1). 67. Defendant is the sponsor and administrator of the Plan, and was subject to the continuation of coverage and notice requirements of COBRA. 68. Plaintiff and the other members of the Class experienced a “qualifying 17 event” as defined by 29 U.S.C. § 1163, and Defendant was aware that they had experienced such a qualifying event. 69. On account of such qualifying event, Defendant sent Plaintiff and the Class Members a COBRA notice in the form described herein. 70. The COBRA notice that Defendant sent to Plaintiff and other Class Members violated 29 U.S.C. § 1166(a) and 29 C.F.R. § 2590.606-4 for the reasons set forth in Paragraphs 8-61 above (among other reasons). 71. These violations were material and willful. 72. Defendant knew, or should have known, that its notice was inconsistent with the Secretary of Labor’s Model Notice and failed to comply with 29 U.S.C. § 1166(a) and 29 C.F.R. § 2590.606-4, but chose to use a non-compliant notice in deliberate or reckless disregard of the rights of Plaintiff and other Class Members. PRAYER FOR RELIEF WHEREFORE, Plaintiff, individually and on behalf of the Class, prays for relief as follows: a. Designating Plaintiff’s counsel as counsel for the Class; b. Issuing proper notice to the Class at Defendant’s expense; c. Declaring that the COBRA notice sent by Defendant to Plaintiffs and other Class Members violated 29 U.S.C. § 1166(a) and 29 C.F.R. § 2590.606-4; d. Awarding appropriate equitable relief pursuant to 29 U.S.C. § 18 1132(a)(3), including but not limited to an order enjoining Defendant from continuing to use its defective COBRA notice and requiring Defendant to send corrective notices; e. Awarding statutory penalties to the Class pursuant to 29 U.S.C. § 1132(c)(1) and 29 C.F.R. § 2575.502c-1 in the amount of $110.00 per day for each Class Member who was sent a defective COBRA notice by Defendant; f. To the extent statutory damages are not awarded, Plaintiff requests the Court award her nominal damages; g. Awarding attorneys’ fees, costs and expenses to Plaintiffs’ counsel as provided by 29 U.S.C. § 1132(g)(1) and other applicable law; and h. Granting such other and further relief, in law or equity, as this Court deems appropriate. Dated this 7th day of February, 2022. Respectfully submitted, /s/Brandon J. Hill LUIS A. CABASSA Florida Bar Number: 053643 Direct No.: 813-379-2565 BRANDON J. HILL Florida Bar Number: 37061 Direct No.: 813-337-7992 WENZEL FENTON CABASSA, P.A. 1110 North Florida Ave., Suite 300 Tampa, Florida 33602 Main No.: 813-224-0431 Facsimile: 813-229-8712 Email: [email protected] Email: [email protected] and 19 Chad A. Justice Florida Bar No. 121559 Michigan Bar No. P84367 JUSTICE FOR JUSTICE, LLC 1205 N. Franklin St. Tampa, FL 33606 Telephone (813) 254-1777 Fax (813) 254-3999 Attorneys for Plaintiff 20

consumer fraud

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Randy M. Andrus (10392) ANDRUS LAW FIRM, LLC 299 South Main Street, Suite 1300 Salt Lake City, Utah 84111-2241 Telephone: (801) 535-4645 Email: [email protected] Attorney for Plaintiff IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH COMPLAINT FOR DAMAGES (JURY TRIAL DEMANDED) Case No. 2:19-cv-00058-EJF Honorable Judge Evelyn J. Furse VANESSA BILLY; Plaintiff, vs. EDGE HOMES, LLC; EDGE CONSTRUCTION, LLC; STEVE MADDOX; DOES 1 through 50, inclusive, Defendants. COMES NOW, Plaintiff, and without waiver of any rights or entitlements, including to amend, allege against Defendants jointly and severally, as follows: I. PARTIES AND RELATED PARTIES 1. Plaintiff, VANESSA BILLY (hereinafter “Plaintiff” or “BILLY”) is, and at all times mentioned in this Complaint was, an individual, residing in the State of Utah. 2. Plaintiff is informed, and believes and on that basis alleges that Defendant, EDGE HOMES, LLC, dba/aka EDGE HOMES (hereafter “Defendant” or “EDGE HOMES”) is, and at all times mentioned in this Complaint was, a business entity, located and/or doing business from its registered place of business in Salt Lake County, State of Utah. 3. Plaintiff is informed, and believes and on that basis alleges that Defendant, EDGE CONSTRUCTION, LLC, dba/aka EDGE CONSTRUCTION (hereafter “Defendant” or “EDGE CONSTRUCTION”) is, and at all times mentioned in this Complaint was, a business entity, located and/or doing business from its registered place of business in Salt Lake County, State of Utah. EDGE HOMES, LLC and EDGE CONSTRUCTION, LLC are collectively referred to as EDGE herein. 4. Defendant, STEVE MADDOX (hereinafter “Defendant” or “MADDOX”) is, and at all times mentioned in this Complaint was, an individual, residing in Utah County, State of Utah. 5. Plaintiff is ignorant of the true names and capacities of Defendants sued herein as DOES 1 through 50, and therefore sue said Defendants by such fictitious names. Plaintiff is informed and believes, and on that basis, alleges that each Defendant named herein is responsible in some manner for the acts, omissions, and occurrences herein alleged, and that Plaintiff’s damages, as hereinafter alleged, were proximately caused by such occurrences. Plaintiff will amend this Complaint to allege the true names and capacities of such Defendants when they are ascertained and based on her rights to conduct discovery. 6. Plaintiff is informed and believes, and on that basis alleges, that each Defendant may or may not have been the agent, servant, and/or employee of each Defendant and may or may not have acted in a concerted conspiracy, pursuant to a common plan, civil conspiracy, or other common and/or integrated enterprise, and that each Defendant may or may not have authorized, ratified, and/or negligently supervised, each act of each Defendant, and that each Defendant is and/or may or may not be the alter ego of each Defendant. Plaintiff is informed and believes and, on that basis, alleges that Defendants were and are responsible for the acts causing Plaintiff’s damages as hereinafter alleged. All Defendants are collectively referred to as “Defendants”. II. JURISDICTION AND VENUE 7. The Court has jurisdiction over this matter by virtue of federal question jurisdiction, including arising under the laws of the United States, including Title VII of the Civil Rights Act of 1964, as amended (“Title VII”) for employment discrimination. Jurisdiction is specifically conferred on this Court by 42 U.S.C. §§ 2000e-2(a), (k) et seq. Equitable and other relief are also sought under 42 U.S.C. 2000e(5)(g). The Court also has supplemental and/or ancillary jurisdiction over related claims which also exist. Jurisdiction is also based on 28 U.S.C. §§ 1331, 1343, and 1367. 8. Venue is proper by virtue of 28 U.S.C. § 1391 as the parties reside; have their principal place of business; are incorporated; are citizens with physical presence and the intent to remain indefinitely in Utah and in this District; and/or are subject to jurisdiction in this District as the the most significant contacts, events or omissions giving rise to the claims occurred here. III. EXHAUSTION OF ADMINISTRATIVE REMEDIES 9. On or about January 2, 2018, Plaintiff Vanessa Billy filed Charges of Discrimination including with the United States Equal Employment Opportunity Commission (“EEOC”), case number 35C-2018-00153. 10. On or about October 30, 2018, the EEOC issued a Notice of Right to Sue to Ms. Billy, attached hereto as EXHIBIT A. Plaintiff Billy has exhausted her administrative remedies. 11. The Complaint in this action was timely filed within the 90-day period specified in the Notice of Right to Sue. IV. FACTUAL BACKGROUND AND ALLEGATIONS A. Defendants’ Structure and Hierarchy 12. At all times relevant, including since 2009/2010 to present, Defendants EDGE is believed to be a domestic for-profit company and enterprise, engaged in interstate commerce with its headquarters and its principal place of business located at 13702 South 200 West, Suite B12, Draper, Utah 84020. 13. At all times relevant, EDGE is primarily a builder and retailer of homes which are built in various locations around the State of Utah. 14. At all times relevant, including since December 2016 to present, Defendant Maddox is and has been an individual; and is and has been an owner, officer, and proxy of B. Defendant EDGE Had a Special Relationship with Plaintiff Billy 15. Since December 2016 to December 2017, a special relationship existed between EDGE and Ms. Billy, including an employer-employee relationship. 16. Since December 2016 to December 2017, Maddox was in a position of power, authority and trust over Ms. Billy and her employment at EDGE. 17. On or about December 8, 2016, and thereafter, Ms. Billy and EDGE entered into express oral and implied contracts, promises and agreements. 18. Among the contracts, promises, and representations made by EDGE to Ms. Billy, and to induce her to rely, leave other employment and opportunities, and enter into the agreements, were promises and representations that EDGE would not discharge Ms. Billy without good, just, or legitimate cause. 19. Ms. Billy agreed to be employed by EDGE and provide her substantial time, talent, skill, experience, knowledge, and industry. 20. EDGE agreed in exchange that it would pay compensation to Ms. Billy, including wages, vacation, bonuses, and other compensation. 21. EDGE also agreed that it would not act arbitrarily with Ms. Billy. 22. EDGE also agreed that it would act with mutual consent with Ms. Billy. 23. EDGE also agreed that it would act with mutual respect with Ms. Billy. 24. Ms. Billy began her employment with EDGE as a full-time Contract Coordinator. 25. In or about October 2017, Ms. Billy became an EDGE sales agent while training multiple persons for her Contract Coordinator position. D. Defendants Assisted, Enabled and Were Complicit in the Conduct Toward Plaintiff 26. Prior to December 2016, EDGE knew of Maddox’s sexual behaviors towards others, including to other employees of EDGE. 27. Prior to December 2016, EDGE created; had special knowledge of; and approved EDGE’s policies expressly prohibiting any form of unlawful harassment by anyone, including any supervisory personnel, co-worker, vendor, client, or customer, that is sexual in nature or based on race, color, religion, gender, national origin, disability, age, status as a veteran, or any other status or characteristic protected by law, and that violation of this policy will result in disciplinary action up to and including termination. 28. The EDGE harassment at the workplace policy states: “Sexual harassment constitutes discrimination and is illegal under federal, state and local laws. For the purposes of this policy, sexual harassment is defined in the Equal Employment Opportunity Commission Guidelines as unwelcome sexual advances, requests for sexual favors and other verbal or physical conduct of a sexual nature when, for example: (i) submission to such conduct is made either explicitly or implicitly a term or condition of an individual's employment; (ii) submission to or rejection of such conduct by an individual is used as the basis for employment decisions affecting such individual; or (iii) such conduct has the purpose or effect of unreasonably interfering with an individual's work performance or creating an intimidating, hostile, or offensive working environment. Sexual harassment may include a range of subtle and not so subtle behaviors and may involve individuals of the same or different gender. Depending on the circumstances, these behaviors may include, but are not limited to: unwanted sexual advances or requests for sexual favors; sexual jokes and innuendos; verbal abuse of a sexual nature; commentary about an individual's body, sexual prowess or sexual deficiencies; leering, catcalls or touching; insulting or obscene comments or gestures; display or circulation in the workplace of sexually suggestive objects or pictures (including through e-mail); and other physical, verbal or visual conduct of a sexual nature. Sex-based harassment, that is harassment not involving sexual activity or language (e.g., male manager yells only at female employees and not males), may also constitute discrimination if it is severe or pervasive and directed at employees because of their gender. Harassment on the basis of any other protected status is also strictly prohibited. Under this policy, harassment is verbal or physical conduct that denigrates or shows hostility or aversion toward an individual because of his/her race, color, religion, gender, national origin, disability, age, marital status, genetic predisposition or carrier status, or any other characteristic protected by law, and that: (i) has the purpose or effect of creating an intimidating, hostile or offensive work environment; (ii) has the purpose or effect of unreasonably interfering with an individual's work performance; or (iii) otherwise adversely affects an individual's employment opportunities. Harassing conduct includes, but is not limited to: epithets, slurs or negative stereotyping; threatening, intimidating or hostile acts; denigrating jokes and display or circulation in the workplace of written or graphic material that denigrates or shows hostility or aversion toward an individual or group (including through e-mail).” 29. Shortly after Ms. Billy was hired, Maddox noticed and became very attracted to 30. Thereafter, including in or about January 2017 and after, Maddox made a point to come see Ms. Billy and pursue her in an unwelcomed and unsolicited manner at and when she was working in conjunction with her job duties. Maddox began with subtle behaviors based on Ms. Billy’s gender, asking her repeated questions about her personal life; questions about her boyfriend; how much money he made; why she wasn’t married to her boyfriend. 31. Further, during Maddox’s offensive, unwelcomed and unsolicited advances to Ms. Billy, Maddox would state that he was in the process of divorcing his wife; how his wife was overweight; how his wife will never have to work again, and how she gets a million dollars. Maddox stated how he couldn’t stand his wife at all; how he hated her; and found her appalling. 32. Further, during Maddox’s offensive, unwelcomed and unsolicited advances to Ms. Billy, Maddox would state to her that he wanted a woman with olive skin, dark hair [like Ms. Billy]; asking if Ms. Billy knew how much money he made; and how he could take care of any lady very well. Maddox also expressed how he wanted an active woman, healthy and fit, and he would ask Ms. Billy what she did to work out and stay fit; and questions about Ms. Billy’s weekends off work, and if her boyfriend was around. 33. Subsequent and in addition to the above, in or around February 2017 and after, Maddox persisted in his pursuit of unwelcomed, offensive, and unsolicited advances to Ms. Billy, escalating his sharing of inappropriate stories from his life and his encounters with women. One in particular, told multiple times, was about how when Maddox was on a church mission, he knocked on a door and a fully naked red headed woman answered. He stated he never liked women like her—red hair all over. He said he was interested in women that were darker skin tone, olive skin, dark hair [like Ms. Billy]. 34. Subsequent and in addition to the above, in or around March 2017 and after, Maddox persisted in his further pursuit and escalating pervasive, offensive, unwelcomed, and unsolicited advances to Ms. Billy including additional behaviors such as calling her into his private office alone and to bring a notebook. Instead of discussing work matters with Ms. Billy, Maddox would talk about his personal life or ask her questions about her personal life; they wouldn't talk about work. Ms. Billy complained by expressing her concerns, that she had a lot of work to do and about the way he talked to her. Ms. Billy told Maddox to stop, but Maddox would just laugh at her; brush her off; would not stop; and would not leave her alone. Ms. Billy openly expressed her complaints and concerns about their conversations on several occasions when he would call her into his office alone. 35. In company meeting settings, Maddox also openly joked inappropriately and offensively, directing comments to Ms. Billy, subjecting her to ridicule and embarrassment. She again complained and asked him to watch and stop his inappropriate unwelcomed behaviors and conversations, but to no avail. 36. Instead of stopping, Maddox’s behaviors continued. Ms. Billy found herself becoming more and more uneasy when Maddox would come talk to her. Her desk was in a corner of the office... backed against a wall. Her ability to leave her desk when Maddox was talking to her, forced her to be trapped and fearful of losing her job. 37. Maddox was in the position of power, authority, and control over her job and promotion opportunities, and from there, Maddox used transference, manipulation, and other methods. 38. On an additional occasion, in or around May 2017 and after, Maddox approached Ms. Billy unwelcomed and unsolicited, and in an offensive and intimidating manner said that he “felt like throwing a woman down on a table and f*ing her hard.” When making this and other such comments, Maddox would watch for Ms. Billy’s reaction and ask her questions about how she felt when he made those comments. Ms. Billy knew he didn’t like it when she was unresponsive, and Maddox would become angry. 39. Despite Ms. Billy’s complaints to management and her superiors, including to Maddox himself, Maddox continued in his pervasive, offensive, unwelcomed, intimidating, and unsolicited behaviors and advances to Ms. Billy. On a separate subsequent occasion, Maddox noticed Ms. Billy’s painted fingernails, then expressed how he needed a girl to be girly enough to care about painting her nails…yet tomboy enough to camp and ride mules with him. He talked extensively and directed to Ms. Billy about what he wanted in a woman for himself. 40. Maddox knew Ms. Billy was a ball of nerves around him and he knew how uncomfortable he made her. 41. On an occasion, in or around September 2017, Maddox told Ms. Billy that he liked her hair, then proceeded to assault and actually touch Ms. Billy’s person physically without her permission, including her hair, in an offensive, unwelcomed, unsolicited, and unpermitted manner. Ms. Billy was frozen and fearful. 42. The work environment became increasingly hostile, offensive, and intimidating. When Ms. Billy would not respond as Maddox wanted, Maddox would made demands and statements, “Why don’t you look at me? Why don’t you answer me?” “I want you to rate yourself.” “I don’t think you’ll make a good agent. You’re flat”. “You wouldn’t be able to close the deal.” 43. After Maddox’s advances to Ms. Billy were rejected, rebuffed, and refused by Ms. Billy, including through her complaints and protected activities, Maddox took retaliatory action against her. 44. Maddox, through the use of perverted, unjust power, sought ways to have Ms. Billy’s employment terms and conditions altered and/or have her removed from her employment, including from her Contract Coordinator position. 45. In or about October 2017, Ms. Billy applied for, and was interviewed to be, an EDGE Sales Agent. 46. As an EDGE Sales Agent, Ms. Billy would not be in the office around Maddox. 47. In or about October 2017, Ms. Billy was accepted to be an EDGE Sales Agent. 48. After she applied and was accepted to be an EDGE Sales Agent, Ms. Billy in reliance, continued to also work in her Contract Coordinator position and spent much time training multiple people to take over her position. 49. Ms. Billy relied and commenced her performance, training, and work as a Sales Agent—with further promises and assurances of employment being made to her by EDGE. 50. EDGE through its agents and officers made a number of representations, promises, and agreements with Ms. Billy, in addition to those referenced above, including: a. That Ms. Billy’s employment would not be impeded in the company; b. That Ms. Billy would be protected; c. That Ms. Billy would be provided with all that is necessary to be an EDGE Sales Agent; d. That Ms. Billy’s real estate agent training and licensing expenses would be provided and paid for by EDGE, something that EDGE stated had not been done before. 51. Despite the representations, promises, and agreements with Ms. Billy, EDGE, including Maddox, took further retaliatory action against Ms. Billy to get rid of her; terminating her employment; and seeking from her a “Release of Claims” including as to Maddox. 52. Instead, EDGE engaged in further gender discrimination against, harassment towards, and a continuing hostile work environment towards Ms. Billy. EDGE thereby engaged in further discrimination and retaliation, including by altering the terms and conditions of her employment and by the termination of Ms. Billy—all in direct violation of her rights and the express promises made to her. 53. The conduct, behaviors, retaliation, and adverse action against Ms. Billy would not have been taken by EDGE but for Ms. Billy’s challenges against and opposition to the unlawful gender discrimination, sexual harassment, quid pro quo, hostile work environment, and retaliation, and/or her participation in protected activities.. 54. Unfortunately, EDGE’s behaviors also breached EDGE’s promises and commitments, to Ms. Billy, including: a. That Ms. Billy was impeded in the company; b. That Ms. Billy was not protected, her employment and physically; c. That Ms. Billy was not provided with all that is necessary to be an EDGE Sales Agent; d. That Ms. Billy’s real estate agent training and licensing expenses were not provided and paid for by EDGE. 55. Instead of correcting and stopping the gender discrimination, sexual harassment, hostile work environment, and retaliation, EDGE continued with additional adverse action. V. CAUSES OF ACTION FIRST COUNT (Violations of Civil Rights and Statutory Discrimination, including Title VII) (Gender / Sexual Harassment / Hostile Work Environment / Retaliation) (Against Defendants EDGE) 56. Plaintiff incorporates by reference the above allegations as if set forth fully herein. 57. From on or about December 8, 2016 to December 15, 2017, Plaintiff Billy was employed with Defendants EDGE. 58. Defendants EDGE is an employer affecting commerce with more than 15 employees. 59. During her employment with EDGE, Ms. Billy has been a member of protected classes, including on the basis of her gender/sex (female) (“Protected Classes”). 60. At all times during her employment with EDGE, Ms. Billy was qualified for the positions she held and for those positions which have been denied to her. 61. During her employment, Ms. Billy was objectively and subjectively, subjected to gender discrimination, severe and pervasive sexual harassment, quid pro quo discrimination, hostile work environment, retaliation, and adverse employment action which has negatively impacted and altered the terms and conditions of her employment, including denial of promotions, job opportunities, her job positions, compensation, based upon her Protected Classes and in retaliation for her protected action, all in violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e-2(a), (k) et seq. 62. EDGE has adopted policies and standards against gender discrimination, sexual and other unlawful harassment, quid pro quo, hostile work environment, and retaliation which EDGE has made promises to its employees and to Ms. Billy particularly, including which is set forth above, which EDGE violated. 63. EDGE, including through Maddox, engaged in severe, pervasive, offensive, abusive, and retaliatory conduct to Ms. Billy, including as described herein, which violates Title VII and EDGE’s own policies and standards. Maddox acted wrongfully, and his conduct fell below EDGE’s policies, standards, and expectations—in violation of EDGE’s own written policies, including those prohibiting sexual harassment, quid pro quo, and hostile work environment—all of which resulted in interference with Ms. Billy’s Constitutional and civil rights; her employment and work performance; creating a hostile and abusive working environment. 64. Ms. Billy complained to EDGE and engaged in protective activities. Following her protected activities, including notification to EDGE of her complaints, including as set forth above, Ms. Billy was subjected to further gender discrimination, sexual harassment, further hostile, abuse and toxic work environment, and retaliation including EDGE’s asserted false and pretextual reasons for termination, thus violating and denying her of her rights. 65. Ms. Billy was treated less favorably than others not in her Protected Classes. EDGE allowed others, not in Ms. Billy’s Protected Classes, to engage in the same or similar conduct without being treated with adverse action like Ms. Billy was. 66. Ms. Billy is informed, believes and on that basis alleges that persons not in the same Protected Classes as Ms. Billy were treated more favorably than was Ms. Billy, and were not treated like Ms. Billy was subjected to. 67. Although qualified for her and other promotional positions, Ms. Billy was subjected to disparate treatment and disparate impact discrimination, and tangible adverse employment action when she was actively discriminated against, subjected to a hostile work environment, harassed, and denied job advantages and promotional positions at EDGE. 68. Ms. Billy engaged in protected activities including with her complaints; however, she was retaliated against, subjected to adverse action, put in fear of reprisal, distraught, and subjected to adverse action because of and with the motivating factors being her Protected Classes status. 69. As a result of EDGE’s actions and willful violation of her rights, Ms. Billy has suffered irreparable injuries, including but not limited to loss of pay, compensation and other economic losses; and is entitled to recover damages and relief, for emotional pain and suffering, mental anguish, humiliation, embarrassment, personal indignity, loss of enjoyment of life, and other intangible injuries for all of which she should be compensated, as well as for liquidated and punitive damages, Eshelman damages, pre-judgment and post-judgment interest, attorney fees, and costs, the exact amount to be shown at the time of trial. WHEREFORE, Plaintiff prays judgment as hereinafter set forth. SECOND COUNT (Civil Assault) (Against All Defendants) 70. Plaintiff incorporates by reference the above allegations as if set forth fully herein. 71. Separate, apart, and standing alone from any employment discrimination, retaliation, and/or any Title VII claims, Defendants, including EDGE and Maddox, and/or each of them, jointly, severally, and individually, also perpetrated and engaged in harmful, offensive, assaulting conduct towards Ms. Billy, including physical conduct initiated by Maddox which was unwanted, unwelcomed, harmful, and damaging to Ms. Billy. 72. Defendants, and/or each of them, knew or should have known that their threatened physical contact with Ms. Billy was unwanted, unwelcomed, harmful, and damaging 73. Defendants’, and/or each of their, actions were perpetrated in such a manner so as to cause Ms. Billy harm and suffering to her as a person individually physically, mentally, and emotionally, including fear of danger, and imminent apprehension of physical battery to her. 74. Defendants’, and/or each of their, actions, including the unpermitted assaulting behaviors of Maddox upon Ms. Billy, were intentional. 75. Defendants’, and/or each of their, actions were unjustified, without Ms. Billy’s consent. 76. As a result of Defendants’, and/or each of their, actions, Ms. Billy felt the imminent apprehension, fear, shock, anxiety, and fright of such contact, and was placed in great fear for her safety and well being. 77. Defendants, and each of them, knew or should have known that their threatened physical contact with Ms. Billy would cause both permanent emotional harm and permanent physical harm to her. 78. As a direct and proximate result of the aforementioned actions by Defendants, and/or each of them, Ms. Billy has sustained and will sustain damages including: a. extreme and severe pain and suffering, both physical and mental; b. economic damages, including bills and expenses for medical care and mental health counseling that Ms. Billy required and will require in the future; c. a diminution in the ability and capacity to work, earn money and perform household and other services in the future; and d. non-economic damages, including a loss of enjoyment of life. WHEREFORE, Plaintiff prays judgment as hereinafter set forth. THIRD COUNT (Civil Battery) (Against All Defendants) 79. Plaintiff incorporates by reference the above allegations as if set forth fully herein. 80. Separate, apart, and standing alone from any employment discrimination, retaliation, and/or any Title VII claims, Defendants, including EDGE and Maddox, and/or each of them, jointly, severally, and individually, also perpetrated and engaged in battery by making harmful and offensive physical and sexual contact with Ms. Billy. 81. Defendants’, and/or each of their, actions towards Ms. Billy, including physical contact were unwanted, unwelcomed, harmful, and damaging to Ms. Billy. 82. Defendants, and/or each of them, knew or should have known that their intentional physical contact upon Ms. Billy was unwanted, unwelcomed, and damaging to her. 83. Defendants’, and/or each of their, actions were perpetrated in such a manner so as to cause Ms. Billy harm and suffering to her as a person individually physically, mentally, and emotionally, including shock, fear of danger to Ms. Billy. 84. Defendants’, and/or each of their actions were intentional. 85. Defendants’, and/or each of their, actions were unjustified and without consent. 85. Defendants, and/or each of them, knew or should have known that their intentional and/or reckless physical contact with Ms. Billy, including the touching of Billy’s body and person, was unwanted, unwelcomed, harmful, offensive and/or damaging to her. 87. Defendants, and/or each of them, knew or should have known that their intentional physical contact with Ms. Billy would cause both permanent emotional harm and permanent physical harm to her. 88. As a direct and proximate result of the aforementioned actions by Defendants, and/or each of them, Ms. Billy has sustained and will sustain damages including: a. extreme and severe pain and suffering, both physical and mental; b. economic damages, including bills and expenses for medical care and mental health counseling that Ms. Billy required and will require in the future; c. a diminution in the ability and capacity to work, earn money and perform household and other services in the future; and d. non-economic damages, including a loss of enjoyment of life. WHEREFORE, Plaintiff prays judgment as hereinafter set forth. FOURTH COUNT (Breach of Contracts, Including Breach of Covenant of Good Faith and Fair Dealing) (Against Defendants EDGE) 89. Plaintiff incorporates by reference the above allegations as if set forth fully herein. 90. Separate, apart, and standing alone from any employment discrimination, retaliation, and/or any Title VII claims, on or about December 8, 2016 and again in or about October 2017, and thereafter, for valuable consideration, Ms. Billy and EDGE, intended, communicated, and entered into express contracts, including written, oral, and implied promises, contracts, and agreements, through offer and acceptance, including that Ms. Billy would be employed by EDGE and provide her time, talent, skill, experience, knowledge, and industry. 91. EDGE agreed in exchange that Ms. Billy be paid compensation, including wages and other compensation; that with Ms. Billy’s long-term employment. 92. Further, EDGE through its agents and officers made a number of representations, promises, and agreements with Ms. Billy, including to induce her to rely, leave other employment and opportunities, and enter into the agreements, were promises and representations a. That EDGE would not discharge Ms. Billy without good, just, or legitimate b. That in exchange for her providing her substantial time, talent, skill, experience, knowledge, and industry, EDGE would pay compensation to Ms. Billy, including wages, vacation, bonuses, and other compensation; c. That EDGE would not act arbitrarily with Ms. Billy; d. That EDGE would act with mutual consent with Ms. Billy; e. That EDGE would act with mutual respect with Ms. Billy; f. That Ms. Billy’s employment would not be impeded in the company; g. That Ms. Billy would be protected, her employment and physically; h. That Ms. Billy would be provided with all that is necessary to be an EDGE Sales Agent; i. That Ms. Billy’s real estate agent training and licensing expenses would be provided and paid for by EDGE. 93. The above contractual promises were made to Ms. Billy by those with actual and/or ostensible authority at EDGE. 94. Ms. Billy relied on Defendants’ representations and promises and began performance. 95. Unfortunately, EDGE’s behaviors that followed breached EDGE’s promises and commitments made to Ms. Billy. 96. EDGE engaged in conduct all in direct violation of her rights under the express promises above made to her. 97. EDGE breached the express contracts, including written, oral, and implied promises, contracts and agreements made with Ms. Billy, including the implied-by-law covenant of good faith and fair dealing, including by its unlawful conduct towards Ms. Billy, arbitrarily, and in bad faith, and desiring in a deceitful, retaliatory, and unlawful manner to get rid of Ms. Billy; refusing to honor the express contracts promises, agreements; and making the work environment and circumstances of Ms. Billy’s employment so intolerable and aggravated that no reasonable person in a civilized society should have to endure such actions by EDGE and its owners, principals, directors, and proxy. 98. Ms. Billy has performed satisfactorily all conditions and covenants required of her under said contracts. Any conditions, covenants, or promises which Ms. Billy has not performed were not performed as a result of EDGE’s breaches and conduct excusing and preventing any such performance by Ms. Billy. 99. As a direct and proximate result of said EDGE’s breaches of contracts, Ms. Billy has suffered and will continue to suffer damages, the exact amount of which has not yet been fully ascertained, but is within the jurisdiction of this Court, and includes the above sums, together with pre-judgment and post-judgment interest. 100. Ms. Billy is entitled to and demands relief, including compensatory and consequential damages, including, but not limited to, damages stemming from breaches of contract, including EDGE’s breaches of the implied-by-law covenant of good faith and fair dealing, compensation, lost income, including back pay and future pay, and other expenses, and pre-judgment and post-judgment interest, attorney fees, and costs, the exact amount to be shown at the time of trial. WHEREFORE, Plaintiff prays judgment as hereinafter set forth. FIFTH COUNT (Negligence) (Breach of Duties, Including Assumed Duties, Affirmative Duties) (Against Defendant Maddox) 101. Plaintiff incorporates by reference the above allegations as if set forth fully herein. 102. Separate, apart, and standing alone from any employment discrimination, retaliation, and/or any Title VII claims, Defendant Maddox individually owed statutory and other legal duties to Ms. Billy, including, but not limited to: Not to harm Ms. Billy; not to assault Ms. Billy; not to batter Ms. Billy; not to cause emotional distress to Ms. Billy. 103. Defendants Maddox negligently or recklessly breached his duties of reasonable care to Ms. Billy, choosing instead to engage in, assist in, enable, and/or commit repeated negligent and reckless acts against Ms. Billy. 104. Defendants Maddox’s negligent or reckless conduct, directly, consequentially, and/or indirectly, constituted breaches of the duties Defendants Maddox owed Ms. Billy. 105. As a direct and proximate result of the aforementioned actions by Defendant Maddox, Ms. Billy has sustained and will sustain damages including: a. extreme and severe pain and suffering, both physical and mental; b. economic damages, including bills and expenses for medical care and mental health counseling that Ms. Billy required and will require in the future; c. a diminution in the ability and capacity to work, earn money and perform household and other services in the future; and d. non-economic damages, including a loss of enjoyment of life. 106. Defendant Maddox’s breaches of duties were substantial factors in Ms. Billy’s injuries and damages, the exact amount to be shown at the time of trial. WHEREFORE, Plaintiff prays judgment as hereinafter set forth. SIXTH COUNT (Negligent Infliction of Emotional Distress) (Against Defendant Maddox) 107. Plaintiff incorporates by reference the above allegations as if set forth fully herein. 108. Separate, apart, and standing alone from any employment discrimination, retaliation, and/or any Title VII claims, Defendant Maddox individually, engaged in outrageous conduct and acted with negligent and/or reckless disregard of the consequences of his conduct, acting in a negligent manner reasonably calculated to cause, or resulting in Ms. Billy’s severe emotional distress and physical and emotional anguish, fear, and injury. Defendant Maddox’s conduct, including described herein, has caused, and continues to cause, Ms. Billy severe emotional distress. 109. As a direct and proximate result of the aforementioned actions by Defendant Maddox, Ms. Billy has sustained and will sustain damages including: a. extreme and severe pain and suffering, both physical and mental; b. economic damages, including bills and expenses for medical care and mental health counseling that Ms. Billy required and will require in the future; c. a diminution in the ability and capacity to work, earn money and perform household and other services in the future; and d. non-economic damages, including a loss of enjoyment of life. WHEREFORE, Plaintiff prays judgment as hereinafter set forth. SEVENTH COUNT (Intentional Infliction of Emotional Distress) (Against Defendant all Defendants) 110. Plaintiff incorporates by reference the above allegations as if set forth fully herein. 111. Separate, apart, and standing alone from any employment discrimination, retaliation, and/or any Title VII claims, Defendants, and each of them, engaged in intentional, atrocious, intolerable, and so extreme and outrageous conduct towards Ms. Billy as to exceed the bounds of decency. 112. Defendants, and each of them individually, acted with the intent to inflict emotional distress, wantonly, or at a minimum acted with reckless disregard of the probability of causing emotional distress when it was certain or substantially certain that emotional distress would result from their conduct towards Ms. Billy. 113. Defendant, and each of them individually, acted knowingly, intentionally, and/or purposefully, and sought to, and did harm and injure Ms. Billy, causing, and which continues to cause, her to suffer emotional distress, physical and emotional anguish, fear, and injury that is so severe that no reasonable person could be expected to endure it. 114. As a direct and proximate result of the aforementioned actions by Defendants, Ms. Billy has sustained and will sustain damages including: a. extreme severe pain and suffering, both physical and mental; b. economic damages, including bills and expenses for medical care and mental health counseling that Ms. Billy required and will require in the future; c. a diminution in the ability and capacity to work, earn money and perform household and other services in the future; and d. non-economic damages, including a loss of enjoyment of life. WHEREFORE, Plaintiff prays judgment as hereinafter set forth. VI. PUNITIVE AND LIQUIDATED DAMAGES (Willful, Wanton, Malicious, Knowingly Reckless and/or Indifferent Conduct) (Against All Defendants) 115. Plaintiff incorporates by reference the above allegations as if set forth fully herein. 116. As to those Counts allowing punitive damages against Defendants, and/or any of them, jointly, severally, or individually, whether under Title VII or otherwise, Ms. Billy is informed, believes, and on that basis alleges, that the conduct of Defendants, including EDGE and/or Maddox, was willful, wanton, malicious and/or reckless and/or knowing with reckless indifference toward, with knowledge of and a disregard of the Title VII and other civil rights of Ms. Billy. Defendants EDGE and/or Maddox, and each of them jointly, severally, and individually, either intended to cause harm or, at a minimum, were recklessly indifferent to the injury that would likely result from their acts and omissions. Their despicable conduct was done maliciously, fraudulently, and oppressively with a conscious, reckless, willful, and/or callous disregard of the probable detrimental consequences to Ms. Billy, and knowing that Defendants’, and/or each of their, conduct was substantially certain to vex, annoy, and injure Ms. Billy, and entitling Ms. Billy to punitive damages in an amount appropriate to punish or set an example of Defendants EDGE and/or Maddox, and each of them jointly, severally, and individually. VII. PRAYER FOR RELIEF WHEREFORE, Plaintiff prays that the Court enter a judgment against each of the Defendants, jointly, severally, and individually: As to the First Count for Violations of Civil Rights and Statutory Discrimination, including Title VII (Gender / Sexual Harassment / Hostile Work Environment / Retaliation), against Defendants EDGE: 1. For general damages according to proof; 2. For special and compensatory damages in a sum according to proof; 3. For back pay and future pay; 4. For equitable, declaratory, injunctive relief, including reinstatement; 5. For liquidated and punitive damages in an amount sufficient to punish Defendants; 6. For pre-judgment and post-judgment interest at the maximum rate allowed by law; 7. For attorney fees, costs, and expenses incurred herein; 8. For Eshelman damages; and 9. For such other and further relief as the Court deems just and proper. As to the Second Count for Civil Assault, against all Defendants: 1. For general damages in a sum according to proof; 2. For compensatory and special damages in a sum according to proof; 3. For punitive damages in an amount sufficient to punish Defendants; 4. For pre-judgment and post-judgment interest at the maximum rate allowed by law; 5. For attorney fees if permitted by law and costs of suit incurred herein; and 6. For such other and further relief as the Court deems just and proper. As to the Third Count for Civil Battery, against all Defendants: 1. For general damages in a sum according to proof; 2. For compensatory and special damages in a sum according to proof; 3. For punitive damages in an amount sufficient to punish Defendants; 4. For pre-judgment and post-judgment interest at the maximum rate allowed by law; 5. For attorney fees if permitted by law and costs of suit incurred herein; and 6. For such other and further relief as the Court deems just and proper. As to the Fourth Count for Breach of Contracts, including Breach of the Covenant of Good Faith and Fair Dealing, against Defendants EDGE: 1. For compensatory and consequential damages; 2. For damages stemming from breaches of contracts; 3. For pre-judgment and post-judgment interest at the maximum rate allowed by law; 4. For attorney fees if permitted by law and costs of suit incurred herein; and 5. For such other and further relief as the Court deems just and proper As to the Fifth Count for Negligence (Breach of Duties, including Assumed Duties, Affirmative Duties), against Defendant Maddox: 1. For general damages in a sum according to proof; 2. For compensatory and special damages in a sum according to proof; 3. For pre-judgment and post-judgment interest at the maximum rate allowed by law; 4. For their costs of suit incurred herein; and 5. For such other and further relief as the Court deems just and proper. As to the Sixth Count for Negligent Infliction of Emotional Distress, against Defendant Maddox: 1. For general damages according to proof; 2. For special and compensatory damages in a sum according to proof; 3. For pre-judgment and post-judgment interest at the maximum rate allowed by law; 4. For costs incurred herein; and 5. For such other and further relief as the Court deems just and proper. As to the Seventh Count for Intentional Infliction of Emotional Distress against Defendant all Defendants: 1. For general damages according to proof; 2. For special and compensatory damages in a sum according to proof; 3. For punitive damages in an amount sufficient to punish Defendant; 4. For pre-judgment and post-judgment interest at the maximum rate allowed by law; 5. For costs incurred herein; and 6. For such other and further relief as the Court deems just and proper. VIII. DEMAND FOR JURY TRIAL Plaintiff Ms. Billy hereby demands and exercises her Constitutional rights to a jury trial. DATED this 25th day of January 2019 ANDRUS LAW FIRM, LLC BY: /s/ Randy M. Andrus RANDY M. ANDRUS Attorney for Plaintiff VANESSA BILLY

civil rights, immigration, family

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Bibianne U. Fell (SBN 234194) FELL LAW, P.C. Mailing: 11956 Bernardo Plaza Dr., Box 531 San Diego, CA 92128 Personal Service: 402 W. Broadway, Suite 950 San Diego, CA 92101 Telephone: (858) 201-3960 Facsimile: (858) 201-3966 [email protected] William B. Federman* Oklahoma Bar No. 2853 FEDERMAN & SHERWOOD 10205 N. Pennsylvania Ave. Oklahoma City, OK 73120 Telephone: (405) 235-1560 Facsimile: (405) 239-2112 [email protected] *Pro Hac Vice application to be submitted Counsel for Plaintiff and the Proposed Class UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA '21CV1143 DEB H Case No.: CLASS ACTION COMPLAINT JURY TRIAL DEMANDED Kate Rasmuzzen, individually and on behalf of all others similarly situated and on behalf of the general public, Plaintiff, v. Scripps Health Defendant. Plaintiff, Kate Rasmuzzen (“Ms. Rasmuzzen” or “Plaintiff Rasmuzzen”), individually and on behalf of all others similarly situated and on behalf of the general public, for her Class Action Complaint, brings this action against Defendant Scripps Health (“Scripps”) based on personal knowledge and the investigation of counsel and alleges as follows: I. INTRODUCTION 1. With this action, Plaintiff seeks to hold Defendant responsible for the harms it caused Plaintiff and the over one hundred forty-seven thousand (147,000) of other similarly situated persons in the massive and preventable ransomware attack that took place on or around April 29, 2021, by which cyber criminals infiltrated Defendant’s inadequately protected network servers where highly sensitive personal and medical information was being kept unprotected (“Data Breach” or “Breach”).1 2. The cybercriminals gained access to certain of Defendant’s network servers with the apparent intention of profiting from such access. 3. Defendant Scripps is the second largest healthcare provider in San Diego.2 On its website, Scripps touts that it “takes great care to ensure [its patients’] health information is kept private and secure.”3 4. Plaintiff and Class members were required, as patients of Scripps, to provide Defendant with their “Personal and Medical Information” (defined below), with the assurance that such information would be kept safe from unauthorized access. By taking possession and control of Plaintiff’s and Class members’ Personal and Medical Information, Defendant assumed a duty to securely store and protect the Personal and Medical Information of Plaintiff and the Class. 5. Defendant breached this duty and betrayed the trust of Plaintiff and Class members by failing to properly safeguard and protect their Personal and Medical Information, thus enabling cybercriminals to access, acquire, appropriate, compromise, disclose, encumber, exfiltrate, release, steal, misuse, and/or view it. 6. The Personal and Medical Information compromised includes names, addresses, dates of birth, health insurance information, medical record numbers, patient account numbers, clinical information, dates of service, treatment information, Social Security numbers, and/or driver’s license numbers.4 7. Defendant’s misconduct – failing to timely implement adequate and reasonable measures to protect Plaintiff’s Personal and Medical Information, failing to timely detect the Data Breach, failing to take adequate steps to prevent and stop the Data Breach, failing to disclose the material facts that they did not have adequate security practices in place to safeguard the Personal and Medical Information, and failing to honor their promises and representations to protect Plaintiff’s and Class members’ Personal and Medical Information – caused substantial harm and injuries to Plaintiff and Class members across the United States. 8. Due to Defendant’s negligence and data security failures, cyber criminals obtained and now possess everything they need to commit personal and medical identity theft and wreak havoc on the financial and personal lives of hundreds of thousands of individuals for decades to come. 9. As a result of the Data Breach, Plaintiff and Class members have already suffered damages. For example, now that their Personal and Medical Information has been released into the criminal cyber domains, Plaintiff and Class members are at imminent and impending risk of identity theft. This risk will continue for the rest of their lives, as Plaintiff and Class members are now forced to deal with the danger of identity thieves possessing and using their Personal and Medical Information. Additionally, Plaintiff and Class members have already lost time and money responding to and mitigating the impact of the Data Breach, which efforts are continuous and ongoing. 10. Plaintiff brings this action individually and on behalf of the Class and seeks actual damages, statutory damages, punitive damages, and restitution, with attorney fees, costs, and expenses, under the California Confidentiality of Medical Information Act (“CMIA”), Cal. Civ. Code § 56, et seq., California’s Unfair Competition Law (“UCL”), Cal. Bus. Prof. Code § 17200, et seq., and further sues Defendant for, among other causes of action, negligence (including negligence per se). Plaintiff also seeks declaratory and injunctive relief, including significant improvements to Defendant’s data security systems and protocols, future annual audits, Defendant-funded long-term credit monitoring services, and other remedies as the Court sees necessary and proper. II. THE PARTIES 11. Plaintiff Kate Rasmuzzen is a citizen and resident of the State of California. 12. Ms. Rasmuzzen was a patient of, and received medical services from, Scripps. Her Personal and Medical Information was within the possession and control of Defendant at the time of the Data Breach. 13. Plaintiff received a letter from Scripps dated June 1, 2021, informing her that her Personal and Medical Information was involved in the Data Breach. See Exhibit 1, the “Notice.” 14. As required in order to obtain medical services from Scripps, Plaintiff provided Scripps with highly sensitive personal, financial, health, and insurance information. 15. Because of Defendant’s negligence leading up to and including the period of the Data Breach, Plaintiff’s Personal and Medical Information is now in the hands of cyber criminals and Plaintiff is under an imminent and substantially likely risk of identity theft and fraud, including medical identity theft and medical 16. The imminent risk of medical identity theft and fraud that Plaintiff and Class members now face is substantial, certainly impending, and continuous and ongoing because of the negligence of Defendant, which negligence led to the Data Breach. Plaintiff and Class members have already been forced to spend time responding to, and attempting to mitigate the harms of, the Data Breach in an effort to determine how best to protect themselves from certainly impending identity theft and medical information fraud. These efforts are continuous and ongoing and will be for years to come. 17. As a direct and proximate result of the Data Breach, Plaintiff and the Class will be required to purchase a yearly subscription to identity theft protection, which Defendant failed to provide to them. The purchase of identity theft protection and credit monitoring will be necessary in order to protect themselves from medical identity theft and other types of fraud, of which they are now substantially at risk. This subscription will need to be renewed yearly for the rest of their lives. 18. Plaintiff and Class members have also suffered injury directly and proximately caused by the Data Breach, including damages and diminution in value of their Personal and Medical Information that was entrusted to Defendant for the sole purpose of obtaining medical services necessary for their health and well-being, with the understanding that Defendant would safeguard this information against disclosure. Additionally, Plaintiff’s and Class members’ Personal and Medical Information is at continued risk of compromise and unauthorized disclosure as it remains in the possession the cybercriminals who carried out the Data Breach and of Defendant, and is thus subject to further breaches so long as Defendant fails to undertake appropriate and adequate measures to protect it. 19. Defendant Scripps is the second largest healthcare provider in San Diego and is a “$3.1 billion not-for-profit health care organization whose legacy spans decades for one shining reason – excellence.”5 20. As part of its business, Defendant collects substantial amounts of Personal and Medical Information. The medical information that Defendant collects qualifies as “Medical Information” under the federal Health Information Portability and Accountability Act (“HIPAA”), the CMIA, and other state medical record protection acts. III. JURISDICTION AND VENUE 21. This Court has diversity jurisdiction over this action under the Class Action Fairness Act (CAFA), 28 U.S.C. § 1332(d) because this is a class action involving more than 100 class members, the amount in controversy exceeds $5,000,000, exclusive of interest and costs and, upon information and belief, the Class includes members who are citizens of states that differ from Defendant. 22. This Court has personal jurisdiction over Defendant because Defendant Scripps conducts much of its business in and has sufficient minimum contacts with California. 23. Venue is likewise proper as to Defendant in this District under 28 U.S.C. § 1391(a)(1) because Defendant Scripps’s headquarters are located in this District and it conducts much of its business through this District (including promoting, selling, marketing, and distributing the Scripps brand and services at issue). IV. FACTUAL ALLEGATIONS A. The California Attorney General Notice 24. On or about April 29, 2021, Defendant Scripps’s network servers were subject to a ransomware attack through which unauthorized third-party cybercriminals gained access to Plaintiff’s and Class members’ Personal and Medical Information. 25. Scripps sent a sample notice of data breach letter that mirrored the language of the Notice sent to Plaintiff and Class members. 26. Pursuant to California Civ. Code § 1798.82(f), “[a] person or business that is required to issue a security breach notification pursuant to [§ 1798.82(a)] to more than 500 California residents as a result of a single breach of the security system shall electronically submit a single sample copy of that security breach notification, excluding any personally identifiable information, to the Attorney General.” 27. Plaintiff’s and Class members’ Personal and Medical Information is “personal information” as defined by California Civ. Code § 1798.82(h). 28. Pursuant to California Civ. Code § 1798.82(a)(1), data breach notification letters are sent to residents of California “whose unencrypted personal information was, or is reasonably believed to have been, acquired by an unauthorized person” due to a “breach of the security of the system.” 29. California Civ. Code § 1798.82(g) defines “breach of the security of the system” as the “unauthorized acquisition of computerized data that compromises the security, confidentiality, or integrity of personal information maintained by the person or business.” 30. The Data Breach was a “breach of the security of the system” as defined by California Civ. Code § 1798.82(g). 31. Plaintiff’s and Class members’ unencrypted personal information was acquired by an unauthorized cybercriminal or cybercriminals as a result of the Data Breach. 32. Defendant reasonably believe Plaintiff’s and Class members’ unencrypted personal information was acquired by an unauthorized person as a result of the Data Breach. 33. The security, confidentiality, or integrity of Plaintiff’s and Class members’ unencrypted personal information was compromised as a result of the Data Breach. 34. Defendant reasonably believed the security, confidentiality, or integrity of Plaintiff’s and Class members’ unencrypted personal information was compromised as a result of the Data Breach. 35. Plaintiff’s and Class members’ unencrypted personal information that was acquired by an unauthorized person as a result of the Data Breach was viewed by unauthorized persons. 36. Defendant reasonably believed Plaintiff’s and Class members’ unencrypted personal information that was acquired by an unauthorized person as a result of the Data Breach was viewed by unauthorized persons. 37. It is reasonable to infer that Plaintiff’s and Class members’ unencrypted personal information that was acquired by an unauthorized person as a result of the Data Breach was viewed by unauthorized persons. 38. It should be presumed that Plaintiff’s and Class members’ unencrypted personal information that was acquired by an unauthorized person as a result of the Data Breach was viewed by unauthorized persons. 39. After receiving letters similar to those sent pursuant to California Civ. Code § 1798.82(a)(1) – and filed with the Attorney General of California in accordance with California Civ. Code § 1798.82(f) – it is reasonable for recipients, including Plaintiff and Class members in this case, to (i) believe that the risk of future harm (including identity theft) is real and imminent, and (ii) take steps to mitigate that risk of future harm. B. The Data Breach and Defendant’s Failed Response 40. It is apparent from the various notices and sample notices of the Data Breach sent to Plaintiff, the Class, and state Attorneys General that the Personal and Medical Information contained on Defendant’s servers was not encrypted. 41. Following discovery of the Data Breach, Defendant began to investigate and address the Data Breach. Based upon the investigation, the attackers were able to access certain network servers containing the Personal and Medical Information at issue, which was being held, unencrypted and unprotected. 42. Upon information and belief, the unauthorized third-party cybercriminals gained access to the Personal and Medical Information with the intent of engaging in misuse of the Personal and Medical Information, including marketing and selling Plaintiff’s and Class members’ Personal and Medical Information on the dark web. 43. In spite of the severity of the Data Breach, Defendant has done very little to protect Plaintiff and the Class. For example, in the Notice, Defendant only provides twelve (12) months of identity theft and credit monitoring protection to a select few Data Breach victims. 44. In effect, Defendant is shirking its responsibility for the harm and increased risk of harm it has caused Plaintiff and members of the Class, including the distress and financial burdens the Data Breach has placed upon the shoulders of the Data Breach victims. 45. The Notice fails to provide the consolation Plaintiff and Class members seek and certainly falls far short of eliminating the substantial risk of fraud and identity theft Plaintiff and the Class now face. 46. Ransomware creators, such as the authors of Defendant’s Data Breach, “are criminals without any ethics,” so there is no guarantee they will do what they promise to do in exchange for any ransom money they receive.6 47. To make matters worse, Defendant’s attackers actually gained access to, and possession of, Plaintiff’s and Class members’ Personal and Medical Information. While many ransomware attacks merely involve the attacker gaining control of the computer or network without access to the victims’ information, the ransomware attack on Defendant’s systems gave the attackers access to, and possession of, Plaintiff’s and Class members’ Personal and Medical Information. 48. Moreover, paying the ransom (if Scripps did indeed pay the ransom) will only encourage attackers to carry out these types of cyberattacks on Scripps’s system networks in the future. 49. Defendant failed to adequately safeguard Plaintiff’s and Class members’ Personal and Medical Information, allowing cyber criminals to access this wealth of priceless information, with virtually no offer of remedy or relief while failing to spend sufficient resources on cybersecurity training and adequate data security measures and protocols. 50. Defendant had obligations created by HIPAA, the CMIA, reasonable industry standards, common law, state statutory law, and its own assurances and representations to keep patients’ Personal and Medical Information confidential and to protect such Personal and Medical Information from unauthorized access. 51. Plaintiff and Class members were required to provide their Personal and Medical Information to Defendant with the reasonable expectation and mutual understanding that Defendant would comply with its obligations to keep such information confidential and secure from unauthorized access. 52. The stolen Personal and Medical Information at issue has great value to the ransomware attackers, due to the large number of individuals affected and the fact that health insurance information, clinical information, driver’s license numbers, and Social Security numbers were part of the data that was compromised. C. Defendant had an Obligation to Protect Personal and Medical Information under Federal Law and the Applicable Standard of Care 53. Defendant is covered by HIPAA (45 C.F.R. § 160.102). As such, it is required to comply with the HIPAA Privacy Rule and Security Rule, 45 C.F.R. Part 160 and Part 164, Subparts A and E (“Standards for Privacy of Individually Identifiable Health Information”), and Security Rule (“Security Standards for the Protection of Electronic Protected Health Information”), 45 C.F.R. Part 160 and Part 164, Subparts A and C. 54. HIPAA’s Privacy Rule or Standards for Privacy of Individually Identifiable Health Information establishes national standards for the protection of health information. 55. HIPAA’s Privacy Rule or Security Standards for the Protection of Electronic Protected Health Information establishes a national set of security standards for protecting health information that is kept or transferred in electronic 56. HIPAA requires Defendant to “comply with the applicable standards, implementation specifications, and requirements” of HIPAA “with respect to electronic protected health information.” 45 C.F.R. § 164.302. 57. “Electronic protected health information” is “individually identifiable health information … that is (i) transmitted by electronic media; maintained in electronic media.” 45 C.F.R. § 160.103. 58. HIPAA’s Security Rule requires Defendant to do the following: a. Ensure the confidentiality, integrity, and availability of all electronic protected health information the covered entity or business associate creates, receives, maintains, or transmits; b. Protect against any reasonably anticipated threats or hazards to the security or integrity of such information; c. Protect against any reasonably anticipated uses or disclosures of such information that are not permitted; and d. Ensure compliance by their workforce. 59. HIPAA also requires Defendant to “review and modify the security measures implemented … as needed to continue provision of reasonable and appropriate protection of electronic protected health information.” 45 C.F.R. § 164.306(e), and to “[i]mplement technical policies and procedures for electronic information systems that maintain electronic protected health information to allow access only to those persons or software programs that have been granted access rights.” 45 C.F.R. § 164.312(a)(1). 60. Moreover, the HIPAA Breach Notification Rule, 45 C.F.R. §§ 164.400-414 requires Defendant to provide notice of the Data Breach to each affected individual “without unreasonable delay and in no case later than 60 days following discovery of the breach.”7 61. Defendant was also prohibited by the Federal Trade Commission Act (the “FTC Act”) (15 U.S.C. § 45) from engaging in “unfair or deceptive acts or practices in or affecting commerce.” The Federal Trade Commission (the “FTC”) has concluded that a company’s failure to maintain reasonable and appropriate data security for consumers’ sensitive personal information is an “unfair practice” in violation of the FTC Act. See, e.g., FTC v. Wyndham Worldwide Corp., 799 F.3d 236 (3d Cir. 2015). 62. In addition to its obligations under federal and state laws, Defendant owed a duty to Plaintiff and Class members to exercise reasonable care in obtaining, retaining, securing, safeguarding, deleting, and protecting the Personal and Medical Information in its possession from being compromised, lost, stolen, accessed, and misused by unauthorized persons. Defendant owed a duty to Plaintiff and Class members to provide reasonable security, including consistency with industry standards and requirements, and to ensure that its computer systems, networks, and protocols adequately protected the Personal and Medical Information of the Class. 63. Defendant owed a duty to Plaintiff and the Class to design, maintain, and test its computer systems and networks to ensure that the Personal and Medical Information in its possession was adequately secured and protected. 64. Defendant owed a duty to Plaintiff and the Class to create and implement reasonable data security practices and procedures to protect the Personal and Medical Information in its possession. 65. Defendant owed a duty to Plaintiff and the Class to implement processes that would detect a breach on its data security systems in a timely manner. 66. Defendant owed a duty to Plaintiff and the Class to act upon data security warnings and alerts in a timely fashion. 67. Defendant owed a duty to Plaintiff and the Class to disclose if its computer systems and data security practices were inadequate to safeguard individuals’ Personal and Medical Information from theft because such an inadequacy would be a material fact in the decision to entrust Personal and Medical Information with Defendant. 68. Defendant owed a duty of care to Plaintiff and the Class because they were foreseeable and probable victims of any inadequate data security practices. D. Defendant was on Notice of Cyber Attack Threats in the Healthcare Industry and of the Inadequacy of its Data Security 69. Defendant was on notice that companies in the healthcare industry were targets for cyberattacks. 70. Defendant was on notice that the FBI has recently been concerned about data security in the healthcare industry. In August 2014, after a cyberattack on Community Health Systems, Inc., the FBI warned companies within the healthcare industry that hackers were targeting them. The warning stated that “[t]he FBI has observed malicious actors targeting healthcare related systems, perhaps for the purpose of obtaining the Protected Healthcare Information (PHI) and/or Personally Identifiable Information (PII).”8 71. The American Medical Association (“AMA”) has also warned healthcare companies about the importance of protecting their patients’ confidential information: Cybersecurity is not just a technical issue; it’s a patient safety issue. AMA research has revealed that 83% of physicians work in a practice that has experienced some kind of cyberattack. Unfortunately, practices are learning that cyberattacks not only threaten the privacy and security of patients’ health and financial information, but also patient access to care.9 72. As implied by the above quote from the AMA, stolen Personal and Medical Information can be used to interrupt important medical services themselves. This is an imminent and certainly impending risk for Plaintiff and Class members. 73. Defendant was on notice that the federal government has been concerned about healthcare company data encryption. Defendant knew it kept protected health information on its servers and yet it appears Defendant did not encrypt this information. 74. The United States Department of Health and Human Services’ Office for Civil Rights urges the use of encryption of data containing sensitive personal information. As long ago as 2014, the Department fined two healthcare companies approximately two million dollars for failing to encrypt laptops containing sensitive personal information. In announcing the fines, Susan McAndrew, the DHHS’s Office of Human Rights’ deputy director of health information privacy, stated “[o]ur message to these organizations is simple: encryption is your best defense against these incidents.”10 75. As a covered entity under HIPAA, Defendant should have known its systems were prone to ransomware and other types of cyberattacks and sought better protection for the Personal and Medical Information accumulating in its system networks. E. Cyber Criminals Will Use Plaintiff’s and Class Members’ Personal and Medical Information to Defraud Them 76. Plaintiff and Class members’ Personal and Medical Information is of great value to hackers and cyber criminals, and the data stolen in the Data Breach will be used in a variety of sordid ways for criminals to exploit Plaintiff and the Class members and to profit off their misfortune. 77. Each year, identity theft causes tens of billions of dollars of losses to victims in the United States.11 For example, with the Personal and Medical Information stolen in the Data Breach, including Social Security numbers and driver’s licenses, identity thieves can open financial accounts, apply for credit, file fraudulent tax returns, commit crimes, create false driver’s licenses and other forms of identification and sell them to other criminals or undocumented immigrants, steal government benefits, give breach victims’ names to police during arrests, and many other harmful forms of identity theft.12 These criminal activities have and will result in devastating financial and personal losses to Plaintiff and Class members. 78. Personal and Medical Information is such a valuable commodity to identity thieves that once it has been compromised, criminals will use it and trade the information on the cyber black-market for years.13 79. For example, it is believed that certain Personal and Medical Information compromised in the 2017 Experian data breach was being used, three years later, by identity thieves to apply for COVID-19-related benefits in the state of Oklahoma.14 80. This was a financially motivated Data Breach, as apparent from the ransom money sought by the cyber criminals, who will continue to seek to profit off of the sale of Plaintiff’s and the Class members’ Personal and Medical Information on the dark web. The Personal and Medical Information exposed in this Data Breach is valuable to identity thieves for use in the kinds of criminal activity described herein. 81. These risks are both certainly impending and substantial. As the FTC has reported, if hackers get access to personally identifiable information, they will use it.15 82. Hackers may not use the information right away. According to the U.S. Government Accountability Office, which conducted a study regarding data breaches: [I]n some cases, stolen data may be held for up to a year or more before being used to commit identity theft. Further, once stolen data have been sold or posted on the Web, fraudulent use of that information may continue for years. As a result, studies that attempt to measure the harm resulting from data breaches cannot necessarily rule out all future harm.16 83. For instance, with a stolen Social Security number, which is part of the Personal and Medical Information compromised in the Data Breach, someone can open financial accounts, get medical care, file fraudulent tax returns, commit crimes, and steal benefits.17 Identity thieves can also use the information stolen from Plaintiff and Class members to qualify for expensive medical care and leave them and their contracted health insurers on the hook for massive medical bills. 84. Medical identity theft is one of the most common, most expensive, and most difficult-to-prevent forms of identity theft. According to Kaiser Health News, “medical-related identity theft accounted for 43 percent of all identity thefts reported in the United States in 2013,” which is more than identity thefts involving banking and finance, the government and the military, or education.18 85. “Medical identity theft is a growing and dangerous crime that leaves its victims with little to no recourse for recovery,” reported Pam Dixon, executive director of World Privacy Forum. “Victims often experience financial repercussions and worse yet, they frequently discover erroneous information has been added to their personal medical files due to the thief’s activities.”19 86. As indicated by James Trainor, second in command at the FBI’s cyber security division: “Medical records are a gold mine for criminals—they can access a patient’s name, DOB, Social Security and insurance numbers, and even financial information all in one place. Credit cards can be, say, five dollars or more where [personal health information] can go from $20 say up to—we’ve seen $60 or $70 [(referring to prices on dark web marketplaces)].”20 A complete identity theft kit that includes health insurance credentials may be worth up to $1,000 on the black market.21 87. If cyber criminals manage to access financial information, health insurance information, and other personally sensitive data—as they did here— there is no limit to the amount of fraud to which Defendant may expose the Plaintiff and Class members. 88. A study by Experian found that the average total cost of medical identity theft is “about $20,000” per incident, and that a majority of victims of medical identity theft were forced to pay out-of-pocket costs for healthcare they did not receive in order to restore coverage.22 Almost half of medical identity theft victims lose their healthcare coverage as a result of the incident, while nearly one-third saw their insurance premiums rise, and forty percent were never able to resolve their identity theft at all.23 89. As described above, identity theft victims must spend countless hours and large amounts of money repairing the impact to their credit.24 90. Defendant’s failure to offer identity monitoring to the most members of the Class, including to Plaintiff, is egregious. Moreover, Defendant’s offer of one year of identity theft monitoring to a few members of the Class is woefully inadequate, as the worst is yet to come. 91. Victims of the Data Breach, like Plaintiff and other Class members, must spend many hours and large amounts of money protecting themselves from the future negative impacts to their credit because of the Data Breach.25 92. In fact, as a direct and proximate result of the Data Breach, Plaintiff and the Class have been placed at an imminent, immediate, and continuing increased risk of harm from fraud and identity theft. Plaintiff and the Class must now take the time and effort and spend the money to mitigate the actual and potential impact of the Data Breach on their everyday lives, including purchasing identity theft and credit monitoring services, placing “freezes” and “alerts” with credit reporting agencies, contacting their financial institutions, healthcare providers, closing or modifying financial accounts, and closely reviewing and monitoring bank accounts, credit reports, and health insurance account information for unauthorized activity for years to come. 93. Plaintiff and the Class have suffered, and continue to suffer, actual harms for which they are entitled to compensation, including: a. Trespass and damage their personal property, including Personal and Medical Information; b. Improper disclosure of their Personal and Medical Information; c. The imminent and certainly impending injury flowing from potential fraud and identity theft posed by their Personal and Medical Information being placed in the hands of criminals; d. The imminent and certainly impending risk of having their confidential medical information used against them by spam callers to defraud them; e. Loss of privacy suffered as a result of the Data Breach; f. Ascertainable losses in the form of the value of their time reasonably expended to remedy or mitigate the effects of the Data Breach; g. Ascertainable losses in the form of deprivation of the value of patients’ personal information, for which there is a well- established and quantifiable national and international market; and h. The loss of use of and access to their credit, accounts, and/or funds. 94. Moreover, Plaintiff and Class members have an interest in ensuring that their information, which remains in the possession of Defendant, is protected from further breaches by the implementation of industry standard and statutorily compliant security measures and safeguards. Defendant has proven itself to be wholly incapable of protecting Plaintiff’s and Class members’ Personal and Medical Information. 95. Plaintiff and Class members are desperately trying to mitigate the damage that Defendant has caused them but, given the kind of Personal and Medical Information Defendant made accessible to hackers, they are certain to incur additional damages. Because identity thieves have their Personal and Medical Information, Plaintiff and all Class members will need to have identity theft monitoring protection for the rest of their lives. Some may even need to go through the long and arduous process of getting a new Social Security number, with all the loss of credit and employment difficulties that come with this change.26 96. None of this should have happened. The Data Breach was preventable. F. Defendant Could Have Prevented the Data Breach but Failed to Adequately Protect Plaintiff’s and Class Members’ Personal and Medical Information 97. Data breaches are preventable.27 As Lucy Thompson wrote in the DATA BREACH AND ENCRYPTION HANDBOOK, “[i]n almost all cases, the data breaches that occurred could have been prevented by proper planning and the correct design and implementation of appropriate security solutions.”28 She added that “[o]rganizations that collect, use, store, and share sensitive personal data must accept responsibility for protecting the information and ensuring that it is not compromised . . . .”29 98. “Most of the reported data breaches are a result of lax security and the failure to create or enforce appropriate security policies, rules, and procedures … Appropriate information security controls, including encryption, must be implemented and enforced in a rigorous and disciplined manner so that a data breach never occurs.”30 99. Defendant required Plaintiff and Class members to surrender their Personal and Medical Information – including but not limited to their names, addresses, driver’s licenses, Social Security numbers, medical information, and health insurance information – and was entrusted with properly holding, safeguarding, and protecting against unlawful disclosure of such Personal and Medical Information. 100. Many failures laid the groundwork for the success (“success” from the cybercriminals’ viewpoint) of the Data Breach, starting with Defendant’s failure to incur the costs necessary to implement adequate and reasonable cyber security protections, procedures and protocols necessary to safeguard Plaintiff’s and Class members’ Personal and Medical Information. 101. Defendant maintained the Personal and Medical Information in a reckless manner on network servers that were left vulnerable to cyberattacks. 102. Defendant knew of the importance of safeguarding Personal and Medical Information and of the foreseeable consequences that would occur if Plaintiff’s and Class members’ Personal and Medical Information was stolen, including the significant costs that would be placed on Plaintiff and Class members as a result of a breach of this magnitude. 103. The mechanism of the cyberattack and potential for improper disclosure of Plaintiff’s and Class members’ Personal and Medical Information was a known risk to Defendant, and thus Defendant was on notice that failing to take necessary steps to secure Plaintiff’s and Class members’ Personal and Medical Information from those risks left that information in a dangerous condition. 104. Defendant disregarded the rights of Plaintiff and Class members by, inter alia, (i) intentionally, willfully, recklessly, or negligently failing to take adequate and reasonable measures to ensure that its network servers were protected against unauthorized intrusions; (ii) failing to disclose that it did not have adequately robust security protocols and training practices in place to adequately safeguard Plaintiff’s and Class members’ Personal and Medical Information; (iii) failing to take standard and reasonably available steps to prevent the Data Breach; (iv) concealing the existence and extent of the Data Breach for an unreasonable duration of time; and (v) failing to provide Plaintiff and Class members prompt and accurate notice of the Data Breach. V. CLASS ACTION ALLEGATIONS 105. Plaintiff incorporates by reference all allegations of the preceding paragraphs as though fully set forth herein. 106. Plaintiff brings all claims as class claims under Federal Rule of Civil Procedure 23. Plaintiff asserts all claims on behalf of the proposed Nationwide Class and Subclass, defined as follows: All persons residing in the United States whose personal and medical information was compromised as a result of the Data Breach that occurred in April 2021. California Subclass: All persons residing in California whose personal and medical information was compromised as a result of the Data Breach that occurred in April 2021. 107. Also, in the alternative, Plaintiff requests additional Subclasses as necessary based on the types of Personal and Medical Information that were compromised. 108. Excluded from the Nationwide Class and Subclass is Defendant, any entity in which Defendant has a controlling interest, and Defendant’s officers, directors, legal representatives, successors, subsidiaries, and assigns. Also excluded from the Class is any judge, justice, or judicial officer presiding over this matter and members of their immediate families and judicial staff. 109. Plaintiff reserves the right to amend the above definitions or to propose alternative or additional Subclass in subsequent pleadings and motions for class certification. 110. The proposed Nationwide Class and the Subclass (collectively referred to herein as the “Class” unless otherwise specified) meet the requirements of Fed. R. Civ. P. 23(a), (b)(1), (b)(2), (b)(3), and (c)(4). 111. Numerosity: The proposed Class is believed to be so numerous that joinder of all members is impracticable. The proposed Subclass is also believed to be so numerous that joinder of all members would be impractical. 112. Typicality: Plaintiff’s claims are typical of the claims of the Class. Plaintiff and all members of the Class were injured through Defendant’s uniform misconduct. The same event and conduct that gave rise to Plaintiff’s claims are identical to those that give rise to the claims of every other Class member because Plaintiff and each member of the Class had their sensitive Personal and Medical Information compromised in the same way by the same conduct of Defendant. 113. Adequacy: Plaintiff is an adequate representative of the Class because her interests do not conflict with the interests of the Class and proposed Subclass that he seeks to represent; Plaintiff has retained counsel competent and highly experienced in data breach class action litigation; and Plaintiff and Plaintiff’s counsel intend to prosecute this action vigorously. The interests of the Class will be fairly and adequately protected by Plaintiff and her counsel. 114. Superiority: A class action is superior to other available means of fair and efficient adjudication of the claims of Plaintiff and the Class. The injury suffered by each individual Class member is relatively small in comparison to the burden and expense of individual prosecution of complex and expensive litigation. It would be very difficult, if not impossible, for members of the Class individually to effectively redress Defendant’s wrongdoing. Even if Class members could afford such individual litigation, the court system could not. Individualized litigation presents a potential for inconsistent or contradictory judgments. Individualized litigation increases the delay and expense to all parties, and to the court system, presented by the complex legal and factual issues of the case. By contrast, the class action device presents far fewer management difficulties and provides benefits of single adjudication, economy of scale, and comprehensive supervision by a single court. 115. Commonality and Predominance: There are many questions of law and fact common to the claims of Plaintiff and the other members of the Class, and those questions predominate over any questions that may affect individual members of the Class. Common questions for the Class include: a. Whether Defendant engaged in the wrongful conduct alleged herein; b. Whether Defendant failed to adequately safeguard Plaintiff’s and Class members’ Personal and Medical Information; c. Whether Defendant’s systems, networks, and data security practices used to protect Plaintiff’s and Class members’ Personal and Medical Information violated the FTC Act, HIPAA, the CMIA, the UCL, and/or Defendant’s other duties discussed herein; d. Whether Defendant owed a duty to Plaintiff and the Class to adequately protect their Personal and Medical Information, and whether they breached this duty; e. Whether Defendant knew or should have known that their computer and network security systems were vulnerable to a data breach; f. Whether Defendant’s conduct, including their failure to act, resulted in or was the proximate cause of the Data Breach; g. Whether Defendant breached contractual duties to Plaintiff and the Class to use reasonable care in protecting their Personal and Medical Information; h. Whether Defendant failed to adequately respond to the Data Breach, including failing to investigate it diligently and notify affected individuals in the most expedient time possible and without unreasonable delay, and whether this caused damages to Plaintiff and the Class; i. Whether Defendant continue to breach duties to Plaintiff and the Class; j. Whether Plaintiff and the Class suffered injury as a proximate result of Defendant’s negligent actions or failures to act; k. Whether Plaintiff and the Class are entitled to recover damages, equitable relief, and other relief; l. Whether injunctive relief is appropriate and, if so, what injunctive relief is necessary to redress the imminent and currently ongoing harm faced by Plaintiff and members of the Class and the general public; m. Whether Defendant’s actions alleged herein constitute gross negligence; and n. Whether Plaintiff and Class members are entitled to punitive damages. VI. CAUSES OF ACTION A. COUNT I – NEGLIGENCE 116. Plaintiff incorporates by reference all allegations of the preceding paragraphs as though fully set forth herein. 117. Defendant solicited, gathered, and stored the Personal and Medical Information of Plaintiff and the Class as part of the operation of its business. 118. Upon accepting and storing the Personal and Medical Information of Plaintiff and Class members, Defendant undertook and owed a duty to Plaintiff and Class members to exercise reasonable care to secure and safeguard that information and to use secure methods to do so. 119. Defendant had full knowledge of the sensitivity of the Personal and Medical Information, the types of harm that Plaintiff and Class members could and would suffer if the Personal and Medical Information was wrongfully disclosed, and the importance of adequate security. 120. Plaintiff and Class members were the foreseeable victims of any inadequate safety and security practices. Plaintiff and the Class members had no ability to protect their Personal and Medical Information that was in Defendant’s possession. As such, a special relationship existed between Defendant and Plaintiff and the Class. 121. Defendant was well aware of the fact that cyber criminals routinely target large corporations through cyberattacks in an attempt to steal sensitive personal and medical information. 122. Defendant owed Plaintiff and the Class members a common law duty to use reasonable care to avoid causing foreseeable risk of harm to Plaintiff and the Class when obtaining, storing, using, and managing personal information, including taking action to reasonably safeguard such data. 123. Defendant’s duty extended to protecting Plaintiff and the Class from the risk of foreseeable criminal conduct of third parties, which has been recognized in situations where the actor’s own conduct or misconduct exposes another to the risk or defeats protections put in place to guard against the risk, or where the parties are in a special relationship. See Restatement (Second) of Torts § 302B. Numerous courts and legislatures also have recognized the existence of a specific duty to reasonably safeguard personal information. 124. Defendant had duties to protect and safeguard the Personal and Medical Information of Plaintiff and the Class from being vulnerable to cyberattacks by taking common-sense precautions when dealing with sensitive Personal and Medical Information. Additional duties that Defendant owed Plaintiff and the Class include: a. To exercise reasonable care in designing, implementing, maintaining, monitoring, and testing Defendant’s networks, systems, protocols, policies, procedures and practices to ensure that Plaintiff’s and Class members’ Personal and Medical Information was adequately secured from impermissible access, viewing, release, disclosure, and publication; b. To protect Plaintiff’s and Class members’ Personal and Medical Information in its possession by using reasonable and adequate security procedures and systems; c. To implement processes to quickly detect a data breach, security incident, or intrusion involving their networks and servers; and d. To promptly notify Plaintiff and Class members of any data breach, security incident, or intrusion that affected or may have affected their Personal and Medical Information. 125. Only Defendant was in a position to ensure that its systems and protocols were sufficient to protect the Personal and Medical Information that Plaintiff and the Class had entrusted to it. 126. Defendant breached its duties of care by failing to adequately protect Plaintiff’s and Class members’ Personal and Medical Information. Defendant breached its duties by, among other things: a. Failing to exercise reasonable care in obtaining, retaining securing, safeguarding, deleting, and protecting the Personal and Medical Information in its possession; b. Failing to protect the Personal and Medical Information in its possession using reasonable and adequate security procedures and systems; c. Failing to adequately train its employees to not store Personal and Medical Information longer than absolutely necessary; d. Failing to consistently enforce security policies aimed at protecting Plaintiff’s and the Class’s Personal and Medical Information; and e. Failing to implement processes to quickly detect data breaches, security incidents, or intrusions; 127. Defendant’s willful failure to abide by these duties was wrongful, reckless, and grossly negligent in light of the foreseeable risks and known threats. 128. As a proximate and foreseeable result of Defendant’s grossly negligent conduct, Plaintiff and the Class have suffered damages and are at imminent risk of additional harms and damages (as alleged above). 129. Through Defendant’s acts and omissions described herein, including but not limited to Defendant’s failure to protect the Personal and Medical Information of Plaintiff and Class members from being stolen and misused, Defendant unlawfully breached its duty to use reasonable care to adequately protect and secure the Personal and Medical Information of Plaintiff and Class members while it was within Defendant’s possession and control. 130. As a result of the Data Breach, Plaintiff and Class members have spent time, effort, and money to mitigate the actual and potential impact of the Data Breach on their lives, including but not limited to, closely reviewing and monitoring bank accounts, credit reports, and statements sent from providers and their insurance companies and the payment for credit monitoring and identity theft prevention services. 131. Defendant’s wrongful actions, inactions, and omissions constituted (and continue to constitute) common law negligence. 132. The damages Plaintiff and the Class have suffered (as alleged above) and will suffer were and are the direct and proximate result of Defendant’s grossly negligent conduct. 133. In addition to its duties under common law, Defendant had additional duties imposed by statute and regulations, including the duties under HIPAA, the FTC Act, and the CMIA. The harms which occurred as a result of Defendant’s failure to observe these duties, including the loss of privacy, significant risk of identity theft, and Plaintiff’s overpayment for goods and services, are the types of harm that these statutes and their regulations were intended to prevent. 134. Defendant violated these statutes when it engaged in the actions and omissions alleged herein and Plaintiff’s injuries were a direct and proximate result of Defendant’s violations of these statutes. Plaintiff therefore is entitled to the evidentiary presumptions for negligence per se under Cal. Evid. Code § 669. 135. Pursuant to the FTC Act, 15 U.S.C. § 45(a), Defendant owed a duty to Plaintiff and the Class to provide fair and adequate computer systems and data security to safeguard the Personal and Medical Information of Plaintiff and the Class. 136. Defendant is an entity covered by HIPAA, 45 C.F.R. §160.102, and as such is required to comply with HIPAA’s Privacy Rule and Security Rule. HIPAA requires Defendant to “reasonably protect” confidential data from “any intentional or unintentional use or disclosure” and to “have in place appropriate administrative, technical, and physical safeguards to protect the privacy of protected health information.” 45 C.F.R. § 164.530(c)(1). The confidential data at issue in this case constitutes “protected health information” within the meaning of HIPAA. 137. HIPAA further requires Defendant to disclose the unauthorized access and theft of the protected health information of Plaintiff and the Class “without unreasonable delay” so that Plaintiff and Class members could take appropriate measures to mitigate damages, protect against adverse consequences, and thwart future misuse of their personal information. See 45 C.F.R. §§ 164.404, 164.406, and 164.410. 138. The FTC Act prohibits “unfair practices in or affecting commerce,” including, as interpreted and enforced by the FTC, the unfair act or practice by businesses, such as Defendant, of failing to use reasonable measures to protect Personal and Medical Information. The FTC publications and orders described above also formed part of the basis of Defendant’s duty in this regard. 139. Defendant gathered and stored the Personal and Medical Information of Plaintiff and the Class as part of its business of soliciting its services to its patients, which solicitations and services affect commerce. 140. Defendant violated the FTC Act by failing to use reasonable measures to protect the Personal and Medical Information of Plaintiff and the Class and by not complying with applicable industry standards, as described herein. 141. Defendant breached its duties to Plaintiff and the Class under the FTC Act and HIPAA by failing to provide fair, reasonable, or adequate computer systems and/or data security practices to safeguard Plaintiff’s and Class members’ Personal and Medical Information, and by failing to provide prompt notice without reasonable delay. 142. Defendant’s failure to comply with applicable laws and regulations constitutes negligence per se. 143. Plaintiff and the Class are within the class of persons that HIPAA and the FTC Act were intended to protect. 144. The harm that occurred as a result of the Data Breach is the type of harm the FTC Act and HIPAA were intended to guard against. 145. Defendant breached its duties to Plaintiff and the Class under these laws by failing to provide fair, reasonable, or adequate computer systems and data security practices to safeguard Plaintiff’s and the Class’s Personal and Medical Information. 146. Defendant’s violation of the FTC Act and HIPAA constitutes negligence per se. 147. As a direct and proximate result of Defendant’s negligence per se, Plaintiff and the Class have suffered, and continue to suffer, damages arising from the Data Breach, as alleged above. 148. The injury and harm that Plaintiff and Class members suffered (as alleged above) was the direct and proximate result of Defendant’s negligence per 149. Plaintiff and the Class have suffered injury and are entitled to actual and punitive damages in amounts to be proven at trial. B. COUNT II – INVASION OF PRIVACY 150. Plaintiff incorporates by reference all allegations of the preceding paragraphs as though fully set forth herein. 151. California established the right to privacy in Article 1, Section 1 of the California Constitution. 152. The State of California recognizes the tort of Intrusion into Private Affairs and adopts the formulation of that tort found in the Restatement (Second) of Torts, which states, “One who intentionally intrudes, physically or otherwise, upon the solitude or seclusion of another or his private affairs or concerns is subject to liability to the other for invasion of his privacy if the intrusion would be highly offensive to a reasonable person.” Restatement (Second) of Torts, § 652B (1977). 153. Plaintiff and Class members had a legitimate and reasonable expectation of privacy with respect to their Personal and Medical Information and were accordingly entitled to the protection of this information against disclosure to and acquisition by unauthorized third parties. 154. Defendant owed a duty to its patients, including Plaintiff and Class members, to keep their Personal and Medical Information confidential. 155. The unauthorized access, acquisition, appropriation, disclosure, encumbrance, exfiltration, release, theft, use, and/or viewing of Personal and Medical Information, especially the type that is the subject of this action, is highly offensive to a reasonable person. 156. The intrusion was into a place or thing that was private and is entitled to be private. Plaintiff and Class members disclosed their Personal and Medical Information to Defendant as part of their receiving medical care and treatment from Defendant, but privately, with the intention that such highly sensitive information would be kept confidential and protected from unauthorized access, acquisition, appropriation, disclosure, encumbrance, exfiltration, release, theft, use, and/or viewing. Plaintiff and Class members were reasonable in their belief that such information would be kept private and would not be disclosed without their authorization. 157. The Data Breach constitutes an intentional interference with Plaintiff’s and Class members’ interest in solitude or seclusion, either as to their persons or as to their private affairs or concerns, of a kind that would be highly offensive to a reasonable person. 158. Defendant acted with a knowing state of mind when it permitted the Data Breach because it knew its information security practices were inadequate. 159. Acting with knowledge, Defendant had notice and knew that its inadequate cybersecurity practices would cause injury to Plaintiff and Class members. 160. As a proximate result of Defendant’s acts and omissions, Plaintiff’s and Class members’ Personal and Medical Information was accessed by, acquired by, appropriated by, disclosed to, encumbered by, exfiltrated by, released to, stolen by, used by, and/ or reviewed by third parties without authorization, causing Plaintiff and Class members to suffer damages. 161. Unless and until enjoined and restrained by order of this Court, Defendant’s wrongful conduct will continue to cause great and irreparable injury to Plaintiff and Class members in that the Personal and Medical Information maintained by Defendant can and will likely again be accessed by, acquired by, appropriated by, disclosed to, encumbered by, exfiltrated by, released to, stolen by, used by, and/ or viewed by unauthorized persons. 162. Plaintiff and the Class have no adequate remedy at law for the injuries in that a judgment for monetary damages will not end the invasion of privacy for Plaintiff and Class members. C. COUNT III – BREACH OF IMPLIED CONTRACT 163. Plaintiff incorporates by reference all allegations of the preceding paragraphs as though fully set forth herein. 164. When Plaintiff and the Class members provided their Personal and Medical Information to Defendant when seeking medical services, they entered into implied contracts in which Defendant agreed to comply with its statutory and common law duties to protect Plaintiff’s and Class members’ Personal and Medical Information. 165. Defendant required Plaintiff and Class members to provide Personal and Medical Information in order to receive medical services. 166. Defendant affirmatively represented that it collected and stored the Personal and Medical Information of Plaintiff and the members of the Class in compliance with HIPAA, the CMIA, and other statutory and common law duties using reasonable, industry standard means. 167. Based on this implicit understanding and also on Defendant’s representations (as described above), Plaintiff and the Class accepted Defendant’s offers and provided Defendant with their Personal and Medical Information. 168. Plaintiff and Class members would not have provided their Personal and Medical Information to Defendant had they known that Defendant would not safeguard their Personal and Medical Information, as promised. 169. Plaintiff and Class members fully performed their obligations under the implied contracts with Defendant. 170. Defendant breached the implied contracts by failing to safeguard Plaintiff’s and Class members’ Personal and Medical Information. 171. Defendant also breached the implied contracts when it engaged in acts and/or omissions that are declared unfair trade practices by the FTC and state statutes and regulations (including California’s UCL), and when it failed to comply with HIPAA, CMIA, and other state personal and medical privacy laws. These acts and omissions included (i) representing that it would maintain adequate data privacy and security practices and procedures to safeguard the Personal and Medical Information from unauthorized disclosures, releases, data breaches, and theft; (ii) omitting, suppressing, and concealing the material fact of the inadequacy of the privacy and security protections for the Class’s Personal and Medical Information; and (iii) failing to disclose to the Class at the time they provided their Personal and Medical Information that Defendant’s data security system and protocols failed to meet applicable legal and industry standards. 172. The losses and damages Plaintiff and Class members sustained (as described above) were the direct and proximate result of Defendant’s breach of the implied contract with Plaintiff and Class members. D. COUNT IV – BREACH OF CONFIDENCE 173. Plaintiff incorporates by reference all allegations of the preceding paragraphs as though fully set forth herein. 174. At all times during Plaintiff’s and Class members’ interactions with Defendant, Defendant was fully aware of the confidential nature of the Personal and Medical Information that Plaintiff and Class members provided to it. 175. As alleged herein and above, Defendant’s relationship with Plaintiff and the Class was governed by promises and expectations that Plaintiff and Class members’ Personal and Medical Information would be collected, stored, and protected in confidence, and would not be accessed by, acquired by, appropriated by, disclosed to, encumbered by, exfiltrated by, released to, stolen by, used by, and/or viewed by unauthorized third parties. 176. Plaintiff and Class members provided their respective Personal and Medical Information to Defendant with the explicit and implicit understandings that Defendant would protect and not permit the Personal and Medical Information to be accessed by, acquired by, appropriated by, disclosed to, encumbered by, exfiltrated by, released to, stolen by, used by, and/or viewed by unauthorized third parties. 177. Plaintiff and Class members also provided their Personal and Medical Information to Defendant with the explicit and implicit understandings that Defendant would take precautions to protect their Personal and Medical Information from unauthorized access, acquisition, appropriation, disclosure, encumbrance, exfiltration, release, theft, use, and/or viewing, such as following basic principles of protecting their networks and data systems. 178. Defendant voluntarily received, in confidence, Plaintiff’s and Class members’ Personal and Medical Information with the understanding that the Personal and Medical Information would not be accessed by, acquired by, appropriated by, disclosed to, encumbered by, exfiltrated by, released to, stolen by, used by, and/or viewed by the public or any unauthorized third parties. 179. Due to Defendant’s failure to prevent, detect, and avoid the Data Breach from occurring by, inter alia, not following best information security practices to secure Plaintiff’s and Class members’ Personal and Medical Information, Plaintiff’s and Class members’ Personal and Medical Information was accessed by, acquired by, appropriated by, disclosed to, encumbered by, exfiltrated by, released to, stolen by, used by, and/or viewed by unauthorized third parties beyond Plaintiff’s and Class members’ confidence, and without their express permission. 180. As a direct and proximate cause of Defendant’s actions and/or omissions, Plaintiff and Class members have suffered damages as alleged herein. 181. But for Defendant’s failure to maintain and protect Plaintiff’s and Class members’ Personal and Medical Information in violation of the parties’ understanding of confidence, their Personal and Medical Information would not have been accessed by, acquired by, appropriated by, disclosed to, encumbered by, exfiltrated by, released to, stolen by, used by, and/or viewed by unauthorized third parties. Defendant’s Data Breach was the direct and legal cause of the misuse of Plaintiff’s and Class members’ Personal and Medical Information, as well as the resulting damages. 182. The injury and harm Plaintiff and Class members suffered and will continue to suffer was the reasonably foreseeable result of Defendant’s unauthorized misuse of Plaintiff’s and Class members’ Personal and Medical Information. Defendant knew its data systems and protocols for accepting and securing Plaintiff’s and Class members’ Personal and Medical Information had security and other vulnerabilities that placed Plaintiff’s and Class members’ Personal and Medical Information in jeopardy. 183. As a direct and proximate result of Defendant’s breaches of confidence, Plaintiff and Class members have suffered and will suffer injury, as alleged herein, including but not limited to (a) actual identity theft; (b) the compromise, publication, and/or theft of their Personal and Medical Information; (c) out-of-pocket expenses associated with the prevention, detection, and recovery from identity theft and/or unauthorized use of their Personal and Medical Information; (d) lost opportunity costs associated with effort expended and the loss of productivity addressing and attempting to mitigate the actual and future consequences of the Data Breach, including but not limited to efforts spent researching how to prevent, detect, contest, and recover from identity theft; (e) the continued risk to their Personal and Medical Information, which remains in Defendant’s possession and is subject to further unauthorized disclosures so long as Defendant fail to undertake appropriate and adequate measures to protect Class members’ Personal and Medical Information in their continued possession; (f) future costs in terms of time, effort, and money that will be expended as result of the Data Breach for the remainder of the lives of Plaintiff and Class members; and (g) the diminished value of Plaintiff’s and Class members Personal and Medical Information; and (h) the diminished value of Defendant’s services Plaintiff and Class members paid for and received. E. COUNT V – BREACH OF IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING 184. Plaintiff incorporates by reference all allegations of the preceding paragraphs as though fully set forth herein. 185. As described above, Defendant made promises and representations to Plaintiff and the Class that it would comply with HIPAA and other applicable laws and industry best practices. 186. These promises and representations became a part of the contract between Defendant and Plaintiff and the Class. 187. While Defendant had discretion in the specifics of how it met the applicable laws and industry standards, this discretion was governed by an implied covenant of good faith and fair dealing. 188. Defendant breached this implied covenant when it engaged in acts and/or omissions that are declared unfair trade practices by the FTC and state statutes and regulations, and when it engaged in unlawful practices under HIPAA and other state personal and medical privacy laws. These acts and omissions included: representing that it would maintain adequate data privacy and security practices and procedures to safeguard the Personal and Medical Information from unauthorized disclosures, releases, data breaches, and theft; omitting, suppressing, and concealing the material fact of the inadequacy of the privacy and security protections for the Class’s Personal and Medical Information; and failing to disclose to the Class at the time they provided their Personal and Medical Information to it that Defendant’s data security systems and protocols, including training, auditing, and testing of employees, failed to meet applicable legal and industry standards. 189. Plaintiff and Class members did all or substantially all significant things that the contract required them to do. 190. Likewise, all conditions required for Defendant’s performance were 191. Defendant’s acts and omissions unfairly interfered with Plaintiff’s and Class members’ rights to receive the full benefit of their contracts. 192. Plaintiff and Class members have been harmed by Defendant’s breach of this implied covenant in the many ways described above, including overpayment for services, imminent risk of certainly impending and devastating identity theft that exists now that cyber criminals have their Personal and Medical Information, and the attendant long-term time and expenses spent attempting to mitigate and insure against these risks. 193. Defendant is liable for this breach of these implied covenants, whether or not it is found to have breached any specific express contractual term. 194. Plaintiff and Class members are entitled to damages, including compensatory damages and restitution, declaratory and injunctive relief, and attorney fees, costs, and expenses. F. COUNT VI – VIOLATIONS OF CALIFORNIA UNFAIR COMPETITION LAW, Cal. Bus. & Prof. Code §17200, et seq. 195. Plaintiff incorporates by reference all allegations of the preceding paragraphs as though fully set forth herein. 196. Plaintiff brings this Count against Defendant on behalf of the Class or, alternatively, the California Subclass. 197. Defendant violated California’s Unfair Competition Law (“UCL”), Cal. Bus. Prof. Code § 17200, et seq., by engaging in unlawful, unfair or fraudulent business acts and practices and unfair, deceptive, untrue or misleading advertising that constitute acts of “unfair competition” as defined in the UCL, including, but not limited to, the following: a. by representing and advertising that it would maintain adequate data privacy and security practices and procedures to safeguard Plaintiff’s and Class members’ Personal and Medical Information from unauthorized disclosure, release, data breach, and theft; representing and advertising that it did and would comply with the requirement of relevant federal and state laws pertaining to the privacy and security of the Class’s Personal and Medical Information; and omitting, suppressing, and concealing the material fact of the inadequacy of the privacy and security protections for the Class’ Personal and Medical Information; b. by soliciting and collecting Class members’ Personal and Medical Information with knowledge that the information would not be adequately protected, and by storing Plaintiff’s and Class members’ Personal and Medical Information in an unsecure electronic environment; c. by violating the privacy and security requirements of HIPAA, 42 U.S.C. §1302d, et seq.; and d. by violating the CMIA, Cal. Civ. Code § 56, et seq. 198. These unfair acts and practices were immoral, unethical, oppressive, unscrupulous, unconscionable, and/or substantially injurious to Plaintiff and Class members. Defendant’s practices were also contrary to legislatively declared and public policies that seek to protect consumer data and ensure that entities that solicit or are entrusted with personal data utilize appropriate security measures, as reflected by laws like the FTC Act, 15 U.S.C. § 45, HIPAA, 42 U.S.C. § 1302d, et seq., and the CMIA, Cal. Civ. Code § 56, et seq. 199. As a direct and proximate result of Defendant’s unfair and unlawful practices and acts, Plaintiff and the Class were injured and lost money or property, including but not limited to the overpayments Defendant received to take reasonable and adequate security measures (but did not), the loss of their legally protected interest in the confidentiality and privacy of their Personal and Medical Information, and additional losses described above. 200. Defendant knew or should have known that its computer systems and data security practices were inadequate to safeguard Plaintiff’s and Class members’ Personal and Medical Information and that the risk of a data breach or theft was highly likely. Defendant’s actions in engaging in the above-named unfair practices and deceptive acts were negligent, knowing and willful, and/or wanton and reckless with respect to the rights of the Class. 201. Plaintiff seeks relief under the UCL, including restitution to the Class of money or property that the Defendant may have acquired by means of Defendant’s deceptive, unlawful, and unfair business practices, declaratory relief, attorney fees, costs and expenses (pursuant to Cal. Code Civ. P. § 1021.5), and injunctive or other equitable relief. G. COUNT VII – VIOLATIONS OF CALIFORNIA CONFIDENTIALITY OF MEDICAL INFORMATION ACT, Cal. Civ. Code § 56, et seq. 202. Plaintiff incorporates by reference all allegations of the preceding paragraphs as though fully set forth herein. 203. Plaintiff brings this Count against Defendant on behalf of the Class or, alternatively, the California Subclass. 204. Defendant is a “provider of healthcare,” as defined in Cal. Civ. Code § 56.06, and is therefore subject to the requirements of the CMIA, Cal. Civ. Code §§ 56.10(a), (d) and (e), 56.36(b), 56.101(a) and (b). 205. Defendant is licensed under California under California’s Business and Professions Code, Division 2. See Cal. Bus. Prof. Code § 4000, et seq. and therefore qualifies as a “provider of healthcare” under the CMIA. 206. Plaintiff and the Class are “patients,” as defined in CMIA, Cal. Civ. Code § 56.05(k) (“‘Patient’ means any natural person, whether or not still living, who received healthcare services from a provider of healthcare and to whom medical information pertains.”). 207. Defendant disclosed “medical information,” as defined in CMIA, Cal. Civ. Code § 56.05(j), to unauthorized persons without first obtaining consent, in violation of Cal. Civ. Code § 56.10(a). The disclosure of information to unauthorized individuals in the Data Breach resulted from the affirmative actions and inactions of Defendant, including its failure to adequately implement sufficient data security measures and protocols to protect Plaintiff’s and Class members’ Personal and Medical Information, which allowed the hackers to see and obtain Plaintiff’s and the Class members’ medical information. 208. Defendant’s negligence resulted in the release of individually identifiable medical information pertaining to Plaintiff and the Class to unauthorized persons and the breach of the confidentiality of that information. Defendant’s negligent failure to maintain, preserve, store, abandon, destroy, and/or dispose of Plaintiff’s and Class members’ medical information in a manner that preserved the confidentiality of the information contained therein, in violation of Cal. Civ. Code §§ 56.06 and 56.101(a). 209. Defendant’s computer systems and protocols did not protect and preserve the integrity of electronic medical information in violation of Cal. Civ. Code § 56.101(b)(1)(A). 210. Plaintiff and the Class were injured and have suffered damages, as described above, from Defendant’s illegal disclosure and negligent release of their medical information in violation of Cal. Civ. Code §§ 56.10 and 56.101, and therefore seek relief under Civ. Code §§ 56.35 and 56.36, including actual damages, nominal statutory damages of $1,000, punitive damages of $3,000, injunctive relief, and attorney fees, expenses and costs. H. COUNT VIII – DECLARATORY RELIEF 211. Plaintiff incorporates by reference all allegations of the preceding paragraphs as though fully set forth herein. 212. Plaintiff brings this Count under the federal Declaratory Judgment Act, 28 U.S.C. §2201. 213. As previously alleged, Plaintiff and members of the Class were parties to an implied contract with Defendant that required Defendant to provide adequate security for the Personal and Medical Information it collected from them. 214. Defendant owed (and continues to owe) a duty of care to Plaintiff and the members of the Class requiring Defendant to adequately secure Personal and Medical Information. 215. Defendant still possess Plaintiff’s and Class members’ Personal and Medical Information. 216. Since the Data Breach, Defendant has announced few if any changes to its data security infrastructure, processes or procedures to fix the vulnerabilities in its computer systems and/or security practices that permitted the Data Breach to occur and go undetected for months. 217. Defendant has not satisfied its contractual obligations and legal duties to Plaintiff and the Class. In fact, now that Defendant’s insufficient data security is known to other ransomware attackers, the Personal and Medical Information in Defendant’s possession is even more vulnerable to subsequent and continuous cyberattacks. 218. Actual harm has arisen in the wake of the Data Breach regarding Defendant’s contractual obligations and duties of care to provide security measures to Plaintiff and the members of the Class. Further, Plaintiff and members of the Class are at risk of additional or further harm due to the nature of the ransomware attack at issue, the exposure of their Personal and Medical Information, and Defendant’s failure to address the security failings that led to such exposure. 219. There is no reason to believe that Defendant’s security measures are any more adequate now than they were before the Data Breach to meet Defendant’s contractual obligations and legal duties. 220. Plaintiff, therefore, seeks a declaration that Defendant’s existing security measures do not comply with their contractual obligations and duties of care to provide adequate security and that, to comply with their contractual obligations and duties of care, Defendant must implement and maintain additional security measures. VII. PRAYER FOR RELIEF WHEREFORE, Plaintiff and the Class pray for judgment against Defendant as follows: a. An order certifying this action as a class action under Fed. R. Civ. P. 23, defining the Class as requested herein, appointing the undersigned as Class counsel, and finding that Plaintiff is a proper representative of the Class requested herein; b. A judgment in favor of Plaintiff and the Class awarding them appropriate monetary relief, including actual and statutory damages, punitive damages, attorney fees, expenses, costs, and such other and further relief as is just and proper. c. An order providing injunctive and other equitable relief as necessary to protect the interests of the Class and the general public as requested herein, including, but not limited to: i. Ordering that Defendant engage third-party security auditors/penetration testers as well as internal security personnel to conduct testing, including simulated attacks, penetration tests, and audits on Defendant’s systems on a periodic basis, and ordering Defendant to promptly correct any problems or issues detected by such third-party security auditors; ii. Ordering that Defendant engage third-party security auditors and internal personnel to run automated security monitoring; iii. Ordering that Defendant audit, test, and train its security personnel regarding any new or modified procedures; iv. Ordering that Defendant segment customer data by, among other things, creating firewalls and access controls so that if one area of Defendant’s systems is compromised, hackers cannot gain access to other portions of Defendant’s systems; v. Ordering that Defendant purge, delete, and destroy in a reasonably secure manner customer data not necessary for their provisions of services; vi. Ordering that Defendant conduct regular database scanning and securing checks; and vii. Ordering that Defendant routinely and continually conduct internal training and education to inform internal security personnel how to identify and contain a breach when it occurs and what to do in response to a breach. d. An order requiring Defendant to pay the costs involved in notifying the Class members about the judgment and administering the claims process; e. A judgment in favor of Plaintiff and the Class awarding them pre-judgment and post-judgment interest, reasonable attorneys’ fees, costs and expenses as allowable by law; and f. An award of such other and further relief as this Court may deem just and proper. VIII. DEMAND FOR JURY TRIAL Plaintiff demands a trial by jury on all issues so triable. DATED: June 21, 2021 /s/ Bibianne U. Fell Bibianne U. Fell, Esq. Attorneys for Plaintiffs EXHIBIT 1 •I 111 I 111111 •11••111111111II1••11111 •'I•• 111111 • I• 11 'I• 1 • 111• I 111 Kate Rasmuzzen 11 June 1, 2021 Dear Kate Rasmuzzen: Maintaining the confidentiality and security of our patients' information is something Scripps Health takes very seriously. Regrettably, we are writing to inform you of an incident involving some of that information. On May 1, 2021, we identified unusual network activity. We immediately initiated our incident response protocols, which included isolating potentially impacted devices and shutting off select systems. We also began an investigation with the assistance of computer forensic firms. The investigation determined that an unauthorized person gained access to our network, deployed malware, and, on April 29, 2021, acquired copies of some of the documents on our system. On May 10, 2021, we discovered that some of those documents contained patient information. Upon conducting a review of those documents, we determined that one or more files may have reflected your name, address, date of birth, health insurance information. medical record number, patient account number, and/or clinical information, such as physician name, date(s) of service, and/or treatment information. We have no indication that any of your information has been used to commit fraud. However, we recommend that you review the statements you receive from your healthcare providers and health 1nsurer. If you see any medical services that-you did not receive, please call the provider - or Insurer immediately. To help prevent something like this from happening again, we are continuing to implement enhancements to our information security, systems, and monitoring capabilities. We deeply regret that this incident occurred and for any concern this may cause you. We value your trust and confidence in Scripps Health, and look forward to continuing to serve you. VOSTP Wl"O. 97711'0 • 00002283. VOSTPON10. 1 of

consumer fraud

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4 Civil Action No. 12 CLASS ACTION COMPLAINT DEMAND FOR JURY TRIAL Dennis Stewart (SBN 99152) Kirk B. Hulett (SBN 110726) GUSTAFSON GLUEK PLLC 600 B Street 17th Floor San Diego, CA 92101 Telephone: (619) 595-3299 [email protected] [email protected] Counsel for Plaintiff and the Proposed Class Additional Plaintiff’s Counsel Appear on the Signature Page UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA DONALD HARRIS, individually and on behalf of all others similarly situated, Plaintiff, v. SK ENERGY AMERICAS, INC.; SK TRADING INTERNATIONAL CO. LTD; VITOL INC.; AND DOES 1-50, Defendants. Plaintiff Donald Harris, on behalf of himself and all others similarly situated, brings this class action complaint for damages, restitution, and injunctive relief against Vitol Inc. (“Vitol”), SK Energy Americas, Inc. (“SK Energy”), and SK Trading International Co. Ltd. (“SK Trading”) (collectively “Defendants”) for violations of Section 1 of the Sherman Act (15 U.S.C. §§ 1, 2, 3), the California Cartwright Act (Cal. B&P Code §§16720 et seq., and the California 27 Unfair Competition Law, Cal. B&P Code §§ 17200 et seq. (“UCL”). Plaintiff is informed and believes, and thereon alleges the following: 3 NATURE OF ACTION 1. On February 18, 2015, a disastrous explosion occurred at a Torrance, California gasoline refinery that, at the time, produced about 20% of the gasoline sold in Southern California and 10% of the gasoline sold statewide.1 The incident caused a market disruption upon which Defendants—horizontal competitors and major traders in the California spot market for gasoline and gasoline blending products—capitalized on to restrain competition in the relevant market. 2. Defendants Vitol, SK Energy, and SK Trading engaged in a scheme to artificially inflate gasoline prices and to maintain those artificially high prices. Defendants carried out their market manipulation scheme by using various tactics including (1) deploying sham transactions to obfuscate the true gasoline supply and demand in California, (2) trading amongst themselves to purposely engineer increases in the gasoline spot market, and (3) entering into unreported arrangements to share the profits of and to hide their unlawful conduct. 3. As a result of Defendants’ scheme, Plaintiff and class members paid a premium on gasoline prices and continued to do so well after the effects of the refinery’s explosion on supply had dissipated. 4. Defendants’ misconduct was uncovered on May 4, 2020 when the California Attorney General filed a redacted complaint exposing Defendants, alleging that although 23 Defendants “may not have created the supply disruption”, they certainly “exacerbated the effects 1 See U.S. Chemical Safety & Hazard Investigation Board “ExxonMobil Torrance Refinery Investigation Report” No. 2015-02-I-CA (May 3, 2017), available at https://www.csb.gov/file.aspx?DocumentId=6023 at p. 6-8. of that disruption to illegally enrich themselves at great cost to California consumers” in violation of the Cartwright Act and Unfair Competition Law.2 3 JURISDICTION AND VENUE 5. This Court has subject matter jurisdiction over the federal antitrust claims pursuant to 28 U.S.C. §§ 1331, 1337(a), and 1367. 6. Venue is proper in this district pursuant to 15 U.S.C. §§ 15(a), 22, and 28 U.S.C. §§ 1391, because a substantial part of the events giving rise to Plaintiff’s claims occurred in this district, a substantial portion of the affected interstate trade and commerce was carried out in this district, and one or more of the Defendants reside in this district or is licensed to do business in this district. Each Defendant has transacted business, maintained substantial contacts, and/or committed overt acts in furtherance of the illegal restraint of trade throughout this district. The anticompetitive conduct alleged herein has been directed at, and has had the intended effect of, causing injury to persons residing in, located in, or doing business in this district. 7. Under Local Rule 3.2, this civil action should be assigned to the San Francisco Division because the trade and commerce affected by Defendants’ illegal conduct was substantially conducted with, directed to, or impacted Plaintiff and class members in counties within the division. Furthermore, the San Francisco spot market is within this division. PARTIES A. Plaintiff 8. Plaintiff Donald Harris is a citizen of the State of California. He purchased 23 gasoline at retail during the Class Period defined herein for his own use and not for resale, and was injured as a result of Defendants’ misconduct alleged herein. 2 Compl. at pp. 2-3, The People of the State of California v. Vitol Inc. et al., No. CGC-20-584456 (Cal. Super. May 4, 2020), available at https://oag.ca.gov/system/files/attachments/press- docs/CGC-20-584456%20Public%20Complaint%20only.pdf B. Defendants 9. Defendant Vitol, a Delaware corporation, is an energy company with its principal 3 place of business in Houston, Texas. Vitol is registered with the California Secretary of State to conduct business in California. Vitol and a related entity are not strangers to unlawful trading conduct. The Federal Energy Regulatory Commission sued Vitol and one of its traders to collect $3.75 million in fines levied against them after finding Vitol’s trading activity manipulated California electricity markets.3 Vitol S.A. was fined five million Euros by French authorities for manipulating the French southern gas trading point “Peg Sud” between June of 2013 and March of 2014.4 10. Defendant SK Energy is a California corporation with its registered office in Houston, Texas. Defendant SK Energy is an indirect, wholly-owned subsidiary of Defendant SK Trading. 11. Defendant SK Trading is a South Korean corporation headquartered in Seoul, South Korea. 12. SK Trading is the indirect parent of SK Energy. SK Trading is also a sister company to SK Energy Co., Ltd. (“SK Energy Korea”), the largest refiner of crude oil in Korea. All these entities are subsidiaries of SK Innovation Co., Ltd. (“SK Innovation”), a publicly traded holding company headquartered in Seoul, Korea. SK Trading publicly describes its subsidiary SK Energy as the marketing agent for SK Energy Korea in the United States and 23 3 ECF No. 1, Federal Energy Regulatory Comm’n v. Vitol, Inc., No. 2:20-cv-00040-KJM-AC (E.D. Cal. Jan. 6, 2020). 4 REUTERS, UPDATE 1-French regulator fines Vitol 5 mln euros for gas market manipulation, (October, 9, 2018), https://www.reuters.com/article/vitol-france-fine-gas/update-1-french- regulator-finesvitol-5-mln-euros-for-gas-market-manipulation-idUSL8N1WP399. explains that SK Energy facilitates the export of SK Energy Korea’s gasoline and gasoline blending products to the United States. 3 13. SK Trading dominated and controlled SK Energy, and specifically ratified the illegal conduct engaged in by SK Energy that is described herein. SK Trading and SK Energy Korea list their headquarters at the same address as SK Innovation. 14. At all relevant times, Defendant SK Energy was an agent and alter ego of Defendant SK Trading, due to the nature and extent of control that SK Trading exercised over SK Energy. 15. At all relevant times, there existed a unity of interest and ownership between SK Energy and SK Trading such that any separateness between them had ceased to exist and SK Trading controlled, dominated, managed, and operated SK Energy. Specifically, SK Trading controlled the business and affairs of SK Energy such that distinctions between the companies were mere technicalities. 16. Additionally, at all relevant times, SK Energy was acting within the course and scope of its agency with the knowledge, consent, permission, authorization, and ratification, either express or implied, of SK Trading in performing the acts alleged in this Complaint. C. The DOE Defendants 17. DOES 1-50 are other individuals or entities who engaged in or abetted the unlawful conduct set forth in this complaint. Plaintiffs intend to seek leave to amend this 23 complaint upon learning the identity of Doe Defendants. D. Agents and Co-Conspirators 18. Throughout the Class Period, Defendants were and are the agent of each of the remaining Defendants, and in doing the acts alleged herein, were acting within the course and scope of such agency. Each Defendant ratified, participated in, or authorized the wrongful acts of each Defendant. Defendants are individually sued as participants and as aiders and abettors in the improper acts, plans, schemes, and transactions that are subject of this Complaint. Defendants have participated as members of the conspiracy or acted with or in furtherance of it, aided or 3 assisted in carrying out its purposes alleged in this Complaint, and have performed acts and made statements in furtherance of the violations and conspiracy. 19. Various persons and/or firms not named as Defendants herein may have participated as co-conspirators in the violations alleged herein and may have performed acts and made statements in furtherance thereof. The Attorney General for the State of California has expressly named individuals and corporate executives who were involved in the conspiracy. Plaintiffs expressly reserve the right to amend this complaint to add such individuals, as appropriate. FACTUAL ALLEGATIONS A. California’s Unique Gasoline Industry 20. According to the California Department of Energy, gasoline is the most used transportation fuel in California. In 2015, 15.1 billion gallons of gasoline were sold to California drivers. As the country’s most populous state, and the state with the most licensed drivers and registered vehicles, California has a high demand for refined gasoline. 21. Moreover, the process by which gasoline reaches consumers is different on the U.S. west coast and specifically, in the State of California, compared to the rest of the country. 23 22. First, the supply chain starts with the extraction of crude oil and its transport to refineries such as the one in Torrance, California where it is processed into gasoline and other petroleum products. Next, the gasoline is sold wholesale and transported by truck to retailers where it is then purchased by consumers. 23. Due to California being geographically isolated from other U.S. refineries, particularly from the oil refining hotbeds in Texas and the Gulf Coast, and the lack of pipelines 3 that ship finished gasoline products into the state, gasoline distributors are forced to ship additional refined gasoline and gasoline blending products by marine vessel when local supply is low. 24. Furthermore, California has a unique vehicle emission standards called California Reformulated Gasoline Blendstock for Oxygenate Blending (“CARBOB”). Most of the CARBOB consumed in California is produced by refineries located in clusters near metropolitan centers in the San Francisco Bay Area and in the greater Los Angeles area. Gasoline produced out-of-state do not meet these more stringent CARBOB specifications and thus, is not a substitute source of supply for CARBOB-compliant gasoline. 25. One of the largest Southern California CARBOB refineries is in Torrance (the “Torrance Refinery”). The Torrance Refinery, owned by ExxonMobil Corp. in 2015, produces approximately twenty percent of all of the gasoline sold in Southern California and ten percent of the statewide supply. The Torrance Refinery also has the capacity to produce significant quantities of alkylate, a high-quality gasoline blending component. 26. Unexpected disruptions to the supply chain, such as the explosion at the Torrance Refinery, leads to a delayed capacity to produce CARBOB-compliant gasoline for California consumers. California is also forced to import CARBOB-compliant gasoline which can take several weeks or more to arrive at ports. 23 B. Trading in California’s Gasoline Spot Market 27. The “spot” market refers to the purchase and sale of fuel that physically changes possession at or near a refinery hub for delivery (like a pipeline or a barge). Spot market sales of wholesale gasoline typically involve minimum increments of 5,000 barrels (210,000 gallons) to 50,000 (2.1 million gallons) at a time.5 3 28. California has two spot markets⁠—one in Los Angeles and one in San Francisco. The spot market prices are influenced by prevailing gasoline prices of the billions of gallons traded daily on the New York Mercantile Exchange (“NYMEX”). NYMEX prices are public so that pricing is transparent to all market participants. 29. However, NYMEX’s pricing on wholesale commodities⁠—like gasoline⁠—reflect national and international factors as well as regional and local supply and demand conditions. In many of California’s spot market sales, the buyer and seller only negotiate the basis while the final price is determined by adding the basis to the price set by the NYMEX. Accordingly, NYMEX spot prices for gasoline play a limited role in gasoline pricing by local traders. 30. Wholesale (or “Rack”) purchases are made throughout points in the fuel distribution system. These purchases are conducted in 8,000-gallon increments, which is the amount of fuel that an average fuel truck is capable of carrying. Companies that re-sell fuel professionally (or “jobbers”) as well as retailers and end users (for example, trucking companies) retrieve their fuel from the wholesale racks. The prices tied to the sale of gasoline from these racks moves up or down based on movements in the daily California spot market. 31. Additionally, with respect to the gasoline itself, there are two types of CARBOB- regulated gasoline that are traded on the spot markets in California: Regular CARBOB (“Regular”) and Premium CARBOB (“Premium”). Premium trades at a higher price than 23 Regular and is traded with far less frequency. These two types of gasoline are created when alkylate, a high-quality gasoline blending product, is added with other blend stocks to create 5 See Spot Market Pricing Overview, OPIS By HIS Market (June 3, 2020), https://www.opisnet.com/product/pricing/spot/. gasoline. Alkylates are a key component to achieving high octane ratings required to sell Premium gasoline at retail in California. 3 32. Unlike NYMEX, the gasoline spot market in California for both Regular CARBOB and Premium CARBOB gasoline are traded through non-public transactions sometimes coined as “over-the-counter” (“OTC”) trades. Because OTC trades do not occur with complete transparency compared to trading through an exchange like NYMEX, prices on the California spot market are not made immediately public. Instead, gasoline traders rely on price reporting services which report market prices from market participant sources such as refiners, traders, and brokers. Indeed, the most popular reporting service in California for the gasoline spot market is the Oil Price Information Service, LLC (“OPIS”). OPIS is a subscription-based service that publishes a daily report, known as the OPIS West Coast Spot Market Report (the “Spot Market Report”), which both buyers and sellers alike use as an industry pricing benchmark in California. OPIS subscribers have access to the Spot Market Report and can also receive market updates from OPIS throughout the day that include reported deals and other industry news. C. Federal and State Law Prohibit Fraudulent and Deceptive Commodities Trading in the Spot Market 33. Spot market trading of gasoline must comply with California’s commodities fraud statute. See Cal. Corp. Code § 29504. This statute makes it unlawful to engage in certain fraudulent acts when buying or selling commodity contracts. See Corp. Code § 29536, subds. (a), 23 (b), (c), (d). 34. Under section 29536(c), it is unlawful to “[t]o willfully engage in any transaction, act, practice, or course of business which operates or would operate as a fraud or deceit upon any persons.” See Corp. Code § 29536(c). 35. In addition, the federal Commodity Exchange Act (“CEA”) makes unlawful certain types of prohibited transactions. See 7 U.S.C. § 6c. Specifically, the CEA prohibits any 3 transaction that “is, of the character of, or commonly known to the trade as, a ‘wash sale’ or ‘accommodation trade.’” See 7 U.S.C. § 6c(a)(2)(A)(i). 36. The CEA also prohibits a transaction that “is used to cause any price to be replied, registered, or recorded that is not a true and bona fide price.” See 7 U.S.C. § 6c(a)(2)(B). D. Defendants’ Illegal Conduct a. Prior to the Torrance Refinery Explosion 37. During the Class Period, Vitol was a major participant in the gasoline spot market trade as it both bought and sold spot market contracts in California for various types of fuel products, including CARBOB Regular and CARBOB Premium. 38. Additionally, throughout the Class Period, Vitol imported gasoline and gasoline blending products into the State of California. 39. Vitol employee Brad Lucas (“Lucas”) was the primary trader at Vitol tasked with trading gasoline and gasoline blending products that were delivered via pipeline within California. 40. While at Vitol, Lucas reported directly to John Addison (“Addison”), a Vitol executive who reported to the President of Vitol Americas. Addison, in addition to supervising Lucas, also had the responsibility of trading gasoline and gasoline blending products that were 23 delivered via marine vessels to the State of California. 41. During the Class Period, SK Energy and SK Trading (collectively “SK”) were major participants in the gasoline spot market trade as both bought and sold spot market contracts in California for various types of fuel products, including CARBOB Regular and CARBOB Premium. 3 42. Additionally, throughout the Class Period, SK imported gasoline and gasoline blending products into the State of California. 43. SK Energy employee David Niemann (“Niemann”) was the primary trader at SK responsible for executing trades in California with respect to California’s gasoline spot market. Shelly Mohammed (“Mohammed”), an employee of Niemann’s, was the gasoline scheduler. 44. SK Energy functioned as SK Trading’s California trading arm at all relevant times during the Class Period. And while Niemann and Mohammed were considered to be employees of SK Energy, SK’s U.S. West Coast trading operations were conducted within the control and supervision of SK Trading and its subsidiaries. SK Trading also reviewed and approved key decisions to coordinate its trading activity with Vitol. b. The Torrance Refinery Explosion 45. On the morning of February 18, 2015, there was a massive explosion at the Torrance Refinery. 46. The blast took place within the “fluid catalytic cracking” (“FCC”) unit, which holds a crucial role on the refining of CARBOB gasoline; specifically, the FCC unit produces high-quality blending products like alkylate. Up until the explosion, the FCC unit at the Torrance Refinery produced a large portion of all of the high-octane alkylate produced in California. 23 47. Due to the explosion, the Torrance Refinery closed the FCC unit and reduced production of gasoline products, like alkylate, until repairs could be completed. Due to this unforeseen circumstance, ExxonMobil needed to replace the lost alkylate production in California if it wanted to continue producing and refining CARBOB-regulated products. c. Defendants’ Unlawful Conduct Post-Explosion 48. Beginning at least as early as February 2015, and while using the explosion at the Torrance Refinery as cover for their illegal efforts, Vitol and SK Energy – through Lucas, 3 Niemann, Mohammed, and others – reached agreements amongst themselves to raise, fix, and otherwise tamper with the price of refined gasoline in California. Defendants were able to carry out the scheme by manipulating OPIS-reported prices in order to actualize supra-competitive profits while limiting market risk. As alleged above, OPIS-reported pricing is used by buyers and sellers in California to benchmark the spot price of gasoline. 49. Defendants specifically engaged in direct or indirect trades between them that were reported to OPIS with the intent of inflating the OPIS-published price for Regular CARBOB and Premium CARBOB gasoline. Occasionally, Defendants used an intermediary broker, and, at other times, Defendants transacted directly with each other. The goal of this conduct was to create the illusion of a supply and demand imbalance for refined gasoline and to drive up spot market prices to artificial highs during strategic pricing windows. 50. These transactions were often “leveraged” because they involved intentionally taking losses on the purchase of smaller quantities of gasoline in order to increase the profits on the sale of larger quantities of gasoline or alkylate. For example, Defendants traded Regular gasoline contracts directly or indirectly with one another at artificially high prices early in the trading day so that OPIS would report the artificially inflated purchase price to other market participants. This signaled a supply and demand imbalance to the market that caused the artificial 23 inflation of spot market prices. 51. Furthermore, Defendants executed intentionally market-spiking trades for Premium CARBOB gasoline to increase the strategic prices for alkylates—the price of which is generally tied to the OPIS-reported spot price for Premium gasoline. 52. Defendants’ manipulation of spot prices for Regular CARBOB gasoline also influenced the price of alkylate because spot prices for Regular CARBOB gasoline and Premium 3 CARBOB gasoline move in tandem. 53. Thus, in order to realize their supra-competitive profits with respect to alkylate, Defendants worked together to inflate the price of Regular CARBOB and Premium CARBOB during key pricing windows, and then proceeded to coordinate their importation of alkylate during the Class Period into California at supra-competitive prices. d. Defendants’ Active Concealment of Their Unlawful Conduct 54. Defendants executed secondary “wash” trades6 intended to hide or disguise their conduct, to limit or eliminate market risk on reported trades, and to share their anticompetitive profits amongst each other. 55. By hedging each of their reported trades, the secondary transaction ensured that there was little to no market risk associated with Defendants’ conduct. 56. Moreover, Defendants had names for their illegal agreements, which they called “joint ventures” or “JVs,” which, in reality, were nothing more than a conspiracy between so- called competitors to artificially increase spot market prices for Regular CARBOB and Premium CARBOB gasoline in California. 57. During the Class Period, the Defendants’ illegal conduct generated millions of dollars in profits for conspiracy members each month. Lucas and Niemann financially benefitted 23 6 A “wash trade” is “a form of fictitious trade in which a transaction or a series of transactions give the appearance that authentic purchases and sales have been made, but where the trades have been entered without the intent to take a bona fide market position or without the intent to execute bona fide transactions subject to market risk or price competition. directly from the conduct alleged herein. The below chart depicts the effect of Defendants’ illegal conduct on gasoline prices before and during the Class Period.7 3 58. Additionally, the production of CARBOB gasoline in California did not change, despite the explosion at the Torrance facility. There was no supply shock to account for in order to explain the surge in pricing on the spot market and for consumers during the Class Period. 59. Defendants’ recurrent manipulation of the spot market price caused retail gasoline prices to be higher throughout the Class Period. Defendants’ profits were made to the detriment of California consumers. 60. The impact of Defendants’ scheme was substantial, costing retail gasoline purchasers like Plaintiff and class members billions over the Class Period. In 2018, Californians paid an average of 30 cents more per gallon than residents of other states at common retailers.8 23 7 See Severin Borenstein, California’s Mystery Gasoline Surcharge Strikes Back, Energy Institute at HAAS (Feb. 10, 2020), https://energyathaas.wordpress.com/2020/02/10/californias- mystery-gasoline-surcharge-strikes-back/. 8 California Energy Commission, “Additional Analysis on Gasoline Prices in California,” www.energy.ca.gov, p. 1, https://www.energy.ca.gov/sites/default/files/2019- 10/Gas_Price_Report_0.pdf. The California Energy Commission (“CEC”) conducted a detailed analysis of potential causes and estimated that California gasoline consumers paid an additional $1.5 billion in 2018 and $11.6 billion over the last five years.9 3 E. The California Attorney General Action 61. On May 4, 2020, California Attorney General Xavier Becerra announced the filing of a lawsuit against Defendants for alleged manipulation of California’s gas prices resulting in artificially inflated retail gasoline prices. The suit alleges that Defendants seized on the market disruption caused by the Torrance refinery explosion to drive up gas prices and keep them at supracompetitive levels. 62. The Attorney General’s press release states that Defendants engaged in market manipulation through trades that were: selectively reported to the Oil Price Information Service, LLC (OPIS)—the most widely used gasoline reporting service in California—in order to drive up the benchmark prices of Regular and Premium gasoline in OPIS’s Spot Market Report. The companies, through two traders who were friends and former colleagues, colluded to drive up the price of OPIS-reported trades during pricing windows for large sales in order to increase the price of gasoline in the state to their profit. The firms engaged in unusual and otherwise irrational market-spiking trades with each other and third parties that had the effect of driving up prices prior to large trades—and they were successful in doing so, artificially moving and inflating the price of Regular and Premium gasoline so effectively that the prices moved or stayed unaccountably higher than the supply and demand prevailing . . . . By driving up benchmark prices, the companies were able to sell their own product at a higher price, and inflate costs for consumers.10 TOLLING OF THE STATUTES OF LIMITATION 23 9 Id. at p. 2. 10 Press Release, Attorney General Becerra Announces Lawsuit Against Two Multinational Companies for Manipulating Gas Market, Costing Californians More at the Pump, https://oag.ca.gov/news/press-releases/attorney-general-becerra-announces-lawsuit-against-two- multinational-companies. 63. Class member purchases of gasoline within four years prior to the filing of this Complaint are not barred by the applicable four-year statute of limitations and are not required to 3 be tolled in order to be actionable. 64. Plaintiff and the Class did not know of Defendants’ illegal conduct until the California Attorney General filed its complaint against Defendants on May 4, 2020. Further, Plaintiff and the Class had no reason to believe that they paid prices for gasoline that were affected by Defendants’ illegal conduct prior to that date, and thus had no duty to investigate the claims set forth in this Complaint until May 4, 2020. Defendants’ secret joint venture agreements were inherently self-concealing. 65. Defendants engaged in affirmative conduct that was designed to mislead and conceal their illegal conduct. For example, Vitol’s Lucas affirmatively misled the CEC about the true cause of high prices for gasoline that followed the Torrance Refinery explosion in February 2015. 66. Defendants repeatedly misled OPIS about the true nature of their trading activities by reporting artificially high spot trades directly or indirectly between them but concealing the existence of offsetting wash trades that reduced or effectively limited any market risk in the primary trade. 67. Additionally, the California Attorney General, as representative of the people of the State of California, obtained tolling agreements with Defendants that are applicable to the claims of Plaintiff and the Class, in whole or in part. These tolling agreements have effective 23 dates of August 3, 2018, and March 8, 2019, respectively. Defendants and the California Attorney General subsequently executed additional tolling agreements to extend the termination dates of the tolling periods specified in the original agreements. These termination dates have not passed as of the filing of this Complaint. 68. Accordingly, to the extent that tolling is necessary to advance some or all of the claims alleged by Plaintiff and the Class, the four year statutes of limitations governing claims 3 under the Sherman Act, the Cartwright Act, and the UCL were tolled at least until May 4, 2020 pursuant to the injury-discovery rule, the doctrine of fraudulent concealment, and by virtue of express tolling agreements between the California Attorney General and Defendants. CLASS ACTION ALLEGATIONS 69. Plaintiff brings this action on behalf of himself, and as a class action under the Federal Rules of Civil Procedure, Rule 23(a) and (b) on behalf of: All persons or entities who purchased gasoline from a retailer within the State of California from February 18, 2015 until December 31, 2016 (the “Class Period”). 70. Specifically excluded from the Class are: (a) any of the Defendants named herein; (b) any of the Defendants’ parent companies, subsidiaries, and affiliates; (c) any of the Defendants’ officers, directors, management, employees, subsidiaries, affiliates or agents; (d) all governmental entities; and (e) the judges and chambers staff in this case, as well as any members of their immediate families. 71. Plaintiff does not know the exact number of class members. Plaintiff is informed and believes that, due to the nature of the trade and commerce involved, there are millions of class members geographically dispersed throughout the State of California, such that joinder of all class members in the prosecution of this action is impracticable. 72. Plaintiff’s claims are typical of the claims of his fellow class members because 23 Plaintiff purchased gasoline during the Class Period. Plaintiff and all class members were damaged by the same wrongful conduct of Defendants as alleged herein, and the relief sought herein is common to all class members. 73. Numerous questions of law or fact common to the entire Class—including, but not limited to those identified below—arise from Defendants’ anticompetitive and unlawful 3 conduct: a. Whether Defendants contracted, combined or conspired with one another to restrain trade in the spot market for gasoline at any time during the Class Period; b. Whether Defendants’ conduct caused the prices of gasoline sold at retail to be higher than the competitive level as a result of their restraint of trade; c. Whether Plaintiff and the other class members were injured by Defendants’ conduct and, if so, the determination of the appropriate classwide measure of damages; and d. Whether Plaintiff and other class members are entitled to, among other things, injunctive relief, and, if so, the nature and extent of such relief. 74. These and other questions of law and fact are common to the Class and predominate over any questions affecting the class members individually. 75. Plaintiff will fairly and adequately represent the interests of the Class because he purchased gasoline at retail within the State of California during the Class Period and has no conflicts with any other class member. Furthermore, Plaintiff has retained sophisticated and competent counsel who is experienced in prosecuting antitrust class actions, as well as other complex litigation. 23 76. Defendants have acted on grounds generally applicable to the Class, thereby making final injunctive relief appropriate with respect to the Class as a whole. 77. This class action is superior to other alternatives for the fair and efficient adjudication of this controversy. Prosecuting the claims pleaded herein as a class action will eliminate the possibility of repetitive litigation. There will be no material difficulty in the management of this action as a class action. 3 78. The prosecution of separate actions by individual class members would create the risk of inconsistent or varying adjudications, establishing incompatible standards of conduct for Defendants. CLAIMS FOR RELIEF COUNT I – VIOLATION OF THE SHERMAN ACT (15 U.S.C. § 1 – Injunctive Relief Only) 79. Plaintiff hereby repeats and incorporates by reference each preceding paragraphs as though fully set forth herein. 80. Defendants entered into and engaged in a continuing combination, conspiracy, or agreement to unreasonably restrain trade or commerce in violation of Section 1 of the Sherman Act (15 U.S.C. § 1) by artificially restraining competition with respect to the price of gasoline within the State of California. 81. Defendants’ activities constitute a per se violation of Sections 1 of the Sherman Act. 82. Defendants’ anticompetitive and unlawful conduct has proximately caused injury to Plaintiff and class members by restraining competition and thereby raising, maintaining, and/or stabilizing the price of gasoline at levels above what would have occurred if competition had prevailed. For this conduct, Plaintiff and class members are entitled to entitled to injunctive 23 relief pursuant to 15 U.S.C. § 26. COUNT II – VIOLATION OF THE CARTWRIGHT ACT (California Business and Professions Code section 16720 et seq.) 83. Plaintiff hereby repeats and incorporates by reference each preceding paragraphs as though fully set forth herein. 84. Defendants entered into and engaged in a continuing combination, conspiracy, or agreement to unreasonably restrain trade or commerce in violation of California Business and 3 Professions Code § 16720 et seq. by artificially restraining competition with respect to the price of gasoline within the State of California. 85. Defendants’ activities constitute a per se violation of the Cartwright Act. Defendants’ anticompetitive and unlawful conduct has proximately caused injury to Plaintiff and class members by restraining competition and thereby raising, maintaining, and/or stabilizing the price of gasoline at levels above what would have occurred if competition had prevailed. For this conduct, Plaintiff and class members are entitled to entitled to treble damages and injunctive relief pursuant to California Business and Professions Code section 16750(a). COUNT III – VIOLATION OF THE UNFAIR COMPETITION LAW (California Business and Professions Code, section 17200 et seq.) 86. Plaintiff hereby repeats and incorporates by reference each preceding paragraphs as though fully set forth herein. 87. Defendants committed acts of unfair competition, as described above, in violation of the UCL. 88. Defendants’ conduct constitutes an “unlawful” business practice within the meaning of the UCL, and includes, without limitation, the following: violating the Sherman and Cartwright Acts, as set forth above; and engaging in wash sales and otherwise manipulating the benchmark prices reported on the California gasoline spot market in violation of California 23 Corporations Code §§ 29535, 29536, 29537, 29538) and the Commodity Exchange Act, 7 U.S.C. § 1 et seq. 89. Defendants’ conduct separately constitutes an “unfair” business practice within the meaning of the UCL because Defendants’ practices have caused and are “likely to cause substantial injury” to the Plaintiff and class members that is not “reasonably avoidable” by them. 90. Defendants’ conduct, as alleged herein, is and was contrary to public policy, immoral, unethical, oppressive, unscrupulous, and/or substantially injurious to consumers. Any 3 purported benefits arising out of Defendants’ conduct do not outweigh the harms caused to the victims of Defendants’ conduct. 91. Defendants’ conduct is also “unfair” because it is contrary to numerous legislatively-declared policies, as set forth in the Sherman Act, the Cartwright Act, the California Corporations Code and in the Commodities Exchange Act. Here, Defendants’ conduct not only violates the letter of the law, but it also contravenes the spirit and purpose of each of those statutes. The conduct threatens an incipient violation of each of those laws and has both an actual and a threatened impact on competition. 92. Defendants’ conduct, as described above, also constitutes an “fraudulent” business practice within the meaning of the UCL. Defendants’ trading activity on the California gasoline spot market fraudulently raised the price of gasoline above the competitive level through fictitious “wash” trades and other manipulative conduct that did not shift economic risk for the transaction to an arm’s length counterparty. This conduct was designed to deceive—and did deceive—other market participants about the true supply and demand situation for gasoline in order to artificially increase the price of gasoline in California. 93. Plaintiff and class members have suffered injury in fact and have lost money as a result of Defendants’ violations of the UCL in that they paid more for gasoline than they would have paid in a competitive market. They are therefore entitled to restitution and injunctive relief 23 pursuant to California Business and Professions Code §17203. PRAYER FOR RELIEF WHEREFORE, Plaintiff requests that the Court enter judgment on his behalf and on behalf of the Class defined herein, by adjudging and decreeing that: A. This action may proceed as a class action, with Plaintiff serving as the Class Representative, and with Plaintiff’s counsel as Class Counsel; B. Defendants have contracted, combined and conspired in violation of the Sherman Act 3 and Cartwright Act; C. Defendants have violated the UCL by engaging in conduct that constitutes unlawful, unfair and fraudulent business practices; D. Plaintiff and the Class have been injured in their business and property as a result of Defendants’ violations; E. Plaintiff and the Class are entitled to recover treble damages and/or restitution, and that a joint and several judgment in favor of Plaintiff and the Class be entered against Defendants in an amount subject to proof at trial; F. Plaintiff and the Class are entitled to pre-judgment and post-judgment interest on the damages awarded them, and that such interest be awarded at the highest legal rate; G. Plaintiff and the Class are entitled to equitable relief appropriate to remedy Defendants’ past and ongoing restraint of trade, including: i. A judicial determination declaring the rights of Plaintiff and the Class, and the corresponding responsibilities of Defendants; and ii. Issuance of a permanent injunction against Defendants and their parents, subsidiaries, affiliates, successors, transferees, assignees and the respective officers, directors, partners, agents, and employees thereof and all other 23 persons acting or claiming to act on their behalf from violations of the law as alleged herein. H. Defendants are to be jointly and severally responsible financially for the costs and expenses of a Court-approved notice program through post and media designed to give immediate notification to the Class; 3 I. Plaintiff and the Class recover their costs of this suit, including reasonable attorneys’ fees as provided by law; and J. Plaintiff and the Class receive such other or further relief as may be just and proper. JURY DEMAND Plaintiff, on behalf of himself and all others similarly situated, hereby demands a trial by jury as to all issues so triable. Dated: June 29, 2020 Respectfully submitted, /s/ Dennis Stewart______________ 23 Dennis Stewart (SBN 99152) Kirk B. Hulett (SBN 110726) GUSTAFSON GLUEK PLLC 600 B Street 17th Floor San Diego, CA 92101 Telephone: (619) 595-3299 [email protected] [email protected] Daniel E. Gustafson Daniel C. Hedlund Daniel J. Nordin Ling S. Wang GUSTAFSON GLUEK PLLC Canadian Pacific Plaza 120 South Sixth Street, Suite 2600 Minneapolis, MN 55402 Telephone: (612) 333-8844 [email protected] [email protected] [email protected] [email protected] Counsel for Plaintiff and the Proposed Class

antitrust

xNERD4cBD5gMZwcz2P8T

Robert G. McCarthy, Esq. MCCARTHY LAW, PC 3738 Harrison Avenue Butte, MT 59701 Tel: (406) 494-2500 [email protected] Attorney for Plaintiffs IN THE UNITED STATES FEDERAL COURT FOR THE DISTRICT OF MONTANA BUTTE DIVISION Cause No. _________________________ CLASS ACTION COMPLAINT AND JURY DEMAND VALERIE BONANINI, JIM BOOTHE, JOLYNN BROWNING, DENISE BUXTON, MICHELLE CRAWFORD, MYRA DEAVEL, LINDA HARDING, KIMBERLY HOLM, MICHELE HUBER- STEARNS, DARLENE JAEGER, WANDA JOHNSON, COLLEEN KAHM, KATHY KOPF, TAYLER LIEBEL, AMY MARTIN, JEAN PARNELL, PATRICIA PETERSON, BRYNN RALPH, TAWNA REDFERN, PATRICIA ROONEY, CHELSEA ROSALES, LENA SCHWARTZMILLER, SUMMER SHARKEY, SHERRY SPEAR, SHEILA STRATFORD, LELAND SWANSON, NOREEN SWANSON, CHEYENNE TAYLOR, DANA THOMPSON, SARA WELDON, Individually and on Behalf of the Class of All Kids Behavioral Health Employees Similarly Situated, Plaintiffs, vs. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) KIDS BEHAVIORAL HEALTH OF MONTANA, INC., dba ACADIA MONTANA, dba ALTACARE OF MONTANA Defendant. ) ) ) ) ) ) TO THE HONORABLE JUDGE OF SAID COURT: COMES NOW, the above-named Plaintiffs on behalf of themselves and the class of those similarly situated (“Other Similarly Situated Employees”), by way of Complaint against Kids Behavioral Health of Montana, Inc., doing business as Acadia Montana and as Altacare of Montana and allege the following: NATURE OF THE ACTION 1. This is a class action for the recovery by Plaintiffs and Other Similarly Situated Employees of the Defendant for damages in the amount of 60 days’ pay and ERISA benefits by reason of Defendant’s violation of the Plaintiffs’ rights under the Worker Adjustment and Retraining Notification Act of 1988 29 U.S.C. § 2101-2109 et. seq. (the “WARN Act”). The Plaintiffs and the Other Similarly Situated Employees were employed by Defendant, KIDS BEHAVIORAL HEALTH OF MONTANA, INC., dba ACADIA MONTANA and as ALTACARE OF MONTANA until they were terminated in anticipation of, as part of, or as a result of a planned mass layoff and/or plant closing ordered by Defendant on or about July 14, 2019 and thereafter. The Defendant violated the WARN Act by failing to give the Plaintiffs and the Other Similarly Situated Employees at least 60 days’ advance written notice of termination, as required by the WARN Act. As a consequence, the Plaintiffs and the Other Similarly Situated Employees of the Defendant are entitled under the WARN Act to recover from the Defendant their wages and ERISA benefits for 60 days and other damages as allowed by statute. JURISDICTION AND VENUE 2. This Court has jurisdiction over these parties, the subject matter of this action and this proceeding pursuant to 28 U.S.C. § 1331 and 29 U.S.C § 2104 (a)(5). 3. The violations of the WARN Act alleged herein occurred in this District and more particularly in Butte, Montana. Venue in this Court is proper pursuant to 29 U.S.C § 2104 (a)(5). PARTIES 4. The above-named Plaintiffs are residents of the State Montana that were employees of the Defendant prior to the actions complained of herein. 5. Upon information and belief any one of the Plaintiffs are representative of a class of over 130 employees of the Defendant who are entitled to recover from the Defendant based on violations of the Worker Adjustment and Retraining Notification Act (“WARN” Act), 29 U.S.C. § 2101 et. seq. 6. The Plaintiffs were employed by Defendant at Defendant’s Butte facility until their termination without cause in anticipation of or as part of a mass layoff or plant closure on or about July 14, 2019 when the Defendant finalized its mass layoff and or plant closing of the Butte facility. 7. KIDS BEHAVIORAL HEALTH OF MONTANA, INC., dba ACADIA MONTANA and ALTACARE OF MONTANA is an entity incorporated in the state of Montana which is doing business in Butte-Silver Bow County and the State of Montana. 8. Upon information and belief, Defendant owned and operated its facilities in and out of Butte providing mental health services, residential mental health care and hospitalization to children and providing mental health services to schools and school districts. The Defendant operated under the assumed business names of Altacare and Acadia from the same location. 9. On or about July 14, 2019 and thereafter, Defendant, as a single employer, ordered the termination of the Plaintiffs’ employment together with the termination of the majority of all of the employees who worked at or reported to the facility doing business as Acadia as a mass layoff and or plant closing as defined by the WARN Act for which the Plaintiffs were entitled to receive 60 days written notice under the WARN Act. CLASS ALLEGATIONS RULES 23(a) and (b) 10. This is an action brought by thirty (30) former employees of the Defendant, alleging that their employer failed to give adequate and proper notice of a plant closure or mass layoff in violation of the Worker Adjustment and Retraining Notification Act (“WARN Act”), 29 U.S.C. § 2101 et. seq. 11. Defendant did not provide the Plaintiffs nor the Other Similarly Situated Employees, nor the state of Montana dislocated worker units, nor the Butte-Silver Bow County local government, with written notice that complied with the statutory requirements of served written notice pursuant to the WARN Act prior to their discharge from employment. 12. All of the Plaintiffs are “affected employees” and aggrieved employees” who sustained “employment loss,” as defined by 20 C.F.R. § 639.3, as a result of their termination from employment with Defendant and the Defendant’s failure to provide notice. 13. Prior to June 17, 2019 and thereafter the majority of the Plaintiffs and the Other Similarly Situated Employees that remained had their hours and days of employment reduced and changed and were informed by Defendant that they were not scheduled. The Defendant also advised the Plaintiffs that they will not pay them under the provisions of the WARN Act despite its clear application to the mass layoff and closure. 14. Pursuant to the WARN Act, 29 U.S.C. Section 21014 (a)(5), the Plaintiffs maintain this action on behalf of themselves and on behalf of each of the Other Similarly Situated Employees. The number of employees terminated is over 130. 15. Each of the Other Similarly Situated Employees are similarly Situated to the Plaintiffs in respect to his or her rights under the WARN Act. 16. Defendant, as a single employer, was required by the WARN Act to give the Plaintiffs and the Other Similarly Situated Employees at least 60 days advance written notice prior to their termination. 17. Prior to their terminations, neither the Plaintiffs nor the Other Similarly Situated Employees received written notice that complied with the requirements of the WARN Act. 18. The Defendant has failed to pay the Plaintiffs and the Other Similarly Situated Employees their respective wages, salary, commissions, bonuses, accrued holiday pay and accrued vacation for 60 days following their respective terminations and failed to make 401(k) contributions and provide them with their health insurance coverage and other employee benefits. 19. The Plaintiffs brings this action on their own behalf and, pursuant to Rules 23(a) and (b)(3) of the Federal Rules of Civil Procedure on behalf of themselves and the Other Similarly Situated Employees who worked at the defendant’s facility that were terminated in anticipation of or as part of, or as the reasonably foreseeable result of the mass layoff and/or plant closing ordered by the Defendant, as a single employer, on or about July 14, 2019 and thereafter. 20. The persons in the Class identified above are so numerous that joinder of all Class Members is impracticable. The number is believed to be 130. 21. There are questions of law and fact common to the Class Members that predominate over any questions affecting only individual members. 22. The claims of the representative party is typical of the claims of the Class. The representative party will be identified following initial discovery. 23. The representative party will fairly and adequately protect the interests of the Class. 24. The Plaintiffs have retained counsel competent and experienced in complex class action employment litigation who has been counsel in other WARN Act claims and other class actions that were successfully and promptly litigated on behalf of employees. 25. A class action is superior to other available methods for the fair and efficient adjudication of this controversy—particularly in the contest of WARN Act litigation, where individual Plaintiffs and the Other Similarly Situated Employees may lack the financial resources to vigorously prosecute a lawsuit in federal court against a corporate defendant. 26. There are questions of law and fact common to the Class Members that predominate over any questions solely affecting individual members of the Class, including but not limited to: (a) Whether the Class Members were employees of the Defendant who worked at or reported to the Butte Facility; (b) Whether Defendant, as a single employer, terminated the employment of the Class Members without cause on their part and without giving them 60 days advance written notice; (c) Whether the Defendant may rely the WARN Acts “unforeseeable business circumstances” or “faltering company” defense. (d) Whether Defendant’s failure to provide 60 days’ notice should render them liable to the Class Members for 60 days’ pay and benefits and the award of attorney fees and cost incurred. CLAIM FOR RELIEF 27. At all relevant times, the Defendant employed 100 or more employees, exclusive of part-time employees, or employed 100 or more employees who in the aggregate worked at least 4,000 hours per week exclusive of hours of overtime within the United States as defined by the WARN Act and employed more than 60 employees at the Butte Facility. 28. At all relevant times, the Defendant was an “employer,” as that term is defined in 29 U.S.C. § 2101(a)(1) of the WARN Act and 20 C.F.R. § 639.3(a). 29. On or about July 14, 2019 and thereafter, Defendant, ordered the “mass layoff” and/or “plant closing” of the Butte Facility of Acadia as those “terms” are defined by 29 U.S.C. § 2101(a). 30. The Plaintiffs and the Other Similarly Situated Employees who were terminated by Defendant as a result of Defendant planning the mass layoff and/or plant closing at the Butte Facility are “affected employees” as defined by 29 U.S.C. § 2101(a)(5) of the WARN Act. The “affected employees” include employees that were discharged in an attempt to reduce employee numbers in order to attempt to prevent the application of the WARN Act. 31. The mass layoff and/or plant closing at the Butte Facility resulted in “employment losses,” as that term is defined by the WARN Act for at least fifty (50) of Defendant’s employees as well as 33% of Defendant’s workforce at the facility, excluding “part-time employees,” as that term is defined by the WARN Act. 32. The Plaintiffs and each of the Other Similarly Situated Employees are “aggrieved employees” of the Defendant as that term is defined in 29 U.S.C. § 2104 (a)(7). 33. Pursuant to Sections 2102 of WARN and 20 C.F.R. § 639.1 - § 639.10 et. seq., Defendant was required to provide at least 60 days prior written notice of the termination or notice as soon as practicable, to the affected employees, explaining why the sixty (60) days prior notice was not given. The Defendant did not do so. 34. Defendant failed to provide at least sixty (60) days prior written notice of the terminations and also failed to provide notice prior to their terminations setting forth the basis for reduced notice as required by the WARN Act. 35. The Defendant failed to pay the Plaintiffs and each of the Other Similarly Situated Employees their respective wages, salary, commissions, bonuses, accrued holiday pay and accrued vacation for 60 working days following their respective terminations, and failed to make the pension and 401(k) contributions, provide other employee benefits under ERISA, and pay their medical expenses for 60 calendar days from and after the dates of their respective terminations. 36. As a result of Defendant’s failure to pay the wages, benefits and other monies as asserted above, the Plaintiffs and Other Similarly Situated Employees were damaged in an amount equal to the sum of the Class Members unpaid wages, accrued holiday pay, accrued vacation pay, accrued sick leave pay and benefits which would have been paid for a period of sixty (60) calendar days after the date of the members’ terminations. WHEREFORE, the Plaintiffs and Other Similarly Situated Employees demand judgment against the Defendant as follows: a. An amount equal to the sum of: unpaid wages, salary, commissions, unpaid bonuses, accrued holiday pay, accrued vacation pay pension and 401(k) contributions and other ERISA benefits, for sixty (60) working days following the member employee’s termination, that would have been covered and paid under the then applicable employee benefit plans had that coverage continued for that period, all determined in accordance with the WARN Act; b. Certification that, pursuant to Fed. R. Civ. P. 23 (a) and (b) and the WARN Act, 29 U.S.C §2104(a)(5), Plaintiffs and the Other Similarly Situated Employees constitute a single class; c. Interest as allowed by law on the amounts owed under the preceding paragraphs; d. Appointment of the undersigned attorney as Class Counsel; e. Appointment of one or more of the named Plaintiffs as the Class Representatives and payment of reasonable compensation for their services as such; f. The reasonable attorneys fees and the costs and disbursements the Plaintiffs incur in prosecuting this action, as authorized by the WARN Act, 29 U.S.C. §2104(a)(6); g. Such other and further relief as this Court may deem just and proper. 37. The Plaintiffs suffered detriment and damages which are recoverable under the WARN Act. 38. The Defendant’s failure to comply with the WARN Act requirements entitles the Plaintiffs class to the remedies of 29 U.S.C. § 2104 including the award of their normal wages and benefits for a period of 60 days and interest and attorneys fees. DATED this 19th day of July, 2019. MCCARTHY LAW, P.C. 3738 Harrison Avenue Butte, Montana 59701 /s/Robert G. McCarthy ROBERT G. MCCARTHY JURY DEMAND The Plaintiffs hereby demand a trial by jury on all issues so triable. MCCARTHY LAW, P.C. 3738 Harrison Avenue Butte, Montana 59701 /s/Robert G. McCarthy ROBERT G. MCCARTHY

consumer fraud

deRdEYcBD5gMZwczFnnT

LEE LITIGATION GROUP, PLLC C.K. Lee (CL 4086) Anne Seelig (AS 3976) 30 East 39th Street, Second Floor New York, NY 10016 Tel.: 212-465-1188 Fax: 212-465-1181 Attorneys for Plaintiffs, FLSA Collective Plaintiffs and the Class UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK MARTIN PUEBLA, NICOLAS PUEBLA-FLORES, EDGAR PUEBLA, JESUS VASQUEZ and JOAQUIN GALLEGOS, on behalf of themselves, FLSA Collective Plaintiffs and the Class, Case No: Plaintiffs, CLASS AND COLLECTIVE ACTION COMPLAINT v. Jury Trial Demanded T&A MARBLE & TILE, INC., JOHN DOE CORP. d/b/a MAXX DEVELOPMENT GROUP, ANTONIO ANZOVINO and MAXIMILIANO ZAPPONE, Defendants. Plaintiffs, MARTIN PUEBLA, NICOLAS PUEBLA-FLORES, EDGAR PUEBLA, JESUS VASQUEZ and JOAQUIN GALLEGOS (“Plaintiffs”), on behalf of themselves and others similarly situated, by and through their undersigned attorneys, hereby file this Class and Collective Action Complaint against Defendants, T&A MARBLE & TILE, INC., JOHN DOE CORP d/b/a MAXX DEVELOPMENT GROUP (the “Corporate Defendants”), ANTONIO ANZOVINO and MAXIMILIANO ZAPPONE (together the “Individual Defendants,” and collectively with the Corporate Defendants, the “Defendants”) and states as follows: INTRODUCTION 1. Plaintiffs allege, pursuant to the Fair Labor Standards Act, as amended, 29 U.S.C. §§201 et. seq. (“FLSA”), that they and others similarly situated are entitled to recover from Defendants: (1) unpaid overtime, (2) liquidated damages (3) compensation for retaliation, and (4) attorneys’ fees and costs. 2. Plaintiffs further allege that, pursuant to the New York Labor Law (“NYLL”), they and others similarly situated are entitled to recover from Defendants: (1) unpaid overtime, (2) statutory penalties, (3) compensation for retaliation, (4) liquidated damages and (5) attorneys’ fees and costs. JURISDICTION AND VENUE 3. This Court has jurisdiction over this controversy pursuant to 29 U.S.C. §216(b), 28 U.S.C. §§1331, 1337 and 1343, and has supplemental jurisdiction over Plaintiffs’ state law claims pursuant to 28 U.S.C. §1367. 4. Venue is proper in the Southern District pursuant to 28 U.S.C. §1391. PARTIES 5. Plaintiff, MARTIN PUEBLA, is a resident of Bronx County, New York. 6. Plaintiff, NICOLAS PUEBLA-FLORES, is a resident of New York County, New York 7. Plaintiff, EDGAR PUEBLA, is a resident of Bronx County, New York. 8. Plaintiff, JESUS VASQUEZ, is a resident of Bronx County, New York. 9. Plaintiff, JOAQUIN GALLEGOS, is a resident of Bronx County, New York. 10. Corporate Defendants: (a) Upon information and belief, Defendant, T&A MARBLE & TILE, INC., is a domestic business corporation organized under the laws of New York, with a principal place of business at 2024 Williamsbridge Road, Bronx, NY 10461 and an address for service of process located at 909 Midland Ave., 3rd Floor, Yonkers, NY 10704. (b) Upon information and belief, Defendant, JOHN DOE CORP d/b/a MAXX DEVELOPMENT GROUP is a domestic business corporation organized under the laws of New York, with a principal place of business at 2024 Williamsbridge Road, Bronx, NY 10461, a corporate office at 935 Morris Park Avenue, Bronx, New York 01542, and an address for service of process located at 909 Midland Ave., 3rd Floor, Yonkers, NY 10704. 11. Upon information and belief, Defendant, JOHN DOE CORP d/b/a MAXX DEVELOPMENT GROUP is a successor in interest to T&A MARBLE & TILE, INC. The Successor Defendant is successor-in-interest to the Predecessor Defendants because: ` (i) The Successor Defendant continued the operation of the same type of business; (ii) The Predecessor Defendant had outstanding liabilities at the time that they sold the business, and transferred such liabilities to the Successor Defendant; (iii) The Predecessor Defendant transferred inventory and equipment to the Successor Defendant; (iv) The Successor Defendant continued the labor and employment policies of the Predecessor Defendant; (vi) The Successor Defendant continued the operation of the business at the same physical address with the same look and feel; (vii) The Successor Defendant retained employees previously employed by Predecessor Defendant; (viii) The Successor Defendant employ individuals in the same positions, and under substantially the same working conditions; (ix) The Successor Defendant had notice of potential liability under the FLSA and NYLL prior to acquiring the business from Predecessor Defendant; (x) The Successor Defendant possessed knowledge that unpaid wages were owed to employees prior to acquiring the business from Predecessor Defendant. 12. Upon information and belief, Defendant, ANTONIO ANZOVINO, is the Chairman or Chief Executive Officer of Defendant, T&A MARBLE & TILE, INC. Defendant ANZOVINO exercised control over the terms and conditions of Plaintiffs’ employment. With respect to Plaintiffs he exercised his power to (i) fire and hire, (ii) determine rate and method of pay, (iii) set employee schedules, and (iv) otherwise affect the quality of employment. 13. Upon information and belief, Defendant, MAXIMILIANO ZAPPONE, is the Chairman or Chief Executive Officer of Successor Defendant, JOHN DOE CORP. d/b/a MAXX DEVELOPMENT GROUP. 14. At all relevant times, each of the Corporate Defendants were and continues to be an “enterprises engaged in commerce” within the meaning of the FLSA. 15. At all relevant times, the work performed by Plaintiffs, FLSA Collective Plaintiffs and Class members was directly essential to the business operated by Defendants. FLSA COLLECTIVE ACTION ALLEGATIONS 16. Plaintiffs bring claims for relief as a collective action pursuant to FLSA Section 16(b), 29 U.S.C. § 216(b), on behalf of all non-exempt employees (including tile installers, tile installer helpers, drivers, laborers) employed by Defendants on or after the date that is six years before the filing of the Complaint in this case as defined herein (“FLSA Collective Plaintiffs”). 17. At all relevant times, Plaintiffs and the other FLSA Collective Plaintiffs are and have been similarly situated, have had substantially similar job requirements and pay provisions, and are and have been subjected to Defendants’ decisions, policies, plans, programs, practices, procedures, protocols, routines, and rules, all culminating in a willful failure and refusal to pay them the proper overtime premium at the rate of one and one half times the regular rate for work in excess of forty (40) hours per workweek. The claims of Plaintiffs stated herein are essentially the same as those of the other FLSA Collective Plaintiffs. 18. The claims for relief are properly brought under and maintained as an opt-in collective action pursuant to §16(b) of the FLSA, 29 U.S.C. 216(b). The FLSA Collective Plaintiffs are readily ascertainable. For purposes of notice and other purposes related to this action, their names and addresses are readily available from the Defendants. Notice can be provided to the FLSA Collective Plaintiffs via first class mail to the last address known to Defendants. STATEMENT OF FACTS 19. Plaintiff Martin Pueblas (a) On or about January 1, 1989, Plaintiff, MARTIN PUEBLAS, was hired by Defendants and/or their predecessors, as applicable, to work as a driver for Defendants’ construction business located at 2024 Williamsbridge Road, Bronx, NY 10461. (b) MARTIN PUEBLA worked for Defendants until on or about August 30, 2015. (c) During the employment of Plaintiff, MARTIN PUEBLA, by Defendants, he worked over forty (40) hours per week. During Plaintiff MARTIN PUEBLA’s employment by Defendants, he worked over ten (10) hours per day. (d) Specifically, Plaintiff MARTIN PUEBLAS worked 6 days a week for 11.5 hours per day. Prior to June 2014, Plaintiff received his compensation on a salary basis, at a rate of $1000 per week. Plaintiff received $500 of his salary in cash and the remaining $500 by check. In June 2014, Plaintiff’s salary was raised to $1,200 per week. Following his raise, Plaintiff received $500 of his salary in cash and the remaining $700 by check. There was never any agreement that Plaintiff’s fixed salary was intended to cover his overtime compensation. Defendants willfully violated Plaintiff MARTIN PUEBLA’ rights by paying him on a salary basis, in violation of the New York Labor Law because Plaintiff is a non-exempt employee who must be paid on an hourly basis. (e) Other non-exempt employees worked similar hours and were provided similar compensation. 20. Plaintiff Nicolas Puebla-Flores (a) On or about January 1, 2000, Plaintiff, NICOLAS PUEBLA-FLORES, was hired by Defendants and/or their predecessors, as applicable, to work as a laborer for Defendants’ construction business located at 2024 Williamsbridge Road, Bronx, NY 10461. (b) NICOLAS PUEBLA-FLORES worked at T&A MARBLE & TILE, INC. until on or about August 30, 2015. (c) During the employment of Plaintiff, NICOLAS PUEBLA-FLORES, by Defendants, he worked over forty (40) hours per week. During Plaintiff’s employment by Defendants, he worked over ten (10) hours per day. (d) Specifically, Plaintiff NICOLAS PUEBLA-FLORES worked 6 days a week for 11.5 hours per day. Between 2009 and June 2014, Plaintiff received his compensation on a salary basis, at a rate of $600 per week. In June 2014, NICOLAS PUEBLA-FLORES’ salary was raised to a rate of $700 per week. There was never any agreement that Plaintiff’s fixed salary was intended to cover his overtime compensation. Defendants willfully violated Plaintiff NICOLAS PUEBLA-FLORES’ rights by paying him on a salary basis, in violation of the New York Labor Law because Plaintiff NICOLAS PUEBLA-FLORES is a non-exempt employee who must be paid on an hourly basis. (e) Other non-exempt employees worked similar hours and were provided similar compensation. 21. Plaintiff Edgar Puebla (a) On or about January 2009, Plaintiff, EDGAR PUEBLA, was hired by Defendants and/or their predecessors, as applicable, to work as a tile installer helper for Defendants’ construction business located at 2024 Williamsbridge Road, Bronx, NY 10461. (b) EDGAR PUEBLA, worked at T&A MARBLE & TILE, INC. until on or about January 30, 2016. (c) During the employment of Plaintiff, EDGAR PUEBLA, by Defendants, he worked over forty (40) hours per week. (d) Specifically, Plaintiff EDGAR PUEBLA worked 6 days a week for 9 hours per day. Between January 2009 and December 2012, Plaintiff received his compensation on a salary basis, at a rate of $110 per day. In January 2013, EDGAR PUEBLAS’ salary was raised to a rate of $120 per day. There was never any agreement that Plaintiff’s fixed salary was intended to cover his overtime compensation. Defendants willfully violated Plaintiff EDGAR PUEBLAS’ rights by paying him on a salary basis, in violation of the New York Labor Law because Plaintiff EDGAR PUEBLA is a non-exempt employee who must be paid on an hourly basis. (e) Other non-exempt employees worked similar hours and were provided similar compensation. 22. Plaintiff Jesus Vasquez (a) On or about January 2009, Plaintiff, JESUS VASQUEZ, was hired by Defendants and/or their predecessors, as applicable, to work as a handyman for Defendants’ construction business located at 2024 Williamsbridge Road, Bronx, NY 10461. (b) JESUS VASQUEZ, worked at T&A MARBLE & TILE, INC. until on or about February, 2016. (c) During the employment of Plaintiff, JESUS VASQUEZ, by Defendants, he worked over forty (40) hours per week. (d) Specifically, Plaintiff JESUS VASQUEZ worked 6 days a week for 9 hours per day. Between January 2009 and December 2012, Plaintiff received his compensation on a salary basis, at a rate of $120 per day. In January 2013, JESUS VASQUEZS’ salary was raised to a rate of $130 per day. There was never any agreement that Plaintiff’s fixed salary was intended to cover his overtime compensation. Defendants willfully violated Plaintiff JESUS VASQUEZS’ rights by paying him on a salary basis, in violation of the New York Labor Law because Plaintiff JESUS VASQUEZ is a non-exempt employee who must be paid on an hourly basis. (e) Other non-exempt employees worked similar hours and were provided similar compensation. 23. Plaintiff Joaquin Gallegos (a) On or about January 2008, Plaintiff, JOAQUIN GALLEGOS, was hired by Defendants and/or their predecessors, as applicable, to work as a tile installer for Defendants’ construction business located at 2024 Williamsbridge Road, Bronx, NY 10461. (b) JOAQUIN GALLEGOS, worked at T&A MARBLE & TILE, INC. until on or about January 20, 2016. (c) During the employment of Plaintiff, JOAQUIN GALLEGOS, by Defendants, he worked over forty (40) hours per week. (d) Specifically, Plaintiff JESUS VASQUEZ worked 6 days a week for 9 hours per day. Throughout his employment, Plaintiff received his compensation on a salary basis, of $150 per day. There was never any agreement that Plaintiff’s fixed salary was intended to cover his overtime compensation. Defendants willfully violated Plaintiff JOAQUIN GALLEGOS’ rights by paying him on a salary basis, in violation of the New York Labor Law because Plaintiff JOAQUIN GALLEGOS is a non-exempt employee who must be paid on an hourly basis. (e) Other non-exempt employees worked similar hours and were provided similar compensation. 24. Defendants knowingly and willfully operated their business with a policy of not paying Plaintiffs the New York State overtime rate (of time and one-half). 25. Defendants knowingly and willfully operated their business with a policy of not providing a proper wage notice to Plaintiffs and other non-exempt employees at the beginning of employment and annually thereafter, in violation of the New York Labor Law. 26. When Defendants became aware Plaintiffs were contemplating to bring FLSA and New York Labor Law claims Defendants retaliated against the Plaintiffs to avoid this litigation by asking Immigration authorities to investigate Defendants immigration status and get them deported. 27. Plaintiffs retained Lee Litigation Group, PLLC to represent Plaintiffs, FLSA Collective Plaintiffs and Class members, in this litigation and has agreed to pay the firm a reasonable fee for its services. STATEMENT OF CLAIM COUNT I VIOLATION OF THE FAIR LABOR STANDARDS ACT ON BEHALF OF PLAINTIFF AND FLSA COLLECTIVE PLAINTIFFS 28. Plaintiffs reallege and reaver Paragraphs 1 through 27 of this class and collective action Complaint as if fully set forth herein. 29. At all relevant times, Defendants were and continue to be employers engaged in interstate commerce and/or the production of goods for commerce within the meaning of the FLSA, 29 U.S.C. §§ 206(a) and 207 (a). Further, Plaintiffs and FLSA Collective Plaintiffs are covered individuals within the meaning of the FLSA, 29 U.S.C. §§ 206(a) and 207 (a). 30. At all relevant times, Defendants employed Plaintiffs and FLSA Collective Plaintiffs within the meaning of the FLSA. 31. At all relevant times, each of the Corporate Defendants had gross annual revenues in excess of $500,000.00. 32. At all relevant times, the Defendants engaged in a policy and practice of refusing to pay overtime compensation at the statutory rate of time and one-half to Plaintiff and FLSA Collective Plaintiffs for all hours worked in excess of forty hours per workweek. 33. Plaintiffs are in possession of certain records concerning the number of hours worked by Plaintiffs and FLSA Collective Plaintiffs and the actual compensation paid to Plaintiffs and FLSA Collective Plaintiffs. Further records concerning these matters should be in the possession and custody of the Defendants. Plaintiffs intend to obtain all records by appropriate discovery proceedings to be taken promptly in this case and, if necessary, will then seek leave of Court to amend this Complaint to set forth the precise amount due. 34. Defendants failed to properly disclose or apprise Plaintiffs and FLSA Collective Plaintiffs of their rights under the FLSA. 35. As a direct and proximate result of Defendants’ willful disregard of the FLSA, Plaintiffs and FLSA Collective Plaintiffs are entitled to liquidated (i.e., double) and retaliation damages pursuant to the FLSA. 36. Due to the intentional, willful and unlawful acts of Defendants, Plaintiffs and FLSA Collective Plaintiffs suffered damages in an amount not presently ascertainable of unpaid overtime wages, plus an equal amount as liquidated damages. 37. Plaintiff and FLSA Collective Plaintiffs are entitled to an award of their reasonable attorneys’ fees and costs pursuant to 29 U.S.C. §216(b). COUNT II VIOLATION OF THE NEW YORK LABOR LAW ON BEHALF OF PLAINTIFFS 38. Plaintiffs reallege and reaver Paragraphs 1 through 37 of collective action Complaint as if fully set forth herein. 39. At all relevant times, Plaintiffs were employed by the Defendants within the meaning of the New York Labor Law, §§2 and 651. 40. Defendants willfully violated Plaintiffs’ rights by failing to pay them overtime compensation at the rate of not less than one and one-half times the regular rate of pay for each hour worked in excess of forty hours in a workweek. 41. Defendants failed to properly notify employees of their hourly pay rate and overtime rate, in direct violation of the New York Labor Law. 42. Defendants failed to provide a proper wage and hour notice, at the date of hiring and annually, to all non-exempt employees per requirements of the New York Labor Law. 43. Defendants failed to provide proper wage statements with every payment as required by New York Lab. Law § 195(3). 44. Defendants willfully violated Plaintiffs’ rights by paying them on a salary basis, in violation of the New York Labor Law because Plaintiffs are non-exempt employees who must be paid on an hourly basis. 45. Due to the Defendants’ New York Labor Law violations, Plaintiffs are entitled to recover from Defendants their unpaid overtime, reasonable attorneys’ fees, liquidated damages, retaliation damages, statutory penalties and costs and disbursements of the action, pursuant to New York Labor Law. PRAYER FOR RELIEF WHEREFORE, Plaintiffs on behalf of themselves, FLSA Collective Plaintiffs and Class members, respectfully requests that this Court grant the following relief: a. A declaratory judgment that the practices complained of herein are unlawful under the FLSA and the New York Labor Law; b. An injunction against Defendants and their officers, agents, successors, employees, representatives and any and all persons acting in concert with them as provided by law, from engaging in each of the unlawful practices, policies and patterns set forth herein; c. An award of unpaid overtime compensation due under the FLSA and the New York Labor Law; d. An award of statutory penalties as a result of Defendants’ failure to comply with New York Labor Law wage notice and wage statement requirements; e. An award of liquidated and/or punitive damages as a result of Defendants’ willful failure to pay compensation for all hours worked and overtime compensation for all hours worked over 40 per workweek, pursuant to 29 U.S.C. § 216; f. An award of liquidated and/or punitive damages as a result of Defendants’ willful failure to pay compensation for all hours worked, overtime compensation for all hours worked over 40 per workweek pursuant to the New York Labor Law; g. An award of prejudgment and post judgment interest, costs and expenses of this action together with reasonable attorneys’ and expert fees and statutory penalties; h. Compensation for retaliation; i. Designation of Plaintiffs as Representatives of the FLSA Collective Plaintiffs; j. Designation of Plaintiffs as Representatives of Class; and k. Such other and further relief as this Court deems just and proper. JURY DEMAND Pursuant to Rule 38(b) of the Federal Rules of Civil Procedure, Plaintiffs demand trial by jury on all issues so triable as of right by jury. Dated: April 4, 2017 Respectfully submitted, LEE LITIGATION GROUP, PLLC C.K. Lee (CL 4086) Anne Seelig (AS 3976) 30 East 39th Street, Second Floor New York, NY 10016 Tel.: 212-465-1188 Fax: 212-465-1181 Attorneys for Plaintiffs, FLSA Collective Plaintiffs and the Class By: /s/ C.K. Lee C.K. Lee, Esq. (CL 4086)

employment & labor

X6EbCYcBD5gMZwczEfag

IN TIIE DISTRICT COURT OF THE VIRGIN ISLANDS ST. CROIX DIVISION 12-89 ROBIN JOACHIM DARTELL. INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, Plaintiff, COMPLAINT vs. CLASS ACTION JURY TRIAL DEMANDEI) TIBET PHARMACEUTICALS, INC, HONG YU, TAYLOR Z. GUO, SABRINA Y. REN, WENBO CHEN, YOUI{ANG PEN, SOLOMON CHEN, ANDERSON & STRUDWICK INCORPORATED, STERNE AGEE GR.OUP, INC., HAYDEN ZOU, L. MCCARTHY DOWNS III and, ACQUAVELLA, CHIARELLI, SHUSTE& BERKOWER & CO., LLP, Defendants. PlaintiffRobin Joachim Dartell ("Plaintiff), individually and on behalfofall other persons similarly situated, by his undersigned attorneys, for his complaint against Defendants, alleges the following based upon personal knowledge as to himselfand his own acts, and information and belief as to all other matters, based upon, inter alia, the investigation conducted by and through his attomeys, which included, among other things, a review of the defendants' public documents, conference calls and announcements made by defendants, United States Securities and Exchange Commission (.'SEC) filings, wire and press releases published by and regarding Tibet Pharmaceuticals, Inc. ("Tibet" orthe "Company"), securities analysts' reports and advisories about the Company, and information readily obtainable on the Intemet. Plaintiffbelieves that substantial evidentiary support will exist for the allegations set forth herein after a reasonable opportunity for discovery. NATURE OFTI{E ACTION 1. This is a federal securities class action on behalfofa class consisting ofall persons other than defendants who purchased the common stock ofTibet pursuant and/or traceable to the Company's Registration Statement and Prospectus, declared effective by the SEC on December 28, 2010, issued in connection with the Company's Initial Public Offering (the "IPO"), including all those who purchased Tibet stock after December 28, 2010, seeking to recover damages caused by defendants' violations offederal securities laws and to oursue remedies under the Securities Act of 1933 (the "Securities Act") JIJRISDICTION AND VENTIE 2. The claims asserted herein arise unde¡ and pursuant to Sections l1 and 15 ofthe Securities Act (15 U.S.C. $$ 771ç 771 and 77(o)). 3. This Court hasjurisdiction over the subject matter ofthis action pursuant to Section 22(a) of the Securities Act, 15 U.S.C. g77v(a). 4. Venue is proper in this Judicial District pursuant to Section 22(a) ofthe Securities Act, l5 U.S.C. $77v(a). 5. In connection with the acts, conduct, and other wrongs alleged in this Complaint, Defendants, directly or indirectly, used the means and instrumentalities of interstate commerce, including but not limited to, the United States mails, interstate telephone communications and the facilities of the national securities exchanse. PARTIES 2 6. Plaintiff, as set forth in the accompanying certification, incorporated by reference herein, purchased Tibet securities at artificially inflated prices during the Class Period and has been damaged thereby. 7. Defendant Tibet, a British Virgin Islands corporation, through its operating subsidiaries purports to engage in the research, development, manufacture, marketing, and sale of traditional Tibetan medicines in China. 8. Defendant Taylor Z. Guo ("Guo") at all relevant times herein was Tibet's Chief Executive Officer and Director. Guo signed the registration statement in connection with the IPO. 9. Defendant Hong Yu ("Yu") at all relevant times herein was Tibet's Chairman of the Board of Directors. Yu signed the registration statement in connection with the IPO. 10. Defendant Sabrina Y. Ren ('Ren") at all relevant times herein was Tibet's Chief Financial Offìcer. Ren signed the regishation statement in connection with the IPO. I l. Defendant Wenbo Chen ('Chen") at all relevant times herein was a Tibet Director. Chen signed the registration statement in connection with the IPO. 12. Defendant Youhang Peng ("Peng") at all relevant times herein was a Tibet Director. Peng signed the registration statement in connection with the IPO. 13. Defendant Solomon Chen ('S. Chen") at all relevant times herein was Tibet Director. S. Chen signed the registration statement in connection with the IPO. 14. Defendant Anderson & Strudwicþ Incorporated, ('A&S) a corporation headquartered in Virginia, was an underwriter ofthe IPO. 15. Defendant Sterne Agee Group, Inc. ("Sterne Agee") is a financial holding company incorporated in Delaware and is headquartered in Alabama. On or after December 2011 Steme Agree acquired A&S. 16. Steme Agee is liable for the acts ofA&S as a successor-in-interest. Thus, ",4&S" as used herein shall sometimes refer to both defendants A&S and Steme Agee. 17. Defendant L. McCarthy Downs III ("Downs") was A&S's designated observer to the Tibet's Board of Directors in connection with the IPO. 18. Defendant Hayden Zou ('Zou") was A&S's designated observer to the Tibet's Board of Directors in connection with the IPO. 19. A&S, Steme Agee, Downs, and Zou are sometimes referred to herein as the "Underw¡iter Defendants." 20. Acquavella, Chiarelli, Shuster, Berkower & Co. LLP ('Acquavella" or "Auditor Defendant") is a certified public accountant and advisory firm headquafered in Iselin, New Jersey, and at all relevant times herein was Tibet's Independent Registered Public Accounting Firm. 21. Guo, Yu, R.en, Chen, Peng, S. Chen, Downs and Zou are sometimes referred to herein as the "Individual Defendants." 22. According to the registration statement, A&S two designated observers, "may ... significantly influence the outcome of matters submitted to the Board of Directors for approval." PLAINTIFF'S CLASS ACTION ALLEGATIONS 23. Plaintiffbrings this action as a class action on behalfofhimselfand on behalfofall purchasers ofTibet's securities issued pursuant to and/or traceable to the Company's IPO, including purchasers of Tibet stock after December 28, 2010, pursuant to Federal Rules of Civil Procedure 23(a) and (b)(3) on behalf of a Class. Excluded from the Class are defendants, the officers and directors ofthe Company, at all relevant times, membe¡s oftheir immediate families and their legal representatives, heirs, successors or assigns and any entity in which defendants have or had a controlling interest 24. The members of the Class are so numerous that joinder of all members is impracticable. Approximately 3 million Tibet shares were sold in the IPO. The precise number of the Class members is unknown to Plaintiff at this time but it is believed to be in the thousands. Members of the Class may be identified from records maintained by Tibet or its transfer agent and may be notified ofthe pendency of this action by mail, using a form ofnotice customarily used in securities class actions. 25. Plaintiffs claims are typical of the claims of the members of the Class, as all members ofthe Class are similarly affected by Defendants' wrongful conduct in violation offederal law that is complained ofherein. 26. Plaintiffwill fairly and adequately protect the interests ofthe members ofthe Class and has retained counsel competent and experienced in class and securities litigation. 27, Common questions of law and fact exist as to all members of the Class and predominate over any questions solely affecting individual members of the Class. Among the questions of law and fact common to the Class are: (a) whether the provisions ofthe Securities Act were violated by defendants' acts as alleged herein; (b) whether documents, including the Registration Statement and Pfospectus, press releases, and public statements issued by defendants to the investing public committed and/or misrepresented material facts about the Company and its business; and (c) the extent to which members ofthe Class have sustained damages, and the proper measure ofdamages. 28. A class action is superior to all other available methods for the fair and efficient adjudication ofthis controversy sincejoinder ofall members is impracticable. Furthermore, as the damages suffered by individual Class members may be relatively small, the expense and burden of individual litigation make it impossible for members ofthe Class to redress individuallythe wrongs done to them. There will be no difficulty in the management ofthis action as a class action. SUBSTANTIVE ALLDGATIONS 29. On December 16, 2010 Tibet filed an amended registration statement and prospectus with the SEC in connection with the IPO. 30. On December 28 ,2010 fhe SEC declared the registration statement effective. 31. On January 18, 201 I Tibet filed with the SEC the prospectus in connection \¡/ith the IPO. 32. OnJanuary 24,2011, the IPO was completed for3 million shares at $5.50/share. Net proceeds from the offering as $14.4 million. 33. Tibet's registration statement and prospectus contained inaccurate statements of material fact because at the time ofthe IPO, the Company misstated its true financial condition. Contrary to the registration statement and prospectus, the Company was not facing the risk of potential intemal control deficiencies, but actually had material intemal control deficiencies that $/ould have a materially adverse affect on the Company-- leading to resignations, a stock trading halt by the NASDAQ, delisting and thus, bringing the Company's financial reporting to a halt and causing investors devastating losses. 34. On June 10, 201 l, defendant Guo inexplicably resigned from the Company as CEO. . He later resigned as director on January 12,2012. 35. On September 6, 20II, the Company's auditor Acquavella, Chiarelli, Shuster, Berkower & Co., LLP, resigned. 36. On April 3, 2012, the NASDAQ halted trading Tibet's stock for "additional information requested." 37. Having failed to provide the "additional information requested" due to Tibet's undisclosed intemal control deficiencies, the Company's stock was delisted from the NASDAQ, and began trading over the counter on the Pink Sheets, on April27,2012. 3E. As a result, on the first day of trading on April 27,2012, Tibet sock fell from $ 1.29lshare to $.35/share, losing 72% of its value. FIRST CLAIM Violation of Section 11 of the Securities Act against AII Defendants 39. Plaintiffrepeats and realleges each and every allegation contained above as iffully set forÍh herein. This claim is not based on and does not sound in fraud. 40. This claim is brought by Plaintiffon his own behalfand on behalfofother members ofthe Class who acquired Tibet shares pursuant to or traceable to the Company's IPO. Each Class Member acquired his, her, or its shares pursuant to and/or traceable to, and in reliance on, the Registration Statement and Prospectus. Tiber is the issuer ofthe securities through the Registration Statement and Prospectus. The Individual Defendants are signatories ofthe Registration Statement and Prospectus. 41. Underwriter Defendants owed to the holders ofthe securities obtained through the Registration Statement the duty to make a reasonable and diligent investigation ofthe statements contained in the Registration Statement at the time they became effective to ensure that such statements were true and correct and that there was no omission of material facts reouired to be stated in order to make the statements contained therein not misleading. Defendants knew, or in the exercise of reasonable care should have known, of the material misstatements and omissions contained in or omitted from the Registration Statement as set forth herein. As such, defendants are liable to the Class. 42. Acquavella was Tibet's certified public accountant at the time ofthe IPO, audited the Consolidated Financial Statements for the fiscal years 2008 and 2009 contained in the registration statement and prospectus, and issued a report included in the R.egistration Statement and Prospectus, the veracity ofsaid report being based on the authority ofAcquavella as experts in accounting and auditing. 43. Acquavella's report included in the Registration Statement and Prospectus was false because it stated that Tibet's Consolidated Financial Statements for the liscal years 2008 and 2009 accurately represented the Company's operations and cashflow when in fact they did not. 44. Acquavella stated that its audits of Tibet were conducted in accordance with the standards ofthe Public Company Accounting Oversight Board ("PCAOB") when in fact they were 45. All Defendants owedto the purchasers ofthe stock obtained through the Registration Statement and Prospsctus the duty to make a reasonable and diligent investigation ofthe statements contained in the Registration Statement and Prospectus at the time they became effective to ensure that such statements were true and correct and that there was no omission ofmaterial facts required to be stated in order to make the statements contained therein not misleadine. 46. None of the defendants made a reasonable investigation or possessed reasonable grounds for the beliefthat the statements contained in the Registration Statement and Prospectus were true or that there was no omission of material facts necessary to make the statements made therein not misleading. 47. Defendants issued and disseminated, caused to be issued and disseminated, and participated in the issuance and dissemination o4 material misstatements to the investing public that were contained in the Registration Statement and Prospectus, which misrepresented or failed to disclose, among other things, the facts set forth above. By reason ofthe conduct alleged herein, each defendant violated and/or controlled a person who violated Section 11 ofthe Securities Act. 48. Tibet isthe issuer ofthe stocksoldviathe Registration Statement and Prospectus. As issuer of stock, the Company is strictly liable to Plaintiff and the Class for the material misstatements and omissions therein. 49. At the times they obtained their shares of Tibet, Plaintiffand members of the Class did so without knowledge of the facts conceming the misstatements and omissions alleged herein. 50. This action is brought within one year after discovery ofthe untrue statements and omissions in and from the Registration Statement and Prospectus that should have been made and/or conected through the exercise ofreasonable diligence, and withinthree years ofthe effective date of the Registration Statement and Prospeotus, 51. Byvirtue ofthe foregoing, plaintiffand the other members ofthe class are entitled to damages under Section 11 as measured by the provisions oftho Section 1 l(e), from the defendants and each ofthem, jointly and severally. SECOND CLAIM Violations of Section f2(a)(2) of the Securities Act Aeainst Tibet. A&S and Sterne Agee 52. Plaintiffrepeats and realleges each and every allegation contained above as iffully set forth herein. This claim is not based on and does not sound in fraud. This claim is asserted against Tibet, A&S, and Sterne Agee ("Second Claim Defendants'). 53. Second Claim Defendants were sellers, offerors and/or solicitors ofsales ofthe shares offered pursuant to the Registration Statement. The Registration Statement contained untrue statements ofmaterial fact and omitted other facts necessary to make the statements not misleading, and failed to disclose material facts. as set forth above. 54. Plaintiffand the other Class members who purchased or otherwise acquired shares pursuant or traceable to the materially untrue and misleading Registration Statement did not know or, in the exercise of reasonable diligence could not have known, of the untruths and omissions contained in the Registration Statement. 55. The Second Claim Defendants owed to Plaintiffs and the other Class members who purchased or otherwise acquired shares pursuant or traceable to the materially false and misleading Registration Statement the duty to make a reasonable and diligent investigation ofthe statements contained in the Registration Statement, to ensure such statements were true and that there was no l0 omission of material fact necessary to prevent the statements contained therein from being misleading. The Second Claim Defendants did not make a reasonable investigation or possess reasonable grounds to believe that the statements contained in the Registration Statement were true and without omissions of any material facts and were not misleading. By virtue of the conduct alleged herein, the Second Claim Defendants violated $ l2(a)(2) ofthe Securities Act. THIRD CLAIM ttotffio"' 56. Plaintiffrepeats and realleges each and every allegation contained above as iffully set forth herein. This claim is not based on and does not sound in fraud. 57. This claim is asserted against the Individual Defendants, each ofwhom was a control person ofTibet during the relevant time period. 58. The Individual Defendants were control persons ofTibet by virtue of, among other things, their positions as senior officers and directors ofthe Company, and they were in positions to control and did control, the false and misleading statements and omissions contained in the Registration Statement and Prospectus. 59. None of the Individual Defendants made reasonable investigation or possessed reasonable grounds for the beliefthat the statements contained in the Registration Statement and Prospectus were accurate and complete in all material respects. Had they exercised reasonable care, they could have known ofthe material misstatements and omissions alleged herein. l1 60. This claim was brought within one year after the discovery ofthe untrue statements and omissions in the Registration Statement and Prospectus and within three years after Tibet shares was sold to the Class in connection with the IPO. 61. By reason ofthe misconduct alleged herein, for which Tibet is primarily liable, as set forth above, the Individual Defendants arejointly and severally liable with and to the same extent as Tibet pursuant to Section 15 of the Securities Act. WIIEREFORE, plaintiffprays for relief and judgment, as follows: (a) Determining that this action is a proper class action, designating plaintiffas Lead Plaintiff and certirying plaintiff as a class representative under Rule 23 of the . Federal R.ules of Civil Procedure and designating plaintifls counsel as Lead Counsel; (b) Awarding damages in favor of plaintiffand the other Class members against all defendants, jointly and severally, together with interest thereon; (c) Awarding plaintiffand the Class reasonable costs and expenses incurred in this action, including counsel fees and expert fees; and (d) Such other and further reliefas the Court may deem just and proper. JURY TRIAL DEMANDED Plaintiff hereby demands a trial by jury. Dated: August 30, 2012 Respectfully submitted, Joel H. Holt LAW OFFICES OF JOEL HOLT 2132 Company Street, Suite 2 t2 St. Croix, VI 00820 Tel: 340-773-8709 Fax:340-773-8677 [email protected] and Laurence M. Rosen Phillip Kim THE ROSEN LAW FIRM, P.A 275 Madison Avenue, 34'" Floor New Yorlç New York 10016 Tel: 212-686-1060 Fax:212-202-3827 [email protected] [email protected] Counsel for Plaintiff IJ

securities

T02yA4kBRpLueGJZnUQs

JEFFREY L. HOGUE, ESQ. (SBN 234557) TYLER J. BELONG, ESQ. (SBN 234543) BRYCE A. DODDS, ESQ. (SBN 283491) HOGUE & BELONG 430 Nutmeg Street, Second Floor San Diego, CA 92103 Telephone No: (619) 238-4720 Facsimile No: (619) 270-9856 [email protected] [email protected] [email protected] DAVID R. MARKHAM, ESQ. (SBN 071814) PEGGY REALI, ESQ. (SBN 153102) JANINE MENHENNET, ESQ. (SBN 163501) MAGGIE K. REALIN, ESQ. (SBN 263639) THE MARKHAM LAW FIRM 750 B Street, Suite 1950 San Diego, CA 92101 Telephone No.: (619)399-3995 Facsimile No.: (619) 615-2067 [email protected] [email protected] [email protected] [email protected] Attorneys for Plaintiffs UNITED STATES DISCTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION Greg Garrison, individually and on behalf of all others similarly situated; CASE NO.: 5:14-cv-04592-LHK vs. FIRST AMENDED ANTITRUST CLASS ACTION COMPLAINT Oracle Corporation, a Delaware corporation; DEMAND FOR JURY TRIAL Defendant. REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED. situated, (collectively, “Plaintiffs”) allege the following: I. INTRODUCTION 1. This class action is brought by Plaintiff, on behalf of himself, and on behalf of all others similarly situated, who have sustained injuries or incurred damages arising from Defendants’ (defined below) violations of the antitrust and unfair competition laws of the United States and the State of California. 2. This class action challenges (1) a conspiracy among defendant Oracle (“Defendant” or “Oracle”) and by and among various other technology companies, including but not limited to, Google, Intuit, Adobe, and IBM, to fix and suppress the compensation of their employees by way of a series of secret agreements (collectively, the “Secret Agreements”). 3. The Secret Agreements were also entered into with non-technology based companies. Specifically, Oracle would agree not to solicit employees from the aforementioned companies’ technology departments, and vice versa. The accounting firm Deloitte & Touche was one such company that Oracle had reciprocal anti-solicitation agreements. 4. Further, the Secret Agreements extended to recruiting companies that place candidates that work in the technology field, where the recruiting firm would have an agreement with Oracle not to recruit Oracle employees. 5. The Secret Agreements came that suppressed the wages of skilled labor came in many forms. For instance, with Google, it was a so-called Restricted Hiring Agreement (defined below). As another example, Oracle had Intuit on a “no-hire” list, which was then confirmed through email correspondence by human resources employees from both companies. 6. Additionally, the Secret Agreements often came in the form of so-called “gentleman’s agreements” where the CEOs of certain companies would agree orally not to solicit one another’s employees. 7. Plaintiff is informed and believes that technology companies, and the technology 8. These companies involved in the conspiracy shall be referred to herein sometimes as unnamed “parties,” “co-conspirators,” or “co-participants.” 9. The intended and actual effect of this conspiracy amongst technology companies, the technology departments of non-technology based companies, and companies that recruited for them, outlined below was to fix and suppress employee compensation, and to impose unlawful restrictions on employee mobility. 10. Oracle’s conspiracy and agreements restrained trade and the overarching conspiracy has been deemed per se unlawful under federal and California law. Plaintiff seeks injunctive relief and damages for violations of: Section 1 of the Sherman Act (15 U.S.C. § 1); the Cartwright Act (Cal. Bus. and Prof. Code §§ 16720, et seq.); and California Business and Professions Code sections 16600 and 17200, et seq. 11. Plaintiff petitions this Court to allow him to represent and prosecute claims against Defendants in this class action proceeding on behalf of all those similarly situated who are residents of the State of California. This class action is brought under Rule 23 of the Federal Rules of Civil Procedure. JURISDICTION 12. This Court has subject matter jurisdiction over this action under 15 U.S.C. sections 4 and 16, and 28 U.S.C. sections 1331 and 1337. 13. This Court has personal jurisdiction over Defendant because it has its principal place of business in the state of California, employed individuals in the state of California during the class period, and has had substantial contacts within the state of California in furtherance of the injuries and conspiracy described herein. 14. Venue is proper in this judicial district under 15 U.S.C. section 22 and 28 U.S.C. section 1391(b)(1)-(2) because a substantial part of the acts or omissions giving rise to the claims set forth herein occurred in this judicial district, a substantial portion of the affected interstate trade and commerce was carried out in this district. 15. Under Civil Local Rule 3-2(c) and (e), assignment of this case to the San Jose Division of the United States District Court for the Northern District of California is proper because a substantial part of the events and omissions which give rise to Plaintiff’s antitrust claims occurred within the county of San Jose. PARTIES 16. Plaintiff Garrison, an individual, is a former employee of Oracle. Mr. Garrison worked for Oracle from approximately December 2008 to June 2009. 17. Plaintiff was a Senior Account Manager who managed sales of Oracle’s Crystal Ball software to the North East United States and Eastern Canada. Crystal Ball was a spreadsheet-based software used for predictive modeling, forecasting, simulation, and optimization across various business industries. 18. Defendant Oracle is a Delaware corporation with its principal place of business located at 500 Oracle Parkway, Redwood Shores, CA 94065. 19. Oracle is a U.S.-based multinational computer technology corporation. It specializes in developing and marketing computer hardware systems and enterprise software products – particularly its own brands of database management systems. Oracle is the second- largest software maker by revenue, after Microsoft. 20. Oracle also builds tools for database development and systems of middle-tier software, enterprise resource planning (ERP) software, customer relationship management (CRM) software and supply chain management (SCM) software. FACTUAL BACKGROUND THE CONSPIRACY 21. Technology employees of all types, such as Plaintiff, are in high demand because they, among other things, have technology related skills and/or can manage employees who work in specialized technology areas. hiring its employees in exchange for Oracle’s agreement not to hire those other firms’ employees. On Oracle’s HR webpage, there is a dropdown menu to either accept or reject a candidate. One of the options to reject a candidate is “works for company on the Do Not Hire List.” 23. Oracle would have these “no-hire” and anti-solicitation agreements in place with various other companies that would periodically change. More important, however, is that there were technology companies, such as Intuit, who were permanent fixtures on the “do not hire” list – companies that had no end date (or the end date listed as “perpetual”), nor any written justification for not being able to recruit. 24. Other companies, such as IBM and Adobe, did not appear on Oracle’s “do not hire” list, but had so-called gentleman’s agreements with Oracle, not to solicit each other’s employees. 25. Intuit was a company that appeared in Oracle’s “do not hire list,” without an end date. In fact, Intuit acknowledged that it had an anti-solicitation and no-hire agreement with Oracle. In an email, an Intuit recruiting employee stated the following: . . . can we make an offer to him after he signs on as a consultant and not be in violation of non-solicitation clauses from Oracle (where he is employed)? . . . . . . I think it may be better to talk to him about the open position first before he gets engaged with us, due to no-hire clauses from both companies’ [Oracle and Intuit] perspective. . . 26. 2 instance, Safra Catz (Oracle's CEO/CFO) could give the directive to an Oracle higher up 3 employee about a so-called gentleman 's agreement whereby the target company was off-limits as 4 far as recrnitment of one of its employees. These directives were often times never added to the 5 "no-hire" lists, and instrncted to be kept "highly confidential." 9 28. In May 2007, Oracle and Google entered into a "Resti·icted Hiring" agreement. 1 O The "Resh'icted Hiring" agreement was a Secret Agreement. Pursuant to that Secret Agreement 11 which Oracle, Google, and the other technology companies who were a paiiy, they agreed to the 12 following: 13 "1) Not to pursue manager level and above candidates for Product, Sales, or G&A roles - even if they have applied to [any of the other companies who are 14 paiiies to the Restricted Hiring Agreement]" 16 29. Google' recrniting and human resource depaiiment would regulai·ly make sure 17 that it was adhering to the Secret Agreement. For instance, in an email dated October 9, 2007, 24 30. Senior executives at Oracle, including Amanda Gill, Christina Crowley (an 25 Oracle VP, for its Global License Management Services), Lai1y Ellison and Safra Catz, reached 26 Secret Agreement with Google through direct, and explicit communications. The executives 27 actively managed and enforced these Secret Agreements through direct, and indirect 28 communications. 2 moneta1y fines to threats of a lawsuit. 3 32. The penalties would typically range from $5,000 to $25,000. In an email dated 4 Janua1y 23, 2008, - Regarding threats of lawsuits, on one occasion, Oracle was infuriated that Adobe 12 33. 13 breached the Secret Agreement and "poached" one of Oracle's employees 17 threatening to file a 18 lawsuit. Oracle had no knowledge or evidence that its foimer employees were divulging trade 19 secrets, yet it threatened- with a lawsuit anyway as a means to punish them for breaching 20 the Secret Agreement. This letter was a direct response by Adobe recrniting Oracle employees. 21 34. This tactic (threatening lawsuits) to anyone that was recrnited by another 22 technology company was commonplace at Oracle. 23 35. Sometimes Oracle followed through and filed a lawsuit against a foimer 24 employee for working with one of their partners purely for vengeful purposes. 25 36. In an e-mail dated June 4, 2007, Oracle employee- memorialized a non- 26 solicitation agreement with Deloitte. In that e-mail she stated, 2 solicitation practices. At times, however, those agreements were memorialized via an email. 3 For instance, in an e-mail dated June 8, 2007,- sent an email to her recrniting team, with 4 the subject line 1 and stating the following: 5 - 38. In an email dated November 30, 2007, sent an email to 39. In another email, dated Janmuy 2, 2008, an Oracle recrniter mistakenly sent an 20 email blast email out to someone who works for a company who was on the no-hire list. The 21 matter was escalated to higher-ups at Oracle, and an Oracle Senior Director Recrniting stated 1 "Partners" in Oracle's parlance does not mean a joint venturer for pmposes of developing new technologies, but simply another entity with whom Oracle had an anticompetitive agreement. 2 subject line, On Febrnaiy 13, 2009, sent an e-mail to 7 41. 8 - complaining that- was hying to "poach" Oracle employees and asking him to 9 stop this practice. In response, 42. In an email dated Febrna1y 16, 2009, sent an email stating, In Mai·ch 19, 2009, and- communicated by email once 43. 15 again. Adobe and Oracle came to a mutual understanding to (1) not to directly or indirectly 16 solicit employees from any company on the "no hire" list; (2) if the candidate applied directly 17 to a company that is on the "no hire" list there was no resti·iction, except that each company had 18 to be told that the employee was interviewing the candidate of the other company. - 19 admitted he was woITied that the practice was illegal, but that he was willing to discuss it 20 anyway. 21 44. In 2009, the Antitrnst Division of the U.S. Depaii ment of Justice ("DOJ'') 22 launched an investigation into the hiring and recrniting practices of several technology finns. 23 Wanting to avoid the DOJ' s investigation, in an email dated August 17, 2009, 26 Ill 27 Ill 28 Ill including Apple, Google, Pixar, Intel, Adobe, and Intuit (collectively, the “Hi-Tech Companies”). In connection with its investigation, the DOJ issued a Civil Investigative Demand (“CID”) to Oracle. Oracle produced some documents pursuant to this CID. 46. Ultimately, on September 24, 2010, the DOJ filed a complaint against certain “Hi-Tech” companies. This “Do Not Cold Call Agreement” (non-solicitation agreements) was deemed unlawful per se by the DOJ, which found that those agreements were “facially anticompetitive” and violated the Sherman Act per se. According to the DOJ, these agreements “eliminated significant forms of competition” and “substantially diminished competition to the detriment of the affected employees who were likely deprived of competitively important information and access to better job opportunities.” The DOJ concluded that the “Do Not Cold Call” agreements “disrupted the normal price-setting mechanisms that apply in the labor setting.” On information and belief, Oracle was among the companies investigated. 47. On March 18, 2011, the DOJ obtained a consent decree against certain Hi-Tech companies other than Oracle. 48. On information and belief, the DOJ sent a letter to the other technology companies it was investigating, announcing that it was closing its investigation in or about October 2014. 49. Oracle’s unlawful conduct continued after the DOJ investigation started. Antonio Miranda was employed at Oracle. While at Oracle, Mr. Miranda held many positions, such as Senior Manager for the Central Region, North American consulting; director of North America Consulting; Senior Director for global IT. Mr. Miranda held that position until he left Oracle in 2011. During his tenure as a Senior Director for global IT, Mr. Miranda, sat in on several recruiting meetings and was on calls, along with Safra Catz and Larry Ellison. During those meetings and calls Ms. Catz carefully monitored and made certain that employees from a “do not hire” list were not recruited. 50. As another example, a former Senior Director at Oracle ended his employment with Oracle in 2014. At the end of his employment, that former Oracle employee asked Rivera that it could not place this former Oracle employee because it had an agreement with Oracle not to perform job placement services for Oracle employees. On information and belief, Oracle had agreements in place up until October 2014 and after with various recruiting companies, including Riviera Partners, not to place Oracle employees with other companies. 51. The Secret Agreements referenced above covered all technology employees and were not necessarily limited by geography, job function, product group, or time period. The other Secret Agreements with technology companies and the companies that recruited for them, covered all Oracle employees. 52. Oracle employees, including Plaintiff, were not apprised of any of these Secret Agreements and did not consent to this restriction on their mobility of employment. 53. The Secret Agreements unreasonably restrained trade in violation of the Sherman Act (15 U.S.C. § 1), and the Cartwright Act (Cal. Bus. & Prof. Code §§ 16720 et seq.), and constituted unfair competition and unfair practices in violation of California’s Unfair Competition Law, California Business & Professions Code sections 17200, et seq. and 16600. The Secret Agreements resulted in technology companies, including Oracle, and companies that had technology departments refusing to competitively seek contracts with one another’s employees. 54. In a lawfully competitive labor market, Oracle and each of its co-participants would have competed against each other for employees and would have hired employees according to the needs of their business and the going market rates for employee wages. And, in such a lawfully competitive labor market, the participants of the Secret Agreements would have engaged in such employee hiring in direct competition with one another, resulting in employees accepting offers from the company which makes the most favorable offer of employment. This competitive process helps to ensure that companies benefit by taking advantage of rivals’ efforts expended soliciting, interviewing, and training skilled employees. It also benefits the public through fostering flow of new non-proprietary information and technologies across competing industry leaders. And, this competitive process benefits our knowledge, and experience. 55. For these reasons, competitive hiring serves as a critical competitive role, particularly in the high technology industry where companies benefit from obtaining employees with advanced skills and abilities. By restricting hiring, employee salaries at competing companies is restricted and depressed, decreasing the pressure of an employee’s current employer to match a rival’s offer and vice versa. Restrictions on hiring also limit an employee’s leverage when negotiating his or her salary with his or her current employer. Furthermore, when companies restrict hiring of rival companies’ top tiers employees the wages of those top tier employees, as well as all other employees underneath them are suppressed because companies are highly unlikely to offer higher salaries to subordinates than they are to managers and executives. As a result, the effects of hiring restrictions impact all employees of participating companies. 56. Oracle entered into, implemented, and policed the Secret Agreements with the knowledge of the overall conspiracy, and did so with the intent and effect of fixing the compensation of the employees of participating companies at artificially low levels. As additional companies joined the conspiracy to control labor costs, competition among participating companies for skilled labor continued to drop, and compensation and mobility of the employees of participating companies was further suppressed. These anticompetitive effects were the purpose of the Secret Agreements, and Oracle and the other parties to the Secret Agreements succeeded in lowering the compensation and mobility of their employees below what would have prevailed in a lawful and properly functioning labor market. 57. Plaintiff and each member of the Class (defined below) was harmed by the Secret Agreements herein alleged. The elimination of competition and suppression of compensation and mobility had a negative cumulative effect on all Class members. For example, an individual who was a managerial employee of Oracle received faced unlawful obstacles to mobility as a result of the Secret Agreements they had with all of the companies that took part in the conspiracy. 58. Oracle’s conduct substantially affected interstate commerce throughout the United States and caused antitrust injury throughout the United States because, among other things, Oracle has employees across state lines as well as did business across state lines. CLASS ALLEGATIONS 59. Plaintiff sues on his own behalf and, under Federal Rule of Civil Procedure 23 on behalf of the following Classes: All natural persons who were employed by Oracle on a salaried basis in the technical, creative, and/or research and development fields in the United States from May 10, 2007 to the present. Excluded from the Class are: retail employees, corporate officers, members of the boards of directors, and senior executives of Oracle. All natural persons who were employed by Oracle on a salaried basis in a manager level or above position, for product, sales, or general and administrative roles in the United States at any time from May 10, 2007 to the present. Excluded from the Class are: retail employees; corporate officers, members of the boards of directors, and senior executives of Oracle. 60. The above-referenced classes shall be collectively known as the Plaintiff Class. 61. The Plaintiff Class has thousands of members, as each defendant employed hundreds or thousands of class members each year. The Plaintiff Class is so numerous that individual joinder of all members is impracticable. 62. The Plaintiff Class is ascertainable from Oracle’s employee and or payroll records. 63. Plaintiff’s claims are typical of the claims of other class members comprising the Plaintiff Class as they arise out of the same course of conduct and the same legal theories, and they challenge Oracle’s conduct with respect to the Plaintiff Class as a whole. 64. Plaintiff has retained able and experienced class action litigators as their counsel. Plaintiff has no conflicts with other class members and will fairly and adequately protect the interests of Plaintiff Class. /// /// resolution, including: a. whether Oracle agreed not to pursue other companies’ employees in technology positions; b. whether Oracle’s Secret Agreements were per se violations of the Sherman Act; c. whether Oracle’s Secret Agreements violated the Sherman Act; d. whether Oracle’s Secret Agreements were per se violations of the Cartwright Act; e. whether Oracle’s Secret Agreements violated the Cartwright Act; f. whether Oracle’s Secret Agreements are void as a matter of law under California Business and Professions Code section 16600; g. whether Oracle’s Secret Agreements constituted unlawful or unfair business acts or practices in violation of California Business and Professions Code section 17220; h. whether Oracle fraudulently concealed its anti-competitive conduct; i. whether Oracle’s conspiracies and associated agreements restrained trade, commerce, or competition; j. whether Plaintiff and the other members of the Plaintiff Class suffered injury as a result of Oracle’s conspiracies and Secret Agreements; k. whether any such injury constitutes antitrust injury, and; l. the measure of damages incurred by Plaintiff and Plaintiff Class. 66. These and other common questions predominate over any questions affecting only individual class members. 67. This class action is superior to any other form of resolving this litigation. Separate actions by individual class members would be enormously inefficient and would create a risk of inconsistent or varying judgments, which could establish incompatible standards of conduct for Oracle and substantially impede or impair the ability of class members to pursue their claims. There will be no material difficulty in the management of this action as a class action. /// /// /// /// Continuing Violation 68. Oracle’s conspiracy was a continuing violation through which Oracle repeatedly invaded Plaintiff and Plaintiff Class’ interests by adhering to, enforcing, and reaffirming the anticompetitive agreements described herein. 69. As referenced above, Plaintiff was employed by Oracle from December 2008 through June 2009. Up until 2015, Plaintiff continued to feel the impact of Oracle’s anti-trust violations. 70. After he left Oracle, he applied to many technology companies, including Google, Intuit, Hewlett-Packard, and Xerox, that were part of the conspiracy at some time from 2007 through 2015. But, each time Plaintiff applied for a job during the four year time frame of 2010 through 2015, the aforementioned technology companies enforced their Secret Agreements and “no-hire” agreements and refused to offer Plaintiff any open positions. 71. Although well qualified, none of the technology companies that were part of the conspiracy would return calls, request Plaintiff to interview, and otherwise denied Plaintiff a position. In sum, Plaintiff was unable to obtain gainful employment and thus was injured. 72. Plaintiff was harmed because through continued enforcement of the Secret Agreements and agreements not to hire former employees of Oracle, he was unable to obtain meaningful employment of his choice. This happened because of the ongoing enforcement of anti-competitive Secret Agreements. 73. Thus, as described up above, there were new and independent acts that caused new and accumulating injury. In other words, the continued enforcement of the Secret Agreements were the cause of Plaintiff’s inability to procure employment in one of his desired companies where he was seeking employment. /// /// /// /// 1. Oracle took Affirmative Acts to Misled Plaintiff. 74. Oracle has attempted to create the false impression that its decisions are independent and that it was acting in accordance with the antitrust laws. 75. Further, the following language is also in Oracle’s published employee handbook: Business Practices Antitrust and Competition Laws Typically, the countries in which Oracle operates have laws and regulations that prohibit unlawful restraint of trade, usually referred to as antitrust or competition laws. These laws are designed to protect consumers and competitors against unfair business practices and to promote and protect healthy competition. Oracle commits rigorously to observing applicable antitrust or competition laws of all countries or organizations…….. Antitrust or competition laws vary from country to country but, generally, such laws prohibit agreements or actions that reduce competition without benefiting consumers. Among those activities generally found to violate antitrust or competition laws are agreements and understandings among competitors to:  Fix or control prices;  Structure or orchestrate bids to direct a contract to a certain competitor or reseller (bid rigging);  Boycott specified suppliers or customers;  Divide or allocate markets tor customers; or  Limit the production or sale of products or product lines for anti- competitive purposes. Agreements of the type listed above are against public policy and are against Oracle policy. Employees must never engage in discussions of such matters with representatives of other companies….. Contracts or other arrangements that involve exclusive dealing, tie-in sales, price discrimination, and other terms of sale may be unlawful under applicable antitrust or competition laws…. Oracle strives to ensure that its global practices comply with United States antitrust laws. In addition to local laws, antitrust laws of the United States may apply to our international business operations and transactions…. contained a section entitled “COMPLIANCE” wherein it states: “We must each operate within the bounds of all laws, regulations, and internal policies applicable to Oracle’s business wherever we conduct it.” 77. The above-referenced iterations in Oracle’s employee handbooks, or words of substantially similar import, were published in each of Oracle’s 2008-2014 employee handbooks. 78. Larry Ellison was the author of all of these handbooks, as his name is in the opening letter to the Oracle employee. 79. At all times, Plaintiff worked for Oracle in Colorado Springs, Colorado. Plaintiff referenced his employment handbook during his employment at Oracle – from December 2008 through June 2009 – in Colorado Springs. In the beginning of his employment Plaintiff referenced the employee handbook to learn what was expected of him and what he could expect during his time at Oracle. Oracle represented that it was against Oracle policy to commit any antitrust violations, like price fixing, and that Oracle assured employees “it complies with United States antitrust laws.” 80. Plaintiff also wanted to know how the compensation and commission structure worked at Oracle, and he referenced the employee handbook for that purpose as well. After reading the handbook, Plaintiff believed he had a firm understanding of the compensation structure and the Oracle employee handbook led him to believe that Oracle complied with all laws. Moreover, Plaintiff talked with an Oracle human resource employee who informed him, falsely, that Oracle’s commission structure was competitive with other technology companies. These affirmative falsehoods led Plaintiff to believe that his salary was driven by a competitive market place and his work performance and not by a series of anti-competitive agreements. 81. By virtue of what Oracle published in its employee handbooks that Larry Ellison authored, Oracle was thus able to conceal it was committing ongoing antitrust violations through the various Secret Agreements it had with other companies until Plaintiff ended his employment. with the SEC so there would be no public filing showing, or even hinting, that it might be committing antitrust violations – even when it was actively being investigated by the DOJ. 83. In Oracle’s SEC 2008, filing it stated the following: We may be unable to hire enough qualified employees or we may lose key employees. We rely on the continued service of our senior management, including our Chief Executive Officer, members of our executive team and other key employees and the hiring of new qualified employees. In the software industry, there is substantial and continuous competition for highly skilled business, product development, technical and other personnel. In addition, acquisitions could cause us to lose key personnel of the acquired companies or at Oracle. We may also experience increased compensation costs that are not offset by either improved productivity or higher prices. We may not be successful in recruiting new personnel and in retaining and motivating existing personnel. With rare exceptions, we do not have long-term employment or non-competition agreements with our employees. Members of our senior management team have left Oracle over the years for a variety of reasons, and we cannot assure you that there will not be additional departures, which may be disruptive to our operations. We continually focus on improving our cost structure by hiring personnel in countries where advanced technical expertise is available at lower costs. When we make adjustments to our workforce, we may incur expenses associated with workforce reductions that delay the benefit of a more efficient workforce structure. We may also experience increased competition for employees in these countries as the trend toward globalization continues which may affect our employee retention efforts and/or increase our expenses in an effort to offer a competitive compensation program. 84. Oracle made substantially identical false public statements in its 10-K SEC filings in the years 2010, 2011, 2012, and 2013. 85. Thus, Oracle made no public statements, and Plaintiff had no way of knowing, that Oracle was committing antitrust violations or that he had been the victim of antitrust violations that caused him harm. In fact, he thought just the opposite because Oracle maintained its representation that there existed strong competition in the technology field, and that compensation played a role. This, however, was not true. 86. By virtue of the Secret Agreements, Oracle was able to reduce its compensation expenses and was able to retain employees at lower costs. 2 attempted to learn the trnth about Oracle's compensation and retention practices. Class 3 members repeatedly asked Oracle about how compensation was dete1mined and what steps 4 Oracle was taking to retain and attract talented employees, but Oracle's misleading responses 5 that compensation was "competitive" thwa1ted those effo1ts, as illustrated above. 6 88. Moreover, in an email dated, Januaiy 17, 2008, 7 - sent an email to one of Oracle's recrniters stating 8 This was an effort to conceal the fact 9 that Oracle had these Secret Agreements in place. 10 89. And- sent another email sh01tly thereafter to one company that Oracle 11 had one of these "no-hire" agreements in place and states, 13 90. In an email dated Febrnaiy 12, 2008, sends out 14 an email to the HR department attaching a ''No Hire" list, and directing them to not f01wai·d, but 15 to call if they have any questions. 16 91. This was representative of a corporate policy decision to avoid dissemination of 17 the secret agreements and restrict the knowledge to the smallest possible group within Oracle. 18 This corporate policy of secrecy was never withdrawn or counte1manded at any time between 19 the years 2008 and 2014, and continued to be in effect as Oracle's corporate policy. 20 2. Plaintiff Did Not Have Actual or Constrnctive Knowledge of the Facts Giving Rise to 21 His Claim. 22 92. The policies in the handbooks and the following SEC filings led Plaintiff to 23 believe he was free to move around in the technology field and that his compensation would 24 potentially increase in order for him to be retained. 25 93. Moreover, several times during the Class Period, Plaintiff and other putative 26 class members attempted to learn the trnth about Oracle's compensation and retention policies. 27 For instance, Plaintiff asked Oracle about his commission stmcture and how it worked. Class 28 members repeatedly asked Oracle about how compensation was dete1mined and the steps had any agreements with any other company not to solicit one another’s employees. Oracle actively concealed such information as explained above. 94. Additionally, even after the Department of Justice’s investigation and the filing of the civil antitrust litigation against some of Oracle’s co-conspirators, Oracle continued to take additional active measures to keep its Secret Agreements secret beyond those already described herein. Specifically, upon receiving demands to produce documents pursuant to the Department of Justices’ investigative proceedings regarding Secret Agreements in the high technology industry and any legal proceedings related thereto, Oracle refused to produce any documents without first securing agreements that the document production would not be publicly filed or disclosed, including requiring that any documents that were publicly filed or disclosed would be heavily redacted so as not to publicly reveal the substance of the Secret Agreements and the specific companies involved. Oracle took the above-described actions between 2009 and 2013, all with the intent of preventing the disclosure of its Secret Agreements and ensuring that its employees who were affected by the Secret Agreements were not made aware of the existence of the Secret Agreements. 95. It was not until 2013, when certain documents were unsealed in the Hi-Tech case (case number 5:11-cv-02509-LHK), and became first available to the public that Oracle’s actual involvement in the anti-solicitation conspiracy was established publicly. 96. Before May 17, 2013, at the earliest, Plaintiff did not have actual or constructive notice, and was not on inquiry notice of certain facts when he discovered he has certain claims and can seek certain relief. The Restrictive Hiring Agreement between Oracle and Google was first publicly disclosed in a filing in this Court on May 17, 2013. Thus, the identity of Oracle’s involvement in the conspiracy remained unknown to Plaintiff until that time. 97. Until that time, Oracle took active measures to keep the Secret Agreements secret, including, without limitation, ensuring that it had no written policy document that would be disseminated in any employee handbook as explained above. Further, a majority of the Secret Agreements with companies were unwritten gentleman’s agreements, and were carefully through carefully worded mails. Also, the CEOs namely, Safra Catz, could add a company that would be subject to the Secret Agreements with an oral directive on a moment’s notice. 98. Oracle’s denials still go on to this day. On or about October 14, 2014, Oracle spokeswoman, Deborah Hellinger, stated “Oracle was deliberately excluded from all prior litigation filed in this matter because all the parties investigating the issue concluded there was absolutely no evidence that Oracle was involved.” Hence, as of October 14, 2014, Oracle was still trying to actively conceal its involvement in the conspiracy outlined above. This statement was false and was made to mislead the class and members of the public. 99. Moreover, Oracle tried to shield the dissemination of its Secret Agreements to the least amount of its employees as much as possible. Their existence was confined to only the most senior executives and the most senior employees from its human resources and recruiting departments, so that the least amount of people knew of those Secret Agreements. And, at no time from 2007 through 2015 did Oracle executives take any steps to rescind or withdraw its policy to restrict knowledge of its Secret Agreements. 100. As a result of Oracle’s fraudulent concealment of its involvement in the conspiracy, the running of any statute of limitations has been tolled with respect to the claims that Plaintiff and Plaintiff Class have as a result of the anticompetitive and unlawful conduct alleged herein. FIRST COUNT (Violation of the Sherman Act, 15 U.S.C. § 1) 101. Plaintiff incorporates by reference all the allegations in the above paragraphs as if fully set forth herein. 102. 15 U.S.C. section 1 provides, in part, that every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. /// /// representatives, has entered into an unlawful agreement, combination, and conspiracy in restraint of trade, in violation of 15 U.S.C. section 1. Specifically, Defendant agreed in advance that Google and Oracle would not pursue one another’s managerial employees. All of the foregoing directly and negatively affected and suppressed the wages of managerial employees at Oracle. Oracle and Google conspired and agreed to restrict competition for services provided by Plaintiff and members Plaintiff Class through Restrictive Hiring Agreements and agreements to fix the wage and salary ranges for said class members, all with the purpose and effect of suppressing class members’ compensation and restraining competition in the market for services of class members. 104. Oracle’s conduct injured and damaged Plaintiff and members of the Plaintiff Class and the Oracle Class by suppressing compensation to levels lower than the members otherwise would have received in the absence of the Restrictive Hiring Agreements, all in an amount to be proven at trial. 105. Oracle’s Secret Agreements are either per se violations of the Sherman Act or violative of it. 106. The acts done by each defendant as part of, and in furtherance of, their contracts, combinations or conspiracies were authorized, ordered, or done by their respective officers, directors, agents, employees, or representatives while actively engaged in the management of each Oracle’s affairs. 107. As a result of the above violations, Plaintiff and Plaintiff Class have been damaged in an amount according to proof. Accordingly, Plaintiff and Plaintiff Class seeks three times their damages caused by Oracle’s violations of the Sherman Act, the costs of bringing suit, reasonable attorneys’ fees, and a permanent injunction enjoining Defendant from ever again entering into similar agreements in violation of the Sherman Act. /// /// /// (Violation of the Cartwright Act, Cal. Bus. & Prof. Code §§ 16720, et seq.) 108. Plaintiff incorporates by reference all the allegations in the above paragraphs as if fully set forth herein. 109. Except as expressly provided in California Business and Professions Code sections 16720 et seq., every trust is unlawful, against public policy, and void. A trust is a combination of capital, skill, or acts by two or more persons for any of the following purposes: (a) To create or carry out restrictions in trade or commerce. (b) To limit or reduce the production, or increase the price of merchandise or of any commodity. (c) To prevent competition in manufacturing, making, transportation, sale or purchase of merchandise, produce or any commodity. (d) To fix at any standard or figure, whereby its price to the public or consumer shall be in any manner controlled or established, any article or commodity of merchandise, produce or commerce intended for sale, barter, use or consumption in this State. 110. Oracle, by and through its officers, directors, employees, agents or other representatives, has entered into an unlawful agreement, combination, and conspiracy in restraint of trade, in violation of California Business and Professions Code section 16720. 111. Oracle conspired with Google, Intuit, Adobe, and the other technology companies identified above and entered into an unlawful trust agreement in restraint of trade and commerce by, among other things, restricting and limiting, to a substantial degree, competition among these defendants’ skilled labor, and fixing the wages and salary ranges for said class members, all with the purpose and effect of suppressing class members’ compensation and restraining competition in the market for services of class members. As of 2007, Oracle involved itself with this conspiracy. /// /// /// were also injured by incurring suppressed compensation to levels lower than the members otherwise would have incurred in the absence of Oracle’s unlawful trust, all in an amount to be proven at trial. 113. Oracle, Plaintiff, and other class members are “persons” within the meaning of the Cartwright Act as defined in California Business and Professions Code section 16702. 114. Oracle’s agreements are per se violations of the Cartwright Act, and their conduct violates the Cartwright Act. 115. As a result of the above violations, Plaintiff and Plaintiff Class have been damaged in an amount according to proof. THIRD COUNT (Unfair Competition, Cal. Bus. & Prof. Code §§ 17200 et seq.) 116. Plaintiff incorporates by reference all the allegations in the above paragraphs as if fully set forth herein. 117. Under California Business and Professions Code sections 17200, et seq., any person who engages, has engaged, or proposes to engage in unfair competition—which includes any fraudulent or unlawful business act or practice—may be enjoined in any court of competent jurisdiction, may be held liable for restoring to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition, and may be held liable for civil penalties. 118. Oracle is a “person” under the meaning of sections 17200, et seq. 119. Oracle entered into an illegal Secret Agreements to suppress wages of their respective workforce by restricting the ability of its managerial employees from attaining employment with the other technology companies. 120. Oracle’s acts were unfair, unlawful, and or unconscionable, both in their own right and because they violated the Sherman Act and the Cartwright Act. 121. Oracle’s conduct injured Plaintiff and other members of Plaintiff Class suppressing the value of managerial employees’ services and thus suppressing their wages. money or property as a result of the unfair competition under California Business and Professions Code section 17204. 122. Under California Business and Professions Code section 17203, disgorgement of Oracle’s unlawful gains is necessary to prevent the use or employment of Oracle’s unfair practices and restitution to Plaintiff and other class members is necessary to restore to them the money or property unfairly withheld from them. 123. As a result of the above unlawful acts, Plaintiff and Plaintiff Class have been damaged in an amount according to proof. FOURTH COUNT (Violation of Cal. Bus. & Prof. Code §§ 16600 et seq.) 124. Plaintiff incorporates by reference all the allegations in the above paragraphs as if fully set forth herein. 125. Under California Business and Professions Code section 16600, et seq., except as expressly provided for by section 16600, et seq., every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void. 126. Oracle entered into, implemented, and enforced express agreements that are unlawful and void under Section 16600. 127. Oracle’s agreements and conspiracy have included concerted action and undertakings among the Defendant and others with the purpose and effect of: (a) reducing open competition among Defendant and other companies for skilled labor; (b) reducing employee mobility; (c) reducing or eliminating opportunities for employees to pursue lawful employment of their choice; and (d) limiting employee professional betterment. 128. Oracle’s agreements and conspiracy are contrary to California’s settled legislative policy in favor of open competition and employee mobility, and are therefore void and unlawful. 129. Oracle’s agreements and conspiracy were not intended to protect and were not limited to protecting any legitimate proprietary interest of Defendant. Section 16600, et seq. 131. The acts done by Oracle and each of the parties to the Secret Agreements as part of, and in furtherance of, their contracts, combinations or conspiracies were authorized, ordered, or done by their respective officers, directors, agents, employees, or representatives while actively engaged in the management of each defendant’s affairs. 132. Accordingly, Plaintiff and members of Plaintiff Class seek a judicial declaration that Defendant’s agreements and conspiracy are void as a matter of law under Section 16600, and a permanent injunction enjoining Oracle from ever again entering into similar agreements in violation of Section 16600. PRAYER FOR RELIEF Plaintiff, on behalf of himself individually and on behalf of Plaintiff Classes prays for relief and judgment against Defendant and any later named defendant, jointly and severally as follows: 1. that the Court determine that this action may be maintained as a class action; 2. Appointment of Plaintiff as Class Representative and his counsel of record as Class Counsel; 3. Pre-judgment and post-judgment interest as provided by law or allowed in equity; 4. An incentive award to compensate Plaintiff for his effort in pursuit of this litigation; 5. For nominal damages; 6. For compensatory damages; 7. For injunction against Defendant, prohibiting any further acts in continuance or perpetuation of any Restrictive Hiring Agreements; 8. For restitution of all monies due to Plaintiff, and the Plaintiff Class, and disgorged profits from the unlawful business practices of Defendant; 9. For costs of suit and expenses incurred herein; 10. For reasonable attorneys’ fees; 11. For treble damages; and 12. For all such other and further relief the Court may deem just and proper. JURY DEMAND AND DESIGNATION OF PLACE OF TRIAL Under Federal Rule of Civil Procedure 38(b), Plaintiff demands a trial by jury on all issues so triable. Dated: May 22, 2015 HOGUE & BELONG /s/ Jeffrey L. Hogue JEFFREY L. HOGUE TYLER J. BELONG BRYCE A. DODDS Attorneys for Plaintiff and on behalf of those similarly situated

antitrust

p6D2CIcBD5gMZwczvtMF

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF NORTH CAROLINA JAMES WEAVER GAREY and WILLIAM PARKER GAREY and AARON CRUTHIS, on behalf of themselves and others similarly situated, Plaintiffs, v. Action No.: JAMES S. FARRIN, P.C. d/b/a LAW OFFICES OF JAMES SCOTT FARRIN, MARCARI, RUSSOTTO, SPENCER & BALABAN, P.C., RIDDLE & BRANTLEY, L.L.P., WALLACE PIERCE LAW, PLLC, R. BRADLEY VAN LANINGHAM d/b/a/ BRADLEY LAW GROUP and LANIER LAW GROUP, P.A. Defendants. COMPLAINT (CLASS ACTION JURY TRIAL DEMANDED) NOW COME Plaintiffs, complaining of Defendants, and allege and say as follows: 1 SUMMARY OF THE ACTION The Defendant law firms violated the federal Driver’s Privacy Protection Act of 1994 which Congress enacted to protect people and their personal information. State DMVs require people who apply for drivers’ licenses and vehicle registrations to disclose personal information, including their name and residential address. See Maracich v. Spears, 133 S. Ct. 2191, 2206 (2013). For many years, this personal information was widely available from the DMVs with little restriction. See id. at 2198. The unrestricted disclosure of state DMV information led to two big problems: (1) stalkers and criminals could get the information; and, (2) states commonly sold the personal information to marketers. Id. Congress addressed these two concerns by enacting the Driver’s Privacy Protection Act of 1994 (DPPA), 18 U.S.C. § 2721 et seq., which bans unwanted disclosure and use of personal information, including names and residential addresses. Defendants in this case are a lawyer and several law firms that have systematically violated the DPPA by knowingly obtaining protected personal information from motor vehicle records in North Carolina and then using that protected information for hundreds, or possibly thousands, of people in an effort to sell their legal services. This systematic abuse has continued even after the United States Supreme Court held, in 2013, that attorney solicitation is an improper use of DMV information. See Maracich, supra at Plaintiffs in this case are individuals whose protected personal information was improperly obtained and used by one or more of the Defendants in violation of the DPPA when Defendants obtained protected DMV information from accident reports and then used that information to send marketing letters. Plaintiffs file this case for themselves, and for others whose privacy was violated, to do two things: (1) ask the Court for an injunction to stop Defendants from further abuse of personal DMV information; and, (2) to ask the Court to award damages as provided by Congress. 2 PARTIES 1. Plaintiff James Weaver Garey is a citizen and resident of Wake County, North Carolina. 2. Plaintiff William Parker Garey is a citizen and resident of Wake County, North Carolina. 3. Plaintiff Aaron Cruthis is a citizen and resident of Alamance County, North Carolina. 4. Defendant James S. Farrin, P.C. (“Farrin Firm”) is a law firm organized as a professional corporation under the laws of the State of North Carolina. Defendant Farrin’s registered agent for service of process is James S. Farrin, and said agent’s address is 280 South Mangum Street, Durham, North Carolina 27701. Defendant Farrin Firm does business and markets its services under the name “Law Offices of James Scott Farrin.” Defendant Farrin Firm has its principal place of business and regularly does business in the Middle District of North Carolina. 5. Defendant Marcari, Russotto, Spencer & Balaban, P.C. (“Marcari Russotto”) is a law firm organized as a professional corporation under the laws of the State of North Carolina. Defendant Marcari Russotto’s registered agent is David W. Spencer, and said agent’s address is 6801 Pleasant Pines Drive, Suite 100, Raleigh, North Carolina 27613. Defendant Marcari Russotto regularly markets its services and does business in the Middle District of North Carolina. 6. Defendant Riddle & Brantley, L.L.P., (“Riddle & Brantley”) is a law firm organized as a limited liability partnership under the laws of the State of North Carolina. 3 Defendant Riddle & Brantley’s registered agent is Gene A. Riddle, and said agent’s address is 601 North Spence Avenue, Goldsboro, North Carolina 27534-4263. Defendant Riddle & Brantley regularly markets its services and does business in the Middle District of North Carolina. 7. Defendant Wallace Pierce Law, PLLC (“Wallace Pierce”) is a law firm organized as a professional corporation under the laws of the State of North Carolina. Defendant Wallace Pierce’s registered agent for service of process is Jared W. Pierce, and said agent’s address is 2304 S. Miami Blvd., Suite 123, Durham, North Carolina 27703. Defendant Wallace Pierce has its principal place of business and regularly does business in the Middle District of North Carolina. 8. Defendant R. Bradley Van Laningham is an attorney who practices law within the Middle District of North Carolina. Defendant Van Laningham does business as “Bradley Law Group”. Defendant Van Laningham’s address is 1000 Revolution Mill Drive, Studio 4, Greensboro, North Carolina 27405. Defendant regularly does business and markets his services in the Middle District of North Carolina. 9. Defendant Lanier Law Group, P.A., is a law firm organized as a corporation under the laws of the State of North Carolina. Defendant Lanier Law Group’s registered agent for service of process is Lisa Lanier, and said agent’s address is 600 South Duke Street, Durham, North Carolina 27701. Defendant Lanier Law Group regularly does business and has its principal place of business in the Middle District of North Carolina. 4 JURISDICTION AND VENUE 10. This action arises under, and is brought pursuant to the DPPA. Subject matter jurisdiction is conferred upon this Court by 18 U.S.C. § 2724(a) and 28 U.S.C. § 1331 as the actions arise under the laws of the United States. 11. Venue is proper in this Court pursuant to 28 U.S.C. § 1391, as one or more Defendants do business in the District and therefore are deemed residents of this district for purposes of venue. 28 U.S.C. §§ 1391(b) and (c). FACTS The DMV-349 Accident Report 12. Law enforcement agencies in North Carolina are obligated to investigate crashes which are reported to them, such as those described below. 13. In conducting crash investigations, law enforcement officers in North Carolina must use a DMV-349 to record their investigations of reportable crashes, as defined by N.C. Gen. Stat. § 20-4.01(33b). 14. When law enforcement officers complete the DMV-349 in connection with a crash investigation, they are obligated to comply with the then-current edition of the Instruction Manual for the DMV-349 (“the Manual”). 15. At the time of the collisions described below, the Manual instructed officers a. record the names of drivers involved in a collision as follows: “Enter the driver’s name exactly as it appears on his/her driver’s license”; 5 b. compare the address given by a driver to the address on that driver’s license and indicate on the DMV-349 whether those addresses match; and c. record each involved driver’s license number on the DMV-349. 16. At the time of the collisions described below, the Manual instructed officers to review the registration information for each vehicle involved in the wreck and to record the name and address of the registered owner of each involved vehicle on the DMV-349. Facts related to William Garey and James Garey 17. On 4 May 2016, Plaintiff William Parker Garey was driving a pickup truck and was involved in a motor vehicle accident (“the Garey Accident”). The Garey Accident was a reportable crash as defined by N.C. Gen. Stat. § 20-4.01. 18. The City of Raleigh Police Department was notified of the accident and sent Officer D.W. Sigrist to investigate the accident. 19. At the scene of the Garey Accident and at Officer Sigrist’s request, Plaintiff William Garey presented his driver’s license to Officer Sigrist. Officer Sigrist transcribed certain information, including Plaintiff William Garey’s name, address, date of birth, telephone number and driver’s license number into a standard North Carolina Division of Motor Vehicles Crash Report known as a DMV-349. The source of Plaintiff’s address, date of birth, telephone number and driver’s license number was the North Carolina Division of Motor Vehicles (“NCDMV”) 6 20. At the scene of the Garey Accident, Officer Sigrist asked Plaintiff William Garey if the information shown on his driver’s license was correct, and Plaintiff William Garey informed Officer Sigrist that the information on his driver’s license was correct. As a result of this interaction, Officer Sigrist checked a box on the DMV-349 to indicate that Plaintiff William Garey’s actual address matched the address on his driver’s license. 21. At the scene of the Garey Accident, Officer Sigrist transcribed on the DMV-349 certain information regarding the registration of the vehicle that Plaintiff William Garey was operating at the time of the Garey Accident. This information related to the registration of said vehicle and included Plaintiff James Weaver Garey’s name and address and the license plate year and number of said vehicle. The source of this information was the North Carolina Division of Motor Vehicles (“NCDMV”). 22. Officer Sigrist filed the DMV-349 for the Garey Accident with his department, which filed it with the NCDMV. 23. Within a few days of the Garey Accident, Defendants Farrin Firm, Marcari Russotto, Riddle & Brantley, Wallace Pierce and Van Laningham obtained a copy of the DMV-349 for the Garey Accident. Said report contained Plaintiff William Garey’s name and address, as well as the fact that the address on the DMV-349 matched the address on Plaintiff William Garey’s driver’s license. Said report also contained the name and address of the other driver involved in the Garey Accident. Said report also contained the name and address of Plaintiff James Garey, along with the name and address of the registered owner of the other vehicle involved in the Garey Accident. 7 24. Each of Defendants Farrin Firm, Marcari Russotto, Riddle & Brantley, Wallace Pierce and Van Laningham obtained the DMV-349 for the Garey Accident for the purpose of marketing that Defendant’s legal services. 25. Defendants Farrin Firm, Marcari Russotto, Riddle & Brantley, Wallace Pierce and Van Laningham knew that the DMV-349 form for the Garey Accident that they obtained and used contained personal information from a motor vehicle record because, among other things: a. The DMV-349 indicated that Plaintiff’s William Garey’s address on the DMV-349 matched the address on his driver’s license. That fact could only have come from a review of Plaintiff William Garey’s driver’s license; b. The DMV-349 had a blank for Plaintiff William Garey’s driver’s license number, the contents of which blank were marked “REDACTED”. Plaintiff William Garey’s driver’s license number originated with, and could only have come from, NCDMV; c. Plaintiff William Garey’s driver’s license restrictions were recorded as “0” on the DMV-349. Those driver’s license restrictions could only have originated as a record of the NCDMV and could only have come from NCDMV; and d. Defendants knew that officers routinely record the name and address of vehicle owners from the vehicle registration card or from the computerized records from NCDMV. 8 26. Defendants Farrin Firm, Marcari Russotto, Riddle & Brantley, Wallace Pierce, and Van Laningham used the protected personal information of Plaintiffs William Garey and James Garey, including their names and addresses, by addressing marketing materials to the address of Plaintiff William Garey and mailing said materials. Defendants Farrin Firm, Marcari Russotto, Riddle & Brantley, and Wallace Pierce included a copy of the DMV-349 for the Garey Accident in their respective mailing. Defendant Van Laningham stated in the mailing that his firm had obtained the DMV-349 for the Garey Accident. 27. A true and accurate copy, save for redactions (shown in red) to prevent the unnecessary disclosure of the personal information of non-parties, of the mailing addressed to Plaintiff William Garey’s home by Defendant Farrin Firm is attached hereto as Exhibit 1. 28. A true and accurate copy, save for redactions (shown in red) to prevent the unnecessary disclosure of the personal information of non-parties, of the mailing addressed to Plaintiff William Garey’s home by Defendant Marcari Russotto is attached hereto as Exhibit 2. 29. A true and accurate copy, save for redactions (shown in red) to prevent the unnecessary disclosure of the personal information of non-parties, of the mailing addressed to Plaintiff William Garey’s home by Defendant Riddle & Brantley is attached hereto as Exhibit 3. 30. A true and accurate copy, save for redactions (shown in red) to prevent the unnecessary disclosure of the personal information of non-parties, of the mailing 9 addressed to Plaintiff William Garey’s home by Defendant Wallace Pierce is attached hereto as Exhibit 4. 31. A true and accurate copy of the mailing addressed to Plaintiff William Garey’s home by Defendant Van Laningham is attached hereto as Exhibit 5. Facts related to Aaron Cruthis 32. On 30 April 2016, Plaintiff Aaron Cruthis was involved in a motor vehicle accident (“the Cruthis Accident”). This Accident was a reportable crash as defined by N.C. Gen. Stat. § 20-4.01. 33. The City of Greensboro Police Department was notified of the accident and sent Officer E.H. Rasecke to investigate the Accident. 34. At the scene of the Cruthis Accident and at Officer Rasecke’s request, Plaintiff Cruthis presented his driver’s license to Officer Rasecke. Officer Rasecke transcribed certain information, including Plaintiff Cruthis’s name, address, date of birth, telephone number and driver’s license number into a standard North Carolina Division of Motor Vehicles Crash Report known as a DMV-349. 35. At the scene of the Cruthis Accident, Officer Rasecke asked Plaintiff Cruthis if the information shown on his driver’s license was correct, and Plaintiff Cruthis informed Officer Rasecke that the information on his driver’s license was correct. As a result of this interaction, Officer Rasecke checked a box on the DMV-349 to indicate that Plaintiff Cruthis’s actual address matched the address on his driver’s license. 36. At the scene of the Cruthis Accident, Officer Rasecke transcribed onto the DMV-349 certain information regarding the registration of the vehicle that Plaintiff 10 Cruthis was operating at the time of the Cruthis Accident. This information related to the registration of said vehicle and also included Plaintiff Cruthis’s name and address and the license plate year and number of said vehicle. The source of this information was the North Carolina Division of Motor Vehicles (“NCDMV”). 37. Officer Rasecke filed the DMV-349 for the Cruthis Accident with his department, which filed it with the NCDMV. 38. Within a few days of the Cruthis Accident, Defendant Lanier Law Group obtained a copy of the DMV-349 for the Cruthis Accident. Said report contained Plaintiff Cruthis’s name and address, as well as the fact that the address on the report matched the address on Plaintiff Cruthis’s driver’s license. Said report also contained the name and address of the other driver involved in the Cruthis Accident. Said report also contained the name and address of the registered owner of the other vehicle involved in the Cruthis Accident. 39. Defendant Lanier Law Group obtained the DMV-349 for the Cruthis Accident for the purpose of marketing Defendant Lanier Law Group’s legal services. 40. Driver’s licenses and vehicle registration cards and records are motor vehicle records as defined by 18 U.S.C. § 2725(1) 41. Defendant Lanier Law Group knew that the DMV-349 form for the Cruthis Accident that it obtained and used contained personal information from a motor vehicle record because, among other things: a. The DMV-349 indicated that Plaintiff’s Cruthis’s address on the DMV-349 matched the address on his driver’s license. That fact 11 could only have come from a review of Plaintiff Cruthis’s driver’s license; b. The DMV-349 had a blank for Plaintiff Cruthis’s driver’s license number, the contents of which blank were marked “REDACTED”. Plaintiff Cruthis’s driver’s license number originated with, and could only have come from, NCDMV; c. Plaintiff Cruthis’ driver’s license restrictions were recorded as “0” on the DMV-349. Those driver’s license restrictions could only have originated as a record of the NCDMV and could only have come from the NCDMV; and d. Defendant Lanier Law Group knew that officers routinely record the name and address of vehicle owners from the vehicle registration card or from the computerized records from the North Carolina Division of Motor Vehicles. 42. Defendant Lanier Law Group used the protected personal information of Plaintiff Cruthis, including his name and address, by addressing marketing materials to the address of Plaintiff Cruthis and mailing said materials. Defendant Lanier Law Group included a copy of the DMV-349 for the Cruthis Accident in its mailing. 43. A true and accurate copy, save for redactions (shown in red) to prevent the unnecessary disclosure of the personal information of non-parties, of the mailing addressed to Plaintiff Cruthis’s home by Defendant Lanier Law Group is attached hereto as Exhibit 6. 12 Facts related to all Defendants 44. Each of Defendants’ mailings described above and attached as Exhibits 1-6 contained the words, “This is an advertisement for legal services” on the outside of the envelope and on the enclosed materials. 45. Driver’s licenses and vehicle registration cards and records are motor vehicle records as defined by 18 U.S.C. § 2725(1). 46. Names and addresses on driver’s licenses and vehicle registration cards and records constitute personal information that is protected by the DPPA. 47. Defendants regularly obtain DMV-349 on motor vehicle accidents in bulk for the purpose of marketing their legal services. 48. Upon information and belief, Defendants review information from DMV- 349 forms that are obtained in bulk in order to determine who is at fault for each accident. Defendants only send marketing materials to those persons who do not appear to be at 49. The mailings described above sent by Defendants are form mailings. The mailing sent by each Defendant to a Plaintiff is identical in all material respects to the mailings that each Defendant regularly sends to persons whose information has been obtained from DMV-349 forms. 50. Upon information and belief, Defendants send materials marked “This is an advertisement for legal services” only to persons whose names and addresses have been gleaned from DMV-349 forms. 13 51. Plaintiffs did not consent to allow any Defendant to obtain or use their personal information from a motor vehicle record. 52. Defendants regularly and knowingly use protected personal information from motor vehicle records to market their services to accident victims in the same manner that Defendants used the protected personal information of Plaintiffs. CLASS ACTION ALLEGATIONS 53. Plaintiffs bring this action on behalf of a class defined as follows: a. All natural persons b. residing in North Carolina c. identified on a DMV-349 as either i. a driver whose address is designated on the DMV-349 as matching the address on that person’s driver’s license or ii. a registered owner of a vehicle registered with the North Carolina Division of Motor Vehicles d. to whom a Defendant named in this action sent a mailing with the words “This is an advertisement for legal services” printed on the outside of the envelope e. within the 4 years preceding the filing of this action through conclusion of this action. 54. Numerosity (Fed. R. Civ. P. 23(a)(1)): The Class members are so numerous that joinder of all is impractical. Upon information and belief, Defendants have knowingly obtained and used the protected personal information of hundreds, if not 14 thousands of individuals meeting the above class definition from DMV-349 reports for marketing purposes. Upon information and belief, many of those persons’ names and addresses are identifiable through documents maintained by Defendants. 55. Existence and Predominance of Common Questions of Law and Fact (Fed. R. Civ. P. 23(a)(2)): Common questions of law and fact exist as to all members of the Class, and predominate over the questions affecting only individual members. The common legal and factual questions include: a. Whether Defendants knowingly obtained protected personal information from a motor vehicle record; b. Whether Defendants’ primary purpose in obtaining protected personal information was the marketing of legal services; and c. Whether Defendants violated section 2722(a) of the DPPA by obtaining or disclosing personal information from a motor vehicle record without a permissible purpose under section 2721(b) of the DPPA; 56. Typicality (Fed. R. Civ. P. 23(a)(3)): Plaintiffs’ claims are typical of the claims of each Class member. Plaintiffs have the same claims for liquidated damages that they seek for absent class members. 57. Adequacy (Fed. R. Civ. P. 23(a)(4)): Plaintiffs are adequate representatives of the Class. Their interests are aligned with, and are not antagonistic to, the interests of the members of the Class they seek to represent, they have retained counsel competent and experienced in complex litigation, and they intend to prosecute this action 15 vigorously. Plaintiffs and their Counsel will fairly and adequately protect the interests of members of the Class. 58. Predominance and Superiority (Fed. R. Civ. P. 23(b)(3)): Questions of law and fact common to the Class members predominate over questions affecting only individual members, and a class action is superior to other available methods for fair and efficient adjudication of the controversy. The liquidated damages sought by each member are the same. However, each class member’s liquidated damages are limited, such that individual prosecution would prove burdensome and expensive. It would be virtually impossible for the members of the Classes individually to redress effectively the wrongs done to them. Even if the members of the Classes themselves could afford such individual litigation, it would be an unnecessary burden on the courts to require class members to file thousands of individual lawsuits. Furthermore, individualized litigation presents a potential for inconsistent or contradictory judgments and increases the delay and expense to all parties and to the court system presented by the legal and factual issues raised by Defendants’ conduct. By contrast, the class action device will result in substantial benefits to the litigants and the Court by allowing the Court to resolve numerous individual claims based upon a single set of proof in a unified proceeding. FIRST CLAIM FOR RELIEF: VIOLATION OF THE DRIVER’S PRIVACY PROTECTION ACT (18 U.S.C. § 2721 ET SEQ.) 59. The allegations contained in the paragraphs 1 through 58, supra, are incorporated herein by reference. 16 60. Defendants knowingly obtained and used one or more Plaintiff’s protected personal information from a motor vehicle record as described above. 61. Each Defendant knowingly obtained and used one or more Plaintiff’s protected personal information from a motor vehicle record for the purpose of marketing that Defendant’s legal services. 62. When each Defendant knowingly obtained and used one or more Plaintiff’s protected personal information, said Defendant lacked Plaintiffs’ express consent as required by the DPPA. 63. When each Defendant sent its above-described mailing containing the words “This is an advertisement for legal services” to one or more Plaintiffs, Defendants knowingly used said Plaintiff’s personal information from a motor vehicle record. 64. Defendants knowingly both obtained and used Plaintiffs’ personal information from a motor vehicle record for the purpose of marketing legal services. 65. Advertising for legal services for the solicitations of new potential clients is not a permissible purpose for obtaining motor vehicle records under the DPPA. Maracich v. Spears, 133 S. Ct. 2191 (2013). 66. Defendants knowingly both obtained and used Plaintiffs’ personal information from a motor vehicle record in violation of the DPPA. 67. Because Defendants regularly and knowingly obtain and use personal information from motor vehicle records for purposes of marketing their services, violations of the DPPA are likely to continue. 17 68. Under 18 U.S.C. § 2724(b)(4), the Court should enter a permanent injunction prohibiting Defendants from obtaining or using personal information from motor vehicle records for marketing purposes. Specifically, the Court should enjoin Defendants from: a. Obtaining names and addresses sourced from DMV-349s for purposes of marketing legal services; b. Sending mailings marketing legal services to drivers whose names and/or addresses are obtained by Defendants by means of DMV- 349s; and c. Sending letters containing a copy of a completed DMV-349 for the purpose of marketing legal services. 69. Because Defendant obtained and used Plaintiffs’ personal information from a motor vehicle record for a purpose not permitted under the DPPA, each Plaintiff is entitled to liquidated damages of $2,500.00 for each letter in which his personal information was contained. 18 WHEREFORE, Plaintiffs pray the Court for the following relief: 1. To enter an Order certifying the proposed Class under Rule 23 and appointing Plaintiffs and the undersigned counsel of record to represent the Class; 2. To permanently enjoin each Defendant, pursuant to 18 U.S.C. §2724(b)(4), a. Obtaining names and addresses sourced from DMV-349s for purposes of marketing legal services; b. Sending letters marketing legal services to drivers whose names and/or addresses are obtained by Defendants by means of DMV- 349s; and c. Sending letters containing a copy of a completed DMV-349 for the purpose of marketing legal services. 3. To award liquidated damages, pursuant to 18 U.S.C. §2724(b)(1), to each Plaintiff in the amount of $2,500.00 for instance in which a Defendant knowingly obtained or used that Plaintiff’s protected personal information; 4. To award reasonable attorneys’ fees and other litigation costs reasonably incurred, pursuant to 18 U.S.C. §2724(b)(3); 5. To award pre- and post-judgment interest as allowed by law; 6. For a trial by jury on all issues so triable; and 7. For such other and further relief as the Court deems just and proper. [SIGNATURE ON NEXT PAGE] 19 Respectfully submitted, this the 27th day of May 2016. /s/ J. David Stradley N.C. State Bar No. 22340 Attorney for Plaintiffs WHITE & STRADLEY, PLLC 3105 Charles B. Root Wynd Raleigh, North Carolina 27612 Telephone: (919) 844-0400 E-mail: [email protected] /s/ Robert P. Holmes N.C. State Bar No. 12438 Attorney for Plaintiffs WHITE & STRADLEY, PLLC 3105 Charles B. Root Wynd Raleigh, North Carolina 27612 Telephone: (919) 844-0400 E-mail: [email protected] 20

privacy

cNe1D4cBD5gMZwczzimy

LEE LITIGATION GROUP, PLLC C.K. Lee (CL 4086) Anne Seelig (AS 3976) 30 East 39th Street, Second Floor New York, NY 10016 Tel.: 212-465-1188 Fax: 212-465-1181 Attorneys for Plaintiff, FLSA Collective Plaintiffs and the Class UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK DIAHANN M. PEREZ, on behalf of herself, FLSA Collective Plaintiffs and the Class, Index No.: Plaintiff, CLASS AND COLLECTIVE ACTION COMPLAINT v. Jury Trial Demanded NEW YORK SPINE SPECIALISTS, LLP, and SEBASTIAN LATTUGA, Defendants. Plaintiff, DIAHANN M. PEREZ (“Plaintiff”), on behalf of herself and others similarly situated, by and through her undersigned attorneys, hereby files this class and collective action Complaint against NEW YORK SPINE SPECIALISTS, LLP ("Corporate Defendant") and SEBASTIAN LATTUGA ("Individual Defendant", and collectively with the Corporate Defendants, “Defendants”) and states as follows: 1 INTRODUCTION 1. Plaintiff alleges, pursuant to the Fair Labor Standards Act, as amended, 29 U.S.C. §§201 et. seq. (“FLSA”), that she and others similarly situated are entitled to recover from Defendants: (1) unpaid regular and overtime wages due to time-shaving, (2) unpaid regular and overtime wages for uncompensated travel time, (3) liquidated damages, and (4) attorneys’ fees and 2. Plaintiff further alleges that, pursuant to the New York Labor Law (“NYLL”), she and others similarly situated are entitled to recover from Defendants: (1) unpaid regular and overtime wages due to time-shaving, (2) unpaid regular and overtime wages for uncompensated travel time. (3) compensation for unreimbursed uniform expenses, (4) statutory penalties and liquidated damages, and (5) attorneys’ fees and costs. JURISDICTION AND VENUE 3. This Court has jurisdiction over this controversy pursuant to 29 U.S.C. §216(b), 28 U.S.C. §§1331, 1337 and 1343, and has supplemental jurisdiction over Plaintiffs’ state law claims pursuant to 28 U.S.C. §1367. 4. Venue is proper in the Eastern District pursuant to 28 U.S.C. §1391. PARTIES 5. Plaintiff, DIAHANN M. PEREZ, is a resident of Kings County, New York. 6. Defendant, NEW YORK SPINE SPECIALISTS, LLP is a domestic limited liability partnership organized under the laws of the State of New York with an address for service of process and corporate headquarters located in Nassau County, NY, at 2001 Marcus Avenue, Suite 170 West, Lake Success, NY 11042. 2 7. Individual Defendant, SEBASTIAN LATTUGA, the chief physician at New York Spine Specialist, is the principal partner and corporate officer of NEW YORK SPINE SPECIALISTS, LLP. 8. Defendants operate a medical practice focusing on the treatment of back pain and other spinal conditions under the common trade name “New York Spine Specialist.” New York Spine Specialist operates medical offices at the following seven (7) locations: a. 150 E 58th Street, 9th Floor Annex Building, New York, NY 10022 (“Manhattan location”); b. 2001 Marcus Avenue, Suite 170 West, Lake Success, NY 11042 (“Long Island location”); c. 70-20 Yellowstone Boulevard, Forest Hills, NY 11375 (“Queens location”); d. 3311 Shore Parkway, Brooklyn, NY 11235 (“Brooklyn-Shore Parkway location”); e. 185 Montague Street, Brooklyn, NY 11201 (“Brooklyn-Montague location”); f. 2356 University Avenue, Bronx, NY 10468 (“Bronx location”); and g. 50 Court Street, Suite #1108, Brooklyn, NY 11201 (“Brooklyn Court Street location”). (collectively, “New York Spine Specialist”). 9. Defendants operate the New York Spine Specialist business as a single integrated enterprise. Specifically, all New York Spine Specialist locations are commonly owned and operated by the Individual Defendants. All locations are jointly advertised on a common website, www.newyorkspinespecialist.com. Medical supplies and employees are interchangeable among the New York Spine Specialist locations. Plaintiff was frequently required by Defendants to travel 3 to each of Defendants’ seven (7) locations to work and to transport medical supplies. SEBASTIAN LATTUGA and each of the other doctors at New York Spine Specialist consult with patients and perform medical services at each of the seven (7) New York Spine Specialist locations. Defendants maintain centralized human resources and a single payroll system for employees at all locations. 10. Individual Defendant, SEBASTIAN LATTUGA, is the principal partner and corporate officer of New York Spine Specialist. Defendant LATTUGA (the chief physician at New York Spine Specialist) had control over the terms and conditions of Plaintiff’s employment, and those similar situated employees. Specifically, with respect to Plaintiff and other similarly situated employees, Defendant LATTUGA maintained the authority to (i) fire and hire, (ii) determine rate and method of pay, (iii) set and adjust employee work schedules, and (iv) otherwise affect the quality of employment of Plaintiff, FLSA Collective Members, and Class Members. Moreover, Defendant LATTUGA exercised functional control over the business operations and financial operations of the Corporate Defendants. 11. At all relevant times, the Corporate Defendant was and continues to be an “enterprise engaged in commerce” within the meaning of the FLSA. 12. At all relevant times, the work performed by Plaintiff, FLSA Collective Plaintiffs and Class members was directly essential to the business operated by Defendants. 13. Plaintiff has fulfilled all conditions precedent to the institution of this action and/or such conditions have been waived. FLSA COLLECTIVE ACTION ALLEGATIONS 14. Plaintiff brings claims for relief as a collective action pursuant to FLSA Section 16(b), 29 U.S.C. § 216(b), on behalf of all non-exempt employees, including, but not limited to nurses, physician assistants, radiology technologists, medical technicians, other medical assistants, 4 and porters employed by Defendants on or after the date that is six years before the filing of the Complaint in this case as defined herein (“FLSA Collective Plaintiffs”). 15. At all relevant times, Plaintiff and the other FLSA Collective Plaintiffs are and have been similarly situated, have had substantially similar job requirements and pay provisions, and are and have been subjected to Defendants’ decisions, policies, plans, programs, practices, procedures, protocols, routines, and rules, all culminating in a willful failure and refusal to pay them: (i) unpaid regular and overtime wages owed due to time-shaving, and (ii) unpaid regular and overtime wages owed for uncompensated travel time spent traveling between Defendants’ offices pursuant to Defendants’ instructions, in violation of the FLSA. The claims of Plaintiff stated herein are essentially the same as those of the other FLSA Collective Plaintiffs. 16. The claims for relief are properly brought under and maintained as an opt-in collective action pursuant to §16(b) of the FLSA, 29 U.S.C. 216(b). The FLSA Collective Plaintiffs are readily ascertainable. For purposes of notice and other purposes related to this action, their names and addresses are readily available from the Defendants. Notice can be provided to the FLSA Collective Plaintiffs via first class mail to the last address known to Defendants. RULE 23 CLASS ALLEGATIONS – NEW YORK 17. Plaintiff brings claims for relief pursuant to the Federal Rules of Civil Procedure (“F.R.C.P.”) Rule 23, on behalf of all non-exempt persons, including, but not limited to nurses, physician’s assistants, radiology technologists, medical technicians, other medical assistants and porters employed by Defendants on or after the date that is six years before the filing of the Complaint in this case as defined herein (the “Class Period”). 18. All said persons, including Plaintiff, are referred to herein as the “Class.” The Class members are readily ascertainable. The number and identity of the Class members are 5 determinable from the records of Defendants. The hours assigned and worked, the position held, and rates of pay for each Class member may also be determinable from Defendants’ records. For purposes of notice and other purposes related to this action, their names and addresses are readily available from Defendants. Notice can be provided by means permissible under F.R.C.P. 23. 19. The proposed Class is so numerous such that a joinder of all members is impracticable, and the disposition of their claims as a class will benefit the parties and the Court. Although the precise number of such persons is unknown because the facts on which the calculation of that number rests presently within the sole control of Defendants, there is no doubt that there are more than forty (40) members of the Class. 20. Plaintiff’s claims are typical of those claims that could be alleged by any member of the Class, and the relief sought is typical of the relief, that would be sought by each member of the Class in separate actions. All the Class members were subject to the same practices of Defendants as alleged herein of: (i) failing to pay them regular and overtime wages owed due to time-shaving, (ii) failing to pay them regular and overtime wages owed for uncompensated travel time spent traveling between Defendants’ offices pursuant to Defendants’ instructions, (iii) failing to reimburse costs of required uniforms, and (iv) failing to provide proper wage and hour notices and wage statements, as required. Defendants’ corporate-wide policies and practices affected all Class members similarly, and Defendants benefited from the same type of unfair and/or wrongful acts as to each Class member. Plaintiff and other Class members sustained similar losses, injuries and damages arising from the same unlawful policies, practices and procedures. 21. Plaintiff is able to fairly and adequately protect the interests of the Class and has no interests antagonistic to the Class. Plaintiff is represented by attorneys who are experienced and 6 competent in both class action litigation and employment litigation and have previously represented plaintiffs in wage and hour cases. 22. A class action is superior to other available methods for the fair and efficient adjudication of the controversy – particularly in the context of the wage and hour litigation where individual class members lack the financial resources to vigorously prosecute a lawsuit against corporate defendant. Class action treatment will permit a large number of similarly situated persons to prosecute common claims in a single forum simultaneously, efficiently, and without the unnecessary duplication of efforts and expense that numerous individual actions engender. Because losses, injuries and damages suffered by each of the individual Class members are small in the sense pertinent to a class action analysis, the expenses and burden of individual litigation would make it extremely difficult or impossible for the individual Class members to redress the wrongs done to them. On the other hand, important public interests will be served by addressing the matter as a class action. The adjudication of individual litigation claims would result in a great expenditure of Court and public resources; however, treating the claims as a class action would result in a significant saving of these costs. The prosecution of separate actions by individual members of the Class would create a risk of inconsistent and/or varying adjudications with respect to the individual members of the Class, establishing incompatible standards of conduct for Defendants and resulting in the impairment of class members’ rights and the disposition of their interests through actions to which they were not parties. The issues in this action can be decided by means of common, class-wide proof. In addition, if appropriate, the Court can, and is empowered to, fashion methods to efficiently manage this action as a class action. 23. Defendants and other employers throughout the state violate the NYLL. Current employees are often afraid to assert their rights out of fear of direct or indirect retaliation. Former 7 employees are fearful of bringing claims because doing so can harm their employment, future employment, and future efforts to secure employment. Class actions provide class members who are not named in the Complaint a degree of anonymity, which allows for the vindication of their rights while eliminating or reducing these risks. 24. There are questions of law and fact common to the Class which predominate over any questions affecting only individual class members, including: a. Whether Defendants employed Plaintiff and the Class within the meaning of the New York law; b. What are and were the policies, practices, programs, procedures, protocols and plans of Defendants regarding the types of work and labor for which Defendants did not pay the Class members properly; c. At what common rate, or rates subject to common methods of calculation, was and are Defendants required to pay the Class members for their work; d. Whether Defendants failed to compensate Plaintiff and Class Member for all regular hours worked, due to a policy of time shaving; e. Whether Defendants failed to compensate Plaintiff and Class Member for all overtime hours worked, due to a policy of time shaving; f. Whether Defendants failed to properly compensate Plaintiff and Class members for time spent traveling between offices; g. Whether Defendants failed to properly reimburse Plaintiff and Class members for required uniform expenses; h. Whether Defendants provided to Plaintiff and Class members proper wage and hour notices, at date of hiring and as required thereafter under the NYLL; and; 8 i. Whether Defendants provided to Plaintiff and Class members proper wage statements with each payment of wages as required by NYLL. STATEMENT OF FACTS 25. On or about February 8, 2016, Plaintiff DIAHANN M. PEREZ was hired to work as a nurse/physician’s assistant at Defendants’ New York Spine Specialist business. Plaintiff’s employment by Defendants terminated on or about April 7, 2017. 26. During her employment, Plaintiff was required to work at each of the seven (7) New York Spine Specialist locations on an as needed basis. Plaintiff was frequently directed by Defendants to drive between New York Spine Specialist locations in the middle of the day to perform or assist with medical services or to transfer medical supplies between locations. 27. While employed by Defendants, Plaintiff regularly worked 9.5 – 10.5 hours per day, 5 days per week for a total of approximately 45 – 50 hours per week. FLSA Collective Plaintiffs and Class Members similarly worked in excess of forty (40) hours each workweek. 28. From the start of her employment on approximately February 8, 2016 until approximately March 2017, Plaintiff was compensated at a base hourly rate of $16.00 per hour. Then, from approximately March 2017 until April 7, 2017, Plaintiff was compensated at a base hourly rate of $17.00 per hour. 29. During her employment, Plaintiff was frequently directed by Defendants to clock out, and then drive to a different New York Spine Specialist location in the middle of the day to perform or assist with medical services or to transfer medical supplies between locations on an as needed basis. Plaintiff was only allowed to clock back in upon reaching the New York Spine Specialist location that she was required to travel to. Even though such travel was an integral component and condition of her employment, Plaintiff did not receive any compensation for the 9 time that she spent traveling between locations at Defendants direction. As a result of Defendants’ refusal to compensate Plaintiff for required travel time, she was not compensated for approximately 2-3 regular and overtime hours each workweek on average. 30. FLSA Collective Plaintiffs and Class Members were similarly required to travel between Defendants’ locations but not compensated at all for travel time between Defendants’ locations. Like Plaintiff, FLSA Collective Plaintiffs and Class Members were not compensated for at least 2 regular and overtime hours each week due to Defendants’ blanket refusal to compensate employees for travel time. 31. Throughout her employment by Defendants, Plaintiff was not compensated for regular and overtime hours that she worked each workweek, due to a commonly applicable policy of time shaving. Specifically, Defendants subjected Plaintiff to the following illegal practices, which were also applicable to FLSA Collective Plaintiffs and Class Members: a) Plaintiff was required to work without any lunch break approximately 4 days each workweek. However, even if Plaintiff did not clock out for lunch on any given day, Defendants would still automatically deduct 30 minutes worth of compensation from her weekly paycheck based on a purported lunch break. b) Each morning, Defendants required Plaintiff to set up the work area at Defendants’ offices to receive patients prior to clocking in. As a result of Defendants’ policy of requiring pre-shift off the clock work, Plaintiff was required to perform approximately 30 minutes of uncompensated work each day. c) At the end of each day, Defendants required Plaintiff to clock out, and then take out the garbage and turn off all the computers. As a result of Defendants’ 10 policy of requiring uncompensated post shift off the clock work, Plaintiff was required to perform approximately 15 minutes of uncompensated work each day. Due to the aforementioned practices, Plaintiff was deprived of compensation to which she was entitled, due to time shaving of approximately 5-7 regular and overtime hours each workweek. FLSA Collective Plaintiffs and Class Members were subjected to the same commonly applicable policies of time shaving described above, and consequently were deprived of compensation for at least 5 overtime and regular hours each week to which they were entitled. 32. During her employment by Defendants, Plaintiff was required by Defendants to purchase medical scrubs in several different colors that were required attire on the job, at her own expense. Defendants required Plaintiff to pay for 3 sets of scrubs in each of several different colors, at a unit price of approximately $20 per set, but never reimbursed her for purchasing these required uniforms. Likewise, Class Members were required to purchase similar sets of scrubs without reimbursement. 33. Defendants never provided Plaintiff or Class Members with proper wage and hour notices as required under the NYLL. Plaintiff and Class Members received improper wage and hour notices that did not accurately state the rate of pay she received each hour, due to Defendants. 34. Defendants provided Plaintiff and Class Members with defective wage statements in violation of NYLL at all times. The wage statements provided to and Class Members did not accurately state the regular or overtime hours that employees actually worked. The wage statements prov 35. At all relevant times, Plaintiff, FLSA Collective Plaintiffs and Class Members regularly worked over forty (40) hours per week, but due to time shaving, Defendants failed to pay them the proper overtime compensation in violation of the FLSA and New York Labor Law. 11 36. Defendant knowingly and willfully subjected Plaintiff, FLSA Collective Plaintiffs to time-shaving of regular and overtime hours in violation of both the FLSA and the New York Labor Law. 37. Defendant knowingly and willfully operated their business with a policy of not providing proper wage statements to Plaintiff, FLSA Collective Plaintiffs and Class Members, in violation of the New York Labor Law. 38. Defendants knowingly and willfully operated their business with a policy of not providing a proper wage notice to Plaintiffs, FLSA Collective Plaintiff and Class Members, at the beginning of employment and annually thereafter, in violation of the New York Labor Law. 39. Plaintiff retained Lee Litigation Group, PLLC to represent them and other employees similarly situated in this litigation and have agreed to pay the firm a reasonable fee for its services. STATEMENT OF CLAIM COUNT I VIOLATION OF THE FAIR LABOR STANDARDS ACT 40. Plaintiff realleges and reavers Paragraphs 1 through 39 of this Complaint as if fully set forth herein. 41. At all relevant times, Defendants were and continue to be employers engaged in interstate commerce and/or the production of goods for commerce within the meaning of the FLSA, 29 U.S.C. §§ 206(a) and 207 (a). Further, Plaintiffs and FLSA Collective Plaintiffs are covered individuals within the meaning of the FLSA, 29 U.S.C. §§ 206(a) and 207 (a). 42. At all relevant times, Defendants employed Plaintiff and FLSA Collective Plaintiffs within the meaning of the FLSA. 12 43. At all relevant times, Corporate Defendant, NEW YORK SPINE SPECIALISTS, LLP had gross annual revenues in excess of $500,000. 44. At all relevant times, the Defendants had a policy and practice of time-shaving, refusing to pay wages to Plaintiffs, FLSA Collective Plaintiffs for their hours worked. 45. Defendants failed to properly disclose or apprise Plaintiff and FLSA Collective Plaintiffs of their rights under the FLSA. 46. At all relevant times, Defendants failed to compensate plaintiff and FLSA collective plaintiffs for travel time for which compensation was due. 47. As a direct and proximate result of Defendants’ willful disregard of the FLSA, Plaintiff and FLSA Collective Plaintiffs are entitled to liquidated (i.e., double) damages pursuant to the FLSA. 48. Due to the intentional, willful and unlawful acts of Defendants, Plaintiff and FLSA Collective Plaintiffs suffered damages in an amount not presently ascertainable of unpaid compensation. 49. Records, if any, concerning the number of hours worked by Plaintiff and FLSA Collective Plaintiffs and the actual compensation paid to Plaintiff and FLSA Collective Plaintiffs should be in the possession and custody of the Defendants. Plaintiff intends to obtain these records by appropriate discovery proceedings to be taken promptly in this case and, if necessary, will then seek leave of Court to amend this Complaint to set forth the precise amount due. 50. Defendants failed to properly disclose or apprise Plaintiff of her rights under the 51. As a direct and proximate result of Defendants’ willful disregard of the FLSA, Plaintiff is entitled to liquidated damages pursuant to the FLSA. 13 52. Due to the intentional, willful and unlawful acts of Defendants, Plaintiff suffered damages, plus an equal amount as liquidated damages. 53. Plaintiff is entitled to an award of their reasonable attorneys’ fees and costs pursuant to 29 U.S.C. §216(b). COUNT II VIOLATION OF THE NEW YORK LABOR LAW 54. Plaintiff realleges and reavers Paragraphs 1 through 53 of this class action Complaint as if fully set forth herein. 55. At all relevant times, Plaintiff and Class members were employed by the Defendants within the meaning of the New York Labor Law, §§2 and 651. 56. Defendants willfully violated Plaintiff’s and Class members’ rights by failing to pay them for all hours worked due to a policy of time-shaving. 57. Defendants knowingly and willfully operated their business with a policy of not providing a proper wage statement to Plaintiff and other non-exempt employees, in violation of the New York Labor Law. 58. Defendants failed to provide a proper wage and hour notice, at the date of hiring and annually, to all non-exempt employees per requirements of the New York Labor Law. 59. Defendants knowingly and willfully operated their business with a policy of not providing a proper wage notice to Plaintiff and other non-exempt employees at the beginning of employment and annually thereafter, in violation of the New York Labor Law. 60. Due to the Defendants’ New York Labor Law violations, Plaintiff is entitled to recover from Defendants their unpaid overtime, unpaid wages due to a policy of time-shaving, 14 unpaid travel time, unreimbursed tools of trade, statutory penalties, damages for unreasonably delayed payments, reasonable attorney’s fees, and costs and disbursements of the action. PRAYER FOR RELIEF WHEREFORE, Plaintiff on behalf of herself, FLSA Collective Plaintiffs and Class members, respectfully requests that this Court grant the following relief: a) A declaratory judgment that the practices complained of herein are unlawful under the FLSA and the NYLL; b) An injunction against Defendants and their officers, agents, successors, employees, representatives and any and all persons acting in concert with them as provided by law, from engaging in each of the unlawful practices, policies and patterns set forth herein; c) An award of unpaid compensation due to a policy of time shaving, in violation of the FLSA and the New York Labor Law. d) An award of unpaid compensation for uncompensated travel time under the New York Labor Law. e) An award of unpaid reimbursement for auto-travel expenses and tools of the trade expenses under the FLSA and New York Labor Law; f) An award of statutory penalties as a result of Defendants’ failure to comply with the NYLL wage notice and wage statement requirements; g) An award of prejudgment and postjudgment interest, costs and expenses of this action together with reasonable attorneys’ and expert fees and statutory penalties; h) An award of liquidated and/or punitive damages as a result of Defendants’ willful failure to pay for time shaved regular and overtime wage, reimbursements for travel expenses and tools of the trade expenses, pursuant to the New York Labor Law; 15 i) Designation of Plaintiff as Representative of the FLSA Collective Plaintiffs; j) Designation of this action as a class action pursuant to F.R.C.P. 23; k) Designation of Plaintiff as Representative of the Class; and l) Such other and further relief as this Court deems just and proper. JURY DEMAND Plaintiff demands trial by jury on all issues so triable as of right by jury. Dated: February 9, 2018 Respectfully submitted, LEE LITIGATION GROUP, PLLC C.K. Lee (CL 4086) Anne Seelig (AS 3976) 30 East 39th Street, Second Floor New York, NY 10016 Tel.: 212-465-1188 Fax: 212-465-1181 Attorneys for Plaintiff, FLSA Collective Plaintiffs and the Class By: /s/ C.K. Lee C.K. Lee, Esq. 16

employment & labor

jqe-CYcBD5gMZwczYxQd

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION HEIDBREDER BUILDING GROUP, LLC, ) on behalf of plaintiff and a class, ) ) Plaintiff, ) ) v. ) ) DHF ASSOCIATES, LLC, ) and JOHN DOES 1-10, ) ) Defendants. ) COMPLAINT – CLASS ACTION MATTERS COMMON TO MULTIPLE COUNTS INTRODUCTION 1. Plaintiff Heidbreder Building Group, LLC brings this action to secure redress for the actions of defendant DHF Associates, LLC, in sending or causing the sending of unsolicited advertisements to telephone facsimile machines in violation of the Telephone Consumer Protection Act, 47 U.S.C. §227 (“TCPA”), the Illinois Consumer Fraud Act, 815 ILCS 505/2 (“ICFA”), and the common law. 2. The TCPA expressly prohibits unsolicited fax advertising. Unsolicited fax advertising damages the recipients. The recipient is deprived of its paper and ink or toner and the use of its fax machine. The recipient also wastes valuable time it would have spent on something else. Unsolicited faxes prevent fax machines from receiving and sending authorized faxes, cause wear and tear on fax machines, and require labor to attempt to identify the source and purpose of the unsolicited faxes. PARTIES 3. Plaintiff Heidbreder Building Group, LLC is a limited liability company with offices at 500 North Fairway Drive, Vernon Hills, Illinois 60061, where it maintains telephone facsimile equipment. Its members are residents of Illinois. 1 4. Defendant DHF Associates, LLC, is a Pennsylvania limited liability company with an office located at 715 Twining Road, Suite LL1, Dresher, Pennsylvania. Its registered agent and office is Savannah Walker, 1328 Brookline Road E. 106, Cleveland Heights, Ohio 5. Defendants John Does 1-10 are other natural or artificial persons that were involved in the sending of the facsimile advertisements described below. Plaintiff does not know who they are. JURISDICTION AND VENUE 6. This Court has jurisdiction under 28 U.S.C. §§1331 and 1367. Mims v. Arrow Financial Services, LLC, 132 S. Ct. 740, 751-53 (2012); Brill v. Countrywide Home Loans, Inc., 427 F.3d 446 (7 Cir. 2005). th 7. This Court also has jurisdiction under 28 U.S.C. §§1332(d) (Class Action Fairness Act). Defendant is of diverse citizenship to at least one class member. On information and belief, based on the economics of junk faxing, the number of class members exceeds 100. On information and belief, based on the economics of junk faxing and the apparent target audience of the faxes, the total amount in controversy, on a classwide basis, exceeds $5 million. (At $1500 per fax, this is satisfied if more than 3,334 faxes were sent; since at the typical rates charged for fax advertising, this would only cost $50 to $100, it makes little or no sense to send fewer faxes.) 8. Personal jurisdiction exists under 735 ILCS 5/2-209, in that defendants: a. Have committed tortious acts in Illinois by causing the transmission of unlawful communications into the state. b. Have transacted business in Illinois. 9. Venue in this District is proper for the same reason. FACTS 10. On February 1, 2013, plaintiff Heidbreder Building Group, LLC received the unsolicited fax advertisement attached as Exhibit A on its facsimile machine. 2 11. Discovery may reveal the transmission of additional faxes as well. 12. Defendant DHF Associates, LLC, is responsible for sending or causing the sending of the fax. 13. Defendant DHF Associates, LLC, as the entity whose products or services were advertised in the fax, derived economic benefit from the sending of the fax. 14. Defendant DHF Associates, LLC, either negligently or wilfully violated the rights of plaintiff and other recipients in sending the fax. 15. Plaintiff had no prior relationship with defendant and had not authorized the sending of fax advertisements to plaintiff. 16. The fax has a “remove” number at the bottom that is associated with the mass broadcasting of advertising faxes. 17. The fax did not contain an opt-out notice that complied with 47 U.S.C. §227. 18. On information and belief, the fax attached hereto were sent as part of a mass broadcasting of faxes. 19. On information and belief, defendants have transmitted similar unsolicited fax advertisements to at least 40 other persons in Illinois. 20. There is no reasonable means for plaintiff or other recipients of defendants’ unsolicited advertising faxes to avoid receiving illegal faxes. Fax machines must be left on and ready to receive the urgent communications authorized by their owners. COUNT I – TCPA 21. Plaintiff incorporates ¶¶ 1-20. 22. The TCPA makes unlawful the “use of any telephone facsimile machine, computr or other device to send an unsolicited advertisement to a telephone facsimile machine ...” 47 U.S.C. §227(b)(1)(C). 23. The TCPA, 47 U.S.C. §227(b)(3), provides: Private right of action. 3 A person or entity may, if otherwise permitted by the laws or rules of court of a State, bring in an appropriate court of that State– (A) an action based on a violation of this subsection or the regulations prescribed under this subsection to enjoin such violation, (B) an action to recover for actual monetary loss from such a violation, or to receive $500 in damages for each such violation, whichever is greater, or (C) both such actions. If the Court finds that the defendant willfully or knowingly violated this subsection or the regulations prescribed under this subsection, the court may, in its discretion, increase the amount of the award to an amount equal to not more than 3 times the amount available under the subparagraph (B) of this paragraph. 24. Plaintiff and each class member suffered damages as a result of receipt of the unsolicited faxes, in the form of paper and ink or toner consumed as a result. Furthermore, plaintiff’s statutory right of privacy was invaded. 25. Plaintiff and each class member is entitled to statutory damages. 26. Defendants violated the TCPA even if their actions were only negligent. 27. Defendants should be enjoined from committing similar violations in the future. CLASS ALLEGATIONS 28. Pursuant to Fed.R.Civ.P. 23(a) and (b)(3), plaintiff brings this claim on behalf of a class, consisting of (a) all persons and entities with fax numbers (b) who, on or after a date four years prior to the filing of this action (28 U.S.C. §1658), or such shorter period during which faxes were sent by or on behalf of defendant DHF Associates, LLC, (c) were sent faxes by or on behalf of defendant DHF Associates, LLC, promoting its goods or services for sale (d) and who were not provided an “opt out” notice as described in 47 U.S.C. §227. 29. The class is so numerous that joinder of all members is impractical. Plaintiff alleges on information and belief that there are more than 40 members of the class. 30. There are questions of law and fact common to the class that predominate over any questions affecting only individual class members. The predominant common questions include: 4 a. Whether defendants engaged in a pattern of sending unsolicited fax advertisements; b. The manner in which defendants compiled or obtained their list of fax numbers; c. Whether defendants thereby violated the TCPA; d. Whether defendants thereby engaged in unfair acts and practices, in violation of the ICFA; and e. Whether defendants thereby converted the property of plaintiff. 31. Plaintiff will fairly and adequately protect the interests of the class. Plaintiff has retained counsel experienced in handling class actions and claims involving unlawful business practices. Neither plaintiff nor plaintiff's counsel have any interests which might cause them not to vigorously pursue this action. 32. Plaintiff’s claims are typical of the claims of the class members. All are based on the same factual and legal theories. 33. A class action is the superior method for the fair and efficient adjudication of this controversy. The interest of class members in individually controlling the prosecution of separate claims against defendants is small because it is not economically feasible to bring individual actions. 34. Several courts have certified class actions under the TCPA. Sadowski v. Med1 Online, LLC, 07 C 2973, 2008 U.S. Dist. LEXIS 41766 (N.D.Ill., May 27, 2008); CE Design Ltd. v Cy's Crabhouse North, Inc., 259 F.R.D. 135 (N.D.Ill. 2009); Targin Sign Sys. v Preferred Chiropractic Ctr., Ltd., 679 F. Supp. 2d 894 (N.D.Ill. 2010); Garrett v. Ragle Dental Lab, Inc., 10 C 1315, 2010 U.S. Dist. LEXIS 108339, 2010 WL 4074379 (N.D.Ill., Oct. 12, 2010); Hinman v. M & M Rental Ctr., 545 F.Supp. 2d 802 (N.D.Ill. 2008); Clearbrook v. Rooflifters, LLC, 08 C 3276, 2010 U.S. Dist. LEXIS 72902 (N.D. Ill. July 20, 2010) (Cox, M.J.); G.M. Sign, Inc. v. Group C Communs., Inc., 08 C 4521, 2010 U.S. Dist. LEXIS 17843 (N.D. Ill. Feb. 25, 5 2010); Holtzman v. Turza, 08 C 2014, 2009 U.S. Dist. LEXIS 95620 (N.D.Ill., Oct. 14, 2009); Kavu, Inc. v. Omnipak Corp., 246 F.R.D. 642 (W.D.Wash. 2007); Display South, Inc. v. Express Computer Supply, Inc., 961 So.2d 451, 455 (La. App. 1st Cir. 2007); Display South, Inc. v. Graphics House Sports Promotions, Inc., 992 So. 2d 510 (La. App. 1st Cir. 2008); Lampkin v. GGH, Inc., 146 P.3d 847 (Ok. App. 2006); ESI Ergonomic Solutions, LLC v. United Artists Theatre Circuit, Inc., 203 Ariz. (App.) 94, 50 P.3d 844 (2002); Core Funding Group, LLC v. Young, 792 N.E.2d 547 (Ind.App. 2003); Critchfield Physical Therapy v. Taranto Group, Inc., 293 Kan. 285; 263 P.3d 767 (2011); Karen S. Little, L.L.C. v. Drury Inns. Inc., 306 S.W.3d 577 (Mo. App. 2010); Travel 100 Group, Inc. v. Empire Cooler Service, Inc., 03 CH 14510 (Cook Co. Cir. Ct., Oct. 19, 2004); Rawson v. C.P. Partners LLC, 03 CH 14510 (Cook Co. Cir. Ct., Sept. 30, 2005); Nicholson v. Hooters of Augusta, Inc., 245 Ga.App. 363, 537 S.E.2d 468 (2000). 35. Management of this class action is likely to present significantly fewer difficulties that those presented in many class actions, e.g. for securities fraud. WHEREFORE, plaintiff requests that the Court enter judgment in favor of plaintiff and the class and against defendants for: a. Actual damages; b. Statutory damages; c. An injunction against the further transmission of unsolicited fax advertising; d. Costs of suit; e. Such other or further relief as the Court deems just and proper. COUNT II – ILLINOIS CONSUMER FRAUD ACT 36. Plaintiff incorporates ¶¶ 1-20. 37. Defendants engaged in unfair acts and practices, in violation of ICFA § 2, 815 ILCS 505/2, by sending unsolicited fax advertising to plaintiff and others. 38. Unsolicited fax advertising is contrary to the TCPA and also Illinois law. 720 6 ILCS 5/26-3(b) makes it a petty offense to transmit unsolicited fax advertisements to Illinois residents. 39. Defendants engaged in an unfair practice by engaging in conduct that is contrary to public policy, unscrupulous, and caused injury to recipients of their advertising. 40. Plaintiff and each class member suffered damages as a result of receipt of the unsolicited faxes, in the form of paper and ink or toner consumed as a result. 41. Defendants engaged in such conduct in the course of trade and commerce. 42. Defendants’ conduct caused recipients of their advertising to bear the cost thereof. This gave defendants an unfair competitive advantage over businesses that advertise lawfully, such as by direct mail. For example, an advertising campaign targeting one million recipients would cost $500,000 if sent by U.S. mail but only $20,000 if done by fax broadcasting. The reason is that instead of spending $480,000 on printing and mailing his ad, the fax broadcaster misappropriates the recipients’ paper and ink. “Receiving a junk fax is like getting junk mail with the postage due”. Remarks of Cong. Edward Markey, 135 Cong Rec E 2549, Tuesday, July 18, 1989, 101st Cong. 1st Sess. 43. Defendants’ shifting of advertising costs to plaintiff and the class members in this manner makes such practice unfair. In addition, defendants’ conduct was contrary to public policy, as established by the TCPA and Illinois statutory and common law. 44. Defendants should be enjoined from committing similar violations in the future. CLASS ALLEGATIONS 45. Pursuant to Fed.R.Civ.P. 23(a) and (b)(3), plaintiff brings this claim on behalf of a class, consisting of (a) all persons and entities with Illinois fax numbers (b) who, on or after a date three years prior to the filing of this action, or such shorter period during which faxes were sent by or on behalf of defendant DHF Associates, LLC, (c) were sent faxes by or on behalf of defendant DHF Associates, LLC, promoting its goods or services for sale (d) and who were not provided an “opt out” notice as described in 47 U.S.C. §227. 7 46. The class is so numerous that joinder of all members is impractical. Plaintiff alleges on information and belief that there are more than 40 members of the class. 47. There are questions of law and fact common to the class that predominate over any questions affecting only individual class members. The predominant common questions include: a. Whether defendants engaged in a pattern of sending unsolicited fax advertisements; b. Whether defendants thereby violated the TCPA; c. Whether defendants thereby engaged in unfair acts and practices, in violation of the ICFA; and d. Whether defendants thereby converted the property of plaintiff. 48. Plaintiff will fairly and adequately protect the interests of the class. Plaintiff has retained counsel experienced in handling class actions and claims involving unlawful business practices. Neither plaintiff nor plaintiff's counsel have any interests which might cause them not to vigorously pursue this action. 49. Plaintiff’s claims are typical of the claims of the class members. All are based on the same factual and legal theories. 50. A class action is the superior method for the fair and efficient adjudication of this controversy. The interest of class members in individually controlling the prosecution of separate claims against defendants is small because it is not economically feasible to bring individual actions. 51. Management of this class action is likely to present significantly fewer difficulties that those presented in many class actions, e.g. for securities fraud. WHEREFORE, plaintiff requests that the Court enter judgment in favor of plaintiff and the class and against defendants for: a. Appropriate damages; 8 b. An injunction against the further transmission of unsolicited fax advertising; c. Attorney’s fees, litigation expenses and costs of suit; and d. Such other or further relief as the Court deems just and proper. COUNT III – CONVERSION 52. Plaintiff incorporates ¶¶ 1-20. 53. By sending plaintiff and the class members unsolicited faxes, defendants converted to their own use ink or toner and paper belonging to plaintiff and the class members. 54. Immediately prior to the sending of the unsolicited faxes, plaintiff and the class members owned and had an unqualified and immediate right to the possession of the paper and ink or toner used to print the faxes. 55. By sending the unsolicited faxes, defendants appropriated to their own use the paper and ink or toner used to print the faxes and used them in such manner as to make them unusable. Such appropriation was wrongful and without authorization. 56. Defendants knew or should have known that such appropriation of the paper and ink or toner was wrongful and without authorization. 57. Plaintiff and the class members were deprived of the paper and ink or toner, which could no longer be used for any other purpose. Plaintiff and each class member thereby suffered damages as a result of receipt of the unsolicited faxes. 58. Defendants should be enjoined from committing similar violations in the future. CLASS ALLEGATIONS 59. Pursuant to Fed.R.Civ.P. 23(a) and (b)(3), plaintiff brings this claim on behalf of a class, consisting of (a) all persons and entities with Illinois fax numbers (b) who, on or after a date five years prior to the filing of this action, or such shorter period during which faxes were sent by or on behalf of defendant DHF Associates, LLC, (c) were sent faxes by or on behalf of defendant DHF Associates, LLC, promoting its goods or services for sale (d) and who were not 9 provided an “opt out” notice as described in 47 U.S.C. §227. 60. The class is so numerous that joinder of all members is impractical. Plaintiff alleges on information and belief that there are more than 40 members of the class. 61. There are questions of law and fact common to the class that predominate over any questions affecting only individual class members. The predominant common questions include: a. Whether defendants engaged in a pattern of sending unsolicited fax advertisements; b. Whether defendants thereby violated the TCPA; c. Whether defendants thereby committed the tort of conversion; d. Whether defendants thereby engaged in unfair acts and practices, in violation of the ICFA; and e. Whether defendants thereby converted the property of plaintiff. 62. Plaintiff will fairly and adequately protect the interests of the class. Plaintiff has retained counsel experienced in handling class actions and claims involving unlawful business practices. Neither plaintiff nor plaintiff’s counsel have any interests which might cause them not to vigorously pursue this action. 63. Plaintiff’s claims are typical of the claims of the class members. All are based on the same factual and legal theories. 64. A class action is the superior method for the fair and efficient adjudication of this controversy. The interest of class members in individually controlling the prosecution of separate claims against defendants is small because it is not economically feasible to bring individual actions. 65. Management of this class action is likely to present significantly fewer difficulties that those presented in many class actions, e.g. for securities fraud. WHEREFORE, plaintiff requests that the Court enter judgment in favor of plaintiff and 10 the class and against defendants for: a. Appropriate damages; b. An injunction against the further transmission of unsolicited fax advertising; c. Costs of suit; d. Such other or further relief as the Court deems just and proper. s/ Daniel A. Edelman Daniel A. Edelman Daniel A. Edelman Cathleen M. Combs James O. Latturner Heather A. Kolbus EDELMAN, COMBS, LATTURNER & GOODWIN, LLC 120 S. LaSalle Street, 18th floor Chicago, Illinois 60603 (312) 739-4200 (312) 419-0379 (FAX) 11 NOTICE OF LIEN AND ASSIGNMENT Please be advised that we claim a lien upon any recovery herein for 1/3 or such amount as a court awards. All rights relating to attorney’s fees have been assigned to counsel. s/ Daniel A. Edelman Daniel A. Edelman Daniel A. Edelman EDELMAN, COMBS, LATTURNER & GOODWIN, LLC 120 S. LaSalle Street, 18th Floor Chicago, Illinois 60603 (312) 739-4200 (312) 419-0379 (FAX) T:\28522\Pleading\Complaint_Pleading.wpd 12

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LEVI & KORSINSKY, LLP Adam M. Apton (316506) Adam C. McCall (302130) 388 Market Street, Suite 1300 San Francisco, CA 94111 Tel : 415-373-1671 Fax : 415-484-1294 Email: [email protected] [email protected] Attorneys for Plaintiffs and the Class UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA ELISSA M. ROBERTS, Individually and on Behalf of All Others Similarly Situated, Plaintiff, v. Case No. 3:19-cv-02935-WHO CLASS ACTION AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS DEMAND FOR JURY TRIAL BLOOM ENERGY CORPORATION, KR SRIDHAR, RANDY FURR, L. JOHN DOERR, SCOTT SANDELL, EDDY ZERVIGON, COLIN L. POWELL, PETER TETI, MARY K. BUSH, KELLY A. AYOTTE, J.P. MORGAN SECURITIES LLC, MORGAN STANLEY & CO. LLC, CREDIT SUISSE SECURITIES (USA) LLC, KEYBANC CAPITAL MARKETS INC., MERRILL LYNCH, PIERCE, FENNER & SMITH IN CORPORA TED, ROBERT W. BAIRD & CO., INCORPORATED, COWEN AND COMPANY, LLC, HSBC SECURITIES (USA) INC., OPPENHEIMER & CO. INC., and RAYMOND JAMES & ASSOCIATES, INC., Defendants. Lead Plaintiff James Everett Hunt (“Hunt”) and additional plaintiff Juan Rodriguez (“Rodriguez”) (collectively, “Plaintiffs”), individually and on behalf of all others similarly situated, by Plaintiffs’ undersigned attorneys, allege the following upon knowledge with respect to their own acts, and upon facts obtained through an investigation conducted by his counsel, which included, inter alia: (a) review and analysis of relevant filings made by Bloom Energy Corporation (“Bloom Energy”) with the United States Securities and Exchange Commission (the “SEC”); (b) review and analysis of Bloom Energy’s public documents, conference calls and press releases; (c) review and analysis of securities analysts’ reports and advisories concerning the company; (d) interviews with former employees; and (e) information readily obtainable on the Internet. Plaintiffs believe that further substantial evidentiary support will exist for the allegations set forth herein after a reasonable opportunity for discovery. Most of the facts supporting the allegations contained herein are known only to Defendants or are exclusively within their control. SUMMARY OF THE ACTION 1. This is a federal securities class action on behalf of a class consisting of all persons and entities who purchased or otherwise acquired shares of Bloom Energy common stock: (i) in Bloom Energy’s initial public offering on July 25, 2018 (the “IPO”); and/or (ii) on the public market between July 25, 2018 and September 16, 2019, inclusive (the “Class Period”), seeking to recover damages for violations of the federal securities laws under Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”), and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and SEC Rule 10b-5 promulgated thereunder, against Bloom Energy and certain of its top officials. JURISDICTION AND VENUE 2. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. §§ 1331 and 1337, Section 22 of the Securities Act (15 U.S.C. § 77v), and Section 27 of the Exchange Act (15 U.S.C. § 78aa). 3. Venue is proper in this District pursuant to 28 U.S.C. § 1391(b), as Bloom Energy has its principal executive offices located in this District and a significant portion of its business, actions, and the subsequent damages, took place within this District. 4. In connection with the acts, conduct and other wrongs alleged in this Complaint, Defendants, directly or indirectly, used the means and instrumentalities of interstate commerce, including but not limited to, the United States mail, interstate telephone communications and the facilities of the national securities exchanges. THE PARTIES 5. Plaintiff Hunt is a former stockholder of Bloom Energy who acquired Bloom Energy common stock at artificially inflated prices pursuant and/or traceable to the Registration Statement and was damaged upon the revelation of Defendants’ misrepresentations. Hunt previously filed his certification evidencing his transactions in Bloom Energy’s common stock with the Court in connection with his motion for appointment as Lead Plaintiff. An updated certification and list of transactions is filed along with this Complaint as “Exhibit A” is incorporated herein by reference. 6. Plaintiff Rodriguez is a former stockholder of Bloom Energy who acquired Bloom Energy common stock at artificially inflated prices pursuant and/or traceable to the Registration Statement and was damaged upon the revelation of Defendants’ misrepresentations. Rodriguez’s transactions and certifications are filed along with this Complaint as “Exhibit B” and is incorporated herein by reference. 7. Defendant Bloom Energy is a Delaware corporation with principal executive offices located at 4353 North First Street, San Jose, California. Bloom Energy is traded on the New York Stock Exchange under the ticker symbol “BE”. 8. Defendant KR Sridhar (“Sridhar”) is Bloom Energy’s Founder and has been a director since January 2001. Sridhar has also been Chief Executive Officer and Chairman of the Board of Directors since April 2002, and has acted as President since at least July 2011. Defendant Sridhar reviewed and signed the Registration Statement. 9. Defendant Randy Furr (“Furr”) has been Bloom Energy’s Chief Financial Officer since April 2015, and has been the Executive Vice President since at least March 2016. Defendant Furr reviewed and signed the Registration Statement. 10. Defendant L. John Doerr (“Doerr”) has been Bloom Energy’s Lead Independent Director since July 2018, and has been a director since May 2002. Defendant Doerr reviewed and signed the Registration Statement. 11. Defendant Scott Sandell (“Sandell”) has been a director of Bloom Energy since August 2003. Defendant Sandell reviewed and signed the Registration Statement. 12. Defendant Eddy Zervigon (“Zervigon”) has been a director of Bloom Energy since October 2007. Defendant Zervigon reviewed and signed the Registration Statement. 13. Defendant Colin L. Powell (“Powell”) has been a director of Bloom Energy since January 2009. Defendant Powell reviewed and signed the Registration Statement. 14. Defendant Peter Teti (“Teti”) has been a director of Bloom Energy since November 2015. Defendant Teti reviewed and signed the Registration Statement. 15. Defendant Mary K. Bush (“Bush”) has been a director of Bloom Energy since January 2017. Defendant Bush reviewed and signed the Registration Statement. 16. Defendant Kelly A. Ayotte (“Ayotte”) has been a director of Bloom Energy since November 2017. Defendant Ayotte reviewed and signed the Registration Statement. 17. Defendant J.P. Morgan Securities LLC (“JP Morgan”) is a Delaware limited liability company with principal executive offices located at 383 Madison Avenue, New York, New York. Defendant JP Morgan entered into an underwriting agreement with the company in connection with the IPO. Defendant JP Morgan also acted as a co-joint, book-running manager of the IPO and as co- representative of the underwriters. 18. Defendant Morgan Stanley & Co. LLC (“Morgan Stanley”) is a Delaware limited liability company with principal executive offices located at 1585 Broadway, New York, New York. Defendant Morgan Stanley entered into an underwriting agreement with the company in connection with the IPO. Defendant Morgan Stanley also acted as a conjoint, book-running manager of the IPO and as co-representative of the underwriters in the IPO. 19. Defendant Credit Suisse Securities (USA) LLC (“Credit Suisse”) is a Delaware limited liability company with principal executive offices located at 11 Madison Avenue, New York, New York. Defendant Credit Suisse entered into an underwriting agreement with the company in connection with the IPO. 20. Defendant KeyBanc Capital Markets Inc. (“KeyBanc”) is an Ohio corporation with principal executive offices located at 127 Public Square, Cleveland, Ohio. Defendant KeyBanc entered into an underwriting agreement with the company in connection with the IPO. 21. Defendant Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”) is a Delaware corporation with principal executive offices located at 4 World Financial Center, North Tower, New York, New York. Defendant Merrill Lynch entered into an underwriting agreement with the company in connection with the IPO. 22. Defendant Robert W. Baird & Co. Incorporated (“Baird”) is a Wisconsin corporation with principal executive offices located at 777 E Wisconsin Avenue, Milwaukee, Wisconsin. Defendant Baird entered into an underwriting agreement with the company in connection with the IPO. 23. Defendant Cowen and Company, LLC (“Cowen”) is a Delaware limited liability company with principal executive offices located at 599 Lexington Avenue, 20th Floor, New York, New York. Defendant Cowen entered into an underwriting agreement with the company in connection with the IPO. 24. Defendant HSBC Securities (USA) Inc. (“HSBC”) is a Delaware corporation with principal executive offices located at 452 Fifth Avenue, New York, New York. Defendant HSBC entered into an underwriting agreement with the company in connection with the IPO. 25. Defendant Oppenheimer & Co. Inc. (“Oppenheimer”) is a New York corporation with principal executive offices located at 85 Broad Street, New York, New York. Defendant Oppenheimer entered into an underwriting agreement with the company in connection with the IPO. 26. Defendant Raymond James & Associates, Inc. (“Raymond James”) is a Florida corporation with principal executive offices located at 880 Carillon Parkway, Saint Petersburg, Florida. Defendant Raymond James entered into an underwriting agreement with the company in connection with the IPO. * * * 27. “Underwriter Defendants” refers to Defendants JP Morgan, Morgan Stanley, Credit Suisse, KeyBanc, Merrill Lynch, Baird, Cowen, HSBC, Oppenheimer, and Raymond James. 28. “Section 11 Defendants” refers to Defendants Bloom Energy, Sridhar, Furr, Doerr, Sandell, Zervigon, Powell, Teti, Bush, Ayotte, and the Underwriter Defendants. 29. “Section 15 Defendants” refers to Defendants Sridhar, Furr, Doerr, Sandell, Zervigon, Powell, Teti, Bush, and Ayotte. 30. “Section 10(b) Defendants” refers to Defendants Bloom Energy, Sridhar, and Furr. 31. “Section 20(a) Defendants” refers to Defendants Sridhar and Furr. BACKGROUND ALLEGATIONS 32. Bloom Energy refers to its core product as a “Bloom Energy Server.” According to Bloom Energy, its Servers are a stationary power generation platform that convert standard low-pressure natural gas or biogas into electricity through an electrochemical process. In other words, Bloom Energy’s Servers convert gas into electric. 33. Bloom Energy primarily recognizes revenue from (i) selling Servers to customers and (ii) providing maintenance services to its customers under warranty and maintenance agreements, or 34. When Bloom Energy sells a Server, the company recognizes revenue only after the Server is installed and producing power. Bloom Energy refers to this as an “acceptance.” 35. Bloom Energy identified “acceptances” as one of its “key operating metrics” that investors could use to track the progress of the company and gain “useful insight into the operational trajectory, cash generation, and cost profile of the business.” 36. When Bloom Energy sells, leases, or finances a Server to a customer, the Server generally comes with a one-year warranty as well as the option to purchase an extended MSA. The yearly cost of the MSA is predetermined at the time of purchase and MSAs may be renewed annually for a period of up to 25 years. According to Bloom Energy, the company’s customers have “almost always” exercised their option to renew the MSAs with “virtually no customers hav[ing] selected to cancel [them].” 37. Bloom Energy’s MSAs contain guarantees for its Servers. Pursuant to these guarantees, Bloom Energy is liable for repairing and/or replacing its Servers when output or efficiency falls below certain thresholds. Bloom Energy prices these contracts, and estimates reserves in relation thereto, based on estimates of the life of the Servers and their components, including the internal fuel cells. THE SECURITIES ACT CLAIMS 38. These claims, brought under Sections 11 and 15 of the Securities Act, 15 U.S.C. §§ 77k and 77o, are based solely on allegations of negligence, strict liability and/or the absence of any affirmative defense based on the reasonableness of the Section 11 Defendants’ investigation of the true facts underlying the alleged misstatements and omissions. 39. These Securities Act claims expressly do not make any allegations of fraud or scienter and do not incorporate any of the allegations contained elsewhere in this Complaint that allege fraud or scienter. These Securities Act claims are not based on any allegation that any Section 11 Defendant engaged in fraud or any other deliberate and intentional misconduct, and Plaintiffs specifically disclaim any reference to or reliance on fraud allegations for the purpose of these claims. 40. After more than 15 years as a private company, Bloom Energy decided to go public. On June 12, 2018, the company filed a draft registration statement with the SEC on Form S-1 registering shares for the IPO. Bloom Energy amended this registration statement on July 9, 2018, July 19, 2018, July 20, 2018, and July 24, 2018. On July 26, 2018, Bloom Energy filed its final prospectus for the IPO. Bloom Energy’s initial registration statement, subsequent amendments, and final prospectus are collectively referred to herein as the “Registration Statement.” 41. The Registration Statement registered over 20.7 million Bloom Energy shares for sale. These shares were sold in the IPO at $15 per share and began trading on July 25, 2018. Bloom Energy received proceeds of $284.3 million, net of underwriting discounts, commissions, and estimated offering 42. Bloom Energy’s Registration Statement contained untrue statements of material fact and omitted to state other material facts required to be stated in order to make statements therein not misleading. The omissions and misrepresentations within the Registration Statement related to: (i) uncertainties arising from “construction delays” that impacted Bloom Energy’s “acceptances” and, in turn, revenue; and (ii) Bloom Energy’s estimated repair and replacement liabilities, including expenses under its MSAs. A. Construction Delays 43. Bloom Energy’s Registration Statement described certain “risks” related to Bloom Energy, including that the company was dependent on construction schedules that may be delayed. In particular, the Registration Statement stated: Our business is subject to risks associated with construction . . . that may arise in the course of completing installations. Because we do not recognize revenue on the sales of our Energy Servers until installation and acceptance, our financial results are dependent, to a large extent, on the timeliness of the installation of our Energy Servers. Furthermore, in some cases, the installation of our Energy Servers may be on a fixed price basis, which subjects us to the risk of cost overruns or other unforeseen expenses in the installation process. * * * The timing of delivery and installations of our products have a significant impact on the timing of the recognition of product revenue. Many factors can cause a lag between the time that a customer signs a purchase order and our recognition of product revenue. These factors include . . . customer facility construction schedules. 44. In violation of Section 11 of the Securities Act, the statements identified in emphasis above in Paragraph 43 did not disclose that Bloom Energy was, at the time of the Registration Statement, already facing significant construction delays that were interfering with its installations and “acceptances.” In fact, the construction delays existing at the time of the Registration Statement were so substantial that they prevented Bloom Energy from meeting even the low end of its publicly-stated guidance for “acceptances” for the third quarter of 2018 (i.e., the quarter in which the IPO occurred). 45. According to CW1 who was a senior program manager for Bloom Energy from June 2016 to February 2018, construction delays were a constant issue at Bloom Energy. CW1 indicated that during his1 tenure at Bloom Energy, construction delays occurred during almost every project. CW1 indicated that these delays typically were delayed by a quarter or half quarter. CW1 indicated that he was “very familiar with the delays” and the reasons behind them. According to CW1, Bloom Energy has a poorly managed design program and the design problems, short comings, and cost savings efforts led directly to the construction delays and field problems. 46. CW1 stated that the construction delays were occurring at Bloom Energy before he started working there in June 2016, and continued after he left the company in February 2018. 47. CW1 also indicated that upper management, all the way up to the company’s CEO KR Sridhar typically became aware right away as the construction delays were constant, on-going, and there was a lot of effort to displace those delays from Bloom Energy onto other contracting partners. 48. CW was in a position to know about the construction delays because he was responsible 1 The CW is referred to in the masculine to help protect his identity. for overseeing sales from development to acceptance, providing technical help during installation and sales, overseeing construction contracts, and ensuring that the construction and installation met all government requirements. 49. On November 5, 2018, Bloom Energy disclosed its operating results for the third quarter of fiscal 2018. The company reported only 206 “acceptances,” which was materially below its guidance number of 215 to 235. During an investor conference call held after market hours that same day, Furr conceded that the company’s low rate of “acceptances” was “a result of construction delays.” Accordingly, at the time of the IPO, Bloom Energy was experiencing significant “construction delays” that the company did not disclose in the Registration Statement. 50. Market analysts from large banks focused on this point. On November 6, 2018, Cowen released an analyst report titled “Growing Pains” and noted that “3Q results were largely impacted by lower than expected acceptances as a result of construction timing delays.” Similarly, Credit Suisse published a report titled “Bloom Wilts a Bit on Project Delays.” Credit Suisse stated, “Bottom line – near-term challenges due to construction delays.” The fact that market analysts focused on the “construction delay” news confirms that it was material to investors and, for that reason, should have been disclosed in the Registration Statement. 51. The Section 11 Defendants also violated Section 11 of the Securities Act in so far as they failed to comply with Item 303 of SEC Regulation S-K, 17 C.F.R. §229.303. Item 303 requires disclosure of any known events or uncertainties that, at the time of the IPO, had caused, or were reasonably likely to cause, a materially negative impact on Bloom Energy. 52. Bloom Energy’s “construction delays” constituted an “uncertainty” under Item 303 that required disclosure in the Registration Statement. As previously alleged, the “construction delays” existed prior to and during the IPO. Moreover, given that the “construction delays” delayed installation of Bloom Energy’s Servers and that Bloom Energy only recognized revenue after installation (i.e., upon “acceptance”), the delays had, or Bloom Energy reasonably expected the delays to have, a material unfavorable impact on its revenues and/or income. This is especially so considering the fact that Bloom Energy knew that many of its customers would not allow construction to proceed during the fourth quarter due to “blackouts,” as described by Furr during the November 5, 2018 investor conference call. Accordingly, unless Servers were installed timely in the third quarter, installations would likely be delayed until the first quarter of fiscal 2019 and, as a result, delaying revenue recognition substantially. B. Expenses and Contingencies 53. When Bloom Energy sells, leases, or finances one of its Servers, it includes a one-year warranty and service guarantee with the purchase price. After the initial one-year warranty period ends, Bloom Energy’s customers enter into MSAs with Bloom Energy, under which Bloom Energy purportedly receives annual service payments from the customer. In the Registration Statement, Bloom Energy provided investors with its expected revenue from these MSAs over the life of the contract (i.e., typically lasting from 10 to 21 years and lasting as long as 25 years). As of March 31, 2018, the amount of this revenue totaled more than $450 million, according to the Registration Statement. 54. Bloom Energy’s MSAs also create expenses for the company, however. Under the terms of the agreements, Bloom Energy is required to service, repair and replace the Servers when output or efficiency falls below certain thresholds. Bloom Energy is responsible for two types of replacements: its fuel cell servers (the system itself) and the individual fuel cells that go inside the Servers. The expenses and/or contingencies associated with these repairs are more than $2 billion. However, the Registration Statement did not disclose this material fact to investors. 55. The Section 11 Defendants violated Section 11 of the Securities Act by failing to disclose the estimated $2 billion in MSA liabilities. Not only was this information material (and therefore deserving of disclosure in its own right), but Bloom Energy was required to disclose this information under both Item 303 of Regulation S-K as an “off-balance sheet arrangement” and Accounting Standards Codification (“ASC”) 450 as a “contingent liability.” Importantly, financial statements are presumed to be in violation of the Securities Act if they do not comply with Regulation S-K or GAAP (including the 56. Item 303 of Regulation S-K required Bloom Energy to disclose “off-balance sheet arrangements,” including “the nature and amounts of any other obligations or liabilities (including contingent obligations or liabilities) of the registrant arising from such arrangements that are or are reasonably likely to become material and the triggering events or circumstances that could cause them to arise.” 17 CFR § 229.303(a)(4). 57. Similarly, ASC 450, the authoritative accounting standard under GAAP concerning loss contingencies, required Bloom Energy to accrue for a loss when that loss is both probable and reasonably estimable. ASC 450-20-25-2. 58. Bloom Energy was required to disclose its liabilities and/or contingencies under both Item 303 and ASC 450. As the loss under the MSAs was probable and reasonably estimable, Bloom Energy should have accounted for the contingent liabilities and disclosed the amount to investors. Bloom Energy admits that “virtually no customers have elected to cancel their maintenance agreements.” Additionally, as Bloom Energy knew the estimated life of its Servers were less than the life of the MSAs, liabilities were probable. 59. In fact, Bloom Energy had already been required to replace Servers and fuel cells under the MSAs. Prior to the IPO, Bloom Energy was required to replace some of its earlier systems under the MSAs and therefore knew it was likely they would have to replace the remaining early generation systems and the cost to do so. In 2015, Bloom Energy implemented a fleet decommissioning program for its early generation Servers. This resulted in “a significant adjustment to revenue in the quarter ended December 31, 2015.” 60. Bloom Energy admitted that it would have to continue to replace these systems. The Registration Statement stated, in pertinent part, that “[a]s of March 31, 2018, we had a total of 58.5 megawatts in total deployed early generation servers, including our first and second generation servers, out of our total installed base of 312 megawatts. . . . [W]e expect that our deployed early generation Energy Servers may continue to perform at a lower output and efficiency level, and as a result the maintenance costs may exceed the contracted prices that we expect to generate in respect of those servers if our customers continue to renew their maintenance service agreements in respect of those servers.” 61. Included in 58.5 megawatts were 30 megawatts of early generation Servers in Delaware that needed immediate replacement within the year. The proximity of the replacement to the IPO shows that at the time of the IPO this replacement, along with the remaining 28.5 megawatts was probable. 62. The amount of these liabilities and/or contingencies were also reasonably estimable. First, as Bloom Energy was able to estimate the amount of revenue to be received from the MSAs, the company was also able to estimate the liabilities. Second, as Bloom Energy had already been required to replace some of the earlier generation systems in 2015, Bloom Energy had historical data upon which they were able to reasonably estimate the costs of replacing other Servers going forward. Third, Bloom Energy knew the estimated life of both its Servers and fuel cells and, therefore, could have calculated when they would need to be replaced. 63. Further proof that these liabilities and/or contingencies were estimable comes from the fact that a third-party market analyst, Hindenburg Research, calculated them in a report dated September 17, 2019. As explained in the report, Bloom Energy had “an estimated $2.2 billion in undisclosed servicing liabilities that the market has missed.” Hindenburg based its calculation on, among other things, (i) the cost to replace fuel cells, (ii) fuel cell life, (iii) length of time on average contract, (iv) average number of times the fuel cells will be replaced, (v) current replacement cycle, (vi) cumulative install base (KW), and (vii) cost to replace servers (per KW). 64. Bloom Energy possessed all of this information and, therefore, was able to perform the required calculations and make the appropriate material disclosures. 65. Bloom Energy’s undisclosed $2 billion in servicing liabilities was material information that should have been disclosed in the Registration Statement. Indeed, when Hindenburg published its report, Bloom Energy’s stock price decreased from $4.19 at close on September 16, 2019, to $3.31 at close on September 17, 2019, a drop of 21% on unusually high trading volume. * * * 66. With proper due diligence, the Section 11 Defendants would have been able to discover the aforementioned errors with regard to Bloom Energy’s construction delays, and omissions relating the contingent liabilities arising out of the MSAs, and either prevented them from occurring or corrected the Registration Statement so as not to omit material facts relating thereto. But for the Section 11 Defendants’ failure to exercise proper and reasonable care in ensuring the accuracy and truthfulness of the Registration Statement, Plaintiffs and other investors would not have been injured. As a direct result of the above misrepresentations Bloom Energy’s stock price has declined from its IPO price of $15 per share of common stock, to under $3 per share of common stock at the time of this filing. COUNT I Violation of Section 11 of the Securities Act against the Section 11 Defendants 67. Plaintiffs incorporate by reference and reallege each and every allegation contained above, as though fully set forth herein. 68. This Cause of Action is brought pursuant to Section 11 of the Securities Act against all Section 11 Defendants. 69. Notwithstanding anything to the contrary alleged herein, for the purposes of this claim, Plaintiffs expressly exclude and disclaim any allegation that could be construed as alleging or sounding in fraud or intentional or reckless misconduct. 70. The Registration Statement contained untrue statements of material facts and/or omitted to state other facts necessary in order to make the statements made not misleading. 71. Defendant Bloom Energy is the registrant and issuer of the stock sold in the IPO. As issuer of the stock, the company is strictly liable to Plaintiffs and the Class for the actionable statements in the Registration Statement. 72. Defendants Sridhar, Furr, Doerr, Sandell, Zervigon, Powell, Teti, Bush, and Ayotte signed the Registration Statement and, therefore, are strictly liable to Plaintiffs and the Class for the actionable statements in the Registration Statement. 73. The Underwriter Defendants are investment banking houses that specialize, inter alia, in underwriting public offerings of securities. They served as the underwriters of the IPO and shared substantial fees collectively. The Underwriter Defendants arranged road shows prior to the IPO during which they, and representatives from Bloom Energy, met with potential investors and presented highly favorable information about the company, its operations, and its financial prospects. 74. The Underwriter Defendants assisted Bloom Energy and the Section 15 Defendants in planning the IPO and purportedly conducted an adequate and reasonable investigation into the business, operations, financials, and accounting of Bloom Energy, an undertaking known as a “due diligence” investigation. The due diligence investigation was required of the Underwriter Defendants in order to engage in the IPO. During the course of their “due diligence,” the Underwriter Defendants had continual access to internal, confidential, current corporate information concerning Bloom Energy’s most up-to- date operational and financial results and prospects. 75. The Underwriter Defendants caused the Registration Statement to be filed with the SEC and declared effective in connection with the offers and sales of securities registered thereby, including those to Plaintiffs and the other Class members. 76. The Underwriter Defendants are strictly liable to Plaintiffs and the Class for the actionable statements in the Registration Statement. 77. The Section 11 Defendants named herein were responsible for the contents and dissemination of the Registration Statement. 78. None of the Section 11 Defendants named herein made a reasonable investigation or possessed reasonable grounds for the belief that the statements contained in the Registration Statement were true and without omissions of any material facts and were not misleading. 79. By reason of the conduct alleged herein, each Section 11 Defendant violated, and/or controlled a person who violated, Section 11 of the Securities Act. 80. Plaintiffs acquired shares of Bloom Energy common stock pursuant to the Registration Statement. 81. Plaintiffs and the Class have sustained damages. 82. By virtue of the foregoing, Plaintiffs and the other Class members are entitled to damages under Section 11 of the Securities Act from all of the Section 11 Defendants, and each of them, jointly and severally. COUNT II Violation of Section 15 of the Securities Act against the Section 15 Defendants 83. Plaintiffs incorporate by reference and reallege each and every allegation contained above, as though fully set forth herein. 84. This Cause of Action is brought pursuant to Section 15 of the Securities Act against the Section 15 Defendants. Notwithstanding anything to the contrary, for the purposes of this claim, Plaintiffs expressly exclude and disclaims any allegation that could be construed as alleging or sounding in fraud or intentional or reckless misconduct. 85. The Section 15 Defendants were controlling persons of Bloom Energy by virtue of their positions as directors or senior officers of Bloom Energy. 86. The Section 15 Defendants were senior officers and/or directors of Bloom Energy. 87. Each of the Section 15 Defendants was involved in the day-to-day operations of Bloom Energy at the highest levels. 88. Each of the Section 15 Defendants was privy to confidential proprietary information concerning Bloom Energy and its business and operations. 89. Due to their positions of control and authority, the Section 15 Defendants were able to, and did, control the contents of the Registration Statement that contained untrue statements and/or omissions of material fact. 90. Bloom Energy’s conduct, as alleged herein, constitutes a violation of Section 11 of the Securities Act. 91. The Section 15 Defendants are liable to Plaintiffs and the other Class members, jointly and severally with and to the same extent as Bloom Energy, for violations under Section 15 of the Securities Act. 92. As a direct and proximate result of said wrongful conduct, Plaintiffs and the other Class members suffered damages. THE EXCHANGE ACT CLAIMS 93. Separate and apart from the Securities Act claims, Plaintiffs’ Exchange Act claims seek to hold the Section 10(b) Defendants and Section 20(a) Defendants liable for intentionally (or with deliberate recklessness) issuing false and misleading statements for the purpose of inducing investors to purchase Bloom Energy’s common stock and/or perpetrating a fraudulent scheme or device upon Plaintiffs and other Class members. 94. Unlike Plaintiffs’ Securities Act claims, Plaintiffs’ claims under the Exchange Act sound in fraud. Defendants’ deception began with Bloom Energy’s IPO. In order to generate interest in the IPO and gain financially, the Section 10(b) Defendants, unbeknownst to the public, made material misrepresentations and/or omissions to artificially inflate Bloom Energy’s stock. The Section 10(b) Defendants misrepresented Bloom Energy’s consolidated financials, specifically contingent liabilities, and did not tell investors of the construction delays that were materially impacting revenue at the time of the IPO. 95. The Section 10(b) Defendants flouted their disclosure obligations and intentionally misled investors so as to benefit financially for their own personal gain. The concrete personal benefits enjoyed by the Section 10(b) Defendants, along with the clear allegations of actual knowledge of wrongdoing, gives rise to a strong, cogent and compelling inference of scienter. A. Defendants’ Materially False and Misleading Statements July 26, 2018 – Registration Statement 96. Bloom Energy’s Registration Statement was materially false and misleading as it hid from investors that Bloom Energy was already experiencing significant construction delays that were materially impacting revenue for the current third quarter, and failed to disclose its contingent liabilities. 97. Bloom Energy’s Registration Statement described certain “risks” related to Bloom Energy, including that the company was dependent on construction schedules that may be delayed. In particular, the Registration Statement stated: Our business is subject to risks associated with construction . . . that may arise in the course of completing installations. Because we do not recognize revenue on the sales of our Energy Servers until installation and acceptance, our financial results are dependent, to a large extent, on the timeliness of the installation of our Energy Servers. Furthermore, in some cases, the installation of our Energy Servers may be on a fixed price basis, which subjects us to the risk of cost overruns or other unforeseen expenses in the installation process. * * * The timing of delivery and installations of our products have a significant impact on the timing of the recognition of product revenue. Many factors can cause a lag between the time that a customer signs a purchase order and our recognition of product revenue. These factors include . . . customer facility construction schedules. 98. In violation of Section 10 of the Exchange Act, the statements identified in emphasis above in Paragraph 97 concealed that Bloom Energy was, at the time of the Registration Statement, already facing significant construction delays that were interfering with its installations and “acceptances.” In fact, the construction delays existing at the time of the Registration Statement were so substantial that they prevented Bloom Energy from meeting even the low end of its publicly-stated guidance for “acceptances.” 99. The Section 10(b) Defendants also violated Section 10(b) of the Exchange Act in so far as they failed to comply with Item 303 of SEC Regulation S-K, 17 C.F.R. §229.303. Item 303 requires disclosure of any known events or uncertainties that, at the time of the IPO, had caused, or were reasonably likely to cause, a materially negative impact on Bloom Energy. 100. Bloom Energy’s “construction delays” constituted an “uncertainty” under Item 303 that required disclosure in the Registration Statement. The “construction delays” existed prior to and during the IPO. 101. CW1 corroborates that construction delays were a constant issue at Bloom Energy. CW1 stated that the construction delays were occurring at Bloom Energy before he started working there in June 2016, and continued after he left the company in February 2018. 102. CW1 indicated that during his tenure at Bloom Energy, construction delays occurred during almost every project. CW1 indicated that these delays typically were delayed by a quarter or half quarter. CW1 indicated that he was “very familiar with the delays” and the reasons behind them. According to CW1, Bloom Energy has a poorly managed design program and the design problems, short comings, and cost savings efforts led directly to the construction delays and field problems. 103. CW1 also indicated that upper management, all the way up to the company’s CEO KR Sridhar typically became aware right away as the construction delays were constant, on-going, and there was a lot of effort to displace those delays from Bloom Energy onto other contracting partners. 104. This is further corroborated by the fact that Furr conceded that the company’s low rate of “acceptances” in Q3 was “a result of construction delays.” The effect of the construction delay was amplified given the customer Q4 “blackout” dates. This resulted in many Server delays by customers to 105. Given that the “construction delays” delayed installation of Bloom Energy’s Servers and that Bloom Energy only recognized revenue after installation (i.e., upon “acceptance”), the Section 10(b) Defendants knew that the delays were causing a material unfavorable impact on its revenues and/or income. This is especially so considering the fact that Bloom Energy knew that many of its customers would not allow construction to proceed during the fourth quarter due to “blackouts,” as described by Furr during the November 5, 2018 investor conference call. Accordingly, unless Servers were installed timely in the third quarter, installations would likely be delayed until the first quarter of fiscal 2019 and, as a result, delaying revenue recognition substantially. 106. Therefore, Bloom Energy made materially false and misleading statements or omissions relating to the construction delays in its Registration Statement. 107. Bloom Energy also materially misrepresented its contingent liabilities that it would incur from the MSAs. The expenses and/or contingencies associated with these repairs under the MSAs amounted to more than $2 billion, including $130 million to replace servers in Delaware, the company’s largest single project, within the year. However, the Registration Statement did not disclose this material fact to investors. 108. The Section 10(b) Defendants violated Section 10(b) of the Exchange Act by failing to disclose this information. Not only was this information material (and therefore deserving of disclosure in its own right), but Bloom Energy was required to disclose this information under both Item 303 of Regulation S-K as an “off-balance sheet arrangement” and Accounting Standards Codification (“ASC”) 450 as a “contingent liability.” Importantly, financial statements are presumed to be in violation of the Exchange Act if they do not comply with Regulation S-K or GAAP (including the ASC). 109. Item 303 of Regulation S-K required Bloom Energy to disclose “off-balance sheet arrangements,” including “the nature and amounts of any other obligations or liabilities (including contingent obligations or liabilities) of the registrant arising from such arrangements that are or are reasonably likely to become material and the triggering events or circumstances that could cause them to arise.” 17 CFR § 229.303(a)(4). 110. Similarly, ASC 450, the authoritative accounting standard under GAAP concerning loss contingencies, required Bloom Energy to accrue for a loss when that loss is both probable and reasonably estimable. ASC 450-20-25-2. 111. Therefore, Bloom Energy was required to disclose its liabilities and/or contingencies under both Item 303 and ASC 450. As the loss under the MSAs was probable and reasonably estimable, Bloom Energy should have accounted for the contingent liabilities and disclosed the amount to investors. Bloom Energy admits that “virtually no customers have elected to cancel their maintenance agreements.” Additionally, as the Section 10(b) Defendants knew the estimated life of its Servers were less than the life of the MSAs, liabilities were probable. 112. In fact, Bloom Energy had already been required to replace Servers and fuel cells under the MSAs. Prior to the IPO, Bloom Energy was required to replace some of its earlier systems under the MSAs and therefore knew it was likely they would have to replace the remaining early generation systems and the cost to do so. In 2015, Bloom Energy implemented a fleet decommissioning program for its early generation Servers. This resulted in “a significant adjustment to revenue in the quarter ended December 31, 2015.” 113. Bloom Energy admitted that it would have to continue to replace these systems. The Registration Statement stated, in pertinent part, that “[a]s of March 31, 2018, we had a total of 58.5 megawatts in total deployed early generation servers, including our first and second generation servers, out of our total installed base of 312 megawatts. . . . [W]e expect that our deployed early generation Energy Servers may continue to perform at a lower output and efficiency level, and as a result the maintenance costs may exceed the contracted prices that we expect to generate in respect of those servers if our customers continue to renew their maintenance service agreements in respect of those servers.” 114. Included in 58.5 megawatts were 30 megawatts of early generation Servers in Delaware that needed immediate replacement within the year. In November of 2018, Bloom Energy filed a request for permit to replace the Servers in Delaware but failed to disclose that Bloom Energy would be liable for the costs under the MSA or the amount of the related liabilities. On June and August 2019, the Section 10(b) Defendants disclosed that Bloom Energy was replacing the Servers under the MSAs and that this would result in approximately $130 million in costs. The proximity of this replacement to the IPO shows that at the time of the IPO this replacement, along with the remaining 40.5 megawatts was probable. 115. The amount of these liabilities and/or contingencies were also reasonably estimable. First, as Bloom Energy was able to estimate the amount of revenue to be received from the MSAs, the company was also able to estimate the liabilities. Second, as Bloom Energy had already been required to replace some of the earlier generation systems in 2015, Bloom Energy had historical data upon which they were able to reasonably estimate the costs of replacing other Servers going forward. Third, the Section 10(b) Defendants knew the estimated life of both its Servers and fuel cells and, therefore, could have calculated when they would need to be replaced. 116. Further proof that these liabilities and/or contingencies were estimable comes from the fact that a third-party market analyst, Hindenburg Research, calculated them in a report dated September 17, 2019. As explained in the report, Bloom Energy had “an estimated $2.2 billion in undisclosed servicing liabilities that the market has missed.” Hindenburg based its calculation on, among other things, (i) the cost to replace fuel cells, (ii) fuel cell life, (iii) length of time on average contract, (iv) average number of times the fuel cells will be replaced, (v) current replacement cycle, (vi) cumulative install base (KW), and (vii) cost to replace servers (per KW). 117. Bloom Energy possessed all of this information and, therefore, was able to perform the required calculations and make the appropriate material disclosures. 118. Bloom Energy’s undisclosed $2 billion in servicing liabilities was material information that should have been disclosed in the Registration Statement. 119. Therefore, the Registration materially misled investors as to its contingent liabilities from the MSAs. August 7, 2018 – Q2 2018 Results 120. On August 7, 2018, Defendants released a “Letter to Shareholders” announcing Bloom Energy’s fiscal Q2 2018 highlights and providing additional financial information. The letter was issued by Sridhar and Furr. The letter was also attached to a Form 8-K filing with the SEC on August 9, 2018. 121. Bloom Energy’s financials in the letter were materially false and misleading as they failed to account for contingent liabilities arising under the MSAs. In pertinent part, the letter included Bloom Energy’s quarterly revenue and financial results but omitted the amount of contingent liabilities, including the $130 million from replacing the Delaware servers, that were probable and reasonably estimable under ASC 450, and failed to disclose the contingent liabilities under Item 303. 122. This information was material and should have been disclosed under Item 303 and ASC September 7, 2018 – Form 10-Q for Q2 2018 123. On September 7, 2018, after market-trading hours, Defendants filed with the SEC their Form 10-Q for fiscal Q2 2018, ending June 30, 2018. The Form 10-Q was signed by Sridhar and Furr. 124. In the Q2 2018 Form 10-Q, Bloom Energy warned investors about possible construction delays despite these delays already being underway and affecting acceptances. In pertinent part, the Q2 2018 Form 10-Q states: Our business is subject to risks associated with construction . . . that may arise in the course of completing installations. Because we do not recognize revenue on the sales of our Energy Servers until installation and acceptance, our financial results are dependent, to a large extent, on the timeliness of the installation of our Energy Servers. Furthermore, in some cases, the installation of our Energy Servers may be on a fixed price basis, which subjects us to the risk of cost overruns or other unforeseen expenses in the installation process. * * * In addition to the other risks described in this “Risk Factors” section, the following factors could also cause our financial condition and results of operations to fluctuate on a quarterly basis . . . the timing of installations, which may depend on many factors such as . . . customer facility construction schedules. 125. These statements were misleading because the disclosed risks had already come to fruition, as Bloom Energy was facing significant construction delays that would prevent it from reaching even the low end of its publicly stated guidance for acceptances. 126. Bloom Energy’s financials in the Q2 2018 Form 10-Q were also materially false and misleading as they failed to account for contingent liabilities arising under the MSAs. In pertinent part, the Q2 2018 Form 10-Q indicated that “the aggregate amount of extended warranty services payments we expect to receive over the remaining term of the Power Purchase Agreement Projects was $447.2 million as of June 30, 2018.” However, Bloom Energy omitted the amount of contingent liabilities, including the $130 million from replacing the Delaware servers, that were probable and reasonably estimable under ASC 450, and failed to disclose the contingent liabilities under Item 303. 127. Further, while Bloom Energy discusses the warranty costs under the “Contingencies” section of the Q2 2018 Form 10-Q, but omits the amount of contingent liabilities for the MSAs. As the amount of contingent liabilities for the MSAs were probable and reasonably estimable under ASC 450, they should have been disclosed and accounted for properly. 128. Although Bloom Energy expected customers to continue to renew the MSAs and “expect[ed] that [its] deployed early generation Energy Servers may continue to perform at a lower output and efficiency level and, as a result, the maintenance costs may exceed the contracted prices that we expect to generate in respect of those servers if our customers continue to renew their maintenance service agreements in respect of those servers,” the Section 10(b) Defendants continued to omit the actual amount and misrepresented to investors the actual financial health of Bloom Energy. This information was material and should have been disclosed under Item 303 and ASC 450. 129. The Q2 2018 Form 10-Q was also materially misleading given that it included certifications by Sridhar and Furr pursuant to the Sarbanes-Oxley Act (“SOX”). These certifications indicated that Sridhar and Furr had both reviewed the Q2 2018 Form 10-Q and that it was materially accurate and not misleading. Specifically, Sridhar and Furr each certified that: 1. I have reviewed this Quarterly Report on Form 10-Q of Bloom Energy Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. (Q2 2018 Form 10-Q, Exs. 31.1 & 31.2.) 130. Given the false and misleading nature of the statements in the Q2 2018 Form 10-Q described above, Sridhar’s and Furr’s certifications were false and/or materially misleading. Specifically, the Form 10-Q omitted the contingent liabilities that should have been disclosed to investors. By omitting these liabilities the Section 10(b) Defendants misled investors to believe that Bloom Energy’s financials were stronger than they appeared. These omissions and misrepresentations were material to Bloom Energy’s investors because investors would have declined to purchase Bloom Energy’s stock had they known that the Q2 2018 Form 10-Q contained material misrepresentations and/or omissions. B. The Truth about Bloom Energy’s Construction Delays Emerges While Defendants Continue to Mislead Investors about Bloom Energy’s Contingent Liabilities November 5, 2018 – Q3 2018 Results 131. On November 5, 2018, Bloom Energy disclosed its operating results for the third quarter of fiscal 2018. The company reported only 206 “acceptances,” which was materially below its guidance number of 215 to 235. During an investor conference call held after market hours that same day, Furr conceded that the company’s low rate of “acceptances” was “a result of construction delays.” The effect of the construction delay was amplified given the customer Q4 “blackout” dates. This resulted in many Server delays by customers to 2019. 132. Market analysts from large banks focused on this point. On November 6, 2018, Cowen released an analyst report titled “Growing Pains” and noted that “3Q results were largely impacted by lower than expected acceptances as a result of construction timing delays. While we don’t expect the bulk of these projects to commence in 4Q given construction blackout periods during holiday season, we believe the projects will be pushed out into 1H19.” 133. Similarly, Credit Suisse published a report titled “Bloom Wilts a Bit on Project Delays.” Credit Suisse stated, “Bottom line – near-term challenges due to construction delays” and noted that “Long term GM% on target, but below our expectations for 4Q and 2019 . . . .” 134. J.P. Morgan also concentrated on the construction delays, stating in a report titled “Solid Demand but Delayed Deployment Weighs on 3Q Results and Guidance”, that “BE reported 3Q EBITDA slightly ahead of consensus on lower than expected Acceptances. 4Q guidance was lower than expected owing to project timing, in large part specific to one single-site 5MW deployment.” 135. In response to the above news, the price of Bloom Energy stock plummeted from $23.01 at close on November 5, 2018, to $17.25 at close on November 6, 2018, a decline of 25% on unusually heavy trading volume. 136. Bloom Energy continued to mislead investors relating to their liabilities under the MSAs. 137. In its letter, financials and on the conference call, the Section 10(b) Defendants failed to disclose that it knew Bloom Energy was expecting $2 billion in liabilities under the MSAs. 138. Despite the call being November 5, 2018, on November 11, 2018, just two days later, Bloom Energy quietly filed a construction permit request in Delaware for the replacements. While Bloom Energy omitted the amount of the liabilities to replace the Delaware servers until August 2019, the replacement costs ultimately costed Bloom Energy $130 million, according to market analysts. Bloom Energy failed to disclose this liability to investors. 139. This information was material and should have been disclosed to investors particularly given how it impacts shareholder liquidity and Bloom Energy’s path to profitability. Therefore, the omission of this liability was materially false and misleading. November 13, 2018 – Form 10-Q for Q3 2018 140. On November 13, 2018, after market-trading hours, Defendants filed with the SEC their Form 10-Q for fiscal Q3 2018, ending September 30, 2018. The Form 10-Q was signed by Sridhar and 141. Bloom Energy’s financials in the Q3 2018 Form 10-Q were materially false and misleading as they failed to account for contingent liabilities arising under the MSAs. In pertinent part, the Q3 2018 Form 10-Q indicated that “[t]he aggregate amount of extended warranty services payments we expect to receive over the remaining term of the Power Purchase Agreement Projects $439.0 million as of September 30, 2018.” However, Bloom Energy omitted $2 billion of contingent liabilities, including the $130 million from replacing the Delaware servers, that were probable and reasonably estimable under ASC 450, and failed to disclose the contingent liabilities under Item 303. 142. While Bloom Energy discussed the warranty costs under the “Contingencies” section of the Q3 2018 Form 10-Q, Bloom Energy omitted the amount of contingent liabilities required to be disclosed under Item 303 and ASC 450. 143. As the amount of contingent liabilities for the MSAs were probable and reasonably estimable under ASC 450, they should have been disclosed and accounted for properly. 144. Although Bloom Energy expected customers to continue to renew the MSAs and “expect[ed] that [its] deployed early generation Energy Servers may continue to perform at a lower output and efficiency level and, as a result, the maintenance costs may exceed the contracted prices that we expect to generate in respect of those servers if our customers continue to renew their maintenance service agreements in respect of those servers,” the Section 10(b) Defendants continued to omit the actual amount ($2 billion) and misrepresented to investors the actual financial health of Bloom Energy. This information was material and should have been disclosed under Item 303 and ASC 450. 145. These liabilities were material and should have been disclosed to investors under Item 303 and ASC 450, particularly given how it impacts shareholder liquidity and Bloom Energy’s path to profitability. Therefore, the omission of these liabilities were materially false and misleading. 146. The Q3 2018 Form 10-Q was also materially misleading given that it included certifications by Sridhar and Furr pursuant to SOX. These certifications indicated that Sridhar and Furr had both reviewed the Q3 2018 Form 10-Q and that it was materially accurate and not misleading. Specifically, Sridhar and Furr each certified that: 1. I have reviewed this Quarterly Report on Form 10-Q of Bloom Energy Corporation; material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. (Q3 2018 Form 10-Q, Exs. 31.1 & 31.2.) 147. Given the false and misleading nature of the statements in the Q3 2018 Form 10-Q described above, Sridhar’s and Furr’s certifications were false and/or materially misleading. Specifically, the Form 10-Q omitted the contingent liabilities that should have been disclosed to investors. By omitting these liabilities the Section 10(b) Defendants misled investors to believe that Bloom Energy’s financials were stronger than they appeared. These omissions and misrepresentations were material to Bloom Energy’s investors because investors would have declined to purchase Bloom Energy’s stock had they known that the Q3 2018 Form 10-Q contained material misrepresentations and/or omissions. February 5, 2019 – Financial Results 148. On February 5, 2019, Defendants released a “Letter to Shareholders” announcing Bloom Energy’s fiscal 2018 highlights and providing additional financial information. The letter was issued by Sridhar and Furr. The letter was also attached to a Form 8-K filing with the SEC on February 6, 2019. 149. Bloom Energy’s financials in the letter were materially false and misleading as they failed to account for contingent liabilities arising under the MSAs. In pertinent part, the letter included Bloom Energy’s quarterly revenue and financial results but omitted the $2.0 billion in undisclosed contingent liabilities that were probable and reasonably estimable under ASC 450, and failed to disclose the contingent liabilities under Item 303. 150. This information was material and should have been disclosed under Item 303 and ASC March 21, 2019 – Form 10-K for Fiscal Year 2018 151. On March 21, 2019, after market-trading hours, the Section 10(b) Defendants filed with the SEC their Fiscal Year 2018 Form 10-K, for the year ending December 31, 2018. The Form 10-K was signed in part by Sridhar and Furr. 152. Bloom Energy’s financials in the 2018 Form 10-K were materially false and misleading as they failed to account for contingent liabilities arising under the MSAs. 153. While Bloom Energy discussed the warranty costs under the “Contingencies” section of the 2018 Form 10-K, Bloom Energy omitted the amount of contingent liabilities, including the $130 million from replacing the Delaware servers, that were probable and reasonably estimable under ASC 450, and failed to disclose the contingent liabilities under Item 303. These liabilities were material and the omission of them materially misled investors. 154. Bloom Energy knew that its customers would continue to renew the MSAs and “expect[ed] that [its] deployed early generation Energy Servers may continue to perform at a lower output and efficiency level and, as a result, the maintenance costs may exceed the contracted prices that we expect to generate if our customers continue to renew their maintenance service agreements in respect of those servers”. 155. As the amount of contingent liabilities ($2 billion) for the MSAs were probable and reasonably estimable, they should have been disclosed and accounted for under Item 303 and ASC 450. Therefore, the Section 10(b) Defendants materially misled investors to the actual amount of contingent liabilities from Bloom Energy’s MSAs. 156. This information was material and should have been disclosed to investors particularly given how it impacts shareholder liquidity and Bloom Energy’s path to profitability. 157. The 2018 Form 10-K was also materially misleading given that it included certifications by Sridhar and Furr pursuant to SOX. These certifications indicated that Sridhar and Furr had both reviewed the 2018 Form 10-K and that it was materially accurate and not misleading. Specifically, Sridhar and Furr each certified that: 1. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2018 of Bloom Energy Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. (2018 Form 10-K, Exs. 31.1 & 31.2.) 158. Given the false and misleading nature of the statements in the 2018 Form 10-K described above, Sridhar’s and Furr’s certifications were false and/or materially misleading. Specifically, the Form 10-K omitted the contingent liabilities that should have been disclosed to investors. By omitting these liabilities the Section 10(b) Defendants misled investors to believe that Bloom Energy’s financials were stronger than they appeared. These omissions and misrepresentations were material to Bloom Energy’s investors because investors would have declined to purchase Bloom Energy’s stock had they known that the 2018 Form 10-K contained material misrepresentations and/or omissions. May 6, 2019 – Financial Results 159. On May 6, 2019, Defendants released a “Letter to Shareholders” announcing Bloom Energy’s Q1 fiscal 2019 highlights and providing additional financial information. The letter was issued by Sridhar and Furr. The letter was also attached to a Form 8-K filing with the SEC on May 9, 2019. 160. Bloom Energy’s financials in the letter were materially false and misleading as they failed to account for contingent liabilities arising under the MSAs. In pertinent part, the letter included Bloom Energy’s quarterly revenue and financial results but omitted the $2.0 billion in undisclosed contingent liabilities that were probable and reasonably estimable under ASC 450, and failed to disclose the contingent liabilities under Item 303. 161. This information was material and should have been disclosed under Item 303 and ASC May 14, 2019 – Form 10-Q for Q1 2019 162. On May 14, 2019, after market-trading hours, the Section 10(b) Defendants filed with the SEC their Form 10-Q for fiscal Q1 2019, ending March 31, 2019. The Form 10-Q was signed by Sridhar and Furr. 163. Bloom Energy’s financials in the Q1 2019 Form 10-Q were materially false and misleading as they failed to account for contingent liabilities arising under the MSAs. 164. While Bloom Energy discussed the warranty costs under the “Contingencies” section of the Q3 2018 Form 10-Q, Bloom Energy omitted the amount of contingent liabilities, including the $130 million from replacing the Delaware servers, that were probable and reasonably estimable under ASC 450, and failed to disclose the contingent liabilities under Item 303. 165. As the amount of contingent liabilities for the MSAs were probable and reasonably estimable under ASC 450, they should have been disclosed and accounted for properly. 166. Although Bloom Energy expected customers to continue to renew the MSAs and “expect[ed] that [its] deployed early generation Energy Servers may continue to perform at a lower output and efficiency level and, as a result, the maintenance costs may exceed the contracted prices that we expect to generate in respect of those servers if our customers continue to renew their maintenance service agreements in respect of those servers,” the Section 10(b) Defendants continued to omit the actual amount ($2 billion) and misrepresented to investors the actual financial health of Bloom Energy. This information was material and should have been disclosed under Item 303 and ASC 450. 167. This information was material and should have been disclosed to investors particularly given how it impacts shareholder liquidity and Bloom Energy’s path to profitability. 168. The Q1 2019 Form 10-Q was also materially misleading given that it included certifications by Sridhar and Furr pursuant to SOX. These certifications indicated that Sridhar and Furr had both reviewed the Q1 2019 Form 10-Q and that it was materially accurate and not misleading. Specifically, Sridhar and Furr each certified that: 1. I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2019 of Bloom Energy Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. (Q1 2019 Form 10-Q, Exs. 31.1 & 31.2.) 169. Given the false and misleading nature of the statements in the Q1 2019 Form 10-Q described above, Sridhar’s and Furr’s certifications were false and/or materially misleading. Specifically, the Form 10-Q omitted the contingent liabilities that should have been disclosed to investors. By omitting these liabilities the Section 10(b) Defendants misled investors to believe that Bloom Energy’s financials were stronger than they appeared. These omissions and misrepresentations were material to Bloom Energy’s investors because investors would have declined to purchase Bloom Energy’s stock had they known that the Q1 2019 Form 10-Q contained material misrepresentations and/or omissions. C. The Truth about Bloom Energy’s Liabilities Begins to Emerge June 21, 2019 – Press Release to Upgrade Delaware Fuel Cell Project 170. On June 21, 2019, Bloom Energy announced that it “will deploy the latest generation of its Bloom Energy Servers at an existing 30 megawatt (MW) fuel cell project located on two sites in New Castle and Newark, Delaware.” 171. Bloom Energy also announced that they would be using funds invested by Southern Power to do so, and that “[t]he fuel cell project was previously owned by Bloom Energy and a tax equity investor. As part of the transaction to upgrade the project, Southern Power will become the majority co- owner with Bloom Energy.” 172. This was evidence that Bloom Energy was subject to significant repair liabilities and costs under the MSAs. Additionally, investors began to realize that Bloom Energy’s public statements were not entirely true because these costs should have been disclosed in the IPO and prior filings. It further created the suspicion that additional liabilities under the MSA were just around the corner. 173. The June 21, 2019 press release confirmed a previous article published by Axios in November 2018 that noted that Bloom Energy had approximately $100-150 million in undisclosed contingent liabilities arising from the replacement of the Delaware servers alone. 174. While the June 21, 2019 press release was Bloom Energy’s first public mention of the Delaware replacement, this confirmed the Axios article’s concerns. However, the June 21, 2019 press release failed to disclose the amount of liabilities it would incur from the Delaware replacements, and that Bloom Energy still had approximately $2 billion in undisclosed contingent liabilities arising from the MSAs. 175. Therefore, this information only partially revealed to the market that Bloom Energy was required to replace a number of servers in Delaware and would face additional undisclosed liabilities. 176. As a result of this news, Bloom Energy’s stock dropped from $12.37 at open on June 21, 2019, to close at $11.56 at close on June 22, 2019, a drop of 6.5%. August 12, 2019 - Q2 2019 Letter to Shareholders and Earnings Call 177. On August 12, 2019, after hours, Defendants announced in a “Letter to Shareholders” filed with the SEC, Q2 Fiscal 2019 results ending June 30, 2019. Defendants also held a Conference Call and issued slides included “Supplemental Financial Information” to discuss Bloom Energy’s financial results. 178. In the letter, Bloom Energy disclosed to investors that revenue was down 3.8% sequentially due, in part, “from the PPA II upgrade” where they replaced the Delaware servers. Additionally, Bloom Energy disclosed a onetime $5.9 million charge associated with the Delaware upgrade. Finally, Bloom Energy disclosed a write-off of PPA II decommissioned assets (the Delaware assets) of $25,613,000, and “payments to redeemable noncontrolling interests related to the PPA II [Delaware] decommissioning” of $18,690,000 for the three months ending June 30, 2019. On the conference call Furr again revealed that the decrease in sequential revenue was due, in part, “from the PPA II [Delaware] upgrade.” 179. This revealed to the market the extent of liabilities from the Delaware replacement project, and partially revealed to the market that Bloom Energy had hidden contingent liabilities from investors relating to the replacement of its servers. 180. As a result of this news, Bloom Energy’s stock price dropped from $8.00 at close on August 12, 2019, to $4.60 at close on August 13, 2019 the following trading day, a decrease of 42.5% on unusually heavy trading volume. 181. Bloom Energy’s financials in the letter were also materially false and misleading as they failed to account for the remaining $2.0 billion in undisclosed contingent liabilities arising under the MSAs. In pertinent part, the letter included Bloom Energy’s quarterly revenue and financial results but omitted the amount of contingent liabilities. This information was material and should have been disclosed to investors. August 13, 2019 – Form 10-Q for Q2 2019 182. On August 13, 2019, after market-trading hours, Defendants filed with the SEC their Form 10-Q for fiscal Q2 2019, ending June 30, 2019. The Form 10-Q was signed by Sridhar and Furr. 183. The Q2 2019 Form 10-Q revealed that Bloom Energy incurred expenses in the amount of $130 million from the decommissioning of old Servers in Delaware: The PPA II Project occurs in two phases, phase 1 where initially SPDS had its purchased interest in 9.7 megawatts of Energy Servers installed during June 2019, and its remaining phase 2 purchased interest in 8.0 megawatts of Energy Servers to be installed which is expected to occur during the remainder of 2019. As of June 30, 2019, we have sold 9.7 megawatts of our current generation Energy Servers for $87.8 million to DSGP subsequent to its deconsolidation, which is included in product revenue, and recognized installation services of $3.9 million which is included in installation revenue, in our condensed consolidated statements of operations for the three and six months ended June 30, 2019. Concurrently, we had repurchased and written-off 10.0 megawatts of our earlier generation energy serves [sic] for $25.6 million and had installed the 9.7 megawatts of servers at a cost of goods sold of $26.3 million, which is included in cost of product revenue in our condensed consolidated statements of operations for the three and six months ended June 30, 2019. In anticipation of replacing the remaining installed 9.0 megawatts of Energy Servers during 2019 under phase 2 which reduced their previously expected useful lives, we recognized charges related to the decommissioning of PPA II Energy Servers of $8.1 million, which is included in cost of electricity revenue in our condensed consolidated statements of operations for the three and six months ended June 30, 2019. Additionally, in paying-off the outstanding debt and interest of PPA II amounting to $77.7 million, we incurred a debt payoff make-whole penalty of $5.9 million, which is included in general and administrative expense in our condensed consolidated statements of operations for the three and six months ended June 30, 2019. Finally, we had PPA II debt issuance costs written-off of $1.0 million and additional interest expense incurred for PPA 2 debt payoff of $0.1 million, which is included in interest expense in our condensed consolidated statements of operations for the three and six months ended June 30, 2019. 184. This reiterated the substantial costs to Bloom Energy in replacing servers under the MSAs that were disclosed on August 12, 2019. 185. The Q2 2019 Form 10-Q was also materially false and misleading as Bloom Energy’s financials failed to account for the remaining contingent liabilities arising under the MSAs. While Bloom Energy discussed the warranty costs under the “Contingencies” section of the Q2 2019 Form 10- Q, Bloom Energy omitted the amount of contingent liabilities that were probable and reasonably estimable under ASC 450, and failed to disclose the contingent liabilities under Item 303. 186. As the amount of contingent liabilities for the MSAs were probable and reasonably estimable under ASC 450, they should have been disclosed and accounted for properly. 187. Although Bloom Energy expected customers to continue to renew the MSAs and “expect[ed] that [its] deployed early generation Energy Servers may continue to perform at a lower output and efficiency level and, as a result, the maintenance costs may exceed the contracted prices that we expect to generate in respect of those servers if our customers continue to renew their maintenance service agreements in respect of those servers,” the Section 10(b) Defendants continued to omit the actual amount and misrepresented to investors the actual financial health of Bloom Energy. This information was material and should have been disclosed under Item 303 and ASC 450. 188. The Q2 2019 Form 10-Q was also materially misleading given that it included certifications by Sridhar and Furr pursuant to SOX. These certifications indicated that Sridhar and Furr had both reviewed the Q2 2019 Form 10-Q and that it was materially accurate and not misleading. Specifically, Sridhar and Furr each certified that: 1. I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2019 of Bloom Energy Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. (Q2 2019 Form 10-Q, Exs. 31.1 & 31.2.) 189. Given the false and misleading nature of the statements in the Q2 2019 Form 10-Q described above, Sridhar’s and Furr’s certifications were false and/or materially misleading. Specifically, the Form 10-Q omitted the contingent liabilities that should have been disclosed to investors. By omitting these liabilities the Section 10(b) Defendants misled investors to believe that Bloom Energy’s financials were stronger than they appeared. These omissions and misrepresentations were material to Bloom Energy’s investors because investors would have declined to purchase Bloom Energy’s stock had they known that the Q2 2019 Form 10-Q contained material misrepresentations and/or omissions. September 17, 2019 – Hindenburg Research Report 190. On September 17, 2019, prior to the market opening, Hindenburg Research published a report revealing to the market the extent of Defendants’ undisclosed contingent liabilities. Hindenburg reported in pertinent part that it “uncovered an estimated $2.2 billion in undisclosed servicing liabilities that the market has missed, even in its most recent re-valuation of Bloom [Energy] shares.” According to Hindenburg, “Bloom[ Energy]’s tricky accounting allows it to mask servicing costs and shift write- downs to other periods, thereby avoiding recognizing major recent additional losses.” 191. These liabilities related to the performance guarantees in the MSAs, and Bloom Energy’s responsibility to replace its fuel cell servers (the system itself) and the individual fuel cells that go inside the servers. 192. Hindenburg reported that “Bloom’s fuel cells and systems degrade significantly faster than expectations, yet the company barely records any liability for these issues.” Hindenburg discloses that this is because Bloom Energy does not recognize future expenses until the customer renews its MSA each year. However, while customers have the right to renew each year, “virtually no customers have elected to cancel their maintenance agreements” and Bloom Energy admits that they “expect that our deployed early generation Energy Servers may continue to perform at a lower output and efficiency 193. Hindenburg based its calculation on, among other things, (i) the cost to replace fuel cells, (ii) fuel cell life, (iii) length of time on average contract, (iv) average number of times the fuel cells will be replaced, (v) current replacement cycle, (vi) cumulative install base (KW), and (vii) cost to replace servers (per KW). 194. Using these factors, and data from Bloom Energy’s public filings, Hindenburg concluded that the liabilities for fuel cell replacement alone was $1.8 billion, and server replacement liabilities were $1.4 billion, which, after off-setting the service liabilities with service revenue, resulted in over $2 billion in service liabilities from the MSAs. 195. Accordingly, the report fully disclosed to the market that Bloom Energy “only books the next year of servicing liabilities, rather than accounting for the liabilities across the full 10-25 years of the contract” and that Bloom Energy hid up to $2 billion in contingent liabilities. 196. On this news, Bloom Energy’s stock price decreased from $4.19 at close on September 16, 2019, to $3.31 at close on September 17, 2019, a drop of 21% on unusually high trading volume. D. Defendants’ Acted With Scienter 197. For the purposes of Plaintiffs’ claims under the Exchange Act only, Plaintiffs allege that the above material misrepresentations and omissions were made by the Section 10(b) Defendants either intentionally and/or with reckless disregard to accuracy for the purposes of: (a) personal financial gain; and (b) inflating market demand for Bloom Energy shares in the IPO. 198. The Section 10(b) Defendants were aware of the construction delays at the time they made material misrepresentations and were aware that Bloom Energy was not accounting for its contingent liabilities. The Section 10(b) Defendants provided investors with material information concerning Bloom Energy’s financials while at the same time knowing that it would have to continue to take losses relating to its MSAs. The Section 10(b) Defendants Acted with Actual Knowledge or Were Deliberately Reckless 199. At all times, the Section 10(b) Defendants knew that they had undisclosed contingent liabilities because their early generation systems and fuel cells would need to be replaced under the MSAs. Bloom Energy admitted this in their filings with the SEC. 200. For example, Bloom Energy admits that “virtually no customers have elected to cancel their maintenance agreements,” and that “as we expect our customers to renew their maintenance service agreements each year, the total liability over time may be more than the accrual.” As the Section 10(b) Defendants knew the estimated life of its servers were less than the life of the contracts, the Section 10(b) Defendants knew that the liabilities were probable. 201. Additionally, Bloom Energy had already been required to replace servers and fuel cells under the MSAs. Prior to the IPO, Bloom Energy was required to replace some of its earlier systems under the MSAs and therefore knew it was likely they would have to replace the remaining early generation systems and knew the costs to do so. In fiscal year 2015, the Section 10(b) Defendants implemented a fleet decommissioning program for its early generation servers. This resulted in “a significant adjustment to revenue in the quarter ended December 31, 2015.” 202. Similarly, Defendants admit that they would have to continue to replace these systems. The Registration Statement and later filings stated in pertinent part, “we expect that our deployed early generation Energy Servers may continue to perform at a lower output and efficiency level, and as a result the maintenance costs may exceed the contracted prices that we expect to generate in respect of those servers if our customers continue to renew their maintenance service agreements in respect of those servers.” 203. As “virtually no customers have elected to cancel their maintenance agreements” and Bloom Energy “anticipates that almost all of its customers will continue to renew their maintenance services agreement each year,” the fact that the maintenance costs would exceed the proceeds was probable. 204. Additionally, the proximity of the Delaware replacements shows that the Section 10(b) Defendants knew they would need to replace additional fuel cells and servers and therefore had undisclosed contingent liabilities. On June 21, 2019, less than a year after the IPO, Defendants disclosed it was commencing a project to “decommission” 30 megawatts worth of servers in Delaware. The servers were only about 7 years old, yet the company was required to replace all of them. The proximity to the IPO shows that at the time of the IPO this replacement was probable and reasonably estimable. 205. Despite the fact that Bloom Energy could reasonably estimate the contingent liabilities under the MSAs, and the fact that the liabilities were probably, the Section 10(b) Defendants refused to disclose this material information to the public. Indeed, the Section 10(b) Defendants went out of their way to hide this information from the public, redacting pertinent information in correspondence with the SEC that would have let investors know the extent of contingent liabilities Bloom Energy was subject 206. Accordingly, the Section 10(b) Defendants had actual knowledge or were deliberately reckless in not complying with ASC 450 and Item 303. 207. The Section 10(b) Defendants similarly acted with actual knowledge or deliberate recklessness when it hid from investors the fact that Bloom Energy was facing significant construction delays at the time of the IPO. 208. The Section 10(b) Defendants’ knowledge about the construction delays at the time of the Registration Statement is evident by the fact that the construction delays were currently on-going at the time of the IPO. This is apparent because the third quarter was already well underway on July 25, 2018, the date of the IPO, and had been since at least June 2016 according to CW1. 209. CW1 corroborates that construction delays were a constant issue at Bloom Energy. CW1 indicated that during his tenure at Bloom Energy, construction delays occurred during almost every project. CW1 indicated that these delays typically were delayed by a quarter or half quarter. CW1 indicated that he was “very familiar with the delays” and the reasons behind them. According to CW1, Bloom Energy has a poorly managed design program and the design problems, short comings, and cost savings efforts led directly to the construction delays and field problems. 210. CW1 stated that the construction delays were occurring at Bloom Energy before he started working there in June 2016, and continued after he left the company in February 2018. 211. CW1 also indicated that upper management, all the way up to the company’s CEO KR Sridhar typically became aware right away as the construction delays were constant, on-going, and there was a lot of effort to displace those delays from Bloom Energy onto other contracting partners. 212. The fact that the construction delays were a constant issue and that these delays were reported immediately all the way up to Defendants Sridhar shows that Sridhar knew of these problems at the time of the IPO, but intentionally misled investors. 213. Accordingly, the Section 10(b) Defendants acted with deliberate recklessness or actual knowledge when warning of risks that were already underway. The Section 10(b) Defendants Were Financially Motivated to Commit Fraud 214. The Section 10(b) Defendants’ motivation behind the misrepresentations and omissions in the Registration Statement and throughout the Class Period stems from their desire to profit financially, their need for financing via the IPO, and the risk that Bloom Energy would be unable to pay the Section 10(b) Defendants their annual employee and director compensation. 215. On March 26, 2019, Bloom Energy filed with the SEC its DEF 14A proxy statement that disclosed Defendants Sridhar’s and Furr’s compensation in 2018, and bonuses for taking Bloom Energy public. According to the DEF 14A, “[i]n 2018, Defendant Sridhar was awarded a cash and equity bonus to be payable or become vested upon the achievement of certain corporate initiatives, specifically the consummation of the IPO and related subsequent milestones. Mr. Sridhar received $2,000,000 of the $3,000,000 cash bonus opportunity in 2018 as a result of having completed two of the milestones and remains eligible to receive the remaining $1,000,000 of this cash bonus program in 2019. In addition, Mr. Sridhar received an equity bonus of RSUs.” 216. Bloom Energy refers investors to the “the ‘Bonus’ and ‘Stock Awards’ columns in the 2018 Summary Compensation Table for the amount of bonuses paid to [Defendant] Sridhar.” According to the Compensation Table, as a direct result of taking Bloom Energy public, Sridhar received $44,259,315 in vested RSUs, along with a $2 million cash bonus. 217. Sridhar received an annual salary of $524,039 in 2017 and $607,500 in 2018. Accordingly, Sridhar’s bonus to take Bloom Energy public was 7,285% higher than his 2018 yearly salary. This is money that Sridhar would not have been awarded had Bloom Energy not gone public. 218. Defendant Furr similarly profited from the IPO. While Bloom Energy does not disclose Furr’s compensation from 2017, and therefore his 2017 salary is unknown, Furr’s salary for 2018 was $407,154. In connection with the IPO, Furr was granted $11,276,283 in vested RSUs. This is 2,769% higher than his 2018 yearly salary. 219. At the time of these bonuses, Bloom Energy operated at a net loss of $281,265,000 for fiscal year 2017, and $259,952,000 for fiscal year 2018. Accordingly, the amount of the bonuses for taking a company that was pre-profit public was material and unreasonable. Thus, the Section 10(b) Defendants were motivated to consummate a public offering. 220. Additionally, the Section 10(b) Defendants desperately needed additional funding with $379.2 million in debt is coming due by the end of 2020, with significant 2021 maturities thereafter. Bloom Energy currently had $308 million in cash on hand (as of June 30, 2019), down from $325.1 million in December 2018. Bloom Energy currently has $701.3 million in total debt, with $431.7 million of that total listed as recourse debt. 221. Of Bloom Energy’s $431.7 million in recourse debt, $296.2 million represents convertible notes due in December 2020. These notes present a problem for the company, as the conversion price is now far out of the money, at $11.25 per share of common stock (Bloom Energy currently trades below $3 per share of common stock). This likely means that, upon maturity, Bloom will have to pay cash, unless it can refinance. 222. Bloom Energy was also incentivized to artificially inflate the stock price at the IPO due to notes that were convertible at the option of the holder at the time of the IPO. Specifically, 25,812,404 shares of Bloom Energy Class B common stock were issuable upon the conversion of Bloom Energy’s outstanding 6.0% notes due 2020 (6% Notes). This was set to convert at a price of 75% of the IPO price of $15 per share. 223. Additionally, 865,060 shares of Bloom Energy’s Class B common stock were issuable upon the conversion of Bloom Energy’s outstanding Constellation Note, which was convertible, at the option of the holder, prior to the completion of IPO, into shares of Series G convertible preferred stock or, following the completion of the IPO, into shares of Class B common stock. Further, approximately 800,000 shares of Bloom Energy’s Class B common stock was issuable upon the conversion of accrued interest payable on its 6% Notes, 8% Notes and Constellation Note after March 31, 2018. 224. Once the IPO was completed, $221.6 million of principal and accrued interest of outstanding 8% Notes automatically converted into additional paid-in capital, the conversion of which included all the related-party noteholders. The 8% Notes converted to shares of Series G convertible preferred stock and, concurrently, each such share of Series G convertible preferred stock converted automatically into one share of Class B common stock. Upon the IPO, conversions of 5,734,440 shares of Class B common stock were issued and the 8% Notes were retired. 225. Total, this resulted in 33,211,904 in Bloom Energy stock, worth $412,161,960 at $15 per share, to satisfy debt obligations alone. 226. Had Bloom Energy’s share price not been inflated, Bloom Energy would not have been able to satisfy its debt obligations at the number of shares that it did. 227. As Bloom Energy preferred to convert the debt to Bloom Energy equity rather than pay cash, Bloom Energy was motivated to artificially inflate Bloom Energy’s stock price by rebooking replacement servers and fuel cells, hiding construction delays, and omitting the amount of contingent liabilities that should have been in its financials. Therefore, the Section 10(b) Defendants’ motivation for committing fraud is indicative of scienter. The SOX Certifications 228. The Section 10(b) Defendants also repeatedly represented to investors that Bloom Energy’s financials were adequate and that Sridhar and Furr were complying with their obligations under SOX. The Section 10(b) Defendants made these representations notwithstanding the fact that they knew that Bloom Energy was not properly accounting for their contingent liabilities. 229. For example, the Section 10(b) Defendants represented that “the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.” The fact that the Section 10(b) Defendants reviewed its financial reporting is highly indicative that the Section 10(b) Defendants reviewed ASC 450 but purposely ignored it. Accordingly, the fact that the Section 10(b) Defendants regularly reviewed Bloom Energy’s financials and the disclosure requirements show that Defendants acted with scienter. 230. In addition, the core-function of the CEO and CFO is to monitor and ensure adequate financials of a company. Bloom Energy stated that Furr was qualified to serve as CFO due to his “30+ years of experience in the technology sector” and disclosed that Furr “is an experienced financial and operations executive.” Furr also “holds a Bachelor of Business Administration degree from the University of Oklahoma and is a certified public accountant.” Accordingly, Furr was familiar with the accounting standards, including ASC 450, and knew that Bloom Energy was required to disclose its contingent liabilities under ASC 450. 231. This is further evidence that the Section 10(b) knew or were deliberately reckless by failing to properly account for the contingent liabilities. Change in Risk Warnings 232. Further evidence that Bloom Energy knew about the fraud was the risk warning added to Bloom Energy’s Fiscal Year 2018 Form 10-K. Prior to the March 22, 2019 Form 10-K Bloom Energy hid the fact that they were not accounting for their future expenses for the MSAs under GAAP. However, starting in the 2018 Form 10-K, Bloom Energy made the conscious decision to inform investors that they only accounted for its service liabilities yearly when the service contracts were renewed. This shows that the Section 10(b) Defendants knew of the service liabilities but hid them from investors. 233. The Section 10(b) Defendants’ knowledge of the accounting rules is highly indicative of the fact that they acted with scienter when making the false and misleading statements. Corporate Scienter 234. Bloom Energy is also liable for the acts of the Section 20(a) Defendants and its employees under the doctrine of respondeat superior and common law principles of agency, as all the wrongful acts complained of herein were carried out within the scope of their employment with authorization. 235. Similarly, the scienter of the Section 20(a) Defendants and other employees and agents of Bloom Energy is imputed to Bloom Energy under respondeat superior and common law agency principles. E. Loss Causation and Economic Loss 236. The Section 10(b) Defendants’ materially misleading statements and omissions during the Class Period resulted in Plaintiffs and the other Class members purchasing Bloom Energy’s shares at artificially inflated prices, and thereby directly or proximately caused, or were a substantial contributing cause, of the damages sustained by Plaintiffs and the other Class members. 237. As alleged herein: a. The market for Bloom Energy’s stock was open, well-developed and efficient at all relevant times; b. The Section 10(b) Defendants’ above-detailed materially misleading statements and/or material omissions had the effect of creating in the market an unrealistically positive assessment of Bloom Energy and its prospects, thus causing Bloom Energy’s shares to be overvalued and the market price of Bloom Energy’s shares to be artificially inflated during the Class Period; c. The Section 10(b) Defendants created an unrealistically positive assessment of Bloom Energy and its prospects by, in part, concealing risks associated with exposure arising from Bloom Energy’s construction delays, and contingent liabilities; d. Plaintiffs and the other Class members purchased or otherwise acquired Bloom Energy stock relying upon the integrity of the market price for Bloom Energy shares and market information relating to Bloom Energy; e. The risks associated with exposure arising from Bloom Energy’s construction delays and contingent liabilities began to materialize and, in turn, investors began to discover that the Section 10(b) Defendants’ public statements were materially misleading; and f. Upon discovery of Defendants’ materially misleading statements and/or material omissions, Bloom Energy’s share price suffered severe devaluation. 238. The Section 10(b) Defendants’ disclosures and/or events on the below dates resulted in damages to investors caused by misrepresentations and omissions in public statements. In each instance, the disclosure revealed material information related to the false statements. 239. November 5, 2018. On November 5, 2018, Bloom Energy disclosed its operating results for the third quarter of fiscal 2018. The company reported only 206 “acceptances,” which was materially below its guidance number of 215 to 235. During an investor conference call held after market hours that same day, Furr conceded that the company’s low rate of “acceptances” was “a result of construction delays.” Accordingly, this announcement revealed to the market that Bloom Energy had been experiencing construction delays that affected its Q3 acceptances and would also affect Q4 acceptances. In response to the above news, the price of Bloom Energy stock plummeted from $23.01 at close on November 5, 2018, to $17.25 at close on November 6, 2018, a decline of 25% on unusually heavy trading volume. 240. June 21, 2019. On June 21, 2019, Bloom Energy announced that it “will deploy the latest generation of its Bloom Energy Servers at an existing 30 megawatt (MW) fuel cell project located on two sites in New Castle and Newark, Delaware.” This was confirmation of a previous article that noted that Bloom Energy had approximately $100-150 million in undisclosed contingent liabilities arising from the replacement of the Delaware servicers. While this press release was Bloom Energy’s first public mention of the Delaware replacement, this confirmed the previous articles concerns. Therefore, this information partially revealed to the market that Bloom Energy was required to replace a number of servers in Delaware and would face additional undisclosed liabilities. As a result of this news, Bloom Energy’s stock dropped from $12.37 at open on June 21, 2019, to close at $11.56 at close on June 22, 2019, a drop of 6.5%. 241. August 12, 2019. On August 12, 2019, after hours, Defendants announced in a “Letter to Shareholders” filed with the SEC, Q2 Fiscal 2019 results ending June 30, 2019. Defendants also held a Conference Call and issued slides included “Supplemental Financial Information” to discuss Bloom Energy’s financial results. In the letter, Bloom Energy disclosed to investors that revenue was down 3.8% sequentially due, in part, “from the PPA II upgrade” where they replaced the Delaware servers. Additionally, Bloom Energy disclosed a onetime $5.9 million charge associated with the Delaware upgrade. Finally, Bloom Energy disclosed a write-off of PPA II decommissioned assets (the Delaware assets) of $25,613,000, and “payments to redeemable noncontrolling interests related to the PPA II [Delaware] decommissioning” of $18,690,000 for the three months ending June 30, 2019. On the conference call Furr again revealed that the decrease in sequential revenue was due, in part, “from the PPA II [Delaware] upgrade.” This revealed to the market the extent of liabilities from the Delaware replacement project, and partially revealed to the market that Bloom Energy had hidden contingent liabilities from investors relating to the replacement of its servers. As a result of this news, Bloom Energy’s stock price dropped from $8.00 at close on August 12, 2019, to $4.60 at close on August 13, 2019 the following trading day, a decrease of 42.5% on unusually heavy trading volume. 242. September 17, 2019. On September 17, 2019, prior to the market opening, Hindenburg Research published a report revealing to the market the extent of Defendants’ undisclosed contingent liabilities. Hindenburg reported in pertinent part that it “uncovered an estimated $2.2 billion in undisclosed servicing liabilities that the market has missed, even in its most recent re-valuation of Bloom [Energy] shares.” According to Hindenburg, “Bloom[ Energy]’s tricky accounting allows it to mask servicing costs and shift write-downs to other periods, thereby avoiding recognizing major recent additional losses.” These liabilities related to the performance guarantees in the MSAs, and Bloom Energy’s responsibility to replace its fuel cell servers (the system itself) and the individual fuel cells that go inside the servers. Accordingly, this report fully disclosed to the market that Bloom Energy “only books the next year of servicing liabilities, rather than accounting for the liabilities across the full 10-25 years of the contract” and that Bloom Energy hid up to $2 billion in contingent liabilities. On this news, Bloom Energy’s stock price decreased from $4.19 at close on September 16, 2019, to $3.31 at close on September 17, 2019, a drop of 21% on unusually high trading volume. 243. The Section 10(b) Defendants failed to disclose to investors material information concerning its contingent liabilities and accounting practices. As the Class Period progressed, investors became increasingly aware of these risks that were previously undisclosed to them by the Section 10(b) Defendants. As the risks surrounding Defendants’ conduct materialized during the Class Period, Bloom Energy’s stock price substantially decreased. Each decline in Bloom Energy’s stock price is evidence that the risks concealed by the Section 10(b) Defendants gradually materialized. The total decline in Bloom Energy’s stock price is attributable to the Section 10(b) Defendants’ fraudulent and/or deliberately reckless conduct pursuant to the materialization-of-the-risk doctrine. F. Presumption of Reliance: Fraud-On-The-Market 244. At all relevant times, the market for Bloom Energy’s common stock was an efficient market for the following reasons, among others: a. Bloom Energy common stock met the requirements for listing and was listed and actively traded on the NYSE during the Class Period, a highly efficient and automated market; b. Bloom Energy communicated with public investors via established market communication mechanisms, including disseminations of press releases on the national circuits of major newswire services and other wide-ranging public disclosures, such as communications with the financial press and other similar reporting services; c. Bloom Energy was followed by several securities analysts employed by major brokerage firms who wrote reports that were distributed to the sales force and certain customers of their respective brokerage firms during the Class Period. Each of these reports was publicly available and entered the public marketplace; and d. unexpected material news about Bloom Energy was reflected in and incorporated into Bloom Energy’s stock price during the Class Period. 245. As a result of the foregoing, the market for Bloom Energy common stock promptly digested current information regarding Bloom Energy from all publicly available sources and reflected such information in Bloom Energy’s stock price. Under these circumstances, all purchasers of Bloom Energy’s common stock during the Class Period suffered similar injury through their purchase of Bloom Energy’s common stock at artificially inflated prices, and a presumption of reliance applies. 246. Alternatively, reliance need not be proven in this action because the action involves omissions and deficient disclosures. Positive proof of reliance is not a prerequisite to recovery pursuant to the ruling of the U.S. Supreme Court in Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128 (1972). All that is necessary is that the facts withheld be material in the sense that a reasonable investor might have considered the omitted information important in deciding whether to buy or sell the subject security. G. Presumption of Reliance: Fraud Created the Market 247. In the alternative, Bloom Energy’s common stock should not have been introduced into the market at the time of the IPO because it was objectively unmarketable. Contrary to the information represented in Bloom Energy’s Registration Statement, Bloom Energy was actual liable for over $2 billion in liabilities and was already experiencing construction delays. Where, as here, actors introduce an otherwise unmarketable security into the market by means of fraud, they have effectively manipulated the market. Accordingly, Plaintiffs and the Class are entitled to a presumption of reliance because they relied on the integrity of the market rather than on individual fraudulent disclosures. H. No Safe Harbor; Inapplicability of Bespeaks Caution Doctrine 248. The statutory safe harbor provided for forward-looking statements under certain circumstances does not apply to any of the material misrepresentations and omissions alleged in this Complaint. 249. To the extent certain of the statements alleged to be misleading or inaccurate may be characterized as forward-looking, they were not identified as “forward-looking statements” when made and there were no meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the purportedly forward-looking statements. 250. Defendants are also liable for any false or misleading “forward-looking statements” pleaded because, at the time each “forward-looking statement” was made, the speaker knew the “forward-looking statement” was false or misleading and the “forward-looking statement” was authorized and/or approved by an executive officer of Bloom Energy who knew that the “forward- looking statement” was false. Alternatively, none of the historic or present-tense statements made by Defendants were assumptions underlying or relating to any plan, projection, or statement of future economic performance, as they were not stated to be such assumptions underlying or relating to any projection or statement of future economic performance when made, nor were any of the projections or forecasts made by Defendants expressly related to or stated to be dependent on those historic or present- tense statements when made. COUNT III Violation of Section 10((b) and SEC Rule 10b-5(b) against the Section 10(b) Defendants 251. Plaintiffs repeat and reallege each and every allegation contained above as if fully set forth herein. 252. This Count is asserted against the Section 10(b) Defendants and is based upon Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder by the SEC. 253. During the Class Period, the Section 10(b) Defendants engaged in a plan, scheme, conspiracy and course of conduct, pursuant to which they knowingly or recklessly engaged in acts, transactions, practices and courses of business which operated as a fraud and deceit upon Plaintiffs and the other Class members; made various untrue statements of material facts and omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and employed devices, schemes and artifices to defraud in connection with the purchase and sale of securities. Such scheme was intended to, and, throughout the Class Period, did: (i) deceive the investing public, including Plaintiffs and other Class members, as alleged herein; (ii) artificially inflate and maintain the market price of Bloom Energy’s common stock; and (iii) cause Plaintiffs and other Class members to purchase or otherwise acquire Bloom Energy’s common stock at artificially inflated prices. In furtherance of this unlawful scheme, plan, and course of conduct, the Section 10(b) Defendants, and each of them, took the actions set forth herein. 254. Pursuant to the above plan, scheme, conspiracy and course of conduct, each of the Section 10(b) Defendants participated directly or indirectly in the preparation and/or issuance of the quarterly and annual reports, SEC filings, press releases and other statements and documents described above, including statements made to securities analysts and the media that were designed to influence the market for Bloom Energy’s common stock. Such reports, filings, releases and statements were materially false and misleading in that they failed to disclose material adverse information and misrepresented the truth about Bloom Energy’s finances, accounting, and business prospects. 255. By virtue of their positions at Bloom Energy, the Section 10(b) Defendants had actual knowledge of the materially false and misleading statements and material omissions alleged herein and intended thereby to deceive Plaintiffs and the other Class members, or, in the alternative, the Section 10(b) Defendants acted with reckless disregard for the truth in that they failed or refused to ascertain and disclose such facts as would reveal the materially false and misleading nature of the statements made, although such facts were readily available to the Section 10(b) Defendants. Said acts and omissions of the Section 10(b) Defendants were committed willfully or with reckless disregard for the truth. In addition, each Section 10(b) Defendants knew or recklessly disregarded that material facts were being misrepresented or omitted as described above. 256. Information showing that the Section 10(b) Defendants acted knowingly or with reckless disregard for the truth is peculiarly within the Section 10(b) Defendants’ knowledge and control. As the senior managers and/or directors of Bloom Energy, the Section 10(b) Defendants had knowledge of the details of Bloom Energy’s internal affairs. 257. The Section 10(b) Defendants are liable both directly and indirectly for the wrongs complained of herein. Because of their positions of control and authority, the Section 10(b) Defendants were able to and did, directly or indirectly, control the content of the statements of Bloom Energy. As officers and/or directors of a publicly-held company, the Section 10(b) Defendants had a duty to disseminate timely, accurate, and truthful information with respect to Bloom Energy’s business operations, accounting, and finances. As a result of the dissemination of the aforementioned false and misleading reports, releases and public statements, the market price of Bloom Energy’s common stock was artificially inflated throughout the Class Period. In ignorance of the adverse facts concerning Bloom Energy’s business, accounting, and financial condition which were concealed by the Section 10(b) Defendants, Plaintiffs and the other Class members purchased or otherwise acquired Bloom Energy’s common stock at artificially inflated prices and relied upon the price of the common stock, the integrity of the market for the common stock and upon the statements disseminated by the Section 10(b) Defendants, and were damaged thereby. 258. During the Class Period, Bloom Energy’s common stock was traded on an active and efficient market. Plaintiffs and the other Class members, relying on the materially false and misleading statements described herein, which the Section 10(b) Defendants made, issued or caused to be disseminated, or relying upon the integrity of the market, purchased or otherwise acquired shares of Bloom Energy’s common stock at prices artificially inflated by the Section 10(b) Defendants’ wrongful conduct. Had Plaintiffs and the other Class members known the truth, they would not have purchased or otherwise acquired said common stock, or would not have purchased or otherwise acquired them at the inflated prices that were paid. At the time of the purchases and/or acquisitions by Plaintiffs and the Class, the true value of Bloom Energy’s common stock was substantially lower than the prices paid by Plaintiffs and the other Class members. The market price of Bloom Energy’s common stock declined sharply upon materialization of undisclosed risks and/or public disclosure of the facts alleged herein to the injury of Plaintiffs and Class members. 259. By reason of the conduct alleged herein, the Section 10(b) Defendants knowingly or recklessly, directly or indirectly, have violated Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder. 260. As a direct and proximate result of the Section 10(b) Defendants’ wrongful conduct, Plaintiffs and the other Class members suffered damages in connection with their respective purchases, acquisitions and sales of Bloom Energy’s common stock during the Class Period, upon the disclosure that Bloom Energy had been disseminating false and/or misleading statements and information to the investing public. COUNT IV Violation of Section 20((a) of the Exchange Act against the Section 20(a) Defendants 261. Plaintiffs repeat and reallege each and every allegation contained in the foregoing paragraphs as if fully set forth herein. 262. During the Class Period, the Section 20(a) Defendants participated in the operation and management of Bloom Energy, and conducted and participated, directly and indirectly, in the conduct of Bloom Energy’s business affairs. Because of their senior positions, they knew the adverse non-public information about Bloom Energy’s misstatement of construction delays, and contingent liabilities. 263. As officers and/or directors of a publicly owned company, the Section 20(a) Defendants had a duty to disseminate accurate and truthful information with respect to Bloom Energy’s financial condition and results of operations, and to correct promptly any public statements issued by Bloom Energy which had become materially false or misleading. 264. Because of their positions of control and authority as senior officers, the Section 20(a) Defendants were able to, and did, control the contents of the various reports, press releases and public filings which Bloom Energy disseminated in the marketplace during the Class Period concerning Bloom Energy’s operations. Throughout the Class Period, the Section 20(a) Defendants exercised their power and authority to cause Bloom Energy to engage in the wrongful acts complained of herein. The Section 20(a) Defendants therefore, were “controlling persons” of Bloom Energy within the meaning of Section 20(a) of the Exchange Act. In this capacity, they participated in the unlawful conduct alleged which artificially inflated the market price of Bloom Energy’s common stock. 265. Each of the Section 20(a) Defendants, therefore, acted as a controlling person of Bloom Energy. By reason of their senior management positions and/or being directors of Bloom Energy, each of the Section 20(a) Defendants had the power to direct the actions of, and exercised the same to cause, Bloom Energy to engage in the unlawful acts and conduct complained of herein. Each of the Section 20(a) Defendants exercised control over the general operations of Bloom Energy and possessed the power to control the specific activities which comprise the primary violations about which Plaintiffs and the other Class members complain. 266. By reason of the above conduct, the Section 20(a) Defendants are liable pursuant to Section 20(a) of the Exchange Act for the violations committed by Bloom Energy. CLASS ACTION ALLEGATIONS 267. Plaintiffs bring this action as a class action pursuant to Federal Rule of Civil Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all persons and entities who purchased or otherwise acquired shares of Bloom Energy common stock: (i) in Bloom Energy’s IPO; and/or (ii) on the public market between July 25, 2018 and September 16, 2019, inclusive, and who were damaged upon revelation of the truth. Excluded from the Class are Defendants and their families, the officers, directors, and affiliates of the Defendants, at all relevant times, members of their immediate families and their legal representatives, heirs, successors, or assigns and any entity in which Defendants have or had a controlling interest. 268. The Class members are so numerous that joinder of all members is impracticable. Bloom Energy’s stock is actively traded on the New York Stock Exchange under the ticker symbol “BE” and millions of shares were sold in the IPO. 269. As of August 5, 2019, there were 69,993,919 shares of Bloom Energy Class A common stock outstanding, and 46,347,002 shares of Bloom Energy Class B common stock outstanding. Upon information and belief, these shares are held by thousands, if not millions, of individuals located throughout the country and possibly the world. Joinder would be highly impracticable. While the exact number of Class members is unknown to Plaintiffs at this time and can only be ascertained through appropriate discovery, Plaintiffs believe that there are thousands if not millions of members in the proposed Class. 270. Record owners and other Class members may be identified from records maintained by Bloom Energy or its transfer agent and may be notified of the pendency of this action by mail, using the form of notice similar to that customarily used in securities class actions. 271. Plaintiffs’ claims are typical of the claims of the Class members, as all Class members are similarly affected by defendants’ conduct in violation of federal securities law that is complained of 272. Plaintiffs will fairly and adequately protect the interests of the Class members and have retained counsel competent and experienced in class and securities litigation. 273. Common questions of law and fact exist as to all Class members and predominate over any questions solely affecting individual Class members. Among the questions of law and fact common to the Class are: (a) whether the federal securities laws were violated by Defendants’ acts as alleged herein; (b) whether statements made by Defendants to the investing public during the Class Period misrepresented material facts about the business operations, financials, and accounting of Bloom Energy; (c) whether Defendants caused Bloom Energy to issue false and misleading statements during the Class Period; (d) whether Defendants acted knowingly or recklessly in issuing false and misleading statements and financial statements; (e) whether the prices of Bloom Energy’s common stock during the Class Period were artificially inflated because of Defendants’ conduct complained of herein; and (f) whether the Class members have sustained damages and, if so, what is the proper measure of damages. 274. A class action is superior to all other available methods for the fair and efficient adjudication of this controversy, since joinder of all members is impracticable. Furthermore, as the damages suffered by individual Class members may be relatively small, the expense and burden of individual litigation make it impossible for Class members to individually redress the wrongs done to them. There will be no difficulty in the management of this action as a class action. PRAYER FOR RELIEF WHEREFORE, Plaintiffs pray for relief and judgment, as follows: A. Determining that the instant action may be maintained as a class action under Rule 23 of the Federal Rules of Civil Procedure, and certifying Plaintiffs as the class representatives; B. Awarding compensatory damages in favor of Plaintiffs and the other Class members against all Defendants, jointly and severally, for all damages sustained as a result of Defendants’ wrongdoing, in an amount to be proven at trial, including interest thereon; C. Awarding Plaintiffs and the Class their reasonable costs and expenses incurred in this action, including counsel fees and expert fees; and E. Awarding such equitable/injunctive or other relief as the Court may deem just and proper. JURY DEMAND Plaintiffs demand a trial by jury. Dated: November 4, 2019 Respectfully submitted, LEVI & KORSINSKY, LLP /s/ Adam M. Apton . Adam M. Apton (SBN 316506) Adam C. McCall (SBN 302130) 388 Market Street, Suite 1300 San Francisco, CA 94111 Telephone: (415) 291-2420 Facsimile: (415) 484-1294 Email: [email protected] Email: [email protected] -and- Nicholas I. Porritt LEVI & KORSINSKY, LLP 1101 30th Street N.W., Suite 115 Washington, D.C. 20007 Tel: (202) 524-4290 Fax: (202) 333-2121 Email: [email protected] (to be admitted pro hac vice) Attorneys for Plaintiffs and the Class

securities

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Jon B. Fougner (State Bar No. 314097) [email protected] 600 California Street, 11th Floor San Francisco, California 94108 Telephone: (415) 577-5829 Facsimile: (206) 338-0783 [Additional counsel appear on signature page] Attorneys for Plaintiff David Escobar and the Proposed Class UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA OAKLAND DIVISION Case No. DAVID ESCOBAR, individually and on behalf of all others similarly situated, Plaintiff, COMPLAINT FOR INJUNCTION AND DAMAGES v. Class Action COMCAST CORPORATION and COMCAST CABLE COMMUNICATIONS MANAGEMENT, LLC, JURY TRIAL DEMAND Defendants. Plaintiff David Escobar, by his undersigned counsel, for this class action complaint against Defendants Comcast Corporation and Comcast Cable Communications Management, LLC (collectively “Defendant” or “Comcast”) and their present, former, and future direct and indirect parent companies, subsidiaries, affiliates, agents, and related entities, alleges as follows: I. INTRODUCTION 1. Nature of Action: This case arises from Defendant’s non-consensual recording of cellular communications in violation of the California Invasion of Privacy Act (“CIPA”), Cal. Penal Code § 632.7. - 1 - COMPL. II. PARTIES 2. Plaintiff is a natural person. 3. Plaintiff resides in Alameda County, California. 4. Comcast Corporation is a corporation. 5. Comcast Corporation is a Delaware corporation. 6. Comcast Corporation’s principal place of business is 1 Comcast Center, Philadelphia, Pennsylvania 19103. 7. Comcast Cable Communications Management, LLC is a limited liability company. 8. Comcast Cable Communications Management, LLC is a Delaware limited liability company. 9. Comcast Cable Communications Management, LLC’s principal place of business is 1 Comcast Center, Philadelphia, Pennsylvania 19103. III. JURISDICTION AND VENUE 10. Jurisdiction: This Court has CAFA jurisdiction over this case. The amount-in- controversy requirement is satisfied because, as set forth more fully herein, CIPA provides for $5,000 in statutory damages per violation, and more than 1,000 violations are alleged. See 28 U.S.C. § 1332(d)(2). The minimum-diversity requirement is satisfied because Plaintiff and putative class members are citizens of California whereas Defendants are citizens of Delaware and Pennsylvania. See id. § 1332(d)(2)(A). 11. Personal Jurisdiction: This Court has personal jurisdiction over Defendants because their conduct at issue intentionally targeted Plaintiff, a California resident, while he was in California, while he was using his cellular telephone number, which, as Defendants knew, bears a California area code. 12. Defendant claims: “Comcast is deeply committed to California, where our nearly 5,000 employees serve more than 3 million customers throughout the state.” 13. The claims alleged herein arose in the course of Defendant’s trying to win customers in California, including Plaintiff. - 2 - COMPL. 14. Venue: Venue is proper in this District pursuant to 28 U.S.C. § 1391(b)(1)-(2) because a substantial part of the events giving rise to Plaintiff’s claims—namely, the illegal recording of Plaintiff—occurred in this District. 15. Intradistrict Assignment: Assignment to this Division is proper pursuant to Civil Local Rule 3-2(c) because a substantial part of the events or omissions that give rise to Plaintiff’s claims—namely, the illegal recording of Plaintiff —occurred in Alameda County. IV. FACTS A. California’s Ban on Nonconsensual Recording of Calls with Cellular Telephones 16. The Right of Privacy: The California State Legislature passed CIPA in 1967 to protect the right of privacy of the people of California. Secret recording “can warrant the imposition of criminal penalties, suggesting the California legislature, and perhaps an ordinary person, would view it to be highly offensive.” Safari Club Int’l v. Rudolph, 845 F.3d 1250, 1267 (9th Cir. 2017). “In enacting the Privacy Act, the Legislature declared in broad terms its intent to protect the right of privacy of the people of this state from what it perceived as a serious threat to the free exercise of personal liberties that cannot be tolerated in a free and civilized society.” Flanagan v. Flanagan, 41 P.3d 575, 581 (Cal. 2002) (internal quotation marks and alteration marks omitted). Accordingly, “courts are required to liberally construe section 632 to effectuate the important public policy ensuring telephonic privacy.” Kight v. CashCall, Inc., 179 Cal. Rptr. 3d 439, 454 (4th App. Dist. 2014). 17. Constitutional Roots: Californians have a constitutional right to privacy. The California Supreme Court has linked the constitutionally protected right to privacy with the intent and provisions of CIPA. 18. Updated for Cell Phones: California Penal Code section 632.7 was added to CIPA in 1992. Section 632.7 prohibits intentionally recording communications involving cellular or cordless telephones, in the absence of the consent of all recorded parties. 19. No Retroactive Consent: California Penal Code section 632.7 is violated the moment a recording of a cellular or cordless conversation is made without the consent of all parties thereto, regardless of whether recordation is subsequently disclosed or consented to. - 3 - COMPL. B. Plaintiff 20. Plaintiff is, and at all times mentioned herein was, a “person” as defined by 47 U.S.C. § 153(39). 21. He is the user of a phone number that begins “(510) 390” (the “Phone Number”). All calls to or from him referenced herein were, respectively, to or from the Phone Number. 22. The Phone Number is assigned to a cellular telephone service. 23. Plaintiff doesn’t use a wireline to make calls from or receive calls on the Phone Number. C. Defendant’s Surreptitious Recording of Plaintiff on January 24, 2019 24. Defendant advertises (800) 934-6489 as its primary customer service phone number. 25. On January 24, 2019, Plaintiff called Defendant at (800) 934-6489. 26. The purpose of the call was to learn about Defendant’s internet and cable television offerings. 27. During the call, Plaintiff learned that Defendant’s services would be more expensive then his current competing services from another provider. Plaintiff decided not to sign up for Defendant’s services. 28. The call lasted 18 minutes. 29. Plaintiff did not consent to or know of any recording of the call. 30. Defendant recorded the call. 31. Defendant has a pattern and practice of recording every call to or from (800) 934- 6489, even calls to or from cellular telephones in California. 32. Defendant has a pattern and practice of failing to disclose upfront or obtain prior consent to its recordation of calls to or from (800) 934-6489, even calls to or from cellular telephones in California. D. Defendant’s Surreptitious Recording of Plaintiff on January 29, 2019 33. On January 29, 2019, Defendant called Plaintiff from (800) 266-2278 at the Phone Number to try to sell him its services. 34. Plaintiff did not purchase its services. - 4 - COMPL. 35. The call lasted 4 minutes. 36. Plaintiff did not consent to or know of any recording of the call. 37. Defendant recorded the call. 38. Defendant has a pattern and practice of recording every call to or from (800) 266- 2278, even calls to or from cellular telephones in California. 39. Defendant has a pattern and practice of failing to disclose upfront or obtain prior consent to its recordation of calls to or from (800) 266-2278, even calls to or from cellular telephones in California. E. The Invasion of Privacy Caused by Defendant’s Secret Recording 40. Defendant’s secret recording invaded the privacy of Plaintiff and putative class members. 41. Defendant’s secret recording is offensive to Plaintiff and putative class members. 42. The risks of harm threatened by Defendant’s secret recording of consumers’ voices are sharpened by the increasingly widespread use of voice recognition to safeguard financial assets. See Updated Investor Bulletin: Protecting Your Online Investment Accounts from Fraud, U.S. Securities and Exchange Commission (Apr. 26, 2017), https://www.sec.gov/oiea/investor- alerts-bulletins/ib_protectaccount.html. 43. The risks of harm threatened by Defendant’s secret recording of consumers’ voices are sharpened by the burgeoning application of artificial intelligence to voice recordings in order to impersonate executives and in order to commit fraud. Fake Voices “Help Cyber-Crooks Steal Cash,” BBC News (July 8, 2019), https://www.bbc.com/news/technology-48908736 (“Symantec said it had seen three cases of seemingly deepfaked audio of different chief executives used to trick senior financial controllers into transferring cash.”) V. CLASS ACTION ALLEGATIONS 44. Class Definition: Pursuant to Federal Rules of Civil Procedure 23(b)(2) and (b)(3), Plaintiff brings this case on behalf of a putative class defined as follows: All persons with whom: a. Defendants, any of them and/or a third party acting on any of their behalf participated in a phone call; - 5 - COMPL. b. which call was recorded by Defendants, any of them and/or a third party acting on any of their behalf; c. while the person was on a cellular telephone to which a phone number bearing a California area code was then assigned; d. during the period that begins one year before the filing of the original complaint in this action and ends on the first day of trial. 45. Plaintiff is a member of the class. 46. Exclusions: Excluded from the class are Defendants, any entity in which Defendants (or any of them) have a controlling interest or that has a controlling interest in Defendants (or any of them), Defendants’ legal representatives, assignees, and successors, the judges to whom this case is assigned, and the employees and immediate family members of all of the foregoing. 47. Numerosity: The class numbers in the thousands, at least. 48. There are more than 39 million Californians. 49. Defendant’s customers are frequently displeased with its service. Accordingly, a significant fraction of them call Defendant. 50. Commonality: The questions and answers that will resolve Plaintiff’s dispute with Defendant are the same as those that will resolve putative class members’ disputes with Defendant. These common questions of law and fact include, but are not limited to, the following: a. Did putative class members have phone conversations with Defendant? b. Were putative class members on their cellular telephones during their conversations with Defendant? c. Does Defendant have a pattern and practice of recording calls? d. Does Defendant have a pattern and practice of failing to obtain prior consent to the recordation of calls? e. Should Defendant be enjoined from secretly recording Californians on their cellular telephones? - 6 - COMPL. 51. Typicality: Plaintiff’s claims are typical of the claims of the class. His claims and those of the class arise out of the same automated, script-based, and rule-based course of conduct by Defendant and are based on the same legal and remedial theories. 52. Adequacy: Plaintiff will fairly and adequately protect the interests of the class. Plaintiff has retained competent and capable counsel experienced in consumer-privacy class- action litigation. Plaintiff and his counsel are committed to prosecuting this action vigorously on behalf of the class and have the financial resources to do so. The interests of Plaintiff and his counsel are aligned with those of the proposed class. 53. Superiority: The common issues arising from this conduct that affect Plaintiff and members of the class predominate over any individual issues, making a class action the superior means of resolution. Adjudication of these common issues in a single action has important advantages, including judicial economy, efficiency for class members, and classwide res judicata for Defendant. Classwide relief is essential to compel Defendant to comply with CIPA. a. Control: The interest of individual members of the class in individually controlling the prosecution of separate claims against Defendant is small because the damages in an individual action are dwarfed by the cost of prosecution. b. Litigation: On information and belief, putative class members’ claims at issue are not already being litigated. c. Forum: The forum is a desirable, efficient location in which to resolve the dispute because the Court is familiar with California law, including CIPA, and experienced in managing class actions. d. Difficulties: No significant difficulty is anticipated in the management of this case as a class action. Management of the claims at issue is likely to present significantly fewer difficulties than are presented in many class actions because CIPA articulates bright-line rules for liability and damages. 54. Appropriateness: Defendant has acted on grounds generally applicable to the class, thereby making final injunctive relief and corresponding declaratory relief appropriate on a classwide basis. - 7 - COMPL. VI. FIRST CLAIM FOR RELIEF (Violations of the California Invasion of Privacy Act, Cal. Penal Code § 632.7) 55. Plaintiff realleges and incorporates by reference each and every allegation set forth in the preceding paragraphs. 56. Defendants violated CIPA, Cal. Penal Code § 632.7, by recording cellular telephone communications with Plaintiff and members of the class without their consent. 57. Plaintiff and members of the class are entitled to and seek an award of $5,000 in damages for each such violation. 58. Plaintiff and members of the class seek an injunction prohibiting Defendants and all other persons who are in active concert or participation with them violating CIPA, Cal. Penal Code § 632.7, by recording cellular telephone communications with Californians without their consent. VII. PRAYER FOR RELIEF WHEREFORE, Plaintiff, on his own behalf and on behalf of all members of the class, prays for judgment against Defendants as follows: A. Certification of the proposed class; B. Appointment of Plaintiff as representative of the class; C. Appointment of the undersigned counsel as counsel for the class; D. A declaration that actions complained of herein violate CIPA; E. An order enjoining Defendants and all other persons who are in active concert or participation with them from engaging in the conduct complained of herein; F. An award to Plaintiff and the class of damages, as allowed by law; G. An award to Plaintiff and the class of costs and attorneys’ fees, as allowed by law, equity and/or California Code of Civil Procedure section 1021.5; H. Leave to amend this complaint to conform to the evidence presented at trial; and I. Orders granting such other and further relief as the Court deems necessary, just, and proper. - 8 - COMPL. VIII. DEMAND FOR JURY Plaintiff demands a trial by jury for all issues so triable. IX. SIGNATURE ATTESTATION The CM/ECF user filing this paper attests that concurrence in its filing has been obtained from each of its other signatories. RESPECTFULLY SUBMITTED AND DATED on August 9, 2019. By: /s/ Jon B. Fougner Jon B. Fougner Anthony I. Paronich, Pro Hac Vice Forthcoming [email protected] PARONICH LAW, P.C. 350 Lincoln Street, Suite 2400 Hingham, Massachusetts 02043 Telephone: (617) 738-7080 Facsimile: (617) 830-0327 Samuel J. Strauss, Pro Hac Vice Forthcoming [email protected] TURKE & STRAUSS LLP 613 Williamson Street, Suite 201 Madison, Wisconsin 53703 Telephone: (608) 237-1775 Facsimile: (608) 509-4423 Attorneys for Plaintiff David Escobar and the Proposed Class - 9 - COMPL.

privacy

sunwEYcBD5gMZwczhRsr

Mark L. Javitch (CA SBN 323729) JAVITCH LAW OFFICE 480 S. Ellsworth Ave San Mateo, CA 94401 Telephone: (650) 781-8000 Facsimile: (650) 648-0705 [email protected] Attorney for Plaintiff and the Class UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA JOANNA CHENG, individually and on behalf of all others similarly situated, Plaintiff, Case No.: [Case No.] CLASS ACTION COMPLAINT JURY TRIAL DEMANDED ALL WEB LEADS, INC., a Delaware Corporation, and JOHN DOES 1, an unknown business entity Defendants. CLASS ACTION COMPLAINT Plaintiff JOANNA CHENG (“Plaintiff”) brings this Class Action Complaint and Demand for Jury Trial against Defendant ALL WEB LEADS, INC., and JOHN DOE 1 (together, “Defendants”) to stop their illegal practice of making unauthorized calls with an artificial intelligence voice to the telephones of consumers nationwide, and to obtain redress for all persons injured by their conduct. Plaintiff alleges as follows upon personal knowledge as to Plaintiff and Plaintiff’s own acts and experiences, and, as to all other matters, upon information and belief, including investigation conducted by its attorney. 1 NATURE OF THE ACTION 1. Defendants collect and sell consumer data to third party companies searching for customers. Defendants, placed thousands of calls deploying an artificial intelligence voice to cellular and residential phones in violation of federal and state consumer protection statutes. 2. In 2013, the FCC required prior express written consent from call recipients prior to deploying artificial or prerecorded voice message telemarketing calls (“robocalls”) to wireless numbers and residential lines. Specifically, it ordered that: [A] consumer’s written consent to receive telemarketing robocalls must be signed and be sufficient to show that the consumer: (1) received “clear and conspicuous disclosure” of the consequences of providing the requested consent, i.e., that the consumer will receive future calls that deliver prerecorded messages by or on behalf of a specific seller; and (2) having received this information, agrees unambiguously to receive such calls at a telephone number the consumer designates.[] In addition, the written agreement must be obtained “without requiring, directly or indirectly, that the agreement be executed as a condition of purchasing any good or service.[]” In the Matter of Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 27 F.C.C. Rcd. 1830, 1844 (2012) (footnotes omitted) (“the FCC Letter”). 3. Defendants did not obtain prior express written consent prior to deploying artificial or prerecorded voices against consumers. 4. Therefore, Defendants are in violation of the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227. 5. Congress enacted the TCPA in 1991 to restrict the use of sophisticated telemarketing equipment that could target millions of consumers en masse. Congress found that these calls were not only a nuisance and an invasion of privacy to consumers specifically but were also a threat to interstate commerce generally. See S. Rep. No. 102-178, at 2-3 (1991), as reprinted in 1991 U.S.C.C.A.N. 1968, 1969-71. 6. To illustrate the scale of the problem facing the country, it is estimated that there were over 47 billion robocalls placed in 2018, and 29 billion in just the first half of 2019. 2 7. Accordingly, the TCPA targets unauthorized calls exactly like the one Defendants made to Plaintiff, based on use of technological equipment to spam consumers on a grand scale. 8. By placing the calls at issue, Defendants have violated the privacy and statutory rights of Plaintiff and the Class. 9. Plaintiff therefore seeks an injunction requiring Defendants to cease their unconsented automated calling, as well as an award of statutory and punitive damages to Plaintiff and the Class members, together with costs and reasonable attorneys’ fees. PARTIES 10. Plaintiff JOANNA CHENG is a natural person and is a citizen of the Northern District of California. 11. Defendant ALL WEB LEADS, INC. (“All Web Leads”) is Delaware corporation number 4538333, a corporation organized and existing under the laws of the State of Delaware, with its principal place of business at 7300 Ranch Road, 2222, Building 2, Ste 100, Austin Texas, 78730-3233. 12. AWL’s registered agent is Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware, 19801. 13. The true names and capacities of the Defendants sued herein as John Doe are currently unknown to Plaintiff, who therefore sues such Defendants by fictitious names. Plaintiff will seek leave of Court to amend the Complaint to reflect the true names and capacities of John Doe when such identities become known. 14. Plaintiff does not yet know the identity of Defendants’ employees/agents, identities as John Doe, who had personal participation in or personally authorized the conduct found to have violated the statute and were not merely tangentially involved. They are named tentatively as numerous District Courts have found that individual officers/principals of corporate entities may be personally liable 3 (jointly and severally) under the TCPA if they had direct, personal participation in or personally authorized the conduct found to have violated the statute and were not merely tangentially involved. Upon learning the identities of said individuals, Plaintiff will move to amend the complaint to name the individuals as defendants herein. 15. Plaintiff is informed and believes and thereon alleges that at all relevant times, each and every Defendant was acting as an agent and/or employee of each of the other Defendants and was the owner, agent, servant, joint venturer and employee of the other and each was acting within the course and scope of its ownership, agency, service, joint venture and employment with the full knowledge and consent of each of the other Defendants. Plaintiff is informed and believes and thereon alleges that each of the acts and/or omissions complained of herein was made known to, and ratified by, each of the other Defendants. JURISDICTION AND VENUE 16. This Court has federal subject matter jurisdiction under 28 U.S.C. § 1331, as the action arises under the Telephone Consumer Protection Act, 47 U.S.C. § 227, which is a federal statute. 17. This Court has specific personal jurisdiction over Defendants because Defendants targeted consumers in California, including Plaintiff, a resident of San Mateo County, California. The events giving rise to this lawsuit substantially occurred in this District. 18. This Court has supplemental jurisdiction over all Plaintiff’s California claims under 28 U.S.C § 1367(a) because they are so related to the TCPA claims in this action that arise under the Court’s original jurisdiction that they form part of the same case or controversy under Article III. 19. Venue is proper in this District pursuant to 28 U.S.C. § 1391(b)(2) because Defendants regularly solicit and transact business with residents of this District, such as they did with Plaintiff, in 4 San Mateo County, California and because the wrongful conduct giving rise to this case substantially occurred in this District. INTRADISTRICT ASSIGNMENT 20. Pursuant to Civil L.R. 3-2(c), this case is properly assigned to the San Francisco / Oakland Division because a substantial part of the events or omissions that give rise to Plaintiffs’ and Class members’ claims occurred in the County of San Mateo, California. COMMON FACTUAL ALLEGATIONS 21. Defendants AWL and John Doe place calls using prerecorded or artificial voices to call and engage with consumers and then sells these contact leads to its customers. 22. Defendants amassed the names and phone numbers for thousands of consumers, from unknown sources, and then these placed artificial robocalls on a mass scale to generate sales for Defendant’s contact leads services, who is compensated on a per-lead basis. 23. When the Class members answered their phones expecting to hear from a real person, Defendants pulled a bait and switch by using an artificial voice to attempt to trick people into speaking to a computer and obtain their consumer data for resale. 24. Defendants respected Class members’ time and privacy so little that they did not even hire a real person to call them. Defendants hoped that if enough leads could be generated as a result of engagement with the artificial voice, it would justify the annoyance experienced by the recipients of the calls as the “cost of doing business.” 25. However, Defendants failed to obtain consent from Plaintiff and the Class before the calls and therefore violated consumer protection statutes. FACTS SPECIFIC TO PLAINTIFF JOANNA CHENG 26. On July 6, 2020, Plaintiff received a call on her cell phone ending in 9347 from Defendants and/or their authorized sales agents. 5 27. The incoming call’s caller ID displayed the phone number as 650-686-7416. 28. When Plaintiff answered the phone, Plaintiff heard an artificial or prerecorded voice talking. The voice was completely automated and asked Plaintiff a series of questions, including her birthdate. In order to track the robocall lead, Plaintiff provided a fake birthdate. The call ended with the voice informing Plaintiff that an authorized representative would be following up on the call. 29. Approximately one hour later, Plaintiff received a follow up telephone call from MPX from the telephone number 650-297-3294. The representative from MPX informed Plaintiff that it was following up on Plaintiff’s “inquiry” and repeated the same fake birthdate that Plaintiff had given during the first call. Plaintiff then received an insurance quote from MPX via email. 30. Plaintiff’s attorney sent a letter to MPX asking for the identity of the robocaller. MPX informed Plaintiff that it purchased Plaintiff’s contact lead from AWL. 31. Plaintiff never consented to receive calls from AWL or MPX. Plaintiff had no relationship with AWL or MPX prior to this call and never requested that AWL or MPX contact her in any manner, let alone by artificial or prerecorded voice. AWL refused to disclose the identity of John Doe. 32. Defendants caused Plaintiff the very harm that Congress sought to prevent—namely, a “nuisance and invasion of privacy.” CLASS ALLEGATIONS 33. Class Definition: Plaintiff brings this action pursuant to Federal Rule of Civil Procedure 23(b)(2) and/or 23(b)(3) on behalf of Plaintiff and a class (“Class”) and subclass (“Subclass”) defined as follows: TCPA Class. All persons in the United States who: (1) from the last 4 years to present (2) received at least one telephone call (3) on his or her cellular or residential telephone; (4) that was called and played an artificial or prerecorded voice message; (5) for the purpose of promoting Defendants’ products or services. 6 CLRA Subclass. All residents of California who: (1) from the last 4 years to present (2) received at least one telephone call from Defendants on his or her phone; (3) for the purpose of promoting Defendants’ products or services; (4) where Defendants did not first introduce the identity and address or phone number of the organization calling using a natural, non-prerecorded voice and obtain permission from the recipient to play the prerecorded message. 34. The following people are excluded from the Class and the Subclass: (1) any Judge or Magistrate presiding over this action and members of their families; (2) Defendants, Defendants’ subsidiaries, parents, successors, predecessors, and any entity in which the Defendants or their parents have a controlling interest and its current or former employees, officers and directors; (3) persons who properly execute and file a timely request for exclusion from the Class and the Subclass; (4) persons whose claims in this matter have been finally adjudicated on the merits or otherwise released; (5) Plaintiff’s counsel and Defendants’ counsel; and (6) the legal representatives, successors, and assigns of any such excluded persons. 35. Numerosity: The exact number of the Class and the Subclass members is unknown and not available to Plaintiff, but it is clear that individual joinder is impracticable. On information and belief, Defendants placed telephone calls to thousands of consumers who fall into the definition of the Subclasses. Members of the Class and Subclass can be identified through Defendants’ records. 36. Typicality: Plaintiff’s claims are typical of the claims of other members of the Class and Subclass, in that Plaintiff and the Class and Subclass members sustained damages arising out of Defendants’ uniform wrongful conduct and unsolicited telephone calls. 37. Adequate Representation: Plaintiff will fairly and adequately represent and protect the interests of the other members of the Class and the Subclass. Plaintiff’s claims are made in a representative capacity on behalf of the other members of the Class and the Subclass. Plaintiff has no interests antagonistic to the interests of the other members of the proposed Class and Subclass and is 7 subject to no unique defenses. Plaintiff has retained competent counsel to prosecute the case on behalf of Plaintiff and the proposed Class and Subclass. Plaintiff and Plaintiff’s counsel are committed to vigorously prosecuting this action on behalf of the members of the Class and Subclass and have the financial resources to do so. 38. Policies Generally Applicable to the Subclasses: This class action is appropriate for certification because Defendants have acted or refused to act on grounds generally applicable to the Class and the Subclass as a whole, thereby requiring the Court’s imposition of uniform relief to ensure compatible standards of conduct toward the Class and the Subclass members and making final injunctive relief appropriate with respect to the Class and the Subclass as a whole. Defendants’ practices challenged herein apply to and affect the Class and the Subclass members uniformly, and Plaintiff’s challenge of those practices hinge on Defendants’ conduct with respect to the Class and the Subclass as a whole, not on facts or law applicable only to Plaintiff. 39. Commonality and Predominance: There are many questions of law and fact common to the claims of Plaintiff and the Class and the Subclass, and those questions predominate over any questions that may affect individual members of the Class and the Subclass. Common questions for the Class and the Subclass include, but are not necessarily limited to the following: i. Whether Defendants’ conduct violated the TCPA; ii. Whether Defendants’ conduct violated the TCPA willingly and/or knowingly; iii. Whether Defendants’ conduct violated Cal. Civ. Code §1770(a)(22)(A); iv. Whether Defendants obtained express written consent from Plaintiff and the Class prior to playing the artificial or prerecorded voice messages; v. Whether members of the Class are entitled to treble damages based on the knowingness or willfulness of Defendants’ conduct. 8 vi. Whether the calls introduced the name and phone number or address of its organization with a natural person’s voice to obtain the Subclass member’s consent prior to deploying an artificial or prerecorded message. vii. Whether members of the Subclass are entitled to statutory and punitive damages. 40. Superiority: This case is also appropriate for class certification because class proceedings are superior to all other available methods for the fair and efficient adjudication of this controversy as joinder of all parties is impracticable. The damages suffered by the individual members of the Class and the Subclass will likely be relatively small, especially given the burden and expense of individual prosecution of the complex litigation necessitated by Defendants’ actions. Thus, it would be virtually impossible for the individual members of the Class and the Subclass to obtain effective relief from Defendants’ misconduct. Even if members of the Class and Subclass could sustain such individual litigation, it would still not be preferable to a class action, because individual litigation would increase the delay and expense to all parties due to the complex legal and factual controversies presented in this Complaint. By contrast, a class action presents far fewer management difficulties and provides the benefits of single adjudication, economy of scale, and comprehensive supervision by a single Court. Economies of time, effort and expense will be fostered, and uniformity of decisions ensured. FIRST CAUSE OF ACTION Violation of 47 U.S.C. § 227 Telephone Consumer Protection Act On behalf of Plaintiff and the TCPA Class Against all Defendants 41. Plaintiff incorporates the foregoing allegations as if fully set forth herein. 42. Defendants and their authorized sales agents, including John Doe 1, placed telephone calls to Plaintiff’s and the Class members’ residential and/or cellular telephones. 43. Defendants deployed an artificial or prerecorded voice message against Plaintiff and the Class as proscribed by 47 U.S.C. § 227(b)(1)(A)(iii) and 47 U.S.C. § 227(b)(1)(B). 9 44. Defendants did not have express written consent prior to calling Plaintiff and the Class and deploying their prohibited messages. 45. The messages were aimed at soliciting sales for Defendants’ leads service. 46. Defendants knew that customers were being solicited pursuant to robocalls. 47. As a result of its unlawful conduct, Defendants repeatedly invaded Plaintiff’s and the Class’s personal privacy, causing them to suffer actual damages and, under 47 U.S.C. § 227(b)(3)(B), entitling them to recover $500 in civil fines for each violation and an injunction requiring Defendants to stop their illegal calling campaign. 48. Defendants and/or its agent made the violating calls “willfully” and/or “knowingly” under 47 U.S.C. § 227(b)(3)(C). 49. If the court finds that Defendants willfully and/or knowingly violated this subsection, the court may exercise its discretion to increase damages up to $1500 per violation under 47 U.S.C. § 227(b)(3)(C). SECOND CAUSE OF ACTION Violation of Cal. Civ. Code §1770(a)(22)(A) California Consumers Legal Remedies Act (Against all Defendants on Behalf of Plaintiff and the Subclass) 50. Plaintiff incorporates the foregoing allegations as if fully set forth herein. 51. Cal. Civ. Code §1750, et seq., California’s Consumer Legal Remedies Act, prohibits a specific list of 27 unfair business practices. 52. Cal. Civ. Code §1770(a)(22)(A) prohibits “[d]isseminating an unsolicited prerecorded message by telephone without an unrecorded, natural voice first informing the person answering the telephone of the name of the caller or the organization being represented, the address or the telephone number of the caller, and without first obtaining the consent of that person to listen to the prerecorded message.” 10 53. Defendants violated Cal. Civ. Code §1770(a)(22)(A) by playing a prerecorded voice message to Plaintiff’s and the Class members’ phones without first asking for their express consent with a natural voice. 54. Defendants knew that customers were being solicited pursuant to artificial or prerecorded voice calls without consent. 55. Plaintiff received an artificial or prerecorded voice call from Defendants and/or their agents. 56. On February 8, 2021, Plaintiff’s attorney sent notice and demand of the violation to Defendants’ registered agent via Registered Mail with Return Receipt Requested. Plaintiff’s attorney received the Green Return Receipt Stamped “FEB 16 2021 CT Corporation” and Defendants did not make any correction within the 30 (thirty) day statutory time period under Cal. Civ. Code § 1782. 57. Any consumer who suffers damage under this section may bring a class action on behalf of himself and all those similarly situated. 58. Plaintiff and the Subclass are entitled to injunctive relief and actual, statutory and punitive damages, costs and attorney’s fees. THIRD CAUSE OF ACTION Unfair and Unlawful Violations of California Unfair Competition Law Cal. Bus. & Prof. Code §17200. (Against all Defendants on Behalf of Plaintiff and the Class) 59. Plaintiff incorporates the foregoing allegations as if fully set forth herein. 60. The unfair prong of California’s Unfair Competition Law prohibits unfair business practices that either offend an established public policy or that are immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers. 11 61. The unlawful prong of California’s Unfair Competition Law borrows violations of other laws. Therefore, each of the violations of the TCPA and the CLRA constitute a separate violation of the unlawful prong. 62. Defendants engaged in a pattern and practice of hiring unlicensed business entities such as John Doe 1 to make robocalls using an artificial and/or prerecorded voice to Plaintiff and the Class from fake phone numbers designed to trick Plaintiff and the Class into answering. Defendants then attempted to shield themselves from liability by refusing to disclose any information about the unlicensed business entities. 63. Defendants’ business practices offends California’s public policy preference for California citizens to be free from harassment by telemarketers calling without their consent, and for consumers to know the names and contact details of the companies who are soliciting them. 64. This is a business practice that is immoral, unethical, oppressive, unscrupulous, and substantially injurious to consumers. 65. The utility of Defendants’ practice is very low (as the calls are outlawed) and is vastly outweighed by the serious gravity of harm in the incursion on Plaintiff’s privacy in being tricked into answering. 66. Plaintiff answered the phone based on Defendants unfair business practices and incurred actual and statutory damages. 67. Plaintiffs is entitled to restitution or injunctive relief under this section. PRAYER FOR RELIEF WHEREFORE, Plaintiff JOANNA CHENG, individually and on behalf of the Class and Subclass, prays for the following relief: 12 A. An order certifying the Subclass as defined above, appointing Plaintiff JOANNA CHENG as the representative of the classes and appointing Plaintiff’s counsel as Counsel for the classes; B. An order declaring that Defendants’ actions, as set out above, violate Cal. Civ. Code §1770(a)(22)(A); C. An order declaring that Defendants’ actions, as set out above, violates the Unfair and Unlawful Prongs of Bus. & Prof. Code § 17200; D. An injunction requiring Defendants to cease deploying artificial or prerecorded voice messages; E. An award of statutory and punitive damages and penalties; F. An award of reasonable attorneys’ fees and costs pursuant to Cal. Civ. Proc. Code § 1021.5 and Cal. Civ. Code § 1780(e); and G. Such other and further relief that the Court deems reasonable and just. JURY DEMAND Plaintiff requests a trial by jury of all claims that can be so tried. Dated: June 16, 2021 Respectfully submitted, JOANNA CHENG, individually and on behalf of all others similarly situated, By: /s/ Mark L. Javitch . Mark L. Javitch (California SBN 323729) JAVITCH LAW OFFICE 480 S. Ellsworth Ave. 13 San Mateo CA 94401 Tel: (650) 781-8000 Fax: (650) 648-0705 [email protected] Attorney for Plaintiff and the Putative Class 14

privacy

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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x JOSUE ROMERO, on behalf of himself and all others similarly situated, Plaintiffs, CLASS ACTION COMPLAINT v. AND DEMAND FOR JURY TRIAL PRIMO WATER OPERATIONS, INC., Defendant. : : : : : : : : : : : : - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x INTRODUCTION 1. Plaintiff JOSUE ROMERO, on behalf of himself and others similarly situated, asserts the following claims against Defendant PRIMO WATER OPERATIONS, INC. as follows. 2. Plaintiff is a visually-impaired and legally blind person who requires screen- reading software to read website content using his computer. Plaintiff uses the terms “blind” or “visually-impaired” to refer to all people with visual impairments who meet the legal definition of blindness in that they have a visual acuity with correction of less than or equal to 20 x 200. Some blind people who meet this definition have limited vision. Others have no vision. 3. Based on a 2010 U.S. Census Bureau report, approximately 8.1 million people in the United States are visually impaired, including 2.0 million who are blind, and according to the American Foundation for the Blind’s 2015 report, approximately 400,000 visually impaired persons live in the State of New York. 4. Plaintiff brings this civil rights action against Defendant for its failure to design, construct, maintain, and operate its website to be fully accessible to and independently usable by Plaintiff and other blind or visually-impaired people. Defendant’s denial of full and equal access to its website, and therefore denial of its goods and services offered thereby, is a violation of Plaintiff’s rights under the Americans with Disabilities Act (“ADA”). 5. Because Defendant’s website, www.primowater.com (the “Website” or “Defendant’s website”), is not equally accessible to blind and visually-impaired consumers, it violates the ADA. Plaintiff seeks a permanent injunction to cause a change in Defendant’s corporate policies, practices, and procedures so that Defendant’s website will become and remain accessible to blind and visually- impaired consumers. JURISDICTION AND VENUE 6. This Court has subject-matter jurisdiction over this action under 28 U.S.C. § 1331 and 42 U.S.C. § 12181, as Plaintiff’s claims arise under Title III of the ADA, 42 U.S.C. § 12181, et seq., and 28 U.S.C. § 1332. 7. This Court has supplemental jurisdiction under 28 U.S.C. § 1367 over Plaintiff’s New York State Human Rights Law, N.Y. Exec. Law Article 15, (“NYSHRL”) and New York City Human Rights Law, N.Y.C. Admin. Code § 8-101 et seq., (“NYCHRL”) claims. 8. Venue is proper in this district under 28 U.S.C. §1391(b)(1) and (2) because Defendant conducts and continues to conduct a substantial and significant amount of business in this District, and a substantial portion of the conduct complained of herein occurred in this District because Plaintiff attempted to utilize, on a number of occasions, the subject Website within this Judicial District. 9. Defendant is subject to personal jurisdiction in this District. Defendant has been and is committing the acts or omissions alleged herein in the Southern District of New York that caused injury, and violated rights the ADA prescribes to Plaintiff and to other blind and other visually impaired-consumers. A substantial part of the acts and omissions giving rise to Plaintiff’s claims occurred in this District: on several separate occasions, Plaintiff has been denied the full use and enjoyment of the facilities, goods and services offered to the general public, on Defendant’s Website in New York County. These access barriers that Plaintiff encountered have caused a denial of Plaintiff’s full and equal access multiple times in the past, and now deter Plaintiff on a regular basis from accessing the Defendant’s Website in the future. 10. This Court is empowered to issue a declaratory judgment under 28 U.S.C. §§ 2201 and 2202. THE PARTIES 11. Plaintiff JOSUE ROMERO, at all relevant times, is a resident of Brooklyn, New York. Plaintiff is a blind, visually-impaired handicapped person and a member of member of a protected class of individuals under the ADA, under 42 U.S.C. § 12102(1)-(2), and the regulations implementing the ADA set forth at 28 CFR §§ 36.101 et seq., the NYSHRL and NYCHRL. 12. Defendant is and was at all relevant times a North Carolina Corporation doing business in New York. 13. Defendant’s Website, and its facilities, goods, and services offered thereupon, is a public accommodation within the definition of Title III of the ADA, 42 U.S.C. § 12181(7). NATURE OF ACTION 14. The Internet has become a significant source of information, a portal, and a tool for conducting business, doing everyday activities such as shopping, learning, banking, researching, as well as many other activities for sighted, blind and visually- impaired persons alike. 15. In today’s tech-savvy world, blind and visually-impaired people have the ability to access websites using keyboards in conjunction with screen access software that vocalizes the visual information found on a computer screen or displays the content on a refreshable Braille display. This technology is known as screen-reading software. Screen-reading software is currently the only method a blind or visually- impaired person may independently access the internet. Unless websites are designed to be read by screen-reading software, blind and visually-impaired persons are unable to fully access websites, and the information, products, goods and contained thereon. 16. Blind and visually-impaired users of Windows operating system-enabled computers and devices have several screen reading software programs available to them. Some of these programs are available for purchase and other programs are available without the user having to purchase the program separately. Job Access With Speech, otherwise known as “JAWS” is currently the most popular, separately purchased and downloaded screen-reading software program available for a Windows computer. 17. For screen-reading software to function, the information on a website must be capable of being rendered into text. If the website content is not capable of being rendered into text, the blind or visually-impaired user is unable to access the same content available to sighted users. 18. The international website standards organization, the World Wide Web Consortium, known throughout the world as W3C, has published version 2.0 of the Web Content Accessibility Guidelines (“WCAG 2.1”). WCAG 2.1 are well- established guidelines for making websites accessible to blind and visually- impaired people. These guidelines are universally followed by most large business entities and government agencies to ensure their websites are accessible. 19. Non-compliant websites pose common access barriers to blind and visually- impaired persons. Common barriers encountered by blind and visually impaired persons include, but are not limited to, the following: a. A text equivalent for every non-text element is not provided; b. Title frames with text are not provided for identification and navigation; c. Equivalent text is not provided when using scripts; d. Forms with the same information and functionality as for sighted persons are not provided; e. Information about the meaning and structure of content is not conveyed by more than the visual presentation of content; f. Text cannot be resized without assistive technology up to 200% without losing content or functionality; g. If the content enforces a time limit, the user is not able to extend, adjust or disable it; h. Web pages do not have titles that describe the topic or purpose; i. The purpose of each link cannot be determined from the link text alone or from the link text and its programmatically determined link context; j. One or more keyboard operable user interface lacks a mode of operation where the keyboard focus indicator is discernible; k. The default human language of each web page cannot be programmatically determined; l. When a component receives focus, it may initiate a change in context; m. Changing the setting of a user interface component may automatically cause a change of context where the user has not been advised before using the component; n. Labels or instructions are not provided when content requires user input, which include captcha prompts that require the user to verify that he or she is not a robot; o. In content which is implemented by using markup languages, elements do not have complete start and end tags, elements are not nested according to their specifications, elements may contain duplicate attributes, and/or any IDs are not unique; p. Inaccessible Portable Document Format (PDFs); and, q. The name and role of all User Interface elements cannot be programmatically determined; items that can be set by the user cannot be programmatically set; and/or notification of changes to these items is not available to user agents, including assistive technology. STATEMENT OF FACTS Defendant’s Barriers on Its Website 20. Defendant is an drink service and retail company, and owns and operates the website, www.primowater.com (its “Website”), offering features which should allow all consumers to access the goods and services and which Defendant ensures the delivery of such goods throughout the United States, including New York State. 21. Defendant operates and distributes its products throughout the United States, including New York. 22. Defendant offers the commercial website, www.primowater.com, to the public. The website offers features which should allow all consumers to access the goods and services whereby Defendant allows for the delivery of those ordered goods to consumers throughout the United States, including New York State. The goods and services offered by Defendant include, but are not limited to the following: the ability to browse various drink services for purchase and delivery, view a blog, obtain defendant’s contact information, and related goods and services available online. 23. It is, upon information and belief, Defendant’s policy and practice to deny Plaintiff, along with other blind or visually-impaired users, access to Defendant’s website, and to therefore specifically deny the goods and services that are offered to the general public. Due to Defendant’s failure and refusal to remove access barriers to its website, Plaintiff and visually-impaired persons have been and are still being denied equal access to Defendant’s Website, and the numerous goods and services and benefits offered to the public through the Website. 24. Plaintiff is a visually-impaired and legally blind person, who cannot use a computer without the assistance of screen-reading software. Plaintiff is, however, a proficient JAWS screen-reader user and uses it to access the Internet. Plaintiff has visited the Website on separate occasions using the JAWS screen-reader. 25. During Plaintiff’s visits to the Website, the last occurring in August 2020, Plaintiff encountered multiple access barriers that denied Plaintiff full and equal access to the facilities, goods and services offered to the public and made available to the public; and that denied Plaintiff the full enjoyment of the facilities, goods and services of the Website. 26. While attempting to navigate the Website, Plaintiff encountered multiple accessibility barriers for blind or visually-impaired people that include, but are not limited to, the following: 27. Lack of Alternative Text (“alt-text”), or a text equivalent. Alt-text is an invisible code embedded beneath a graphical image on a website. Web accessibility requires that alt-text be coded with each picture so that screen-reading software can speak the alt-text where a sighted user sees pictures, which includes captcha prompts. Alt- text does not change the visual presentation, but instead a text box shows when the cursor moves over the picture. The lack of alt-text on these graphics prevents screen readers from accurately vocalizing a description of the graphics. 28. Empty Links That Contain No Text causing the function or purpose of the link to not be presented to the user. This can introduce confusion for keyboard and screen- reader users; 29. Redundant Links where adjacent links go to the same URL address which results in additional navigation and repetition for keyboard and screen-reader users; and 30. Linked Images Missing Alt-text, which causes problems if an image within a link contains no text and that image does not provide alt-text. A screen reader then has no content to present the user as to the function of the link, including information contained in PDFs. 31. As a result of visiting Defendant’s Website and from investigations performed on his behalf, Plaintiff is aware that the Website includes at least the following additional barriers blocking his full and equal use: a. A Pop-up has been identified with a promotion "20% off your dispenser order" by providing your email address. There is no indication that a Pop-Up is on the screen, therefore, negates the purpose of the Pop-Up itself and because the information is missing, screen readers are unable to interpret the Pop-Up and the user will miss the promotion and discounts that are being offered. b. The video located on the main page is accessible, however, once you play the video, a new window opens up, and it is inaccessible, losing advertising or promotional information that the website is trying to convey to its users. c. Site element like text is not labeled properly to integrate with screen reader, some text is spelled out instead of read as a whole word, barring the user from thoroughly understanding the text. d. Site element such as product item number is not labeled properly, giving the user useless and confusing information which would bar the user from making a quick and direct purchase. e. Product have text that describe the item's original price and sale price. When the screen reader interprets the pricing, both prices are read but there is no distinction between original and sale prices nor is there any way to determine what price the item is being offered at. Defendant Must Remove Barriers To Its Website 32. Due to the inaccessibility of Defendant’s Website, blind and visually-impaired customers such as Plaintiff, who need screen-readers, cannot fully and equally use or enjoy the facilities, products, and services Defendant offers to the public on its Website. The access barriers Plaintiff encountered have caused a denial of Plaintiff’s full and equal access in the past, and now deter Plaintiff on a regular basis from visiting the Website, presently and in the future. 33. These access barriers on Defendant’s Website have deterred Plaintiff from learning about those various drink services for purchase and delivery, and enjoying them equally to sighted individuals because: Plaintiff was unable to determine and or purchase items from its Website, among other things. 34. If the Website was equally accessible to all, Plaintiff could independently navigate the Website and complete a desired transaction as sighted individuals do. 35. Through his attempts to use the Website, Plaintiff has actual knowledge of the access barriers that make these services inaccessible and independently unusable by blind and visually-impaired people. 36. Because simple compliance with the WCAG 2.1 Guidelines would provide Plaintiff and other visually-impaired consumers with equal access to the Website, Plaintiff alleges that Defendant has engaged in acts of intentional discrimination, including but not limited to the following policies or practices: a. Constructing and maintaining a website that is inaccessible to visually-impaired individuals, including Plaintiff; b. Failure to construct and maintain a website that is sufficiently intuitive so as to be equally accessible to visually-impaired individuals, including Plaintiff; and, c. Failing to take actions to correct these access barriers in the face of substantial harm and discrimination to blind and visually-impaired consumers, such as Plaintiff, as a member of a protected class. 37. Defendant therefore uses standards, criteria or methods of administration that have the effect of discriminating or perpetuating the discrimination of others, as alleged herein. 38. The ADA expressly contemplates the injunctive relief that Plaintiff seeks in this action. In relevant part, the ADA requires: In the case of violations of . . . this title, injunctive relief shall include an order to alter facilities to make such facilities readily accessible to and usable by individuals with disabilities . . . Where appropriate, injunctive relief shall also include requiring the . . . modification of a policy . . . 42 U.S.C. § 12188(a)(2). 39. Because Defendant’s Website have never been equally accessible, and because Defendant lacks a corporate policy that is reasonably calculated to cause its Website to become and remain accessible, Plaintiff invokes 42 U.S.C. § 12188(a)(2) and seeks a permanent injunction requiring Defendant to retain a qualified consultant acceptable to Plaintiff (“Agreed Upon Consultant”) to assist Defendant to comply with WCAG 2.1 guidelines for Defendant’s Website. Plaintiff seeks that this permanent injunction requires Defendant to cooperate with the Agreed Upon Consultant to: a. Train Defendant’s employees and agents who develop the Website on accessibility compliance under the WCAG 2.1 guidelines; b. Regularly check the accessibility of the Website under the WCAG 2.0 guidelines; c. Regularly test user accessibility by blind or vision-impaired persons to ensure that Defendant’s Website complies under the WCAG 2.1 guidelines; and, d. Develop an accessibility policy that is clearly disclosed on Defendant’s Websites, with contact information for users to report accessibility-related problems. 40. If the Website was accessible, Plaintiff and similarly situated blind and visually- impaired people could independently view service items, shop for and otherwise research related goods and services available via the Website. 41. Although Defendant may currently have centralized policies regarding maintaining and operating its Website, Defendant lacks a plan and policy reasonably calculated to make them fully and equally accessible to, and independently usable by, blind and other visually-impaired consumers. 42. Defendant has, upon information and belief, invested substantial sums in developing and maintaining their Website and has generated significant revenue from the Website. These amounts are far greater than the associated cost of making their Website equally accessible to visually impaired customers. 43. Without injunctive relief, Plaintiff and other visually-impaired consumers will continue to be unable to independently use the Website, violating their rights. CLASS ACTION ALLEGATIONS 44. Plaintiff, on behalf of himself and all others similarly situated, seeks to certify a nationwide class under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind individuals in the United States who have attempted to access Defendant’s Website and as a result have been denied access to the equal enjoyment of goods and services, during the relevant statutory period. 45. Plaintiff, on behalf of himself and all others similarly situated, seeks certify a New York State subclass under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind individuals in the State of New York who have attempted to access Defendant’s Website and as a result have been denied access to the equal enjoyment of those services, during the relevant statutory period. 46. Plaintiff, on behalf of himself and all others similarly situated, seeks certify a New York City subclass under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind individuals in the City of New York who have attempted to access Defendant’s Website and as a result have been denied access to the equal enjoyment of goods and services offered, during the relevant statutory period. 47. Common questions of law and fact exist amongst Class, including: a. Whether Defendant’s Website is a “public accommodation” under the ADA; b. Whether Defendant’s Website is a “place or provider of public accommodation” under the NYSHRL or NYCHRL; c. Whether Defendant’s Website denies the full and equal enjoyment of its products, services, facilities, privileges, advantages, or accommodations to people with visual disabilities, violating the ADA; and d. Whether Defendant’s Website denies the full and equal enjoyment of its products, services, facilities, privileges, advantages, or accommodations to people with visual disabilities, violating the NYSHRL or NYCHRL. 48. Plaintiff’s claims are typical of the Class. The Class, similarly to the Plaintiff, are severely visually impaired or otherwise blind, and claim that Defendant has violated the ADA, NYSYRHL or NYCHRL by failing to update or remove access barriers on its Website so either can be independently accessible to the Class. 49. Plaintiff will fairly and adequately represent and protect the interests of the Class Members because Plaintiff has retained and is represented by counsel competent and experienced in complex class action litigation, and because Plaintiff has no interests antagonistic to the Class Members. Class certification of the claims is appropriate under Fed. R. Civ. P. 23(b)(2) because Defendant has acted or refused to act on grounds generally applicable to the Class, making appropriate both declaratory and injunctive relief with respect to Plaintiff and the Class as a whole. 50. Alternatively, class certification is appropriate under Fed. R. Civ. P. 23(b)(3) because fact and legal questions common to Class Members predominate over questions affecting only individual Class Members, and because a class action is superior to other available methods for the fair and efficient adjudication of this litigation. 51. Judicial economy will be served by maintaining this lawsuit as a class action in that it is likely to avoid the burden that would be otherwise placed upon the judicial system by the filing of numerous similar suits by people with visual disabilities throughout the United States. FIRST CAUSE OF ACTION VIOLATIONS OF THE ADA, 42 U.S.C. § 12181 et seq. 52. Plaintiff, on behalf of himself and the Class Members, repeats and realleges every allegation of the preceding paragraphs as if fully set forth herein. 53. Section 302(a) of Title III of the ADA, 42 U.S.C. § 12101 et seq., provides: No individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation. 42 U.S.C. § 12182(a). 54. Defendant’s Website is a public accommodations within the definition of Title III of the ADA, 42 U.S.C. § 12181(7). The Website is a service that is offered to the general public, and as such, must be equally accessible to all potential consumers. 55. Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to deny individuals with disabilities the opportunity to participate in or benefit from the products, services, facilities, privileges, advantages, or accommodations of an entity. 42 U.S.C. § 12182(b)(1)(A)(i). 56. Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to deny individuals with disabilities an opportunity to participate in or benefit from the products, services, facilities, privileges, advantages, or accommodation, which is equal to the opportunities afforded to other individuals. 42 U.S.C. § 12182(b)(1)(A)(ii). 57. Under Section 302(b)(2) of Title III of the ADA, unlawful discrimination also includes, among other things: [A] failure to make reasonable modifications in policies, practices, or procedures, when such modifications are necessary to afford such goods, services, facilities, privileges, advantages, or accommodations to individuals with disabilities, unless the entity can demonstrate that making such modifications would fundamentally alter the nature of such goods, services, facilities, privileges, advantages or accommodations; and a failure to take such steps as may be necessary to ensure that no individual with a disability is excluded, denied services, segregated or otherwise treated differently than other individuals because of the absence of auxiliary aids and services, unless the entity can demonstrate that taking such steps would fundamentally alter the nature of the good, service, facility, privilege, advantage, or accommodation being offered or would result in an undue burden. 42 U.S.C. § 12182(b)(2)(A)(ii)-(iii). 58. The acts alleged herein constitute violations of Title III of the ADA, and the regulations promulgated thereunder. Plaintiff, who is a member of a protected class of persons under the ADA, has a physical disability that substantially limits the major life activity of sight within the meaning of 42 U.S.C. §§ 12102(1)(A)-(2)(A). Furthermore, Plaintiff has been denied full and equal access to the Website, has not been provided services that are provided to other patrons who are not disabled, and has been provided services that are inferior to the services provided to non-disabled persons. Defendant has failed to take any prompt and equitable steps to remedy its discriminatory conduct. These violations are ongoing. 59. Under 42 U.S.C. § 12188 and the remedies, procedures, and rights set forth and incorporated therein, Plaintiff, requests relief as set forth below. SECOND CAUSE OF ACTION VIOLATIONS OF THE NYSHRL 60. Plaintiff, on behalf of himself and the New York State Sub-Class Members, repeats and realleges every allegation of the preceding paragraphs as if fully set forth herein. 61. N.Y. Exec. Law § 296(2)(a) provides that it is “an unlawful discriminatory practice for any person, being the owner, lessee, proprietor, manager, superintendent, agent or employee of any place of public accommodation . . . because of the . . . disability of any person, directly or indirectly, to refuse, withhold from or deny to such person any of the accommodations, advantages, facilities or privileges thereof.” 62. Defendant’s Website and its’ sale of goods to the general public, constitute sales establishments and public accommodations within the definition of N.Y. Exec. Law § 292(9). Defendant’s Website is a service, privilege or advantage of Defendant. 63. Defendant is subject to New York Human Rights Law because it owns and operates its Website. Defendant is a person within the meaning of N.Y. Exec. Law § 292(1). 64. Defendant is violating N.Y. Exec. Law § 296(2)(a) in refusing to update or remove access barriers to its Website, causing its Website to be completely inaccessible to the blind. This inaccessibility denies blind patrons full and equal access to the facilities, services that Defendant makes available to the non-disabled public. 65. Under N.Y. Exec. Law § 296(2)(c)(i), unlawful discriminatory practice includes, among other things, “a refusal to make reasonable modifications in policies, practices, or procedures, when such modifications are necessary to afford facilities, privileges, advantages or accommodations to individuals with disabilities, unless such person can demonstrate that making such modifications would fundamentally alter the nature of such facilities, privileges, advantages or accommodations being offered or would result in an undue burden". 66. Under N.Y. Exec. Law § 296(2)(c)(ii), unlawful discriminatory practice also includes, “a refusal to take such steps as may be necessary to ensure that no individual with a disability is excluded or denied services because of the absence of auxiliary aids and services, unless such person can demonstrate that taking such steps would fundamentally alter the nature of the facility, privilege, advantage or accommodation being offered or would result in an undue burden.” 67. Readily available, well-established guidelines exist on the Internet for making websites accessible to the blind and visually impaired. These guidelines have been followed by other large business entities and government agencies in making their website accessible, including but not limited to: adding alt-text to graphics and ensuring that all functions can be performed using a keyboard. Incorporating the basic components to make its Website accessible would neither fundamentally alter the nature of Defendant’s business nor result in an undue burden to Defendant. 68. Defendant’s actions constitute willful intentional discrimination against the class on the basis of a disability in violation of the NYSHRL, N.Y. Exec. Law § 296(2) in that Defendant has: a. constructed and maintained a website that is inaccessible to blind class members with knowledge of the discrimination; and/or b. constructed and maintained a website that is sufficiently intuitive and/or obvious that is inaccessible to blind class members; and/or c. failed to take actions to correct these access barriers in the face of substantial harm and discrimination to blind class members. 69. Defendant has failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 70. Defendant discriminates, and will continue in the future to discriminate against Plaintiff and New York State Sub-Class Members on the basis of disability in the full and equal enjoyment of the products, services, facilities, privileges, advantages, accommodations and/or opportunities of Defendant’s Website under § 296(2) et seq. and/or its implementing regulations. Unless the Court enjoins Defendant from continuing to engage in these unlawful practices, Plaintiff and the Sub-Class Members will continue to suffer irreparable harm. 71. Defendant’s actions were and are in violation of New York State Human Rights Law and therefore Plaintiff invokes his right to injunctive relief to remedy the discrimination. 72. Plaintiff is also entitled to compensatory damages, as well as civil penalties and fines under N.Y. Exec. Law § 297(4)(c) et seq. for each and every offense. 73. Plaintiff is also entitled to reasonable attorneys’ fees and costs. 74. Under N.Y. Exec. Law § 297 and the remedies, procedures, and rights set forth and incorporated therein Plaintiff prays for judgment as set forth below. THIRD CAUSE OF ACTION VIOLATION OF THE NEW YORK STATE CIVIL RIGHTS LAW 75. Plaintiff, on behalf of himself and the New York State Sub-Class Members, repeats and realleges every allegation of the preceding paragraphs as if fully set forth herein. 76. Plaintiff served notice thereof upon the attorney general as required by N.Y. Civil Rights Law § 41. 77. N.Y. Civil Rights Law § 40 provides that “all persons within the jurisdiction of this state shall be entitled to the full and equal accommodations, advantages, facilities and privileges of any places of public accommodations, resort or amusement, subject only to the conditions and limitations established by law and applicable alike to all persons. No persons, being the owner, lessee, proprietor, manager, superintendent, agent, or employee of any such place shall directly or indirectly refuse, withhold from, or deny to any person any of the accommodations, advantages, facilities and privileges thereof . . .” 78. N.Y. Civil Rights Law § 40-c(2) provides that “no person because of . . . disability, as such term is defined in section two hundred ninety-two of executive law, be subjected to any discrimination in his or her civil rights, or to any harassment, as defined in section 240.25 of the penal law, in the exercise thereof, by any other person or by any firm, corporation or institution, or by the state or any agency or subdivision.” 79. Defendant’s Website is a service, privilege or advantage of Defendant and its Website which offers such goods and services to the general public is required to be equally accessible to all. 80. Defendant is subject to New York Civil Rights Law because it owns and operates their Website, and Defendant is a person within the meaning of N.Y. Civil Law § 40-c(2). 81. Defendant is violating N.Y. Civil Rights Law § 40-c(2) in refusing to update or remove access barriers to its Website, causing its Website and the goods and services integrated with such Website to be completely inaccessible to the blind. This inaccessibility denies blind patrons full and equal access to the facilities, goods and services that Defendant makes available to the non-disabled public. 82. N.Y. Civil Rights Law § 41 states that “any corporation which shall violate any of the provisions of sections forty, forty-a, forty-b or forty-two . . . shall for each and every violation thereof be liable to a penalty of not less than one hundred dollars nor more than five hundred dollars, to be recovered by the person aggrieved thereby . . .” 83. Under NY Civil Rights Law § 40-d, “any person who shall violate any of the provisions of the foregoing section, or subdivision three of section 240.30 or section 240.31 of the penal law, or who shall aid or incite the violation of any of said provisions shall for each and every violation thereof be liable to a penalty of not less than one hundred dollars nor more than five hundred dollars, to be recovered by the person aggrieved thereby in any court of competent jurisdiction in the county in which the defendant shall reside ...” 84. Defendant has failed to take any prompt and equitable steps to remedy its discriminatory conduct. These violations are ongoing. 85. Defendant discriminates, and will continue in the future to discriminate against Plaintiff and New York State Sub-Class Members on the basis of disability are being directly or indirectly refused, withheld from, or denied the accommodations, advantages, facilities and privileges thereof in § 40 et seq. and/or its implementing regulations. 86. Plaintiff is entitled to compensatory damages of five hundred dollars per instance, as well as civil penalties and fines under N.Y. Civil Law § 40 et seq. for each and every offense. FOURTH CAUSE OF ACTION VIOLATIONS OF THE NYCHRL 87. Plaintiff, on behalf of himself and the New York City Sub-Class Members, repeats and realleges every allegation of the preceding paragraphs as if fully set forth herein. 88. N.Y.C. Administrative Code § 8-107(4)(a) provides that “It shall be an unlawful discriminatory practice for any person, being the owner, lessee, proprietor, manager, superintendent, agent or employee of any place or provider of public accommodation, because of . . . disability . . . directly or indirectly, to refuse, withhold from or deny to such person, any of the accommodations, advantages, facilities or privileges thereof.” 89. Defendant’s Website is a sales establishment and public accommodations within the definition of N.Y.C. Admin. Code § 8-102(9). 90. Defendant is subject to NYCHRL because it owns and operates its Website, making it a person within the meaning of N.Y.C. Admin. Code § 8-102(1). 91. Defendant is violating N.Y.C. Administrative Code § 8-107(4)(a) in refusing to update or remove access barriers to Website, causing its Website and the services integrated with such Website to be completely inaccessible to the blind. This inaccessibility denies blind patrons full and equal access to the facilities, products, and services that Defendant makes available to the non-disabled public. 92. Defendant is required to “make reasonable accommodation to the needs of persons with disabilities . . . any person prohibited by the provisions of [§ 8-107 et seq.] from discriminating on the basis of disability shall make reasonable accommodation to enable a person with a disability to . . . enjoy the right or rights in question provided that the disability is known or should have been known by the covered entity.” N.Y.C. Admin. Code § 8-107(15)(a). 93. Defendant’s actions constitute willful intentional discrimination against the Sub- Class on the basis of a disability in violation of the N.Y.C. Administrative Code § 8-107(4)(a) and § 8-107(15)(a) in that Defendant has: a. constructed and maintained a website that is inaccessible to blind class members with knowledge of the discrimination; and/or b. constructed and maintained a website that is sufficiently intuitive and/or obvious that is inaccessible to blind class members; and/or c. failed to take actions to correct these access barriers in the face of substantial harm and discrimination to blind class members. 94. Defendant has failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 95. As such, Defendant discriminates, and will continue in the future to discriminate against Plaintiff and members of the proposed class and subclass on the basis of disability in the full and equal enjoyment of the products, services, facilities, privileges, advantages, accommodations and/or opportunities of its Website under § 8-107(4)(a) and/or its implementing regulations. Unless the Court enjoins Defendant from continuing to engage in these unlawful practices, Plaintiff and members of the class will continue to suffer irreparable harm. 96. Defendant’s actions were and are in violation of the NYCHRL and therefore Plaintiff invokes his right to injunctive relief to remedy the discrimination. 97. Plaintiff is also entitled to compensatory damages, as well as civil penalties and fines under N.Y.C. Administrative Code § 8-120(8) and § 8-126(a) for each offense as well as punitive damages pursuant to § 8-502. 98. Plaintiff is also entitled to reasonable attorneys’ fees and costs. 99. Under N.Y.C. Administrative Code § 8-120 and § 8-126 and the remedies, procedures, and rights set forth and incorporated therein Plaintiff prays for judgment as set forth below. FIFTH CAUSE OF ACTION DECLARATORY RELIEF 100. Plaintiff, on behalf of himself and the Class and New York State and City Sub- Classes Members, repeats and realleges every allegation of the preceding paragraphs as if fully set forth herein. 101. An actual controversy has arisen and now exists between the parties in that Plaintiff contends, and is informed and believes that Defendant denies, that its Website contains access barriers denying blind customers the full and equal access to the products, services and facilities of its Website, which Defendant owns, operations and controls, fails to comply with applicable laws including, but not limited to, Title III of the Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et seq., and N.Y.C. Admin. Code § 8-107, et seq. prohibiting discrimination against the blind. 102. A judicial declaration is necessary and appropriate at this time in order that each of the parties may know their respective rights and duties and act accordingly. PRAYER FOR RELIEF WHEREFORE, Plaintiff respectfully requests this Court grant the following relief: a. A preliminary and permanent injunction to prohibit Defendant from violating the Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et seq., N.Y.C. Administrative Code § 8-107, et seq., and the laws of New York; b. A preliminary and permanent injunction requiring Defendant to take all the steps necessary to make its Website into full compliance with the requirements set forth in the ADA, and its implementing regulations, so that the Website is readily accessible to and usable by blind individuals; c. A declaration that Defendant owns, maintains and/or operates its Website in a manner that discriminates against the blind and which fails to provide access for persons with disabilities as required by Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et seq., N.Y.C. Administrative Code § 8-107, et seq., and the laws of New York d. An order certifying the Class and Sub-Classes under Fed. R. Civ. P. 23(a) & (b)(2) and/or (b)(3), appointing Plaintiff as Class Representative, and his attorneys as Class Counsel; e. Compensatory damages in an amount to be determined by proof, including all applicable statutory and punitive damages and fines, to Plaintiff and the proposed class and subclasses for violations of their civil rights under New York State Human Rights Law and City Law; f. Pre- and post-judgment interest; g. An award of costs and expenses of this action together with reasonable attorneys’ and expert fees; and h. Such other and further relief as this Court deems just and proper. DEMAND FOR TRIAL BY JURY Pursuant to Fed. R. Civ. P. 38(b), Plaintiff demands a trial by jury on all questions of fact the Complaint raises. Dated: Brooklyn, New York September 2, 2020 COHEN & MIZRAHI LLP By: /s/ Joseph H. Mizrahi Joseph H. Mizrahi, Esq. [email protected] 300 Cadman Plaza West, 12th Fl. Brooklyn, New York 11201 Tel: (929) 575-4175 Fax: (929) 575-4195 Attorneys For Plaintiff

civil rights, immigration, family

O7NAC4cBD5gMZwczRjdA

Todd M. Friedman (SBN 216752) Adrian R. Bacon (SBN 280332) LAW OFFICES OF TODD M. FRIEDMAN, P.C. 21550 Oxnard St., Suite 780 Woodland Hills, CA 91367 Phone: 323-306-4234 Fax: 866-633-0228 [email protected] [email protected] Attorneys for Plaintiff UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA '20CV2358 LL DMS ALEX BECK, individually, and on behalf of all others similarly situated, Plaintiff, v. MOSSY NISSAN OCEANSIDE, and DOES 1 through 10, inclusive, Case No.: CLASS ACTION COMPLAINT FOR DAMAGES AND INJUNCTIVE RELIEF PURSUANT TO THE TELEPHONE CONSUMER PROTECTION ACT, 47 U.S.C. § 227, ET SEQ. JURY TRIAL DEMANDED Defendant. INTRODUCTION 1. ALEX BECK (“Plaintiff”) bring this Class Action Complaint for damages, injunctive relief, and any other available legal or equitable remedies, resulting from the illegal actions of MOSSY NISSAN OCEANSIDE (“Defendant”), in negligently, knowingly, and/or willfully contacting Plaintiff on Plaintiff’s cellular telephone in violation of the Telephone Consumer Protection Act, 47. U.S.C. § 227 et seq. (“TCPA”) and related regulations, specifically the National Do-Not-Call provisions, thereby invading Plaintiff’s privacy. Plaintiff alleges as follows upon personal knowledge as to himself and his own acts and experiences, and, as to all other matters, upon information and belief, including investigation conducted by their attorneys. CLASS COMPLAINT described within this complaint, and to protect the privacy of citizens like Plaintiff. “Voluminous consumer complaints about abuses of telephone technology – for example, computerized calls dispatched to private homes – prompted Congress to pass the TCPA.” Mims v. Arrow Fin. Servs., LLC, 132 S. Ct. 740, 744 (2012). 3. In enacting the TCPA, Congress intended to give consumers a choice as to how creditors and telemarketers may call them, and made specific findings that “[t]echnologies that might allow consumers to avoid receiving such calls are not universally available, are costly, are unlikely to be enforced, or place an inordinate burden on the consumer. TCPA, Pub.L. No. 102–243, § 11. Toward this end, Congress found that [b]anning such automated or prerecorded telephone calls to the home, except when the receiving party consents to receiving the call or when such calls are necessary in an emergency situation affecting the health and safety of the consumer, is the only effective means of protecting telephone consumers from this nuisance and privacy invasion. Id. at § 12; see also Martin v. Leading Edge Recovery Solutions, LLC, 2012 WL 3292838, at* 4 (N.D.Ill. Aug. 10, 2012) (citing Congressional findings on TCPA’s purpose). 4. Congress also specifically found that “the evidence presented to the Congress indicates that automated or prerecorded calls are a nuisance and an invasion of privacy, regardless of the type of call….” Id. at §§ 12-13. See also, Mims, 132 S. Ct. at 744. 5. As Judge Easterbrook of the Seventh Circuit recently explained in a TCPA case regarding calls to a non-debtor similar to this one: The Telephone Consumer Protection Act … is well known for its provisions limiting junk-fax transmissions. A less-litigated part of the Act curtails the use of automated dialers and prerecorded messages to CLASS COMPLAINT cell phones, whose subscribers often are billed by the minute as soon as the call is answered—and routing a call to voicemail counts as answering the call. An automated call to a landline phone can be an annoyance; an automated call to a cell phone adds expense to annoyance. Soppet v. Enhanced Recovery Co., LLC, 679 F.3d 637, 638 (7th Cir. 2012). 6. The Ninth Circuit recently affirmed certification of a TCPA class case remarkably similar to this one in Meyer v. Portfolio Recovery Associates, LLC, 707 F.3d 1036 (9th Cir. Dec. 28, 2012). JURISDICTION & VENUE 7. Jurisdiction is proper under 28 U.S.C. § 1331 because Plaintiff’s claims arise under a law of the United States, the TCPA. 8. Venue is proper in the United States District Court for the Southern District of California pursuant to 28 U.S.C. § 1391(b)(2) because a substantial portion of the events giving rise to Plaintiff’s claims occurred in this District. PARTIES 9. Plaintiff is, and at all times mentioned herein was, a natural person and citizen and resident of the State of California. Plaintiff is, and at all times mentioned herein was, a “person” as defined by 47 U.S.C. § 153(39). 10. Defendant is, and at all times mentioned herein was, a company engaged in the marketing and sale of automobiles and is therefore a “person” as defined by 47 U.S.C. § 153(39). 11. The above-named Defendant, and its subsidiaries and agents, are collectively referred to as “Defendants.” The true names and capacities of the Defendants sued herein as DOE DEFENDANTS 1 through 10, inclusive, are currently unknown to Plaintiff, who therefore sues such Defendants by fictitious names. Each of the Defendants designated herein as a DOE is legally responsible for the unlawful acts alleged herein. Plaintiff will seek leave of Court to amend the CLASS COMPLAINT such identities become known. 12. Plaintiff is informed and believes that at all relevant times, each and every Defendant was acting as an agent and/or employee of each of the other Defendants and was acting within the course and scope of said agency and/or employment with the full knowledge and consent of each of the other Defendants. Plaintiff is informed and believes that each of the acts and/or omissions complained of herein was made known to, and ratified by, each of the other Defendants. FACTUAL ALLEGATIONS 13. At all times relevant, Plaintiff was a citizen of the County of San Diego, State of California. Plaintiff is, and at all times mentioned herein was, a “person” as defined by 47 U.S.C. § 153(39). 14. Defendant is, and at all times mentioned herein was, a “person,” as defined by 47 U.S.C. § 153(39). 15. At all times relevant Defendant conducted business in the State of California and in the County of San Diego, within this judicial district. 16. In or about September of 2020, Plaintiff received an unsolicited text message from Defendant on his cellular telephone, number ending in -6870. 17. During this time, Defendant began to use Plaintiff’s cellular telephone for the purpose of sending Plaintiff spam advertisements and/or promotional offers, via text messages, including a text message sent to and received by Plaintiff on or about September 22, 2020 from Defendant’s phone number, (760) 230-9023. 18. On September 22, 2020, Plaintiff received a text from Defendant that read: Mossy Nissan Oceanside is confirming request to send a message. CLASS COMPLAINT HELP for help. Msg & data rates may apply. Reply STOP to cancel 19. Plaintiff responded by sending the following message: “STOP”. 20. Defendant then responded with a text that read: Mossy Nissan Oceanside: You’ve been unsubscribed and will no longer received messages. For questions call (760) 720-9797. 21. At that point, Plaintiff had withdrawn any consent Defendant might have believed Defendant had prior to that point. Despite Plaintiff’s responses, Defendant continues to send unwanted text messages to Plaintiff. 22. Despite noting Plaintiff’s attempt to stop these messages, Defendant continued to send him similar text messages on at least five separate occasions. 23. When Defendant sent the same text to Plaintiff on October 15, 2020, Plaintiff responded with a message that read: “HELP”. 24. The telephone number that Defendant, or their agent, messaged was assigned to a cellular telephone service for which Plaintiff incurs a charge for incoming calls and messages pursuant to 47 U.S.C. § 227 (b)(1). 25. These texts constituted messages that were not for emergency purposes as defined by 47 U.S.C. § 227 (b)(1)(A)(i). 26. Plaintiff was never a customer of Defendant’s and never provided his cellular telephone number Defendant for any reason whatsoever. Accordingly, Defendant and their agent never received Plaintiff’s prior express consent to receive unsolicited text messages, pursuant to 47 U.S.C. § 227 (b)(1)(A). CLASS COMPLAINT 227(b)(1). 28. Plaintiff’s phone number ending in -6870 had been registered on the National Do-Not Call registry for more than thirty days prior to Defendant’s initial message. 29. Such messages constitute solicitation calls pursuant to 47 C.F.R. § 64.1200(c)(2) as they were attempts to promote or sell Defendant’s services. 30. Plaintiff received numerous solicitation messages from Defendant within a 12-month period. 31. Plaintiff requested for Defendant to stop calling Plaintiff during one of the initial messages from Defendant, thus revoking any prior express consent that had existed and terminating any established business relationship that had existed, as defined under 16 C.F.R. 310.4(b)(1)(iii)(B). 32. Despite this, Defendant continued to message Plaintiff in an attempt to solicit its services and in violation of the entity-specific Do-Not-Call provisions of the TCPA. 33. Upon information and belief, and based on Plaintiff’s experiences of being messaged by Defendant after requesting they stop messaging him, and at all relevant times, Defendant failed to establish and implement reasonable practices and procedures to effectively prevent telephone solicitations in violation of the regulations prescribed under 47 U.S.C. § 227(c)(5). CLASS ALLEGATIONS 34. Plaintiff brings this action on behalf of himself and on behalf of and all others similarly situated, as a member of the three proposed classes (hereinafter, jointly, “the Classes”). 35. The class concerning the ATDS claim for no prior express consent (hereafter “the ATDS Class”) is defined as follows: All persons within the United States who received any solicitation/telemarketing messages from Defendant to said person’s cellular telephone made through the use of CLASS COMPLAINT any automatic telephone dialing system and such person had not previously consented to receiving such messages within the four years prior to the filing of this Complaint through the date of class certification. 36. The class concerning the National Do-Not-Call violation (hereafter “the DNC Class”) is defined as follows: All persons within the United States registered on the National Do-Not-Call Registry for at least 30 days, who had not granted Defendant prior express consent nor had a prior established business relationship, who received more than one message made by or on behalf of Defendant that promoted Defendant’s products or services, within any twelve-month period, within four years prior to the filing of the complaint through the date of class certification. 37. The class concerning the entity-specific Do-Not-Call violation (hereafter “the Internal DNC Class”) is defined as follows: All persons within the United States who received more than one message made by or on behalf of Defendant that promoted Defendant’s products or services, after having requested to be placed on Defendant’s internal do-not-call list, within any twelve-month period, within four years prior to the filing of the complaint through the date of class certification. 38. Plaintiff represents, and is a member of, the ATDS Class, consisting of all persons within the United States who received any unsolicited text messages from Defendant to said person’s cellular telephone made through the use of any automatic telephone dialing system and such person had not previously provided their cellular telephone number to Defendant within the four years prior to the filing of this Complaint through the date of class certification. 39. Plaintiff represents, and is a member of, the DNC Class, consisting of all persons within the United States registered on the National Do-Not-Call Registry for at least 30 days, who had not granted Defendant prior express consent nor had a prior established business relationship, who received more than one message made by or on behalf of Defendant that promoted Defendant’s products or services, within CLASS COMPLAINT through the date of class certification. 40. Plaintiff represents, and is a member of, The Internal DNC Class, consisting of all persons within the United States who received more than one message made by or on behalf of Defendant that promoted Defendant’s products or services, after having requested to be placed on Defendant’s internal do-not-call list, within any twelve-month period, within four years prior to the filing of the complaint through the date of class certification. 41. Defendant and their employees or agents are excluded from the Classes. Plaintiff does not know the number of members in the Classes but believes the Classes’ members number in the hundreds of thousands, if not more. Thus, this matter should be certified as a class action to assist in the expeditious litigation of this matter. 42. The Classes are so numerous that the individual joinder of all of their members is impractical. While the exact number and identities of the Classes’ members are unknown to Plaintiff at this time and can only be ascertained through appropriate discovery, Plaintiff is informed and believes and thereon alleges that the Classes include thousands of members. Plaintiff alleges that the Classes’ members may be ascertained by the records maintained by Defendant. 43. Plaintiff and members of the ATDS Class were harmed by the acts of Defendant in at least the following ways: Defendant, either directly or through their agents, illegally contacted Plaintiff and the ATDS Class members via their cellular telephones by sending solicitation text messages, thereby causing Plaintiff and the ATDS Class members to incur certain cellular telephone charges or reduce cellular data for which Plaintiff and the ATDS Class members previously paid, and invading the privacy of said Plaintiff and the ATDS Class members. Plaintiff and the ATDS Class members were damaged thereby. CLASS COMPLAINT Class which predominate over any questions affecting only individual members of the ATDS Class. These common legal and factual questions, which do not vary between ATDS Class members, and which may be determined without reference to the individual circumstances of any ATDS Class members, include, but are not limited to, the following: a. Whether, within the four years prior to the filing of this Complaint through the date of class certification, Defendant made any marketing/solicitation message (other than a message made for emergency purposes or made with the prior express consent of the called party) to an ATDS Class member using any automatic telephone dialing system to any telephone number assigned to a cellular telephone service; b. Whether Plaintiff and the ATDS Class members were damaged thereby, and the extent of damages for such violation; and c. Whether Defendant should be enjoined from engaging in such conduct in the future. 45. As a person that received numerous telemarketing/solicitation messages from Defendant using an automatic telephone dialing system, without Plaintiff’s prior express consent, Plaintiff is asserting claims that are typical of The ATDS Class. 46. Plaintiff and members of the DNC Class were harmed by the acts of Defendant in at least the following ways: Defendant illegally contacted Plaintiff and DNC Class members via their cellular telephones for solicitation purposes, thereby invading the privacy of said Plaintiff and DNC Class members whose telephone numbers were on the National Do-Not-Call Registry. Plaintiff and the DNC Class members were damaged thereby. CLASS COMPLAINT Class which predominate over any questions affecting only individual members of the DNC Class. These common legal and factual questions, which do not vary between DNC Class members, and which may be determined without reference to the individual circumstances of any DNC Class members, include, but are not limited to, the following: a. Whether, within the four years prior to the filing of this Complaint through the date of class certification, Defendant or its agents placed more than one solicitation message to the members of the DNC Class whose telephone numbers were on the National Do-Not-Call Registry and who had not granted prior express consent to Defendant and did not have an established business relationship with Defendant; b. Whether Defendant obtained prior express written consent to place solicitation calls to Plaintiff or the DNC Class members’ telephones; c. Whether Plaintiff and the DNC Class members were damaged thereby, and the extent of damages for such violation; and d. Whether Defendant and its agents should be enjoined from engaging in such conduct in the future. 48. As a person that received numerous solicitation calls from Defendant within a 12-month period, who had not granted Defendant prior express consent and did not have an established business relationship with Defendant, Plaintiff is asserting claims that are typical of the DNC Class. 49. Common questions of fact and law exist as to all members of the Internal DNC Class which predominate over any questions affecting only individual members of the Internal DNC Class. These common legal and factual questions, which do not vary between Internal DNC Class members, and which may be CLASS COMPLAINT Class members, include, but are not limited to, the following: a. Whether, within the four years prior to the filing of this Complaint through the date of class certification, Defendant or its agents placed more than one solicitation message to the members of the Internal DNC Class who had previously requested to be placed on Defendant’s internal do-not-call list; b. Whether Plaintiff and the Internal DNC Class members were damaged thereby, and the extent of damages for such violation; and c. Whether Defendant and its agents should be enjoined from engaging in such conduct in the future. 50. As a person that received numerous solicitation messages from Defendant after having requested to be placed on Defendant’s internal do-not-call list, Plaintiff is asserting claims that are typical of the Internal DNC Class. 51. Plaintiff will fairly and adequately protect the interests of the members of the Classes. Plaintiff has retained attorneys experienced in the prosecution of class actions. 52. A class action is superior to other available methods of fair and efficient adjudication of this controversy, since individual litigation of the claims of all the Classes’ members is impracticable. Even if every member could afford individual litigation, the court system could not. It would be unduly burdensome to the courts in which individual litigation of numerous issues would proceed. Individualized litigation would also present the potential for varying, inconsistent, or contradictory judgments and would magnify the delay and expense to all parties and to the court system resulting from multiple trials of the same complex factual issues. By contrast, the conduct of this action as a class action presents fewer management CLASS COMPLAINT protects the rights of each member of the Classes. 53. The prosecution of separate actions by individual members of the Classes would create a risk of adjudications with respect to them that would, as a practical matter, be dispositive of the interests of the other members not parties to such adjudications or that would substantially impair or impede the ability of such non-party members of the Classes to protect their interests. 54. Defendant has acted or refused to act in respects generally applicable to the Classes, thereby making appropriate final and injunctive relief with regard to the members of the Classes as a whole. FIRST CAUSE OF ACTION Negligent Violations of the Telephone Consumer Protection Act 47 U.S.C. § 227(b). On Behalf of the ATDS Class 55. Plaintiff incorporates by reference all of the above paragraphs of this Complaint as though fully stated herein. 56. The foregoing acts and omissions of Defendant constitute numerous and multiple negligent violations of the TCPA, including but not limited to each and every one of the above-cited provisions of 47 U.S.C. § 227(b), and in particular 47 U.S.C. § 227(b)(1)(A). 57. As a result of Defendant’s negligent violations of 47 U.S.C. § 227(b), Plaintiff and the ATDS Class members are entitled to an award of $500.00 in statutory damages, for each and every violation, pursuant to 47 U.S.C. § 227(b)(3)(B). 58. Plaintiff and the ATDS Class members are also entitled to and seek injunctive relief prohibiting such conduct in the future. CLASS COMPLAINT Knowing and/or Willful Violations of the Telephone Consumer Protection Act 47 U.S.C. § 227(b) On Behalf of the ATDS Class 59. Plaintiff incorporates by reference all of the above paragraphs of this Complaint as though fully stated herein. 60. The foregoing acts and omissions of Defendant constitute numerous and multiple knowing and/or willful violations of the TCPA, including but not limited to each and every one of the above-cited provisions of 47 U.S.C. § 227(b), and in particular 47 U.S.C. § 227(b)(1)(A). 61. As a result of Defendant’s knowing and/or willful violations of 47 U.S.C. § 227(b), Plaintiff and the ATDS Class members are entitled to an award of $1,500.00 in statutory damages, for each and every violation, pursuant to 47 U.S.C. § 227(b)(3)(B) and 47 U.S.C. § 227(b)(3)(C). 62. Plaintiff and the ATDS Class members are also entitled to and seek injunctive relief prohibiting such conduct in the future. THIRD CAUSE OF ACTION Negligent Violations of the Telephone Consumer Protection Act 47 U.S.C. § 227(c) On Behalf of the DNC Class and the Internal DNC Class 63. Plaintiff incorporates by reference all of the above paragraphs of this Complaint as though fully stated herein. 64. The foregoing acts and omissions of Defendant constitute numerous and multiple negligent violations of the TCPA, including but not limited to each and every one of the above cited provisions of 47 U.S.C. § 227(c), and in particular 47 U.S.C. § 227(c)(5). CLASS COMPLAINT Plaintiff and the DNC Class and Internal DNC Class members are entitled to an award of $500.00 in statutory damages, for each and every violation, pursuant to 47 U.S.C. § 227(c)(5)(B). 66. Plaintiff and the DNC Class and Internal DNC Class members are also entitled to and seek injunctive relief prohibiting such conduct in the future. FOURTH CAUSE OF ACTION Knowing and/or Willful Violations of the Telephone Consumer Protection Act 47 U.S.C. § 227(c) On Behalf of the DNC Class and Internal DNC Class 67. Plaintiff incorporates by reference all of the above paragraphs of this Complaint as though fully stated herein. 68. The foregoing acts and omissions of Defendant constitute numerous and multiple knowing and/or willful violations of the TCPA, including but not limited to each and every one of the above cited provisions of 47 U.S.C. § 227(c), in particular 47 U.S.C. § 227(c)(5). 69. As a result of Defendant’s knowing and/or willful violations of 47 U.S.C. § 227(c), Plaintiff and the DNC Class and Internal DNC Class members are entitled to an award of $1,500.00 in statutory damages, for each and every violation, pursuant to 47 U.S.C. § 227(c)(5). 70. Plaintiff and the DNC Class and Internal DNC Class members are also entitled to and seek injunctive relief prohibiting such conduct in the future. PRAYER FOR RELIEF WHEREFORE, Plaintiff respectfully requests judgment against Defendant for the following: CLASS COMPLAINT Negligent Violations of the Telephone Consumer Protection Act 47 U.S.C. § 227(b)  As a result of Defendant’s negligent violations of 47 U.S.C. § 227(b)(1), Plaintiff seeks for himself and each ATDS Class member $500.00 in statutory damages, for each and every violation, pursuant to 47 U.S.C. § 227(b)(3)(B).  Pursuant to 47 U.S.C. § 227(b)(3)(A), injunctive relief prohibiting such conduct in the future.  Any other relief the Court may deem just and proper. SECOND CAUSE OF ACTION Knowing and/or Willful Violations of the Telephone Consumer Protection Act 47 U.S.C. § 227(b)  As a result of Defendant’s knowing and/or willful violations of 47 U.S.C. § 227(b)(1), Plaintiff seeks for himself and each ATDS Class member $1500.00 in statutory damages, for each and every violation, pursuant to 47 U.S.C. § 227(b)(3)(B).  Pursuant to 47 U.S.C. § 227(b)(3)(A), injunctive relief prohibiting such conduct in the future.  Any other relief the Court may deem just and proper. THIRD CAUSE OF ACTION Negligent Violations of the Telephone Consumer Protection Act 47 U.S.C. § 227(c)  As a result of Defendant’s negligent violations of 47 U.S.C. § 227(c)(5), Plaintiff and the DNC Class and Internal DNC Class members are entitled to and request $500 in statutory damages, for each and every violation, pursuant to 47 U.S.C. § 227(c)(5). CLASS COMPLAINT FOURTH CAUSE OF ACTION Knowing and/or Willful Violations of the Telephone Consumer Protection Act 47 U.S.C. § 227(c)  As a result of Defendant’s willful and/or knowing violations of 47 U.S.C. § 227(c)(5), Plaintiff and the DNC Class and Internal DNC Class members are entitled to and request treble damages, as provided by statute, up to $1,500, for each and every violation, pursuant to 47 U.S.C. § 227(c)(5).  Any and all other relief that the Court deems just and proper. JURY DEMAND 71. Pursuant to the seventh amendment to the Constitution of the United States of America, Plaintiff is entitled to, and demands, a trial by jury. Dated: December 3, 2020 Respectfully submitted, THE LAW OFFICES OF TODD M. FRIEDMAN, P.C. By: /s/ Todd M. Friedman TODD M. FRIEDMAN, ESQ. ATTORNEY FOR PLAINTIFF CLASS COMPLAINT

privacy

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA Case No.: BECKY WELBORN and WENDY WINDRICH, on behalf of themselves and all others similarly situated, Plaintiffs, v. INTERNAL REVENUE SERVICE, JOHN KOSKINEN, in his official capacity as Commissioner of Internal Revenue, and DOES 1 through 100, inclusive, Defendants. CLASS ACTION COMPLAINT AND DEMAND FOR JURY TRIAL Plaintiffs Beck Welborn and Wendy Windrich (collectively, “Plaintiffs”), individually and on behalf of the proposed class described below, bring this action for injunctive relief, and actual and statutory damages against Defendants Internal Revenue Service (“IRS”) and Commissioner John A. Koskinen (“Koskinen” or “Commissioner”), and allege based on information and belief except as where indicated, as follows: INTRODUCTION 1. This case arises out of the cyber-breach of IRS’s systems that resulted in cyber-criminals stealing the identity and financial information (“Personal Identification Information” or “PII”) from approximately 330,000 taxpayers, which would have been prevented, had the IRS fixed the known security deficits in its data storage system. At the time of the data breach of taxpayers’ information, the IRS had received – but not acted on - numerous reports that its systems did not have adequate security; it knew its systems had been previously hacked by cyber-criminals; it knew that cyber-criminals were highly motivated to hack the IRS system in order to steal taxpayer information that has significant value in the black market; and it had actual knowledge that cyber-criminals were engaged in ongoing efforts to hack the IRS systems. Despite this knowledge, the IRS deliberately and intentionally decided not to implement the security measures needed to prevent the subject data breach. 2. Plaintiffs and Class members include the 330,000 Americans, as well as their spouses and dependants, who had their tax information stolen via the IRS’s “Get Transcript” online service, which allows taxpayers to access the IRS system to order copies of their own tax returns and other filings. That service, which allowed taxpayers to access the IRS system, did not have requisite security in place to prevent cyber-criminals from also accessing the IRS system. The impact of the breach extends beyond the 330,000 people directly affected, given that the personal information of spouses and dependents was also included in the stolen transcripts. 3. The IRS requires that taxpayers submit a significant amount of personal and financial information to the IRS. The IRS collects and maintains this personal and financial information on each taxpayer. The IRS also relies extensively on computerized systems to carry out its responsibilities to collect taxes, process tax returns, and enforce the federal tax laws. As custodians of taxpayer information, the IRS has an obligation to protect the confidentiality of this sensitive information against unauthorized access or loss. Otherwise, taxpayers would be exposed to invasion of privacy and financial loss or damage from identity theft or other financial crimes, like what happened in May of this 4. The Government Accountability Office (“GOA”) and the Treasury Inspector General for Tax Administration (“TIGTA”) specially issued reports warning the IRS of its lax computer security years before the hack of the 330,000 taxpayer accounts on the IRS’s website. This is not a new threat, but has been known to the IRS for a number of years. 5. What should have been a trustworthy digital service had been compromised and is yet the latest sign that the U.S. Government cannot be relied upon to keep the personal data of its citizens safe. This information is highly valuable to criminals. Even though the theft began in February 2015, the criminal activity was apparently not detected until after tax season. According to Koskinen’s testimony to the U.S. Senate Finance Committee1 on June 2, 2015, hackers made 200,000 attempts on the “Get Transcript” page, approximately half of which were successful.2 Since the theft, the IRS has taken the service offline. 6. The IRS’s process for verifying people requesting transcripts is vulnerable to exploitation to fraudsters because it relies on static identifiers and so-called “knowledge-based authentication” (KBA) – i.e., challenge questions that can be easily defeated with information widely available for sale in the cybercrime underground and/or with a small amount of searching online. The IRS knew or should have known that KBA would not have provided adequate security for the taxpayer 7. The KBA questions—which involve multiple-choice “out of wallet” questions such as previous address, loan amounts and dates—can be successfully enumerated with random guessing or found on the Internet. For example, Zillow.com can provide answers to the KBA questions in a matter of minutes. Spokeo also solves the “old address” questions with 100% accuracy. Moreover, answers to common security questions such as “What is your mother’s maiden name?” are easily gleaned from 1  The Senate Committee on Finance stands alone, having legislative jurisdiction over the Internal 2 In a statement released by the IRS on August 17, 2015, the agency announced that the personal information of more than 220,000 taxpayers had been stolen that the agency had originally estimated. the public domain by using such non-sophisticated techniques as looking up a Facebook profile or engaging in a little light social engineering. 8. The hacks which took place on the IRS did not require significant funding, technology, or intelligence. The only necessary preconditions were knowledge that the application exists and the ability to deduce what information is required to access information in it. Once infiltrated, the cyber- criminal has access to the taxpayer’s full tax transcript, including, identification information, children and spouse social security numbers, prior W2s, current W2s, income, holdings, and more than enough information to fraudulently file for a tax refund using the taxpayer’s identification. 9. The gravity of the stolen data is alarming, as stated by Senator Ron Wyden at the hearing: The thieves who steal taxpayer information could wipe out people’s life savings and leave them in financial ruin. They could falsify tax returns next year or further down the road. They could take out huge, fraudulent home or student loans. And on a bigger scale, the money stolen in this cybercrime wave could be funneled into more criminal activity. It could wind up in war zones. There’s a possibility that it could fund acts of terrorism without being traced. 10. At the June 2, 2015, hearing of the Senate Finance Committee after the breach, panel Chairman Orrin Hatch (“Hatch”) told Koskinen that his agency “has failed” the taxpayers whose returns were stolen in the breach reported the prior month. Chairman Hatch added: These taxpayers, and their families, must now begin the long and difficult process of repairing their reputations. And they must do so with the knowledge that the thieves who stole their data will likely try to use it to perpetrate further fraud against them. 11. Based on what Koskinen said repeatedly in congressional testimony3, the security breach was not related to the financial resources available to the agency. Instead, it was a deliberate decision not to implement the security measures recommended by GAO and TIGTA, and reportedly by its own employees. 12. According to an anonymous former IT manager for the IRS quoted by Patrick Thibodeau in Computerworld, security staff “would have preferred to implement a more dynamic and aggressive security framework that would have stopped the fraudsters from being able to get in using the information they stole from the third party,” but senior IRS leadership allegedly overruled them, choosing instead to roll out a more simple authentication method to encourage use. 13. Despite the IRS’s failure to comply with TIGTA’s recommendations and failure to take steps to secure its systems, the IRS went ahead and knowingly launched an application that it knew was vulnerable and insecure. 14. As such, Plaintiffs on behalf of themselves and others similarly situated allege that through its conduct Defendants violated the Privacy Act of 1974 and the Administrative Procedure Act. Plaintiffs request damages to compensate them for their current and future losses and injunctive relief to fix the IRS’s security protocol, implement TIGTA’s audit recommendations, implement President Obama’s executive order focused on improving the security of consumer financial transactions, to provide adequate credit monitoring services for a sufficient time period, and to provide after-the-fact identity repair services and identity theft insurance to protect Class members from fraud and/or identity 3 “Not every problem is a budget problem, so I don't want to wander around town every time we have a challenge saying, ‘Ah, if we had more money, we'd fix it,’” Koskinen said. “This is a technology issue, not a budget (issue), but a question of security, a question of keeping up criminals in terms of authentication.” Likewise, at the hearing, U.S. Senator Ron Wyden stated that the IRS’s inadequate security system “is not just a question of resources.” PARTIES A. Plaintiffs 15. Plaintiff Becky Welborn (“Welborn”) is a resident and citizen of Dripping Springs, 16. Plaintiff Wendy Windrich (“Windrich”) is a resident and citizen of Conroe, Texas. B. Defendants 17. Defendant Internal Revenue Service is, and was at all times relevant hereto, an administrative agency of the United States Government, subject to the Administrative Procedures Act (“APA”). See 5 U.S.C. § 551. The IRS is headquartered at 1111 Constitution Avenue, NW, Washington, DC 20224. 18. Defendant John A. Koskinen is being sued in his official capacity as the Commissioner of Internal Revenue. He serves as the head of the Internal Revenue Service, in Washington, DC. JURISDICTION 19. This Court has subject matter jurisdiction over all claims in this action pursuant to the Class Action Fairness Act, 28 U.S.C. § 1332(d)(2), because Plaintiffs bring class claims on behalf of citizens of states different than Defendants’ state of citizenship, the amount in controversy exceeds $5 million, and the proposed class includes in excess of 100 members. 20. This Court also has subject matter jurisdiction over the Privacy Act of 1974 claim pursuant to 5 U.S.C. § 552a(g)(1). 21. This Court has personal jurisdiction over the IRS because it maintains headquarters in the District of Columbia and the relevant conduct occurred in the District of Columbia. 22. This Court has personal jurisdiction because Defendant Commissioner Koskinen performs his official duties in the District of Columbia and the relevant conduct occurred in the District of Columbia. 23. Venue is proper in this Court under 28 U.S.C. § 1391(e) because this is an action against officers and agencies of the United States; Defendant Internal Revenue Service is found in this judicial district; Defendant Commissioner Koskinen performs his official duties in this judicial district; and a substantial part of the events or omissions giving rise to this action occurred in this judicial district. FACTUAL ALLEGATIONS A. The Internal Revenue Service Is Responsible for the Collection and Storage of a Substantial Amount of Confidential and Sensitive Personnel Records 24. The IRS is an agency in the U.S. Department of the Treasury responsible for administering the United States tax code. The official mission statement of the IRS is to: Provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all. 25. The IRS employs approximately 91,000 employees, who collected over $3.1 trillion in tax revenue, processed over 242 million tax returns and other forms, and issued $374 billion in tax refunds during Fiscal Year 2014. Part of the duties of the IRS include investigating individuals who use the IRS as a means of furthering fraudulent, criminal activity that negatively impacts the operations of the IRS. 26. The current Commissioner of the IRS is John Koskinen, who was confirmed by the Senate on December 20, 2013. The Commissioner of Internal Revenue presides over the nation’s tax system. The Commissioner “ensures that the agency maintains an appropriate balance between taxpayer service and tax enforcement and administers the tax code with fairness and integrity.” The Commissioner is “responsible for establishing and interpreting tax administration policy and for developing strategic issues, goals and objectives for managing and operating the IRS. The Commissioner is responsible for overall planning, directing, controlling and evaluating IRS policies, programs, and performance.” 27. One of the responsibilities of the Commissioner of the IRS is to provide taxpayers and tax professionals with electronic products and services that they desire to enable them to interact and communicate with the IRS. This is rooted in the IRS’s acknowledgement that the current technology environment has raised taxpayers’ expectations for online customer service interactions and the IRS’s need to meet these expectations. The self-assisted interactive online tool, “Get Transcript” application, which can include account transactions, line-by-line tax return information, and income reported to the IRS, was one of the applications born of this vision. 28. As part of an effort to provide taxpayers with self-service and electronic service options in the form of web-based tools, the IRS launched the Get Transcript online application in January 2014. Get Transcript allows taxpayers to view and print a copy of their prior-year tax information, also known as a transcript, in a matter of minutes. Taxpayers use tax transcript information for a variety of financial activities, such as verifying income when applying for a mortgage or a student loan. 29. To access Get Transcript, taxpayers go through an authentication process to establish their identity. The authentication process includes several “out-of-wallet” questions, which are designed to elicit information that only the taxpayer would normally know, but which can be easily ascertained by a third party. The taxpayer then receives an email from the Get Transcript system containing a confirmation code that they enter to access the application and request a transcript. B. The IRS Generally Knew that its Systems Would be a Target for Cyber-Criminals 30. The IRS was aware of the recent surge in massive data breaches experienced by large corporations such as Home Depot, Chase Bank, Target, Sony, Premera Blue Cross, Anthem Blue Cross, and the United States Office of Personnel and Management. As the result of these massive data breaches, government agencies such as the IRS knew or should have known that its systems storing taxpayers’ personal data were at a very high risk of being hacked by cybercriminals. 31. In the past two years alone, well over 100 million people have received a letter, call or email notifying that they have been victims of a data breach. In some cases, key personal data has been exposed by retailers, including Target; for others, it is health insurance companies including Anthem, or employers like Sony. 32. Over the past year alone, millions of people have fallen prey to identity theft through massive data breaches at some of the nation’s largest companies. The following are examples of the largest data breaches in recent times: • In September 2014, Home Depot, the world’s largest home improvement chain, confirmed that a total of 56 million credit and debit cards were affected by a data breach; • In June and July 2014, JP Morgan Chase, the nation’s largest bank by assets, confirmed that it had experienced a massive data breach that affected 76 million households and 7 million small businesses; • In early December 2014, Sony’s system was hacked, resulting in the theft of 47,000 social security numbers, which subsequently appeared more than 1.1 million times on 601 publicly-posted files stolen by hackers; • In January 2014, it was revealed that Target Corporation’s holiday data breach affected up to 70 million people, who had their names, mailing addresses, phone numbers, and email addresses stolen by hackers; • In January 2015, it was revealed that health insurance giant Premera Blue Cross experienced a data breach involving the personal data of approximately 80 million members across the country. • In February 2015, Anthem. Inc., the country’s second largest health insurer, announced that its systems had been compromised in a massive data breach, in which a total of 78.8 million records were stolen, including 8.8 to 18.8 million records of non-customers. • In June 2015, the United States Office of Personnel and Management announced that its systems housing employee records had been breached by cybercriminals, resulting in a loss of sensitive data for approximately 14 million employees. C. The IRS’s Specifically Knew that its Cyber Security Measures Were Inadequate to Prevent Cyber-Criminals from Hacking into its System and Stealing Taxpayer Information 33. The Federal Information Security Management Act of 2002 (“FISMA”)4 was enacted to strengthen the security of information and systems within federal government agencies. The IRS collects and maintains a significant amount of personal and financial information on each taxpayer. As custodians of taxpayer information, the IRS has an obligation to protect the confidentiality of sensitive information against unauthorized access or loss. 34. As part of the FISMA legislation, the Offices of Inspectors General are required to perform an independent evaluation of each agency’s information security programs and practices. Under FISMA, an agency must develop, implement, and maintain a security program that assesses the 4 At the time the IRS audits were conducted, the Federal Information Security Management Act of 2002 governed the auditing process. 44 U.S.C. § 3541 et seq. TIGTA submitted the most recent audit report in September 2014. The President signed the Federal Information Security Modernization Act of 2014 into law on December 18, 2014. The Federal Information Security Modernization Act updates and supersedes the Federal Information Security Management Act. For purposes of this Complaint, “FISMA” means the Federal Information Security Management Act of 2002 and “Modernization Act” means the Federal Information Security Modernization Act of 2014. risks and provides adequate security for the operations and assets of programs and software systems under its control. Specifically, FISMA requires: (1) annual agency program reviews; (2) annual Inspector General evaluations; (3) agency reporting to the Office of Management and Budget (“OMB”) the results of Inspector General evaluations for unclassified software systems; and (4) an annual OMB report to Congress summarizing the material received from agencies. The OMB uses the reports to help it ensure that the various federal agencies are in compliance with its cyber security requirements. 35. In July 2010, OMB Memorandum M-10-28, Clarifying Cybersecurity Responsibilities and Activities of the Executive Office of the President and the Department of Homeland Security (DHS), expanded the role of the DHS in regard to the operational aspects of federal agency cybersecurity and information systems that fall within FISMA requirements. The DHS prepares the security metrics to assist the federal agencies and the Inspectors General in evaluating agency progress in achieving compliance with federal security standards. 36. FISMA oversight of the Department of the Treasury is performed by two distinct Inspector General Offices: the Treasury Inspector General for Tax Administration (TIGTA) and the Treasury Office of the Inspector General (OIG). The TIGTA is responsible for oversight of the Internal Revenue Service (IRS), while the Treasury OIG is responsible for all other Treasury bureaus. 37. To assist the Inspectors General in evaluating federal agencies’ compliance with the FISMA, the DHS issued the Fiscal Year (FY) 2014 Inspector General Federal Information Security Management Act Reporting Metrics on December 2, 2013, which specified 11 information security program areas and listed specific attributes within each area for evaluation. The 11 information security program areas are: (1) continuous monitoring management; (2) configuration management; (3) identity and access management; (4) incident and response reporting; (5) risk management; (6) security training; (7) plan of action and milestones; (8) remote access management; (9) contingency planning; (10) contractor systems; and (11) security capital planning. 38. In accordance with FISMA, the TIGTA is statutorily mandated to provide independent audit and investigative services necessary to improve the economy, efficiency, and effectiveness of the IRS. TIGTA’s oversight activities are designed to indentify high-risk systemic inefficiencies in IRS operations and to investigate exploited weaknesses in tax administration. TIGTA’s role is critical in that it provides the taxpayer with assurance that the approximately 91,000 IRS employees perform their duties in an effective and efficient manner while minimizing the risks of waste, fraud, or abuse. Over the past year, a significant part of TIGTA’s workload has been devoted to investigating scams that can negatively impact the integrity of tax administration. 39. TIGTA identified a number of areas in which the IRS should better protect taxpayer data and improve its overall security posture. Most recently, in its FISMA report for Fiscal Year 2014, TIGTA found four security program areas were not fully effective due to one or more DHS guideline program attributes that were not met: • Continuous Monitoring Management. The IRS has not yet implemented its Information Security Continuous Monitoring (ISCM) strategy, but stated that it is fully participating in the DHS’s Continuous Diagnostics and Mitigation Program to comply with the OMB M-14-033 mandate to implement ISCM and is in the process of determining its final toolset to meet the program requirements. • Incident Response and Reporting. The IRS did not always report incidents involving Personally Identifiable Information to the U.S. Computer Emergency Response Team (US-CERT) within established time frames. • Security Training. The IRS has not yet fully implemented a process for identifying and tracking contractors who are required to complete specialized training, but stated that it continues to make progress and is working to incorporate a clause into contracts that requires contractors to complete and record such training. • Remote Access Management. The IRS has not fully implemented unique user identification and authentication that complies with Homeland Security Presidential Directive-12 (HSPD-12). 40. Two security program areas, Configuration Management and Identity and Access Management, did not meet the level of performance specified by the DHS guidelines due to the majority of the specified attributes not being met. 41. “Identity and Access Management” ensures that only those with a business need are able to obtain access to IRS systems and data. However, TIGTA found that the IRS needed to fully implement unique user identification and authentication that complies with Department of Homeland Security directives, ensure that users are only granted access based on needs, ensure that user accounts are terminated when no longer required, and control the improper use of shared accounts. 42. “Configuration Management” ensures that settings on IRS systems are maintained in an organized, secure, and approved manner, including timely updating “patches”5 to known security vulnerabilities. TIGTA found that the IRS needed to improve enterprise-wide processes for assessing configuration settings and vulnerabilities by means of automated scanning, timely remediating scan result deviations, timely installing software patches, and controlling changes to hardware and software configurations. 5 A patch is a fix of a design flaw in a computer program. Patches must be installed or applied to the appropriate computer for the flaw to be corrected. 43. Patch management is an important element in mitigating the security risks associated with known vulnerabilities to computer systems. This is critical to prevent intrusions by unauthorized individuals or entities. Due to its importance, TIGTA evaluated the effectiveness of the IRS security patch management process, which, according to TIGTA, has been “an ongoing challenge for the IRS.” TIGTA found that the IRS had not yet implemented key patch management policies and procedures needed to ensure that all IRS systems are patched timely and operating securely. 44. According to Treasury Inspector George’s testimony, “Any significant delays in patching software with critical vulnerabilities provides ample opportunity for persistent attackers to gain control over vulnerable computers and get access to the sensitive data the computer systems may contain, including taxpayer data.” 45. TIGTA warned in its 2014 audit that “[u]ntil the IRS takes steps to improve its security program deficiencies and fully implements all 11 security program areas required by the FISMA, taxpayer data will remain vulnerable to inappropriate use, modification, or disclosure, possibly without being detected.” 46. Furthermore, in March of this year, IT security journalist Brian Krebs warned that the IRS’s process for verifying the identities of people requesting a tax transcript was vulnerable to exploitation because it relied on knowledge-based questions whose answers could be found through public records, stolen credit reports, or leaked personal information –which is exactly what occurred. D. The IRS Deliberately and Intentionally Chose Not to Implement Appropriate Security of Taxpayer Information 47. Since Fiscal Year 2011, TIGTA has designated the security of taxpayer data as the top concern facing the IRS based on the increased number and sophistication of threats to taxpayer information and the need for the IRS to better protect taxpayer data and improve its enterprise security program. In compliance with FISMA requirements, TIGTA’s investigators audit the IRS’s security systems every year and suggest improvements. 48. To provide oversight of the IRS’s Information Security Program, TIGTA completes approximately seven audits each year on various security programs, systems, and solutions. As of March 2015, these audits have resulted in 44 recommendations that the IRS has thus far failed to implement. While most of these recommendations are based on recent audits, there are 10 recommendations from five security audits that were completed during the Fiscal Years of 2008-2012. 49. Some of the oldest recommendations that were made, but never implemented by the IRS, were recommendations that TIGTA believed have had some bearing on the IRS’s ability to stop or prevent the Get Transcript breach. 50. The IRS’s Computer Security Incident Response Center (“CSIRC”) is responsible for monitoring IRS networks 24 hours a day year-round for cyber attacks and responding to various computer security incidents. Prior to the security breach, TIGTA evaluated the effectiveness of the CSIRC at preventing, detecting, reporting, and responding to computer security incidents targeting IRS computers and data. TIGTA found that the CSIRC was deficient in certain respects. At the time of their review, TIGTA found that the CSIRC’s host-based intrusion detection system was not monitoring a significant percentage of IRS servers, which leaves that portion of the IRS network and data at risk. In addition, CSIRC was not reporting all computer security incidents to the Department of the Treasury, as required. Finally, incident response policies, plans, and procedures were either nonexistent, inaccurate, or incomplete. 51. TIGTA has also previously raised concerns over the remediation of security weaknesses identified in their audits to the IRS. TIGTA reviewed closed corrective actions to security weaknesses and findings reported by TIGTA and identified weak management controls in the IRS over its closed planned corrective actions for the security of systems involving taxpayer data. During the audit, TIGTA determined that eight (42%) of 19 planned corrective actions that were approved and closed by the IRS as fully implemented in response to reported security weaknesses from prior TIGTA audits were not in fact fully implemented. 52. Moreover, according to TIGTA, “management control” also involves the use of risk- based decisions by IRS management to make an exception to its own policies and requirements based on appropriate justification and a thorough assessment of evident and potential risks. Exceptions related to security information systems are permissible if meeting the requirement is: (1) not technically or operationally possible, or (2) not cost effective. TIGTA found that these risk-based decisions were not adequately tracked and documented. Without required supporting documentation, TIGTA “could not determine why decisions were made and whether the information technology risks were appropriately accepted and approved.” 53. According to TIGTA, patch management is an important element in mitigating the security risks associated with known vulnerabilities to computer systems because it is critical to prevent intrusions by unauthorized individual or entities. Due to its importance, TIGTA evaluated the effectiveness of the IRS security patch management process, which has been an ongoing challenge for the IRS. TIGTA found that the IRS had not implemented key patch management policies and procedures needed to ensure that all IRS systems are patched timely and operating securely. TIGTA warned that any significant delays in patching software with critical vulnerabilities provides ample opportunity for persistent attackers to gain control over vulnerable computers and get access to the sensitive data the computer systems may contain, including taxpayer data. The IRS failed to patch the software as recommended and thereby allowed the attackers to gain access to taxpayer data through its “Get Transcript” application. 54. At the Finance Committee hearing, Senator Pat Roberts stated that “[i]t’s a paradox of enormous irony” that just weeks prior to this breach, privacy experts briefed his staff on how safe the Get Transcript application was. Senator Roberts observed that this is not a new threat, because the IRS, the Inspector General, GAO, and the oversight agencies, have been concerned about and warned the IRS of these vulnerabilities. Senator Roberts also noted that “[i]n a rush to push out programs, like Get Transcript, we have let access and purported cost savings overtake the absolute need to safeguard taxpayer information.” 55. Moreover, in October 2014, President Barak Obama issued an executive order focused on improving the security of consumer financial transactions. In Section 3 of the order, titled “Securing Federal Transactions Online,” the President directed the National Security Staff, the White House Office of Science and Technology Policy, and Office of Management and Budget to present a plan “consistent with the guidance set forth in the 2011 National Strategy for Trusted Identifiers in Cyberspace [NSTIC], to ensure that all agencies making personal data accessible to citizens through digital applications require the use of multiple factors of authentication and an effective identity proofing process, as appropriate.” 56. Following that order, a group of government agencies submitted a plan to the President that would “ensure that all agencies making personal data accessible to citizens through digital applications require the use of multiple factors of authentication and an effective identity proofing process, as appropriate.” When President Obama signed that executive order, it certainly applied to the IRS and getting online identity – and identify protection – right should have been the IRS’ priority. 57. When Get Transcript was initiated, the IRS was the lone exception to every other federal agency in offering online access to sensitive information. Other agencies, which often had two or three services that should have been online, refused to do so because of the high level of risk in identity authentication. When Get Transcript launched, it was known, in the private and public sectors, that the username/password mechanism, like that used for Get Transcript, was broken and insecure. Despite such knowledge, the IRS went live with the insecure application anyway.         E. The IRS Breach Caused Damage to the Plaintiffs and Putative Class 58. During the 2015 filing season, taxpayers used the Get Transcript application to obtain approximately 23 million copies of their recently filed tax information. During the middle of May 2015, the IRS’s cybersecurity team noticed unusual activity on the Get Transcript application. At the time, the cybersecurity team thought it may be a “denial of service” attempt, where hackers try to disrupt a website’s normal functioning. However, after looking deeper into the issue, it was discovered that there were questionable attempts to access the Get Transcript application. As a result, the IRS shut down the Get Transcript application on May 21, 2015. Further investigation by the IRS initially revealed that a total of approximately 200,000 suspicious attempts to gain access to taxpayer information on the Get Transcript application were made between mid-February and mid-May, with more than half being successful attempts. Just recently, however, on August 17, 2015, the IRS announced that the theft of American taxpayer data was much worse than originally thought and has revised the number of successful stolen forms to 330,000, or three times the amount initially reported. 59. According to reports from the IRS, an individual or individuals succeeded in clearing its authentication process. Although the illegal activity began in February 2015, the IRS did not detect the malicious activity until mid-May 2015. According to the most recent information provided by the IRS, approximately 610,000 taxpayers, including spouses and children of the taxpayers, have had access attempts to their PII, with 330,000 of those actually compromised.   60. As the taxpayer information remains at large and in the hands of cybercriminals, Plaintiffs and the putative class are at great risk of the cybercriminals using their PII for fraudulent purposes that will harm Plaintiffs and the putative class. The possibilities for which the thieves can profit from the stolen personal tax information are limitless, in time and money. F. Implementation of Proper Security Measures that the IRS Intentionally Elected Not to Employ Would Have Prevented the Loss to Taxpayers 61. The Government Accountability Office (“GAO”) issued a report in March 2015 that identified more than 50 weaknesses in the IRS's computer security that had not been resolved. In the report, the GAO stated “[u]ntil those weaknesses are fixed, financial and taxpayer data will remain unnecessarily vulnerable to inappropriate and undetected use, modification or disclosure.” 62. J. Russell George (“George”), the Treasury Inspector General for Tax Administration testified before the Senate Finance Committee (hereinafter “Hearing”) on June 2, 2015, and stated that the IRS had not addressed certain security weaknesses before the attack and failed to upgrade systems that would have deterred the organized security breach and subsequent tax fraud. At the hearing of the Senate Finance Committee, about one month after the breach, George told the panel that 44 of its recommendations to the IRS “have yet to be implemented.” Specifically, he said the IRS had not always applied high-risk computer security upgrades known as patches, and that the agency had failed to monitor many of its servers, “which put the IRS’ networks, data and applications at risk.” 63. Also, in response to a question from Hatch, George conceded that “[i]t would have been much more difficult if [the IRS] had implemented all of the recommendations we made.” George also stated “[w]e also found that the IRS was not monitoring a significant percentage of its [computer] servers, which puts data at risk,” and that the IRS needs “to be even more vigilant to protect the confidentiality of their data.” 64. Despite the IRS’s knowledge of its vulnerable and unsecure system, as well as data breach attempts on the IRS itself, along with the widely-publicized high-profile data breaches this past year, the IRS had many options which would have prevented the breach which include:   • A dynamic and aggressive security framework that would make it harder for fraudsters to impersonate legitimate taxpayers using information gleaned from around the Web; • A more complex system that includes multi-factor authentication using biometrics and dynamic questions based on non-public information; • Better use of a system the IRS already has in place: An easily hackable six-digit PIN that is available to taxpayers6; • Or an authentication process that links phone numbers to taxpayers, similar to what online services such as Google now offer. 65. However, the IRS made an intentional decision not to implement the needed security measures without regard to the significant risk and danger to unsuspecting taxpayers. This decision by the IRS resulted in the loss of taxpayer data for Plaintiffs and the putative class. PLAINTIFFS’ DAMAGES 66. As a result of Defendants’ willful, intentional disregard of Plaintiffs’ and Class members’ privacy rights, and the Defendants’ failure to implement TIGTA’s detailed recommendations and instructions to prevent the breach, Plaintiffs and Class Members have suffered and will continue to suffer damages, including actual damages within the meaning of the Privacy Act, pecuniary losses, anxiety, and emotional distress. They have suffered or are at increased risk of suffering from: • the loss of the opportunity to control how their PII is used; • the diminution in the value and/or use of their PII, entrusted to the IRS for the purpose of filing their annual income tax returns with the understanding that the IRS and its employees/managers would safeguard their PII against theft and not allow access and misuse of their PII by others; 6 • the compromise, publication and/or theft of their PII and the PII of their family members/spouses/dependents; • out-of-pocket costs associated with the prevention, detection, and recovery from identity theft and/or unauthorized use of financial and medical accounts; • lost opportunity costs associated with effort expended and the loss of productivity from addressing and attempting to mitigate the actual and future consequences of the IRS breach, including but not limited to efforts spent researching how to prevent, detect, contest and recover from identity and health care/medical data misuse; • costs associated with the ability to use credit and assets frozen or flagged due to credit misuse, including complete credit denial and/or increased costs to use credit, credit scores, credit reports and assets; • unauthorized use of compromised PII to open new financial and/or health care or medical accounts; • the continued risk to their PII, and the PII of their family members/spouses/dependents, which remains in the IRS’s possession and is subject to further breaches so long as Defendants fail to undertake appropriate measures to protect the PII in their possession; • current and future costs in terms of time, effort, and money that will be expended to prevent, detect, contest, and repair the impact of the PII compromised as a result of the IRS breach for the remainder of the lives of the Class members and their families/spouses/dependents. PLAINTIFFS’ EXPERIENCES A. Plaintiff Wendy Windrich’s Experience 67. Wendy Windrich has never used or accessed the “Get Transcript” application. 68. In early June 2015, Plaintiff Windrich received a letter from the IRS stating that her and her husband’s e-filing had been processed and their $9,300 return had been electronically deposited into the account they provided in their e-filing. 69. This letter from the IRS alerted Plaintiff Windrich that something was wrong. Through their accountant, she had filed for an extension in late March or early April, and had not sent in money with the extension request. Further, Plaintiff Windrich has not received a refund from the IRS in many years and instead, she and her husband have had to write the IRS a check year after year. 70. After being alerted of possible fraud by the IRS return letter, Plaintiff Windrich informed the IRS and the IRS told her that the fraudulent tax return had very specific and personal information that had to be taken from her prior two years’ income tax returns. Neither Plaintiff Windrich nor her husband had their personal information stolen or breached prior to the Get Transcript incident and the information supplied in the fraudulent tax return could only have come from the Get Transcript application. Based on information and belief, Plaintiff Windrich believes that her fraudulent tax return was filed with her family’s personal information stolen from the Get Transcript application. During the phone call, the IRS instructed Plaintiff Windrich to go to the IRS website for instructions on how to report the potential fraud or suspicious activity. 71. The IRS then told Plaintiff Windrich that she would be given a special PIN number to include in her paper filing this year and that she would not be able to e-file for the foreseeable future. Plaintiff Windrich and her husband are IT professionals who have always taken great pride and effort in keeping their own computers secure, locked down, and free of viruses. Plaintiff Windrich is reasonably concerned about her and her husband’s future, as well as their grown children’s, as the family’s PII was in the stolen tax data. The stolen information also includes their names, residential address, dates of birth, telephone numbers, bank account information, and other personal information. Now the entire family’s PII lie in the hands of the fraudsters. 72. Because the IRS required that she provide this highly important personal data to the IRS, under penalty of law if she were to refuse to do so, Plaintiff Windrich had a reasonable expectation that Defendants would have in place reasonable and appropriate security measures to ensure that her and her husband’s, and their children’s, personal data were secure. 73. Plaintiff Windrich and/or her husband have spent more than 30 hours dealing with the ramifications of this fraud. Further, because of this fraud, Plaintiff Windrich is no longer eligible for electronic filing of her tax returns for the “forseeable future.” Plaintiff Windrich reasonably believes that her PII was compromised and obtained by the cybercriminals through the IRS systems. Further, because the IRS permitted fraudsters’ access to her account information by its knowing and willful implementation of the insecure Get Transcript application, Plaintiff Windrich is at a heightened risk of further identity theft requiring her to pay indefinitely for on-going credit monitoring. B. Plaintiff Becky Welborn’s Experience 74. Plaintiff Becky Welborn has never electronically filed her income tax returns. 75. Plaintiff Welborn self-filed her annual income taxes on April 15, 2015, in paper form. Five weeks after filing, Plaintiff Welborn began calling and checking the IRS website to inquire about her refund. The IRS website indicated that her return was being processed. When Plaintiff Welborn telephoned the IRS, the automated system took her through all of the standard questions and, like the website, stated that her return was being processed. The system then automatically disconnected the 76. After ten weeks of no refund, Plaintiff Welborn called the IRS automated telephone system and tried every option until she got a live person on the line. After two hours on the phone with an IRS representative, the IRS representative explained to Plaintiff Welborn that someone had filed a duplicate joint return using her and her husband’s social security numbers. The representative would not release any further information, but said that the fraudulent party had requested a transcript of Plaintiff Welborn’s taxes through the Get Transcript application. 77. When Plaintiff Welborn inquired as to why the IRS did not notify Plaintiff about the fraudulent access to her income tax transcript, the agent responded that the IRS has not, but will be, sending a notification letter to notify the victims of the breach. Plaintiff Welborn asked if the IRS was taking any responsibility for the theft and the representative just referred Plaintiff Welborn to the IRS website. 78. Plaintiff Welborn is reasonably concerned about her and her husband’s future, as well as their three children’s, as the family’s PII was in their stolen tax data. Now the entire family’s PII lie in the hands of the fraudsters. 79. Because the IRS required that she provide this highly important personal data to the IRS, under penalty of law if she were to refuse to do so, Plaintiff Welborn had a reasonable expectation that Defendants would have in place reasonable and appropriate security measures to insure that her and her husband’s, and their children’s, personal data were secure. 80. Plaintiff Welborn and/or her husband have spent dozens of hours dealing with the ramifications of this fraud. Plaintiff Welborn had to change all of their bank account numbers, file a police report, place fraud alerts with all three credit agencies, file a report with the Federal Trade Commission, submit a fraud affidavit to the IRS, and request written copies of her family’s credit reports from the three credit agencies. To date, Plaintiff Welborn has not received any written notification of the breach from the IRS. Further, because of this fraud, Plaintiff Welborn is no longer eligible for electronic filing of her tax returns. The result is that any future potential tax refunds will be delayed for a significant period of time. 81. Further, because the IRS permitted fraudsters’ access to her account information by its knowing and willful implementation of the insecure Get Transcript application, Plaintiff Welborn is at a heightened risk of further identity theft requiring her to pay indefinitely for on-going credit monitoring. CLASS ACTION ALLEGATIONS 82. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, Plaintiffs bring this action on behalf of a class of similarly situated persons, which they initially propose be defined as follows: All Tax filers of the United States and their spouses and/or dependants whose PII was compromised as a result of the “Get Transcript” application data breach. 83. Excluded from the proposed class are the IRS, Commissioner Koskinen, as well as agents, officers and directors (and their immediate family) of the IRS, their, and their affiliates and controlled persons. Also excluded is any judicial officer assigned to this case. 84. This action has been brought and may properly be maintained as a class action under Federal Rule of Civil Procedure 23(a), 23(b)(1), 23(b)(2), 23(b)(3), and 23(c)(4). 85. Numerosity—Fed. R. Civ. P. 23(a)(1). The members of the class are so numerous that joinder of all members is impracticable. While the exact number of class members is unknown to Plaintiffs at the present time and can only be ascertained through appropriate discovery, Plaintiffs believe that there are 500,000 or more members of the class located throughout the United States. It would be impracticable to join the class members individually. 86. Existence and predominance of common questions of law—Fed. R. Civ. P. 23(a)(2), 23(b)(3). Common questions of law and fact exist as to all members of the class and predominate over any questions solely affecting individual members of the class. 87. Among the many questions of law and fact common to the class are: • whether Defendants’ conduct violated the Privacy Act of 1974; • whether Defendants failed to establish appropriate administrative, technical, and physical safeguards to ensure the security and confidentiality of records and to protect against known and anticipated threats or hazards to the security and integrity of these records; • whether Defendants disclosed Plaintiffs’ and Class members’ PII without their prior written consent; • whether Defendants’ conduct was willful or with flagrant disregard for the security of Plaintiffs’ and Class Members’ PII; • whether Defendants had a legal duty to use reasonable cyber security measures to protect Plaintiffs and Class members’ PII; • whether Defendants breached their legal duty by failing to protect Plaintiffs’ and Class members’ PII; • whether Defendants acted willfully in failing to secure Plaintiffs’ and Class members’ PII; • whether Plaintiffs and Class members are entitled to damages, declaratory or injunctive relief. 88. Typicality—Fed. R. Civ. P. 23(a)(3). Plaintiffs’ claims are typical of the claims of the members of the class. Among other things, Plaintiffs and Class members are all former, current, and prospective American income tax filers and their spouses and/or dependents who provided personal information in connection with the filing of their federal income tax returns and other sensitive documentation filed with the IRS. 89. Adequacy—Fed. R. Civ. P. 23(a)(4). Plaintiffs will adequately represent the proposed Class members. They have retained counsel competent and experienced in class action and internet privacy litigation and intend to pursue this action vigorously. Plaintiffs have no interests contrary to or in conflict with the interests of class members. 90. Superiority—Fed. R. Civ. P. 23(b)(3). A class action is superior to all other available methods for the fair and efficient adjudication of this controversy. Plaintiffs know of no difficulty to be encountered in the management of this action that would preclude its maintenance as a class action. 91. In the alternative, the class may be certified under Rule 23(b)(1), 23(b)(2) or 23(c)(4) because: • the prosecution of separate actions by the individual members of the class would create a risk of inconsistent or varying adjudications with respect to individual Class members, which would establish incompatible standards of conduct for Defendants; • the prosecution of separate actions by individual Class members would create a risk of adjudications that would, as a practical matter, be dispositive of the interests of other Class members not parties to the adjudications, or would substantially impair or impede their ability to protect their interests; • Defendants acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief with respect to the members of the class as a whole; and • the claims of class members are comprised of common issues that are appropriate for certification under Rule 23(c)(4). CAUSES OF ACTION COUNT ONE (On behalf of Plaintiffs and Class Members against the IRS) VIOLATION OF PRIVACY ACT OF 1974, 5 U.S.C. § 552a (“PRIVACY ACT”) 92. Plaintiffs incorporate each and every allegation above as if fully set forth herein. 93. The IRS is an “agency” within the meaning of the Privacy Act. 94. Pursuant to 5 U.S.C. § 552a(b), agencies are prohibited from disclosing “any record which is contained in a system of records by any means of communication to any person, or to another agency, except pursuant to a written request by, or with the prior written consent of, the individual to whom the record pertains . . . .” 95. Pursuant to 5 U.S.C. § 552a(e)(10), “[e]ach agency that maintains a system of records shall . . . establish appropriate administrative, technical, and physical safeguards to insure the security and confidentiality of records and to protect against any anticipated threats or hazards to their security or integrity which could result in substantial harm, embarrassment, inconvenience, or unfairness to any individual on whom information is maintained.” 96. The IRS obtained and preserved Plaintiffs and Class members’ PII, including tax return transcripts, and other records, in a system of records during the tax collection and assessment process. 97. The IRS is therefore prohibited from disclosing federal taxpayers’ PII, under 5 U.S.C. § 552a(b), and is responsible for establishing appropriate “safeguards to insure the security and confidentiality of records and to protect against any anticipated threats or hazards to their security or integrity,” under 5 U.S.C. § 552a(e)(10). 98. The IRS is, and at all relevant times hereto was, required by law to comply with both FISMA and the Modernization Act. The IRS is also responsible for ensuring that its cyber security systems comply with 5 U.S.C. § 552a and other rules and regulations governing cyber security practices. 99. However, as related herein, the IRS intentionally and willfully failed to comply with FISMA and the Modernization Act and 5 U.S.C. § 552a and other rules and regulations governing cyber security practices. 100. The IRS’s history of non-compliance with FISMA’s legal requirements that culminated in the IRS’s risk-based decisions to make exceptions to its own policies and requirements in its decision not to follow TIGTA’s 2014 instruction to take corrective actions for a more secure and less vulnerable security system, resulted in (1) the disclosure of Plaintiffs’ and Class members’ records without prior written consent in violation of 5 U.S.C. § 552a(b) and, ultimately, (2) the “substantial harm, embarrassment, inconvenience, or unfairness to Plaintiffs and Class members,” that 5 U.S.C. § 552a(e)(10) is designed to protect against. 101. As a result of Defendants’ intentional and willful conduct, Plaintiffs and Class members have suffered and will continue to suffer actual damages and pecuniary losses within the meaning of the Privacy Act. Such damages have included or may include without limitation: (1) the loss of the opportunity to control how their PII is used; (2) the diminution in the value and/or use of their PII entrusted to the IRS for the purpose of filing income tax returns and with the understanding that the IRS would safeguard their PII against theft and not allow access and misuse of their PII by others; (3) the compromise, publication, and/or theft of their PII and the PII of their family members, (4) out-of- pocket costs associated with the prevention, detection, and recovery from identity theft and/or unauthorized use of financial and medical accounts; (5) lost opportunity costs associated with effort expended and the loss of productivity from addressing and attempting to mitigate the actual and future consequences of the IRS breach, including but not limited to efforts spent researching how to prevent, detect, contest and recover from PII misuse; (6) costs associated with the ability to use credit and assets frozen or flagged due to credit misuse, including complete credit denial and/or increased costs to use credit, credit scores, credit reports and assets; (7) unauthorized use of compromised PII to open new financial accounts or file fraudulent tax returns; (8) the continued risk to their PII, and the PII of their family members, which remains in the IRS’s possession and is subject to further breaches so long as the IRS fails to undertake appropriate and adequate measures to protect the PII in its possession; and (9) future costs in terms of time, effort, and money that will be expended to prevent, detect, contest, and repair the impact of the PII compromised as a result of the IRS Breach for the remainder of the lives of the Plaintiffs, Class members, and their families. Plaintiffs and Class members are thus entitled to relief, pursuant to 5 U.S.C. §§ 552a(g)(1)(D) and (g)(4). COUNT TWO (On behalf of Plaintiffs and Class members against the Defendants) VIOLATION OF THE ADMINISTRATIVE PROCEDURE ACT, 5 U.S.C. § 701, ET SEQ. 102. Plaintiffs incorporate each and every allegation as if fully set forth herein. 103. The IRS was required to comply with FISMA and has a continuing obligation to comply with the Modernization Act. Moreover, under FISMA, Defendant Koskinen was required to exercise oversight of the IRS’s information security policies and practices, including implementation of rules and standards complying with 40 U.S.C. § 11331. However, as is alleged above and incorporated herein, from 2010 to 2014, through a continuous course of conduct, the IRS intentionally failed to comply with FISMA and 40 U.S.C. § 11331 resulting in violations of the Privacy Act, 5 U.S.C. § 552a. 104. The IRS Defendants’ non-compliance with FISMA’s requirements was consistent from 2010 to 2014 and was not a valid exercise of discretion. FISMA and the Modernization Act are the law and, pursuant to FISMA’s terms, Defendant Koskinen is required to oversee the IRS’s compliance with both. TIGTA found that he failed to do so and that his failure put the IRS’s networks, data, and applications at risk. Ultimately the IRS’s noncompliance with FISMA and the Modernization Act resulted in the Privacy Act violations at the center of this lawsuit. 105. The IRS’s noncompliance with FISMA is well documented in each of TIGTA’s annual audit reports issued from 2010 to 2014. As is alleged in the preceding paragraphs, in each of TIGTA’s audit reports, the TIGTA instructed the IRS to bring its cybersecurity systems into compliance with FISMA, but each year, the IRS Defendants made the decision not to do so. For example, from 2012 to 2014, TIGTA told the IRS it was not in compliance with FISMA because of its failure to meet the level of performance specified by the Office of Management and Budget and Department of Homeland Security in the areas of (1) Identity and Access Management, and (2) Configuration Management. Nevertheless, the IRS Defendants repeatedly and intentionally made the decision not to comply with FISMA’s requirements. 106. The IRS’s continuous string of decisions not to comply with FISMA culminated in Koskinen’s choice to launch the “Get Transcript” application despite knowing the major security vulnerabilities and the IRS’s own declaration that its Information Security program was a “significant deficiency” from a financial reporting standpoint. This means weaknesses in its internal control environment were important enough to merit the attention of those charged with IRS governance. 107. The IRS Defendants’ many decisions not to comply with FISMA including but not limited to (1) deciding not to implement 44 recommendations that would have protected taxpayer data and improved its overall security posture and, instead, (2) deciding to launch the “Get Transcript” application despite its chronic failure to meet the level of performance specified by the OMB and the Department of Homeland Security, constitute final agency actions because the decisions were the consummation of the IRS’s decision making process, were not merely tentative or interlocutory nature, and denied Plaintiffs and Class members the right to protection of their PII. Because the IRS Defendants’ willful, intentional, and continuous course of conduct resulted in the IRS Breach in which Plaintiffs and Class members’ PII was compromised, the IRS Defendants continuous string of decisions not to comply with FISMA caused violations of the Privacy Act and damages to Plaintiffs and Class members. 108. The IRS Defendants violated their obligation to comply with FISMA, 40 U.S.C. § 11331, and the Privacy Act because, for years, they ignored TIGTA’s detailed instructions, and ultimately, decided to reject 44 of TIGTA’s security recommendations. 109. Defendants’ continuous string of decisions not to comply with FISMA—including TIGTA’s recommendations of the IRS’s Information Security program, was arbitrary, capricious and otherwise not in accordance with law; was in excess of statutory jurisdiction, authority, or limitations, or short of statutory right; and was without observance of procedure required by law. 110. Because of the IRS Defendants’ decisions not to comply with FISMA, the IRS Defendants violated the Privacy Act, and Plaintiffs and Class members suffered a legal wrong, and were adversely affected insofar as cyber attackers gained access to their sensitive, confidential, and personal information. 111. Plaintiffs and Class members are thus entitled to declaratory and injunctive relief. PRAYER FOR RELIEF WHEREFORE, Plaintiffs pray for judgment as follows: (a) Certify this case as a class action, appoint Plaintiffs as class representatives, and appoint Plaintiffs’ counsel to represent the class; (b) Award Plaintiffs and Class members appropriate relief, including actual and statutory damages; (c) Award equitable, injunctive, and declaratory relief as may be appropriate: (d) Award all costs, including experts’ fees and attorneys’ fees, and the costs of prosecuting this action; (e) Award pre-judgment and post-judgment interest as prescribed by law; and, (f) Grant further and additional relief as this court may deem just and proper. JURY TRIAL DEMANDED Plaintiffs hereby demand a trial by jury on all issues so triable. Dated: August 20, 2015 Respectfully submitted, ABBOTT LAW GROUP P.A. By:/s/ Steven W. Teppler (DC Bar No. 445259) E-mail: [email protected] ABBOTT LAW GROUP, P.A. 2929 Plummer Cove Road Jacksonville, FL 32223 Ph: (904) 292-1111 / Fax: (904) 292-1220 Richard D. McCune (CA Bar. No. 132124)* E-mail: [email protected] David C. Wright (CA Bar No. 177468)* E-Mail: [email protected] Michele M. Vercoski (CA Bar No. 244010)* E-mail: [email protected] MCCUNEWRIGHT LLP 2068 Orange Tree Lane, Suite 216 Redlands, California 92374 Ph: (909) 557-1250 / Fax: (909) 557-1275 John A. Yanchunis (FL Bar No. 324681)* E-mail: [email protected] Patrick A. Barthle II (FL Bar No. 99286)* E-mail: [email protected] MORGAN & MORGAN 201 N. Franklin Street, 7th Floor Tampa, Florida, 33602 Telephone: (813) 223-5505 Fax: (813) 222-4738 Joel R. Rhine (NC State Bar No. 16028)* E-Mail: [email protected] RHINE LAW FIRM, P.C. 1612 Military Cutoff Road, Ste. 300 Wilmington, NC 28403 Telephone: (910) 777-7651 Fax: (910) 772-9062 *Pro Hac Vice Applications to be submitted Attorneys for Plaintiffs and Putative Class

securities

rO-6EocBD5gMZwczA3FQ

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA Civil Action No: CLASS ACTION SCOMA CHIROPRACTIC, P.A., a Florida corporation, individually and as the representative of a class of similarly-situated persons, Plaintiff, v. TIVITY HEALTH, INC., a Delaware corporation, Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) CLASS ACTION COMPLAINT Plaintiff, SCOMA CHIROPRACTIC, P.A. (“Plaintiff”), brings this action on behalf of itself and all others similarly situated, through its attorneys, and except as to those allegations pertaining to Plaintiff or its attorneys, which allegations are based upon personal knowledge, alleges the following upon information and belief against Defendant, TIVITY HEALTH, INC. (“Defendant”): PRELIMINARY STATEMENT 1. This case challenges Defendant’s practice of sending unsolicited facsimiles. 2. The federal Telephone Consumer Protection Act of 1991, as amended by the Junk Fax Prevention Act of 2005 (“JFPA”), 47 USC § 227 (hereafter “TCPA” or the “Act”), and the regulations promulgated under the Act, prohibit a person or entity from faxing or having an agent fax advertisements without the recipient’s prior express invitation or permission. The TCPA provides a private right of action and provides statutory damages of $500 per violation. On or about November 15, 2019, Defendant sent Plaintiff an unsolicited fax advertisement in violation of the TCPA (“the Fax”), a true and correct copy of which is attached hereto as Exhibit A, and made a part hereof. Upon information and belief, Defendant has sent the Fax and other facsimile transmissions of unsolicited advertisements to Plaintiff and the Class in violation of the TCPA. The Fax describes the commercial availability or quality of Defendant’s property, goods or services, namely, Defendant’s new healthy lifestyle program – Mutually Well by Mutual of Omaha. (See Exhibit A). Plaintiff alleges on information and belief that Defendant has sent, and continues to send, unsolicited advertisements via facsimile transmission in violation of the TCPA, including but not limited to the advertisement sent to Plaintiff. 3. Unsolicited faxes damage their recipients. A junk fax recipient loses the use of its fax machine, paper, and ink toner. An unsolicited fax wastes the recipient’s valuable time that would have been spent on something else. A junk fax intrudes into the recipient’s seclusion and violates the recipient’s right to privacy. Unsolicited faxes occupy fax lines, prevent fax machines from receiving authorized faxes, prevent their use for authorized outgoing faxes, cause undue wear and tear on the recipients’ fax machines, and require additional labor to attempt to discern the source and purpose of the unsolicited message. 4. On behalf of itself and all others similarly situated, Plaintiff brings this case as a class action asserting claims against Defendant under the TCPA. Plaintiff seeks to certify a class which were sent the Fax and other unsolicited fax advertisements that were sent without prior express invitation or permission and without compliant opt-out language (to the extent the affirmative defense of established business relationship is alleged). Plaintiff seeks statutory damages for each violation of the TCPA and injunctive relief. 5. Plaintiff is informed and believes, and upon such information and belief avers, that this action is based upon a common nucleus of operative facts because the facsimile transmissions at issue were and are being done in the same or similar manner. This action is based on the same legal theory, namely liability under the TCPA. This action seeks relief expressly authorized by the TCPA: (i) injunctive relief enjoining Defendant, their employees, agents, representatives, contractors, affiliates, and all persons and entities acting in concert with them, from sending unsolicited advertisements in violation of the TCPA; and (ii) an award of statutory damages in the minimum amount of $500 for each violation of the TCPA, and to have such damages trebled, as provided by § 227(b)(3) of the Act in the event willfulness in violating the TCPA is shown.. JURISDICTION AND VENUE 6. This Court has subject matter jurisdiction under 28 U.S.C. § 1331 and 47 U.S.C. 7. This court has personal jurisdiction over Defendant because Defendant transact business within this judicial district, has made contacts within this judicial district, and/or has committed tortious acts within this judicial district. PARTIES 8. Plaintiff, SCOMA CHIROPRACTIC, P.A., is Florida corporation. 9. Defendant, TIVITY HEALTH, INC., is a Delaware corporation. Defendant’s principal place of business is in Franklin, Tennessee. FACTS 10. On or about November 15, 2019, Defendant sent an unsolicited facsimile to Plaintiff using a telephone facsimile machine, computer, or other device. See Exhibit A. Plaintiff received the Fax on a traditional stand-alone fax machine. 11. The Fax states, in part, as follows: “Dear Practitioner, As part of the WholeHealth Living Choices® network, we’re excited to let you know we have a new program that could bring you new clients: Mutually Well by Mutual of Omaha. The program is a healthy lifestyle program that gives their members access to great complementary and alternative medicine (CAM) providers like you. Mutually Well members can find you through a search on the program’s website or accompanying app. An image of the Mutually Well member care is below. Clients may show that to you to get your discount listed on the WholeHealth Living Choices website. Please contact WholeHealth Networks at 1-800-274-7526 if you have any questions.” 12. The Fax advertises the commercial availability or quality of Defendant’s new healthy lifestyle program, Mutually Well by Mutual of Omaha. 13. Defendant created or made Exhibit A, or directed a third party to do so, and Exhibit A was sent by or on behalf of Defendant with Defendant’s full knowledge and authorization. 14. Defendant receives some or all of the revenues from the sale of the services advertised on Exhibit A, and Defendant profits and benefits from the sale of said services advertised on Exhibit A. 15. Plaintiff did not give Defendant “prior express invitation or permission” to send the fax. 16. On information and belief, Defendant faxed the same and other unsolicited facsimile advertisements without the required opt-out language to Plaintiff and at least 40 other recipients or sent the same and other advertisements by fax with the required opt-out language but without first receiving the recipients’ express invitation or permission and without having an established business relationship as defined by the TCPA and its regulations. 17. There is no reasonable means for Plaintiff (or any other class member) to avoid receiving unauthorized fax advertisements. Fax machines are left on and ready to receive the urgent communications their owners desire to receive. 18. Defendant’s facsimile attached as Exhibit A does not display a proper opt-out notice as required by 47 C.F.R. § 227(b)(1)(C) and 47 C.F.R. § 64.1200(a)(4). CLASS ACTION ALLEGATIONS 19. In accordance with Fed. R. Civ. P. 23(b)(3), Plaintiff brings this class action pursuant to the TCPA, on behalf of the following class of persons: All persons who (1) on or after four years prior to the filing of this action, (2) were sent telephone facsimile messages of material advertising the commercial availability or quality of any property, goods, or services by or on behalf of Defendant, (3) from whom Defendant did not obtain “prior express invitation or permission” to send fax advertisements, or (4) with whom Defendant did not have an established business relationship, or (5) where the fax advertisements did not include an opt-out notice compliant with 47 C.F.R. § 64.1200(a)(4)(iii). Excluded from the Class are Defendant, its employees, agents and members of the Judiciary. Plaintiff seeks to certify a class which includes, but is not limited to, the fax advertisement sent to Plaintiff. Plaintiff reserves the right to amend the class definition upon completion of class certification discovery. 20. Class Size (Fed. R. Civ. P. 23(a)(1)): Plaintiff is informed and believes, and upon such information and belief avers, that the number of persons and entities of the Plaintiff Class is numerous and joinder of all members is impracticable. Plaintiff is informed and believes, and upon such information and belief avers, that the number of class members is at least forty. 21. Commonality (Fed. R. Civ. P. 23(a)(2)): Common questions of law and fact apply to the claims of all class members. Common material questions of fact and law include, but are not limited to, the following: (a) Whether the Fax and other faxes sent during the class period constitute advertisements under the TCPA and its implementing regulations; (b) Whether Defendant meets the definition of “sender” for direct TCPA liability, meaning a “person or entity on whose behalf a facsimile unsolicited advertisement is sent or whose goods or services are advertised or promoted in the unsolicited advertisement,” 47 C.F.R. § 64.1200(f)(10); (c) Whether Defendant had prior express invitation or permission to send Plaintiff and the class fax advertisements; (d) Whether the Fax(es) contain an “opt-out notice” that complies with the requirements of § (b)(1)(C)(iii) of the Act, and the regulations promulgated thereunder, and the effect of the failure to comply with such requirements; (e) Whether Defendant should be enjoined from faxing advertisements in the future; (f) Whether Plaintiff and the other members of the class are entitled to statutory damages; and (g) Whether the Court should award treble damages. 22. Typicality (Fed. R. Civ. P. 23 (a) (3)): Plaintiff's claims are typical of the claims of all class members. Plaintiff received the same or similar faxes as the faxes sent by or on behalf of Defendant advertising the commercial availability or quality of Defendant’s property, goods, or services during the Class Period. Plaintiff is making the same claims and seeking the same relief for itself and all class members based upon the same federal statute. Defendant has acted in the same or in a similar manner with respect to Plaintiff and all the class members by sending Plaintiff and each member of the class the same or similar faxes or faxes which did not contain the proper opt-out language or were sent without prior express invitation or permission. 23. Fair and Adequate Representation (Fed. R. Civ. P. 23 (a) (4)): Plaintiff will fairly and adequately represent and protect the interests of the class. It is interested in this matter, has no conflicts, and has retained experienced class counsel to represent the class. 24. Predominance and Superiority (Fed. R. Civ. P. 23 (b) (3)): Common questions of law and fact predominate over any questions affecting only individual members, and a class action is superior to other methods for the fair and efficient adjudication of the controversy because: (a) Proof of the claims of Plaintiff will also prove the claims of the class without the need for separate or individualized proceedings; (b) Evidence regarding defenses or any exceptions to liability that Defendant may assert and attempt to prove will come from Defendant’s records and will not require individualized or separate inquiries or proceedings; (c) Defendant has acted and are continuing to act pursuant to common policies or practices in the same or similar manner with respect to all class members; (d) The amount likely to be recovered by individual class members does not support individual litigation. A class action will permit a large number of relatively small claims involving virtually identical facts and legal issues to be resolved efficiently in one proceeding based upon common proofs; and (e) This case is inherently manageable as a class action in that: (i) Defendant identified persons to receive the fax transmissions and it is believed that Defendant’s and/or Defendant’s agents’ computers and business records will enable Plaintiff to readily identify class members and establish liability and damages; (ii) Liability and damages can be established for Plaintiff and the class with the same common proofs; (iii) Statutory damages are provided for in the statute and are the same for all class members and can be calculated in the same or a similar manner; (iv) A class action will result in an orderly and expeditious administration of claims and it will foster economics of time, effort and expense; (v) A class action will contribute to uniformity of decisions concerning Defendant’s practices; and (vi) As a practical matter, the claims of the class are likely to go unaddressed absent class certification. Claim for Relief for Violation of the TCPA, 47 U.S.C. § 227 et seq. 25. The TCPA makes it unlawful for any person to “use any telephone facsimile machine, computer or other device to send, to a telephone facsimile machine, an unsolicited advertisement . . . .” 47 U.S.C. § 227(b)(1)(C). 26. The TCPA defines “unsolicited advertisement” as “any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person's prior express invitation or permission, in writing or otherwise.” 47 U.S.C. § 227 (a) (5). 27. Opt-Out Notice Requirements. The TCPA strengthened the prohibitions against the sending of unsolicited advertisements by requiring, in § (b)(1)(C)(iii) of the Act, that senders of faxed advertisements place a clear and conspicuous notice on the first page of the transmission that contains the following among other things (hereinafter collectively the “Opt-Out Notice Requirements”): (1) A statement that the recipient is legally entitled to opt-out of receiving future faxed advertisements – knowing that he or she has the legal right to request an opt- out gives impetus for recipients to make such a request, if desired; (2) A statement that the sender must honor a recipient’s opt-out request within 30 days and the sender’s failure to do so is unlawful – thereby encouraging recipients to opt-out, if they did not want future faxes, by advising them that their opt-out requests will have legal “teeth”; (3) A statement advising the recipient that he or she may opt-out with respect to all of his or her facsimile telephone numbers and not just the ones that receive a faxed advertisement from the sender – thereby instructing a recipient on how to make a valid opt-out request for all of his or her fax machines; (4) The opt-out language must be conspicuous. The requirement of (1) above is incorporated from § (b)(D)(ii) of the Act. The requirement of (2) above is incorporated from § (b)(D)(ii) of the Act and the rules and regulations of the Federal Communications Commission (the “FCC”) in ¶ 31 of its 2006 Report and Order, 21 F.C.C.R. 3787, 2006 WL 901720, which rules and regulations took effect on August 1, 2006). The requirements of (3) above are contained in § (b)(2)(E) of the Act and incorporated into the Opt-Out Notice Requirements via § (b)(2)(D)(ii). Compliance with the Opt- Out Notice Requirements is neither difficult nor costly. The Opt-Out Notice Requirements are important consumer protections bestowed by Congress upon the owners of the telephone lines and fax machines giving them the right, and means, to stop unwanted faxed advertisements. 28. 2006 FCC Report and Order. The TCPA, in § (b)(2) of the Act, directed the FCC to implement regulations regarding the TCPA, including the TCPA’s Opt-Out Notice Requirements and the FCC did so in its 2006 Report and Order, which in addition provides among other things: A. The definition of, and the requirements for, an established business relationship for purposes of the first of the three prongs of an exemption to liability under § (b)(1)(C)(i) of the Act and provides that the lack of an “established business relationship” precludes the ability to invoke the exemption contained in § (b)(1)(C) of the Act (See 2006 Report and Order ¶¶ 8-12 and 17-20); B. The required means by which a recipient’s facsimile telephone number must be obtained for purposes of the second of the three prongs of the exemption under § (b)(1)(C)(ii) of the Act and provides that the failure to comply with these requirements precludes the ability to invoke the exemption contained in § (b)(1)(C) of the Act (See 2006 Report and Order ¶¶ 13-16); C. The things that must be done in order to comply with the Opt-Out Notice Requirements for the purposes of the third of the three prongs of the exemption under § (b)(1)(C)(iii) of the Act and provides that the failure to comply with these requirements precludes the ability to invoke the exemption contained in § (b)(1)(C) of the Act (See 2006 Report and Order ¶¶ 24-34); D. The failure of a sender to comply with the Opt-Out Notice Requirements precludes the sender from claiming that a recipient gave “prior express invitation or permission” to receive the sender’s fax (See Report and Order ¶ 48). As a result thereof, a sender of a faxed advertisement who fails to comply with the Opt- Out Notice Requirements has, by definition, transmitted an unsolicited advertisement under the TCPA. This is because such a sender can neither claim that the recipients of the faxed advertisement gave “prior express invitation or permission” to receive the fax nor can the sender claim the exemption from liability contained in § (b)(C)(1) of the Act. 29. The Fax. Defendant sent the Fax on or about November 15, 2019, via facsimile transmission from telephone facsimile machines, computers, or other devices to the telephone lines and facsimile machines of Plaintiff and members of the Plaintiff Class. The Fax constituted an advertisement under the Act and the regulations implementing the Act. Defendant failed to comply with the Opt-Out Requirements in connection with the Fax. The Fax was transmitted to persons or entities without their prior express invitation or permission and/or Defendant is precluded from asserting any prior express invitation or permission or that Defendant had an established business relationship with Plaintiff and other members of the class, because of the failure to comply with the Opt-Out Notice Requirements. By virtue thereof, Defendant violated the TCPA and the regulations promulgated thereunder by sending the Fax via facsimile transmission to Plaintiff and members of the Class. Plaintiff seeks to certify a class which includes this Fax and all others sent during the four years prior to the filing of this case through the present. 30. Defendant’s Other Violations. Plaintiff is informed and believes, and upon such information and belief avers, that during the period preceding four years of the filing of this Complaint and repeatedly thereafter, Defendant has sent via facsimile transmission from telephone facsimile machines, computers, or other devices to telephone facsimile machines of members of the Plaintiff Class other faxes that constitute advertisements under the TCPA and its implementing regulations that were transmitted to persons or entities without their prior express invitation or permission (and/or that Defendant is precluded from asserting any prior express invitation or permission or that Defendant had an established business relationship because of the failure to comply with the Opt-Out Notice Requirements in connection with such transmissions). By virtue thereof, Defendant violated the TCPA and the regulations promulgated thereunder. Plaintiff is informed and believes, and upon such information and belief avers, that Defendant may be continuing to send unsolicited advertisements via facsimile transmission in violation of the TCPA and the regulations promulgated thereunder, and absent intervention by this Court, will do so in the future. 31. The TCPA provides a private right of action to bring this action on behalf of Plaintiff and the Plaintiff Class to redress Defendant’s violations of the Act, and provides for statutory damages. 47 U.S.C. § 227(b)(3). The Act also provides that injunctive relief is appropriate. Id. 32. The TCPA is a strict liability statute, so Defendant is liable to Plaintiff and the other class members even if its actions were only negligent. 33. Defendant knew or should have known that (a) Plaintiff and the other class members had not given prior express invitation or permission for Defendant or anybody else to send faxes advertising the commercial availability or quality of Defendant’s new healthy lifestyle program; (b) Plaintiff and the other class members did not have an established business relationship; (c) Defendant transmitted advertisements; (d) the Fax did not contain the required Opt-Out Notice; and (e) Defendant’s transmission of advertisements that did not contain the required opt-out notice or were sent without prior express invitation or permission was unlawful. 34. Defendant’s actions caused damages to Plaintiff and the other class members. Receiving Defendant’s junk faxes caused Plaintiff and the other recipients to lose paper and toner consumed in the printing of Defendant’s faxes. Moreover, Defendant’s faxes used Plaintiff's and the other class members’ telephone lines and fax machine. Defendant’s faxes cost Plaintiff and the other class members time, as Plaintiff and the other class members and their employees wasted their time receiving, reviewing and routing Defendant’s unauthorized faxes. That time otherwise would have been spent on Plaintiff's and the other class members’ business or personal activities. Defendant’s faxes intruded into Plaintiff’s and other class members’ seclusion and violated their right to privacy, including their interests in being left alone. Finally, the injury and property damage sustained by Plaintiff and the other class members from the sending of Defendant’s advertisements occurred outside of Defendant’s premises. WHEREFORE, Plaintiff, SCOMA CHIROPRACTIC, P.A., individually and on behalf of all others similarly situated, demands judgment in its favor and against Defendant, TIVITY HEALTH, INC., as follows: A. That the Court adjudge and decree that the present case may be properly maintained as a class action, appoint Plaintiff as the representative of the class, and appoint Plaintiff’s counsel as counsel for the class; B. That the Court award actual monetary loss from such violations or the sum of five hundred dollars ($500.00) for each violation, whichever is greater, and that the Court award treble damages of $1,500.00 if the violations are deemed “willful or knowing”; C. That Court enjoin Defendant from additional violations; and D. That the Court award pre-judgment interest, costs, and such further relief as the Court may deem just and proper. Respectfully submitted, SCOMA CHIROPRACTIC, P.A., individually, and as the representative of a class of similarly- situated persons By: /s/ Ryan M. Kelly Ryan M. Kelly – FL Bar No.: 90110 ANDERSON + WANCA 3701 Algonquin Road, Suite 500 Rolling Meadows, IL 60008 Telephone: 847/368-1500 / Fax: 847/368-1501

privacy

7sjyDYcBD5gMZwczZu_6

CLASS ACTION JURY TRIAL DEMANDED UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF NORTH CAROLINA CASE NO: 1:21-CV-539 RAYMOND NARDO, individually and on behalf of all others similarly situated, Plaintiff, vs. PHE, INC. d/b/a ADAM AND EVE, Defendant. ______________________________________/ CLASS ACTION COMPLAINT Plaintiff Raymond Nardo brings this class action against Defendant PHE, Inc. d/b/a Adam and Eve (“Defendant”) and alleges as follows upon personal knowledge as to Plaintiff and Plaintiff’s own acts and experiences, and, as to all other matters, upon information and belief, including investigation conducted by Plaintiff’s attorneys. NATURE OF THE ACTION 1. This is a putative class action pursuant to the Telephone Consumer Protection Act, 47 U.S.C. §§ 227, et seq. (the “TCPA”). 2. Defendant is the largest e-commerce distributor of erotica in the United States. 3. Plaintiff has never purchased anything from Defendant, conducted business with Defendant, or visited Defendant’s website. 4. Defendant uses an automatic telephone dialing system to send mass automated marketing text messages to individuals’ cellular phone numbers without first obtaining the required express written consent. 5. Defendant also violates the TCPA’s Do Not Call (“DNC”) regulations by placing solicitation calls to individuals who have registered their telephone numbers on the national DNC registry and by continuing to place calls after individuals request to opt out of Defendant’s messaging. 6. Through this action, Plaintiff seeks injunctive relief to halt Defendant’s unlawful conduct, which has resulted in the invasion of privacy, harassment, aggravation, and disruption of the daily life of thousands of individuals. Plaintiff also seeks statutory damages on behalf of themselves and members of the Class, and any other available legal or equitable remedies. JURISDICTION AND VENUE 7. This Court has federal question subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1331, as the action arises under the Telephone Consumer Protection Act, 47 U.S.C. §§ 227, et seq. (“TCPA”). 8. Defendant is subject to personal jurisdiction in North Carolina because its primary place of business is in North Carolina. 9. Venue is proper in this District pursuant to 28 U.S.C. §§ 1391(b) and (c) because Defendant is deemed to reside in any judicial district in which it is subject to personal jurisdiction, and because a substantial part of the events or omissions giving rise to the claim occurred in this District. PARTIES 10. Plaintiff is a natural person who, at all times relevant to this action, was a citizen of and domiciled in Mineola, New York. 11. Defendant is a North Carolina corporation with its principal place of business in Orange County, North Carolina. Defendant directs, markets, and provides its business activities throughout the state of North Carolina. 12. Unless otherwise indicated, the use of Defendant’s name in this Complaint includes all agents, employees, officers, members, directors, heirs, successors, assigns, principals, trustees, sureties, subrogees, representatives, vendors, and insurers of Defendant. FACTS 13. Plaintiff has never purchased an item from Defendant, inquired about Defendant’s products, provided his contact information to Defendant, or visited Defendant’s website. 14. Despite this, on May 9, 2021, Defendant, or parties under Defendant’s direction, used an ATDS to cause the following automated telemarketing text messages to be transmitted to Plaintiff’s cellular telephone number ending in 9996 (herein, the “9996 Number”): 15. At the time Plaintiff received these calls and messages, Plaintiff was the subscriber and/or sole user of the 9996 Number. 16. Plaintiff primarily uses the 9996 Number as a personal phone. 17. The 9996 Number has been registered with the National Do Not Call Registry since February 20, 2007. 18. Defendant’s text messages constitute telemarketing, advertising, or solicitations because they promote Defendant’s business, goods and services. 19. Plaintiff has never inquired about or purchased any of Defendant’s goods or services. 20. At no point in time did Plaintiff provide Defendant (1) with his contact information, (2) with the 9996 Number, (3) with his prior express consent to be contacted with text messages sent using an ATDS, or (4) with his prior express written consent to be contacted by telemarketing text messages sent using an ATDS. 21. As demonstrated above, Plaintiff requested multiple times that Defendant stop contacting the 9996 Number using the “stop” key word provided in the text messages. 22. Notwithstanding, Plaintiff continued to receive unsolicited text messages from Defendant. 23. Indeed, as recently as June 17th, Defendant sent another marketing solicitation text message to the 9996 Number, as shown below: 24. The failure to stop calling is indicative of Defendant’s failure to implement a written policy for maintaining a do-not-call list and to train its personnel engaged in telemarketing on the existence and use of the do-not-call-list. 25. An ATDS was used to send the text messages to the 9996 Number. 26. The impersonal and generic nature of Defendant’s text messages demonstrates that Defendant utilized an ATDS in transmitting the messages. The text messages include no personal identifiers and are formatted in a generic manner. 27. The text messages also include instructions on how to respond in manner that the ATDS will understand. As an example, the text message contains the key words “help” and “stop” as responses. 28. The number used by Defendant to send Plaintiff the text messages was the short- code 33233. 29. A short code is a standard 5-digit code that enabled Defendant to send SMS text messages en masse, while deceiving recipients that the message was personalized and sent from a telephone number operated by an individual. 30. Upon information and belief, Defendant caused similar text messages to be sent to individuals residing within this judicial district. 31. Upon information and belief, to place the text messages, Defendant used a software suite (the “Platform”) that permitted Defendant to transmit bulk SMS text messages. Systems like the Platform utilized by Defendant have the capacity to transmit thousands of texts messages per second and are technologically more sophisticated in their availability to transmit messages than a traditional smartphone. 32. The Platform utilized by Defendant is an ATDS because it has the capacity to (1) store telephone numbers; (2) using a random or sequential number generator. 33. The Platform utilized by Defendant is also an ATDS because it has the capacity to (1) produce telephone numbers; (2) using a random or sequential number generator. 34. For example, the Platform has the capacity to indefinitely store telephone numbers within a computer database for subsequent dialing. 35. Further, the Platform has the capacity to utilize a random and sequential number generator in the storage of those numbers, and does in fact utilize said number generator for a variety of functions including, but not limited to, the selection and creation of SMS packets containing the target telephone numbers to be dialed by the Platform, as well as the sequential and/or random selection of telephone numbers to be dialed from a preselected stored list of numbers. 36. A packet in the context of SMS transmission is an envelope of data that contains various instructions and content, including the target cellular telephone number to be dialed, the sequence in which to dial each number, and wording of the message. The following is an example of a typical SMS packet: SubmitReq:StatusReportReq=true,Destination=0011166500313,Sequence=35722 139,Originator=91157,OriginatorType=3,Body=3:2e:0a11:2f14:2f11:0aDEBIT(p) $1:2e47:0aCHKCARDFOUTSETCROBERTIDUS:0aFornexttransaction:3aReply N:0aForprevious:3aReplyP,BillingRef=,ClientRef=41883049- 1,ProfileId=31174,Operator=31003,Tariff=0,Tag- Program=stdrt,TagChClientID=31174,TagChUsername=corvette_31174,ServiceI d=51437,Interface=xml, 37. In the context of SMS packet creation, the Platform utilizes a random and/or sequential number generator to pull and generate telephone numbers from a list of numbers and transfer those numbers to a separate list for the creation of the packets, and ultimately placement into each independent SMS packet. 38. In the context of dialing the numbers, the Platform utilizes a random and/or sequential number generator to pick and designate the sequence in which to dial the telephone numbers. The Platform independently selects the rate and time at which to dial each telephone numbers and may temporarily store the packets in a queue when the volume exceeds capacity to deliver them. 39. The Platform also has the capacity to use its random and/or sequential number generator to generate random or sequential identification numbers that it assigns to each SMS 40. Defendant’s unsolicited text message caused Plaintiff additional harm, including invasion of privacy, aggravation, annoyance, intrusion on seclusion, trespass, and conversion. Defendant’s call also inconvenienced Plaintiff and caused disruption to his daily life. CLASS ALLEGATIONS PROPOSED CLASS 41. Plaintiff brings this case as a class action pursuant to Fed. R. Civ. P. 23, on behalf of himself and all others similarly situated. 42. Plaintiff brings this case on behalf of the Class defined as follows: ATDS CLASS: All persons in the United States who from four years prior to the filing of this action: (1) Defendant, or anyone on Defendant’s behalf, (2) transmitted a text message; (3) using the same type of equipment used to text message Plaintiff; (4) to said person’s cellular telephone number; (5) where the purpose of the text message was to encourage the purchase or rental of, or investment in, Defendant’s property, goods, or services. DO NOT CALL CLASS: All persons in the United States who from four years prior to the filing of this action (1) Defendant, or anyone on Defendant’s behalf, (2) placed more than one text message call within any 12-month period; (3) where the person’s telephone number that had been listed on the National Do Not Call Registry for at least thirty days; (4) for the purpose of encouraging the purchase or rental of, or investment in, Defendant’s property, goods, or services; (5) who did not purchase or transact business with Defendant during the eighteen (18) months immediately preceding the date of the first message; and (6) who did not contact Defendant during the three (3) months immediately preceding the date of the first message with an inquiry about a product, good, or service offered by Defendant. Internal Do Not Call Class: All persons within the United States who, within the four years prior to the filing of this Complaint, (1) Defendant, or anyone on Defendant’s behalf, (2) placed a text message call, (3) for the purpose of encouraging the purchase or rental of, or investment in, Defendant’s property, goods, or services, (4) to said person’s residential telephone number, (5) after the person had requested to Defendant to not receive any more telephonic communications from Defendant. 43. Plaintiff reserves the right to modify the Class definitions as warranted as facts are learned in further investigation and discovery. 44. Defendant and its employees or agents are excluded from the Class. Plaintiff does not know the number of members in the Class but believes the Class members number in the several thousands, if not more. NUMEROSITY 45. Upon information and belief, Defendant has placed calls to telephone numbers belonging to thousands of consumers throughout the United States without their prior express consent and/or in violation of the national DNC. The members of the Class, therefore, are believed to be so numerous that joinder of all members is impracticable. 46. The exact number and identities of the members of the Class are unknown at this time and can only be ascertained through discovery. Identification of the Class members is a matter capable of ministerial determination from Defendant’s call records. COMMON QUESTIONS OF LAW AND FACT 47. There are numerous questions of law and fact common to members of the Class which predominate over any questions affecting only individual members of the Class. Among the questions of law and fact common to the members of the Class are: a) Whether Defendant made non-emergency calls to Plaintiff’s and Class members’ cellular telephones using an ATDS; b) Whether Defendant can meet its burden of showing that it obtained prior express written consent to make such calls; c) Whether Defendant’s conduct was knowing and willful; d) Whether Defendant initiated telemarketing calls to telephone numbers listed on the National Do Not Call Registry; e) Whether Defendant initiated telemarketing calls to telephone numbers who requested to not receive such calls; f) Whether Defendant is liable for damages, and the amount of such damages; and g) Whether Defendant should be enjoined from such conduct in the future. 48. The common questions in this case are capable of having common answers. If Plaintiff’s claim that Defendant routinely transmits calls to telephone numbers assigned to cellular telephone services is accurate, Plaintiff and the Class members will have identical claims capable of being efficiently adjudicated and administered in this case. TYPICALITY 49. Plaintiff’s claims are typical of the claims of the Class members, as they are all based on the same factual and legal theories. PROTECTING THE INTERESTS OF THE CLASS MEMBERS 50. Plaintiff is a representative who will fully and adequately assert and protect the interests of the Class, and has retained competent counsel. Accordingly, Plaintiff is an adequate representative and will fairly and adequately protect the interests of the Class. PROCEEDING VIA CLASS ACTION IS SUPERIOR AND ADVISABLE 51. A class action is superior to all other available methods for the fair and efficient adjudication of this lawsuit, because individual litigation of the claims of all members of the Class is economically unfeasible and procedurally impracticable. While the aggregate damages sustained by the Class are in the millions of dollars, the individual damages incurred by each member of the Class resulting from Defendant’s wrongful conduct are too small to warrant the expense of individual lawsuits. The likelihood of individual Class members prosecuting their own separate claims is remote, and, even if every member of the Class could afford individual litigation, the court system would be unduly burdened by individual litigation of such cases. 52. The prosecution of separate actions by members of the Class would create a risk of establishing inconsistent rulings and/or incompatible standards of conduct for Defendant. For example, one court might enjoin Defendant from performing the challenged acts, whereas another may not. Additionally, individual actions may be dispositive of the interests of the Class, although certain class members are not parties to such actions. COUNT I Violations of the TCPA, 47 U.S.C. § 227(b) and 47 C.F.R. § 64.1200 (On Behalf of Plaintiff and the ATDS Class) 53. Plaintiff re-alleges and incorporates the foregoing allegations as if fully set forth herein. 54. It is a violation of the TCPA to make “any call (other than a call made for emergency purposes or made with the prior express consent of the called party) using any automatic telephone dialing system … to any telephone number assigned to a … cellular telephone service ….” 47 U.S.C. § 227(b)(1)(A)(iii). 55. It is also a violation of the TCPA regulations promulgated by the FCC to “initiate any telephone call…using an automatic telephone dialing system…To any telephone number assigned to a paging service, cellular telephone service, specialized mobile radio service, or other radio common carrier service, or any service for which the called party is charged for the call.” 47 C.F.R. § 64.1200(a)(1)(iii). 56. Additionally, it is a violation of the TCPA regulations promulgated by the FCC to “[i]nitiate, or cause to be initiated, any telephone call that includes or introduces an advertisement or constitutes telemarketing, using an automatic telephone dialing system…other than a call made with the prior express written consent of the called party or the prior express consent of the called party when the call is made …” 47 C.F.R. § 64.1200(a)(2). 57. The TCPA defines an “automatic telephone dialing system” (hereinafter “ATDS”) as “equipment which has the capacity – (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” 47 U.S.C. § 227(a)(1). 58. Defendant used an ATDS to make non-emergency telemarketing calls to the cellular telephones of Plaintiff and the other members of the Class defined below. 59. These calls were made without regard to whether or not Defendant had first obtained express written consent from the called party to make such calls. 60. In fact, Defendant did not have prior express written consent to call the telephones of Plaintiff and the other members of the putative Class when its calls were made. 61. Defendant has, therefore, violated § 227(b)(1)(A)(iii) and 47 C.F.R. § 64.1200(a) of the TCPA by using an ATDS to make non-emergency telephone calls to the cell phones of Plaintiff and the other members of the putative Class without their prior express written consent. 62. Defendant knew that it did not have prior express consent to make these calls and knew, or should have known, that it was using equipment that at constituted an automatic telephone dialing system. The violations were therefore willful or knowing. 63. As a result of Defendant’s conduct and pursuant to § 227(b)(3) of the TCPA, Plaintiff and the other members of the putative Class were harmed and are each entitled to a minimum of $500.00 in damages for each violation. Plaintiff and the members of the Class are also entitled to an injunction against future calls. COUNT III Violations of 47 U.S.C. § 227 and 47 C.F.R. § 64.1200 (On Behalf of Plaintiff and the Do Not Call Registry Class) 64. Plaintiff re-alleges and incorporates the allegations of paragraphs 1-51 as if fully set forth herein. 65. The TCPA’s implementing regulation, 47 C.F.R. § 64.1200(c), provides that “[n]o person or entity shall initiate any telephone solicitation” to “[a] residential telephone subscriber who has registered his or her telephone number on the national do-not-call registry of persons who do not wish to receive telephone solicitations that is maintained by the federal government.” 66. 47 C.F.R. § 64.1200(e), provides that § 64.1200(c) and (d) “are applicable to any person or entity making telephone solicitations or telemarketing calls to wireless telephone numbers.” 67. 47 C.F.R. § 64.1200(d) further provides that “[n]o person or entity shall initiate any call for telemarketing purposes to a residential telephone subscriber unless such person or entity has instituted procedures for maintaining a list of persons who request not to receive telemarketing calls made by or on behalf of that person or entity.” 68. Any “person who has received more than one telephone call within any 12- month period by or on behalf of the same entity in violation of the regulations prescribed under this subsection may” may bring a private action based on a violation of said regulations, which were promulgated to protect telephone subscribers’ privacy rights to avoid receiving telephone solicitations to which they object. 47 U.S.C. § 227(c). 69. Defendant violated 47 C.F.R. § 64.1200(c) by initiating, or causing to be initiated, telephone solicitations to telephone subscribers such as Plaintiff and the Do Not Call Registry Class members who registered their respective telephone numbers on the National Do Not Call Registry, a listing of persons who do not wish to receive telephone solicitations that is maintained by the federal government. 70. Defendant violated 47 U.S.C. § 227(c)(5) because Plaintiff and the Do Not Call Registry Class received more than one telephone call in a 12-month period made by or on behalf of Defendant in violation of 47 C.F.R. § 64.1200, as described above. As a result of Defendant’s conduct as alleged herein, Plaintiff and the Do Not Call Registry Class suffered actual damages and, under section 47 U.S.C. § 227(c), are entitled, inter alia, to receive up to $500 in damages for such violations of 47 C.F.R. § 64.1200. 71. To the extent Defendant’s misconduct is determined to be willful and knowing, the Court should, pursuant to 47 U.S.C. § 227(c)(5), treble the amount of statutory damages recoverable by the members of the Do Not Call Registry Class. COUNT III Violations of 47 U.S.C. § 227 and 47 C.F.R. § 64.1200 (On Behalf of Plaintiff and the Internal Do Not Call Class) 72. Plaintiff re-alleges and incorporates paragraphs 1-51 as if fully set forth herein. 73. In pertinent part, 47 C.F.R. § 64.1200(d) provides: No person or entity shall initiate any call for telemarketing purposes to a residential telephone subscriber unless such person or entity has instituted procedures for maintaining a list of persons who request not to receive telemarketing calls made by or on behalf of that person or entity. The procedures instituted must meet the following minimum standards: (1) Written policy. Persons or entities making calls for telemarketing purposes must have a written policy, available upon demand, for maintaining a do-not-call list. (2) Training of personnel engaged in telemarketing. Personnel engaged in any aspect of telemarketing must be informed and trained in the existence and use of the do-not-call list. 74. Under 47 C.F.R § 64.1200(e), the rules set forth in 47 C.F.R. § 64.1200(d) are applicable to any person or entity making telephone solicitations or telemarketing calls to wireless telephone numbers. 75. Plaintiff and the Internal Do Not Call Class members made requests to Defendant not to receive future calls on their cellular telephone numbers from Defendant. 76. Defendant failed to honor Plaintiff and the Internal Do Not Call Class members’ opt-out requests. 77. Defendant’s refusal to honor opt-out requests is indicative of Defendant’s failure to implement a written policy for maintaining a do-not-call list and to train its personnel engaged in telemarketing on the existence and use of the do-not-call-list. 78. Thus, Defendant has violated 47 C.F.R. § 64.1200(d). 79. Pursuant to section 227(c)(5) of the TCPA, Plaintiff and the Internal Do Not Call Class members are entitled to an award of $500.00 in statutory damages, for each and every negligent violation. 80. As a result of Defendant’s knowing or willful conduct, Plaintiff and the Internal Do Not Call Class members are entitled to an award of $1,500.00 in statutory damages per violation. 81. Plaintiff and the Internal Do Not Call Class members are also entitled to and seek injunctive relief prohibiting Defendant’s illegal conduct in the future, pursuant to section 227(c)(5). PRAYER FOR RELIEF WHEREFORE, Plaintiff, individually and on behalf of the Class, prays for the following a) An order declaring that Defendant’s actions, as set out above, violate the TCPA; b) An order certifying this case as a class action on behalf of the Classes as defined above, and appointing Plaintiff as the representative of the Classes and Plaintiff’s counsel as Class Counsel; c) An injunction prohibiting Defendant from initiating calls to telephone numbers listed on the National Do Not Call Registry, requiring Defendant to obtain prior express written consent prior to placing telemarketing calls using an ATDS, mandating Defendant to honor opt our requests and maintain an internal Do Not Call list. d) As a result of Defendant’s negligent violations of 47 U.S.C. §§ 227, et seq., and 47 C.F.R. § 64.1200, Plaintiff seeks for himself and each member of the Class $500.00 in statutory damages for each and every violation pursuant to 47 U.S.C. § 227(b)(3). e) As a result of Defendant’s knowing and/or willful violations of 47 U.S.C. §§ 227, et seq., and 47 C.F.R. § 64.1200, Plaintiff seeks for himself and each member of the Class treble damages, as provided by statute, up to $1,500.00 for each and every violation pursuant to 47 U.S.C. § 227(b)(3). f) Such further and other relief as the Court deems necessary. JURY DEMAND Plaintiff hereby demand a trial by jury. DOCUMENT PRESERVATION DEMAND Plaintiff demands that Defendant take affirmative steps to preserve all records, lists, electronic databases or other itemization of telephone numbers associated with Defendant and the calls as alleged herein. Dated: June 30, 2021 /s/ David M. Wilkerson DAVID M. WILKERSON NC State Bar No. 35742 The Van Winkle Law Firm 11 N. Market Street Asheville, North Carolina 28801 (828)258-299 (phone) (828)257-2767 (fax) [email protected] Ignacio Hiraldo, Esq. FL State Bar No. 56031 DC State Bar No. 485610 IJH Law 1200 Brickell Ave. Suite 1950 Miami, FL 33131 E: [email protected] T: 786-496-4469 Pro Hac Vice to be filed Attorneys for Plaintiff and the Proposed Class

privacy

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Sophia M. Rios (305801) BERGER MONTAGUE PC 12544 High Bluff Drive, Suite 340 San Diego, CA 92130 Tel: (619) 489-0300 Fax: (215) 875-4604 [email protected] Eric L. Cramer (Pro Hac Vice to be filed) Michael C. Dell’Angelo (Pro Hac Vice to be filed) Patrick F. Madden (Pro Hac Vice to be filed) Michaela Wallin (Pro Hac Vice to be filed) BERGER MONTAGUE PC 1818 Market Street, Suite 3600 Philadelphia, PA 19103 Tel: (215) 875-3000 Fax: (215) 875-4604 [email protected] [email protected] [email protected] [email protected] Attorneys for Plaintiff and the Class [Additional counsel listed on signature page] IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION Case No.: 20-CV-9321 CLASS ACTION COMPLAINT JURY TRIAL DEMANDED STERLING INTERNATIONAL CONSULTING GROUP, on behalf of itself and all others similarly situated, Plaintiff, v. GOOGLE LLC, Defendant. I. NATURE OF ACTION AND SUMMARY .....................................................................................1 II. JURISDICTION AND VENUE ......................................................................................................4 III. PARTIES ..........................................................................................................................................5 IV. DIGITAL DISPLAY ADVERTISING .............................................................................................5 A. How Digital Display Advertising Works .............................................................................6 B. �e Importance of Data in Digital Advertising ....................................................................8 V. GOOGLE’S BUSINESS ..................................................................................................................9 VI. GOOGLE’S MARKET POWER IN THE PUBLISHER AD SERVER MARKET ......................10 A. �e Relevant Market ..........................................................................................................10 B. Google Dominates the Relevant Market ............................................................................ 11 VII. GOOGLE’S ANTICOMPETITIVE SCHEME .............................................................................13 A. Google Engaged In A Series Of Acquisitions To Acquire A Foothold At Each Level Of �e Ad Tech Stack. .......................................................................................................14 B. Google Used Its Dominant Position �roughout the Ad Tech Stack to Engage In Exclusionary Conduct ........................................................................................................16 C. Google Manipulates Its Ad Auction Processes to Preference Its Own Tied Auctions .......17 1. �e Waterfall System (Pre-2009) ...........................................................................18 2. Dynamic Allocation (2009)....................................................................................20 3. Enhanced Dynamic Allocation (2014) ...................................................................21 4. Header Bidding (2015) ..........................................................................................21 5. Exchange Bidding (2018) ......................................................................................24 6. First-Price Unified Auction ....................................................................................24 D. Google Uses Its Monopoly Power In Other Markets To Impair Potential Competitors In �e Publisher Ad Server Market. ..............................................................26 E. Google Made an Unlawful Agreement with Its Biggest Competitor to Suppress Competition........................................................................................................................27 VIII. GOOGLE’S SCHEME FORECLOSED THE PUBLISHER AD SERVER MARKET ................30 IX. GOOGLE’S SCHEME CAUSES ANTICOMPETITIVE EFFECTS ...........................................31 A. Google’s Scheme Suppresses Ad Revenues Publishers Receive for �eir Ad Inventory Below Competitive Levels ................................................................................31 B. Google’s Scheme Reduces Publishers’ Content Output and Quality Along with Publishers’ Revenue-Generating Abilities. ........................................................................32 C. Google’s Scheme Causes Anticompetitive Effects for Both Google’s Advertiser Clients and Non-Google Advertisers. ................................................................................33 X. GOOGLE’S SCHEME CAUSES PUBLISHERS ANTITRUST INJURY ...................................34 XI. INTERSTATE COMMERCE ........................................................................................................35 XII. CLASS ALLEGATIONS ...............................................................................................................35 XIII. CAUSES OF ACTION ..................................................................................................................38 XIV. DEMAND FOR JUDGMENT .......................................................................................................41 XV. JURY TRIAL DEMAND ...............................................................................................................41 class action on behalf of all others similarly situated, pursuant to Rule 23 of the Federal Rules of Civil Procedure, against Defendant Google LLC (“Google” or “Defendant”). Plaintiff seeks treble damages and injunctive relief for Defendant’s violations of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§1, 2. Plaintiff complains and alleges as follows based on: (a) its personal knowledge; (b) the investigation of Plaintiff’s counsel; and (c) information and belief. I. NATURE OF ACTION AND SUMMARY 1. �is is a civil antitrust action under Sections 1 and 2 of the Sherman Act for treble damages and other relief arising out of Google’s overarching anticompetitive scheme (the “Scheme”) to capture a dominant share of the revenues associated with services required to place open-web display ads. Specifically, Google has obtained and maintained a monopoly in the market for providing publisher ad server services (the “Publisher Ad Server Market”), and has used that power to artificially inflate its prices charged to “Publishers.” 2. Plaintiff is a “Publisher”: Plaintiff operates a website on which it sells space to advertisers to place digital display ads. 3. To sell its ad space, Plaintiff directly purchases publisher ad server services from Google. Publisher ad servers identify ad space that gets created when users load Publishers’ webpages, and then solicit and organize bids from various sources of advertiser demand to fill the space. Publisher ad server providers receive compensation in a form of a cut of the payments advertisers make for their ads to appear in Publishers’ webpages. 4. Plaintiff, like other purchasers of Google’s publisher ad server services, depends on Google to solicit and organize bids from advertisers for its website’s ad inventory. 5. When users generate ad inventory on Publishers’ sites by loading the page, this sets off a series of processes in what is known as the “Ad Tech Stack.” �e publisher ad server notifies demand sources (e.g., “ad exchanges” or “ad networks” that run auctions between advertisers) of the existence of ad space. �e demand sources provide bids from their participating advertisers to the publisher ad server. Once the ad server identifies the winning bid, it obtains the winning advertisement from the advertiser’s second. 6. Google controls the dominant services at each level of the Ad Tech Stack. Most importantly, Google controls (1) the dominant publisher ad server products, (2) the dominant ad exchange and ad network, and (3) the dominant advertiser ad server. 7. Google thus controls which ad inventory a dominant share of advertisers will bid on, which advertisers can participate in the most significant auctions (Google’s auctions), and how Publishers prioritize and compare different demand sources (e.g., ad exchange auctions, ads sold directly by a Publisher to an advertiser, and other auction types) to identify the advertiser that ultimately “wins” the right to place an ad in a particular ad slot. 8. �rough a series of anticompetitive acts beginning by at least 2007 and continuing through the present (together, the “Scheme”), Google has illegally acquired, enhanced, and maintained dominant positions in the Publisher Ad Server Market. 9. First, Google engaged in a series of acquisitions designed to give it a significant market presence at each level of the Ad Tech Stack. Most notably, Google acquired DoubleClick in 2007, a company with the then-highest market share in the Publisher Ad Server Market. 10. Second, Google engaged in exclusionary conduct designed to entrench its offerings at each level of the Ad Tech Stack and disadvantage actual and potential rivals. For example, in selling its services to advertisers, Google ties its ad targeting and attribution data services to its advertiser-facing ad tech services.1 Because these data services are critical to advertisers, Google was able to amass a substantial pool of advertiser clients through the tying arrangement. Google then used its positions at other levels of the Ad Tech Stack to control Publishers’ access to that pool of advertiser demand. Specifically, Google required its advertisers to bid in Google-controlled auctions (through Google’s ad exchange and/or ad network). Google then controlled how Publishers could access bids from Google- 1 As set forth herein, Google’s data on users is unparalleled. Google gleans data from its consumer-facing offerings including, inter alia, its market-leading web browser (Chrome), its popular email service (Gmail), the Android operating system (“OS”) in use on hundreds of millions of mobile devices, Google’s search data, and Google’s ad placement products. auctions to use a Google publisher ad server. �is conduct coerces Publishers to use Google’s publisher ad server products. 11. �ird, as more and more Publishers adopted Google’s publisher ad server products, Google reinforced its control on the advertiser side of the Ad Tech Stack through similar conduct. In particular, Google gave its own demand sources (e.g., bids from its ad exchange) privileged access to Google’s Publisher-clients’ ad space through its control over a dominant share of Publishers’ ad servers. By disadvantaging bids from non-Google demand sources, advertisers who want to display ads on Google’s Publisher-clients must use Google’s advertiser-facing products. �e resulting increase in the number of advertisers in Google’s pool of clients then further increases Publishers’ need to use Google ad servers, further entrenching Google’s market dominance. 12. Fourth, Google has taken a variety of measures to impair potential rivals’ ability to collect user data and use such data to target advertisements. For example, Google has coerced Publishers to create content for mobile users in a format known as “accelerated mobile pages” or “AMP” by suppressing non-AMP content in Google Search results. �en, when Publishers offer content in AMP format, Google caches the AMP pages such that when a user attempts to navigate to the content from, inter alia, Google Search results or the Google News app, Google serves the content from Google’s (and not the Publisher’s) servers. As a result, Publishers (and any third-party tracker the Publishers engage) cannot obtain data from their users that could later be used to target advertisements. Similarly, Google has announced imminent changes to features of its popular Chrome web browser that will inhibit potential rivals from collecting data through third-party cookies and/or DNS data.2 13. Fifth, according to the complaint filed by the Texas Attorney General (and other state attorneys general), Google made an unlawful agreement with its largest potential rival—Facebook, Inc. �rough the agreement the two advertising behemoths agreed to cooperate rather than compete. Such conduct removed significant competitive pressure on Google. 2 As discussed infra, third-party cookies and DNS data tracking are mechanisms that potential competitors can use to amass data that would allow advertisers to target their advertisements without relying on Google’s data services. Scheme allows Google to charge Publishers supracompetitive prices for its publisher ad server services. Because Google’s Scheme has effectively destroyed competition in the Publisher Ad Server Market, Publishers have no choice but to pay the supracompetitive prices—extracted as a percentage of their advertising revenue. 15. As alleged herein, Google’s conduct has had substantial anticompetitive effects in the Publisher Ad Server Market and has harmed Plaintiff and members of the Class. Plaintiff and members of the proposed Class accordingly seek compensatory and injunctive relief for violations of the Sherman Act, 15 U.S.C. §§ 1, 2. II. JURISDICTION AND VENUE 16. Plaintiff brings this action under Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2. 17. Plaintiff has been injured, and is likely to continue to be injured, as a direct result of Defendant’s unlawful conduct alleged herein. 18. �e United States District Court for the Northern District of California has subject matter jurisdiction over this action pursuant to 28 U.S.C. §§ 1331 and 1337(a), and Section 4 of the Clayton Act, 15 U.S.C. § 15(a)(2). 19. �e United States District Court for the Northern District of California also has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1332(d). �e amount in controversy exceeds $5,000,000 exclusive of interests and costs, and Plaintiff and a significant proportion of the members of the proposed Class are citizens of a state different from Defendant. 20. Venue is proper in this District under Sections 4 and 12 of the Clayton Act, 15 U.S.C. §§ 15, 22. Google is headquartered in this District, its principal business operations are based in this District, and the Scheme was formulated and carried out in this District. Venue also is proper pursuant to 28 U.S.C. § 1391 for the same reasons. 21. Additionally, Plaintiff and members of the proposed Class have contracts with Google containing a forum selection clause. �e forum selection clause requires all claims between the parties to be resolved “exclusively in the federal or state courts of Santa Clara County, California,” which includes this District. 22. Plaintiff Sterling International Consulting Group is a Delaware Corporation with its principal place of business in Statesville, NC. Plaintiff operates an ad-supported website that uses a Google publisher ad server to identify the creation of ad inventory, obtain bids from demand sources, and fill the ad space. 23. Defendant Google is a Delaware corporation with its principal place of business in Mountain View, California. IV. DIGITAL DISPLAY ADVERTISING 24. Digital advertising has exploded in recent years. Worldwide digital advertising spending was estimated to be $194.6 billion in 2016 and rose to $325 billion in 2019. 25. �e United States accounts for a substantial proportion of those revenue figures. In 2019, for example, the United States accounted for approximately 40% of the global digital advertising revenues. 26. Digital advertising takes several complementary forms. For example, advertisements can be targeted to consumers, inter alia, as text-based ads to appear with search engine query results (“search ads”), as display ads appearing in-line in Publishers’ content such as blog posts or news articles (“display ads”), or as ads in social media feeds. 27. Advertisers purchase one format or another to serve their different goals. For instance, advertisers may purchase search ads to reach consumers actively looking to make a purchase by searching for a particular product or company. By contrast, they may purchase display ads on a Publisher’s site to increase brand awareness or to market a product to a user that put the product in his shopping cart but did not complete the purchase. 28. While search ads are targeted principally based on the search terms the user inputs into the search engine, display ads are shown to each user who loads a webpage programmed to display advertising. �us, data about the webpage user is critical to advertisers seeking to display their advertisement to such user. types of ad formats they can sell. A news website, for example, can generally sell display ads alongside its news articles but cannot generally sell search ads to monetize the same content. A. How Digital Display Advertising Works 30. Publishers sell their ad inventory to advertisers either directly through their marketing departments or indirectly through programmatic ad auctions run by their publisher ad server and/or ad exchanges and ad networks. 31. Generally, only large Publishers have the means and/or incentive to sell advertisements directly to advertisers (so-called “direct-sold” ads) due to the need for internal staffing and general advertiser demand for the Publishers’ ad inventory. 32. Even those Publishers that sell ad space directly to advertisers cannot always predict how many ad spaces they have available for direct-sold ads because the number of ad spaces is dependent on the number of users who visit each Publisher’s website (as well as other factors specific to the Publishers’ deals with advertisers, e.g., specific criteria for users who would be targeted with the ads). �us, selling inventory through programmatic ad auctions permits Publishers to sell their remnant inventory that either does not qualify for their direct-sold deals or where the programmatic placement would fetch a higher price than the direct-sold ad deals. Additionally, some Publishers sell the entirety of their inventory indirectly through programmatic ad auctions. 33. Programmatic ad auctions are run in various forms by ad exchange, ad networks, and ad servers. �eir purpose is to determine which advertiser can place its ad in a particular ad slot created when a user loads a Publisher’s webpage. 34. Instead of advertisers placing an order for a fixed amount of impressions (i.e., user views) from a Publisher as they would in direct-sold ads, each auction organizer (i.e., the ad exchange, ad server, or ad network) auctions the ad slot between its participating advertisers in real time when the page is loaded. �is process—in which a user loads a webpage, the auction organizer conducts the auction, and the ad gets placed—occurs automatically (usually taking a few hundred milliseconds). 35. �e process involves several entities providing services in the “Ad Tech Stack.” On one end of the Ad Tech Stack, the Publisher engages a publisher ad server. �e ad server can conduct its own middlemen between Publishers and advertisers. 36. On the other end of the Ad Tech Stack, advertisers engage an advertiser ad server and a “demand side platform”3 or “DSP.” �e advertiser ad server performs the function of storing the advertisers’ ads, serving advertisers ads when the advertiser wins auctions, and tracks the advertiser’ ad campaign results. �e DSP manages advertisers’ programmatic ad buying. �e DSP essentially automates the process of bidding on advertisers’ behalf in ad auctions. 37. �us, the Ad Tech Stack looks like this: Publisher Publisher Ad  Server Ad Exchange/Ad  Network Demand Side  Platform Advertiser Ad  Server Advertiser Figure 1: The Ad Tech Stack 38. �e Publisher- and advertiser-facing services in the Ad Tech Stack are not always fully interoperable, meaning that ad tech service providers control the extent to which other service providers’ clients (Publishers or advertisers) can transact with each other. 39. As one relevant example, Google has not allowed Publishers who are not customers of Google’s ad tech services on the supply side4 to access Google’s auctions to obtain real-time bids from Google’s pool of advertisers on the demand side. 40. As a result of this interoperability issue, Publishers (and advertisers) consider the demand (supply) that their publisher ad server (advertiser ad server and/or DSP) can access. In other words, a key consideration for Publishers in selecting an ad server is what demand (and on what terms) the ad server can solicit bids from different demand sources; the more advertisers (who are expected to bid the most) who participate in the auctions the ad server can access the better. Conversely, if a publisher ad server 3 Publishers may also engage a platform (called a “supply side platform” or “SSP”) to work with ad exchanges. Google has collapsed many of these functions into single offerings. As a result, there is relatively little distinction between the function of a publisher ad server and a SSP today. 4 Publishers are the “supply” side because they generate the “supply” of ad inventory. Advertisers are the “demand” side because they purchase the ability to place ads in Publishers’ ad inventory. against Google’s publisher ad server products. B. �e Importance of Data in Digital Advertising 41. �e digital economy more broadly relies heavily on collecting, mining, analyzing, and monetizing data. Personal information collected by companies in the digital economy has become a substantial intangible asset used to create value, not unlike copyrights, patents, and goodwill. 42. Traditionally, advertising has relied on targeting methods. For example, when an advertiser wanted to market nationwide, the advertiser might purchase advertising space in nationally distributed newspapers and magazines (e.g., USA Today or Newsweek). As a result, newspapers, magazines, and television stations tracked and kept detailed reader/viewer data. �eir marketing departments (and/or contractors) would then work with advertisers (and/or their agents and contractors) to provide information on the potential reach and targeting capability of advertising on the media. 43. Digital advertising is not different in its reliance on targeting. However, the availability of data on users enable digital advertisers to target advertising with far more precision. 44. Different forms of digital advertising use different types of data. For example, when an advertiser markets to users of a search engine, the advertiser is using the user’s search terms to target advertising. When seeking to use display advertisements, whether on a social network platform or on a Publisher’s site, an advertiser can target users better with more personalized data about the individual users. So, if an advertiser knows a particular person used the advertiser’s website and placed merchandise in his or her shopping cart without purchasing the item, that advertiser may place significant value being able to market that merchandise to that person as the person visits other websites. As another example, a particular advertiser (whether a retailer, political campaign, or services provider, etc.) may know that people with particular characteristics (e.g., with certain interests like sports, travel, etc., with certain incomes or wealth, or located in a particular place) would be receptive to their marketing. To such advertisers, data on who is receiving advertisements is a valuable and critical element to their advertising campaigns. 45. One company ran a trial in 2019 to compare the revenue Publishers in the United Kingdom received from advertising benefiting from personalized data with revenue received from 50% and 65% less revenue when they were unable to sell personalized advertising but competed with others who could. 46. In digital advertising, a key input is data on consumers who would be targeted by a given advertisement. �e more targeted an ad, the more likely it is that users act upon it (e.g., click on the ad’s link), and therefore the higher the return on investment is. �us, advertisers are willing to (and do) bid far more when they have significant data on a user than when they have little or no data. 47. It is precisely because consumer data is the key input that Google and Facebook have emerged as the dominant players in the broader digital advertising sphere. �rough its data access, Google dominates search advertising and the ad tech services that place advertising on Publishers’ websites. Google achieved its dominance in no small part because of its ability to collect particular types of user data. Google’s control over consumer-facing products, e.g., Search, Android OS, Gmail, Maps, YouTube, Chrome, and its ad tech services, provides Google with unmatched access to user data based on what websites users view, what they search for, what emails they receive, where they go and how often they go there, where they live, where they work, what videos they watch on YouTube, what apps they use on their phone, and more. V. GOOGLE’S BUSINESS 48. Google offers myriad “free” services to consumers, such as Google Search, Google Chrome, Google Maps, YouTube, and Android OS. While consumers do not compensate Google for those services with money, consumers do allow Google to collect data from them relating to those interactions. For example, Google’s Android OS provides Google with location data, Google Search provides Google with data on what a particular user is looking for online, and YouTube provides Google with data on user interests. 49. Google uses the data gathered from consumers using these “free” services (as well as other Google business lines, including its advertising services) to target advertisements displayed on Publishers’ webpages, making billions of dollars a year in the process. 50. Because of the data Google gleans from users of its “free” services, Google has a nearly unparalleled ability to target advertisements to users. As a result, one of Google’s most significant with interrelated services throughout the Ad Tech Stack. 51. Google’s unparalleled access to user data has been a significant factor in Google’s domination of the digital display ad ecosystem with its offerings at each level of the Ad Tech Stack. Google’s offerings include services that work together to (1) identify advertising inventory when a user loads a Publisher’s content, (2) collect bids from advertisers interested in serving an ad to particular Publishers, (3) determine the winning advertiser, and (4) serve the ad—all of which happens in milliseconds. VI. GOOGLE’S MARKET POWER IN THE PUBLISHER AD SERVER MARKET A. �e Relevant Market 52. �e Relevant Market is the market for publisher ad server services (the “Publisher Ad Server Market” or the “Market”). 53. Publishers are purchasers of services in the Publisher Ad Server Market. Companies, like Google, who offer publisher ad server products are sellers of services in the Market. 54. Publisher ad servers are inventory management systems that Publishers use to holistically manage their online display advertising inventory—the image-based graphical ads alongside web content. �ey provide features such as: (1) reservation-based sales technology to support a Publisher’s direct sales efforts; (2) inventory forecasting technology to help a Publisher determine what inventory will be available to sell; (3) a user interface through which a Publisher’s sales team can input directly sold campaign requirements; (4) co-management of direct and indirect sales channels; (5) report generation of ad inventory performance; (6) invoicing capabilities for a Publisher’s direct campaigns; and (7) yield management technology. 55. �e relevant geographic market is the United States, or in the alternative, predominantly English-speaking countries of the United States, Canada, the United Kingdom, and Australia. Publishers seek out publisher ad server services based on the service provider’s ability to connect the Publisher with advertisers that would seek to target the Publisher’s users. Because Publishers sell advertising space to advertisers based on, inter alia, the location of the Publishers’ users, the geographic market’s scope is determined by the Publishers’ targeted user geographies, here, the United States, or in the alternative, Australia. A publisher ad server that could not connect Publishers with a significant pool of advertisers seeking to target American (or alternatively, English-speaking) users could not generate auction returns that rivaled publisher ad servers that could deliver such advertiser demand. B. Google Dominates the Relevant Market 56. However the geographic component is defined, Google has market power in the Publisher Ad Server Market. Publisher Ad Server:  Google's market share is  estimated to be 90‐100% Ad Exchange/Ad  Network: Google's  market share estimated  to exceed 50‐60% Demand Side Platform:  Google's market share  estimated to exceed 50‐ 60% Advertiser Ad Server:  Google's market share  estimated to exceed 80‐ 90% Google Ad  Manager Display &  Video 360 Campaign  Manager Google  AdSense Google  Display  Network Google Ads Google Ads Google  AdMob Figure 2: Google's Estimated Market Share at Each Level of the Ad Tech Stack 57. Google has a dominant share of the Publisher Ad Server Market, likely exceeding 90% of the market. Indeed, the United Kingdom’s Competition & Markets Authority (“CMA”) (the U.K.’s antitrust authority) found that Google had between 90% and 100% of the Publisher Ad Server Market (as measured by the money advertisers paid to place ads within U.K. Publishers’ content.5 Google holds similar market shares in the Publisher Ad Server Market in each geographic market. 5 See Online Platforms and Digital Advertising, Market Study Final Report (July 2020), available at https://assets.publishing.service.gov.uk/media/5fa557668fa8f5788db46efc/Final_report_Digital_ALT_TE XT.pdf. high) market shares at the ad exchange/ad network and DSP levels of the Ad Tech Stack, the CMA’s method would tend to understate Google’s power at those levels of the Ad Tech Stack. Specifically, the CMA’s analysis looked at how much money advertisers spent and how much money Publishers received over a specific time period, and then determined how much of that overall revenue traveled through the Google properties throughout the Ad Tech Stack. �e analysis included, inter alia, direct-sold ads (i.e., ads sold directly by Publishers to advertisers) that would show up as part of Google’s market shares at the ad server levels on either side of the Ad Tech Stack (because advertisers spent the money as recorded by their Google ad server, and Publishers received it and placed the ad through their Google ad server), but not at the auction or DSP level because the direct-sold ads did not use DSPs’ automated bidding services or participate in auctions. As a result, these direct-sold sums would suppress Google’s apparent share of revenues at the auction and DSP levels of the Ad Tech Stack (as reflected in Figure 2) even though no Google competitor would capture such revenue. In addition, as a general matter, advertisers and Publishers generally use only one ad server each, but advertisers may use multiple DSPs and both Publishers and advertisers may use multiple auction sources. Although that situation may reflect some competition at the DSP and auction levels of the Ad Tech Stack, such competition is muted by the fact that the Publishers and advertisers that use non-Google DSPs and auctions also tend to use Google’s offerings as well. 59. Other than Google, the other sellers in the Publisher Ad Server Market are small and fragmented. Indeed, since 2012, Google’s closest competitors have either exited the market entirely or have been relegated to negligible market shares. 60. Google’s market position in the Publisher Ad Server Market is protected by high barriers to entry. 61. First, Publishers who might look to switch ad server products face high switching costs because these server products must be programmatically and technologically built into the Publishers’ operations. 62. Second, any potential rival seeking to gain market share at Google’s expense must be able to compete with Google in two key areas: (1) the ability to deliver comparable data targeting and and generate comparable revenue to Google’s auctions. 63. �ese two elements are interrelated due to Google’s conduct. Google’s consumer-facing businesses (including, inter alia, Search, Gmail, YouTube, and Chrome), as well as its ad tech products collect significant user data that Google makes available to its advertiser-clients for targeting purposes. Advertisers who switch away from Google lose access to Google’s data targeting and attribution services, and no substitute service can match Google’s data offerings. Because Google only allows Publishers who use Google’s publisher ad servers to have full access Google’s advertiser demand, other publisher ad server providers must supply access to comparable advertiser demand that can replace Google’s advertiser demand for Publishers to switch. But, even if a potential rival publisher ad server provider could connect Publishers to a sufficiently large pool of advertiser demand, if those advertisers lacked data comparable to Google’s offerings, the rival’s pool of advertiser demand would tend to bid less—and thus not be a true substitute for—Google’s advertisers. �us, Google’s pool of advertisers and data targeting and attribution services impose high barriers to entry. 64. �ird, Google provides limited pricing information to Publishers. �us, even if there were competing publisher ad server products for Publishers to switch to, those products would have significant difficulty in demonstrating to Publishers that switching is worthwhile because Google makes direct price comparisons nearly impossible. 65. �ese barriers inhibit entry and expansion by potential competitors in the Publisher Ad Server Market, evidencing Google’s monopoly power in the Relevant Market. VII. GOOGLE’S ANTICOMPETITIVE SCHEME 66. Google has engaged in a series of actions to acquire and maintain monopoly power in the Publisher Ad Server Market including: (1) anticompetitive acquisitions at each level of the ad tech stack, including in the Publisher Ad Server Market, (2) bundling and/or tying its advertiser-facing properties in the ad tech stack to its data services to collect and control advertiser demand, (3) requiring Publishers who seek access to Google’s pool of advertiser demand to use Google’s publisher ad server products, (4) self-preferencing and/or steering ad placements through Google’s ad tech products, (5) using its market compete with Google, and (6) making an agreement with its biggest potential rival (Facebook, Inc.) to cooperate and not compete in the relevant market. 67. Google used this Scheme to achieve market dominance in the Publisher Ad Server Market. A. Google Engaged In A Series Of Acquisitions To Acquire A Foothold At Each Level Of �e Ad Tech Stack. 68. Google commenced its Scheme to dominate the Ad Tech Stack with a series of acquisitions. 69. �e first and most significant such acquisition was Google’s 2007 purchase of DoubleClick for $3.1 billion. Google purchased DoubleClick as a means of entering the markets for providing services within the Ad Tech Stack. DoubleClick provided publisher ad server services and operated the largest ad exchange. �e DoubleClick products formed the basis of Google’s ad tech offerings in ensuing years. As Google’s submission to the United States House of Representative’s Subcommittee on Antitrust, Commercial and Administrative Law acknowledged, prior to the DoubleClick acquisition, Google had “no meaningful presence” in the Ad Tech Stack. A July 2006 Google presentation suggested that, by acquiring DoubleClick, Google could obtain “self-reinforcing benefits” for Google’s planned digital ad “ecosystem.” 70. �e Federal Trade Commission (“FTC”), as well as various foreign competition authorities, reviewed the DoubleClick acquisition. Ultimately, the FTC approved the merger, concluding that display advertising markets were “relatively nascent, dynamic and highly fragmented,” and the DoubleClick acquisition did not threaten competition in the markets because other big companies appeared “to be well positioned to compete vigorously against Google.”6 However, as the New York Times recently reported, at least one of the FTC commissioners who voted to approve the merger has 6 See Statement of Federal Trade Commission Concerning Google/DoubleClick, available at https://www.ftc.gov/system/files/documents/public_statements/418081/071220googledc-commstmt.pdf. what I know now, I would have voted to challenge the DoubleClick acquisition.”7 71. Indeed, when Google purchased DoubleClick, it told Congress and the FTC that it would not combine the data collected on internet users via DoubleClick with the data collected throughout Google’s ecosystem (e.g., through Gmail, Search, etc.). But in 2016, Google reversed that commitment and combined its datasets. 72. Google followed its DoubleClick acquisition with additional ad tech properties: a. In November 2009, Google acquired AdMob, a company with technology for serving ads in mobile apps. Google now uses AdMob technology to offer publisher ad server services in mobile apps. b. In June 2010, Google acquired Invite Media, which offered a media buying optimization technology for display advertisers. Google now uses this technology as part of its DSP offerings, including Display & Video 360. c. In June 2011, Google acquired AdMeld, a supply-side platform that Google integrated into its auction platforms. d. May 2014, Google acquired an analytics and attribution provider known as Adometry, which Google integrated into its Google Analytics offering to provide improved attribution services.8 73. �ese acquisitions created and/or solidified Google’s product offerings in the Ad Tech 7 See This Deal Helped Turn Google Into an Ad Powerhouse. Is That a Problem?, �e New York Times (Sept. 21, 2020), available at https://www.nytimes.com/2020/09/21/technology/google-doubleclick- antitrust-ads.html. 8 In addition to these acquisitions, Google has made further acquisitions in the ad tech space relating to in-app and video advertisements: mDialog (June 2014); Directr (August 2014); Toro (February 2015); Famebit (October 2016). Exclusionary Conduct 74. Google has engaged in multiple types of exclusionary conduct to obtain, maintain, and enhance its market power in the Publisher Ad Server Market. 75. Google’s substantial, detailed user profiles derived from its consumer-facing services (and further supplemented by its ad tech properties’ data collection activities) is a must-have input for many advertisers. Other than perhaps Facebook, no other company can provide the data targeting abilities that Google can provide. As a result, Google could sell data targeting services to advertisers—and would have substantial market power in a market for such services if it did so. But instead of selling such services as a standalone product, Google ties its data targeting services to its advertiser-facing ad tech products (DSP and advertiser ad server offerings), requiring advertisers to purchase Google’s ad tech services to receive its data targeting services. 76. Specifically, Google ties together its ad targeting and attribution data services with its ad server and DSP services. In other words, Google only lets advertisers, who buy ad space through Google’s buying platforms (Google Ads and Google Display & Video 360), use Google’s data for ad targeting and attribution purposes (including several types of data that only Google can collect, e.g., Google’s first-party data from the use of Google services—Gmail, Google Maps, Chrome, and the Android OS—data Google gleans from Publishers’ websites that use Google’s ad tech products, and Google’s Search data). �us, Google ties together separate products to advertisers: data—a must-have input for advertisers, particularly smaller advertisers without access to their own proprietary data—with its advertiser ad server and DSP. Each of these products could be made available to advertisers separately, but Google refuses to do so. 77. Because advertisers need significant scale to benefit from so-called “multi-homing” (meaning using more than one DSP and/or ad server), and because Google’s ad targeting data is a key input, Google’s tie of ad targeting data with advertiser-facing ad tech services effectively coerces advertisers to use Google’s ad tech services to the exclusion of other ad tech service providers who cannot provide access to comparable data targeting services. �e advertiser-facing tie effectively compels controls approximately 80–90% of advertiser ad server business). 78. For Publishers, Google ties its ad server and auction offerings. Prior to June 2018, Google offered its ad server and access to auctions as nominally separate products. But in June 2018, Google formally tied these two products together, requiring Publishers to use its ad server products to access its auctions (and the advertiser demand the auctions represent). Both before and after Google officially tied its ad server to accessing Google’s auctions, Google restricted auction access to Publishers that used Google’s ad server. Specifically, although Google’s auctions can receive requests from non-Google ad servers, Google has never permitted its auctions to participate in real-time bidding against other companies’ auctions.9 �is means that Publishers must use a Google ad server to have full access to Google’s auctions and the corresponding pool of Google’s advertiser demand. Because Google’s auctions are the only way to obtain bids from advertisers using Google’s advertiser-facing services in the Ad Tech Stack (representing 80%–90% of the advertising spend in the overall market), Google’s conduct coerces Publishers to use Google’s ad server irrespective of whether Google’s tie was formal (post-June 2018) or whether Google’s conduct coerced Publishers to treat the services as tied together (to access one, a Publisher needed to access the other). C. Google Manipulates Its Ad Auction Processes to Preference Its Own Tied Auctions 79. To entrench its monopoly power further, Google manipulates the ad auction process. 80. Google’s publisher ad server controls the auction process for at least 90% of advertisers’ digital display ad spending. In this role, Google determines how advertiser bids from competing ad tech services (e.g., other ad exchanges or ad networks) will be compared to Google’s advertiser-clients’ bids through Google’s auctions. From at least 2010 to the present, Google used this favored position to preference its own tied auctions, and to disadvantage competing products. 9 Absent Google’s refusal to deal, Google’s auction winner would compete in auctions head-to-head with the auction winners of other companies’ auctions. the ways its auctions operate to maximize its own revenues to the disadvantage of both Publishers and advertisers. 82. Google is able to take these steps because it occupies the dominant position as the representative for most sellers (Publishers) and most buyers (advertisers), and because of its role in designing and conducting the auctions for the sellers’ inventory (by virtue of its dominant market share in providing PAS services). Pre‐2009 2009 2014 2015 2018 2019 •Waterfall  System •Dynamic  Allocation •Header  Bidding •Exchange  Bidding •Enhanced  Dynamic  Allocation •Unified  First  Price  Auction Figure 3: Evolution of Google Display Ad Auctions 83. During each time period set forth in Figure 3, Google found a way to preference its own auctions, disadvantage competitors’ auctions, and/or ensure that its advertiser clients using its advertiser services in the Ad Tech Stack won the maximum number of impressions without maximizing the returns for Google’s Publisher clients. 84. Such conduct suppresses revenues to Publishers and impairs rivals throughout the Ad Tech Stack. While it might appear in theory that the conduct could advantage Google’s advertiser clients (through lower prices to win auctions), as set forth herein, Google does not pass these savings through to advertisers and instead retains any such “savings” for itself. 1. �e Waterfall System (Pre-2009) 85. Prior to 2009, Google’s display ad auctions allowed Publishers to prioritize their sources of demand for advertising (from deals sold directly by the Publishers and from auctions through one or more ad exchanges) within Google’s publisher ad server using a “waterfall” sequence. 86. Publishers could prioritize their demand sources based on how the Publishers valued the demand sources, with direct-sold deals (if any) typically having priority over auctioned ads. �e typical based on estimated performance using historical yield data. 87. When ad inventory became available (i.e., when a user loaded the Publisher’s page generating ad slots) and there was no direct deal ad eligible for placement, the Google publisher ad server selected the demand source in order of the Publisher’s assigned rankings, with the highest-ranked source having the opportunity to conduct an auction and present a winning bid for the ad slot above a reserve 88. If that first auction sold the ad above the reserve, the auctioning process stopped there. If the reserve price was not met, Google’s publisher ad server would offer the next exchange in the waterfall the opportunity to bid at a lower reserve price, and the process repeated for additional demand sources, lowering the reserve price each time. 89. Although this process helped Publishers reduce risk that ad inventory would not sell, it precluded ad exchange demand sources from bidding against each other in real time (which would maximize Publisher yield). 90. �e Waterfall System failed to maximize revenues to Publishers because it did not allow all interested advertisers to bid in real time, nor did it allow Publishers to rank demand sources in the Waterfall in accordance with the demand sources’ actual bids (instead relying only on estimated bids based on historic auction results). 91. �is limitation reduced Publisher yields. For example, if the Publisher’s estimated bids for its second (or third, or fourth, or fifth, etc.) demand source was inaccurate and those lower-ranked sources’ advertisers would have valued the ad slots more (i.e., bid higher amounts) than the first demand source, the Waterfall System did not allow those lower-ranked demand sources to bid on the ad slots. 10 Until recently, second-price auctions have been the norm in programmatic advertising. In a second- price auction, the winner only pays $0.01 more than the second highest bid. If Advertiser A bids $2.00 for an impression and Advertiser B bids $1.75, the auction clearing winning bid will be $1.76. Second-price auctions incentivize advertisers to bid in accordance with the value they place on the impression because they know that they will only have to pay the amount needed to beat the next highest bidder irrespective of their bid amount. First-price auctions, on the other hand, create incentives for advertisers not to bid as high as they value the impression and instead focus on optimizing their bids to bid as low as possible but still win the auction. both running second-price auctions, the publisher ad server would collect the bid from the first demand source using a reserve price (say $5). �e auction clearing price may then be $5.01 and, because the reserve price was satisfied, the first auction would place the ad. However, if the second demand source’s auction clearing price would have been $6.01, the Publisher effectively loses $1 for the ad placement due to the Waterfall System because that second demand source never gets the opportunity to bid. DSP #1: $10 bid Ad Exchange 1: 2nd  price auction clearing  price is %5.01 (winning) DSP #2: $5 bid Publisher: 1st price  auction clearing price:  $5.01 DSP #3: $8 bid Ad Exchange 2: 2nd  price auction clearing  price is $6.01 (not used) DSP #4: $6 bid Figure 4: Lost Opportunity Due to Waterfall 93. �erefore, the Publisher cannot maximize its revenue for its ad slots because the advertisers that valued the slots the highest were not permitted to bid. 94. An additional issue created by the Waterfall System was slow-loading advertisements. �e process of conducting successive auctions sometimes took long enough that users often left a page before the advertisement loads, creating issues with tracking ad performance and potentially causing the Publisher’s content to load more slowly and diminishing user experience. 2. Dynamic Allocation (2009) 95. Beginning in or around 2009, Google’s PAS used a system called “Dynamic Allocation” as a supplement to the Waterfall System. Google used the Publisher’s highest estimated bid from a demand source in the Waterfall System (which Publishers inputted into the PAS) as the reserve price for Google’s ad exchange’s auction. If Google’s ad exchange could beat that highest estimated price, Google placed the ad from its auction winner and no other demand source was given the opportunity to bid. 97. �is gave Google’s ad exchange a privileged position as the default first demand source in the Waterfall System. 98. Dynamic Allocation did nothing to address the inefficiencies of the Waterfall System; rather, it capitalized on those inefficiencies by imposing Google as the default first demand source. 3. Enhanced Dynamic Allocation (2014) 99. In 2014, Google implemented “Enhanced Dynamic Allocation,” pursuant to which Google’s ad exchange used an adjusted price from the highest value direct deal the Publisher had arranged as the reserve price for its own auction. 100. Enhanced Dynamic Allocation conferred an even greater advantage on Google’s own ad exchange by allowing it to prioritize Google’s ad exchange even ahead of Publishers’ direct-sold deals in the Waterfall System. 101. Meanwhile other ad exchanges would only get to bid if (1) Google’s ad exchange failed to meet the reserve, and (2) there was no direct deal qualifying for the space, and (3) the PAS reached the other ad exchange in the Waterfall System. 102. While this process created the potential to increase Publisher revenues in the short term (by selling higher-revenue programmatic ads over direct deals), overall, the likely effect was weakening Publishers’ direct sales channels and driving advertisers to programmatic channels (which benefits Google over the Publishers’ direct sales). 4. Header Bidding (2015) 103. To address the inefficiencies created by the Waterfall System and Google’s Dynamic Allocation processes, Publishers and ad tech competitors began to develop and implement a process known as “header bidding.” different means to allow Publishers to conduct real time auctions between multiple demand sources (e.g., auctions and ad networks). 105. Client-side header bidding involves adding a piece of code to Publishers’ websites which causes the user’s browser to send ad requests to the Publishers’ demand sources before the code initiates the Publisher’s ad server system. �e header bidding demand sources then submit their bids simultaneously. 106. Several ad tech companies offer server-side header bidding pursuant to which demand sources bid in a real time auction on a remote server controlled by a third party. 107. Although server-side header bidding is marginally faster than client-side header bidding, server-side header bidding results in lower Publisher revenues because it impairs advertisers’ ability to match their data to the user to whom the ad will be served. 108. �rough either type of header bidding, Publishers’ ad inventory sales process avoids the Waterfall System altogether. 109. With the Waterfall system, once the publisher ad server identifies a demand source in the Waterfall that meets the floor price, the process is over. But header bidding involves all demand sources •$1.90  bid •$2.00  bid •$1.90  bid Demand  Source #1 Winner Demand  Source  #1 Demand  Source  #2 •$2.00  bid Demand  Source #2 Winner Demand  Source  #4 Demand  Source #  3 •$2.10  bid Demand  Source # 3 •$2.50  bid •$2.10  bid •$2.50  bid Demand  Source #4 Figure 6: Header bidding with $2.00 Floor Price Figure 5: Waterfall with $2.00 Floor Price (Waterfall auction), with Figure 6 (Header bidding auction). 110. �e advent of header bidding significantly increased revenues to Publishers, sometimes up to 70%. 111. Google undermines client-side header bidding by refusing to allow its ad exchange to participate in header bidding auctions. 112. Because Google controls so much of the advertiser demand, Google’s refusal to participate thins header bidding auctions, causing them to generate lower clearing bids. Google then provides its ad exchange a “last look” advantage after header bidding processes are complete. �rough this process, after the client-side header bidding process sends the winning bid to Google’s PAS, Google offers the spot to its ad exchange to see whether Google’s exchange can beat the price. 113. Google’s “last look” does not achieve the same result as participating in the header bidding process. With the last look, Google’s ad exchange must only beat the header bidding clearing price. But if a header bidding advertiser would pay more than its winning bid, simply affording Google the last look results in a lower sale price because Google’s winning bidder and the header bidding winner did not have to determine which would bid the highest in an auction between them. For example, if the winning header bidding advertiser is willing to bid $3.00 but needs only $2.00 to clear the header bidding auction. Google’s last look advantage would allow Google’s advertiser to win the auction at $2.01 rather than needing $3.01 to beat the header bidding winner.11 As a result, Google can optimize its advertiser bids to bid the lowest amount needed to beat the header bidding auction clearing price rather than competing directly with the header bidding auction participants.12 11 Notably, Google’s advertisers do not benefit from these lower prices because Google still charges its advertisers a higher price (e.g., the value the advertiser ascribes to displaying an ad to a particular user/type of user) and keeps the difference between that price and the clearing bid price. 12 Google also used its control over the initial AMP format to make AMP incompatible with client-side header bidding. More recently, Google has introduced an AMP solution that allows client-side header bidding, but it imposes strict limits on the number of demand sources allowed to participate in bidding and a time constraint on response times from demand sources. �e News Corp. Submission argues that these constraints “shut out some exchanges.” Id. at 26. 114. In 2018, Google introduced “Exchange Bidding” (also known as “Open Bidding”) on its publisher ad servers. Google introduced Exchange Bidding to prevent header bidding from invading Google’s market dominance. Exchange Bidding is a unified auction between rival ad exchanges that is, in essence, a form of server-side header bidding. Each time inventory is for sale, with Exchange Bidding activated by the Publisher, the Google publisher ad server runs consecutive auctions as follows:13  First, Google conducts a second-price auction within Google Ads (a Google DSP that provides advertiser-facing services to smaller advertisers) to select the highest bidder among Google Ads advertisers.  Second, Google conducts a second-price auction within Google’s primary ad exchange (AdX) where Google Ads would compete with other DSPs.  �ird, Google conducts the Exchange Bidding auction, a final first-price auction where AdX would compete against other exchanges. 115. In that final auction, however, if the winning bidder of the Exchange Bidding auction is a non-Google advertiser client (e.g., the winning bidder uses a competing ad exchange), Google charges the winning bidder a surcharge equal to 5%–10% of the winning bid. Google does not change this fee to Google’s advertiser clients. �us, Google places a 5%–10% tax on competition from other ad exchanges, raising its rivals’ costs (and forcing advertisers to pay more). Google does not pass through this tax to its Publisher clients. 6. First-Price Unified Auction 116. Over time, many ad exchanges moved away from second-price auctions to first-price auctions. By September 2019, Google completed its switch to a first-price unified auction. 117. When Google “unified” its auctions, it collapsed its second-price auctions within its ad exchange into its Exchange Bidding auction, meaning that Google ran one first-price auction rather than second-price auctions followed by a first-price Exchange Bidding auction. 13 Exchange Bidding must be actively enabled in Google’s publisher ad server. having Google’s ad exchange compete in real-time with other demand sources), it appears that the switch was driven by Google’s desire to implement unified pricing. Specifically, when Google unified its auction, it removed its Publishers’ ability to set different reserve prices (or floor prices) for different demand sources. Google’s move to unified pricing was driven by its observation that Publishers were setting higher floor prices for Google’s ad exchange than for Publishers’ other demand sources. 119. From Publishers’ perspective, the need for differential reserve prices is heightened with a first-price auction, making Google’s switch from a second-price auction with differential reserve prices to a first-price auction with unified pricing particularly problematic. Although the switch to first-price auctions, in the short term, can increase the value of winning bids (because advertisers will pay the amount they bid rather than $0.01 more than the second highest bid as they would in a second-price auction), over the long term, revenues do not increase because of the practice of bid shading. 120. Bid shading refers to the use of an algorithm created by DSPs that optimizes bidding in ad auctions. �ese algorithms use machine learning capabilities and input historical data such as site, ad size, exchange and competitive dynamics to enable advertisers to pay as little as possible without impacting their win rate. 121. DSPs, including Google’s DSP offerings, use bid shading algorithms in first-price auctions to try to approximate the results of a second-price auction. Because of the prevalence of these bid shading approaches, Publishers have seen relatively small increases in revenue from the switch to first- price auctions. 122. Google’s unified auction impairs Publishers’ ability to counteract bid shading by imposing unified pricing. As one Publisher put it: When a seller faces asymmetric bidders in an auction, it is optimal to set a higher reserve price (price floor) for the stronger bidder. �is incentivizes the stronger bidder to engage in less ‘bid shading’, which improves revenue for the auctioneer (in this case the publisher). Google’s exclusionary conduct, including its informational advantages, imply that publishers have a strong incentive to set higher reserve prices for Google’s ad exchange. �is partially (but not fully) mitigates Google’s artificial advantages. Following the rule change [prohibiting publishers from setting separate price floors], publishers must use the same price floor for all buyers and bidders. As a result, publishers cannot run optimal auctions that require Google DSPs to pay for artificial information advantages. general, but specifically protect Google’s ability to engage in bid shading. D. Google Uses Its Monopoly Power In Other Markets To Impair Potential Competitors In �e Publisher Ad Server Market. 124. Google has used its dominance in other markets (notably search and internet browser markets) to impair potential competitors’ ability to collect data that could be used to compete with Google’s advertiser-facing offerings in the Ad Tech Stack, which could undermine Google’s stranglehold on advertisers that Google uses to control the Publisher Ad Server Market. Notably, Google has taken at least three actions in recent years that have impaired actual or potential competitors’ ability to collect data that could be used for advertising purposes. 125. First, Google has recently taken steps to stop supporting third-party cookies in its Chrome Browser. �ird-party cookies have been a key mechanism in digital advertising for years. Cookies are pieces of text that websites place on users’ browsers when they visit the website. �e text contains code that identifies the user to the website so that the website can pull information on the users’ past interactions with the site (e.g., prior pages viewed, items in the users’ shopping carts, etc.). In addition to cookies the website places on a user’s browser, third parties can place cookies on a user’s browser in certain circumstances (e.g., Facebook places cookies on users’ browsers when the users visit sites that utilize Social Plugins). �ese third-party cookies allow the third parties to aggregate information about particular users across all websites that the user visits. 126. Various companies use third-party cookies to collect data on users to offer advertisers increased targeting abilities. However, Google’s exclusionary conducts has directly impaired these companies’ ability to compete in providing ad targeting services. 127. Second, Google recently released a new version of Chrome that introduced a new encryption feature that would prevent internet service providers (“ISPs”) from collecting user browsing data. �rough this action, Google prevents ISPs like Verizon, which has offered competing services in the Ad Tech Stack, from collecting data on users’ browsing history that ISPs could use or sell to be used to compete with Google for advertiser clients. “accelerated mobile pages” (“AMP”) format. Once the Publisher loads content in AMP format, Google creates a cached version on Google’s servers. Each time a user then navigates to the Publisher’s AMP content from Google properties (e.g., Search or Google News), instead of directing the user to the Publisher’s server, Google serves the AMP content from Google’s AMP cache server. �is practice prevents Publishers from collecting their own data on users (which could be used to facilitate the Publisher’s advertising objectives, or combined and/or sold to other parties to aggregate into datasets that could be used to compete with Google). 129. Each of these practices may significantly impair potential competitors in the Publisher Ad Server Market by blocking several of the most common ways that companies collect data for purposes of targeting advertisements and providing attribution services. Yet, each of these practices would have limited, if any, effect on Google’s ability to collect user data because Google does not rely on third-party cookies or scraping DNS data in amassing its user data for ad targeting purposes. Similarly, because Google collects first party data through its advertising intermediation services and because Google hosts the AMP cache, the AMP cache conduct only adversely affects Publishers and has no effect on Google. 130. By inducing advertisers to utilize Google’s Ad Tech Stack to distribute their content, Google has made Publishers dependent upon Google for selling their display ad inventory. 131. Google also took actions to impair directly competitors’ and Publishers’ ability to generate their own datasets on users that Publishers could use to sell advertising through Google’s competitors in the Publisher Ad Server Market. 132. Google’s conduct in this regard has allowed it to continually increase its market share at the expense of other ad tech services providers and to the detriment of Publishers. E. Google Made an Unlawful Agreement with Its Biggest Competitor to Suppress Competition. 133. In March of 2017, Facebook publicly announced it would support header bidding. By doing so, Facebook would enable web and mobile app Publishers and advertisers to bypass the fees associated with transacting through Google’s ad server. When bidding into Google’s ad server, ad announced approach would let Publishers and advertisers evade fees altogether. 134. �e wider industry also thought that Facebook was prepared to challenge Google’s monopoly. Google and Facebook operate the largest ad networks for display and in-app mobile inventory in the United States (i.e., Google Display Network, AdMob, and Facebook Audience Network). �e same day as Facebook’s March 2017 header bidding announcement, industry publication AdAge wrote that Facebook was poised to execute a “digital advertising coup against rival Google and its DoubleClick empire.” A Business Insider headline the same day read, “Facebook Made an Unprecedented move to Partner With Ad Tech Companies – Including Amazon – to Take on Google.” 135. Even before Facebook’s March 2017 announcement, Google was concerned about large entrants supporting header bidding. In an October 2016 internal presentation, a Google employee expressed concern about the potential for competition from Facebook and other large tech companies, saying “to stop these guys from doing HB [header bidding] we probably need to consider something more aggressive.” 136. �us, when Facebook announced its support for header bidding, Google realized its fears that Facebook’s support could crack Google’s stranglehold on the Ad Tech Stack generally, and the Publisher Ad Server Market in particular. Indeed, Facebook has its own ad tech tools (the Audience Network) that Publishers could use, in theory, to replace the function of Google’s ad server products, along with substantial user data and a significant pool of advertisers. As a result, Facebook represented a viable threat to Google’s market share if it were to enter the Publisher Ad Server Market and support header bidding. 137. Facebook’s backing of the header bidding threat was a credible threat in part because it would allow advertisers to bid on Publishers’ ad inventory without paying the 5%–10% tax Google levied on non-Google advertisers that won Google’s Exchange Bidding auctions. 138. Facebook’s announcement sought to and did induce Google to negotiate a deal with Facebook. Within months of Facebook’s header bidding announcement, Google and Facebook began formal negotiations to reach a deal not to compete head-to-head in display advertising. negotiations was a September 2018 Google-Facebook agreement that resulted in Facebook significantly curtailing its header bidding initiatives. Facebook would instead bid through Google’s advertising tools and in return, Google agreed to give Facebook a leg up in its auctions. 140. �e agreement was known internally at Google as “Jedi Blue,” a code name for the deal that references “Star Wars.” Facebook executive Sheryl Sandberg signed the deal with Google and described the deal to Facebook CEO Mark Zuckerberg, among other executives, as “a big deal strategically.” 141. Google and Facebook were aware that the Jedi Blue agreement could trigger antitrust investigations and liability. �e word “antitrust” appears in the Jedi Blue contract no fewer than 20 times. As part of the agreement, Google and Facebook agreed to cooperate and assist one another if they ever faced an investigation into the agreement to work together in online advertising. 142. Pursuant to the deal, Facebook committed to spending a minimum of $500 million annually in Google-run auctions, and Google agreed that Facebook would win a fixed percentage of those auctions. According to an internal Facebook document, Facebook believed the deal was “relatively cheap” as compared with direct competition. 143. By providing Facebook with advantages, Google has further manipulated auctions. Google already manipulates Publishers’ ad auctions by giving Google bidders information and speed advantages. In 2019, these advantages helped them to win the overwhelming majority of Publishers’ ad auctions, hosted by Google. Now Google offered Facebook information advantages, speed advantages, and other prioritizations, to the detriment of other auction participants. Google publicly misrepresents that all bidders in Publishers’ auctions compete on an equal footing. “All participants in the unified auction, including Authorized Buyers and third-party yield partners, compete equally for each impression on a net basis,” Google says. �is, of course, is false. 144. Given the scope and extensive nature of cooperation between the two companies, Google and Facebook were highly aware that their agreement could trigger antitrust violations. 145. �rough the anticompetitive conduct described above, Google forecloses other Ad Tech Stack service providers from competing for advertisers and Publishers. Because of its acquisitions and subsequent advantages Google conferred on itself by tying its various distinct products together, Google amassed network effects throughout the Ad Tech Stack. �ese network effects are self-reinforcing: advertisers use Google ad services to access Google’s data advantages, and Publishers use Google ad services to access the advertiser demand that Google uniquely amasses through its data offerings. 146. Google then further reinforces its market position by impairing potential competing Ad Tech Service providers by using its market power in other markets (e.g., the internet browser market and internet search services market) to prevent potential rivals from collecting rival datasets that could make the potential rivals viable alternatives to Google for advertisers (which could, in turn, loosen Google’s hold on the Publishers in the Publisher Ad Server Market). 147. For Facebook, the one ad tech services provider Google could not foreclose through its conduct due to Facebook’s independent ability to amass user data and substantial book of advertiser clients, Google entered into an illicit market allocation and bid-rigging agreement. �e agreement turned Facebook from a potential challenger to Google’s market dominance into a structural support of such dominance. 148. Finally, Google foreclosed what few service providers remained by steering auctions to Google’s services and away from the other service providers, and taxing/raising such rivals’ costs when the rivals managed to win auctions for Google’s Publisher-clients’ ad inventory notwithstanding the hurdles Google imposed. Because of this conduct, potential rivals lack the ability to generate scale sufficient to compete with Google. 149. �e foreclosure caused by Google’s conduct in the Publisher Ad Server Market can be seen by the exit of competitors and limited entry over the past decade or so. Several large advertising technology firms offered publisher ad server solutions, including substantial competitive offerings from Yahoo!, AppNexus, and OpenX. Today, few publisher ad server competitors remain in the United States. Yahoo’s publisher ad server was acquired in 2017 and shuttered in 2019. AppNexus’s publisher ad server considering selling the publisher ad server. OpenX shut down its ad server solution in 2019. 150. Entry into the Publisher Ad Server Market has been remarkably weak over the past decade too. �is lack of entry is a result of high switching costs for Publishers augmented by the artificial barriers arising from Google’s anticompetitive conduct. As a result, Publishers have very limited alternatives to Google’s publisher ad serving product, and rivals are unable to compete by improving quality or lowering price. IX. GOOGLE’S SCHEME CAUSES ANTICOMPETITIVE EFFECTS 151. Google’s conduct with respect to the ad tech stack has had multiple anticompetitive A. Google’s Scheme Suppresses Ad Revenues Publishers Receive for �eir Ad Inventory Below Competitive Levels 152. Google’s Publisher-facing services work with its advertiser-facing services to manipulate the auctioning and ad placement processes in ways that favor Google and suppress the net advertising income Publishers receive. Google represents the interests of two sides of the Ad Tech Stack (advertisers and Publishers) that conflict; advertisers want to pay as little as possible, whereas Publishers want to maximize their revenues. Google, as the representative of both sides of the Ad Tech Stack, represents neither interest. Google instead prioritizes Google’s services to maximize the revenue Google can retain from advertiser payments before transmitting the net payments to Publishers; in other words, Google seeks to maximize the spread between what advertisers pay and what Publishers receive in connection with each ad placement because Google retains that difference. 153. In a competitive market, service providers in the Ad Tech Stack would compete for Publishers (and advertisers) based on (1) the cut the ad server/ad exchanges take from advertiser spending on Publishers’ ad inventory, and (2) efficiency of auction mechanisms (e.g., Publishers would seek out ad servers and auction providers that would represent the Publishers’ interests, including maximizing Publishers’ revenue from auctions as opposed to prioritizing the vendors’ own services to services in the Ad Tech Stack and increase Publishers’ ad revenues by more efficiently running auction processes (as well as improve the quality of Publisher-facing ad tech services, e.g., by increasing analytic data on auctions, placements, and revenues). 154. In short, Google retains at least 30% of what Google’s advertisers pay to place ads on Google’s Publishers’ pages (and analyses of pre-2019 periods estimate that Google took around 50% of advertiser payments), and in a competitive market, Google would retain a lower share of what would likely be higher gross revenues.15 Given that Google’s returns on capital are around 40% for its digital advertising intermediation business, while Publishers have been starved of advertising revenues, the CMA has raised concerns that Google’s “take” is supra-competitive and suppresses payments to Publishers. B. Google’s Scheme Reduces Publishers’ Content Output and Quality Along with Publishers’ Revenue-Generating Abilities. 155. As set forth above, Google’s conduct has impaired Publishers’ ability to monetize their content by reducing competition in the Publisher Ad Server Market and charging supracompetitive prices. But Publishers require more revenue to increase output and improve quality. 156. Publishers invest significant resources in content creation. For example, Publishers who operate news sites pay journalists to research and report on stories, pay for production of visual media, and have editors, producers, fact-checkers, etc. to ensure content quality. 157. By reducing Publishers’ ability to monetize their content, Google necessarily reduces the quality of Publishers’ content by reducing their ability to pay to create it. 14 Vendors would also likely compete on non-price bases e.g., speed of auction processes/ad placements, ability to control types of advertisements that may appear on the Publishers’ content, and integration with the Publishers’ systems and needs. 15 Gross revenues would likely be higher absent Google’s conduct for a variety of reasons including, without limitation, auction bids would be higher as participants combine into unified auctions without Google’s self-preferencing and manipulations, and because Google’s commission would decrease and Publishers would see higher net revenues, Publishers would expand output creating more ad impressions for sale, which leads to higher gross revenues as well. High-quality news publishers are built on the notion that investing in a superior product yields benefits for all parties. But when publishers cannot effectively monetize their content, they cannot make the necessary investments to continue to produce high-quality content. Without such investment, journalists/content writers will be laid off, offices will be closed, and longer-term investigations and writing projects will be cut. �e platforms and the publishers are thus locked in an existential (for publishers) battle over whether consumers will pay for news content—which would make them more likely to navigate directly to publishers’ sites and apps—or whether content will be made available for free, and intermediated by the platforms. �e stakes are amplified by the fact that the platforms also control the only alternative form of monetization, advertising. Given the disparate power between the two sides, the likeliest outcome will be the reinforcement of the platforms’ dominance and the further degradation of publishers’ ability to generate quality journalism. See Comments of News Corp to the Federal Trade Commission Re: Hearings on Competition and Consumer Protection in the 21st Century at 13 (Aug. 20, 2018). 159. Even for those Publishers that have sufficient revenue, reputation, and influence to maintain the quality and quantity of their content, receipt of additional revenues would allow for even better content and quality. It is almost certain that Google’s conduct reduces output and quality from smaller and less well-established Publishers and prevents others from starting in the first place. 160. Google does not balance these anticompetitive effects with corresponding procompetitive effects. Both Publishers (through reduced compensation) and consumers (through reduced content quality and reduced content quantity) experience these anticompetitive effects. C. Google’s Scheme Causes Anticompetitive Effects for Both Google’s Advertiser Clients and Non-Google Advertisers. 161. In addition to suppressing Publisher revenues, limiting Publishers’ output, and reducing content quality (which harms consumers), Google’s Scheme increases prices advertisers pay. 162. First, Google restricts the ability of its DSP customers to compete for the inventory of Publishers using non-Google ad servers. �is restriction has the effect of penalizing advertisers using Google’s ad tech services by not allowing them to bid on non-Google Publishers’ ad inventory through Google’s DSPs. Google, of course, does this as part of the Scheme to coerce Publishers to use Google’s Publisher-facing products (i.e., by denying Publishers access to Google’s advertisers through competing Publisher-facing products, Google can coerce Publishers to use Google’s products irrespective of the harms such policy imposes upon Google’s advertisers). Further, some evidence indicates that at least (allowing Google to retain the difference between the advertiser’s payment that Google determines and the auction-clearing price), thus artificially raising prices to its advertisers. 163. Second, Google prevents advertisers that do not use Google’s services from having an equal opportunity to bid on Google’s Publisher-clients’ advertising inventory. For example, prior to 2018, Google manipulated the auctioning process for its Publisher clients to allow its demand sources to outbid other ad exchanges’ pools of advertisers without ever allowing those rival ad exchanges to bid. As a result, Google effectively excluded non-Google client advertisers from bidding for significant portions of Google’s Publisher-clients’ ad inventory. 164. In addition, since 2018, when Google began to allow non-Google advertisers to bid in “Open Bidding” auctions against Google’s advertisers, Google has charged non-Google advertisers an additional fee of 5%–10% when those advertisers outbid Google’s own auctions. X. GOOGLE’S SCHEME CAUSES PUBLISHERS ANTITRUST INJURY 165. As a direct and proximate result of Google’s anticompetitive conduct, as alleged herein, Plaintiff and members of the Class suffered substantial losses to their business or property in that their revenues from selling non-search digital display advertising space were artificially suppressed during the Class Period. �e full amount of such damages will be calculated after discovery and upon proof at trial. 166. Google used its Scheme to obtain, maintain, and enhance its monopoly power in the Publisher Ad Server Market. 167. Due to Google’s ill-gotten market power, Plaintiff and the Class were forced to utilize Google’s publisher ad server services, pursuant to which Plaintiff and the Class paid Google a supracompetitive cut of advertising revenues Publishers generated for user visits to their sites. Absent this anticompetitive conduct, however, Plaintiff and members of the Class would have received more revenues for advertising on their content. 168. Moreover, because of the reduced revenues Publishers can generate due to this Scheme, Publishers have been forced to reduce output, lay off content creators (e.g., journalists), and many have gone out of business altogether. revenue (including, without limitation, a cut of ad revenues through the Google Ad Manager), suppresses Publishers’ revenues, and forces Publishers to reduce the content they produce causing further reductions in revenues. 170. �e conduct comprising Google’s anticompetitive Scheme is continuing and so are the damages suffered by members of the Class. XI. INTERSTATE COMMERCE 171. Google engages in interstate commerce and in activities substantially affecting interstate commerce including, without limitation, (1) providing consumer services, such as Search, Gmail, YouTube, and Android OS, to consumers throughout the United States and globally, (2) providing advertiser buying platforms, Google Ads and Google Display & Video 360, to advertisers targeting consumers throughout the United States and globally, and (3) providing Google Ad Manager, Google AdSense, and Google AdMob to Publishers based throughout the United States and globally. Publishers, both foreign and domestic, use Google’s ad tech services to sell ad inventory targeted at users across the United States. Both foreign and domestic advertisers use Google to target advertisements to Publishers’ users across the United States. XII. CLASS ALLEGATIONS 172. Plaintiff brings this class action is brought under Rules 23(a) and 23(b) of the Federal Rules of Civil Procedure on behalf of the “Class,” defined as follows: All Publishers that sell digital display advertising inventory through a Google publisher ad server targeting consumers in the United States between December 23, 2016 and the date the Court certifies the Class. 173. Excluded from the Class are: (1) any Judge or Magistrate presiding over the class action and members of their families; (2) Defendant and its subsidiaries, parents, successors, predecessors, or any entity in which Defendant has a controlling interest; (3) persons who properly execute and file a timely request for exclusion from the class; and (4) the legal representatives, successors, or assigns of such excluded persons. action is impracticable. �e Class is reasonably estimated to include at least one hundred (if not thousands of) participants. While the precise number, names, and addresses of all members of the Class are unknown to Plaintiff at this time, such information is ascertainable in several ways, including, without limitation, from analysis of Defendant’s records. 175. �e objective facts are the same for all members of the Class in that, inter alia, Google’s conduct in monopolizing the Publisher Ad Server Market was the same, e.g., Google’s conduct outlined herein vis-à-vis Publishers and advertisers, its tying of separate products, its market allocation agreement with Facebook, and its conduct impairing other companies’ and Publishers’ ability to collect data to be used for targeting ads. 176. Within each Claim for Relief asserted below, the same legal standards govern resolution of the same operative facts existing across all members of the Class’s individual claims. If Defendant is liable to one member of the Class, Defendant is liable to all members of the Class. 177. Because the claims of each member of the Class have a common origin and share a common basis in terms of Defendant’s systematic misconduct, there are common questions of fact and law which exist and which are susceptible to common answers as to each Class member under Federal Rule of Civil Procedure 23(a)(2), and which predominate over any questions affecting only individual members under Federal Rule of Civil Procedure 23(b). 178. Substantial questions of fact and law that are common to all members of the Class, and which are susceptible to common answers and which control this litigation and predominate over any individual issues, include, inter alia, the following: a. whether the Publisher Ad Server Market is a relevant market in this case; b. whether Google possesses monopoly power in the Publisher Ad Server Market; c. whether, through the conduct alleged herein, Google willfully acquired, maintained, and/or enhanced its monopoly power in the Publisher Ad Server Market; d. whether Google’s conduct, as alleged herein, is anticompetitive; e. whether Google’s conduct, as alleged herein, had anticompetitive effects in the Relevant Market; ad tech services to Publishers; g. whether Google entered into an agreement with Facebook for Facebook to win a fixed percentage of Google’s auctions; h. whether Google’s conduct caused Plaintiff and members of the Class antitrust injury; i. the appropriate measure of damages; and j. the propriety of declaratory and injunctive relief. 179. Plaintiff’s claims are typical of the claims of the Class, and arise from the same course of conduct undertaken by Google against the Class. �ere are no conflicts between the interests of the named Plaintiff and the interests of the members of the Class that Plaintiff seeks to represent. �e relief Plaintiff seeks is typical of the relief sought for the members of the Class. 180. Plaintiff will fairly and adequately represent and protect the interests of the Class because of the common injury and interests of the members of the Class and the uniform conduct of Google that is, and was, applicable to all members of the Class. Plaintiff has retained counsel competent and experienced in antitrust class action litigation that will adequately represent and protect the interests of the members of the Class. 181. Class certification is appropriate under Federal Rule of Civil Procedure 23(b)(3) not only because common questions of fact and law predominate, but also because a class action is superior to other available methods for fairly and efficiently adjudicating the controversy. �e prosecution of separate actions by individual members of the Class would impose heavy burdens upon the courts and Google, and would create a risk of inconsistent or varying adjudications of the questions of law and fact common to the Class. Class action status, on the other hand, would achieve substantial economies of time, effort and expense, and would assure uniformity of decision as to persons similarly situated without sacrificing procedural fairness or bringing about other undesirable results. 182. Plaintiff is not aware of any management difficulties which should preclude maintenance of this litigation as a class action. Plaintiff does not anticipate any difficulty in the management of this action as a class action. Rule 23 provides the Court with authority and flexibility to maximize the efficiencies and benefits of the class mechanism and reduce management challenges. �e Court may, on particular claims, issues, or common questions of fact or law for class-wide adjudication; certify and adjudicate bellwether class claims; and utilize Rule 23(c)(5) to divide the class into subclasses. XIII. CAUSES OF ACTION COUNT I: Violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. (Brought by the Class Against Google) 183. Plaintiff hereby incorporates by reference the preceding paragraphs as if they were fully set forth herein. 184. �e relevant geographic market is defined to include the United States, or in the alternative, the principally English-speaking countries of the United States, Canada, the United Kingdom, and Australia. 185. �e relevant market is the Publisher Ad Server Market. 186. Google possesses market power in the Publisher Ad Server Market, regardless of the scope of the geographic market. Google has obtained, enhanced, and maintained dominance in the Publisher Ad Server Market through the Scheme alleged herein to impair and foreclose competition in that market in several ways, including, without limitation, (a) acquiring businesses that gave Google substantial footholds at each level of the Ad Tech Stack, (b) using data amassed through its consumer services (e.g., Search, Gmail, YouTube, Maps, Chrome, Android OS) to lock-in substantial advertiser demand (tying advertiser ad tech services to Google’s data services), (c) using its control over such advertiser demand to require its advertisers to bid only in Google’s own auctions, (d) tying its publisher ad server services to Google’s ad auctions—thus requiring Publishers who want to access Google’s advertiser demand to use Google’s ad server services, (e) impairing actual and potential rivals’ ability to amass datasets that would enable them to better compete with Google, and (f) making an agreement to cooperate instead if compete with its largest potential competitor. 187. As a direct and proximate result of Google’s continuing violation of Section 2 of the Sherman Act, Plaintiff and members of the Class have suffered injury and damages in the form of artificially suppressed advertising revenues in amounts to be proven at trial. Google for these violations. �ese damages represent the amount of Google’s overcharges and additional advertising revenues Publishers in the Class would have received absent Google’s anticompetitive Scheme alleged herein. Damages will be quantified on a class-wide basis. �ese actual damages should be trebled under Section 4 of the Clayton Act, 15 U.S.C. § 15. 189. Plaintiff, on behalf of itself and other members of the Class seek injunctive relief barring Google from engaging in the anticompetitive Scheme alleged herein. �e violations set forth above, and the effects thereof, are continuing and will continue unless injunctive relief is granted. 190. Plaintiff’s and Class members’ injuries are of the type the antitrust laws were designed to prevent, and flow directly from Google’s unlawful conduct. COUNT II: Violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. (Brought by the Class Against Google) 191. Plaintiff hereby incorporates by reference the preceding paragraphs as if they were fully set forth herein. 192. Google and Facebook, Inc. entered into and carried out an unlawful market allocation and bid-rigging agreement in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. 193. In 2017, Facebook announced its support for the auction process known as “header bidding” to signal to Google that Facebook intended to compete head-to-head with Google in the Publisher Ad Server Market. 194. Combined with Facebook’s significant pool of advertisers and unique dataset derived from its third-party cookies and Social Plugins (e.g., the “Like” and “Share” buttons on Publishers pages) and Facebook’s social network platform, Facebook’s endorsement of header bidding (which Publishers prefer to Google’s systems) represented a significant competitive threat to Google’s market dominance. 195. Following Facebook’s announcement, Google and Facebook commenced negotiations into an agreement not to compete. 196. In September 2018, Google and Facebook reached an agreement—which Google code- named “Jedi Blue.” Server Market supporting header bidding, and would use Google’s ad tech tools. 198. �rough Jedi Blue, Facebook committed to spending at least $500 million annually on Google’s auctions and Google, in return, committed to ensuring that Facebook would win a fixed percentage of auctions. 199. Facebook’s agreement not to compete with Google for Publishers’ business and its agreement to spend $500 million annually reinforced Google’s market dominance in the Publisher Ad Server Market. Absent the Jedi Blue agreement, Facebook would have competed for Publishers’ ad server business which, in turn, would have created price competition in the market that does not otherwise exist. Further, absent the Jedi Blue agreement, Facebook’s advertising dollars would have been available to other ad tech providers through competition. Instead, the Jedi Blue agreement ensured that Google would not have to compete with its most significant potential competitor and that it would control significant additional advertising demand that further cemented Google’s market share in the Publisher Ad Server Market. 200. Further, because Google guaranteed that Facebook would win a fixed percentage of auctions, the Jedi Blue agreement was not only a market allocation agreement, but also constitutes bid- rigging. Indeed, assured of winning a fixed percentage of auctions, Facebook would not need to bid as high to win the auctions, thus suppressing auction revenues and preventing advertisers that should have won more auctions from doing so. 201. Google’s illicit market allocation and bid-rigging agreement with Facebook caused Publishers’ injury. 202. Indeed, by agreeing not to compete in the Publisher Ad Server Market, Google cemented its dominance in the market and charged Publishers supracompetitive prices for its ad server services. 203. Further, by guaranteeing that Facebook would a fixed percentage of auctions, Google’s agreement with Facebook suppressed auction revenues Publishers received for their ad inventory. 204. Google entered into the agreement with the purpose and intent of restraining trade in the Publisher Ad Server Market. As one internal Google email put it, the endgame was to “collaborate when necessary to maintain the status quo….” of Google continuing to dominate the market. negotiating team sent an email to Facebook CEO Mark Zuckerberg saying that the company faced options: “invest hundreds more engineers” and spend billions of dollars to lock up inventory, exit the business, or do the deal with Google. Ultimately, Facebook and Google did the deal, ensuring that Google could charge Publishers supracompetitive prices and suppress the revenues Publishers could generate on their content to Google’s advantage. XIV. DEMAND FOR JUDGMENT 206. WHEREFORE, Plaintiff, on behalf of itself and the Class, respectfully asks the Court for a judgment that: a. Certifies the Class as a class action pursuant to Fed. R. Civ. P. 23(a), 23(b)(2), and 23(b)(3), and appoints Plaintiff and its attorneys as class representatives and class counsel, respectively; b. Awards Plaintiff and each member of the Class treble the amount of damages actually sustained by reason of the antitrust violations alleged herein, plus the reasonable costs of this action including attorneys’ fees; c. Orders such equitable relief as is necessary to correct for the anticompetitive market effects caused by the unlawful conduct of Defendant; d. Awards such other relief the Court deems reasonable and appropriate. XV. JURY TRIAL DEMAND 207. Plaintiff hereby requests a jury trial for all issues so triable. Dated: December 23, 2020 Respectfully Submitted, By: /s/ Sophia M. Rios Sophia M. Rios (305801) BERGER MONTAGUE PC 12544 High Bluff Drive, Suite 340 San Diego, CA 92130 Tel: (619) 489-0300 Fax: (215) 875-4604 [email protected] Eric L. Cramer (Pro Hac Vice to be filed) Michael C. Dell’Angelo (Pro Hac Vice to be filed) Patrick F. Madden (Pro Hac Vice to be filed) Michaela Wallin (Pro Hac Vice to be filed) BERGER MONTAGUE PC 1818 Market Street, Suite 3600 Philadelphia, PA 19103 Tel: (215) 875-3000 Fax: (215) 875-4604 [email protected] [email protected] [email protected] [email protected] Daniel J. Walker (Pro Hac Vice to be filed) BERGER MONTAGUE PC 2001 Pennsylvania Ave., NW Suite 300 Washington, DC 20006 Tel: (202) 559-9745 [email protected] Michael K. Yarnoff (Pro Hac Vice to be filed) KEHOE LAW FIRM, P.C. Two Penn Center Plaza 1500 JFK Blvd., Suite 1020 Philadelphia, PA 19102 Tel: (215) 792-6676 [email protected] Attorneys for Plaintiff and the Class

antitrust

NatJCocBD5gMZwczoXaK

IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Case No. CHERYL BESSER, individually and on behalf of all others similarly situated, Plaintiff, v. Complaint – Class Action CONSUMERS CREDIT UNION, Defendant. Jury Demanded CLASS ACTION COMPLAINT – JURY DEMANDED Comes now Plaintiff Cheryl Besser (“Plaintiff Besser”), on behalf of herself and all others similarly situated and alleges as follows: INTRODUCTION 1. Plaintiff Besser is a blind individual. Her condition was caused by juvenile rheumatoid arthritis and she has been completely blind for the past thirty-two years. 2. As Plaintiff goes about her daily business, she regularly has occasion to make use of the banking services that are available through Automated Teller Machines (“ATMs”), so long as those ATMs are accessible to the blind. As discussed at length below, federal law includes very specific provisions calculated to guarantee that ATMs are accessible to blind and visually- impaired individuals.1 3. If a given ATM does not include the accessibility features that are mandated by federal law, blind consumers like Plaintiff cannot use the ATM independently and are thus faced 1 Plaintiff invokes the term “accessibility” as a defined term of art. That is, “accessibility” is specifically defined in the applicable statutes and regulations discussed at length in the text below and Plaintiff is using the term in the context of those definitions, and not in the abstract. CLASS ACTION COMPLAINT Page 1 with the prospect of having to share private banking information with other individuals to complete a banking transaction at the ATM. The mandatory ATM accessibility requirements at issue in this lawsuit are calculated to permit blind and visually impaired individuals to use ATMs independently, without having to divulge private banking information to a third party. 4. Notwithstanding that federal law mandates very specific ATM accessibility requirements for the blind, a March 7, 2012 Wall Street Journal article noted the widely publicized fact that at least 50% of the nation’s ATMs remain inaccessible to blind individuals in violation of these laws. In that same article, a spokesperson for the National Federation of the Blind (“NFB”) was quoted as saying: “It is absolutely unacceptable that at this late date there are hundreds of thousands of ATMs that are still not accessible to blind people.” 5. As is the case nationally, a significant percentage of the ATMs throughout Michigan continue to violate accessibility requirements mandated by federal law. Many inaccessible ATMs are located within the geographic zone that Plaintiff typically travels as part of her everyday activities. This shortage of accessible ATMs severely limits the ability of Plaintiff and other blind and visually impaired individuals to benefit from the banking services made available to the American consumer public through ATMs. 6. The NFB and other blind advocacy groups have been fighting to achieve ATM accessibility since at least as early as 1999, at which time the NFB began to work with the manufacturers of ATMs and the banking industry to encourage the addition of voice guidance and universal tactile keypads, inter alia, to ATM machines. 7. While some financial institutions have worked pro-actively to achieve compliance with federal ATM accessibility requirements that impact the blind community, the NFB and other blind advocacy organizations have pursued civil litigation against financial institutions CLASS ACTION COMPLAINT Page 2 which remain in violation of accessibility requirements long after those accessibility requirements were first introduced.2 8. As noted above, to the extent that a given ATM does not comply with the accessibility requirements mandated by federal law, it is nearly impossible for Plaintiff and others similarly situated to independently use that ATM.3 9. After March 15, 2012, Plaintiff Besser visited an ATM owned and operated by Defendant Consumers Credit Union (“Defendant”) located at 1511 West Centre Avenue, Portage, Michigan, 49024 (the “Subject ATM”). The Subject ATM is inaccessible to the blind in violation of applicable law, as is described in detail in the text below. 10. The Subject ATM is located approximately six miles from Plaintiff Besser’s home. The Subject ATM is within the geographic zone that Plaintiff Besser typically travels as part of her everyday activities. Plaintiff Besser will continue to regularly visit the ATM in the future as part of her effort to locate accessible ATMs that she personally can use within the geographic zone that she typically travels as part of her everyday activities, and on behalf of the blind community, generally. 11. Plaintiff alleges violations of Title III of the Americans with Disabilities Act, 42 U.S.C. § 12101 et seq., (the “ADA”) and its implementing regulations. 2 The history of the specific accessibility requirements applicable to ATMs is discussed in detail in the text below. 3 To understand how difficult it would be for a blind person to use an ATM that does not include the accessibility features at issue in this lawsuit, a sighted individual need only close his or her eyes, approach the ATM and attempt to perform a banking transaction—any transaction. It is impossible to perform the transaction without vision because the input modalities for the transaction rely upon visual cues, which are of course meaningless to somebody who is blind. That is why an ATM is not accessible to a blind individual unless it offers voice guidance and all of the additional accessibility requirements that are mandated by the laws at issue. CLASS ACTION COMPLAINT Page 3 12. On behalf of a class of similarly situated individuals, Plaintiff seeks a declaration that Defendant’s ATMs violate federal law as described and an injunction requiring Defendant to update or replace its ATMs so that they are fully accessible to, and independently usable by, blind individuals. Plaintiff also requests that once Defendant is fully in compliance with the requirements of the ADA, the Court retain jurisdiction for a period of time to be determined to ensure that Defendant has adopted and is following an institutional policy that will, in fact, cause Defendant to remain in compliance with the law. JURISDICTION AND VENUE 13. This Court has federal question jurisdiction over the ADA claims asserted herein pursuant to 28 U.S.C. § 1331 and 42 U.S.C. § 12188. 14. Plaintiff’s claims asserted herein arose in this judicial district and Defendant does substantial business in this judicial district. 15. Venue in this judicial district is proper under 28 U.S.C. § 1391(b)(1) and (2) in that this is the judicial district in which Defendant resides, and in which a substantial part of the acts and omissions giving rise to the claims occurred. PARTIES 16. Plaintiff, Cheryl Besser, is and, at all times relevant hereto, was a resident of the State of Michigan. Plaintiff Besser is and, at all times relevant hereto, has been legally blind and is therefore a member of a protected class under the ADA, 42 U.S.C. § 12102(2) and the regulations implementing the ADA set forth at 28 CFR §§ 36.101 et seq. 17. Defendant, Consumers Credit Union is a credit union organized under the laws of the State of Michigan and is headquartered at 7040 Stadium Drive, Kalamazoo, Michigan, CLASS ACTION COMPLAINT Page 4 49009. Defendant is a public accommodation pursuant to 42 U.S.C. § 12181(7)(F) which offers banking services through its ATMs. TITLE III OF THE ADA 18. On July 26, 1990, President George H.W. Bush signed into law the ADA, a comprehensive civil rights law prohibiting discrimination on the basis of disability. 19. The ADA broadly protects the rights of individuals with disabilities with respect to employment, access to State and local government services, places of public accommodation, transportation, and other important areas of American life. 20. Title III of the ADA prohibits discrimination in the activities of places of public accommodation and requires places of public accommodation to comply with ADA standards and to be readily accessible to, and independently usable by, individuals with disabilities. 42 U.S.C. § 12181-89. 21. On July 26, 1991, the Department of Justice (“DOJ”) issued rules implementing Title III of the ADA, which are codified at 28 CFR Part 36.4 22. Appendix A of the 1991 Title III regulations (republished as Appendix D to 28 CFR part 36) contains the ADA standards for Accessible Design (1991 Standards), which were based upon the Americans with Disabilities Act Accessibility Guidelines (1991 ADAAG) published by the Access Board on the same date.5 4 The DOJ is the administrative agency charged by Congress with implementing the requirements of the ADA. 5 The Access Board was established by section 502 of the Rehabilitation Act of 1973. 29 U.S.C.§ 792. The Board consists of 13 public members appointed by the President, the majority of whom must be individuals with disabilities, and the heads of the 12 Federal departments and agencies specified by statute, including the heads of the Department of Justice and the Department of Transportation. Originally, the Access Board was established to develop and maintain accessibility guidelines for facilities designed, constructed, altered, or leased with CLASS ACTION COMPLAINT Page 5 23. In 1994, the Access Board began the process of updating the 1991 ADAAG by establishing a committee composed of members of the design and construction industries, the building code community, and State and local government entities, as well as individuals with disabilities. 24. In 1999, based largely on the report and recommendations of the advisory committee, the Access Board issued a notice of proposed rulemaking to update and revise its ADA and ABA Accessibility Guidelines. 25. The Access Board issued final publication of revisions to the 1991 ADAAG on July 23, 2004 (“2004 ADAAG”). 26. On September 30, 2004, the DOJ issued an advance notice of proposed rulemaking to begin the process of adopting the 2004 ADAAG. 27. On June 17, 2008, the DOJ published a notice of proposed rulemaking covering Title III of the ADA. 28. The long-contemplated revisions to the 1991 ADAAG culminated with the DOJ’s issuance of The 2010 Standards for Accessible Design (“2010 Standards”). The DOJ published Federal dollars under the Architectural Barriers Act of 1968. 42 U.S.C. § 4151 et seq. The passage of the ADA expanded the Access Board’s responsibilities. The ADA requires the Access Board to “issue minimum guidelines . . . to ensure that buildings, facilities, rail passenger cars, and vehicles are accessible, in terms of architecture and design, transportation, and communication, to individuals with disabilities.” 42 U.S.C. § 12204. The ADA requires the DOJ to issue regulations that include enforceable accessibility standards applicable to facilities subject to Title III that are consistent with the “minimum guidelines” issued by the Access Board, 42 U.S.C. § 12134(c), 12186(c), but vests with the Attorney General sole responsibility for the promulgation of those standards that fall within the DOJ’s jurisdiction and enforcement of the regulations. The ADA also requires the DOJ to develop regulations with respect to existing facilities subject to Title III. CLASS ACTION COMPLAINT Page 6 the Final Rule detailing the 2010 Standards on September 15, 2010. The 2010 Standards consist of the 2004 ADAAG and the requirements contained in subpart D of 28 CFR part 36.6 THE ADA HAS LONG REQUIRED THAT FINANCIAL INSTITUTIONS THAT OWN, OPERATE, CONTROL AND/OR LEASE ATMS PROVIDE ATMS THAT ARE FULLY ACCESSIBLE AND INDEPENDENTLY USABLE BY BLIND PEOPLE 29. Since the enactment of the ADA in 1991, banks and financial institutions which provide banking services through ATMs have been required to ensure that all banking services available at the ATM are fully accessible to, and independently usable by, individuals who are blind. The 1991 DOJ Standards required that “instructions and all information for use shall be made accessible to and independently usable by persons with vision impairments.” 28 CFR part 36, App. A. section 4.34.4. 30. Initially, the ADA and its implementing regulations did not provide technical details defining the steps required to make an ATM fully accessible to and independently usable by blind individuals. 31. However, after a lengthy rulemaking process wherein the Access Board entertained extensive input from all stakeholders, the 2004 ADAAGs adopted very specific guidelines calculated to ensure that ATM banking services were, in fact, fully accessible to, and independently usable by, individuals who are blind. 32. Section 220.1 of the 2004 ADAAGs stated that “where automatic teller machines . . . are provided, at least one of each type provided at each location shall comply with Section 6 Though the Effective Date of the 2010 Standards was March 15, 2011, the communication elements of Chapter 7 of the Standards—which frame Plaintiff’s allegations in this case—did not become effective until March 15, 2012, at which time the 2010 Standards became enforceable through civil actions by private plaintiffs. CLASS ACTION COMPLAINT Page 7 33. In turn, Section 707 of the 2004 ADAAGs delineated very precise accessibility guidelines for ATMs, including guidelines calculated to ensure that ATMs are fully accessible to, and independently usable by, visually impaired individuals. These guidelines included, inter alia, the following elements: ATMs shall be speech enabled (i.e. talking ATMs)—Section 707.5; input controls shall be tactilely discernible—Section 707.6; function keys shall have specific tactile symbols—Section 707.6.3.2; Braille instructions shall be provided for initiating the speech mode. 34. As noted, the 2010 Standards adopt the 2004 ADAAGs. The communication elements of the 2010 Standards are set forth at Section 7-- including, in relevant part, the elements which are expressly calculated to make ATMs fully accessible to, and independently usable by, visually impaired individuals. The Section 7 communication elements became fully effective on March 15, 2012.7 35. Defendant owns, operates, controls and/or leases a place of public accommodation. 36. Defendant’s ATMs are not fully accessible to, and independently usable by, blind individuals. Some of Defendant’s ATMs do not include functional voice guidance and suffer from myriad additional violations of Section 7 of the 2010 Standards. 37. Defendant does not have an institutional policy that is reasonably calculated to ensure that its ATMs be fully accessible to, and independently usable by, visually impaired individuals, as those terms are informed by Section 7 of the 2010 Standards. 7 The DOJ has consistently taken the position that the communication-related elements of ATMs are auxiliary aids and services, rather than structural elements. See 28 CFR part 36, app. B at 728 (2009). Thus, the 2010 Standards do not provide a safe-harbor provision for implementation of these requirements unless compliance would cause an “undue hardship” upon a public accommodation. CLASS ACTION COMPLAINT Page 8 VIOLATIONS AT ISSUE 38. After March 15, 2012, Plaintiff Besser visited Defendant’s ATM located at1511 West Centre Avenue, Portage, Michigan, 49024. 39. When Plaintiff visited the Subject ATM, she had in her possession an ATM card, and headphones that are compatible with the 2010 Standards, and intended to avail herself of the banking services offered through Defendant’s ATM. 40. At the time of the visit, the Subject ATM violated Chapter 7 of the 2010 Standards in that there was no functional voice-guidance feature (Section 707.5). 41. The Subject ATM is within the geographic zone that Plaintiff Besser typically travels as part of her everyday activities as it is located within six (6) miles from her home. 42. Based upon an investigation performed on Plaintiff’s behalf, Plaintiff has actual notice that additional ATMs in Defendant’s ATM network are similarly in violation of Chapter 7 of the 2010 Standards. Plaintiff would visit these additional ATMs but for the violations of which she has actual notice. 43. Though Defendant has centralized policies regarding the management and operation of its ATMs, Defendant does not have a plan or policy that is reasonably calculated to cause its ATMs to be in timely compliance with Chapter 7 of the 2010 Standards, as is demonstrated by the fact that its network remains out of compliance. 44. Plaintiff uses ATMs that meet the accessibility requirements of the 2010 Standards, but these ATMs are often not conveniently located. 45. To date, Plaintiff has not had the practical ability to use the Subject ATM because it is in violation of the 2010 Standards (and prior to the effective date of the 2010 Standards, the CLASS ACTION COMPLAINT Page 9 Subject ATM was not otherwise readily accessible to or independently usable by blind individuals). 46. A significant percentage of the ATMs that are located within the geographic zone that Plaintiff typically travels as part of her everyday activities do not comply with the 2010 Standards and are therefore inaccessible to blind individuals like Plaintiff. 47. Plaintiff will continue to attempt to use Defendant’s ATMs because she wants to identify convenient accessible ATM options within the geographic zone that she typically travels as part of her everyday activities, and she wants to increase ATM accessibility for the blind community, generally. However, so long as the Subject ATM continues to violate Section 7, Plaintiff will be unable to use it independently and will be, thereby, deterred from visiting it. 48. In contrast to an architectural barrier at a public accommodation, wherein a remediation of the barrier to cause compliance with the ADA provides a permanent or long-term solution, the addition of, or repair to, a speech enabling function (and other related accessibility requirements) provided at the ATM of a public accommodation requires periodic monitoring to confirm, not only that the public accommodation is in compliance in the first instance, but also that the public accommodation remains in compliance. 49. Without injunctive relief, Plaintiff will continue to be unable to independently use Defendant’s ATMs in violation of her rights under the ADA. CLASS ACTION ALLEGATIONS 50. Plaintiff brings this action pursuant to Rules 23(a) and 23(b)(2) of the Federal Rules of Civil Procedure on behalf of herself and all legally blind individuals who have attempted to access, or will attempt to access, Defendant’s ATMs. CLASS ACTION COMPLAINT Page 10 51. The class described above is so numerous that joinder of all individual members in one action would be impracticable. The disposition of the individual claims of the respective class members through this class action will benefit both the parties and this Court. 52. Typicality: Plaintiff’s claims are typical of the claims of the members of the class. The claims of the Plaintiff and members of the class are based on the same legal theories and arise from the same unlawful conduct. 53. Common Questions of Fact and Law: There is a well-defined community of interest and common questions of fact and law affecting members of the class in that they all have been and/or are being denied their civil rights to full and equal access to, and use and enjoyment of, Defendant’s facilities and/or services due to Defendant’s failure to make its ATMs fully accessible and independently usable as above described. 54. The questions of fact and law common to the class include but are not limited to the following: a. Whether Defendant is a “public accommodation” under the ADA; b. Whether Defendant’s conduct in failing to make its ATMs fully accessible and independently usable as above described violated the ADA, 42 U.S.C. § 12101 et seq.; and c. Whether Plaintiff and members of the class are entitled to declaratory and injunctive relief, and also costs and/or attorneys’ fees for Defendant’s acts and conduct. 55. Adequacy of Representation: Plaintiff is an adequate representative of the class because her interests do not conflict with the interests of the members of the class. Plaintiff will fairly, adequately, and vigorously represent and protect the interests of the members of the class CLASS ACTION COMPLAINT Page 11 and has no interests antagonistic to the members of the class. Plaintiff has retained counsel who are competent and experienced in the prosecution of class action litigation. 56. Class certification is appropriate pursuant to Fed. R. Civ. P. 23(b)(2) because Defendant has acted or refused to act on grounds generally applicable to the Class, making appropriate both declaratory and injunctive relief with respect to Plaintiff and the Class as a whole. SUBSTANTIVE VIOLATION 57. The allegations contained in the previous paragraphs are incorporated by reference. 58. Defendant has discriminated against Plaintiff and the Class in that it has failed to make its ATM banking services fully accessible to, and independently usable by, individuals who are blind in violation of Section 707 of the 2010 Standards, as described above. 59. Complying with the ADA and Section 707 of the 2010 Standards would neither fundamentally alter the nature of Defendant’s banking services nor result in an undue burden to Defendant. 60. Defendant’s conduct is ongoing, and, given that Defendant has not complied with the ADA’s requirements that public accommodations make ATM services fully accessible to, and independently usable by, blind individuals—as specifically defined in Section 707 of the 2010 Standards, Plaintiff invokes his statutory right to declaratory and injunctive relief, as well as costs and attorneys’ fees. 61. Without the requested injunctive relief, specifically including the request that the Court retain jurisdiction of this matter for a period to be determined after the Defendant certifies that it is fully in compliance with the mandatory requirements of the ADA that are discussed CLASS ACTION COMPLAINT Page 12 above, Defendant’s non-compliance with the ADA’s requirements that its ATMs be fully accessible to, and independently usable, by blind people is likely to recur. CLASS ACTION COMPLAINT Page 13 PRAYER FOR RELIEF WHEREFORE, Plaintiff, on behalf of herself and the members of the class, prays for: a. A Declaratory Judgment that at the commencement of this action Defendant was in violation of the specific requirements of Title III of the ADA described above (specifically including Section 707 of the 2010 Standards); b. A permanent injunction which directs Defendant to take all steps necessary to bring its ATMs into full compliance with the requirements set forth in the ADA, and its implementing regulations, and which further directs that the Court shall retain jurisdiction for a period to be determined after Defendant certifies that all of its ATMs are fully in compliance with the relevant requirements of the ADA to ensure that Defendant has adopted and is following an institutional policy that will in fact cause Defendant to remain in compliance with the law; c. An Order certifying the class proposed by Plaintiff, and naming Plaintiff as class representative and appointing her counsel as class counsel; d. Payment of costs of suit; e. Payment of reasonable attorneys’ fees; and, f. The provision of whatever other relief the Court deems just, equitable and appropriate. Dated: March 1, 2013 Respectfully Submitted, _ Daniel O. Myers The Law Offices of Daniel O. Myers 100 Park Street Traverse City, Michigan 49684 Phone: (231) 929-0500 ext. 122 Fax: (231) 929-0504 Email: [email protected] R. Bruce Carlson [email protected] (to be admitted pro hac vice) CARLSON LYNCH LTD PNC Park 115 Federal Street, Suite 210 Pittsburgh, PA 15212 www.carlsonlynch.com (p) 412.322.9243 (f) 412.231.0246 CLASS ACTION COMPLAINT Page 14

civil rights, immigration, family

30wP_ogBF5pVm5zYGNBJ

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF TEXAS DALLIS ROGERS, Individually and on Behalf of All Others Similarly Situated, Plaintiff, v. Case No. 1:22-cv-907 CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS JURY TRIAL DEMANDED LOTTERY.COM, INC. f/k/a TRIDENT ACQUISITIONS CORP., ANTHONY DIMATTEO, MATTHEW CLEMENSON, and RYAN DICKINSON, Defendants. Plaintiff Dallis Rogers (“Plaintiff”), individually and on behalf of all others similarly situated, by Plaintiff’s undersigned attorneys, for Plaintiff’s complaint against Defendants, alleges the following based upon personal knowledge as to Plaintiff and Plaintiff’s own acts, and information and belief as to all other matters, based upon, inter alia, the investigation conducted by and through Plaintiff’s attorneys, which included, among other things, a review of the Defendants’ public documents, conference calls and announcements made by Defendants, United States (“U.S.”) Securities and Exchange Commission (“SEC”) filings, wire and press releases published by and regarding Lottery.com, Inc. f/k/a Trident Acquisitions Corp. (“Lottery.com” or the “Company”), analysts’ reports and advisories about the Company, and information readily obtainable on the Internet. Plaintiff believes that substantial, additional evidentiary support will exist for the allegations set forth herein after a reasonable opportunity for discovery. NATURE OF THE ACTION 1. This is a federal securities class action on behalf of a class consisting of all persons and entities other than Defendants that purchased or otherwise acquired Lottery.com securities between November 15, 2021 and July 28, 2022, both dates inclusive (the “Class Period”). Plaintiff pursues claims against the Defendants under the Securities Exchange Act of 1934 (the “Exchange 2. Lottery.com, headquartered in Spicewood, Texas, is a technology company that operates a business-to-consumer (“B2C”) platform enabling players to remotely purchase legally sanctioned lottery games in the U.S. and internationally. The Company also provides affiliate marketing services under the LotteryLink brand, and delivers lottery data, such as winning numbers and results, to approximately 400 digital publishers and media organizations. Formerly known as Trident Acquisitions Corp. (“TDAC”), the Company was formed as a Delaware corporation on March 1 17, 2016, and its securities traded on the Nasdaq Stock Market (“NASDAQ”) under the symbols “TDAC”, “TDACW”, and “TDACU”. TDAC completed its initial public offering (“IPO”) of 20,125,000 units on June 1, 2018. 3. On October 29, 2021, pursuant to a Business Combination Agreement dated February 21, 2021, TDAC consummated a business combination (the “Business Combination”) with AutoLotto, Inc. (“AutoLotto”), which, since its founding in 2015, conducted business as Lottery.com. Following the closing of the Business Combination, the Company changed its name to Lottery.com, the business of AutoLotto became Lottery.com’s business, and the Company’s shares began trading on the NASDAQ under the symbol “LTRY”. 4. Throughout the Class Period, Defendants made materially false or misleading statements and/or failed to disclose, inter alia, that: (i) the Company lacked adequate internal accounting controls; (ii) the Company lacked adequate internal controls over financial reporting, including, but not limited to, those pertaining to revenue recognition and the reporting of cash; (iii) the Company was not in compliance with state and federal laws governing the sale of lottery tickets; and (iv) as a result, the Company’s public statements were materially false and misleading at all relevant times. 5. On July 6, 2022, on a Form 8-K filed with the SEC, Lottery.com disclosed that an internal investigation, conducted by independent counsel, had uncovered “instances of non- compliance with state and federal laws concerning the state in which tickets are procured as well as order fulfillment.” In addition, the investigation revealed “issues pertaining to the Company’s internal accounting controls.” The July 6, 2022 8-K further disclosed that, in light of the findings of the independent investigation, on June 30, 2022, the Company’s Board of Directors (the 2 “Board”) terminated the Company’s President, Treasurer, and Chief Financial Officer Ryan Dickinson (“Dickinson”), effective July 1, 2022. 6. On this news, Lottery.com’s stock price fell $0.15 per share, or more than 12%, from a closing price of $1.22 per share on July 5, 2022 to a closing price of $1.07 per share on July 6, 2022, on abnormally high volume. 7. On July 15, 2022, in a Form 8-K filed with the SEC after the markets closed, Lottery.com announced that Chief Revenue Officer (“CRO”) Matthew Clemenson (“Clemenson”) had resigned on July 11, 2022, effective immediately. Moreover, the Company provided an update on the independent investigation previously disclosed on July 6, 2022. The Company reported that, after a review of its cash balances, its revenue recognition policies and procedures, and other internal accounting controls, Lottery.com had “preliminarily conclude[d] that it has overstated its available unrestricted cash balance by approximately $30 million and that, relatedly, in the prior fiscal year, it improperly recognized revenue in the same amount[,]” and that, “[t]he Company, in consultation with its outside advisors, is currently validating its preliminary conclusion, assessing any impact on previously issued financial reports, and has begun to institute appropriate remedial measures.” 8. On this news, Lottery.com’s stock price fell $0.146 per share, or over 15%, from a closing price of $0.966 per share on July 15, 2022 to a closing price of $0.82 per share on July 18, 2022, on abnormally high volume. 9. The Company made a series of additional adverse disclosures before finally, on July 29, 2022, in another Form 8-K filed with the SEC, informing the market that it did not have “sufficient financial resources to fund its operations or pay certain existing obligations,” and that it therefore intended to furlough certain employees effective July 29, 2022. Moreover, because Lottery.com’s 3 resources were not sufficient to fund its operations for a twelve-month period, “there is substantial doubt about the Company’s ability to continue as a going concern,” and the Company may be forced to wind down its operations or pursue liquidation of the Company’s assets. 10. On this news, Lottery.com’s stock price lost 64% of its value in a single trading day, falling $0.52 per share, from a closing price of $0.815 per share on July 28, 2022 to a close of $0.295 per share on July 29, 2022. 11. As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s securities, Plaintiff and other Class members have suffered significant losses and damages. JURISDICTION AND VENUE 12. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of the Exchange Act (15 U.S.C. §§ 78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder by the SEC (17 C.F.R. § 240.10b-5). 13. This Court has jurisdiction over the subject matter of this action pursuant to Section 27 of the Exchange Act (15 U.S.C. § 78aa). 14. Venue is proper in this Judicial District pursuant to 28 U.S.C. § 1391(b) and Section 27 of the Exchange Act (15 U.S.C. § 78aa(c)). Lottery.com is headquartered in this Judicial District, Defendants conduct business in this Judicial District, and a significant portion of Defendants’ actions took place within this Judicial District. 15. In connection with the acts alleged in this Complaint, Defendants, directly or indirectly, used the means and instrumentalities of interstate commerce, including, but not limited to, the mails, interstate telephone communications, and the facilities of the national securities markets. 4 PARTIES 16. Plaintiff, as set forth in the attached Certification, purchased or otherwise acquired Lottery.com securities during the Class Period, and suffered damages as a result of the federal securities law violations and false and/or misleading statements and/or material omissions alleged herein. 17. Defendant Lottery.com is a Delaware corporation with principal executive offices located at 20808 State Highway 71 West, Unit B, Spicewood, Texas 78669. Lottery.com’s common stock trades in an efficient market on the NASDAQ under the trading symbol “LTRY”. 18. Defendant Lawrence Anthony “Tony” DiMatteo III (“DiMatteo”) has been Chief Executive Officer (“CEO”) of Lottery.com since 2015 and Chairperson of the Board since October 2021. Defendant DiMatteo signed Lottery.com’s Forms 10-K and 10-Q filed with the SEC during the Class Period. 19. Defendant Dickinson served as Lottery.com’s President, Treasurer, and Acting Chief Financial Officer (“CFO”) from October 2021 until his termination effective July 1, 2022, and CFO from March 2022 until his termination effective July 1, 2022. Defendant Dickinson signed Lottery.com’s Forms 10-K and 10-Q filed with the SEC during the Class Period. 20. Defendant Clemenson served as Lottery.com’s CRO and director from March 2015 until his resignation on July 11, 2022. 21. Defendants DiMatteo, Dickinson, and Clemenson are referred to herein collectively as the “Individual Defendants.” 22. The Individual Defendants possessed the power and authority to control the contents of Lottery.com’s SEC filings, press releases, and other market communications. The Individual Defendants were provided with copies of Lottery.com’s SEC filings and press releases 5 alleged herein to be misleading prior to or shortly after their issuance and had the ability and opportunity to prevent their issuance or to cause them to be corrected. Because of their positions with Lottery.com, and their access to material information available to them but not to the public, the Individual Defendants knew that the adverse facts specified herein had not been disclosed to and were being concealed from the public, and that the positive representations being made were then materially false and misleading. The Individual Defendants are liable for the false statements and omissions pleaded herein. SUBSTANTIVE ALLEGATIONS Background 23. Lottery.com, a Delaware corporation with principal executive offices in Spicewood, Texas, is a leading provider of domestic and international lottery products and services that enable consumers and businesses to purchase purportedly legally sanctioned lottery tickets in the U.S. and abroad online through its proprietary platform, the B2C platform (the “Platform”). TDAC, its predecessor entity, completed its IPO of 20,125,000 units on June 1, 2018. 24. The Company’s revenue is derived from: (i) offering the B2C Platform via Lottery.com’s app and websites to users located in certain U.S. and international jurisdictions; (ii) selling LotteryLink Credits to third-party master affiliate marketing partners that can be exchanged by them and by their sub-affiliates for LotteryLink promotion packages that include marketing collateral, prepaid advertising, development services, account management, and prepaid lottery games for use in promotions and marketing activities and promoting the B2C Platform; (iii) offering a proprietary business-to-business application programming interface (“API”) of the Platform to enable Lottery.com’s commercial partners to purchase lottery games from Lottery.com and resell them (“B2B API”); and (iv) delivering global lottery data, such as winning numbers and 6 results, and data sets of their proprietary, anonymized transaction data pursuant to multi-year contracts to commercial digital subscribers (“Data Service”). 25. On February 22, 2021, TDAC and AutoLotto announced that they had entered into the Business Combination Agreement that would result in AutoLotto (d/b/a Lottery.com) becoming a publicly traded company. The press release announcing the Business Combination stated, in pertinent part: NEW YORK and AUSTIN, Texas, Feb. 22, 2021 (GLOBE NEWSWIRE) - - Trident Acquisitions Corp. (Nasdaq: TDACU, TDAC, TDACW) (“Trident”) and AutoLotto, Inc. (“Lottery.com”), a leading online platform to play the lottery online or from a mobile device, have entered into a definitive agreement for a business combination that would result in Lottery.com becoming a publicly listed company. Founded in 2015, Lottery.com empowers users to play the lottery from their phone and on the go. It offers official state-sanctioned lottery games, like Powerball, Mega Millions and state games where permissible. Lottery.com is also the world’s largest provider of lottery data to over 400 digital publishers, including hundreds of digital newspapers, television and news sites, and major digital publishers such as Google, Verizon/Yahoo and Amazon’s Alexa devices. Lottery.com has been a pioneer in the lottery industry, working closely with state regulators to advance the industry into the digital age. Through its online platform, Lottery.com provides official lottery games and enhanced regulatory capabilities by developing innovative blockchain technology, while also capturing untapped market share, including digitally native players. With the expected proceeds to be received by Lottery.com upon the closing of the transaction, Lottery.com would be well-positioned to accelerate its revenue growth through further expansion in its existing markets and into new high-growth markets both domestically and internationally. Lottery.com Investment Highlights • Potential to Significantly Expand Global Market Share: Leveraging its successful playbook in the U.S., Lottery.com intends to become a global marketplace for legally available lottery games to consumers across the world. At $430 billion of global lottery sales with only 4% online penetration, this is a large market opportunity that is expected to shift to transact online during the next decade. • Innovative Ecommerce Platform Bringing an Outdated Industry into the Digital Age: Lottery.com has developed a world-class safe and secure 7 mobile lottery platform and app leveraging blockchain technology to maintain an accurate ledger that provides users the ability to play official lottery games and other games of chance directly from their phone. Lottery.com has benefited from a customer acquisition cost of $4.01, with those users producing an average of $30.90 of gross revenue in their first year. • Favorable Macro Dynamics Driving Consumers Online: Betting and gambling industries have begun successfully transitioning to online platforms as pandemic-related changes in consumer behavior have accelerated online and digital adoption. In addition, millennials are increasingly participating in games of chance, including the lottery. • Easing Regulatory Environment Propelling Market Growth: Many states and international governments have been easing restrictions on lottery games in an effort to increase ticket sales and revenue contribution in the form of tax as more and more gaming companies collaborate on lobbying efforts. • Poised for Expansion: From 2016 to 2020, Lottery.com grew gross revenue at a compounded annual growth rate of 322%, and forecasts gross revenue equal to approximately $71 million in 2021, $280 million in 2022 and $571 million in 2023. Lottery.com is currently operating in 11 states across the U.S. and has plans to cover 34 states by the end of 2023. Lottery.com looks forward to announcing upcoming partnerships with significant room to expand into other countries, along with opportunities to grow deeper within its current footprint. • Large and Growing Player Pool for Cross Selling Additional Games: With over 7.5 million visitors in 2020, the Lottery.com platform is capable of distributing a range of wagering and games of chance across large and growing national and international markets. “Lottery.com’s innovative platform has already made significant progress bringing the lottery industry into the digital age and continuing to expand its markets both domestically and internationally,” said Vadim Komissarov, CEO of Trident. “With a track record of substantial growth and user base expansion in a relatively short period of time, we are confident that Lottery.com has the ability to cement its place as a leading online platform to both play the lottery and to introduce additional wagering and games of chance worldwide. We believe this transaction will allow Lottery.com to be on a path to reach its true growth potential, and we look forward to working with the team as we introduce their compelling story to the public markets.” Co-founder and CEO of Lottery.com, Tony DiMatteo, commented: “Lottery.com is innovating a legacy industry with ground-breaking technologies poised to capitalize on the large population of active internet and smartphone users in the 8 U.S. and throughout the world. Over the past several months, we have made significant progress, launching our app in the Google Play Store and expanding domestically into Colorado and internationally through announced partnership plans in Turkey and Ukraine. We believe this transaction will further enhance our ability to grow into new markets as consumers are now, more than ever, engaging with digital and online platforms. The team at Trident shares our vision of growing into a global marketplace for legally available lottery games, and other games of chance, to consumers across the world and we firmly believe this partnership will accelerate our growth.” * * * Transaction Terms The combined company will have an estimated post-business combination enterprise value of approximately $526 million. The net proceeds raised from the business combination will be used to support Lottery.com’s working capital and global platform expansion. The proposed business combination contemplates that Lottery.com’s stockholders will roll 100% of their equity into the combined company, with no minimum cash requirement to close the business combination. Upon completion of the transaction, the combined company will be trademarked Lottery.com and its common stock is expected to remain listed on the Nasdaq Stock Market under the new ticker symbol “LTRY.” 26. On February 23, 2021, in a Form 8-K filed with the SEC pursuant to Rule 425 under the Securities Act of 1933, TDAC disclosed additional details regarding the Business Combination Agreement, including the following: On February 21, 2021, Trident Acquisitions Corp. (“TDAC”) entered into a business combination agreement (the “Merger Agreement”) with Trident Merger Sub II Corp. (“Merger Sub”) and AutoLotto, Inc. (“Lottery.com”). The transactions contemplated by the Merger Agreement are sometimes referred to herein as the “Merger” or the “Business Combination.” Terms used herein as defined terms and not otherwise defined herein shall have the meanings ascribed to them in the Merger Agreement. Acquisition of Lottery.com; Acquisition Consideration Upon the closing (the “Closing”) of the Business Combination, Merger Sub will merge with and into Lottery.com, with Lottery.com as the surviving company, continuing as a wholly owned subsidiary of TDAC, following the Merger and the 9 separate existence of Merger Sub shall cease. At the Closing, each share of Lottery.com Common Stock issued and outstanding as of immediately prior to the Closing shall be converted into the right to receive the Per Share Merger Consideration. “Per Share Merger Consideration” means the quotient obtained by dividing (a) 40,000,000 shares of TDAC Common Stock by (b) the aggregate number of shares of Lottery.com Common Stock (including shares issued upon the conversion or exercise of Lottery.com convertible securities) issued and outstanding as of immediately prior to the Closing (the “Lottery.com Shares”). The Per Share Merger Consideration shall be reduced by the number of shares of TDAC Common Stock equal to the quotient of (i) the amount by which Net Indebtedness exceeds $10,000,000, as mutually agreed between TDAC and Lottery.com (each acting reasonably), divided by (ii) 11.00. “Net Indebtedness” means the amount equal to Lottery.com’s Indebtedness, less cash and cash equivalents. For the avoidance of doubt, Lottery.com’s Indebtedness shall not include current liabilities or any intercompany Indebtedness between or among Lottery.com and any of its subsidiaries. The holders of the Lottery.com Shares (the “Sellers”) will also be entitled to receive up to 6,000,000 additional shares of TDAC Common Stock (the “Seller Earnout Shares”) that may be issuable from time to time as set forth below. The aggregate value of the consideration to be paid by TDAC in the Business Combination (excluding the Seller Earnout Shares) is approximately $444 million (calculated as follows: 40,000,000 shares of TDAC Common Stock to be issued to the Sellers, multiplied by $11.00). Upon the Closing, TDAC will change its name to “LOTTERY.COM.” If, at any time on or prior to December 31, 2021, the daily volume-weighted average price of shares of TDAC Common Stock equals or exceeds $13.00 per share for 20 of any 30 consecutive trading days commencing after the Closing, each Seller shall receive its pro rata portion of 3,000,000 Seller Earnout Shares and Vadim Komissarov, Ilya Ponomarev and Marat Rosenberg (the “Founder Holders”) shall receive an aggregate of 2,000,000 shares of TDAC Common Stock. If, at any time on or prior to December 31, 2022, the daily volume-weighted average price of shares of TDAC Common Stock equals or exceeds $16.00 per share for 20 of any 30 consecutive trading days commencing after the Closing, each Seller shall receive its pro rata portion of 3,000,000 Seller Earnout Shares and the Founder Holders shall receive an aggregate of 2,000,000 shares of TDAC Common Stock. The Seller Earnout Shares then earned and issuable shall be issued to the Sellers on a pro-rata basis based on the percentage of the Lottery.com Shares owned by them immediately prior to the Closing. The parties agreed that immediately following the Closing, TDAC’s board of directors will consist of five directors, four of which will be designated by Lottery.com and one of which will be designated by TDAC, such appointment by TDAC to be an independent director. Stockholder Approval 10 Prior to the consummation of the Merger, the holders of a majority of TDAC’s common stock attending a stockholder’s meeting (at which there is a quorum) must approve the transactions contemplated by the Merger Agreement (the “Stockholder Approval”). In connection with obtaining the Stockholder Approval, TDAC must call a special meeting of its common stockholders and must prepare and file with the SEC a Proxy Statement on Schedule 14A, which will be mailed to all stockholders entitled to vote at the meeting. 27. On October 29, 2021, the Company announced the completion of the Business Combination, and that upon the closing, the combined entity was renamed Lottery.com and its warrants and stock would begin trading on the NASDAQ on November 1, 2021. According to the press release: AUSTIN, Texas, October 29, 2021 -- (GLOBE NEWSWIRE) -- Lottery.com Inc. (Nasdaq: LTRY, LTRYW) (“Lottery.com” or the “Company”), a leading technology company that is transforming how, where and when lottery is played announced today that it has completed its previously announced business combination with Trident Acquisitions Corp. (“Trident”). The transaction was approved at a special meeting of Trident’s stockholders on October 28, 2021. Additionally, Trident stockholders elected to retain 99.6% of Trident’s outstanding stock, resulting in the Company receiving gross proceeds of over $63 million from the transaction. Upon the closing, the combined company was renamed Lottery.com Inc. and its common stock and warrants will begin trading on The Nasdaq Stock Market under the ticker symbols LTRY and LTRYW, respectively, on Monday, November 1, 2021. Tony DiMatteo, CEO of Lottery.com commented, “Today represents a momentous achievement for Lottery.com. I am grateful to all our stockholders for their continued support and the entire Lottery.com team for their dedication.” He continued, “Since we entered our first state, our convenient online platform has resonated with consumers, which has driven our strong growth. As a public company with enhanced access to capital, we plan to continue building on this positive momentum by leveraging our low customer acquisition cost to further expand our customer base, broadening our product offerings, and executing on strategic and synergistic acquisitions. We remain squarely focused on realizing the profitable growth opportunities before us and delivering long-term value to our stockholders.” 28. On November 1, 2021, Lottery.com’s common shares and warrants began trading on the NASDAQ under the ticker symbols “LTRY” and “LTRYW”, respectively. 11 29. On November 4, 2021, Lottery.com filed with the SEC a Form 8-K announcing that the Business Combination had been consummated on October 29, 2021. Materially False and Misleading Statements Issued During the Class Period 30. The Class Period begins on November 15, 2021, when Lottery.com filed with the SEC a Form 8-K that announced that, on November 10, 2021, the Board had approved the engagement of Aramino LLP as the Company’s independent registered public accounting firm to audit the Company’s consolidated financial statements for the year ended December 31, 2021, and the dismissal of Marcum LLP as the Company’s auditing firm. With respect to Marcum LLP’s audits of the financial statements of TDAC (prior to the Business Combination), the Company reported that there were no issues or concerns with any prior financial statement, for the years ended December 31, 2020 and December 31, 2019. Specifically, the Company stated: The reports of Marcum on TDAC’s financial statements as of and for the fiscal years ended December 31, 2020 and December 31, 2019, did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles. During TDAC’s fiscal years ended December 31, 2020, December 31, 2019 and during the subsequent interim period through November 10, 2021, the date of dismissal of Marcum, there were no disagreements between TDAC or the Company and Marcum on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. During TDAC’s fiscal year ending December 31, 2020, December 31, 2019 and during the subsequent interim period through November 10, 2021, the date of dismissal of Marcum, there were no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934, as amended) other than the material weakness in internal controls identified by management related to evaluating complex accounting issues relating to the warrants issued in connection with TDAC’s initial public offering, which resulted in the restatement of TDAC’s financial statements as set forth in TDAC’s Form 10-K/A for the year ended December 31, 2020, as filed with the SEC on June 28, 2021. 31. Also on November 15, 2021, the Company filed with the SEC its quarterly report on Form 10-Q for the period ending September 30, 2021 (the “3Q21 10-Q”). In the 3Q21 10-Q, 12 Lottery.com stated that, “[i]n connection with the preparation of the Company’s financial statements as of September 30, 2021, management identified errors made in its historical financial statements where, at the closing of the Company’s Initial Public Offering, the Company improperly valued its common stock subject to possible redemption.” Accordingly, the 3Q21 10- Q provided restated values for its common stock. 32. In addition, the 3Q21 10-Q referenced the fact that the Company had identified a material weakness and determined that its disclosure controls and procedures were not effective as of September 30, 2021, and thus had restated its financial statements on Form 10-K/A on June 28, 2021 (the “10-K/A”), in order to comply with a new SEC Staff Statement regarding the classification of warrants. Specifically, with respect to Lottery.com’s Controls and Procedures, the Company stated: On April 12, 2021, the staff of the SEC issued a new Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) (the “SEC Statement”). The SEC Statement addresses certain accounting and reporting considerations related to warrants. In the SEC Statement, the staff of the SEC expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to equity. Based upon that evaluation and in light of the SEC Statement, our certifying officers concluded that, due solely to the material weakness identified that resulted in the restatement of the Company’s financial statements to reclassify the Company’s Private Warrants and UPO Warrants as described in the Explanatory Note to the 10K/A, our disclosure controls and procedures were not effective as of September 30, 2021. (Emphasis added.) 33. Defendants went on to state that, other than the matters set forth in the 10-K/A, there were no changes in internal control over financial reporting. Further, Defendants represented that Lottery.com intended to “enhance [its] processes to identify and appropriately apply applicable accounting requirements . . . .” In full, the Company stated: Changes in Internal Control Over Financial Reporting 13 Other than what was described in the 10-K/A, there were no changes in our internal control over financial reporting (as such term is defined in Rules 13a- 15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. In light of the restatement of our financial statements included in the 10-K/A, we plan to enhance our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects. (Emphases in bold and italics added.) 34. In connection with the 3Q21 10-Q, Defendants DiMatteo and Dickinson each executed a certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (“SOX”), and certified that: 1. I have reviewed this quarterly report on Form 10-Q of Lottery.com Inc. for the quarterly period ended September 30, 2021; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, is made 14 known to us by others within those entities, particularly during the period in which this report is being prepared; and b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 35. Also pursuant to Section 906 of SOX, Defendants DiMatteo and Dickinson certified that the 3Q21 10-Q “fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934” and that “[t]o my knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.” 15 36. On March 31, 2022, the Company issued a press release, also filed as an attachment to a Form 8-K filed with the SEC on that date, which reported Lottery.com’s “strong” financial results for the fourth quarter (“Q4”) and full-year 2021. Among the information provided, the Company reported revenue of $21.5 million for Q4 2021 (an increase of $18.2 million over the prior year period) and revenue of $68.5 million for the full year 2021 (an increase of $61 million over 2020). The Company also reported cash for Q4 2021 of $62.6 million—an increase of $58.8 million over the prior year period. 37. On April 1, 2022, the Company filed with the SEC its Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 10-K”). In addition to the financial metrics reported in the press release the day before, in the 2021 10-K, the Company stated that it had identified a material weakness in internal control over financial reporting as of year-end 2021 and 2020, but it described this material weakness as one largely related to personnel and staffing— specifically, it related to “the design and operation of the procedures relating to the closing of financial statements.” Defendants reassured investors that the Company had “commenced measures to remediate” such material weakness. In particular, the Company stated the following: In connection with the audits of our condensed consolidated financial statements included in this Annual Report, our management has identified a material weakness in internal control over financial reporting as of December 31, 2021 and 2020 relating to deficiencies in the design and operation of the procedures relating to the closing of our financial statements. These include: (i) our lack of a sufficient number of personnel with an appropriate level of knowledge and experience in accounting for complex or non-routine transactions, (ii) the fact that our policies and procedures with respect to the review, supervision and monitoring of our accounting and reporting functions were either not designed and in place or not operating effectively; (iii) the timely closing of financial books at the quarter and fiscal year end, and (iv) incomplete segregation of duties in certain types of transactions and processes. We have commenced measures to remediate the identified material weakness, including (i) adding personnel with sufficient accounting knowledge; (ii) adopting a more rigorous period-end review process for financial reporting; (iii) adopting improved period close processes and accounting processes, and (iv) clearly 16 defining and documenting the segregation of duties for certain transactions and processes. The implementation of our remediation is ongoing and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles. We may also conclude that additional measures may be required to remediate the material weakness in our internal control over financial reporting. (Emphases added.) 38. The Company stated in the 2021 10-K that other than the deficiencies identified, “there was no change in our internal control over financial reporting.” 39. In the 2021 10-K, Defendants DiMatteo and Dickinson executed substantively the same certifications pursuant to Sections 302 and 906 of SOX as set forth in ¶¶ 34-35, supra. 40. On May 16, 2022, the Company issued a press release, filed with the SEC on Form 8- K, in which it announced its “strong” financial results for the first quarter 2022, ended March 31, 2022 (“Q1 2022”). Among the highlights, Defendants reported that Lottery’s Q1 2022 revenues were $21.2 million, an increase of $15.7 million over the prior year period. The Company further reported Q1 2022 cash of $50.8 million, up $32.5 million over the prior year period. 41. Also on May 16, 2022, the Company filed its quarterly report for Q1 2022 on Form 10-Q (the “1Q22 10-Q”). In addition to reporting the financial metrics disclosed in the press release on the same day, the 1Q22 10-Q stated that management had “evaluated the effectiveness of our disclosure controls and procedures” and that: [b]ased on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were not effective due to the material weakness in our internal control over financial reporting with respect to our financial statement close and reporting process[.] (Emphasis added.) Critically, however, Defendants were careful to reassure investors that: Notwithstanding such material weakness in our internal control over financial reporting, our management concluded that our condensed consolidated financial statements included in this Quarterly Report fairly present, in all material 17 respects, our financial position, results of operations and cash flows as of the dates and for the periods presented in conformity with GAAP. (Emphasis added.) 42. With respect to the Business Combination, the 2021 10-K provided that: On October 29, 2021, the Company and AutoLotto consummated the transactions contemplated by the Merger Agreement. At the Closing, each share of common stock and preferred stock of AutoLotto that was issued and outstanding immediately prior to the effective time of the Merger (other than excluded shares as contemplated by the Merger Agreement) was cancelled and converted into the right to receive approximately 3.0058 shares (the “Exchange Ratio”) of Lottery.com. common stock. The Merger closing was a triggering event for the Series B convertible notes, of which $63.8 million was converted into 3,248,526 shares of AutoLotto that were then converted into 9,764,511 shares of Lottery.com common stock using the Exchange Ratio. At the Closing, each option to purchase AutoLotto’s common stock, whether vested or unvested, was assumed and converted into an option to purchase a number of shares of Lottery.com common stock in the manner set forth in the Merger Agreement. The Company accounted for the Business Combination as a reverse recapitalization whereby AutoLotto was determined as the accounting acquirer and TDAC as the accounting acquiree. Refer to Note 2, Summary of Significant Accounting Policies, for further details. Accordingly, the Business Combination was treated as the equivalent of AutoLotto issuing stock for the net assets of TDAC, accompanied by a recapitalization. The net assets of TDAC are stated at historical cost, with no goodwill or other intangible assets recorded. The accompanying consolidated financial statements and related notes reflect the historical results of AutoLotto prior to the merger and do not include the historical results of TDAC prior to the consummation of Business combination. Upon the closing of the transaction, AutoLotto received total gross proceeds of approximately $42,794,000, from TDAC’s trust and operating accounts. Total transaction costs were approximately $9,460,000, which principally consisted of advisory, legal and other professional fees and were recorded in additional paid in capital. Cumulative debt repayments of approximately $11,068,000, inclusive of accrued but unpaid interest, were paid in conjunction with the close, which included approximately $5,475,000 repayment of notes payable to related parties, and approximately $5,593,000 payment of accrued underwriter fees. Pursuant to the terms of the Business Combination Agreement, the holders of issued and outstanding shares of AutoLotto immediately prior to the Closing (the “Sellers”) 18 were entitled to receive up to 6,000,000 additional shares of Common Stock (the “Seller Earnout Shares”) and Vadim Komissarov, Ilya Ponomarev and Marat Rosenberg (collectively the “TDAC Founders”) were also entitled to receive up to 4,000,000 additional shares of Common Stock (the “TDAC Founder Earnout Shares” and, together with the Seller Earnout Shares, the “Earnout Shares”). One of the earnout criteria had not been met by the December 31, 2021 deadline thus no earnout shares were granted specific to that criteria. As of December 31, 2021, 3,000,000 of the Seller Earnout Shares and 2,000,000 TDAC Founder Earnout Shares are still eligible Earnout Shares until December 31, 2022. 43. Lastly, in the 1Q22 10-Q, Defendants DiMatteo and Dickinson executed substantively the same certifications pursuant to Sections 302 and 906 of SOX as set forth in ¶¶ 34-35, supra. 44. The statements referenced in ¶¶ 30-43, supra, were materially false and misleading because Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and compliance policies. Specifically, these statements misrepresented and/or failed to disclose that: (i) the Company lacked adequate internal accounting controls; (ii) the Company lacked adequate internal controls over financial reporting pertaining to revenue recognition and the reporting of cash; (iii) the Company was not in compliance with state and federal laws governing the sale of lottery tickets; and (iv) as a result, the Company’s public statements were materially false and misleading at all relevant times. The Truth Emerges 45. Beginning on July 6, 2022, the true state of Lottery.com’s finances and operations was gradually and incrementally revealed in a series of successive disclosures made by the Company. On July 6, 2022, in a Form 8-K filed with the SEC, Lottery.com disclosed that an internal investigation, conducted by independent counsel, had uncovered “instances of non- compliance with state and federal laws concerning the state in which tickets are procured as well as order fulfillment” (emphasis added). In addition, the investigation revealed “issues pertaining to the Company’s internal accounting controls” (emphasis added). The July 6, 2022 8-K further 19 disclosed that, in light of the findings of the independent investigation, on June 30, 2022, the Board had terminated Defendant Dickinson, the Company’s CFO, President, and Treasurer, effective July 1, 2022. 46. On this news, Lottery.com’s stock price fell $0.15 per share, or more than 12%, from a closing price of $1.22 per share on July 5, 2022 to a closing price of $1.07 per share on July 6, 2022, on abnormally high volume. 47. Next, on July 15, 2022, in a Form 8-K filed with the SEC after the markets closed, Lottery.com announced that Defendant Clemenson, the Company’s CRO, had resigned on July 11, 2022, effective immediately. Moreover, the Company provided an update on the independent investigation previously disclosed on July 6, 2022. The Company reported that, after a review of its cash balances, its revenue recognition policies and procedures, and other internal accounting controls, Lottery.com had: preliminarily conclude[d] that it has overstated its available unrestricted cash balance by approximately $30 million and that, relatedly, in the prior fiscal year, it improperly recognized revenue in the same amount. The Company, in consultation with its outside advisors, is currently validating its preliminary conclusion, assessing any impact on previously issued financial reports, and has begun to institute appropriate remedial measures. (Emphasis added.) 48. On this news, Lottery.com’s stock price fell $0.146 per share, or over 15%, from a closing price of $0.966 per share on July 15, 2022 to a closing price of $0.82 per share on July 18, 2022, on abnormally high volume. 49. Then, on July 22, 2022, Lottery.com filed another Form 8-K with the SEC in which the Company disclosed that it had been advised by its independent accountant that its audited financial statements for the fiscal year ended December 31, 2021 and unaudited financial statements for the quarter ended March 31, 2022 should no longer be relied upon. In addition, in the July 22, 20 2022 8-K, the Company reported that CEO and co-founder Defendant DiMatteo was resigning, effective immediately. Specifically, the Company’s announcement provided that: Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review. (b) On July 20, 2022, Lottery.com Inc. (the “Company”) was advised by Armanino LLP (“Armanino”), its registered independent public accountant for the fiscal year ended December 31, 2022, that the audited financial statements for the year ended December 31, 2021, and the unaudited financial statements for the quarter ended March 31, 2022, should no longer be relied upon. Armanino advised and determined subsequent to the audit and review of such financial statements, respectively, that a Company subsidiary entered into a line of credit in January 2022 that was not disclosed in the footnotes to the December 31, 2021 financial statements and was not recorded in the March 31, 2022 financial statements. * * * Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. On July 21, 2022, Lawrence Anthony “Tony” DiMatteo III, the Chief Executive Officer (the “CEO”) of the Company and a member of its Board of Directors (the “Board”), provided a notice of resignation as CEO of the Company, its wholly owned subsidiary, AutoLotto, Inc. (“AutoLotto”), and all of its other subsidiaries and affiliates with the exception of LTRY WinTogether, Inc., with immediate effect. The Company accepted his resignation from such positions. Mr. DiMatteo served as an officer and director of AutoLotto since February 2015 and as CEO of the Company since the effectuation of the business combination in October 2021. (Emphasis in bold and italics added.) 50. On these disclosures, Lottery.com’s shares fell $0.10, or more than 12%, over the next two trading days, from a closing price of $0.82 per share on July 22, 2022 to a closing price of $0.72 per share on July 26, 2022. 51. Finally, on July 29, 2022, in another Form 8-K filed with the SEC, the Company disclosed that it did not have “sufficient financial resources to fund its operations or pay certain existing obligations,” and that it therefore intended to furlough certain employees effective July 29, 2022. Moreover, because Lottery.com’s resources were not sufficient to fund its operations 21 for a twelve-month period, “there is substantial doubt about the Company’s ability to continue as a going concern,” and the Company may be forced to wind down its operations or pursue liquidation of the Company’s assets. In full, the Company stated that: Item 8.01 Other Events. On July, 28, 2022, the Board of Directors of Lottery.com Inc. (the “Company”) determined that the Company does not currently have sufficient financial resources to fund its operations or pay certain existing obligations, including its payroll and related obligations. Accordingly, the Company intends to furlough certain employees effective July 29, 2022. As of July 29, 2022, the Company owed approximately $425,000 in outstanding payroll obligations. The Company’s inability to pay this amount may result in employees terminating their relationship with the Company and/or pursuing legal remedies. Since the Company’s business is dependent on the efforts and talents of its employees, particularly its developers and engineers, and the provision of ongoing services to customers by its employees, a material loss of its employee base may result in the inability of the Company to operate its technology, meet its obligations to customers, the loss of key customer relationships and revenue, and claims for breach of contractual obligations. Additionally, the Company’s capital resources are not sufficient to fund its operations for a twelve-month period and, therefore, there is substantial doubt about the Company’s ability to continue as a going concern. If the Company is not able to secure additional capital resources or otherwise fund its operations, the Company will be forced to wind down some or all of its operations and pursue options for liquidating the Company’s assets, including equipment and intellectual property. (Emphases in bold and italics added.) 52. In reaction to this news, Lottery.com’s stock price lost 64% of its value in a single trading day, falling $0.52 per share, from a closing price of $0.815 per share on July 28, 2022 to a close of $0.295 per share on July 29, 2022. PLAINTIFF’S CLASS ACTION ALLEGATIONS 53. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil Procedure 23(a) and (b)(3) on behalf of a class consisting of all persons and entities other than Defendants that purchased or otherwise acquired Lottery.com securities during the Class Period; and were damaged thereby (the “Class”). Excluded from the Class are Defendants, the officers 22 and directors of the Company, at all relevant times, members of their immediate families and their legal representatives, heirs, successors, or assigns, and any entity in which Defendants have or had a controlling interest. 54. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, Lottery.com securities were actively traded on the NASDAQ. While the exact number of Class members is unknown to Plaintiff at this time and can be ascertained only through appropriate discovery, Plaintiff believes that there are hundreds or thousands of members in the proposed Class. Record owners and other members of the Class may be identified from records maintained by Lottery.com or its transfer agent and may be notified of the pendency of this action by mail, using the form of notice similar to that customarily used in securities class actions. 55. Plaintiff’s claims are typical of the claims of the members of the Class as all members of the Class are similarly affected by Defendants’ wrongful conduct in violation of federal law that is complained of herein. 56. Plaintiff will fairly and adequately protect the interests of the members of the Class and has retained counsel competent and experienced in class and securities litigation. Plaintiff has no interests antagonistic to or in conflict with those of the Class. 57. Common questions of law and fact exist as to all members of the Class and predominate over any questions solely affecting individual members of the Class. Among the questions of law and fact common to the Class are: • whether the federal securities laws were violated by Defendants’ acts as alleged herein; • whether statements made by Defendants to the investing public during the Class Period misrepresented material facts about the business, operations and management of Lottery.com; 23 • whether the Individual Defendants caused Lottery.com to issue false and misleading financial statements during the Class Period; • whether Defendants acted knowingly or recklessly in issuing false and misleading financial statements; • whether the prices of Lottery.com securities during the Class Period were artificially inflated because of the Defendants’ conduct complained of herein; and • whether the members of the Class have sustained damages and, if so, what is the proper measure of damages. 58. A class action is superior to all other available methods for the fair and efficient adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the damages suffered by individual Class members may be relatively small, the expense and burden of individual litigation make it impossible for members of the Class to individually redress the wrongs done to them. There will be no difficulty in the management of this action as a class action. 59. Plaintiff will rely, in part, upon the presumption of reliance established by the fraud- on-the-market doctrine, in that: • Defendants made public misrepresentations or failed to disclose material facts during the Class Period; • the omissions and misrepresentations were material; • Lottery.com securities are traded in an efficient market; • the Company’s shares were liquid and traded with moderate to heavy volume during the Class Period; • the Company traded on the NASDAQ and was covered by multiple analysts; • the misrepresentations and omissions alleged would tend to induce a reasonable investor to misjudge the value of the Company’s securities; and • Plaintiff and members of the Class purchased, acquired and/or sold Lottery.com securities between the time the Defendants failed to disclose or misrepresented material facts and the time the true facts were disclosed, without knowledge of the omitted or misrepresented facts. 24 60. Based upon the foregoing, Plaintiff and the members of the Class are entitled to a presumption of reliance upon the integrity of the market. 61. Alternatively, Plaintiff and the members of the Class are entitled to the presumption of reliance established by the Supreme Court in Affiliated Ute Citizens of the State of Utah v. United States, 406 U.S. 128, 92 S. Ct. 2430 (1972), as Defendants omitted material information in their Class Period statements in violation of a duty to disclose such information, as detailed above. COUNT I (Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Promulgated Thereunder Against All Defendants) 62. Plaintiff repeats and re-alleges each and every allegation contained above as if fully set forth herein. 63. This Count is asserted against all Defendants and is based upon Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder by the SEC. 64. During the Class Period, Defendants engaged in a plan, scheme, conspiracy and course of conduct, pursuant to which they knowingly or recklessly engaged in acts, transactions, practices and courses of business which operated as a fraud and deceit upon Plaintiff and the other members of the Class; made various untrue statements of material facts and omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and employed devices, schemes and artifices to defraud in connection with the purchase and sale of securities. Such scheme was intended to, and, throughout the Class Period, did: (i) deceive the investing public, including Plaintiff and other Class members, as alleged herein; (ii) artificially inflate and maintain the market price of Lottery.com securities; and (iii) cause Plaintiff and other members of the Class to purchase or otherwise acquire Lottery.com securities and options at artificially inflated prices. In furtherance of this unlawful 25 scheme, plan and course of conduct, Defendants, and each of them, took the actions set forth 65. Pursuant to the above plan, scheme, conspiracy, and course of conduct, each of the Defendants participated directly or indirectly in the preparation and/or issuance of the quarterly and annual reports, SEC filings, press releases and other statements and documents described above, including statements made to securities analysts and the media that were designed to influence the market for Lottery.com securities. Such reports, filings, releases and statements were materially false and misleading in that they failed to disclose material adverse information and misrepresented the truth about Lottery.com’s finances and business prospects. 66. By virtue of their positions at Lottery.com, Defendants had actual knowledge of the materially false and misleading statements and material omissions alleged herein and intended thereby to deceive Plaintiff and the other members of the Class, or, in the alternative, Defendants acted with reckless disregard for the truth in that they failed or refused to ascertain and disclose such facts as would reveal the materially false and misleading nature of the statements made, although such facts were readily available to Defendants. Said acts and omissions of Defendants were committed willfully or with reckless disregard for the truth. In addition, each of the Defendants knew or recklessly disregarded that material facts were being misrepresented or omitted as described above. 67. Information showing that Defendants acted knowingly or with reckless disregard for the truth is peculiarly within Defendants’ knowledge and control. As the senior managers and/or directors of Lottery.com, the Individual Defendants had knowledge of the details of Lottery.com’s internal affairs. 26 68. Defendants are liable both directly and indirectly for the wrongs complained of herein. Because of their positions of control and authority, Defendants were able to and did, directly or indirectly, control the content of the statements of Lottery.com. As officers and/or directors of a publicly held company, the Individual Defendants had a duty to disseminate timely, accurate, and truthful information with respect to Lottery.com’s businesses, operations, future financial condition, and future prospects. As a result of the dissemination of the aforementioned false and misleading reports, releases and public statements, the market price of Lottery.com’s securities was artificially inflated throughout the Class Period. In ignorance of the adverse facts concerning Lottery.com’s business and financial condition which were concealed by Defendants, Plaintiff and the other members of the Class purchased or otherwise acquired the Company’s securities at artificially inflated prices and relied upon the price of the securities, the integrity of the market for the securities and/or upon statements disseminated by Defendants, and were damaged thereby. 69. During the Class Period, Lottery.com securities were traded on an active and efficient market. Plaintiff and the other members of the Class, relying on the materially false and misleading statements described herein, which Defendants made, issued or caused to be disseminated, or relying upon the integrity of the market, purchased or otherwise acquired shares of Lottery.com securities at prices artificially inflated by Defendants’ wrongful conduct. Had Plaintiff and the other members of the Class known the truth, they would not have purchased or otherwise acquired said securities, or would not have purchased or otherwise acquired them at the inflated prices that were paid. At the time of the purchases and/or acquisitions by Plaintiff and the Class, the true value of Lottery.com securities was substantially lower than the prices paid by Plaintiff and the other members of the Class. The market price of Lottery.com securities declined 27 sharply upon public disclosure of the facts alleged herein to the injury of Plaintiff and Class members. 70. By reason of the conduct alleged herein, Defendants knowingly or recklessly, directly or indirectly, have violated Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder. 71. As a direct and proximate result of Defendants’ wrongful conduct, Plaintiff and the other members of the Class suffered damages in connection with their respective purchases, acquisitions, and sales of the Company’s securities during the Class Period, upon the disclosure that the Company had been disseminating misrepresented financial statements to the investing COUNT II (Violations of Section 20(a) of the Exchange Act Against the Individual Defendants) 72. Plaintiff repeats and re-alleges each and every allegation contained in the foregoing paragraphs as if fully set forth herein. 73. During the Class Period, the Individual Defendants participated in the operation and management of Lottery.com, and conducted and participated, directly and indirectly, in the conduct of Lottery.com’s business affairs. Because of their senior positions, they knew the adverse non-public information about Lottery.com’s misstatement of income and expenses and false financial statements. 74. As officers and/or directors of a publicly owned company, the Individual Defendants had a duty to disseminate accurate and truthful information with respect to Lottery.com’s financial condition and results of operations, and to correct promptly any public statements issued by Lottery.com which had become materially false or misleading. 28 75. Because of their positions of control and authority as senior officers, the Individual Defendants were able to, and did, control the contents of the various reports, press releases and public filings which Lottery.com disseminated in the marketplace during the Class Period concerning Lottery.com’s results of operations. Throughout the Class Period, the Individual Defendants exercised their power and authority to cause Lottery.com to engage in the wrongful acts complained of herein. The Individual Defendants, therefore, were “controlling persons” of Lottery.com within the meaning of Section 20(a) of the Exchange Act. In this capacity, they participated in the unlawful conduct alleged which artificially inflated the market price of Lottery.com securities. 76. Each of the Individual Defendants, therefore, acted as a controlling person of Lottery.com. By reason of their senior management positions and/or being directors of Lottery.com, each of the Individual Defendants had the power to direct the actions of, and exercised the same to cause, Lottery.com to engage in the unlawful acts and conduct complained of herein. Each of the Individual Defendants exercised control over the general operations of Lottery.com and possessed the power to control the specific activities which comprise the primary violations about which Plaintiff and the other members of the Class complain. 77. By reason of the above conduct, the Individual Defendants are liable pursuant to Section 20(a) of the Exchange Act for the violations committed by Lottery.com. PRAYER FOR RELIEF WHEREFORE, Plaintiff demands judgment against Defendants as follows: A. Determining that the instant action may be maintained as a class action under Rule 23 of the Federal Rules of Civil Procedure, and certifying Plaintiff as the Class representative; 29 B. Requiring Defendants to pay damages sustained by Plaintiff and the Class by reason of the acts and transactions alleged herein; C. Awarding Plaintiff and the other members of the Class prejudgment and post- judgment interest, as well as their reasonable attorneys’ fees, expert fees and other costs; and D. Awarding such other and further relief as this Court may deem just and proper. DEMAND FOR TRIAL BY JURY Plaintiff hereby demands a trial by jury. Dated: September 9, 2022 Respectfully submitted, THE BRISCOE LAW FIRM, PLLC /s/ Willie C. Briscoe WILLIE C. BRISCOE State Bar Number 24001788 12700 Park Central Drive, Suite 520 Dallas, Texas 75251 Telephone: 972-521-6868 Facsimile: 346-214-7463 [email protected] POMERANTZ LLP Jeremy A. Lieberman (pro hac vice application forthcoming) J. Alexander Hood II (pro hac vice application forthcoming) 600 Third Avenue, 20th Floor New York, New York 10016 Telephone: (212) 661-1100 Facsimile: (212) 661-8665 [email protected] [email protected] Attorneys for Plaintiff 30

securities

GP6mFIcBD5gMZwczMOY1

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK Case No. 16-9890 CLASS ACTION COMPLAINT JURY TRIAL DEMANDED PLUMBERS & PIPEFITTERS LOCAL 178 HEALTH & WELFARE TRUST FUND, on behalf of itself and all others similarly situated, Plaintiff, v. LANNETT COMPANY, INC.; MYLAN PHARMACEUTICALS, INC., SANDOZ, INC., Defendants. Plaintiff Plumbers & Pipefitters Local 178 Health & Welfare Trust Fund (“Local 178” or “Plaintiff”), by and through the undersigned counsel, allege the following based upon information and belief (except for those allegations relating to Plaintiff): INTRODUCTION 1. Local 178 brings this action on behalf of itself and on behalf of all persons and entities in the United States and its territories who purchased, paid, and/or provided reimbursement for some or all of the purchase price of generic levothyroxine sodium marketed and sold by Defendants during the period February 1, 2013 to the present. 2. Levothyroxine sodium, the second-most-prescribed drug in the United States, has been used for nearly 100 years to treat hypothyroidism (a condition in which the thyroid gland does not produce enough thyroid hormone), to decrease the size of enlarged thyroid glands (also called goiters), and to treat thyroid cancer. Levothyroxine sodium is a synthetic thyroid hormone that is identical to thyroxine, the hormone produced by the thyroid gland in healthy individuals, and as such can augment the body’s under-production of thyroxine. Those who need levothyroxine sodium typically take it every day, for their entire lives. 3. Like its counterpart thyroxine, levothyroxine sodium increases the metabolic rate of cells of all tissues in the body. In the womb and in newborns, the thyroid hormone is important for the growth and development of all tissues, including bones and the brain. In adults, the thyroid hormone helps to maintain brain function, utilization of food, and body temperature, among other effects. 4. Because of its critical importance to those who need it, the World Health Organization (“WHO”) has included levothyroxine sodium in the WHO Model List of Essential Medicines, which “presents a list of minimum medicine needs for a basic health-care system, listing the most efficacious, safe and cost–effective medicines for priority conditions. Priority conditions are selected on the basis of current and estimated future public health relevance, and potential for safe and cost-effective treatment.”1 5. Thyroid hormone replacements have been the subject of study since 1891, and levothyroxine sodium was first manufactured, marketed, and sold in 1927. For decades, the Food & Drug Administration (“FDA”) permitted the manufacture, marketing, and sale of levothyroxine sodium without formal approval because of its “grandfathered” status. In 1997, however, the FDA notified levothyroxine sodium manufacturers of its intention to regulate the drug moving forward and required manufacturers to submit new drug applications demonstrating the safety and efficacy of their levothyroxine sodium drugs. By late 2002, certain brand-name levothyroxine sodium drugs had earned FDA approval and had entered or re-entered the market. 1 http://www.who.int/entity/medicines/publications/essentialmedicines/EML_2015_FINAL_amen ded_NOV2015.pdf?ua=1. 6. In June 2004, the Defendants each announced FDA approval of their respective generic levothyroxine sodium products. Lannett Company, Inc. (“Lannett”) announced FDA approval of its generic levothyroxine sodium (supplied exclusively by Jerome Stevens Pharmaceuticals, Inc.) as bioequivalent to Abbott Laboratories’ Synthroid® and King Pharmaceuticals, Inc.’s Levoxyl®, the leading brand-name levothyroxine sodium drugs at that time, with combined revenues of $1.3 billion annually. Sandoz, Inc. (“Sandoz”) likewise announced FDA approval of its generic levothyroxine sodium (supplied exclusively by Alara Pharmaceuticals, Inc.) as bioequivalent to Synthroid® and Levoxyl®. Finally, Mylan Pharmaceuticals, Inc. (“Mylan”) announced FDA approval of its generic levothyroxine sodium as bioequivalent to Synthroid®, later followed by FDA approval of its generic levothyroxine sodium as bioequivalent to Levoxyl®, Lloyd Inc.’s Levothroid®, and Jerome Stevens Pharmaceuticals, Inc.’s Unithroid® (additional brand-name levothyroxine sodium drugs). 7. Over the next decade and during the Class Period, Defendants Lannett, Mylan, and Sandoz collectively dominated the market for generic levothyroxine sodium, as they do today. Until 2013, these three Defendants competed against each other in the market for generic levothyroxine sodium, resulting in competitive and low prices. In or around early 2013, however, the Defendants agreed collectively to raise prices and forgo competition, which resulted in staggering price increases for generic levothyroxine sodium from 2013 to the present day. 8. Local 178 alleges that Defendants Lannett, Mylan, and Sandoz—the principal marketers and sellers of generic levothyroxine sodium—have conspired, combined, and contracted to fix, raise, maintain, and stabilize the prices at which generic levothyroxine sodium would be sold. 9. The claims in this case arise from a broad conspiracy among manufacturers of generic drugs to fix the prices charged for various generic drugs in recent years. This conspiracy was effectuated by joint activities and direct company-to-company, person-to-person contacts between and among generic drug manufacturers, including through trade shows, customer events, trade association gatherings, and private dinners. The unlawful acts undertaken with respect to generic levothyroxine sodium arise from that larger conspiracy. 10. Beginning in early 2013, each Defendant began raising the price of generic levothyroxine sodium—eventually doubling or even tripling the price of generic levothyroxine sodium during the Class Period. For example, as of January 2013, the average per-unit price of 300 microgram generic levothyroxine sodium sold by Lannett, Mylan, and Sandoz was $0.25107; by September 2016, that average per-unit price had increased by 237% to $0.84648. Similarly, as of January 2013, the average per-unit price of 125 microgram generic levothyroxine sodium sold by Lannett, Mylan, and Sandoz was $0.13310; by September 2016, that average per- unit price had increased by 267% to $0.48840. 11. These and other recent precipitous price hikes by drug manufacturers for generic drugs have prompted extensive scrutiny by the press, the United States Congress, and federal and state antitrust regulators. In 2014, the Antitrust Division of the United States Department of Justice (“DOJ”) commenced a wide-ranging criminal investigation of this broad conspiracy and caused grand jury subpoenas to be issued to various generic drug manufacturers in connection with this investigation.2 In July 2014, the State of Connecticut likewise initiated an investigation into suspicious price increases for certain generic pharmaceuticals, in coordination with other 2 The investigation encompasses a number of generic drugs and, as the scope of the states’ and the DOJ’s investigation is further clarified, Plaintiff reserves the right to amend its complaint to add more parties and/or claims. states. The information developed through that multi-state investigation, which is still ongoing, has uncovered evidence of a broad, well-coordinated, and long-running series of schemes to fix the prices and allocate markets for various generic drugs in the U.S. 12. All of the Defendants—Lannett, Mylan, and Sandoz—have been subpoenaed by the DOJ as part of its ongoing investigation of anticompetitive practices in the generic pharmaceutical industry. These subpoenas accompanied public reports that highlighted concerns about the rising prices of generic drugs generally, and generic levothyroxine sodium more specifically. For example, a recent joint investigation by the Wisconsin Center for Investigative Journalism, Wisconsin Health News, and Wisconsin Public Radio revealed that “generic hypothyroidism drug price[s] tripled . . . . The cost of a single levothyroxine sodium tablet, the generic of Synthroid, ranged from 14 to 51 cents from 2011 to 2016.”3 In an October 2016 Forbes article titled “Another Drug Company That Raises Prices Like Crazy,” investigative journalist Nathan Vardi noted that “[s]tarting around April 2013, Lannett increased the price of levothyroxine, a widely used thyroid medicine, by 158% in two years.”4 13. These extraordinary price increases were not the result of supply shortages, demand spikes, or other market conditions. Rather, they were the result of Defendants’ coordinated and collusive efforts and agreement, which violate the Sherman Act (15 U.S.C. § 1, et seq.), as well as state antitrust, consumer protection, and common laws. 14. As a result of Defendants’ unlawful conduct, Plaintiff and the other members of the proposed Classes paid artificially inflated prices during the Class Period that exceeded the 3 http://wisconsinwatch.org/2016/11/costs-of-widely-prescribed-drugs-jumped-up-to-5241- percent-in-recent-years/. 4 http://www.forbes.com/sites/nathanvardi/2016/10/06/another-drug-company-that-raises-prices- like-crazy/2/#122c51b77ef5. amount they would have paid if a competitive market had determined the prices for generic levothyroxine sodium, and the Defendants realized more revenue and profits than they would have received if a competitive market had determined the prices for generic levothyroxine sodium. JURISDICTION AND VENUE 15. Plaintiff brings this action under Section 16 of the Clayton Act (15 U.S.C. § 26), for injunctive relief and costs of suit, including reasonable attorneys’ fees, against Defendants for the injuries sustained by Plaintiff and the members of the Classes by reason of the violations of Sections 1 and 3 of the Sherman Act (15 U.S.C. §§ 1, 3). 16. This action also includes claims under the antitrust, consumer protection, and common laws of various states for damages and equitable relief, as described in Counts Two through Four below. 17. Jurisdiction is conferred upon this Court by 28 U.S.C. §§ 1331 and 1337 and by Section 16 of the Clayton Act (15 U.S.C. § 26). In addition, jurisdiction is also conferred upon this Court by 28 U.S.C. § 1367. Finally, jurisdiction is conferred upon this Court by the Class Action Fairness Act of 2005 (“CAFA”), which amended 28 U.S.C. § 1332 to add a new subsection (d) authorizing federal jurisdiction where “the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs, and is a class action in which . . . any member of a class of plaintiffs is a citizen of a State different from any defendant.” The $5 million amount-in-controversy and diverse-citizenship requirements of CAFA are satisfied here. 18. Venue is proper in this judicial district pursuant to 15 U.S.C. §§ 15(a) and 22 and 28 U.S.C. § 1391(b), (c) and (d) because during the Class Period, Defendants resided, transacted business, were found, or had agents in this District, and a substantial portion of the affected interstate trade and commerce described below has been carried out in this District.5 19. This Court has personal jurisdiction over each Defendant because, inter alia, each Defendant: (a) transacted business throughout the United States, including in this District; (b) sold generic levothyroxine sodium throughout the United States, including in this District; (c) had substantial contacts with the United States, including in this District; and/or (d) was engaged in an illegal scheme and price-fixing conspiracy that was directed at and had the intended effect of causing injury to persons residing in, located in, or doing business throughout the United States, including in this District. PLAINTIFF 20. Plaintiff Plumbers & Pipefitters Local 178 Health & Welfare Trust Fund (“Local 178” or “Plaintiff”), located in Springfield, Missouri, is a local union that provides health care and other benefits to its members who reside in Missouri as well as other locations throughout the United States, through its not-for-profit trust fund. Local 178 indirectly purchased generic levothyroxine sodium during the Class Period as defined below, and was injured in its business or property by reason of the violations of law alleged herein. For prescriptions of generic drugs, such as generic levothyroxine sodium manufactured by one or more Defendants, the employee plan participant typically pays a portion of the cost of the prescription. Participating pharmacies collect the co-payment from the employee plan participant and bill Local 178 for the remaining cost of the generic levothyroxine sodium purchases. 5 As used herein, the term “Class Period” means February 1, 2013 to the present. DEFENDANTS 21. Defendant Lannett Company, Inc. (“Lannett”) is a corporation organized and existing under the laws of the State of Delaware with its principal place of business at 13200 Townsend Road, Philadelphia, PA 19154. During the Class Period, Lannett marketed and sold generic levothyroxine sodium to customers in this District and other locations in the United 22. Defendant Mylan Pharmaceuticals, Inc. (“Mylan”) is a corporation organized and existing under the laws of the State of Delaware with its principal place of business at 1000 Mylan Boulevard, Canonsburg, PA 15317. During the Class Period, Mylan manufactured, marketed, and sold generic levothyroxine sodium to customers in this District and other locations in the United States. 23. Defendant Sandoz, Inc. (“Sandoz”) is a corporation organized and existing under the laws of the State of Colorado with its principal place of business at 100 College Rd W, Princeton, NJ 08540. During the Class Period, Sandoz marketed and sold generic levothyroxine sodium to customers in this District and other locations in the United States. 24. Whenever in this complaint reference is made to any act, deed, or transaction of any corporation, the allegation means that the corporation engaged in the act, deed, or transaction by or through its officers, directors, agents, employees, or representatives while they were actively engaged in the management, direction, control, or transaction of the corporation’s business or affairs. 25. All acts alleged in this complaint to have been done by Defendants were performed by their officers, directors, agents, employees, or representatives while engaged in the management, direction, control, or transaction of Defendants’ business affairs. CO-CONSPIRATORS 26. Various other persons, firms, corporations and entities have participated as unnamed co-conspirators with Defendants in the violations and conspiracy alleged herein. In order to engage in the offenses charged and violations alleged herein, these co-conspirators have performed acts and made statements in furtherance of the antitrust violations and conspiracies alleged herein. 27. At all relevant times, each Defendant was an agent of each of the remaining Defendants, and in doing the acts alleged herein, was acting within the course and scope of such agency. Each Defendant ratified and/or authorized the wrongful acts of each of the Defendants. Defendants, and each of them, are individually sued as participants and as aiders and abettors in the improper acts and transactions that are the subject of this action. INTERSTATE TRADE AND COMMERCE 28. The business activities of Defendants that are the subject of this action were within the flow of, and substantially affected, interstate trade and commerce. 29. During the Class Period, Defendants sold substantial quantities of generic levothyroxine sodium in a continuous and uninterrupted flow of interstate commerce to customers throughout the United States. FACTUAL ALLEGATIONS The Industry 30. Defendants manufacture, market, and sell, among other products, generic versions of branded drugs, including generic levothyroxine sodium, for which FDA approval can be sought only after the patent on the corresponding branded drug expires. Here, generic levothyroxine sodium first entered the marketplace in 2004 with FDA approval—on the heels of brand-name levothyroxine drugs Synthroid® and Levoxyl®, among others, for which any patent protection had lapsed long ago. 31. According to the FDA’s Glossary, a generic drug is “the same as a brand name drug in dosage, safety, strength, how it is taken, quality, performance, and intended use.”6 Once the FDA approves a generic drug as “‘therapeutically equivalent’” to a brand name drug, the generic version “can be expected to have equal effect and no difference when substituted for the brand name product.” Id. 32. A drug company seeking approval to market and sell a generic equivalent of a brand name drug must refer to the Reference Listed Drug (“RLD”) in its Abbreviated New Drug Application (“ANDA”). Id. Once the FDA determines that a drug company’s application contains sufficient scientific evidence establishing the bioequivalence of the product to the RLD, an applicant may manufacture, market, and sell the generic drug product, which provides a safe, effective, low-cost alternative to the American public. Id. 33. Furthermore, the FDA will generally assign a Therapeutic Equivalence Code (“TE Code”) of AB to those products it determines to be bioequivalent. 7 This coding system allows users to quickly determine important information about the drug product in question.8 For example, the Food & Drug Administration (“FDA”) states that “[p]roducts generally will be coded AB if a study is submitted demonstrating bioequivalence. Even though drug products of distributors and/or repackagers are not included in the List, they are considered therapeutically 6 FDA Glossary, available at http://www.fda.gov/Drugs/InformationOnDrugs/ucm079436.htm#G. 7 http://www.fda.gov/Drugs/DevelopmentApprovalProcess/FormsSubmissionRequirements/ ElectronicSubmissions/DataStandardsManualmonographs/ucm071713.htm. 8 http://www.fda.gov/Drugs/DevelopmentApprovalProcess/ucm079068.htm#TEC. equivalent to the application holder’s drug product if the application holder’s drug product is rated AB.”9 34. The entire purpose of authorizing a generic drug industry in the United States was to encourage the manufacture of less expensive, non-branded substitutes for branded prescription drugs that either had no patent exclusivity or for which the patent exclusivity was expiring. Once the patent on a brand-name drug expires, generic manufacturers can move in, creating more competition and lower prices. In a January 2012 report, the GAO noted that “[o]n average, the retail price of a generic drug is 75 percent lower than the retail price of a brand-name drug.”10 35. Due to the significant price differentials between branded and generic drugs, as well as other institutional features of the pharmaceutical industry, pharmacists liberally and typically substitute the generic drug when presented with a prescription for the branded drug. Since passage of the Hatch-Waxman Act (Pub. L. No. 98-417, 98 Stat. 1585 (codified at 15 U.S.C. §§ 355, 360cc; 35 U.S.C. §§ 156, 271)), every state has adopted substitution laws requiring or permitting pharmacies to substitute generic drug equivalents for branded drug prescriptions (unless the prescribing physician specifically orders otherwise by writing “dispense as written” or similar language on the prescription). 36. According to a report by the Generic Pharmaceutical Association (“GPhA”), nearly 3.8 billion (88%) of the total 4.3 billion prescriptions dispensed in the U.S. in 2014 were filled using generic drugs.11 9 http://www.fda.gov/Drugs/DevelopmentApprovalProcess/FormsSubmissionRequirements/ ElectronicSubmissions/DataStandardsManualmonographs/ucm071713.htm. 10 http://www.gao.gov/assets/590/588064.pdf. 11 http://www.gphaonline.org/media/wysiwyg/PDF/GPhA_Savings_Report_2015.pdf. 37. There has been substantial consolidation in the generic drug industry recently. The result of the generic drug industry’s consolidation has been an environment ripe for collusion and higher prices for consumers. Generic manufacturers merged as a partial reaction to the consolidation of the distributors, the logic being that generic manufacturers could exert leverage to charge higher prices if distributors were stripped of the option of negotiating lower prices with other generic manufacturers offering therapeutically equivalent drugs. Market consolidation has also resulted in more generic product lines being combined or discontinued, further reducing price competition. Market for Generic Levothyroxine Sodium 38. Levothyroxine sodium is prescribed widely to treat hypothyroidism (by restoring thyroid hormone balance in individuals with low thyroid hormone levels), prevent the growth of goiters, and treat thyroid cancer (by suppressing thyroid hormone release from cancerous thyroid nodules). Levothyroxine sodium is a human-made thyroid hormone identical to thyroxine, the hormone that is naturally made by the thyroid gland. 39. Levothyroxine sodium, including the generic levothyroxine sodium marketed and sold by Defendants, comes in twelve tablet dosage levels, ranging from 25 micrograms to 300 micrograms. When a doctor first prescribes levothyroxine sodium, he or she will monitor the patient for the first few months to ensure prescription of the right dosage level. Typically, patients requiring levothyroxine sodium will take the drug once each day, for their entire lives. 40. Generic levothyroxine sodium is the bioequivalent of Synthroid®, Levoxyl®, Levothroid®, and Unithroid®, the leading brand-name levothyroxine sodium drugs. 41. Defendants collectively sell hundreds of millions of dollars-worth of generic levothyroxine sodium every year in the United States. 42. The market for generic levothyroxine sodium is controlled by Defendants, and it was controlled by Defendants during the Class Period. Defendants’ Pricing Conduct for Generic Levothyroxine Sodium 43. Generic levothyroxine sodium pricing was remarkably stable until early 2013. 44. During the Class Period and beginning in or around early 2013, however, the Defendants, through their sales representatives and senior management, met in person and/or otherwise communicated by phone, email, text message, and other means to discuss pricing and pricing strategies for generic levothyroxine sodium, ultimately agreeing to forgo competition and fix the prices at which generic levothyroxine sodium would be sold in its various dosages. 45. During the Class Period, the Defendants also communicated indirectly to facilitate and monitor their unlawful agreement—using their quarterly investor earnings calls to lament earlier price wars, call for “rational” and “responsible” pricing behavior, signal their intention to raise prices (and continue doing so), and address their massive price increases for generic levothyroxine sodium. 46. For example, the following exchange took place during Lannett’s September 10, 2013 earnings call between a research analyst and Lannett CEO Arthur Bedrosian, in which Bedrosian expressed his gratitude to a competitor for raising the price of generic levothyroxine sodium and characterized companies that raise prices in conjunction with their competitors as “responsible”: Randall Stanicky - Canaccord Genuity, Research Division Arthur, can you just talk about the Levo pricing dynamics and any benefit that you’ve been able to capture from that as you look at 2014? Arthur P. Bedrosian Is that a legal price? Randall Stanicky - Canaccord Genuity, Research Division No, the Levothyroxine. Yes, one of your competitors took pricing up quite significantly. I’m just wondering what your reaction was, what you’ve done? And as we look at the numbers, how much of a benefit could be -- could you have captured from that? Arthur P. Bedrosian You mean after I sent them the thank you note? I’m just kidding. Randall Stanicky - Canaccord Genuity, Research Division Exactly. Arthur P. Bedrosian I’m always grateful to see responsible generic drug companies realize that our cost of doing business is going up as well. . . . So whenever people start acting responsibly and raise prices as opposed to the typical spiral down of generic drug prices, I’m grateful. Because Lannett tends to be active in raising prices. . . . . 47. During Lannett’s November 7, 2013 earnings call, Bedrosian reported that “price increases on key products” including generic levothyroxine sodium were among “[t]he primary drivers for our outstanding first quarter performance,” noting further “that we believe these positive trends will continue throughout fiscal 2014.” Bedrosian also noted that “these price increases that are going on in the industry, I think they’re going to stick for all the companies.” CFO Martin Galvan added that, in the preceding quarter, “[n]et sales for our largest product category, thyroid deficiency, grew to $20 million or 44% of our total net sales.” 48. During Lannett’s February 6, 2014 earnings call, Bedrosian again reported “outstanding financial results for the quarter. For the fiscal 2014 second quarter, we recorded the highest net sales, gross margin and net income in our company’s history. Net sales increased 84% to $67 million. Gross margin more than tripled. And net income grew to $17 million, which was nearly 6x the net income we recorded in last year’s second quarter.” And, according to Galvan, “the key products that are driving . . . our gross margin from a price increase perspective, the key ones from a magnitude perspective are the Levothyroxine Sodium product and also Digoxin.” Bedrosian also commented, in response to a question about the impact, if any, of reported Levoxyl shortages on Lannett’s generic levothyroxine sodium business: “we don’t see it impacting our business.” 49. During Lannett’s May 7, 2014 earnings call, Bedrosian again announced rosy financial results for a quarter in which “gross margin more than tripled” from the previous year, marked by a highly profitable “50% increase on Levo,” which nevertheless still kept prices for Lannett’s generic levothyroxine sodium “at 75% of the brand [drugs] with this new increase.” 50. During Lannett’s August 27, 2014 earnings call, Bedrosian explained that Lannett did not anticipate any new competition for generic levothyroxine sodium: “We’ve heard nothing in the trade and we’ve made no arrangements to anticipate anything for this fiscal year.” Bedrosian commented further on the absence of future competitors, noting one recently stymied attempt at market entry: “But we did know one case, a company in Europe that indicated they were going to get an approval and they reached out to a competitor to distribute it to them but we know that, that competitor turned them down. When we called them, they denied they even were working on a product.” Bedrosian also confirmed the tight concentration in the market for generic levothyroxine sodium: Well, the way I describe it, it’s really between Mylan and Lannett, and I tend to give Mylan a little more market share than they currently have. I tend to tell people it’s about a 70-30 split. If you factor in Sandoz . . . Mylan might be at 68 and Sandoz might have picked up a couple of percentage points. But it really is, the bulk of the market is between Mylan and Lannett in terms of units that are sold. 51. During Lannett’s November 3, 2014 earnings call, Bedrosian was asked about the prospect of increased competition from Mylan and responded: “Mylan is one of those rational competitors, so we’re not really expecting anything crazy from them. . . . [E]ach one of us has our favorite customers and usually we get business to start with from our customers that prefer doing business to one company versus another. No major change on either one of the Levos, Digoxins for the year though.” As for continued price increases, Bedrosian observed “let’s just say that, the rocket ship is leveling off now that it’s broken through the atmosphere.” 52. During Lannett’s February 4, 2015 earnings call, Bedrosian shared his views on the future of the generic drug industry: We don’t see that kind of behavior sustainable [referring to earlier price wars], and we don’t see it going further into the future. I think you’re going to find more capital pricing, more – I’ll say less competition, in a sense. You won’t have price wars. . . . I just don’t see the prices eroding like they did in the past. 53. During Lannett’s August 25, 2015 earnings call, Bedrosian conveyed his optimism about continued pricing growth: [E]verybody keeps bringing up the sustainability of price increases. Well, they seem to be sustainable. I’m not saying that there hasn’t been some weakness here and there, but overall, I feel the price increases have been sustainable and we’re going into almost the third year now with some of these increases. So we think it’s a more rational market we’re in. 54. During Lannett’s February 3, 2016 earnings call, Galvan noted that “[l]evothyroxine is our largest product. The gross margin on the product[,] it’s above 50%.” 55. During Lannett’s August 23, 2016 earnings call, Bedrosian celebrated “net sales of $45.9 million” for Lannett’s generic levothyroxine sodium, “a record for that category.” In response to a question about the absence of price discounts by new entrants in the generic drug industry, Bedrosian responded: So price usually doesn’t get you to results you want. So, I think a lot of people have learned that lesson by now. But some of the dumber newer companies continue to go down that path, because they haven’t figured it out yet for themselves. But I do see occasional situations like that, but not a lot. Bedrosian applauded the “expertise” of competitors that do not succumb to price discounting, which “in itself moderates some of the crazy behaviors that are occurring when some countries decided to enter the U.S. market and grab market share. As a result, I’ve seen those people have been maturing in the market in realizing they need to make it profit as well in the United States.” 56. Lannett’s view that forgoing price competition is “rational” behavior among generic drug competitors was shared by Mylan as well. For example, during Mylan’s October 25, 2012 earnings call, before the beginning of the Class Period, Mylan CEO Heather Bresch conveyed: “You’ve heard me quarter after quarter coming and saying we weren’t going to chase the bottom, that there’s been irrational behavior and that we would continue to hold steady and control what we can control.” 57. Seven months later, during Mylan’s May 2, 2013 earnings call, Bresch again lamented earlier price competition as “chasing the floor” and signaled Mylan’s intention to raise I think that there was very whacked-out prices, dirt cheap, literally cheaper than dirt for some of those older products. And the bar needs to go. It needed to go up from a quality perspective, and it needs to go up and get rebalanced from a pricing perspective. So I think that we have certainly seen that. And I’m not -- there’s extremes on both ends. But I think, overall, the bar is going up. And so that stability and that tide will go with it. And so I see that staying, because I think people realized the detriment it did to this therapeutic category by having the dynamics in place that were. 58. During the Class Period, Lannett, Mylan, and Sandoz were active members of the Generic Pharmaceutical Association (“GPhA”), which describes itself as “the nation’s leading trade association for manufacturers and distributors of generic prescription drugs, manufacturers of bulk active pharmaceutical chemicals, and suppliers of other goods and services to the generic industry.”12 The current GPhA Board of Directors includes Mylan CEO Heather Bresch (Chair) and Sandoz President Peter Goldschmidt. GPhA’s frequent functions and events each year afforded the Defendants’ executives various opportunities to communicate in-person during the Class Period. Those events and functions included, but are not limited to, the October 1-3, 2012 GPhA Fall Technical Conference in Bethesda, MD (which Lannett, Mylan, and Sandoz attended); the February 20-22, 2013 GPhA Annual Meeting in Orlando, FL (which Mylan and Sandoz attended); the June 4-5, 2013 GPhA/FDA CMC Workshop in Bethesda, MD (which Lannett, Mylan, and Sandoz attended); and the October 28-30, 2013 GPhA/FDA Fall Technical Conference in Bethesda, MD (which Lannett, Mylan, and Sandoz attended). 59. The National Average Drug Acquisition Cost (“NADAC”) is a pricing reference file published by the Centers for Medicare and Medicaid Services that is based on average actual acquisition costs of various outpatient drugs collected from a monthly survey of retail community pharmacies across the United States.13 60. The NADAC data for generic levothyroxine sodium reveals a pattern of massive price increases beginning in early 2013, after which prices remained elevated well above their previous competitive levels to the present day. 61. For example, the chart below, based on NADAC data, reveals a dramatic increase in the average per-unit price for generic levothyroxine sodium 25mcg tablets marketed and sold by Defendants Lannett, Mylan, and Sandoz on or around February 2013 followed by continued price elevation through 2015: 12 http://www.gphaonline.org/about/the-gpha-association. 13 See https://www.medicaid.gov/medicaid-chip-program-information/by-topics/prescription- drugs/ful-nadac-downloads/nadacmethodology.pdf. 62. The NADAC data for generic levothyroxine sodium 50mcg tablets marketed and sold by Defendants Lannett, Mylan, and Sandoz reveals a strikingly similar pattern: 63. The NADAC data for generic levothyroxine sodium 75mcg tablets marketed and sold by Defendants Lannett, Mylan, and Sandoz also reveals a similar pattern: 64. The NADAC data for generic levothyroxine sodium 88mcg tablets marketed and sold by Defendants Lannett, Mylan, and Sandoz also reveals a similar pattern: 65. The NADAC data for generic levothyroxine sodium 100mcg tablets marketed and sold by Defendants Lannett, Mylan, and Sandoz also reveals a similar pattern: 66. The NADAC data for generic levothyroxine sodium 112mcg tablets marketed and sold by Defendants Lannett, Mylan, and Sandoz also reveals a similar pattern: 67. The NADAC data for generic levothyroxine sodium 125mcg tablets marketed and sold by Defendants Lannett, Mylan, and Sandoz also reveals a similar pattern: 68. The NADAC data for generic levothyroxine sodium 137mcg tablets marketed and sold by Defendants Lannett, Mylan, and Sandoz also reveals a similar pattern: 69. The NADAC data for generic levothyroxine sodium 150mcg tablets marketed and sold by Defendants Lannett, Mylan, and Sandoz also reveals a similar pattern: 70. The NADAC data for generic levothyroxine sodium 175mcg tablets marketed and sold by Defendants Lannett, Mylan, and Sandoz also reveals a similar pattern: 71. The NADAC data for generic levothyroxine sodium 200mcg tablets marketed and sold by Defendants Lannett, Mylan, and Sandoz also reveals a similar pattern: 72. The NADAC data for generic levothyroxine sodium 300mcg tablets marketed and sold by Defendants Lannett, Mylan, and Sandoz also reveals a similar pattern: 73. In every case, NADAC prices spiked dramatically in late 2013 and again in late 2014 before coming to rest at levels that were two to three times higher than before the Class Period. As of December 2016, the NADAC price of generic levothyroxine sodium remains approximately 200% to 300% higher than late 2012 levels. 74. These substantial across-the-board price increases reflected in the NADAC data were not the result of one maverick manufacturer’s unilateral decision to raise prices exponentially—which would not have been sustainable in a competitive environment as other generic levothyroxine sodium manufacturers gained market share by selling the same product at a lower price. Rather, the sustained price elevation reflected in the NADAC data, across generic levothyroxine sodium in various dosages, was and is the result of a conspiracy among Defendants to artificially raise, fix, maintain, and/or stabilize the price of generic levothyroxine sodium sold in the United States. The Effects of Defendants’ Pricing Conduct 75. Defendants’ sudden and massive price increases present a sharp departure from the previous years of low and stable prices. This in itself is indicative of collusion. 76. There were no reasonable justifications for this abrupt shift in pricing conduct. Federal law requires drug manufacturers to report potential drug shortages to the FDA, the reasons therefor, and the expected duration of the shortage. No supply disruption was reported by the Defendants with respect to generic levothyroxine sodium. 77. And because generic pharmaceutical manufacturers do not need to incur the large research and development costs that brand manufacturers absorb in developing new drugs, the price increases cannot be attributed to the need to fund research and development. 78. Industry analysts have suggested that recent price increases for generic levothyroxine sodium are the result of collusion among manufacturers. Indeed, Richard Evans at Sector & Sovereign Research recently wrote: “[a] plausible explanation [for price increases of generic drugs] is that generic manufacturers, having fallen to near historic low levels of financial performance are cooperating to raise the prices of products whose characteristics – low sales due to either very low prices or very low volumes – accommodate price inflation.”14 79. The investor platform Seekingalpha.com recently explained, in November 2016, “Why We Remain Short Lannett,” concluding that “[w]e see evidence of collusion between the generics”: [L]et’s look at Levothyroxine, in this case Mylan (NASDAQ:MYL) gets the ball rolling with consecutive price increases in 2013 and 2014 that are both matched within days by LCI [Lannett] and Sandoz. Levothyroxine is not a new product (first synthesized in the 1920’s) but because of the cozy pricing relationship displayed by the three generic competitors this remains a multi $100m generics market. Again one has to question the value of competition.15 80. This abrupt shift in the pricing of generic levothyroxine sodium has had a catastrophic effect on consumers. As noted in letters sent to generic drug manufacturers as part of a Congressional investigation into unexplained price increases: This dramatic increase in generic drug prices results in decreased access for patients. According to the National Community Pharmacists Association (NCPA), a 2013 member survey found that pharmacists across the country “have seen huge upswings in generic drug prices that are hurting patients and pharmacies ability to operate” and “77% of pharmacists reported 26 or more instances over the past six months of a large upswing in a generic drug’s acquisition price.” These price increases have a direct impact on patients’ ability to purchase their needed medications. The NCPA survey found that “pharmacists reported patients declining their medication due to increased co-pays,” and “84% of pharmacists said that the acquisition price/lagging reimbursement trend is 14 http://blogs.wsj.com/pharmalot/2015/04/22/generic-drug-prices-keep-rising-but-is-a- slowdown-coming/. 15 http://seekingalpha.com/article/4024425-remain-short-lannett-internal-collusion-investigation- assuage-fears. having a ‘very significant’ impact on their ability to remain in business to continue serving patients.” (Footnotes omitted).16 81. NPR, in collaboration with Kaiser Health News, reported one consumer’s plight in July 2016 in his or her own words: I take levothyroxine, the generic form of Synthroid, to treat a thyroid disorder. This generic has been on the list of drugs that cost $10 for a 90-day supply at my pharmacy for as long as I can remember. Starting in April, the drug was dropped from the list and the price rose 300 percent. The pharmacist tells me all the generic drug manufacturers are raising prices. How is it possible that this drug increased in price so quickly?17 82. A meeting of the minds among the competing sellers of generic levothyroxine sodium assured them increased profits. 83. These price increases are reflected in the Defendants’ financial results during the Class Period. 84. For example, Mylan reported tremendous revenue and profit growth from 2013 to 2015, increasing total annual revenues from $6.9 billion to $9.429 billion and increasing annual gross profits from $3.04 billion to $4.216 billion. 85. Lannett, meanwhile, reported increases in annual net sales from $151 million in 2013 to $406 million in 2015 as well as increases in annual gross profits from $57 million in 2013 to $306 million in 2015. 86. Finally, Sandoz reported growth in core returns on net sales, up from 16.4% in 2014 to 18.1% in 2015—a 10.4% increase. 16 The letters sent to generic drug manufacturers may be found at http://www.sanders.senate.gov/newsroom/press-releases/congress-investigating-why-generic- drug-prices-are-skyrocketing. 17 http://www.npr.org/sections/health-shots/2016/07/26/487367877/insurers-may-share-blame- for-increased-price-of-some-generic-drugs. Congressional and Regulators’ Responses to Rising Generic Drug Prices 87. As noted above, drug manufacturers’ dramatic and unexplained price hikes have engendered extensive scrutiny by the United States Congress and by federal and state antitrust regulators. 88. In a January 8, 2014 letter to members of key committees of the United States House of Representatives and Senate, Douglas P. Hoey, Chief Executive Officer of the National Community Pharmacists’ Association, asked Congress to conduct an investigation of generic drug price increases.18 89. On October 2, 2014, Representative Elijah E. Cummings (“Cummings”), Ranking Member of the House Committee on Oversight and Government Reform, and Senator Bernie Sanders (“Sanders”), Chairman of the Subcommittee on Primary Health and Aging of the Senate Committee on Health, Education, Labor and Pensions, sent letters to Defendants Lannett, Mylan, and 12 other drug manufacturers (“October Letters”) asking for detailed information on the generic price hikes.19 90. On November 20, 2014, Sanders’s committee held a hearing titled “Why Are Some Generic Drugs Skyrocketing In Price?” (“Senate Hearing”). Various witnesses discussed the price hikes for generic drugs. 91. At the Senate Hearing, Stephen W. Schondelmeyer, Professor of Pharmaceutical Management & Economics at the University of Minnesota testified concerning “signals of market failure” and noted that “nearly 20% (27 of 280) of the widely used generic drug prices saw an annual price increase of 50% or more in 2013.” Professor Schondelmeyer identified 18 See https://www.ncpanet.org/pdf/leg/jan14/letter-generic-spikes.pdf. 19 The October Letters may be found at http://www.sanders.senate.gov/newsroom/press- releases/congress-investigating-why-generic-drug-prices-are-skyrocketing. generic levothyroxine sodium among generic drug products with extremely high annual price hikes in 2013, citing “9 different strengths . . . with annual increases ranging from 44% to 63%.” 92. Sanders and Cummings followed up on the Senate Hearing by writing a letter on February 24, 2015 to the Office of the Inspector General (“OIG”) of the Department of Health & Human Services, asking it to investigate the effect that price increases of generic drugs have had on generic drug spending within the Medicare and Medicaid programs.20 The OIG responded in a letter dated April 13, 2015, noting it planned to engage in a review of quarterly average manufacturer prices for the top 200 generic drugs from 2005 through 2014.21 93. In the meantime, the Antitrust Division of the United States Department of Justice (“DOJ”) commenced a wide-ranging criminal investigation of generic drug pricing and has caused grand jury subpoenas to be issued to various generic drug manufacturers in connection with this investigation. According to a June 26, 2015 report by the service Policy and Regulatory Report (“PaRR Report”) (available at http://www.mergermarket.com/pdf/DoJ-Collusion- Generic-Drug-Prices-2015.pdf): A PaRR source says prosecutors see the case much like its antitrust probe of the auto parts industry, which has gone on for years and morphed into the department’s largest criminal antitrust probe ever. Like in that case, prosecutors expect “to move from one drug to another in a similar cascading fashion.” 94. On November 3, 2016, Bloomberg reported: The antitrust investigation by the Justice Department, begun about two years ago, now spans more than a dozen companies and about two dozen drugs, according to people familiar with the matter. The grand jury probe is examining whether some executives agreed with one another to raise prices, and the first charges could emerge by the end of the year, they said. . . . . 20 http://www.sanders.senate.gov/download/sanders-cummings-letter?inline=file. 21 http://www.sanders.senate.gov/download/oig-letter-to-sen-sanders-4-13-2015?inline=file. Charges could extend to high-level executives, according to the people. The antitrust division, which has an immunity program to motivate wrongdoers to confess and inform on others, has stepped up its commitment to holding individuals responsible. 95. Most recently, on November 7, 2016, the publication Mlex reported that the DOJ had received assistance from a leniency applicant beginning in the summer of 2016: While the Justice department didn’t have a whistleblower at the beginning of the investigation, it is understood that this summer a company applied for leniency, which grants full immunity to the first company to come forward and admit to cartel violations. The company is understood to be privately held and hasn’t publicly disclosed its involvement in the investigation. 96. The DOJ is poised to file criminal indictments—and began that process earlier this month. On December 12, 2016, the DOJ charged Jeffrey Glazer, a former chief executive officer of Heritage Pharmaceuticals, Inc., and Jason Malek, a former president of Heritage Pharmaceuticals, Inc., with “knowingly enter[ing] into and engag[ing] in a combination and conspiracy with other persons and entities engaged in the production and sale of generic pharmaceutical products, including doxycycline hyclate, the primary purpose of which was to allocate customers, rig bids, and fix and maintain prices of doxycycline hyclate sold in the United States . . . [and] including glyburide, the primary purpose of which was to allocate customers and fix and maintain prices of glyburide sold in the United States.” 97. State attorneys’ general, led by the Connecticut Attorney General, have also pursued their own investigations, culminating most recently in a 19-state complaint filed on December 14, 2016 charging Aurobindo Pharma USA, Inc., Citron Pharma, LLC, Heritage Pharmaceuticals, Inc., Mayne Pharma (USA), Inc., Mylan, and Teva Pharmaceuticals USA, Inc. “with entering into contracts, combinations and conspiracies that had the effect of unreasonably restraining trade, artificially inflating and maintaining prices and reducing competition in the markets for Doxycycline Hyclate Delayed Release (‘Doxy DR’) and Glyburide in the United States.”22 The complaint notes that “the Plaintiff States have uncovered a wide-ranging series of conspiracies implicating numerous different drugs and competitors, which will be acted upon at the appropriate time.” Id. The complaint also details Mylan’s role in both conspiracies, including Mylan’s frequent communications with other competitors to facilitate and further their agreement to fix prices, which began “as early as 2013.” Id. 98. On November 9, 2016, Mylan disclosed in its 10-Q report that it had received numerous federal and state subpoenas in conjunction with the marketing, pricing, and sale of generic drugs: On December 3, 2015, a subsidiary of Mylan N.V. received a subpoena from the Antitrust Division of the U.S. DOJ seeking information relating to the marketing, pricing, and sale of our generic Doxycycline products and any communications with competitors about such products. On September 8, 2016, a subsidiary of Mylan N.V., as well as certain employees and a member of senior management, received subpoenas from the DOJ seeking additional information relating to the marketing, pricing and sale of our generic Cidofovir, Glipizide-metformin, Propranolol and Verapamil products and any communications with competitors about such products. Related search warrants also were executed. . . . . On December 21, 2015, the Company received a subpoena and interrogatories from the Connecticut Office of the Attorney General seeking information relating to the marketing, pricing and sale of certain of the Company’s generic products (including Doxycycline) and communications with competitors about such products.23 22 http://www.ct.gov/ag/lib/ag/press_releases/2016/20161215_gdms_complain.pdf. 23 https://www.sec.gov/Archives/edgar/data/1623613/000162361316000071/myl10q_20160930xdo c.htm. 99. On November 4, 2016, Lannett disclosed in its 10-Q report that it too had received numerous federal and state subpoenas in conjunction with the marketing, pricing, and sale of generic drugs: In July 2014, the Company received interrogatories and subpoena from the State of Connecticut Office of the Attorney General concerning its investigation into pricing of digoxin. According to the subpoena, the Connecticut Attorney General is investigating whether anyone engaged in any activities that resulted in (a) fixing, maintaining or controlling prices of digoxin or (b) allocating and dividing customers or territories relating to the sale of digoxin in violation of Connecticut antitrust law. In June 2016, the Connecticut Attorney General issued interrogatories and a subpoena to an employee of the Company in order to gain access to documents and responses previously supplied to the Department of Justice. . . . . In fiscal year 2015 and 2016, the Company and certain affiliated individuals each were served with a grand jury subpoena relating to a federal investigation of the generic pharmaceutical industry into possible violations of the Sherman Act. The subpoenas request corporate documents of the Company relating to corporate, financial and employee information, communications or correspondence with competitors regarding the sale of generic prescription medications and the marketing, sale, or pricing of certain products, generally for the period of 2005 through the dates of the subpoenas.24 100. According to a November 2016 Bloomberg report, “Novartis’s Sandoz unit [including Fougera] got a U.S. Justice Department subpoena in March [2016] requesting documents related to marketing and pricing of copycat medicines.”25 101. The fact that these companies and/or their employees received subpoenas from a federal grand jury is significant, as is reflected in Chapter 3 of the 2014 edition of the DOJ’s 24 http://app.quotemedia.com/data/downloadFiling?webmasterId=101533&ref=11214259&type=H TML&symbol=LCI&companyName=Lannett+Co+Inc&formType=10-Q&dateFiled=2016-11- 04. 25 https://www.bloomberg.com/news/articles/2016-11-13/novartis-said-to-hold-talks-to-buy-u-s- generics-maker-amneal. Antitrust Division Manual.26 Section F.1 of that chapter notes that “staff should consider carefully the likelihood that, if a grand jury investigation developed evidence confirming the alleged anticompetitive conduct, the Division would proceed with a criminal prosecution.” Id. at III-82. The staff request needs to be approved by the relevant field chief and is then sent to the Antitrust Criminal Enforcement Division. Id. “The DAAG [Deputy Assistant Attorney General] for Operations, the Criminal DAAG, and the Director of Criminal Enforcement will make a recommendation to the Assistant Attorney General. If approved by the Assistant Attorney General, letters of authority are issued for all attorneys who will participate in the grand jury investigation.” Id. at III-83. “The investigation should be conducted by a grand jury in a judicial district where venue lies for the offense, such as a district from or to which price-fixed sales were made or where conspiratorial communications occurred.” Id. Thus, the fact that the Defendants and certain of their employees received federal grand jury subpoenas is a strong indication that antitrust offenses have occurred. 102. Commentators have also taken note of the criminal subpoenas. As reported on one legal website: The Justice Department’s subpoenas focus on sharing and exchanging of pricing information and other issues among generic drug companies. The initial subpoenas, including two senior executives, suggest that the Justice Department has specific information relating to their participation in potentially criminal conduct. It is rare for the Justice Department to open a criminal investigation with specific subpoenas for individuals, along with company-focused subpoenas. Given the breadth of such a potential cartel investigation, the Justice Department’s inquiry of the generic pharmaceutical industry could be significant. The prices for a large number of generic drug prices have increased significantly over the last year. There does not appear to be any rational explanation for such increases involving a diverse set of products. 26 http://www.justice.gov/atr/public/divisionmanual/chapter3.pdf. The scope of these price increases and the timing of them certainly raise serious concerns about collusive activity among competitors. 27 103. As Mark Rosman, former assistant chief of the National Criminal Enforcement Section of DOJ’s Antitrust Division, noted in an article on the “unusual” nature of the criminal subpoenas, “[a] DOJ investigation into the alleged exchange of pricing information in the pharmaceutical industry likely indicates that the agency anticipates uncovering criminal antitrust conduct in the form of price-fixing or customer allocation.” 28 104. Likewise significant is Mlex’s confirmation that a leniency applicant has sought amnesty from the DOJ. As the DOJ notes on its web site (http://www.justice.gov/atr/frequently- asked-questions-regarding-antitrust-divisions-leniency-program): 5. Does a leniency applicant have to admit to a criminal violation of the antitrust laws before receiving a conditional leniency letter? Yes. The Division’s leniency policies were established for corporations and individuals “reporting their illegal antitrust activity,” and the policies protect leniency recipients from criminal conviction. Thus, the applicant must admit its participation in a criminal antitrust violation involving price fixing, bid rigging, capacity restriction, or allocation of markets, customers, or sales or production volumes before it will receive a conditional leniency letter. Applicants that have not engaged in criminal violations of the antitrust laws have no need to receive leniency protection from a criminal violation and will receive no benefit from the leniency program. What is more, the leniency applicant must also satisfy the following condition, among others, to avail itself of the government’s leniency: “[t]he confession of wrongdoing is truly a corporate act, as opposed to isolated confessions of individual executives or officials.” Id. Factors Increasing the Levothyroxine Sodium Market’s Susceptibility to Collusion 105. Publicly available data on the generic levothyroxine sodium market in the United States demonstrates that it is susceptible to price-fixing by the Defendants. Factors that make a 27 http://www.jdsupra.com/legalnews/criminal-global-cartel-focus-on-generic-92387/. 28 https://www.wsgr.com/publications/PDFSearch/rosman-1114.pdf. market susceptible to collusion include: (1) a high degree of industry concentration; (2) significant barriers to entry; (3) inelastic demand; (4) the lack of available substitutes for the goods involved; (5) a standardized product with a high degree of interchangeability between the goods of cartel participants; (6) absence of a competitive fringe of sellers; and (7) intercompetitor contacts and communication. 106. Industry Concentration. A high degree of concentration facilitates the operation of a cartel because it makes it easier to coordinate behavior among co-conspirators. 107. In the United States generic levothyroxine sodium market, the Defendants named here account for all sales of the drug in question (in oral tablet form), as was the case during the Class Period. What is more, the number of competitors has historically been limited to these three Defendants, with respective market shares of 30% (Lannett), 68% (Mylan), and 2% (Sandoz), according to Lannett CEO Bedrosian’s August 2014 estimates. 108. The market for generic levothyroxine sodium is mature, and the Defendants can only gain market share by competing on price. 109. The Defendants—and no other firms—currently control the market. 110. Barriers to Entry. Supracompetitive pricing (at odds with pricing that can be sustained in a competitive environment) in a market normally attracts additional competitors who want to avail themselves of the high levels of profitability that are available. However, the presence of significant barriers to entry makes this more difficult and helps to facilitate the operation of a cartel. 111. Here, there are significant capital, regulatory, and intellectual property barriers to entry in the market for generic levothyroxine sodium. 112. Manufacturing costs, coupled with regulatory oversight, represent a substantial barrier to entry into the generic levothyroxine sodium market. Intellectual property costs can also be sizable. 113. Entry into the generic levothyroxine sodium market (oral tablets) has not occurred since the Defendants began marketing and selling generic levothyroxine sodium in 2004. 114. Demand Inelasticity. Price elasticity of demand is defined as the measure of responsiveness in the quantity demanded for a product as a result of change in price of the same product. It is a measure of how demand for a product reacts to a change in price. The basic necessities of life—food, water, and shelter—are examples of goods that experience nearly perfectly inelastic demand at or near the minimums necessary to sustain life. In other words, a person on the verge of dying of thirst will pay almost anything for drinking water. In order for a cartel to profit from raising prices above competitive levels, demand for the product must be sufficiently inelastic such that any loss in sales will be more than offset by increases in revenue on those sales that are made. Otherwise, increased prices would result in declining revenues and profits. 115. Generic levothyroxine sodium offers potentially life-saving relief to those suffering from hypothyroidism and thyroid cancer. Because the need for generic levothyroxine sodium is great among those who are so suffering, patients have little choice but to purchase levothyroxine at the price at which it is offered. Thus, generic levothyroxine sodium is an excellent candidate for price-fixing because price increases will result in more revenue, rather than less. 116. Lack of Substitutes. For those whose bodies do not produce enough thyroid hormone, there is no substitute for levothyroxine sodium. Nor do brand name levothyroxine sodium drugs provide reasonable alternatives for generic levothyroxine sodium—for two reasons. First, even at the inflated levels witnessed during the Class Period, brand name levothyroxine sodium drugs have historically cost significantly more than the generic levothyroxine sodium marketed and sold by the Defendants. Second, despite FDA approval of generic levothyroxine sodium as bioequivalent, some prescribing doctors recommend that patients start on and continue with either the brand name or generic levothyroxine sodium—and not switch between the two—because of speculation about potential differences in maintaining precise thyroid hormone levels. 117. Standardized Product with High Degree of Interchangeability. A commodity- like product is one that is standardized across suppliers and allows for a high degree of substitutability among different suppliers in the market. When products offered by different suppliers are viewed as interchangeable by purchasers, it is easier for the suppliers to agree on prices for the good in question and it is easier to monitor these prices effectively. Here, the generic levothyroxine sodium made by the Defendant manufacturers each contain identical active ingredients and are viewed as interchangeable by the pharmacies that fill the prescriptions. 118. Absence of a Competitive Fringe of Sellers. Companies that are not part of the conspiracy can erode at conspirators’ market shares by offering products at a lower, more competitive price. This reduces revenue and makes sustaining a conspiracy more difficult. In the market for generic levothyroxine sodium, there is no realistic threat that a fringe of competitive sellers will take market share from Defendants. The Defendants have oligopolistic power in the market for generic levothyroxine sodium, which facilitates their ability to raise prices without losing market share to non-conspirators. 119. Intercompetitor Contacts and Communications. In order to be successful, collusive agreements require a level of trust among the conspirators. Collaboration fostered through industry associations, trade shows, customer events, and private dinners facilitate relationships between individuals who would otherwise be predisposed to compete vigorously with each other. The state attorneys general have characterized the generic drug industry as “cozy.” Here, for example, the Defendants are long-time members of or participants in the GPhA, which meets frequently and describes itself on its website as “the nation’s leading trade association for manufacturers and distributors of generic prescription drugs, manufacturers of bulk active pharmaceutical chemicals, and suppliers of other goods and services to the generic industry.” 29 Thus, representatives of the Defendants have opportunities to meet and conspire at functions of this group, including GPhA meetings immediately prior to the announcement of the generic levothyroxine sodium price increases, as well as at numerous other industry gatherings and private functions. 120. The grand jury subpoenas discussed above lend further support to the conclusion that intercompetitor communications occurred among the Defendants with respect to the pricing of generic levothyroxine sodium. Indeed, according to the previously identified PaRR Report, “prosecutors are taking a close look at trade associations as part of their investigation as having been one potential avenue for facilitating the collusion between salespeople at different generic producers.” DEFENDANTS’ ANTITRUST VIOLATIONS 121. During the Class Period, the Defendants engaged in a continuing agreement, understanding, and conspiracy in restraint of trade to artificially raise, fix, maintain, or stabilize the prices of generic levothyroxine sodium in the United States. 29 http://www.gphaonline.org/about/the-gpha-association. 122. In formulating and effectuating the contract, combination or conspiracy, the Defendants identified above and their co-conspirators engaged in anticompetitive activities, the purpose and effect of which were to artificially raise, fix, maintain, and/or stabilize the price of generic levothyroxine sodium sold in the United States. These activities included the following: a. Defendants participated in meetings and/or conversations to discuss the price of generic levothyroxine sodium in the United States; b. Defendants agreed during those meetings and conversations to charge prices at specified levels and otherwise to increase and/or maintain prices of generic levothyroxine sodium sold in the United States; c. Defendants agreed during those meetings and conversations to fix the price of generic levothyroxine sodium; and d. Defendants issued price announcements, customer bids, and price quotations in accordance with their agreements. Defendants and their co-conspirators engaged in the activities described above for the purpose of effectuating the unlawful agreements described in this Complaint. 123. During and throughout the period of the conspiracy alleged in this Complaint, Plaintiff and members of the Classes purchased generic levothyroxine sodium from Defendants (or their subsidiaries or controlled affiliates) or their co-conspirators at inflated and supracompetitive prices. 124. Defendants’ contract, combination, or conspiracy constitutes an unreasonable restraint of interstate trade and commerce in violation of Sections 1 and 3 of the Sherman Act (15 U.S.C. §§ 1, 3) and the laws of various states. 125. As a result of Defendants’ unlawful conduct, Plaintiff and the other members of the Classes have been injured in their business and property in that they have paid more for generic levothyroxine sodium than they would have paid in a competitive market. 126. The unlawful contract, combination, or conspiracy has had the following effects, among others: a. price competition in the market for generic levothyroxine sodium has been artificially restrained; b. prices for generic levothyroxine sodium sold by the Defendants have been raised, fixed, maintained, or stabilized at artificially high and non- competitive levels; and c. purchasers of generic levothyroxine sodium from the Defendants have been deprived of the benefit of free and open competition in the market for generic levothyroxine sodium. CLASS ACTION ALLEGATIONS 127. Plaintiff brings this action on behalf of itself and as a class action under Rule 23(a) and (b)(2) of the Federal Rules of Civil Procedure, seeking equitable and injunctive relief on behalf of the following class (the “Nationwide Class”): All persons and entities in the United States and its territories who purchased, paid, and/or provided reimbursement for some or all of the purchase price for Defendants’ generic levothyroxine sodium from February 1, 2013 through the present. This class excludes: (a) Defendants, their officers, directors, management, employees, subsidiaries, and affiliates; (b) all federal and state governmental entities except for cities, towns, or municipalities with self-funded prescription drug plans; (c) all persons or entities who purchased Defendants’ generic levothyroxine sodium for purposes of resale or directly from Defendants; (d) fully insured health plans (i.e., health plans that purchased insurance covering 100% of their reimbursement obligation to members); (e) any “flat co-pay” consumers whose purchases of Defendants’ generic levothyroxine sodium were paid in part by a third party payor and whose co- payment was the same regardless of the retail purchase price; and (f) any judges or justices involved in this action and any members of their immediate families. 128. Plaintiff also brings this action on behalf of itself and as a class action under Rule 23(a) and (b)(3) of the Federal Rules of Civil Procedure, seeking damages pursuant to the common law of unjust enrichment and the state antitrust, unfair competition, and consumer protection laws of the states listed below (the “Indirect Purchaser States”)30 on behalf of the following class (the “Damages Class”): All persons and entities in the Indirect Purchaser States who purchased, paid, and/or provided reimbursement for some or all of the purchase price for Defendants’ generic levothyroxine sodium from February 1, 2013 through the present. This class excludes: (a) Defendants, their officers, directors, management, employees, subsidiaries, and affiliates; (b) all federal and state governmental entities except for cities, towns, or municipalities with self-funded prescription drug plans; (c) all persons or entities who purchased Defendants’ generic levothyroxine sodium for purposes of resale or directly from Defendants; (d) fully insured health plans (i.e., health plans that purchased insurance covering 100% of their reimbursement obligation to members); (e) any “flat co-pay” consumers whose purchases of Defendants’ generic levothyroxine sodium were paid in part by a third party payor and whose co- payment was the same regardless of the retail purchase price; and (f) any judges or justices involved in this action and any members of their immediate families. 129. The Nationwide Class and the Damages Class are referred to herein as the “Classes.” 30 The “Indirect Purchaser States” consist of Alabama, Arkansas, Arizona, California, District of Columbia, Florida, Hawaii, Iowa, Kansas, Maine, Massachusetts, Michigan, Minnesota, Missouri, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, West Virginia, and Wisconsin. 130. While Plaintiff does not know the exact number of the members of the Classes, Plaintiff believes there are millions of members in each Class. 131. Common questions of law and fact exist as to all members of the Classes. This is particularly true given the nature of Defendants’ conspiracy, which was generally applicable to all the members of both Classes, thereby making appropriate relief with respect to the Classes as a whole. Such questions of law and fact common to the Classes include, but are not limited a. Whether Defendants and their co-conspirators engaged in a combination and conspiracy among themselves to fix, raise, maintain, and/or stabilize prices of generic levothyroxine sodium; b. The identity of the participants of the alleged conspiracy; c. The duration of the alleged conspiracy and the acts carried out by Defendants and their co-conspirators in furtherance of the conspiracy; d. Whether the alleged conspiracy violated the Sherman Act, as alleged in the First Count; e. Whether the alleged conspiracy violated state antitrust and unfair competition laws, and/or state consumer protection laws, as alleged in the Second and Third Counts; f. Whether the Defendants unjustly enriched themselves to the detriment of the Plaintiff and the members of the Classes, thereby entitling Plaintiff and the members of the Classes to disgorgement of all benefits derived by Defendants, as alleged in the Fourth Count; g. Whether the conduct of the Defendants and their co-conspirators, as alleged in this Complaint, caused injury to the business or property of Plaintiff and the members of the Classes; h. The effect of the alleged conspiracy on the prices of generic levothyroxine sodium sold in the United States during the Class Period; i. The appropriate injunctive and related equitable relief for the Nationwide Class; and j. The appropriate class-wide measure of damages for the Damages Class. 132. Plaintiff’s claims are typical of the claims of the members of the Classes, and Plaintiff will fairly and adequately protect the interests of the Classes. Plaintiff and all members of the Classes are similarly affected by Defendants’ wrongful conduct in that they paid artificially inflated prices for generic levothyroxine sodium purchased indirectly from the Defendants and/or their co-conspirators. 133. Plaintiff’s claims arise out of the same common course of conduct giving rise to the claims of the other members of the Classes. Plaintiff’s interests are coincident with, and not antagonistic to, those of the other members of the Classes. Plaintiff is represented by counsel who are competent and experienced in the prosecution of antitrust and class action litigation. 134. The questions of law and fact common to the members of the Classes predominate over any questions affecting only individual members, including legal and factual issues relating to liability and damages. 135. Class action treatment is a superior method for the fair and efficient adjudication of the controversy, in that, among other things, such treatment will permit a large number of similarly situated persons to prosecute their common claims in a single forum simultaneously, efficiently, and without the unnecessary duplication of evidence, effort, and expense that numerous individual actions would engender. The benefits of proceeding through the class mechanism, including providing injured persons or entities with a method for obtaining redress for claims that might not be practicable to pursue individually, substantially outweigh any difficulties that may arise in management of this class action. 136. The prosecution of separate actions by individual members of the Classes would create a risk of inconsistent or varying adjudications, establishing incompatible standards of conduct for Defendants. FIRST COUNT Violation of Section 1 and 3 of the Sherman Act (on behalf of Plaintiff and the Nationwide Class) 137. Plaintiff repeats the allegations set forth above as if fully set forth herein. 138. Defendants and unnamed conspirators entered into and engaged in a contract, combination, or conspiracy in unreasonable restraint of trade in violation of Sections 1 and 3 of the Sherman Act (15 U.S.C. §§ 1, 3). 139. The acts done by each of the Defendants as part of, and in furtherance of, their contract, combination, or conspiracy were authorized, ordered, or done by their officers, agents, employees, or representatives while actively engaged in the management of Defendants’ affairs. 140. During the Class Period, Defendants and their co-conspirators entered into a continuing agreement, understanding, and conspiracy in restraint of trade to establish a price floor and artificially fix, raise, stabilize, and control prices for generic levothyroxine sodium, thereby creating anticompetitive effects. 141. The conspiratorial acts and combinations have caused unreasonable restraints in the market for generic levothyroxine sodium. 142. As a result of Defendants’ unlawful conduct, Plaintiff and other similarly situated indirect purchasers in the Nationwide Class who purchased generic levothyroxine sodium have been harmed by paying inflated, supracompetitive prices for generic levothyroxine sodium. 143. In formulating and carrying out the alleged agreement, understanding and conspiracy, Defendants and their co-conspirators did those things that they combined and conspired to do, including but not limited to the acts, practices, and course of conduct set forth herein. 144. Defendants’ conspiracy had the following effects, among others: (a) Price competition in the market for generic levothyroxine sodium has been restrained, suppressed, and/or eliminated in the United States; (b) Prices for generic levothyroxine sodium provided by Defendants and their co-conspirators have been fixed, raised, maintained, and stabilized at artificially high, non-competitive levels throughout the United States; and (c) Plaintiff and members of the Nationwide Class who purchased generic levothyroxine sodium indirectly from Defendants and their co- conspirators have been deprived of the benefits of free and open competition. 145. Plaintiff and members of the Nationwide Class have been injured and will continue to be injured in their business and property by paying more for generic levothyroxine sodium purchased indirectly from Defendants and the co-conspirators than they would have paid and will pay in the absence of the conspiracy. 146. The alleged contract, combination, or conspiracy is a per se violation of the federal antitrust laws. 147. Plaintiff and members of the Nationwide Class are entitled to an injunction against Defendants, preventing and restraining the violations alleged herein. SECOND COUNT Violation of State Antitrust Statutes (on behalf of Plaintiff and the Damages Class) 148. Plaintiff repeats the allegations set forth above as if fully set forth herein. 149. During the Class Period, Defendants and their co-conspirators engaged in a continuing contract, combination, or conspiracy with respect to the sale of generic levothyroxine sodium in unreasonable restraint of trade and commerce and in violation of the various state antitrust and other statutes set forth below. 150. The contract, combination, or conspiracy consisted of an agreement among the Defendants and their co-conspirators to fix, raise, inflate, stabilize, and/or maintain artificially supracompetitive prices for generic levothyroxine sodium. 151. In formulating and effectuating this conspiracy, Defendants and their co- conspirators performed acts in furtherance of the combination and conspiracy, including: (a) participating in meetings and conversations among themselves in the United States during which they agreed to price generic levothyroxine sodium at certain levels, and otherwise to fix, increase, inflate, maintain, or stabilize effective prices paid by Plaintiff and members of the Damages Class with respect to generic levothyroxine sodium provided in the United States; and (b) participating in meetings and trade association conversations among themselves in the United States and elsewhere to implement, adhere to, and police the unlawful agreements they reached. 152. Defendants and their co-conspirators engaged in the actions described above for the purpose of carrying out their unlawful agreements to fix, increase, maintain, or stabilize prices of generic levothyroxine sodium. 153. Defendants’ anticompetitive acts described above were knowing and willful and constitute violations or flagrant violations of the following state antitrust statutes. 154. Defendants have entered into an unlawful agreement in restraint of trade in violation of Alabama Code § 6-6-60, et seq. Defendants’ combinations or conspiracies had the following effects: (1) price competition for generic levothyroxine sodium was restrained, suppressed, and eliminated throughout Alabama; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout Alabama; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct substantially affected Alabama commerce. As a direct and proximate result of Defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured in their business and property and are threatened with further injury. By reason of the foregoing, Defendants entered into agreements in restraint of trade in violation of Alabama Code § 6-6- 60, et seq. Accordingly, Plaintiff and members of the Damages Class seek all forms of relief available under Alabama Code § 6-6-60, et seq. 155. Defendants have entered into an unlawful agreement in restraint of trade in violation of Arizona Revised Statutes, §§ 44-1401, et seq. Defendants’ combinations or conspiracies had the following effects: (1) price competition for generic levothyroxine sodium was restrained, suppressed, and eliminated throughout Arizona; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout Arizona; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct substantially affected Arizona commerce. As a direct and proximate result of defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured in their business and property and are threatened with further injury. By reason of the foregoing, Defendants entered into agreements in restraint of trade in violation of Ariz. Rev. Stat. §§ 44-1401, et seq. Accordingly, Plaintiff and members of the Damages Class seek all forms of relief available under Ariz. Rev. Stat. §§ 44-1401, et seq. 156. Defendants have entered into an unlawful agreement in restraint of trade in violation of California Business and Professions Code §§ 16700 et seq. During the Class Period, Defendants and their co-conspirators entered into and engaged in a continuing unlawful trust in restraint of the trade and commerce described above in violation of California Business and Professions Code Section §16720. Defendants, and each of them, have acted in violation of Section 16720 to fix, raise, stabilize, and maintain prices of generic levothyroxine sodium at supracompetitive levels. The aforesaid violations of Section 16720 consisted, without limitation, of a continuing unlawful trust and concert of action among the Defendants and their co-conspirators, the substantial terms of which were to fix, raise, maintain, and stabilize the prices of generic levothyroxine sodium. For the purpose of forming and effectuating the unlawful trust, the Defendants and their co-conspirators have done those things that they combined and conspired to do, including but not limited to the acts, practices, and course of conduct set forth above and creating a price floor, fixing, raising, and stabilizing the price of generic levothyroxine sodium. The combination and conspiracy alleged herein has had, inter alia, the following effects: (1) price competition for generic levothyroxine sodium has been restrained, suppressed, and/or eliminated in the State of California; (2) prices for generic levothyroxine sodium provided by Defendants and their co-conspirators have been fixed, raised, stabilized, and pegged at artificially high, non-competitive levels in the State of California and throughout the United States; and (3) those who purchased generic levothyroxine sodium directly or indirectly from Defendants and their co-conspirators have been deprived of the benefit of free and open competition. As a direct and proximate result of Defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured in their business and property in that they paid more for generic levothyroxine sodium than they otherwise would have paid in the absence of Defendants’ unlawful conduct. As a result of Defendants’ violation of Section 16720, Plaintiff and members of the Damages Class seek treble damages and their cost of suit, including a reasonable attorney’s fee, pursuant to California Business and Professions Code § 16750(a). 157. Defendants have entered into an unlawful agreement in restraint of trade in violation of District of Columbia Code Annotated §§ 28-4501, et seq. Defendants’ combinations or conspiracies had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout the District of Columbia; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout the District of Columbia; (3) Plaintiff and members of the Damages Class, including those who resided in the District of Columbia and/or purchased generic levothyroxine sodium that were shipped by Defendants or their co-conspirators, were deprived of free and open competition, including in the District of Columbia; and (4) Plaintiff and members of the Damages Class, including those who resided in the District of Columbia and/or purchased generic levothyroxine sodium in the District of Columbia that were shipped by Defendants or their co-conspirators, paid supracompetitive, artificially inflated prices for generic levothyroxine sodium, including in the District of Columbia. During the Class Period, Defendants’ illegal conduct substantially affected District of Columbia commerce. As a direct and proximate result of defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured in their business and property and are threatened with further injury. By reason of the foregoing, Defendants have entered into agreements in restraint of trade in violation of District of Columbia Code Ann. §§ 28-4501, et seq. Accordingly, Plaintiff and members of the Damages Class seek all forms of relief available under District of Columbia Code Ann. §§ 28-4501, et seq. 158. Defendants have entered into an unlawful agreement in restraint of trade in violation of Hawaii Revised Statutes Annotated §§ 480-1, et seq. Defendants’ unlawful conduct had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout Hawaii; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout Hawaii; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct substantially affected Hawaii commerce. As a direct and proximate result of Defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured in their business and property and are threatened with further injury. By reason of the foregoing, Defendants have entered into agreements in restraint of trade in violation of Hawaii Revised Statutes Annotated §§ 480-4, et seq. Accordingly, Plaintiff and members of the Damages Class seek all forms of relief available under Hawaii Revised Statutes Annotated §§ 480-4, et seq. 159. Defendants have entered into an unlawful agreement in restraint of trade in violation of the Illinois Antitrust Act (740 Illinois Compiled Statutes 10/1, et seq.). Defendants’ combinations or conspiracies had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout Illinois; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout Illinois; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct substantially affected Illinois commerce. As a direct and proximate result of Defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured in their business and property and are threatened with further injury. 160. Defendants have entered into an unlawful agreement in restraint of trade in violation of Iowa Code §§ 553.1, et seq. Defendants’ combinations or conspiracies had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout Iowa; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout Iowa; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct substantially affected Iowa commerce. As a direct and proximate result of Defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured in their business and property and are threatened with further injury. By reason of the foregoing, Defendants have entered into agreements in restraint of trade in violation of Iowa Code §§ 553.1, et seq. Accordingly, Plaintiff and members of the Damages Class seek all forms of relief available under Iowa Code §§ 553, et seq. 161. Defendants have entered into an unlawful agreement in restraint of trade in violation of Kansas Statutes Annotated, §§ 50-101, et seq. Defendants’ combinations or conspiracies had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout Kansas; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout Kansas; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct substantially affected Kansas commerce. As a direct and proximate result of Defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured in their business and property and are threatened with further injury. By reason of the foregoing, Defendants have entered into agreements in restraint of trade in violation of Kansas Stat. Ann. §§ 50-101, et seq. Accordingly, Plaintiff and members of the Damages Class seek all forms of relief available under Kansas Stat. Ann. §§ 50-101, et seq. 162. Defendants have entered into an unlawful agreement in restraint of trade in violation of Maine Revised Statutes (Maine Rev. Stat. Ann. 10, §§ 1101, et seq.). Defendants’ combinations or conspiracies had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout Maine; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout Maine; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct substantially affected Maine commerce. As a direct and proximate result of Defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured in their business and property and are threatened with further injury. By reason of the foregoing, Defendants have entered into agreements in restraint of trade in violation of Maine Rev. Stat. Ann. 10, §§ 1101, et seq. Accordingly, Plaintiff and members of the Damages Class seek all relief available under Maine Rev. Stat. Ann. 10, §§ 1101, et seq. 163. Defendants have entered into an unlawful agreement in restraint of trade in violation of Michigan Compiled Laws Annotated §§ 445.771, et seq. Defendants’ combinations or conspiracies had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout Michigan; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout Michigan; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct substantially affected Michigan commerce. As a direct and proximate result of Defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured in their business and property and are threatened with further injury. By reason of the foregoing, Defendants have entered into agreements in restraint of trade in violation of Michigan Comp. Laws Ann. §§ 445.771, et seq. Accordingly, Plaintiff and members of the Damages Class seek all relief available under Michigan Comp. Laws Ann. §§ 445.771, et seq. 164. Defendants have entered into an unlawful agreement in restraint of trade in violation of Minnesota Annotated Statutes §§ 325D.49, et seq. Defendants’ combinations or conspiracies had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout Minnesota; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout Minnesota; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct substantially affected Minnesota commerce. As a direct and proximate result of Defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured in their business and property and are threatened with further injury. By reason of the foregoing, Defendants have entered into agreements in restraint of trade in violation of Minnesota Stat. §§ 325D.49, et seq. Accordingly, Plaintiff and members of the Damages Class seek all relief available under Minnesota Stat. §§ 325D.49, et seq. 165. Defendants have entered into an unlawful agreement in restraint of trade in violation of Mississippi Code Annotated §§ 75-21-1, et seq. Defendants’ combinations or conspiracies had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout Mississippi; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout Mississippi; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct substantially affected Mississippi commerce. As a direct and proximate result of Defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured in their business and property and are threatened with further injury. By reason of the foregoing, Defendants have entered into agreements in restraint of trade in violation of Mississippi Code Ann. § 75-21-1, et seq. Accordingly, Plaintiff and members of the Damages Class seek all relief available under Mississippi Code Ann. § 75-21- 1, et seq. 166. Defendants have entered into an unlawful agreement in restraint of trade in violation of Nebraska Revised Statutes §§ 59-801, et seq. Defendants’ combinations or conspiracies had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout Nebraska; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout Nebraska; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct substantially affected Nebraska commerce. As a direct and proximate result of Defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured in their business and property and are threatened with further injury. By reason of the foregoing, Defendants have entered into agreements in restraint of trade in violation of Nebraska Revised Statutes §§ 59-801, et seq. Accordingly, Plaintiff and members of the Damages Class seek all relief available under Nebraska Revised Statutes §§ 59-801, et 167. Defendants have entered into an unlawful agreement in restraint of trade in violation of Nevada Revised Statutes Annotated §§ 598A.010, et seq. Defendants’ combinations or conspiracies had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout Nevada; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout Nevada; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct substantially affected Nevada commerce. As a direct and proximate result of Defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured in their business and property and are threatened with further injury. By reason of the foregoing, Defendants have entered into agreements in restraint of trade in violation of Nevada Rev. Stat. Ann. §§ 598A, et seq. Accordingly, Plaintiff and members of the Damages Class seek all relief available under Nevada Rev. Stat. Ann. §§ 598A, et seq. 168. Defendants have entered into an unlawful agreement in restraint of trade in violation of New Hampshire Revised Statutes §§ 356:1, et seq. Defendants’ combinations or conspiracies had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout New Hampshire; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout New Hampshire; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct substantially affected New Hampshire commerce. As a direct and proximate result of Defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured in their business and property and are threatened with further injury. By reason of the foregoing, Defendants have entered into agreements in restraint of trade in violation of New Hampshire Revised Statutes §§ 356:1, et seq. Accordingly, Plaintiff and members of the Damages Class seek all relief available under New Hampshire Revised Statutes §§ 356:1, et seq. 169. Defendants have entered into an unlawful agreement in restraint of trade in violation of New Mexico Statutes Annotated §§ 57-1-1, et seq. Defendants’ combinations or conspiracies had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout New Mexico; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout New Mexico; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct substantially affected New Mexico commerce. As a direct and proximate result of Defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured in their business and property and are threatened with further injury. By reason of the foregoing, Defendants have entered into agreements in restraint of trade in violation of New Mexico Stat. Ann. §§ 57-1-1, et seq. Accordingly, Plaintiff and members of the Damages Class seek all relief available under New Mexico Stat. Ann. §§ 57-1- 1, et seq. 170. Defendants have entered into an unlawful agreement in restraint of trade in violation of New York General Business Laws §§ 340, et seq. Defendants’ combinations or conspiracies had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout New York; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout New York; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium that were higher than they would have been absent the Defendants’ illegal acts. During the Class Period, Defendants’ illegal conduct substantially affected New York commerce. As a direct and proximate result of Defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured in their business and property and are threatened with further injury. By reason of the foregoing, Defendants have entered into agreements in restraint of trade in violation of the New York Donnelly Act, §§ 340, et seq. The conduct set forth above is a per se violation of the Act. Accordingly, Plaintiff and members of the Damages Class seek all relief available under New York Gen. Bus. Law §§ 340, et seq. 171. Defendants have entered into an unlawful agreement in restraint of trade in violation of the North Carolina General Statutes §§ 75-1, et seq. Defendants’ combinations or conspiracies had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout North Carolina; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout North Carolina; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct substantially affected North Carolina commerce. As a direct and proximate result of Defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured in their business and property and are threatened with further injury. By reason of the foregoing, Defendants have entered into agreements in restraint of trade in violation of North Carolina Gen. Stat. §§ 75-1, et seq. Accordingly, Plaintiff and members of the Damages Class seek all relief available under North Carolina Gen. Stat. §§ 75- 1, et seq. 172. Defendants have entered into an unlawful agreement in restraint of trade in violation of North Dakota Century Code §§ 51-08.1-01, et seq. Defendants’ combinations or conspiracies had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout North Dakota; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout North Dakota; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct had a substantial effect on North Dakota commerce. As a direct and proximate result of Defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured in their business and property and are threatened with further injury. By reason of the foregoing, Defendants have entered into agreements in restraint of trade in violation of North Dakota Cent. Code §§ 51-08.1-01, et seq. Accordingly, Plaintiff and members of the Damages Class seek all relief available under North Dakota Cent. Code §§ 51- 08.1-01, et seq. 173. Defendants have entered into an unlawful agreement in restraint of trade in violation of Oregon Revised Statutes §§ 646.705, et seq. Defendants’ combinations or conspiracies had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout Oregon; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout Oregon; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct had a substantial effect on Oregon commerce. As a direct and proximate result of Defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured in their business and property and are threatened with further injury. By reason of the foregoing, Defendants have entered into agreements in restraint of trade in violation of Oregon Revised Statutes §§ 646.705, et seq. Accordingly, Plaintiff and members of the Damages Class seek all relief available under Oregon Revised Statutes §§ 646.705, et 174. Defendants have entered into an unlawful agreement in restraint of trade in violation of South Dakota Codified Laws §§ 37-1-3.1, et seq. Defendants’ combinations or conspiracies had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout South Dakota; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout South Dakota; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct had a substantial effect on South Dakota commerce. As a direct and proximate result of Defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured in their business and property and are threatened with further injury. By reason of the foregoing, Defendants have entered into agreements in restraint of trade in violation of South Dakota Codified Laws Ann. §§ 37-1, et seq. Accordingly, Plaintiff and members of the Damages Class seek all relief available under South Dakota Codified Laws Ann. §§ 37-1, et seq. 175. Defendants have entered into an unlawful agreement in restraint of trade in violation of Tennessee Code Annotated §§ 47-25-101, et seq. Defendants’ combinations or conspiracies had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout Tennessee; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout Tennessee; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct had a substantial effect on Tennessee commerce. As a direct and proximate result of Defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured in their business and property and are threatened with further injury. By reason of the foregoing, Defendants have entered into agreements in restraint of trade in violation of Tennessee Code Ann. §§ 47-25-101, et seq. Accordingly, Plaintiff and members of the Damages Class seek all relief available under Tennessee Code Ann. §§ 47-25-101, et seq. 176. Defendants have entered into an unlawful agreement in restraint of trade in violation of Utah Code Annotated §§ 76-10-911, et seq. Defendants’ combinations or conspiracies had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout Utah; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout Utah; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct had a substantial effect on Utah commerce. As a direct and proximate result of Defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured in their business and property and are threatened with further injury. By reason of the foregoing, Defendants have entered into agreements in restraint of trade in violation of Utah Code Annotated §§ 76-10-911, et seq. Accordingly, Plaintiff and members of the Damages Class seek all relief available under Utah Code Annotated §§ 76-10-911, et seq. 177. Defendants have entered into an unlawful agreement in restraint of trade in violation of the Vermont Stat. Ann. 9 §§ 2453, et seq. Defendants’ combinations or conspiracies had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout Vermont; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout Vermont; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct had a substantial effect on Vermont commerce. As a direct and proximate result of Defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured in their business and property and are threatened with further injury. By reason of the foregoing, Defendants have entered into agreements in restraint of trade in violation of Vermont Stat. Ann. 9 §§ 2453, et seq. Accordingly, Plaintiff and members of the Damages Class seek all relief available under Vermont Stat. Ann. 9 §§ 2453, et seq. 178. Defendants have entered into an unlawful agreement in restraint of trade in violation of West Virginia Code §§ 47-18-1, et seq. Defendants’ combinations or conspiracies had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout West Virginia; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout West Virginia; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct had a substantial effect on West Virginia commerce. As a direct and proximate result of Defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured in their business and property and are threatened with further injury. By reason of the foregoing, Defendants have entered into agreements in restraint of trade in violation of West Virginia Code §§ 47-18-1, et seq. Accordingly, Plaintiff and members of the Damages Class seek all relief available under West Virginia Code §§ 47-18-1, et seq. 179. Defendants have entered into an unlawful agreement in restraint of trade in violation of the Wisconsin Statutes §§ 133.01, et seq. Defendants’ combinations or conspiracies had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout Wisconsin; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout Wisconsin; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct had a substantial effect on Wisconsin commerce. As a direct and proximate result of Defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured in their business and property and are threatened with further injury. By reason of the foregoing, Defendants have entered into agreements in restraint of trade in violation of Wisconsin Stat. §§ 133.01, et seq. Accordingly, Plaintiff and members of the Damages Class seek all relief available under Wisconsin Stat. §§ 133.01, et seq. 180. Plaintiff and members of the Damages Class in each of the above states have been injured in their business and property by reason of Defendants’ unlawful combination, contract, conspiracy and agreement. Plaintiff and members of the Damages Class have paid more for generic levothyroxine sodium than they otherwise would have paid in the absence of Defendants’ unlawful conduct. This injury is of the type the antitrust laws of the above states were designed to prevent and flows from that which makes Defendants’ conduct unlawful. 181. In addition, Defendants have profited significantly from the aforesaid conspiracy. Defendants’ profits derived from their anticompetitive conduct come at the expense and detriment of Plaintiff and members of the Damages Class. 182. Accordingly, Plaintiff and members of the Damages Class in each of the above jurisdictions seek damages (including statutory damages where applicable), to be trebled or otherwise increased as permitted by a particular jurisdiction’s antitrust law, and costs of suit, including reasonable attorneys’ fees, to the extent permitted by the above state laws. THIRD COUNT Violation of State Consumer Protection Statutes (on behalf of Plaintiff and the Damages Class) 183. Plaintiff repeats the allegations set forth above as if fully set forth herein. 184. Defendants engaged in unfair competition or unfair, unconscionable, deceptive or fraudulent acts or practices in violation of the state consumer protection and unfair competition statutes listed below. 185. Defendants have knowingly entered into an unlawful agreement in restraint of trade in violation of the Arkansas Code Annotated, § 4-88-101, et seq. Defendants knowingly agreed to, and did in fact, act in restraint of trade or commerce by affecting, fixing, controlling, and/or maintaining at non-competitive and artificially inflated levels, the prices at which generic levothyroxine sodium was sold, distributed, or obtained in Arkansas and took efforts to conceal their agreements from Plaintiff and members of the Damages Class. The aforementioned conduct on the part of the Defendants constituted “unconscionable” and “deceptive” acts or practices in violation of Arkansas Code Annotated, § 4-88-107(a)(10). Defendants’ unlawful conduct had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout Arkansas; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout Arkansas; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct substantially affected Arkansas commerce and consumers. As a direct and proximate result of the unlawful conduct of the Defendants, Plaintiff and members of the Damages Class have been injured in their business and property and are threatened with further injury. Defendants have engaged in unfair competition or unfair or deceptive acts or practices in violation of Arkansas Code Annotated, § 4-88-107(a)(10) and, accordingly, Plaintiff and members of the Damages Class seek all relief available under that statute. 186. Defendants have engaged in unfair competition or unfair, unconscionable, deceptive or fraudulent acts or practices in violation of California Business and Professions Code § 17200, et seq. During the Class Period, Defendants manufactured, marketed, sold, or distributed generic levothyroxine sodium in California, and committed and continue to commit acts of unfair competition, as defined by Sections 17200, et seq. of the California Business and Professions Code, by engaging in the acts and practices specified above. This claim is instituted pursuant to Sections 17203 and 17204 of the California Business and Professions Code, to obtain restitution from these Defendants for acts, as alleged herein, that violated Section 17200 of the California Business and Professions Code, commonly known as the Unfair Competition Law. The Defendants’ conduct as alleged herein violated Section 17200. The acts, omissions, misrepresentations, practices and non-disclosures of Defendants, as alleged herein, constituted a common, continuous, and continuing course of conduct of unfair competition by means of unfair, unlawful, and/or fraudulent business acts or practices within the meaning of California Business and Professions Code §17200, et seq., including, but not limited to, the following: (1) the violations of Section 1 of the Sherman Act, as set forth above; (2) the violations of Section 16720, et seq. of the California Business and Professions Code, set forth above. Defendants’ acts, omissions, misrepresentations, practices, and non-disclosures, as described above, whether or not in violation of Section 16720, et seq. of the California Business and Professions Code, and whether or not concerted or independent acts, are otherwise unfair, unconscionable, unlawful or fraudulent; (3) Defendants’ acts or practices are unfair to purchasers of generic levothyroxine sodium in the State of California within the meaning of Section 17200, California Business and Professions Code; and (4) Defendants’ acts and practices are fraudulent or deceptive within the meaning of Section 17200 of the California Business and Professions Code. Plaintiff and members of the Damages Class are entitled to full restitution and/or disgorgement of all revenues, earnings, profits, compensation, and benefits that may have been obtained by Defendants as a result of such business acts or practices. The illegal conduct alleged herein is continuing and there is no indication that Defendants will not continue such activity into the future. The unlawful and unfair business practices of Defendants, and each of them, as described above, have caused and continue to cause Plaintiff and members of the Damages Class to pay supracompetitive and artificially-inflated prices for generic levothyroxine sodium. Plaintiff and members of the Damages Class suffered injury in fact and lost money or property as a result of such unfair competition. The conduct of Defendants as alleged in this Complaint violates Section 17200 of the California Business and Professions Code. As alleged in this Complaint, Defendants and their co-conspirators have been unjustly enriched as a result of their wrongful conduct and by Defendants’ unfair competition. Plaintiff and members of the Damages Class are accordingly entitled to equitable relief including restitution and/or disgorgement of all revenues, earnings, profits, compensation, and benefits that may have been obtained by Defendants as a result of such business practices, pursuant to the California Business and Professions Code, §§17203 and 17204. 187. Defendants have engaged in unfair competition or unfair, unconscionable, or deceptive acts or practices in violation of District of Columbia Code § 28-3901, et seq. Defendants agreed to, and did in fact, act in restraint of trade or commerce by affecting, fixing, controlling, and/or maintaining, at artificial and/or non-competitive levels, the prices at which generic levothyroxine sodium was sold, distributed, or obtained in the District of Columbia. The foregoing conduct constitutes “unlawful trade practices,” within the meaning of D.C. Code § 28- 3904. Plaintiff and members of the Damages Class were not aware of Defendants’ price-fixing conspiracy and were therefore unaware that they were being unfairly and illegally overcharged. There was a gross disparity of bargaining power between the parties with respect to the price charged by Defendants for generic levothyroxine sodium. Defendants had the sole power to set that price and Plaintiff and members of the Damages Class had no power to negotiate a lower price. Moreover, Plaintiff and members of the Damages Class lacked any meaningful choice in purchasing generic levothyroxine sodium because they were unaware of the unlawful overcharge and there was no alternative source of supply through which Plaintiff and members of the Damages Class could avoid the overcharges. Defendants’ conduct with regard to sales of generic levothyroxine sodium, including their illegal conspiracy to secretly fix the price of generic levothyroxine sodium at supracompetitive levels and overcharge consumers, was substantively unconscionable because it was one-sided and unfairly benefited Defendants at the expense of Plaintiff and the public. Defendants took grossly unfair advantage of Plaintiff and members of the Damages Class. The suppression of competition that has resulted from Defendants’ conspiracy has ultimately resulted in unconscionably higher prices for purchasers so that there was a gross disparity between the price paid and the value received for generic levothyroxine sodium. Defendants’ unlawful conduct had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout the District of Columbia; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout the District of Columbia; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. As a direct and proximate result of the Defendants’ conduct, Plaintiff and members of the Damages Class have been injured and are threatened with further injury. Defendants have engaged in unfair competition or unfair or deceptive acts or practices in violation of District of Columbia Code § 28-3901, et seq., and, accordingly, Plaintiff and members of the Damages Class seek all relief available under that statute. 188. Defendants have engaged in unfair competition or unfair, unconscionable, or deceptive acts or practices in violation of the Florida Deceptive and Unfair Trade Practices Act, Fla. Stat. §§ 501.201, et seq. Defendants’ unlawful conduct had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout Florida; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout Florida; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct substantially affected Florida commerce and consumers. As a direct and proximate result of Defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured and are threatened with further injury. Defendants have engaged in unfair competition or unfair or deceptive acts or practices in violation of Florida Stat. § 501.201, et seq., and, accordingly, Plaintiff and members of the Damages Class seek all relief available under that statute. 189. Defendants have engaged in unfair competition or unfair, unconscionable, or deceptive acts or practices in violation of the Hawaii Revised Statutes Annotated §§ 480-1, et seq. Defendants’ unlawful conduct had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout Hawaii; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout Hawaii; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct substantially affected Hawaii commerce and consumers. As a direct and proximate result of Defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured and are threatened with further injury. Defendants have engaged in unfair competition or unfair or deceptive acts or practices in violation of Hawaii Rev. Stat. § 480, et seq., and, accordingly, Plaintiff and members of the Damages Class seek all relief available under that statute. 190. Defendants have engaged in unfair competition or unlawful, unfair, unconscionable, or deceptive acts or practices in violation of the Massachusetts Gen. Laws, Ch 93A, § 1, et seq. Defendants were engaged in trade or commerce as defined by G.L. 93A. Defendants, in a market that includes Massachusetts, agreed to, and did in fact, act in restraint of trade or commerce by affecting, fixing, controlling, and/or maintaining at non-competitive and artificially inflated levels, the prices at which generic levothyroxine sodium was sold, distributed, or obtained in Massachusetts and took efforts to conceal their agreements from Plaintiff and members of the Damages Class. The aforementioned conduct on the part of the Defendants constituted “unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce,” in violation of Massachusetts Gen. Laws, Ch 93A, §§ 2, 11. Defendants’ unlawful conduct had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout Massachusetts; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout Massachusetts; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and the members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct substantially affected Massachusetts commerce and consumers. As a direct and proximate result of the unlawful conduct of the Defendants, Plaintiff and members of the Damages Class have been injured in their business and property and are threatened with further injury. Defendants have engaged in unfair competition or unfair or deceptive acts or practices in violation of Massachusetts Gen. Laws, Ch 93A, §§ 2, 11, that were knowing or willful, and, accordingly, Plaintiff and members of the Damages Class seek all relief available under that statute, including multiple damages. 191. Defendants have engaged in unfair competition or unfair, unconscionable, or deceptive acts or practices in violation of the Missouri Merchandising Practices Act, Mo. Rev. Stat. § 407.010, et seq. Plaintiff and members of the Damages Class purchased generic levothyroxine sodium for personal or family purposes. Defendants engaged in the conduct described herein in connection with the sale of generic levothyroxine sodium in trade or commerce in a market that includes Missouri. Defendants agreed to, and did in fact affect, fix, control, and/or maintain, at artificial and non-competitive levels, the prices at which generic levothyroxine sodium was sold, distributed, or obtained in Missouri, which conduct constituted unfair practices in that it was unlawful under federal and state law, violated public policy, was unethical, oppressive and unscrupulous, and caused substantial injury to Plaintiff and members of the Damages Class. Defendants concealed, suppressed, and omitted to disclose material facts to Plaintiff and members of the Damages Class concerning Defendants’ unlawful activities and artificially inflated prices for generic levothyroxine sodium. The concealed, suppressed, and omitted facts would have been important to Plaintiff and members of the Damages Class as they related to the cost of generic levothyroxine sodium they purchased. Defendants misrepresented the real cause of price increases and/or the absence of price reductions in generic levothyroxine sodium by making public statements that were not in accord with the facts. Defendants’ statements and conduct concerning the price of generic levothyroxine sodium were deceptive as they had the tendency or capacity to mislead Plaintiff and members of the Damages Class to believe that they were purchasing generic levothyroxine sodium at prices established by a free and fair market. Defendants’ unlawful conduct had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout Missouri; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout Missouri; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. The foregoing acts and practices constituted unlawful practices in violation of the Missouri Merchandising Practices Act. As a direct and proximate result of the above-described unlawful practices, Plaintiff and members of the Damages Class suffered ascertainable loss of money or property. Accordingly, Plaintiff and members of the Damages Class seek all relief available under Missouri’s Merchandising Practices Act, specifically Mo. Rev. Stat. § 407.020, which prohibits “the act, use or employment by any person of any deception, fraud, false pretense, false promise, misrepresentation, unfair practice or the concealment, suppression, or omission of any material fact in connection with the sale or advertisement of any merchandise in trade or commerce…,” as further interpreted by the Missouri Code of State Regulations, 15 CSR 60- 7.010, et seq., 15 CSR 60-8.010, et seq., and 15 CSR 60-9.010, et seq., and Mo. Rev. Stat. § 407.025, which provides for the relief sought in this count. 192. Defendants have engaged in unfair competition or unfair, unconscionable, or deceptive acts or practices in violation of the Montana Unfair Trade Practices and Consumer Protection Act of 1970, Mont. Code, §§ 30-14-103, et seq., and §§ 30-14-201, et. seq. Defendants’ unlawful conduct had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout Montana; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout Montana; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants marketed, sold, or distributed generic levothyroxine sodium in Montana, and Defendants’ illegal conduct substantially affected Montana commerce and consumers. As a direct and proximate result of Defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured and are threatened with further injury. Defendants have engaged in unfair competition or unfair or deceptive acts or practices in violation of Mont. Code, §§ 30-14-103, et seq., and §§ 30-14-201, et seq., and, accordingly, Plaintiff and members of the Damages Class seek all relief available under that statute. 193. Defendants have engaged in unfair competition or unfair, unconscionable, or deceptive acts or practices in violation of the New Mexico Stat. § 57-12-1, et seq. Defendants agreed to, and did in fact, act in restraint of trade or commerce by affecting, fixing, controlling, and/or maintaining at non-competitive and artificially inflated levels, the prices at which generic levothyroxine sodium was sold, distributed, or obtained in New Mexico and took efforts to conceal their agreements from Plaintiff and members of the Damages Class. The aforementioned conduct on the part of the Defendants constituted “unconscionable trade practices,” in violation of N.M.S.A. Stat. § 57-12-3, in that such conduct, inter alia, resulted in a gross disparity between the value received by Plaintiff and members of the Damages Class and the prices paid by them for generic levothyroxine sodium as set forth in N.M.S.A., § 57-12-2E. Plaintiff and members of the Damages Class were not aware of Defendants’ price-fixing conspiracy and were therefore unaware that they were being unfairly and illegally overcharged. There was a gross disparity of bargaining power between the parties with respect to the price charged by Defendants for generic levothyroxine sodium. Defendants had the sole power to set that price and Plaintiff and members of the Damages Class had no power to negotiate a lower price. Moreover, Plaintiff and members of the Damages Class lacked any meaningful choice in purchasing generic levothyroxine sodium because they were unaware of the unlawful overcharge and there was no alternative source of supply through which Plaintiff and members of the Damages Class could avoid the overcharges. Defendants’ conduct with regard to sales of generic levothyroxine sodium, including their illegal conspiracy to secretly fix the price of generic levothyroxine sodium at supracompetitive levels and overcharge consumers, was substantively unconscionable because it was one-sided and unfairly benefited Defendants at the expense of Plaintiff and the public. Defendants took grossly unfair advantage of Plaintiff and members of the Damages Class. The suppression of competition that has resulted from Defendants’ conspiracy has ultimately resulted in unconscionably higher prices for consumers so that there was a gross disparity between the price paid and the value received for generic levothyroxine sodium. Defendants’ unlawful conduct had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout New Mexico; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout New Mexico; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct substantially affected New Mexico commerce and consumers. As a direct and proximate result of the unlawful conduct of the Defendants, Plaintiff and members of the Damages Class have been injured and are threatened with further injury. Defendants have engaged in unfair competition or unfair or deceptive acts or practices in violation of New Mexico Stat. § 57-12-1, et seq., and, accordingly, Plaintiff and members of the Damages Class seek all relief available under that statute. 194. Defendants have engaged in unfair competition or unfair, unconscionable, or deceptive acts or practices in violation of N.Y. Gen. Bus. Law § 349, et seq. Defendants agree to, and did in fact, act in restraint of trade or commerce by affecting, fixing, controlling, and/or maintaining, at artificial and non-competitive levels, the prices at which generic levothyroxine sodium was sold, distributed, or obtained in New York and took efforts to conceal their agreements from Plaintiff and members of the Damages Class. Defendants and their co- conspirators made public statements about the prices of generic levothyroxine sodium that either omitted material information that rendered the statements that they made materially misleading or affirmatively misrepresented the real cause of price increases for generic levothyroxine sodium; and Defendants alone possessed material information that was relevant to consumers, but failed to provide the information. Because of Defendants’ unlawful trade practices in the State of New York, New York class members who indirectly purchased generic levothyroxine sodium were misled to believe that they were paying a fair price for generic levothyroxine sodium or the price increases for generic levothyroxine sodium were for valid business reasons; and similarly situated consumers were potentially affected by Defendants’ conspiracy. Defendants knew that their unlawful trade practices with respect to pricing generic levothyroxine sodium would have an impact on New York consumers and not just the Defendants’ direct customers. Defendants knew that their unlawful trade practices with respect to pricing generic levothyroxine sodium would have a broad impact, causing consumer class members who indirectly purchased generic levothyroxine sodium to be injured by paying more for generic levothyroxine sodium than they would have paid in the absence of Defendants’ unlawful trade acts and practices. The conduct of the Defendants described herein constitutes consumer-oriented deceptive acts or practices within the meaning of N.Y. Gen. Bus. Law § 349, which resulted in consumer injury and broad adverse impact on the public at large, and harmed the public interest of New York State in an honest marketplace in which economic activity is conducted in a competitive manner. Defendants’ unlawful conduct had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout New York; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout New York; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants marketed, sold, or distributed generic levothyroxine sodium in New York, and Defendants’ illegal conduct substantially affected New York commerce and consumers. During the Class Period, each of the Defendants named herein, directly, or indirectly and through affiliates they dominated and controlled, manufactured, sold, and/or distributed generic levothyroxine sodium in New York. Plaintiff and members of the Damages Class seek all relief available pursuant to N.Y. Gen. Bus. Law § 349 (h). 195. Defendants have engaged in unfair competition or unfair, unconscionable, or deceptive acts or practices in violation of North Carolina Gen. Stat. § 75-1.1, et seq. Defendants agree to, and did in fact, act in restraint of trade or commerce by affecting, fixing, controlling, and/or maintaining, at artificial and non-competitive levels, the prices at which generic levothyroxine sodium was sold, distributed, or obtained in North Carolina and took efforts to conceal their agreements from Plaintiff and members of the Damages Class. Defendants’ price- fixing conspiracy could not have succeeded absent deceptive conduct by Defendants to cover up their illegal acts. Secrecy was integral to the formation, implementation and maintenance of Defendants’ price-fixing conspiracy. Defendants committed inherently deceptive and self- concealing actions, of which Plaintiff and members of the Damages Class could not possibly have been aware. Defendants and their co-conspirators publicly provided pretextual and false justifications regarding their price increases. Defendants’ public statements concerning the price of generic levothyroxine sodium created the illusion of competitive pricing controlled by market forces rather than supracompetitive pricing driven by Defendants’ illegal conspiracy. Moreover, Defendants deceptively concealed their unlawful activities by mutually agreeing not to divulge the existence of the conspiracy to outsiders. The conduct of the Defendants described herein constitutes consumer-oriented deceptive acts or practices within the meaning of North Carolina law, which resulted in consumer injury and broad adverse impact on the public at large, and harmed the public interest of North Carolina consumers in an honest marketplace in which economic activity is conducted in a competitive manner. Defendants’ unlawful conduct had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout North Carolina; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout North Carolina; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants marketed, sold, or distributed generic levothyroxine sodium in North Carolina, and Defendants’ illegal conduct substantially affected North Carolina commerce and consumers. During the Class Period, each of the Defendants named herein, directly, or indirectly and through affiliates they dominated and controlled, manufactured, sold, and/or distributed generic levothyroxine sodium in North Carolina. Plaintiff and members of the Damages Class seek actual damages for their injuries caused by these violations in an amount to be determined at trial and are threatened with further injury. Defendants have engaged in unfair competition or unfair or deceptive acts or practices in violation of North Carolina Gen. Stat. § 75-1.1, et seq., and, accordingly, Plaintiff and members of the Damages Class seek all relief available under that statute. 196. Defendants have engaged in unfair competition or unfair, unconscionable, or deceptive acts or practices in violation of the Rhode Island Unfair Trade Practice and Consumer Protection Act (R.I. Gen. Laws §§ 6-13.1-1, et seq.) Members of this Damages Class purchased generic levothyroxine sodium for personal, family, or household purposes. Defendants agreed to, and did in fact, act in restraint of trade or commerce in a market that includes Rhode Island, by affecting, fixing, controlling, and/or maintaining, at artificial and non-competitive levels, the prices at which generic levothyroxine sodium was sold, distributed, or obtained in Rhode Island. Defendants deliberately failed to disclose material facts to Plaintiff and members of the Damages Class concerning Defendants’ unlawful activities and artificially inflated prices for generic levothyroxine sodium. Defendants owed a duty to disclose such facts, and considering the relative lack of sophistication of the average, non-business purchaser, Defendants breached that duty by their silence. Defendants misrepresented to all purchasers during the Class Period that Defendants’ generic levothyroxine sodium prices were competitive and fair. Defendants’ unlawful conduct had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout Rhode Island; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout Rhode Island; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. As a direct and proximate result of the Defendants’ violations of law, Plaintiff and members of the Damages Class suffered an ascertainable loss of money or property as a result of Defendants’ use or employment of unconscionable and deceptive commercial practices as set forth above. That loss was caused by Defendants’ willful and deceptive conduct, as described herein. Defendants’ deception, including their affirmative misrepresentations and omissions concerning the price of generic levothyroxine sodium, likely misled all purchasers acting reasonably under the circumstances to believe that they were purchasing generic levothyroxine sodium at prices set by a free and fair market. Defendants’ affirmative misrepresentations and omissions constitute information important to Plaintiff and members of the Damages Class as they related to the cost of generic levothyroxine sodium they purchased. Defendants have engaged in unfair competition or unfair or deceptive acts or practices in violation of Rhode Island Gen. Laws. § 6-13.1-1, et seq., and, accordingly, Plaintiff and members of the Damages Class seek all relief available under that statute. 197. Defendants have engaged in unfair competition or unfair, unconscionable, or deceptive acts or practices in violation of South Carolina Unfair Trade Practices Act (S.C. Code Ann. §§ 39-5-10, et seq.). Defendants’ combinations or conspiracies had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout South Carolina; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout South Carolina; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. During the Class Period, Defendants’ illegal conduct had a substantial effect on South Carolina commerce. As a direct and proximate result of Defendants’ unlawful conduct, Plaintiff and members of the Damages Class have been injured in their business and property and are threatened with further injury. Defendants have engaged in unfair competition or unfair or deceptive acts or practices in violation of S.C. Code Ann. §§ 39-5-10, et seq., and, accordingly, Plaintiff and the members of the Damages Class seek all relief available under that 198. Defendants have engaged in unfair competition or unfair, unconscionable, or deceptive acts or practices in violation of 9 Vermont § 2451, et seq. Defendants agreed to, and did in fact, act in restraint of trade or commerce in a market that includes Vermont, by affecting, fixing, controlling, and/or maintaining, at artificial and non-competitive levels, the prices at which generic levothyroxine sodium was sold, distributed, or obtained in Vermont. Defendants deliberately failed to disclose material facts to Plaintiff and members of the Damages Class concerning Defendants’ unlawful activities and artificially inflated prices for generic levothyroxine sodium. Defendants owed a duty to disclose such facts, and considering the relative lack of sophistication of the average, non-business purchaser, Defendants breached that duty by their silence. Defendants misrepresented to all purchasers during the Class Period that Defendants’ generic levothyroxine sodium prices were competitive and fair. Defendants’ unlawful conduct had the following effects: (1) generic levothyroxine sodium price competition was restrained, suppressed, and eliminated throughout Vermont; (2) generic levothyroxine sodium prices were raised, fixed, maintained, and stabilized at artificially high levels throughout Vermont; (3) Plaintiff and members of the Damages Class were deprived of free and open competition; and (4) Plaintiff and members of the Damages Class paid supracompetitive, artificially inflated prices for generic levothyroxine sodium. As a direct and proximate result of the Defendants’ violations of law, Plaintiff and members of the Damages Class suffered an ascertainable loss of money or property as a result of Defendants’ use or employment of unconscionable and deceptive commercial practices as set forth above. That loss was caused by Defendants’ willful and deceptive conduct, as described herein. Defendants’ deception, including their affirmative misrepresentations and omissions concerning the price of generic levothyroxine sodium, likely misled all purchasers acting reasonably under the circumstances to believe that they were purchasing generic levothyroxine sodium at prices set by a free and fair market. Defendants’ misleading conduct and unconscionable activities constitutes unfair competition or unfair or deceptive acts or practices in violation of 9 Vermont § 2451, et seq., and, accordingly, Plaintiff and members of the Damages Class seek all relief available under that statute. FOURTH COUNT Unjust Enrichment (on behalf of Plaintiff and the Damages Class) 199. Plaintiff repeats the allegations set forth above as if fully set forth herein. 200. As a result of their unlawful conduct described above, Defendants have and will continue to be unjustly enriched. Defendants have been unjustly enriched by the receipt of, at a minimum, unlawfully inflated prices and unlawful profits on generic levothyroxine sodium. 201. Defendants have benefited from their unlawful acts, and it would be inequitable for Defendants to be permitted to retain any of the ill-gotten gains resulting from the overpayments made by Plaintiff and members of the Damages Class for generic levothyroxine sodium manufactured by Defendants during the Class Period. 202. Plaintiff and members of the Damages Class are entitled to the amount of Defendants’ ill-gotten gains resulting from their unlawful, unjust, and inequitable conduct. Plaintiff and members of the Damages Class are entitled to the establishment of a constructive trust consisting of all ill-gotten gains from which Plaintiff and members of the Damages Class may make claims on a pro rata basis. PRAYER FOR RELIEF WHEREFORE, Plaintiff demands judgment that: 1. The Court determine that this action may be maintained as a class action under Rules 23(a), (b)(2) and (b)(3) of the Federal Rules of Civil Procedure, and direct that reasonable notice of this action, as provided by Rule 23(c)(2) of the Federal Rules of Civil Procedure, be given to each and every member of the Class; 2. That the unlawful conduct, contract, conspiracy, or combination alleged herein be adjudged and decreed: (a) an unreasonable restraint of trade or commerce in violation of Section 1 of the Sherman Act; (b) a per se violation of Section 1 of the Sherman Act; (c) an unlawful combination, trust, agreement, understanding, and/or concert of action in violation of the state antitrust and unfair competition and consumer protection laws as set forth herein; and (d) acts of unjust enrichment by Defendants as set forth herein. 3. Plaintiff and members of the Damages Class recover damages, to the maximum extent allowed under such laws, and that a joint and several judgment in favor of Plaintiff and members of the Damages Class be entered against Defendants in an amount to be trebled to the extent such laws permit; 4. Plaintiff and members of the Damages Class recover damages, to the maximum extent allowed by such laws, in the form of restitution and/or disgorgement of profits unlawfully gained from them; 5. Defendants, their affiliates, successors, transferees, assignees, and other officers, directors, partners, agents and employees thereof, and all other persons acting or claiming to act on their behalf or in concert with them, be permanently enjoined and restrained from in any manner continuing, maintaining, or renewing the conduct, contract, conspiracy, or combination alleged herein, or from entering into any other contract, conspiracy, or combination having a similar purpose or effect, and from adopting or following any practice, plan, program, or device having a similar purpose or effect; 6. Plaintiff and members of the Damages Class be awarded restitution, including disgorgement of profits Defendants obtained as a result of their acts of unfair competition and acts of unjust enrichment; 7. Plaintiff and members of the Classes be awarded pre- and post-judgment interest as provided by law, and that such interest be awarded at the highest legal rate from and after the date of service of this Complaint; 8. Plaintiff and members of the Classes recover their costs of suit, including reasonable attorneys’ fees, as provided by law; and 9. Plaintiff and members of the Classes have such other and further relief as the case may require and the Court may deem just and proper. JURY DEMAND Plaintiff demands a trial by jury, pursuant to Rule 38(b) of the Federal Rules of Civil Procedure, of all issues so triable. Dated: December 22, 2016 Respectfully submitted, By: /s/ Scott A. Martin Irving Scher Scott A. Martin HAUSFELD LLP 33 Whitehall Street, 14th Floor New York, NY 10004 Tel: (646) 357-1100 Fax: (212) 202-4322 Email: [email protected] Email: [email protected] Michael P. Lehmann Bonny E. Sweeney Christopher L. Lebsock Stephanie Y. Cho HAUSFELD LLP 600 Montgomery Street, Suite 3200 San Francisco, CA 94111 Tel: (415) 633-1908 Fax: (415) 358-4980 Email: [email protected] Email: [email protected] Email: [email protected] Michael D. Hausfeld Sathya S. Gosselin Jeannine M. Kenney HAUSFELD LLP 1700 K Street NW, Suite 650 Washington, DC 20006 Tel: (202) 540-7200 Fax: (202) 540-7201 Email: [email protected] Email: [email protected] Email: [email protected] Lee Albert (Pro Hac Vice to be Filed) Gregory B. Linkh (GL0477) GLANCY PRONGAY & MURRAY LLP 122 E. 42nd Street Suite 2920 New York, NY 10168 Telephone: (212) 682-5340 Fax: (212) 884-0988 Email: [email protected] Email: [email protected] Counsel for Plaintiff

antitrust

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Case No. 18-cv-5217 SHAKED LAW GROUP, P.C. Dan Shaked (DS-3331) 44 Court Street, Suite 1217 Brooklyn, NY 11201 Tel. (917) 373-9128 Email: [email protected] Attorneys for Plaintiff and the Class UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK -----------------------------------------------------------X RASHETA BUNTING, Individually and as the representative of a class of similarly situated persons, Plaintiff, - against - TRAVEL CADDY, INC. d/b/a Travelon, Defendants. -----------------------------------------------------------X COMPLAINT – CLASS ACTION INTRODUCTION 1. Plaintiff, Rasheta Bunting (“Plaintiff” or “Bunting”), brings this action on behalf of herself and all other persons similarly situated against Travel Caddy, Inc. d/b/a Travelon (hereinafter “Travelon” or “Defendant”), and states as follows: 2. Plaintiff is a visually-impaired and legally blind person who requires screen- reading software to read website content using his computer. Plaintiff uses the terms “blind” or “visually-impaired” to refer to all people with visual impairments who meet the legal definition of blindness in that they have a visual acuity with correction of less than or equal to 20 x 200. Some blind people who meet this definition have limited vision; others have no vision. 3. Based on a 2010 U.S. Census Bureau report, approximately 8.1 million people in the United States are visually impaired, including 2.0 million who are blind, and according to 1 the American Foundation for the Blind’s 2015 report, approximately 400,000 visually impaired persons live in the State of New York. 4. Plaintiff brings this civil rights action against Travelon for their failure to design, construct, maintain, and operate their website to be fully accessible to and independently usable by Plaintiff and other blind or visually-impaired persons. Defendant is denying blind and visually- impaired persons throughout the United States with equal access to the goods and services Travelon provides to their non-disabled customers through http//:www.Travelonbags.com (hereinafter “Travelonbags.com” or “the website”). Defendants’ denial of full and equal access to its website, and therefore denial of its products and services offered, and in conjunction with its physical locations, is a violation of Plaintiff’s rights under the Americans with Disabilities Act (the “ADA”). 5. Travelonbags.com provides to the public a wide array of the goods, services, price specials, employment opportunities and other programs offered by Travelon. Yet, Travelonbags.com contains thousands of access barriers that make it difficult if not impossible for blind and visually-impaired customers to use the website. In fact, the access barriers make it impossible for blind and visually-impaired users to even complete a transaction on the website. Thus, Travelon excludes the blind and visually-impaired from the full and equal participation in the growing Internet economy that is increasingly a fundamental part of the common marketplace and daily living. In the wave of technological advances in recent years, assistive computer technology is becoming an increasingly prominent part of everyday life, allowing blind and visually-impaired persons to fully and independently access a variety of services. 6. The blind have an even greater need than the sighted to shop and conduct transactions online due to the challenges faced in mobility. The lack of an accessible website 2 means that blind people are excluded from experiencing transacting with defendant’s website and from purchasing goods or services from defendant’s website. 7. Despite readily available accessible technology, such as the technology in use at other heavily trafficked retail websites, which makes use of alternative text, accessible forms, descriptive links, resizable text and limits the usage of tables and JavaScript, Defendant has chosen to rely on an exclusively visual interface. Travelon’s sighted customers can independently browse, select, and buy online without the assistance of others. However, blind persons must rely on sighted companions to assist them in accessing and purchasing on Travelonbags.com. 8. By failing to make the website accessible to blind persons, Defendant is violating basic equal access requirements under both state and federal law. 9. Congress provided a clear and national mandate for the elimination of discrimination against individuals with disabilities when it enacted the ADA. Such discrimination includes barriers to full integration, independent living, and equal opportunity for persons with disabilities, including those barriers created by websites and other public accommodations that are inaccessible to blind and visually impaired persons. Similarly, New York state law requires places of public accommodation to ensure access to goods, services, and facilities by making reasonable accommodations for persons with disabilities. 10. Plaintiff browsed and intended to make an online purchase of a zip wallet on Travelonbags.com. However, unless Defendant remedies the numerous access barriers on its website, Plaintiff and Class members will continue to be unable to independently navigate, browse, use, and complete a transaction on Travelonbags.com. 11. Because Defendant’s website, Travelonbags.com, is not equally accessible to blind and visually-impaired consumers, it violates the ADA. Plaintiff seeks a permanent injunction to cause a change in Travelon’s policies, practices, and procedures to that Defendant’s website 3 will become and remain accessible to blind and visually-impaired consumers. This complaint also seeks compensatory damages to compensate Class members for having been subjected to unlawful discrimination. JURISDICTION AND VENUE 12. This Court has subject matter jurisdiction over this action under 28 U.S.C. § 1331 and 42 U.S.C. § 12181, as Plaintiff’s claims arise under Title III of the ADA, 42 U.S.C. § 12181 et seq., and 28 U.S.C. § 1332, because this is a class action, as defined by 28 U.S.C. § 1332(d)(1)(B), in which a member of the putative class is a citizen of a different state than Defendant, and the amount in controversy exceeds the sum or value of $5,000,000, excluding interest and costs. See 28 U.S.C. § 133(d)(2). 13. This Court also has supplemental jurisdiction over pursuant to 28 U.S.C. § 1367, over Plaintiff’s pendent claims under the New York State Human Rights Law, N.Y. Exec. Law, Article 15 (Executive Law § 290 et seq.) and the New York City Human Rights Law, N.Y.C. Administrative Code § 8-101 et seq. (“City Law”). 14. Venue is proper in this District of New York pursuant to 28 U.S.C. §§ 1391(b)- (c) and 144(a) because Plaintiff resides in this District, Defendant conducts and continues to conduct a substantial and significant amount of business in this District, and a substantial portion of the conduct complained of herein occurred in this District. 15. Defendant is registered to do business in New York State and has been conducting business in New York State, including in this District. Defendant purposefully targets and otherwise solicits business from New York State residents through its website and sells its products through many retailers in this District. Because of this targeting, it is not unusual for Travelon to conduct business with New York State residents. Defendant also has been and is committing the acts alleged herein in this District and has been and is violating the rights of 4 consumers in this District and has been and is causing injury to consumers in this District. A substantial part of the act and omissions giving rise to Plaintiff’s claims have occurred in this District. Most courts support the placement of venue in the district in which Plaintiff tried and failed to access the Website. In Access Now, Inc. v. Otter Products, LLC 280 F.Supp.3d 287 (D. Mass. 2017), Judge Patti B. Saris ruled that “although the website may have been created and operated outside of the district, the attempts to access the website in Massachusetts are part of the sequence of events underlying the claim. Therefore, venue is proper in [the District of Massachusetts].” Otter Prods., 280 F.Supp.3d at 294. This satisfies Due Process because the harm – the barred access to the website – occurred here.” Otter Prods., 280 F.Supp.3d at 293. Additionally, in Access Now, Inc. v. Sportswear, Inc., No. 17-cv-11211-NMG, 2018 Dist. LEXIS 47318 (D. Mass. Mar. 22, 2018), Judge Nathaniel M. Gorton stated that the defendant “availed itself of the forum state’s economic activities by targeting the residents of the Commonwealth . . . . Such targeting evinces a voluntary attempt to appeal to the customer base in the forum.” Sportswear, No. 1:17-cv-11211-NMG, 2018 U.S. Dist. LEXIS 47318 at *11. Thus, establishing a customer base in a particular district is sufficient cause for venue placement. Specifically, Plaintiff attempted to purchase a zip wallet on Defendant’s website, Travelonbags.com. PARTIES 16. Plaintiff, is and has been at all relevant times a resident of Kings County, State of New York. 17. Plaintiff is legally blind and a member of a protected class under the ADA, 42 U.S.C. § 12102(l)-(2), the regulations implementing the ADA set forth at 28 CFR §§ 36.101 et seq., the New York State Human Rights Law and the New York City Human Rights Law. Plaintiff, Rasheta Bunting, cannot use a computer without the assistance of screen reader 5 software. Plaintiff, Rasheta Bunting, has been denied the full enjoyment of the facilities, goods and services of Travelonbags.com as a result of accessibility barriers on Travelonbags.com. 18. Defendant, Travel Caddy, Inc., is an Illinois Foreign Business Corporation doing business in New York with its principal place of business located at 700 Touhy Avenue, Elk Grove Village, IL 60007. 19. Travelon provides to the public a website known as Travelonbags.com which provides consumers with access to an array of goods and services, including, the ability to view the various lines of bags, wallets, cases, and accessories, and make purchases, among other features. Consumers across the United States and the world use Defendant’s website to purchase bags, wallets, cases, and related products. Defendant’s website is a place of public accommodation within the definition of Title III of the ADA, 42 U.S.C. § 12181(7). See Victor Andrews v. Blick Art Materials, LLC, No. 17-cv-767, 2017 WL 3278898 (E.D.N.Y. August 1, 2017). The inaccessibility of Travelonbags.com has deterred Plaintiff from buying a zip wallet. NATURE OF THE CASE 20. The Internet has become a significant source of information, a portal, and a tool for conducting business, doing everyday activities such as shopping, learning, banking, researching, as well as many other activities for sighted, blind and visually-impaired persons alike. 21. The blind access websites by using keyboards in conjunction with screen- reading software which vocalizes visual information on a computer screen. Except for a blind person whose residual vision is still sufficient to use magnification, screen access software provides the only method by which a blind person can independently access the Internet. Unless websites are designed to allow for use in this manner, blind persons are unable to fully access Internet websites and the information, products and services contained therein. 6 22. For screen-reading software to function, the information on a website must be capable of being rendered into text. If the website content is not capable of being rendered into text, the blind user is unable to access the same content available to sighted users. 23. Blind users of Windows operating system-enabled computers and devises have several screen-reading software programs available to them. Job Access With Speech, otherwise known as “JAWS” is currently the most popular, separately purchase and downloaded screen- reading software program available for blind computer users. 24. The international website standards organization, the World Wide Web Consortium, known throughout the world as W3C, has published version 2.1 of the Web Content Accessibility Guidelines (“WCAG 2.1”). WCAG 2.1 are well-established guidelines for making websites accessible to blind and visually-impaired persons. These guidelines are universally followed by most large business entities and government agencies to ensure their websites are accessible. Many Courts have also established WCAG 2.1 as the standard guideline for accessibility. The federal government has also promulgated website accessibility standards under Section 508 of the Rehabilitation Act. These guidelines are readily available via the Internet, so that a business designing a website can easily access them. These guidelines recommend several basic components for making websites accessible, including but not limited to: adding invisible alt-text to graphics, ensuring that all functions can be performed using a keyboard and not just a mouse, ensuring that image maps are accessible, and adding headings so that blind persons can easily navigate the site. Without these very basic components, a website will be inaccessible to a blind person using a screen reader. Websites need to be accessible to the “least sophisticated” user of screen-reading software and need to be able to work with all browsers. Websites need to be continually updated and maintained to ensure that they remain fully accessible. FACTUAL ALLEGATIONS 7 25. Defendant, Travel Caddy, Inc., controls and operates Travelonbags.com in New York State and throughout the United States and the world. 26. Travelonbags.com is a commercial website that offers products and services for Online sale. The online store allows the user to browse bags, wallets, cases, and accessories, make purchases, and perform a variety of other functions. 27. Among the features offered by Travelonbags.com are the following: (a) Consumers may use the website to connect with Travelon on social media, using such sites as Facebook, Twitter, Instagram, and Pinterest; (b) an online store, allowing customers to purchase the various lines of bags, wallets, cases, and accessories; and (c) learning about career opportunities, promotions, and about the company. 28. This case arises out of Travelon’s policy and practice of denying the blind access to the goods and services offered by Travelonbags.com. Due to Travelon’s failure and refusal to remove access barriers to Travelonbags.com, blind individuals have been and are being denied equal access to Travelon, as well as to the numerous goods, services and benefits offered to the public through Travelonbags.com. 29. Travelon denies the blind access to goods, services and information made available through Travelonbags.com by preventing them from freely navigating Travelonbags.com. 30. Travelonbags.com contains access barriers that prevent free and full use by Plaintiff and blind persons using keyboards and screen-reading software. These barriers are pervasive and include, but are not limited to: lack of alt-text on graphics, inaccessible drop-down menus, the lack of navigation links, the lack of adequate prompting and labeling, the denial of 8 keyboard access, empty links that contain no text, redundant links where adjacent links go to the same URL address, and the requirement that transactions be performed solely with a mouse. 31. Alternative text (“Alt-text”) is invisible code embedded beneath a graphical image on a website. Web accessibility requires that alt-text be coded with each picture so that a screen-reader can speak the alternative text while sighted users see the picture. Alt-text does not change the visual presentation except that it appears as a text pop-up when the mouse moves over the picture. There are many important pictures on Travelonbags.com that lack a text equivalent. The lack of alt-text on these graphics prevents screen readers from accurately vocalizing a description of the graphics (screen-readers detect and vocalize alt-text to provide a description of the image to a blind computer user). As a result, Plaintiff and blind Travelonbags.com customers are unable to determine what is on the website, browse the website or investigate and/or make purchases. Specifically, Plaintiff was unable to learn about any specific product. She was unable to learn about the material and the dimensions. 32. Travelonbags.com also lacks prompting information and accommodations necessary to allow blind shoppers who use screen-readers to locate and accurately fill-out online forms. On a shopping site such as Travelonbags.com, these forms include search fields to locate bags, wallets, cases, and accessories, fields that specify the color, and fields used to fill-out personal information, including address and credit card information. Due to lack of adequate labeling, Plaintiff and blind customers cannot make purchases or inquiries as to Defendant’s merchandise, nor can they enter their personal identification and financial information with confidence and security. When Plaintiff attempted to select a color, the screen-reader would not recognize the selection and would not allow her to continue to checkout. Consequently, Plaintiff was unable to view any of the products, unable to learn about any of the products, unable to “add to cart”, unable to proceed to checkout and unable to complete a transaction. 9 33. Similarly, Travelonbags.com lacks accessible drop-down menus. Drop-down menus allow customers to locate and choose products as well as specify the color of certain items. On Travelonbags.com, blind customers are not aware if the desired products, such as wallets, have been added to the shopping cart because the screen-reader does not indicate the type of product. Moreover, blind customers are unable to select the color of the product they desire. Therefore, blind customers are essentially prevented from purchasing any items on Travelonbags.com. 34. Furthermore, Travelonbags.com lacks accessible image maps. An image map is a function that combines multiple words and links into one single image. Visual details on this single image highlight different “hot spots” which, when clicked on, allow the user to jump to many different destinations within the website. For an image map to be accessible, it must contain alt-text for the various “hot spots.” The image maps on Travelonbags.com’s menu page do not contain adequate alt-text and are therefore inaccessible to Plaintiff and the other blind individuals attempting to make a purchase. When Plaintiff tried to access the menu link in order to make a purchase, she was unable to access it completely. 35. Travelonbags.com also lacks accessible forms. Color boxes allow customers to specify the color of certain items. On Travelonbags.com, blind customers are unable to select specific color because the screen-reader does not indicate the function of the box. As a result, blind customers are denied access to the color box. Furthermore, Plaintiff is unable to locate the shopping cart because the shopping cart form does not specify the purpose of the shopping cart. As a result, blind customers are denied access to the shopping cart. Consequently, blind customers are unsuccessful in adding products into their shopping carts and are essentially prevented from purchasing items on Travelonbags.com. 10 36. Moreover, the lack of navigation links on Defendant’s website makes attempting to navigate through Travelonbags.com even more time consuming and confusing for Plaintiff and blind consumers. 37. Travelonbags.com requires the use of a mouse to complete a transaction. Yet, it is a fundamental tenet of web accessibility that for a web page to be accessible to Plaintiff and blind people, it must be possible for the user to interact with the page using only the keyboard. Indeed, Plaintiff and blind users cannot use a mouse because manipulating the mouse is a visual activity of moving the mouse pointer from one visual spot on the page to another. Thus, Travelonbags.com’s inaccessible design, which requires the use of a mouse to complete a transaction, denies Plaintiff and blind customers the ability to independently navigate and/or make purchases on Travelonbags.com. 38. Due to Travelonbags.com’s inaccessibility, Plaintiff and blind customers must in turn spend time, energy, and/or money to make their purchases at traditional brick-and-mortar retailers. Some blind customers may require a driver to get to the stores or require assistance in navigating the stores. By contrast, if Travelonbags.com was accessible, a blind person could independently investigate products and make purchases via the Internet as sighted individuals can and do. According to WCAG 2.1 Guideline 2.4.1, a mechanism is necessary to bypass blocks of content that are repeated on multiple webpages because requiring users to extensively tab before reaching the main content is an unacceptable barrier to accessing the website. Plaintiff must tab through every navigation bar option and footer on Defendant’s website in an attempt to reach the desired service. Thus, Travelonbags.com’s inaccessible design, which requires the use of a mouse to complete a transaction, denies Plaintiff and blind customers the ability to independently make purchases on Travelonbags.com. 11 39. Travelonbags.com thus contains access barriers which deny the full and equal access to Plaintiff, who would otherwise use Travelonbags.com and who would otherwise be able to fully and equally enjoy the benefits and services of Travelonbags.com in New York State and throughout the United States. 40. Plaintiff, Rasheta Bunting, has made numerous attempts to complete a purchase on Travelonbags.com, most recently in August 2018, but was unable to do so independently because of the many access barriers on Defendant’s website. These access barriers have caused Travelonbags.com to be inaccessible to, and not independently usable by, blind and visually-impaired persons. Amongst other access barriers experienced, Plaintiff was unable to purchase a zip wallet. 41. As described above, Plaintiff has actual knowledge of the fact that Defendant’s website, Travelonbags.com, contains access barriers causing the website to be inaccessible, and not independently usable by, blind and visually-impaired persons. 42. These barriers to access have denied Plaintiff full and equal access to, and enjoyment of, the goods, benefits and services of Travelonbags.com. 43. Defendant engaged in acts of intentional discrimination, including but not limited to the following policies or practices: (a) constructed and maintained a website that is inaccessible to blind class members with knowledge of the discrimination; and/or (b) constructed and maintained a website that is sufficiently intuitive and/or obvious that is inaccessible to blind class members; and/or (c) failed to take actions to correct these access barriers in the face of substantial harm and discrimination to blind class members. 12 44. Defendant utilizes standards, criteria or methods of administration that have the effect of discriminating or perpetuating the discrimination of others. 45. Because of Defendant’s denial of full and equal access to, and enjoyment of, the goods, benefits and services of Travelonbags.com, Plaintiff and the class have suffered an injury-in-fact which is concrete and particularized and actual and is a direct result of defendant’s conduct. CLASS ACTION ALLEGATIONS 46. Plaintiff, on behalf of herself and all others similarly situated, seeks certification of the following nationwide class pursuant to Rule 23(a) and 23(b)(2) of the Federal Rules of Civil Procedure: “all legally blind individuals in the United States who have attempted to access Travelonbags.com and as a result have been denied access to the enjoyment of goods and services offered by Travelonbags.com, during the relevant statutory period.” 47. Plaintiff seeks certification of the following New York subclass pursuant to Fed.R.Civ.P. 23(a), 23(b)(2), and, alternatively, 23(b)(3): “all legally blind individuals in New York State who have attempted to access Travelonbags.com and as a result have been denied access to the enjoyment of goods and services offered by Travelonbags.com, during the relevant statutory period.” 48. There are hundreds of thousands of visually-impaired persons in New York State. There are approximately 8.1 million people in the United States who are visually- impaired. Id. Thus, the persons in the class are so numerous that joinder of all such persons is impractical and the disposition of their claims in a class action is a benefit to the parties and to the Court. 49. This case arises out of Defendant’s policy and practice of maintaining an 13 inaccessible website denying blind persons access to the goods and services of Travelonbags.com. Due to Defendant’s policy and practice of failing to remove access barriers, blind persons have been and are being denied full and equal access to independently browse, select and shop on Travelonbags.com. 50. There are common questions of law and fact common to the class, including without limitation, the following: (a) Whether Travelonbags.com is a “public accommodation” under the ADA; (b) Whether Travelonbags.com is a “place or provider of public accommodation” under the laws of New York; (c) Whether Defendant, through its website, Travelonbags.com, denies the full and equal enjoyment of its goods, services, facilities, privileges, advantages, or accommodations to people with visual disabilities in violation of the ADA; and (d) Whether Defendant, through its website, Travelonbags.com, denies the full and equal enjoyment of its goods, services, facilities, privileges, advantages, or accommodations to people with visual disabilities in violation of the law of New York. 51. The claims of the named Plaintiff are typical of those of the class. The class, similar to the Plaintiff, is severely visually-impaired or otherwise blind, and claims Travelon has violated the ADA, and/or the laws of New York by failing to update or remove access barriers on their website, Travelonbags.com, so it can be independently accessible to the class of people who are legally blind. 52. Plaintiff will fairly and adequately represent and protect the interests of the members of the Class because Plaintiff has retained and is represented by counsel competent and experienced in complex class action litigation, and because Plaintiff has no interests antagonistic to the members of the class. Class certification of the claims is appropriate pursuant to Fed. R. 14 Civ. P. 23(b)(2) because Defendant has acted or refused to act on grounds generally applicable to the Class, making appropriate both declaratory and injunctive relief with respect to Plaintiff and the Class as a whole. 53. Alternatively, class certification is appropriate under Fed. R. Civ. P. 23(b)(3) because questions of law and fact common to Class members clearly predominate over questions affecting only individual class members, and because a class action is superior to other available methods for the fair and efficient adjudication of this litigation. 54. Judicial economy will be served by maintenance of this lawsuit as a class action in that it is likely to avoid the burden that would be otherwise placed upon the judicial system by the filing of numerous similar suits by people with visual disabilities throughout the United States. 55. References to Plaintiff shall be deemed to include the named Plaintiff and each member of the class, unless otherwise indicated. FIRST CAUSE OF ACTION (Violation of 42 U.S.C. §§ 12181 et seq. – Title III of the Americans with Disabilities Act) 56. Plaintiff repeats, realleges and incorporates by reference the allegations contained in paragraphs 1 through 55 of this Complaint as though set forth at length herein. 57. Title III of the American with Disabilities Act of 1990, 42 U.S.C. § 12182(a) provides that “No individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation.” Title III also prohibits an entity from “[u]tilizing standards or criteria or methods of administration that have the effect of discriminating on the basis of disability.” 42 U.S.C. § 12181(b)(2)(D)(I). 15 58. Travelonbags.com is a sales establishment and public accommodation within the definition of 42 U.S.C. §§ 12181(7). 59. Defendant is subject to Title III of the ADA because it owns and operates Travelonbags.com. 60. Under Title III of the ADA, 42 U.S.C. § 12182(b)(1)(A)(I), it is unlawful discrimination to deny individuals with disabilities or a class of individuals with disabilities the opportunity to participate in or benefit from the goods, services, facilities, privileges, advantages, or accommodations of an entity. 61. Under Title III of the ADA, 42 U.S.C. § 12182(b)(1)(A)(II), it is unlawful discrimination to deny individuals with disabilities or a class of individuals with disabilities an opportunity to participate in or benefit from the goods, services, facilities, privileges, advantages, or accommodation, which is equal to the opportunities afforded to other individuals. 62. Specifically, under Title III of the ADA, 42 U.S.C. § 12182(b)(2)(A)(II), unlawful discrimination includes, among other things, “a failure to make reasonable modifications in policies, practices, or procedures, when such modifications are necessary to afford such goods, services, facilities, privileges, advantages, or accommodations to individuals with disabilities, unless the entity can demonstrate that making such modifications would fundamentally alter the nature of such goods, services, facilities, privileges, advantages or accommodations.” 63. In addition, under Title III of the ADA, 42 U.S.C. § 12182(b)(2)(A)(III), unlawful discrimination also includes, among other things, “a failure to take such steps as may be necessary to ensure that no individual with disability is excluded, denied services, segregated or otherwise treated differently than other individuals because of the absence of auxiliary aids and services, unless the entity can demonstrate that taking such steps would fundamentally alter 16 the nature of the good, service, facility, privilege, advantage, or accommodation being offered or would result in an undue burden.” 64. There are readily available, well-established guidelines on the Internet for making websites accessible to the blind and visually-impaired. These guidelines have been followed by other business entities in making their websites accessible, including but not limited to ensuring adequate prompting and accessible alt-text. Incorporating the basic components to make their website accessible would neither fundamentally alter the nature of Defendant’s business nor result in an undue burden to Defendant. 65. The acts alleged herein constitute violations of Title III of the ADA, 42 U.S.C. § 12101 et seq., and the regulations promulgated thereunder. Patrons of Travelon who are blind have been denied full and equal access to Travelonbags.com, have not been provided services that are provided to other patrons who are not disabled, and/or have been provided services that are inferior to the services provided to non-disabled patrons. 66. Defendant has failed to take any prompt and equitable steps to remedy its discriminatory conduct. These violations are ongoing. 67. As such, Defendant discriminates, and will continue in the future to discriminate against Plaintiff and members of the proposed class and subclass on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, accommodations and/or opportunities of Travelonbags.com in violation of Title III of the Americans with Disabilities Act, 42 U.S.C. §§ 12181 et seq. and/or its implementing regulations. 68. Unless the Court enjoins Defendant from continuing to engage in these unlawful practices, Plaintiff and members of the proposed class and subclass will continue to suffer irreparable harm. 17 69. The actions of Defendant were and are in violation of the ADA, and therefore Plaintiff invokes his statutory right to injunctive relief to remedy the discrimination. 70. Plaintiff is also entitled to reasonable attorneys’ fees and costs. 71. Pursuant to 42 U.S.C. § 12188 and the remedies, procedures, and rights set forth and incorporated therein, Plaintiff prays for judgment as set forth below. SECOND CAUSE OF ACTION (Violation of New York State Human Rights Law, N.Y. Exec. Law Article 15 (Executive Law § 292 et seq.)) 72. Plaintiff repeats, realleges and incorporates by reference the allegations contained in paragraphs 1 through 71 of this Complaint as though set forth at length herein. 73. N.Y. Exec. Law § 296(2)(a) provides that it is “an unlawful discriminatory practice for any person, being the owner, lessee, proprietor, manager, superintendent, agent, or employee of any place of public accommodation . . . because of the . . . disability of any person, directly or indirectly, to refuse, withhold from or deny to such person any of the accommodations, advantages, facilities or privileges thereof.”. 74. Travelonbags.com is a sales establishment and public accommodation within the definition of N.Y. Exec. Law § 292(9). 75. Defendant is subject to the New York Human Rights Law because it owns and operates Travelonbags.com. Defendant is a person within the meaning of N.Y. Exec. Law. § 76. Defendant is violating N.Y. Exec. Law § 296(2)(a) in refusing to update or remove access barriers to Travelonbags.com, causing Travelonbags.com to be completely inaccessible to the blind. This inaccessibility denies blind patrons the full and equal access to the facilities, goods and services that Defendant makes available to the non-disabled public. 18 77. Specifically, under N.Y. Exec. Law § unlawful discriminatory practice includes, among other things, “a refusal to make reasonable modifications in policies, practices, or procedures, when such modifications are necessary to afford facilities, privileges, advantages or accommodations to individuals with disabilities, unless such person can demonstrate that making such modifications would fundamentally alter the nature of such facilities, privileges, advantages or accommodations.” 78. In addition, under N.Y. Exec. Law § 296(2)(c)(II), unlawful discriminatory practice also includes, “a refusal to take such steps as may be necessary to ensure that no individual with a disability is excluded or denied services because of the absence of auxiliary aids and services, unless such person can demonstrate that taking such steps would fundamentally alter the nature of the facility, privilege, advantage or accommodation being offered or would result in an undue burden.” 79. There are readily available, well-established guidelines on the Internet for making websites accessible to the blind and visually-impaired. These guidelines have been followed by other business entities in making their website accessible, including but not limited to: adding alt-text to graphics and ensuring that all functions can be performed by using a keyboard. Incorporating the basic components to make their website accessible would neither fundamentally alter the nature of Defendant’s business nor result in an undue burden to Defendant. 80. Defendant’s actions constitute willful intentional discrimination against the class on the basis of a disability in violation of the New York State Human Rights Law, N.Y. Exec. Law § 296(2) in that Defendant has: (a) constructed and maintained a website that is inaccessible to blind class members with knowledge of the discrimination; and/or 19 (b) constructed and maintained a website that is sufficiently intuitive and/or obvious that is inaccessible to blind class members; and/or (c) failed to take actions to correct these access barriers in the face of substantial harm and discrimination to blind class members. 81. Defendant has failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 82. As such, Defendant discriminates, and will continue in the future to discriminate against Plaintiff and members of the proposed class and subclass on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, accommodations and/or opportunities of Travelonbags.com under N.Y. Exec. Law § 296(2) et seq. and/or its implementing regulations. Unless the Court enjoins Defendant from continuing to engage in these unlawful practices, Plaintiff and members of the class will continue to suffer irreparable harm. 83. The actions of Defendant were and are in violation of the New York State Human Rights Law and therefore Plaintiff invokes his right to injunctive relief to remedy the discrimination. 84. Plaintiff is also entitled to compensatory damages, as well as civil penalties and fines pursuant to N.Y. Exec. Law § 297(4)(c) et seq. for each and every offense. 85. Plaintiff is also entitled to reasonable attorneys’ fees and costs. 86. Pursuant to N.Y. Exec. Law § 297 and the remedies, procedures, and rights set forth and incorporated therein, Plaintiff prays for judgment as set forth below. THIRD CAUSE OF ACTION (Violation of New York State Civil Rights Law, NY CLS Civ R, Article 4 (CLS Civ R § 40 et seq.)) 20 87. Plaintiff repeats, realleges and incorporates by reference the allegations contained in paragraphs 1 through 86 of this Complaint as though set forth at length herein. 88. Plaintiff served notice thereof upon the attorney general as required by N.Y. Civil Rights Law § 41. 89. N.Y. Civil Rights Law § 40 provides that “all persons within the jurisdiction of this state shall be entitled to the full and equal accommodations, advantages, facilities, and privileges of any places of public accommodations, resort or amusement, subject only to the conditions and limitations established by law and applicable alike to all persons. No persons, being the owner, lessee, proprietor, manager, superintendent, agent, or employee of any such place shall directly or indirectly refuse, withhold from, or deny to any person any of the accommodations, advantages, facilities and privileges thereof . . .” 90. N.Y. Civil Rights Law § 40-c(2) provides that “no person because of . . . disability, as such term is defined in section two hundred ninety-two of executive law, be subjected to any discrimination in his or her civil rights, or to any harassment, as defined in section 240.25 of the penal law, in the exercise thereof, by any other person or by any firm, corporation or institution, or by the state or any agency or subdivision.” 91. Travelonbags.com is a sales establishment and public accommodation within the definition of N.Y. Civil Rights Law § 40-c(2). 92. Defendant is subject to New York Civil Rights Law because it owns and operates Travelonbags.com. Defendant is a person within the meaning of N.Y. Civil Law § 40- 93. Defendant is violating N.Y. Civil Rights Law § 40-c(2) in refusing to update or remove access barriers to Travelonbags.com, causing Travelonbags.com to be completely 21 inaccessible to the blind. This inaccessibility denies blind patrons full and equal access to the facilities, goods and services that Defendant makes available to the non-disabled public. 94. There are readily available, well-established guidelines on the Internet for making websites accessible to the blind and visually-impaired. These guidelines have been followed by other business entities in making their website accessible, including but not limited to: adding alt-text to graphics and ensuring that all functions can be performed by using a keyboard. Incorporating the basic components to make their website accessible would neither fundamentally alter the nature of Defendant’s business nor result in an undue burden to Defendant. 95. In addition, N.Y. Civil Rights Law § 41 states that “any corporation which shall violate any of the provisions of sections forty, forty-a, forty-b or forty two . . . shall for each and every violation thereof be liable to a penalty of not less than one hundred dollars nor more than five hundred dollars, to be recovered by the person aggrieved thereby . . .” 96. Specifically, under N.Y. Civil Rights Law § 40-d, “any person who shall violate any of the provisions of the foregoing section, or subdivision three of section 240.30 or section 240.31 of the penal law, or who shall aid or incite the violation of any of said provisions shall for each and every violation thereof be liable to a penalty of not less than one hundred dollars nor more than five hundred dollars, to be recovered by the person aggrieved thereby in any court of competent jurisdiction in the county in which the defendant shall reside . . .” 97. Defendant has failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 98. As such, Defendant discriminates, and will continue in the future to discriminate against Plaintiff and members of the proposed class on the basis of disability are 22 being directly indirectly refused, withheld from, or denied the accommodations, advantages, facilities and privileges thereof in § 40 et seq. and/or its implementing regulations. 99. Plaintiff is entitled to compensatory damages of five hundred dollars per instance, as well as civil penalties and fines pursuant to N.Y. Civil Rights Law § 40 et seq. for each and every offense. FOURTH CAUSE OF ACTION (Violation of New York City Human Rights Law, N.Y.C. Administrative Code § 8-102, et seq.) 100. Plaintiff repeats, realleges and incorporates by reference the allegations contained in paragraphs 1 through 99 of this Complaint as though set forth at length herein. 101. N.Y.C. Administrative Code § 8-107(4)(a) provides that “it shall be an unlawful discriminatory practice for any person, being the owner, lessee, proprietor, manager, superintendent, agent or employee of any place or provider of public accommodation, because of . . . disability . . . directly or indirectly, to refuse, withhold from or deny to such person, any of the accommodations, advantages, facilities or privileges thereof.” 102. Travelonbags.com is a sales establishment and public accommodation within the definition of N.Y.C. Administrative Code § 8-102(9). 103. Defendant is subject to City Law because it owns and operates Travelonbags.com. Defendant is a person within the meaning of N.Y.C. Administrative Code § 8-102(1). 104. Defendant is violating N.Y.C. Administrative Code § 8-107(4)(a) in refusing to update or remove access barriers to Travelonbags.com, causing Travelonbags.com to be completely inaccessible to the blind. This inaccessibility denies blind patrons full and equal access to the facilities, goods, and services that Defendant makes available to the non-disabled public. Specifically, Defendant is required to “make reasonable accommodation to the needs of 23 persons with disabilities . . . any person prohibited by the provisions of [§ 8-107 et seq.] from discriminating on the basis of disability shall make reasonable accommodation to enable a person with a disability to . . . enjoy the right or rights in question provided that the disability is known or should have been known by the covered entity.” N.Y.C. Administrative Code § 8- 107(15)(a). 105. Defendant’s actions constitute willful intentional discrimination against the class on the basis of a disability in violation of the N.Y.C. Administrative Code § 8-107(4)(a) and § 8-107(15)(a) in that Defendant has: (a) constructed and maintained a website that is inaccessible to blind class members with knowledge of the discrimination; and/or (b) constructed and maintained a website that is sufficiently intuitive and/or obvious that is inaccessible to blind class members; and/or (c) failed to take actions to correct these access barriers in the face of substantial harm and discrimination to blind class members. 106. Defendant has failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 107. As such, Defendant discriminates, and will continue in the future to discriminate against Plaintiff and members of the proposed class and subclass on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, accommodations and/or opportunities of Travelonbags.com under N.Y.C. Administrative Code § 8-107(4)(a) and/or its implementing regulations. Unless the Court enjoins Defendant from continuing to engage in these unlawful practices, Plaintiff and members of the class will continue to suffer irreparable harm. 24 108. The actions of Defendant were and are in violation of City law and therefore Plaintiff invokes his right to injunctive relief to remedy the discrimination. 109. Plaintiff is also entitled to compensatory damages, as well as civil penalties and fines under N.Y.C. Administrative Code § 8-120(8) and § 8-126(a) for each offense. 110. Plaintiff is also entitled to reasonable attorneys’ fees and costs. 111. Pursuant to N.Y.C. Administrative Code § 8-120(8) and § 8-126(a) and the remedies, procedures, and rights set forth and incorporated therein, Plaintiff prays for judgment as set forth below. FIFTH CAUSE OF ACTION (Declaratory Relief) 112. Plaintiff repeats, realleges and incorporates by reference the allegations contained in paragraphs 1 through 111 of this Complaint as though set forth at length herein. 113. An actual controversy has arisen and now exists between the parties in that Plaintiff contends, and is informed and believes that Defendant denies, that Travelonbags.com contains access barriers denying blind customers the full and equal access to the goods, services and facilities of Travelonbags.com, which Travelon owns, operates and/or controls, fails to comply with applicable laws including, but not limited to, Title III of the American with Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et seq., and N.Y.C. Administrative Code § 8-107, et seq. prohibiting discrimination against the blind. 114. A judicial declaration is necessary and appropriate at this time in order that each of the parties may know their respective rights and duties and act accordingly. 25 PRAYER FOR RELIEF WHEREFORE, Plaintiff respectfully demands judgment in favor of Plaintiff and the class and against the Defendants as follows: a) A preliminary and permanent injunction to prohibit Defendant from violating the Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et seq., and N.Y.C. Administrative Code § 8-107, et seq., and the laws of New York; b) A preliminary and permanent injunction requiring Defendant to take all the steps necessary to make its website, Travelonbags.com, into full compliance with the requirements set forth in the ADA, and its implementing regulations, so that Travelonbags.com is readily accessible to and usable by blind individuals; c) A declaration that Defendant owns, maintains and/or operates its website, Travelonbags.com, in a manner which discriminates against the blind and which fails to provide access for persons with disabilities as required by Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et seq., and N.Y.C. Administrative Code § 8-107, et seq., and the laws of New York; d) An order certifying this case as a class action under Fed. R. Civ. P. 23(a) & (b)(2) and/or (b)(3), appointing Plaintiff as Class Representative, and his attorneys as Class Counsel; e) An order directing Defendants to continually update and maintain its website to ensure that it remains fully accessible to and usable by the visually-impaired; f) Compensatory damages in an amount to be determined by proof, including all applicable statutory damages and fines, to Plaintiff and the proposed class for violations of their civil rights under New York State Human Rights Law and City Law; g) Plaintiff’s reasonable attorneys’ fees, expenses, and costs of suit as provided by state and federal law; 26 h) For pre- and post-judgment interest to the extent permitted by law; and i) For such other and further relief which this court deems just and proper. Dated: Brooklyn, New York September 5, 2018 SHAKED LAW GROUP, P.C. Attorneys for Plaintiff By:/s/Dan Shaked_________ Dan Shaked (DS-3331) 44 Court St., Suite 1217 Brooklyn, NY 11201 Tel. (917) 373-9128 e-mail: [email protected] 27

civil rights, immigration, family

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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION HARRY CURTIS, individually and on behalf of § all others similarly situated, § § Civil Action No. 4:19-cv-2147 Plaintiff, § § JURY DEMAND v. § § BUCKEYE PARTNERS, L.P., OLIVER G. § RICHARD III, CLARK C. SMITH, FRANK S. § SOWINSKI, BARBARA J. DUGANIER, § JOSEPH A. LASCALA, JR., LARRY C. PAYNE, § MARTIN A. WHITE, PIETER BAKKER, § BARBARA M. BAUMANN, MARK C. § MCKINLEY, and BUCKEYE GP, LLC, § § Defendants. § CLASS ACTION COMPLAINT Plaintiff Harry Curtis (“Plaintiff”), alleges upon personal knowledge as to his own acts and upon information and belief as to all other matters, based upon the investigation made by and through his attorneys, which investigation included, inter alia, the review of United States Securities and Exchange Commission (“SEC”) filings, press releases, analyst reports, news articles and other materials, as follows: I. NATURE OF THE CASE 1. Plaintiff brings this class action individually and on behalf of all other similarly situated unitholders of Buckeye Partners, L.P. (“Buckeye Partners” or the “Partnership”) against Buckeye Partners, its general partner, Buckeye GP, LLC (“Buckeye GP”), and Buckeye GP’s Board of Directors (the “Board” or the “Individual Defendants,” identified below), in connection with their attempt to sell the Partnership to IFM Global Infrastructure Fund, a wholly owned subsidiary of IFM Investors, collectively (“IFM”) by means of an unfair process and for an unfair price. Plaintiff also brings claims against Defendants (defined herein) for their violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 14a-9 promulgated thereunder (“Rule 14a-9”). 2. On May 10, 2014, IFM and the Partnership announced that they had entered into an Agreement and Plan of Merger (the “Merger Agreement”) that will culminate in IFM, through an affiliated entity, acquiring all of the outstanding units of Buckeye Partners in an all-cash transaction valued at approximately $10.3 billion including assumed debt). Buckeye Partners unitholders are expected to receive $41.50 for each unit of Buckeye Partners they own (the “Merger”). 3. Thereafter, on June 7, 2019, Buckeye Partners filed a Preliminary Proxy Statement on form PREM14A (the “Preliminary Proxy”) with the SEC in support of the Proposed Transaction. 4. The Board has violated Buckeye Partners’ partnership agreement (“LPA,” as further described below) and breached their express and implied contractual duties owed and fiduciary duties to Plaintiff and other Buckeye Partners unitholders by agreeing to the Merger for grossly inadequate consideration. As described in more detail below, given Buckeye Partners’ recent strong performance as well as its future growth prospects, the consideration that unitholders will receive is inadequate and undervalues the Partnership. 5. In addition, the Proposed Transaction is unfair and undervalued for a number of reasons. Significantly, the Preliminary Proxy describes an insufficient sales process in which the Board rushed through an inadequate “sales process” in which the only end goal was a sale to IFM, and in which only a cursory market check was conducted. 6. Moreover, no committee of disinterested directors was created to run the process. 7. Further evidence of the conflicted nature of the sales process is the fact that Buckeye Partners unnecessarily retained two financial advisors in regards to the sales process, Intrepid Partners, LLC (“Intrepid”) and Wells Fargo Securities, LLC (“Wells Fargo”). This unnecessary waste of Buckeye Partners’ capital was highlighted by the fact that no fairness opinion from Intrepid regarding the Proposed Transaction was included in the Preliminary 8. Such a sales process, or lack thereof, clearly indicates that the only end-goal acceptable to Defendants was an acquisition of Buckeye Partners by IFM. 9. The Individual Defendants, as defined herein, have exacerbated their breaches of fiduciary duty by agreeing to lock up the Merger with preclusive and onerous deal protection devices that preclude other bidders from making successful competing offers for the Partnership and act to render the Merger a fait accompli. For example, the Board agreed to: (i) a “no shop” provision that prevents the Partnership from negotiating with or providing confidential information to competing bidders except under extremely limited circumstances; (ii) a “matching rights” provision that allows IFM to match any competing proposal in the unlikely event that one emerges; and (iii) a $130 million termination fee if the Board agrees to a competing proposal. These provisions substantially and improperly limit the Board’s ability to act with respect to investigating and pursuing superior proposals and alternatives to the Merger. 10. Furthermore, in violation of Sections 14(a) and 20(a) of the Exchange Act, and in in further violation of their fiduciary duties, Defendants caused to be filed the materially deficient Preliminary Proxy on June 7, 2019, with the SEC in an effort to solicit unitholders to vote their Buckeye Partners units in favor of the Proposed Transaction. The Preliminary Proxy is materially deficient, deprives Buckeye Partners unitholders of the information they need to make an intelligent, informed and rational decision of whether to vote their units in favor of the Proposed Transaction, and is thus in breach of Defendants’ fiduciary duties. As detailed below, the Preliminary Proxy omits and/or misrepresents material information concerning, among other things: (a) the sales process; (b) the financial projections for Buckeye Partners, provided by Buckeye Partners to the Partnership’s financial advisors Intrepid and Wells Fargo for use in their financial analyses; and (c) the data and inputs underlying the financial valuation analyses that purport to support the fairness opinions provided by the Partnership’s financial advisors, Intrepid and Wells Fargo. 11. Consequently, the Individual Defendants have breached their fiduciary duties of loyalty and due care, and IFM has aided and abetted such breaches by Buckeye Partners’ officers and directors. 12. For these reasons and as set forth in detail herein, Plaintiff seeks to enjoin Defendants from taking any steps to consummate the Merger, or in the event the Merger is consummated, recover damages resulting from the Individual Defendants’ violations of their fiduciary duties of loyalty, good faith, due care, and full and fair disclosure. II. JURISDICTION AND VENUE 13. This Court has subject matter jurisdiction under 28 U.S.C. § 1331 (federal question jurisdiction), as Plaintiff alleges violations of Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder. The Court has supplemental jurisdiction over any claims arising under state law pursuant to 28 U.S.C. § 1367. 14. The Court has personal jurisdiction over each Defendant because each either is organized under the laws of, conducts business in and maintains operations in this District, or is an individual who either is present in this District for jurisdictional purposes or has sufficient minimum contacts with this District as to render the exercise of jurisdiction by this Court permissible under traditional notions of fair play and substantial justice. This action is not a collusive one to confer jurisdiction on a court of the United States which it would not otherwise 15. Venue is proper in this District pursuant to 28 U.S.C. § 1391 because: (a) one or more Defendant either resides in or maintains executive offices here; (b) a substantial portion of the transactions and wrongs complained of herein occurred here; and (c) Defendants have received substantial compensation and other transfers of money here by doing business here and engaging in activities having an effect here. III. PARTIES 16. Plaintiff is, and has been at all relevant times, the owner of common units of Buckeye Partners. 17. Defendant Clark C. Smith (“Smith”) has been the Chairman, President and Chief Executive Officer (“CEO”) of Buckeye GP since 2014. 18. Defendant Pieter Bakker (“Bakker”) has been a director of Buckeye GP since 19. Defendant Barbara M. Baumann (“Baumann”) has been a director of Buckeye GP since 2011. 20. Defendant Barbara J. Duganier (“Duganier”) has been a director of Buckeye GP since 2013. 21. Defendant Joseph A. LaScala, Jr. (“LaScala”) has been a director of Buckeye GP since 2010. 22. Defendant Mark C. McKinley (“McKinley”) has been a director of Buckeye GP since 2007. 23. Defendant Larry C. Payne (“Payne”) has been a director of Buckeye GP since 24. Defendant Oliver G. Richard III (“Richard”) has served as a Director of Buckeye GP since 2009. 25. Defendant Frank S. Sowinski (“Sowinski”) has served as a Director of Buckeye GP since 2006 and is the Lead Independent Director. 26. Defendant Martin A. White (“White”) has served as a Director of Buckeye GP since 2010. 27. Defendant Buckeye Partners is a limited partnership organized and existing under the laws of the State of Delaware. It maintains its principal executive offices at One Greenway Plaza, Suite 600, Houston, Texas, 77046. Its common units are listed on the New York Stock Exchange under the symbol “BPL.” 28. Defendant Buckeye GP is the general partner of the Partnership. Importantly, as is common among publicly traded limited partnerships, the Partnership is managed by Buckeye GP’s directors and officers. Buckeye GP is a Delaware limited liability company. 29. Non-Defendant IFM is an investment fund manager. IFM’s principal executive offices are located at Level 29 Casselden 2 Lonsdale Stree,t Melbourne VIC 3000 Australia. 30. Defendants set forth in paragraphs 17 to 26 are referred to herein as the “Board” or the “Individual Defendants.” 31. Defendants set forth in paragraphs 17 to 28 are referred to herein as “Defendants.” IV. CLASS ACTION ALLEGATIONS 32. Plaintiff brings this action as a class action pursuant to Rule 23 of the Federal Rules of Civil Procedure on behalf of all persons that own Buckeye Partners common units (the “Class”) as of May 10, 2019, the date on which the Merger was announced. Excluded from the Class are Defendants and their affiliates, immediate families, legal representatives, heirs, successors or assigns and any entity in which Defendants have or had a controlling interest. 33. The Class is so numerous that joinder of all members is impracticable. While the exact number of Class members is unknown to Plaintiff at this time and can only be ascertained through discovery, Plaintiff believes that there are thousands of members in the Class. All members of the Class may be identified from records maintained by Buckeye Partners or its transfer agent and may be notified of the pendency of this action by mail, using forms of notice similar to that customarily used in securities class actions. 34. Questions of law and fact are common to the Class, including: (i) Have the Individual Defendants breached their obligations to act in good faith and/or fiduciary duties of undivided loyalty or due care with respect to Plaintiff and the other members of the Class in connection with the Merger; (ii) Have the Individual Defendants breached or violated any of the terms and conditions of the LPA in connection with the Merger; (iii) Have Defendants violated the implied covenant of good faith and fair dealing by entering into the Merger Agreement; (iii) Have the Individual Defendants breached their fiduciary duty to secure and obtain the best price reasonable under the circumstances for the benefit of Plaintiff and the other members of the Class in connection with the Merger; (iv) Have the Individual Defendants, in bad faith and for improper motives, impeded or erected barriers to discourage other strategic alternatives including offers from interested parties for the Partnership or its assets; (v) Whether Defendants failed to provide Plaintiff and the other members of the Class with true, full and fair disclosure of all material information in connection with the Merger; (vi) Whether the Preliminary Proxy contains material misrepresentations and/or omissions in violation of federal laws; (vii) Whether Plaintiff and the other members of the Class would be irreparably harmed were the transactions complained of herein consummated; and (viii) Is the Class entitled to injunctive relief or damages as a result of Defendants’ wrongful conduct. 35. Plaintiff’s claims are typical of the claims of the other members of the Class. Plaintiff and the other members of the Class have sustained damages as a result of Defendants’ wrongful conduct as alleged herein. 36. Plaintiff will fairly and adequately protect the interests of the Class, and have no interests contrary to or in conflict with those of the Class that Plaintiff seeks to represent. 37. The prosecution of separate actions by individual members of the Class would create the risk of inconsistent or varying adjudications for individual members of the Class and of establishing incompatible standards of conduct for the party opposing the Class, and conflicting adjudications for individual members of the Class might, as a practical matter, be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests. Moreover, Defendants have acted or refused to act on grounds generally applicable to the Class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the Class as a whole. 38. A class action is superior to all other available methods for the fair and efficient adjudication of this controversy. Plaintiff knows of no difficulty to be encountered in the management of this action that would preclude its maintenance as a class action. V. OBLIGATIONS & FIDUCIARY DUTIES OF THE INDIVIDUAL DEFENDANTS 39. By reason of the Individual Defendants’ positions with the Partnership as officers and/or directors of Buckeye GP, said individuals are in a fiduciary relationship with Plaintiff and the other unitholders of Buckeye Partners and owe Plaintiff and the other members of the Class, as well as the Partnership, at a minimum an implied contractual duty of good faith and fair dealing. 40. The relationship between Buckeye GP’s Board and its public unitholders is, in part, governed by the LPA – i.e., the Amended and Restated Agreement of Limited Partnership of Buckeye Partners, LP dated November 19, 2010. 41. Section 8.1 of the LPA states: “The Limited Partners shall have no liability under this Agreement (including, without limitation, liability under Section 7.12).” 42. Under the Delaware Act, partnership agreements in Delaware cannot “eliminate the implied contractual covenant of good faith and fair dealing.” Allen v. Encore Energy Partners, L.P., 72 A.3d 93, 100 (Del. 2013). 43. By virtue of their positions as directors of Buckeye GP, the Individual Defendants, at all relevant times, had the power to control and influence, and did control and influence and cause Buckeye Partners to engage in the practices complained of herein. 44. Each of the Individual Defendants is required to act in good faith, in the best interests of the Partnership’s unitholders and with due care. In a situation where the directors of a publicly traded company and/or master limited partnership undertake a transaction that may result in a change in corporate control, the directors must take all steps reasonably required to maximize the value unitholders will receive rather than use a change of control to benefit themselves, and to disclose all material information concerning the proposed change of control to enable the unitholders to make an informed voting decision. To diligently comply with this duty, the directors of a corporation may not take any action that: a. Adversely affects the value provided to the corporation’s unitholders; b. Contractually prohibits them from complying with or carrying out their fiduciary duties; c. Discourages or inhibits alternative offers to purchase control of the corporation or its assets; d. Will otherwise adversely affect their duty to search for and secure the best value reasonably available under the circumstances for the corporation’s unitholders; or e. Will provide the directors and/or officers with preferential treatment at the expense of, or separate from, the public unitholders. 45. Moreover, Section 8.5 of the LPA provides that limited partners have the right “to obtain true and full information regarding the status of the business and financial condition of the Partnership” and “to obtain such other information regarding the affairs of the Partnership as is just and reasonable.” 46. Plaintiff alleges herein that the Individual Defendants, separately and together, in connection with the Merger, violated duties owed to Plaintiff and the other unitholders of Buckeye Partners, including their express and implied duties under the LPA and their duties of loyalty, good faith, candor and independence under both the Partnership’s LPA and under governing Delaware law, and have failed to provide Plaintiff and other Buckeye Partners unitholders with true, full, and fair disclosures concerning the Merger. VI. SUBSTANTIVE ALLEGATIONS a. Partnership Background and Its Poise for Growth 47. Buckeye Partners is a publicly traded master limited partnership which owns and operates a diversified global network of integrated assets providing midstream logistic solutions, primarily consisting of the transportation, storage, processing and marketing of liquid petroleum products. and other third-party entities to enhance and exploit oil and gas properties. It is a Delaware limited partnership. 48. Buckeye Partners is one of the largest independent liquid petroleum products pipeline operators in the United States in terms of volumes delivered, with approximately 6,000 miles of pipeline. Buckeye also uses its service expertise to operate and/or maintain third-party pipelines and perform certain engineering and construction services for its customers. Buckeye's global terminal network comprises more than 115 liquid petroleum products terminals with aggregate tank capacity of over 118 million barrels across our portfolio of pipelines, inland terminals and marine terminals located primarily in the East Coast, Midwest and Gulf Coast regions of the United States as well as in the Caribbean. 49. The Partnership’s 2018 fiscal year was successful and positioned Buckeye Partners for near and long-term growth. 50. In a February 8, 2019 press release announcing the Partnership’s fourth quarter and full-year 2018 results, Defendant Smith stated, in part, “[w]e have reduced our leverage, strengthened our balance sheet, increased our distribution coverage ratio and significantly improved our overall financial flexibility as a result of our recently completed dispositions of the package of non-integrated domestic pipeline and terminal assets in December 2018 and our equity interest in VTTI in January 2019…. We believe these actions solidified our investment grade credit rating, eliminated the need for Buckeye to access the public equity markets and will allow us to reallocate capital to the higher return growth opportunities across our remaining assets, positioning us to provide solid returns for our unitholders over the long-term.” 51. Moreover, even after the announcement of the Proposed Transaction, Buckeye Partners, the Partnership’s First Quarter 2019 results establish its near- and long-term business prospects. In a May 10, 2019 press release on the results, “Our first quarter results demonstrated the stability of our diversified asset portfolio,” stated Clark C. Smith, Chairman, President and Chief Executive Officer. “Our Domestic Pipelines and Terminals segment benefited from higher average pipeline tariff rates, driven by annual escalations on our systems, and increased pipeline and terminal throughput volumes, after adjusting for the Domestic Asset Package sale. Within our Global Marine Terminals segment, strong performance by our Buckeye Texas Partners facilities, which benefited from annual fee escalations and continued operating efficiencies during the quarter, was partially offset by the continued impact of challenging market conditions in the segregated storage market. Our Buckeye Merchant Services segment continued to generate strong utilization across our portfolio of assets and again achieved a record contribution to our other segments, while favorable spreads more than offset weaker rack margins in this business. Finally, all of our businesses benefited from our operating and administrative teams’ continued focus on managing costs across the organization.” b. The Flawed Sales Process 52. As detailed in the Preliminary Proxy, the process deployed by the Individual Defendants was flawed and inadequate, was conducted out of the self-interest of the Individual Defendants, and was designed with only one concern in mind – to effectuate a sale of the Partnership to IFM. 53. First, it appears that only a cursory market check was conducted by Partnership or its financial advisors during the sales process. Notably, it appears that only two potentially interested third parties were affirmatively contacted by the Buckeye Partners or its financial advisors during the sales process. Moreover, neither Buckeye Partners nor its financial advisors appear to have reached out to the other entities of the initial interested consortium of which IFM was a part after its dissolution to gauge the individual interest of the entities therein. 54. In addition, the Preliminary Proxy indicates that no committee of independent board members was created to run the sales process. 55. The Preliminary Proxy is also unclear as to the nature of any specific standstill restrictions arising out of the terms of any of the non-disclosure agreements entered into between Buckeye Partners on the one hand and any interested third party, including IFM, on the other, and if the terms of any included “don’t-ask, don’t-waive” provisions in any such agreements, and if so, the specific conditions, if any, under which such provisions would fall away. 56. Moreover, the Preliminary Proxy is also unclear as to any differences that may exist between the various non-disclosure agreements entered into between Buckeye Partners and any interested third parties. 57. The Preliminary Proxy does not divulge why Buckeye Partners retained two separate financial advisors, at significant cost. Specifically, the Preliminary Proxy does not disclose why it was necessary to retain Wells Fargo in addition to Intrepid (who was already retained) at a cost of $17.5 million. 58. In addition, the Preliminary Proxy does not contain a fairness opinion from Intrepid regarding the Proposed Transaction. Said opinion, if it exists, should be divulged to unitholders. If no fairness opinion was created by Intrepid, it is further evidence as to the unnecessary waste of engaging two separate financial advisors by the Partnership. The Preliminary Proxy also fails to indict what relationship, if any, Intrepid has with IFM or its affiliates. 59. Finally, the Preliminary Proxy does not provide adequate information regarding the Board’s decision, announced on November 2, 2018, to divest several key assets during the sales process, selling its 50% equity stake in the Vitol Tank Terminal International B.V. (“VTTI”) and a package of non-integrated domestic pipeline and terminal assets for a collective $1.425 billion, as well as significantly reducing the Partnerships cash distribution from $3.00 per unit to $0.75 per unit on an annual basis. This significant sale of assets and reorganization of cash distributions during the sales process likely had a significant impact on the availability of any potentially interested third parties, however the reasoning behind this decision, and its impacts on the Sales Process, are not disclosed in the Preliminary Proxy. 60. It is not surprising, given this background to the overall sales process, that it was conducted in a completely inappropriate and misleading manner. c. The Proposed Transaction 61. On May 10, 2019, Buckeye Partners and IFM issued a press release announcing the Proposed Transaction. The press release stated, in relevant part: HOUSTON and NEW YORK, May 10, 2019 (GLOBE NEWSWIRE) -- IFM Investors and Buckeye Partners, L.P. (NYSE: BPL) today announced a definitive agreement ("Agreement") under which the IFM Global Infrastructure Fund will acquire all of the outstanding public common units of Buckeye for $41.50 per common unit. The all-cash transaction is valued at $10.3 billion enterprise value and $6.5 billion equity value. The acquisition price represents a 27.5% premium to Buckeye’s closing unit price on May 9, 2019 and a 31.9% premium to Buckeye’s volume-weighted average unit price since November 1, 2018, which is the last trading day prior to Buckeye’s announcement of certain strategic actions. Buckeye’s Board of Directors unanimously approved the proposed transaction with IFM. The closing of the merger will be subject to approval of a majority of the Buckeye unitholders, certain regulatory approvals and other customary closing conditions. Buckeye owns and operates one of the largest diversified networks of integrated midstream assets, including 6,000 miles of pipeline with over 100 delivery locations and 115 liquid petroleum products terminals with aggregate tank capacity of over 118 million barrels. Its network of marine terminals is located primarily in the East Coast and Gulf Coast regions of the United States, as well as in the Caribbean. IFM is a pioneer and leader in infrastructure investing on behalf of institutional investors globally, with a 23-year track record of success. IFM has $90 billion of assets under management, including $39.1 billion in infrastructure, which it manages on behalf of more than 370 institutional investors, and takes a long-term approach to investing, with no pre-determined time divestiture horizon. IFM targets core infrastructure in developed markets and currently has interests in 32 investments across North America, Australia and Europe, including several midstream assets. “This acquisition is aligned with IFM’s focus on investing in high quality, essential infrastructure assets that underpin the economies in which they operate,” said Julio Garcia, Head of Infrastructure, North America of IFM. “We are pleased to have the opportunity to bring the Buckeye business and management team under the IFM umbrella,” said Jamie Cemm, Executive Director of IFM. “The proposed acquisition of Buckeye is a complementary addition to IFM’s substantial investments in energy infrastructure across North America and globally. We look forward to supporting the continuing growth of the business.” “Buckeye’s Board of Directors recently reviewed strategic options for the business and determined that IFM’s proposal to acquire Buckeye is in the best interest of Buckeye,” said Clark C. Smith, Chairman, President and Chief Executive Officer of Buckeye. “The proposed transaction will provide immediate and enhanced value for our unitholders with an attractive premium that accelerates long-term returns and represents the underlying value of our business. In addition, the proposed transaction will provide Buckeye with superior access to capital to execute on its long-term business strategy. We look forward to this next chapter in Buckeye’s 133-year story.” Additional Information Closing of the transaction is expected to occur in the fourth quarter of 2019 and is subject to customary closing conditions. Pending transaction close, the companies will continue to operate independently. Evercore Group LLC is acting as lead financial advisor to IFM, and Credit Suisse, Goldman, Sachs & Co. LLC and BofA Merrill Lynch are acting as financial advisors to IFM. White & Case LLP and Baker Botts LLP are acting as legal advisors to IFM. Intrepid Partners, LLC and Wells Fargo Securities, LLC are acting as financial advisors and Cravath, Swaine & Moore LLP is acting as legal advisor to Buckeye. d. The Unfair Price 62. Given the Partnership’s recent strong performance and its positioning for growth, the Merger consideration is inadequate and significantly undervalues the Partnership. 63. The Merger provides a meager premium. Notably, within the last 52 weeks, the Partnership has traded as high as $38.65 per share, a value only 7% below the Merger consideration. 64. In addition, the Merger consideration fails to adequately compensate Buckeye Partners unitholders for the significant synergies created by the Merger. In the press release announcing the Merger, Jamie Cemm, Executive Director of IFM, stated: We are pleased to have the opportunity to bring the Buckeye business and management team under the IFM umbrella,” said Jamie Cemm, Executive Director of IFM. “The proposed acquisition of Buckeye is a complementary addition to IFM’s substantial investments in energy infrastructure across North America and globally. We look forward to supporting the continuing growth of the business. 65. The low value of the transaction was not lost on the financial media. In a Seeking Alpha article, the author stated, “[l]ast year, DCF for Buckeye came out to $631.63 million, and the implied purchase price of the transaction is $6.5 billion on an equity basis. This results in a trading multiple on free cash flow of 10.3. No matter how you stack it, that looks quite cheap. Another way to value the firm, though, is using its EV/EBITDA. With EBITDA of $1.01 billion in 2018, the purchase price of $10.3 billion translates to a multiple of 10.2. This is a more realistic reading and is reflective of Buckeye's leverage, but even that seems to be at the low end of valuation for a quality operator with a history of robust cash flows and the ability to keep current operations in check.” 66. The author concluded, “something about this deal looks off. While the company is not too far from fair value, I still believe upside from here would have been warranted, with an EV/EBITDA of 12 or higher not necessarily being out of the question.” e. The Preclusive Deal Protection Devices 67. To the detriment of Buckeye Partners unitholders, as part of the Merger Agreement, the Individual Defendants agreed to certain onerous and preclusive deal protection devices that operate conjunctively to make the Merger a fait accompli and ensure that no competing offers will emerge for the Partnership. 68. The Merger Agreement contains a strict “no shop” provision prohibiting the members of the Buckeye GP Board from taking any affirmative action to comply with their fiduciary duties to maximize unitholder value, including soliciting alternative acquisition proposals or business combinations. 69. That same section provides a matching rights provision whereby the Partnership must promptly notify IFM of the bidder’s identity and the terms of the bidder’s offer should it receive an unsolicited competing acquisition proposal. The Partnership must further require the Board to keep IFM informed of all material developments with respect to the status and terms of any such proposal and to provide it with copies of any additional written proposals received by the Partnership or that the Partnership has delivered to any third party. 70. Upon receipt of a “Superior Proposal,” Buckeye Partners must then permit IFM to negotiate to make such adjustments in the terms and conditions of the Merger Agreement so that such superior proposal ceases to constitute a superior proposal. 71. The effect of these provisions is to prevent the Board from entering discussions or negotiations with other potential purchasers unless the Board can first determine that the competing acquisition proposal is, in fact, “superior,” and even then, the Buckeye Partners must permit IFM to match the competing acquisition proposal. Consequently, this provision prevents Buckeye GP’s Board from exercising their fiduciary duties and precludes an opportunity for a potential purchaser to emerge. 72. Furthermore, the Merger Agreement provides that Buckeye Partners must pay IFM a termination fee of $130 million if the Partnership decides to pursue another competing offer, thereby essentially requiring that the alternative bidder agree to pay a naked premium for the right to provide Buckeye Partners unitholders with a superior offer. 73. Ultimately, these preclusive deal protection devices illegally restrain the Partnership's ability to solicit or engage in negotiations with any third party regarding a proposal to acquire all or a significant interest in the Partnership. The circumstances under which the Board may respond to an unsolicited alternative acquisition proposal that constitutes, or would reasonably be expected to constitute, a superior proposal are too narrowly circumscribed to provide an effective “fiduciary out” under the circumstances. Likewise, these provisions will foreclose the new bidder from providing the needed market check of IFM’s inadequate offer. f. The Partnership’s Directors and Officers Are Receiving Unique Benefits 74. Buckeye GP’s directors and officers will receive unique benefits in connection with the Merger. The breakdown of the benefits of the deal indicate that Buckeye Partnership and Buckeye GP insiders are the primary beneficiaries of the Proposed Transaction, not the Partnership’s public unitholders. The Board and the Partnership’s executive officers are conflicted because they will have secured unique benefits for themselves from the Proposed Transaction not available to Plaintiff and the public unitholders of Buckeye Partners. 75. Certain insiders stand to receive massive financial benefits as a result of the Proposed Transaction. Notably, Partnership insiders, including the Individual Defendants, currently own large, illiquid portions of Partnership units that will be exchanged for large cash pay days upon the consummation of the Proposed Transaction. Partnership insiders own such units as follows: Name (1) Number of Partnership Units (2) Percentage of Partnership Units Clark C. Smith 214,586(3) * Pieter Bakker 21,552 * Barbara M. Baumann 8,667 * Barbara J. Duganier 13,000 * Joseph A. LaSala, Jr. 23,000 * Mark C. McKinley 28,000 * Larry C. Payne 10,667 * Oliver “Rick” G. Richard, III 23,408 * Frank S. Sowinski 32,210 * Martin A. White 25,242 * Keith E. St.Clair 139,715(4) * Robert A. Malecky 108,764(5) * Khalid A. Muslih 63,978 * William J. Hollis 29,570 * All directors and officers as a group (18 persons) 832,934 * OppenheimerFunds, Inc. 14,927,413(6) 9.7% ALPS Advisors, Inc. 14,532,364(7) 9.4% Tortoise Capital Advisors, L.L.C. 11,271,876(8) 7.3% 76. Notably the Preliminary Proxy does not provide a breakdown of the amount of money each block of units represents under the Proposed Transaction, further obscuring the conflicts of interests from Plaintiff and other public unitholders of the Partnership. 77. Furthermore, upon the consummation of the Proposed Transaction, each outstanding Partnership option or equity award will be canceled and converted into the right to receive certain consideration according to the Merger Agreement. The Individual Defendants and other Partnership insiders will receive consideration as a consequence of these options, not shared amongst Plaintiff and other members of the Class, as follows: Partnership Deferral Units/Partnership Director Deferred Units Partnership Performance Units (1) Name Partnership Phantom Units Distribution Equivalents with respect to Partnership Phantom Units and Partnership Performance Units (2) Total ($) (3) # ($) # ($) # ($) ($) ($) Executive Officers Clark Smith 104,862 $4,351,773 68,178 $2,829,387 209,725 $8,703,588 $ 1,054,618 $16,939,366 Keith E. St.Clair 29,996 $1,244,834 36,690 $1,522,635 59,988 $2,489,502 $ 308,286 $ 5,565,257 Robert Malecky 24,157 $1,002,516 36,638 $1,520,477 48,312 $2,004,948 $ 235,269 $ 4,763,210 Khalid Muslih 25,265 $1,048,498 34,968 $1,451,172 50,531 $2,097,037 $ 253,408 $ 4,850,114 William Hollis 19,202 $ 796,883 29,288 $1,215,452 38,401 $1,593,642 $ 190,801 $ 3,796,778 Mark Esselman 12,994 $ 539,251 17,042 $ 707,243 25,987 $1,078,461 $ 138,142 $ 2,463,097 Todd Russo 18,423 $ 764,555 20,654 $ 857,141 36,844 $1,529,026 $ 188,465 $ 3,339,187 Joseph Sauger 14,832 $ 615,528 11,662 $ 483,973 29,664 $1,231,056 $ 155,501 $ 2,486,058 Gary Bohnsack 28,711 $1,191,507 10,260 $ 425,790 13,827 $ 573,821 $ 66,224 $ 2,257,341 Directors Pieter Bakker 3,583 $ 148,695 — — — — — $ 148,695 Barbara M. Baumann 3,583 $ 148,695 — — — — — $ 148,695 Barbara J. Duganier 3,583 $ 148,695 — — — — — $ 148,695 Joseph A. LaSala, Jr. 3,583 $ 148,695 — — — — — $ 148,695 Mark C. McKinley 3,583 $ 148,695 598 $ 24,817 — — — $ 173,512 Larry C. Payne 3,583 $ 148,695 — — — — — $ 148,695 Oliver “Rick” G. Richard, III 3,583 $ 148,695 — — — — — $ 148,695 Frank S. Sowinski 3,583 $ 148,695 — — — — — $ 148,695 Martin A. White 3,583 $ 148,695 — — — — — $ 148,695 78. Moreover, certain employment agreements with certain Partnership executives entitle such executives to severance packages should their employment be terminated under certain circumstances. These ‘golden parachute’ packages are significant and will grant each director or officer entitled to them millions of dollars, compensation not shared by Buckeye Partners common unitholders. 79. These golden parachute payouts will be paid to Partnership insiders as a consequence of the Proposed Transaction’s consummation, as follows: Name Cash Severance ($) (1) Equity ($) (2) Benefits ($) (3) Total ($) Clark Smith $ 2,021,895 $ 16,939,366 $ 27,126 $ 18,988,386 Keith E. St.Clair $ 1,193,400 $ 5,565,257 $ 26,286 $ 6,784,943 Robert Malecky $ 1,071,000 $ 4,763,210 $ 27,034 $ 5,861,243 Khalid Muslih $ 1,071,000 $ 4,850,114 $ 27,187 $ 5,948,301 William Hollis $ 907,800 $ 3,796,778 $ 17,673 $ 4,772,251 80. Thus, while the Merger is not in the best interest of Buckeye Partners unitholders, it will produce lucrative benefits for the Partnership’s officers and directors. g. The Materially Misleading and/or Incomplete Preliminary Proxy 81. On June 7, 2019, Defendants caused to be filed with the SEC a materially misleading and incomplete Preliminary Proxy that, in violation of their fiduciary duties, failed to provide the Partnership’s unitholders with material information and/or provides them with materially misleading information critical to the total mix of information available to the Partnership’s unitholders concerning the financial and procedural fairness of the Proposed Transaction. Omissions and/or Material Misrepresentations Concerning the Sales Process Leading Up to the Proposed Transaction 82. Specifically, the Preliminary Proxy fails to provide material information concerning the process conducted by the Partnership and the events leading up to the Proposed Transaction. In particular, the Preliminary Proxy fails to disclose: a. The nature of any specific standstill restrictions arising out of the terms of any of the non-disclosure agreements entered into between Buckeye Partners on the one hand and any interested third party, including Marvell, on the other, and if the terms of any included “don’t-ask, don’t-waive” provisions in any such agreements, and if so, the specific conditions, if any, under which such provisions would fall away; b. The nature of any differences that exist between the various non-disclosure agreements entered into between Buckeye Partners and any interested third parties; c. The specific reasoning as to why the market check conducted by the Partnership’s financial advisors during the sales process entailed only contacting two potentially interested third parties; d. Why no committee of independent board members was created to run the sales process; e. The specific reasoning as to why Buckeye Partners retained two separate financial advisors; f. Why Intrepid did not provide a fairness opinion regarding the Proposed Transaction; g. The amount of money being paid to Intrepid by Buckeye Partners for its services as a financial advisor regarding the Proposed Transaction; h. The specific nature of any work performed by Intrepid for IFM or any IFM affiliate within the last two years; i. The Preliminary Proxy does not provide adequate information regarding the Board’s decision, announced on November 2, 2018, to divest several key assets during the sales process, selling its 50% equity stake in VTTI and a package of non-integrated domestic pipeline and terminal assets for a collective $1.425 billion, as well as significantly reducing the Partnerships cash distribution from $3.00 per unit to $0.75 per unit on an annual basis. This significant sale of assets and reorganization of cash distributions during the sales process likely had a significant impact on the availability of any potentially interested third parties, however the reasoning behind this decision, and its impacts on the Sales Process, should be disclosed. Omissions and/or Material Misrepresentations Concerning Buckeye Partners’ Financial Projections 83. The Preliminary Proxy fails to provide material information concerning financial projections provided by Buckeye Partners’ management and relied upon by Intrepid and Wells Fargo in their analyses. The Preliminary Proxy discloses management-prepared financial projections for the Partnership which are materially misleading. The Preliminary Proxy indicates that in connection with the rendering of Wells Fargo’s fairness opinion, Wells Fargo reviewed “certain internal financial analyses and forecasts for the Partnership (the “Partnership Projections”) prepared by the management of the Partnership.” Accordingly, the Preliminary Proxy should have, but fails to provide, certain information in the projections that Buckeye Partners management provided to the Board, Intrepid and Wells Fargo. Courts have uniformly stated that “projections … are probably among the most highly-prized disclosures by investors. Investors can come up with their own estimates of discount rates or [] market multiples. What they cannot hope to do is replicate management’s inside view of the company’s prospects.” In re Netsmart Techs., Inc. S’holders Litig., 924 A.2d 171, 201-203 (Del. Ch. 2007). 84. With respect to the “2018 Management Case” projections, the Preliminary Proxy fails to provide material information concerning the financial projections prepared by Partnership management. Specifically, the Preliminary Proxy fails to disclose the material line items for Adjusted EBITDA. 85. With respect to the “Updated 2018 Management Case” projections, the Preliminary Proxy fails to provide material information concerning the financial projections prepared by Partnership management. Specifically, the Preliminary Proxy fails to disclose the material line items for Adjusted EBITDA. 86. With respect to the “2019 Management Case” projections, the Preliminary Proxy fails to provide material information concerning the financial projections prepared by Partnership management. Specifically, the Preliminary Proxy fails to disclose the material line items for Adjusted EBITDA. 87. Specifically, the Preliminary Proxy provides non-GAAP financial metrics, including Adjusted EBITDA, for each set of disclosed projections but fails to disclose a reconciliation of all non-GAAP to GAAP metrics. 88. This information is necessary to provide Partnership unitholders a complete and accurate picture of the sales process and its fairness. Without this information, unitholders were not fully informed as to Defendants’ actions, including those that may have been taken in bad faith, and cannot fairly assess the process. 89. Without accurate projection data presented in the Preliminary Proxy, Plaintiff and other unitholders of Buckeye Partners are unable to properly evaluate the Partnership’s true worth, the accuracy of Intrepid and/or Wells Fargo’s financial analyses, or make an informed decision whether to vote their Partnership units in favor of the Proposed Transaction. As such, the Board has breached their fiduciary duties by failing to include such information in the Preliminary Proxy. Omissions and/or Material Misrepresentations Concerning the Financial Analyses by Wells Fargo 90. In the Preliminary Proxy, Wells Fargo describes its respective fairness opinion and the various valuation analyses performed to render such opinion. However, the descriptions fail to include necessary underlying data, support for conclusions, or the existence of, or basis for, underlying assumptions. Without this information, one cannot replicate the analyses, confirm the valuations or evaluate the fairness opinions. 91. With respect to the Discounted Cash Flow Analysis, the Preliminary Proxy fails to disclose the following: a. The specific inputs and assumptions used to calculate the discount rate range of 7.84% to 8.34%; b. The specific inputs and assumptions used to calculate Buckeye Partners’ perpetuity growth rates of 1.00% to 2.00%. 92. With respect to the Discounted Distributions Analysis, the Preliminary Proxy fails to disclose the following: a. The specific inputs and assumptions used to calculate the cost of equity range of 9.80% to 10.30%; b. The specific inputs and assumptions used to calculate Buckeye Partners’ perpetuity growth rates of 0.00% to 2.00%. 93. With respect to the Selected Precedent Transactions Analysis, the Preliminary Proxy fails to disclose the following: a. Why only three precedent transactions were chosen to compare; b. The total value of each transaction; c. The date each precedent transaction closed; 94. With respect to the Selected Public MLPs Analysis, the Preliminary Proxy fails to disclose the following: a. Why only four MLPs were chosen to compare. 95. The Preliminary Proxy fails to disclose why Buckeye Partners retained multiple financial advisors. 96. Finally the Preliminary Proxy fails to disclose any financial analysis, or any fairness opinion whatsoever, from Intrepid, even though the Preliminary Proxy indicates that Intrepid was retained by the Partnership to act as a financial advisor regarding the Proposed Transaction. 97. These disclosures are critical for unitholders to be able to make an informed decision on whether to vote their units in favor of the Proposed Transaction. 98. Without the omitted information identified above, Buckeye Partners’ public unitholders are missing critical information necessary to evaluate whether the proposed consideration truly maximizes unitholder value and serves their interests. Moreover, without the key financial information and related disclosures, Buckeye Partners’ public unitholders cannot gauge the reliability of the fairness opinion and the Board’s determination that the Proposed Transaction is in their best interests. As such, the Board has breached their fiduciary duties by failing to include such information in the Preliminary Proxy. VII. CLAIMS FOR RELIEF COUNT I On Behalf of Plaintiff and the Class Against the Individual Defendants for Breach of Fiduciary Duties 99. Plaintiff repeats all previous allegations as if set forth in full herein. 100. The Individual Defendants have knowingly and recklessly and in bad faith violated fiduciary duties of care and loyalty owed to the unitholders of Buckeye Partners and have acted to put their personal interests ahead of the interests of Buckeye Partners unitholders. The Individual Defendants’ registration of the Merger will result in change of control of the Partnership which imposes heightened fiduciary responsibilities to maximize Buckeye Partners’ value for the benefit of the unitholders and requires enhanced scrutiny by the Court. 101. The Individual Defendants have breached their fiduciary duties of loyalty, good faith, and independence owed to the unitholders of Buckeye Partners because, among other reasons: a. they failed to take steps to maximize the value of Buckeye Partners to its public unitholders and took steps to avoid competitive bidding; b. they failed to properly value Buckeye Partners; c. they failed to take the necessary steps to comply with their fiduciary duties and Buckeye Partners’ LPA; and d. they ignored or did not protect against the numerous conflicts of interest resulting from the directors’ own interrelationships or connection with the Merger. 102. As a result of the Individual Defendants’ breaches of their fiduciary duties, Plaintiff and the Class will suffer irreparable injury in that they have not and will not receive their fair portion of the value of Buckeye Partners’ assets and will be prevented from benefiting from a value-maximizing transaction. 103. Unless enjoined by this Court, the Individual Defendants will continue to breach their fiduciary duties owed to Plaintiff and the Class, and may consummate the Merger, to the irreparable harm of the Class. 104. Plaintiff and the Class have no adequate remedy at law. COUNT II On Behalf of Plaintiff and the Class Against the Individual Defendants for Breach of Fiduciary Duty – Disclosure 105. Plaintiff repeats all previous allegations as if set forth in full herein. 106. The fiduciary duties of the Individual Defendants in the circumstances of the Merger require them to disclose in a non-misleading way to Plaintiff and the Class all information material to the decisions confronting Buckeye Partners unitholders. 107. As set forth above, the Individual Defendants have breached their fiduciary duty through materially misleading disclosures and material disclosure omissions. 108. As a result, Plaintiff and the Class members are being harmed irreparably. 109. Plaintiff and the Class have no adequate remedy at law. COUNT III On Behalf of Plaintiff and the Class Against the Individual Defendants and Buckeye GP for Breach of Express and Implied Duties in Connection with the Merger 110. Plaintiff incorporates by reference and realleges each and every allegation contained above as though fully set forth herein. 111. Buckeye GP and the Individual Defendants owed the Partnership and its public unitholders duties as defined in the LPA. Further, Buckeye Partners, Buckeye GP and the Individual Defendants owed the public unitholders the implied duty of good faith and fair dealing, which the LPA could not eliminate. 112. Buckeye Partners, Buckeye GP and the Individual Defendants breached their express obligations under the LPA and the implied duty of good faith and fair dealing by, for example, causing Buckeye Partners to enter into the Merger Agreement and pursue the Merger, and by failing to disclose material information to allow Buckeye Partners unitholders to cast a fully informed vote on the Merger . 113. By reason of the foregoing, Buckeye GP and the Individual Defendants approved the Proposed Transaction in bad faith. 114. Plaintiff and the other members of the Class have no adequate remedy at law. Only through the exercise of this Court’s equitable powers can Plaintiff and the Class be fully protected from the immediate and irreparable injury which Defendants’ actions threaten to COUNT IV On Behalf of Plaintiff and the Class Against the Individual Defendants and Buckeye Partners for Aiding and Abetting Buckeye GP’s Breach of Express and Implied Duties in Connection with the Proposed Transaction 115. Plaintiff incorporates by reference and realleges each and every allegation contained above as though fully set forth herein. 116. As set forth above, Buckeye GP owed Buckeye Partners’ public unitholders duties and obligations that Buckeye GP breached in respect to the Merger. 117. Further, each Defendant knowingly participated in the foregoing breaches by directly or indirectly causing Buckeye GP to pursue the Merger and enter into the Merger Agreement, thereby causing damage to Plaintiff and the Class. 118. Plaintiff and the Class have no adequate remedy at law. Only through the exercise of this Court’s equitable powers can Plaintiff and the Class be fully protected from the immediate and irreparable injury which Defendants’ actions threaten to inflict. COUNT V On Behalf of Plaintiff and the Class Against all Defendants, for Violations of Section 14(a) of the 1934 Act and Rule 14a-9 Promulgated Thereunder 119. Plaintiff repeats and realleges each and every allegation contained above as if fully set forth herein. 120. During the relevant period, Defendants disseminated the false and misleading Preliminary Proxy specified above, which failed to disclose material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. 121. The Preliminary Proxy was prepared, reviewed and/or disseminated by Defendants. It misrepresented and/or omitted material facts, including material information about the unfair sales process for the Partnership, the unfair consideration offered in the Proposed Transaction, and the actual intrinsic value of the Partnership’s assets. 122. In so doing, Defendants made untrue statements of material facts and omitted material facts necessary to make the statements that were made not misleading in violation of § 14(a) of the 1934 Act and SEC Rule 14a-9 promulgated thereunder. By virtue of their positions within the Partnership, the Individual Defendants and Buckeye GP were aware of this information and of their duty to disclose this information in the Registration Statement. 123. The Individual Defendants and Buckeye GP were at least negligent in filing the Preliminary Proxy with these materially false and misleading statements. 124. The omissions and false and misleading statements in the Preliminary Proxy are material in that a reasonable unitholder would consider them important in deciding how to vote on the Proposed Transaction. In addition, a reasonable investor would view a full and accurate disclosure as significantly altering the “total mix” of information made available in the Preliminary Proxy and in other information reasonably available to unitholders. 125. By reason of the foregoing, Defendants have violated § 14(a) of the 1934 Act and SEC Rule 14a-9(a) promulgated thereunder. 126. Because of the false and misleading statements in the Registration Statement, Plaintiff is threatened with irreparable harm, rendering money damages inadequate. Therefore, injunctive relief is appropriate to ensure that Defendants’ misconduct is corrected. COUNT VI On Behalf of Plaintiff and the Class Against the Individual Defendants and Buckeye GP for Violations of Section 20(a) of the Exchange Act 127. Plaintiff repeats all previous allegations as if set forth in full herein. 128. The Individual Defendants and Buckeye GP acted as controlling persons of Buckeye Partners within the meaning of § 20(a) of the 1934 Act as alleged herein. By virtue of their positions as officers and/or directors of Buckeye Partners and participation in and/or awareness of the Partnership’s operations and/or intimate knowledge of the false statements contained in the Preliminary Proxy filed with the SEC, they had the power to influence and control and did influence and control, directly or indirectly, the decision-making of the Partnership, including the content and dissemination of the various statements which Plaintiff contends are false and misleading. 129. Each Individual Defendant and Buckeye GP were provided with or had unlimited access to copies of the Preliminary Proxy and other statements alleged by Plaintiff to be misleading prior to and/or shortly after these statements were issued and had the ability to prevent the issuance of the statements or cause the statements to be corrected. 130. In particular, each Individual Defendant and Buckeye GP had direct and supervisory involvement in the day-to-day operations of the Partnership and, therefore, are presumed to have had the power to control or influence the particular transactions giving rise to the securities violations as alleged herein, and exercised the same. The Preliminary Proxy at issue contains the unanimous recommendation of each of the Individual Defendants to approve the Proposed Transaction. They were thus directly involved in the making of this document. 131. In addition, as the Preliminary Proxy sets forth at length, and as described herein, the Individual Defendants and Buckeye GP were each involved in negotiating, reviewing and approving the Proposed Transaction. The Preliminary Proxy purports to describe the various issues and information that they reviewed and considered, descriptions which had input from the Individual Defendants and Buckeye GP. 132. By virtue of the foregoing, the Individual Defendants and Buckeye GP have violated § 20(a) of the 1934 Act. 133. As set forth above, the Individual Defendants and Buckeye GP had the ability to exercise control over and did control a person or persons who have each violated § 14(a) and SEC Rule 14a-9, by their acts and omissions as alleged herein. By virtue of their positions as controlling persons, Defendants are liable pursuant to § 20(a) of the 1934 Act. As a direct and proximate result of Defendants’ conduct, Partnership unitholders will be irreparably harmed. WHEREFORE, Plaintiff demands judgment against Defendants, jointly and severally, as follows: a. declaring this action to be a class action and certifying Plaintiff as Class representative and his counsel as Class counsel; b. enjoining, preliminarily and permanently, the Merger c. directing Defendants to fairly and fully disclose all material information concerning the Merger; d. in the event that the transaction is consummated prior to the entry of this Court’s final judgment, rescinding it or awarding Plaintiff and the Class rescissory damages; e. directing that Defendants account to Plaintiff and the other members of the Class for all damages caused by them and account for all profits and any special benefits obtained as a result of their breaches of their fiduciary duties; f. awarding Plaintiff the costs of this action, including a reasonable allowance for the fees and expenses of Plaintiff’s attorneys and experts; and g. granting Plaintiff and the other members of the Class such further relief as the Court deems just and proper. JURY DEMAND Plaintiff demands a trial by jury. DATED: June 13, 2019. Respectfully submitted, /s/ Thomas E. Bilek Thomas E. Bilek TX Bar No. 02313525 / SDTX Bar No. 9338 THE BILEK LAW FIRM, L.L.P. 700 Louisiana, Suite 3950 Houston, TX 77002 (713) 227-7720 Attorneys for Plaintiff OF COUNSEL: Evan Smith Marc L. Ackerman BRODSKY & SMITH, LLC Two Bala Plaza, Suite 510 Bala Cynwyd, PA 19004 Tel (610) 667-6200 Fax (610) 667-9029

securities

vbjYC4cBD5gMZwczagCk

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS BEAUMONT DIVISION SCOTTIE TURNER § § VS. § CIVIL ACTION NO. 1:11-cv-322 § TURNER INDUSTRIES GROUP, L.L.C. § PLAINTIFFS’ ORIGINAL COLLECTIVE ACTION COMPLAINT TO THE HONORABLE JUDGE OF SAID COURT: COMES NOW, SCOTTIE TURNER, Plaintiff, complaining of and against TURNER INDUSTRIES GROUP, L.L.C., Defendant, for causes of action and alleges as follows: I. JURISDICTION 1.1 This is an action under the Fair Labor Standards Act of 1938, as amended, 29 USC 201 et seq. (hereinafter “the FLSA”). Jurisdiction of this action is conferred on the Court under Section 16(b) of the FLSA (29 USC 216(b)), by the provisions of 28 USC 1337, and by 28 USC 1331. II. VENUE 2.1 Venue is proper pursuant to 28 U.S.C. § 1391(b), as the Eastern District of Texas is the judicial district in which a substantial part of the events giving rise to the claims occurred. III. PARTIES 3.1 Plaintiff, SCOTTIE TURNER, is a resident of Orange County, Texas. 3.2 Defendant, TURNER INDUSTRIES GROUP, L.L.C., is a foreign corporation and may be served with process by serving its registered agent for service in the state of 75201-4234. IV. FACTUAL ALLEGATIONS 4.1. Plaintiff, SCOTTIE TURNER, was employed by Defendant TURNER INDUSTRIES GROUP, L.L.C., beginning approximately August 25, 2009. During that time period, Plaintiff performed work at the Motiva Port Arthur, Texas SBU2 Crude Expansion Project (hereinafter referred to as “the Motiva job”). Each day, Plaintiff was required by Defendant, TURNER INDUSTRIES GROUP, L.L.C., to report for work at a certain location, usually at 5:40 a.m. – 6:30 a.m., whereupon he was to get on a bus and be transported to the Motiva facility. Later, he would be taken back by bus to the original point of departure. 4.2 Each day, the time spent in transit (from time of original reporting at the beginning of the work shift until time of disembarking the bus at the end of the shift) was approximately thirty minutes total. 4.3 During that time, Plaintiff was unable to effectively use his time for his own purposes. Moreover, he was under the control of his employer, and the time in question predominantly benefitted his employer in that the arrangement lowered his employer’s costs and/or increased his employer’s profits pursuant to the contract with Motiva. Plaintiff was not presented with, nor allowed any alternative means by which to report to his jobsite. As such, the provisions of the Portal-to-Portal Act and cases interpreting same are inapplicable. See, e.g., Vega v. Gasper, 36 F.3d 417, 425 (5th Cir. 1994) (“the workers were not required to use Gasper’s buses to get to work in the morning. They chose where they lived and how to get to and from work. Not all of Gasper’s field workers rode his buses.”); Johnson v. RGIS Inventory Specialists, 554 F.Supp.2d 693, 704-705 (E.D.Tex. transportation was entirely voluntary, as it was in Vega.”); Cervantez v. Celestica Corp., 618 F.Supp.2d 1208, 1216 (C.D.Cal. 2009) (“the distinguishing factor here is obvious: employee choice. The Vega plaintiffs had the choice of whether or not to use the employer’s transportation, even if the choice was not reasonable for some employees, given their individual circumstances.”). 4.4 Plaintiff is both an individual Plaintiff and a Consentor in this action. V. COLLECTIVE ACTION ALLEGATIONS 5.1 During the time period referenced above, and before and after, Defendant has implemented and enforced this policy of requiring its employees to report early and compete the day late as to all of its hourly employees working at the Motiva job. There exists a class of persons defined as all those who have been employed by Defendant on the Motiva job from the time period February 2, 2008 and continuing; but the class shall not include the presiding judge, any persons currently employed by the United States Government and working in the offices of or on behalf of the District Clerk for the Eastern District of Texas, or in the offices of or on behalf of any judge sitting in the Eastern District of Texas, and any persons who become so employed or so work prior to the entry of a Final Judgment in this action. 5.2 The requisites of 29 USC 216 and the FLSA Collective-Action provisions have been met. The class consists of hundreds of persons, making the members so numerous that individual lawsuits by each of the members of the group would be impractical. 5.3 Further, there are common questions of law and fact common to all members of the group. These common questions include, among others: (1) Whether Defendant should have properly included time spent reporting early and completely the day late for Whether Defendant’s actions were “willful” as defined by the Fair Labor Standards Act. 5.4 The claims of Plaintiff are typical of the claims of other members of the group, and he will fairly and adequately represent and protect the interest of the proposed class. Plaintiff has no interests antagonistic to those of the other members of the proposed class. His attorneys are qualified, experienced, and able to conduct this litigation. 5.5 The questions of law and fact common to the members of the proposed class predominate over any questions affecting only individual members. 5.6 A class or collective action is superior to other methods for the fair and efficient adjudication of the claims asserted herein, and no unusual difficulties are likely to be encountered in the management of this class action. VI. VIOLATIONS AND DAMAGES 6.1 Defendant has negligently or willfully failed to pay Plaintiff and other class members for time spent in employment, as more fully set forth above, in violation of the 6.2 Defendant has negligently or willfully failed to keep adequate records of hours worked, in violation of the FLSA. 6.3 Plaintiffs are entitled to damages representing wages not properly paid, as well as an additional equal amount as liquidated damages resulting from Defendant’s willful violation of the FLSA. 29 USC 207, 216(b), 255(a). Plaintiff are further entitled to damages, and their costs of court. PRAYER WHEREFORE, Plaintiff, SCOTTIE TURNER, prays for judgment against Defendant as follows: 1. For an order certifying this matter as a class or collective action under the Federal Rules of Civil Procedure, and appointing Plaintiff and his counsel to represent the class; 2. For an order directing that all class members be notified of the pendency of this action and given an opportunity to consent to participation, at the cost of Defendant, 2. For all damages, actual, special, and incidental, that are recoverable under law as the evidence may show proper; 2. For attorney’s fees in an amount deemed sufficient to cover the prosecution of this action; 3. For all costs of these proceedings and interest from date of judicial demand; and, 4. For such other and further relief, in law or in equity, as to which Plaintiffs may show themselves to be justly entitled. Respectfully submitted, REAUD, MORGAN & QUINN, L.L.P. 801 Laurel Street P. O. Box 26005 Beaumont, Texas 77720-6005 (409) 838-1000 FAX (409) 833-8236 By /s/ John Werner John Werner State Bar No. 00789720 Attorneys for Plaintiff

employment & labor

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UNITED STATES DISTRICT COURT EASTERN DISTRICT OF TEXAS SHERMAN DIVISION 4:12-cv-0374 Case No. GEORGE NEELY and JOAN NEELY, Individually and On Behalf of All Others Similarly Situated, Plaintiffs, CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS v. JURY TRIAL DEMANDED INTRUSION INC., JACK BLOUNT, and B. FRANKLIN BYRD, Defendants. Plaintiffs George Neely and Joan Neely (“Plaintiffs”), individually and on behalf of all others similarly situated, by and through their attorneys, allege the following upon information and belief, except as to those allegations concerning Plaintiffs, which are alleged upon personal knowledge. Plaintiffs’ information and belief is based upon, among other things, their counsel’s investigation, which includes without limitation: (a) review and analysis of regulatory filings made by Intrusion Inc. (“Intrusion” or the “Company”) with the United States (“U.S.”) Securities and Exchange Commission (“SEC”); (b) review and analysis of press releases and media reports issued by and disseminated by Intrusion; and (c) review of other publicly available information concerning Intrusion. NATURE OF THE ACTION AND OVERVIEW 1. This is a class action on behalf of persons and entities that purchased or otherwise acquired Intrusion securities between January 13, 2021 and April 13, 2021, inclusive (the “Class Period”). Plaintiffs pursue claims against the Defendants under the Securities Exchange Act of 1934 (the “Exchange Act”). 2. Intrusion develops, sells, and supports products that purport to protect entities from cyberattacks by combining advanced threat intelligence with real-time artificial intelligence. It offers three products: Shield, a cybersecurity solution packaged as a comprehensive, real-time AI- based Security-as-a-Service; TraceCop, a big data tool with IP intelligence, including reputation information on known good and known bad active IP addresses; and Savant, a network monitoring solution that identifies suspicious traffic in real-time. 3. On April 14, 2021, White Diamond Research published a report alleging, among other things, that Intrusion’s product, Shield, “has no patents, certifications, or insurance, which are all essential for selling cybersecurity products” and that “Shield is based on open-source data already available to the public.” Thus, the report stated that “Shield is a repackaging of pre-existing technology rather than an innovative offering.” Moreover, the report alleged that the claims that Shield “stopp[ed] a total of 77,539,801 cyberthreats from 805,110 uniquely malicious entities . . . in the 90-day beta program” were “outlandish,” leading White Diamond to question “[h]ow have these companies been able to function so far, as they’ve been attacked many times per minute by ransomware, malware, data theft, phishing and DDoS attacks?” 4. On this news, the Company’s share price fell $4.50, or over 16%, to close at $23.75 per share on April 14, 2021, on unusually heavy trading volume. The share price continued to decline by $3.22, or 14%, over the next trading session to close at $20.53 per share on April 15, 2021. 5. Throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors: (1) that Intrusion’s Shield product was merely a repackaging of existing technology in the Company’s portfolio; (2) that Shield lacked the patents, certifications, and insurance critical to the sale of cybersecurity products; (3) that the Company had overstated the efficacy of Shield’s purported ability to protect against cyberattacks; (4) that, as a result of the foregoing, Intrusion’s Shield was reasonably unlikely to generate significant revenue; and (5) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis. 6. As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s securities, Plaintiffs and other Class members have suffered significant losses and damages. JURISDICTION AND VENUE 7. The claims asserted herein arise under Sections 10(b) and 20(a) of the Exchange Act (15 U.S.C. §§ 78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder by the SEC (17 C.F.R. § 240.10b-5). 8. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. § 1331 and Section 27 of the Exchange Act (15 U.S.C. § 78aa). 9. Venue is proper in this Judicial District pursuant to 28 U.S.C. § 1391(b) and Section 27 of the Exchange Act (15 U.S.C. § 78aa(c)). Substantial acts in furtherance of the alleged fraud or the effects of the fraud have occurred in this Judicial District. Many of the acts charged herein, including the dissemination of materially false and/or misleading information, occurred in substantial part in this Judicial District. In addition, the Company’s principal executive offices are in this District. 10. In connection with the acts, transactions, and conduct alleged herein, Defendants directly and indirectly used the means and instrumentalities of interstate commerce, including the United States mail, interstate telephone communications, and the facilities of a national securities exchange. PARTIES 11. Plaintiffs George Neely and Joan Neely, as set forth in the accompanying certification, incorporated by reference herein, purchased Intrusion securities during the Class Period, and suffered damages as a result of the federal securities law violations and false and/or misleading statements and/or material omissions alleged herein. 12. Defendant Intrusion is incorporated under the laws of Delaware with its principal executive offices located in 101 East Park Blvd., Suite 1300, Plano, Texas 75074. Intrusion’s common stock trades on the NASDAQ exchange under the symbol “INTZ.” 13. Defendant Jack B. Blount (“Blount”) was the Company’s Chief Executive Officer (“CEO”) at all relevant times. 14. Defendant B. Franklin Byrd (“Byrd”) was the Company’s Chief Financial Officer (“CFO”) at all relevant times. 15. Defendants Blount and Byrd (collectively the “Individual Defendants”), because of their positions with the Company, possessed the power and authority to control the contents of the Company’s reports to the SEC, press releases and presentations to securities analysts, money and portfolio managers and institutional investors, i.e., the market. The Individual Defendants were provided with copies of the Company’s reports and press releases alleged herein to be misleading prior to, or shortly after, their issuance and had the ability and opportunity to prevent their issuance or cause them to be corrected. Because of their positions and access to material non- public information available to them, the Individual Defendants knew that the adverse facts specified herein had not been disclosed to, and were being concealed from, the public, and that the positive representations which were being made were then materially false and/or misleading. The Individual Defendants are liable for the false statements pleaded herein. SUBSTANTIVE ALLEGATIONS Background 16. Intrusion develops, sells, and supports products that purport to protect entities from cyberattacks by combining advanced threat intelligence with real-time artificial intelligence. It offers three products: Shield, a cybersecurity solution packaged as a comprehensive, real-time AI- based Security-as-a-Service; TraceCop, a big data tool with IP intelligence, including reputation information on known good and known bad active IP addresses; and Savant, a network monitoring solution that identifies suspicious traffic in real-time. Materially False and Misleading Statements Issued During the Class Period 17. The Class Period begins on January 13, 2021. On that day, the Company issued a press release entitled “INTRUSION Successfully Completes Beta Testing of its Newest Cybersecurity Solution, Shield; Announces General Availability.” It stated, in relevant part: Beta testing of INTRUSION Shield confirmed the solution’s efficacy by stopping a total of 77,539,801 cyberthreats from 805,110 uniquely malicious entities attempting to breach 13 companies that participated in the 90-day beta program. Shield was able to continuously protect these companies from ransomware, denial of service attacks, malware, data theft, phishing and more. In fact, analysis by INTRUSION also concluded that Shield would have defended against the Sunburst malware that was at the heart of the recent cyberattacks involving SolarWinds and FireEye, which impacted many government agencies and 18,000 SolarWinds customers. “With the high-risk patterns we’ve incorporated into the rule set that feeds our AI, along with the reputation and suspicious activity that it searches for while monitoring all traffic in and out of a network, we can confidently say Shield would have protected our customers where clearly other security approaches failed,” said Jack B. Blount, President and CEO of INTRUSION. “The malware had been living on the SolarWinds network for at least nine months undetected – it got past firewalls and many other cybersecurity products. This is all the more reason companies need a multi-layered approach to cybersecurity, and specifically one that stops threats in real-time to protect them from the damage cybercriminals can cause over time.” All companies participating in the beta program have made the decision to move forward with Shield in production. “The Shield solution has shown us that virtually every network is already infected, and front-end protection is not possible. The understanding that networks are already compromised and that the only means of protection is to monitor and restrict outgoing traffic is the breakthrough of the Shield philosophy,” said Richard, President of NovaTech. Additionally, false positive security alerts – where legitimate traffic is identified as a threat – are a significant problem among cybersecurity solutions available today, with Ponemon Institute reporting that most cybersecurity companies see mistaken alerts happening 33% of the time. Cybersecurity professionals spend hundreds of hours investigating these alerts only to determine ultimately that there was no threat. Beta testing for Shield showed a median false positive rate of 0.001% of all traffic, far surpassing other solutions on the market and allowing businesses to run uninterrupted. Multiple beta customers were happy to report they saw zero false positives using Shield. 18. On February 25, 2021, Intrusion announced its fourth quarter and full year financial results in a press release that stated, in relevant part: “Since releasing INTRUSION’s revolutionary Shield solution only 6 weeks ago, we have received an unprecedented amount of interest and a growing pipeline of customers that is nothing short of extraordinary,” said Jack B. Blount, President and CEO of INTRUSION. “Shield is the first platform that uses real-time artificial intelligence to not just block intruders, but to kill cyberattacks including zero-days. . . .” * * * Fourth Quarter Financial Results Revenue for the fourth quarter 2020 was $1.6 million, compared to $2.6 million in the fourth quarter 2019 and $1.6 million for the third quarter 2020. For the full year 2020, revenue was $6.6 million as compared to $13.6 million in 2019. Gross profit margin was 58% of revenue in the fourth quarter of 2020, compared to 61% in the fourth quarter 2019 and 59% in the third quarter 2020. For the full year 2020, gross margin was 59% as compared to 61% in the prior year. Operating expenses in the fourth quarter of 2020 were $4.8 million, which included a $1.1 million non-cash write-off related to a prior office lease agreement. This compares to operating expenses of $1.3 million in the fourth quarter 2019 and $2.3 million in the third quarter 2020. Full year 2020 operating expenses were $10.4 million, which included the aforementioned non-cash write-off, compared to $3.8 million in 2019. Net loss in the fourth quarter of 2020 was $3.9 million, which included the $1.1 million non-cash write-off and compares to net income of $0.3 million in the fourth quarter 2019 and a net loss of $1.4 million in the third quarter 2020. For the full year 2020, net loss was $6.5 million, which included the fourth quarter non- cash write-off, compared to net income of $4.5 million in the prior year. 19. On March 9, 2021, Intrusion filed its annual report on Form 10-K for the period ended December 31, 2020 (the “2020 10-K”) with the SEC, affirming the previously reported financial results. Regarding Shield’s performance, the Company stated, in relevant part: We could experience damage to our reputation in the cybersecurity industry in the event that our Shield solution fails to meet our customers’ needs or to achieve market acceptance. Our reputation in the industry as a provider of entity identification, data mining, and advanced persistent threat detection solutions may be harmed, perhaps significantly, in the event that Shield fails to perform as we expect it to. If Shield does not perform as we expect, if we experience delivery delays, or if our customers do not perceive the benefits of purchasing and using Shield as part of their comprehensive cybersecurity solution, our position as a leader in this technology space may be damaged and could affect the willingness of our customers, as well as potential customers, to purchase our other solutions that function separately from Shield. Any reputational damage could result in a decrease in orders for all of our solutions, the loss of current customers, and a decrease in our overall revenues which could in turn have a material adverse effect on our results of operation. 20. On April 13, 2021, the Company issued a press release entitled “Intrusion Q1 2021 Results Surpass Expectations.” Therein, Intrusion stated, in relevant part: Highlights from the quarter include: • INTRUSION Shield is now protecting over 50,000 seats (almost 8x the company’s original Q1 goal) • Hired new Chief Sales Officer, Darryl Athans, to drive continued growth • Signed over 30 channel partners including resellers in Australia and Mexico • Company now able to sell latest innovation, Shield, globally Since announcing the general availability of Shield in January 2021, the company wasted no time ramping up its go-to-market activities to finish the first quarter with several key wins. INTRUSION recently announced manufacturing giants Kimberly-Clark and Lippert Components signing on as Shield customers, with other customer additions including KBI and Geocent adopting Shield to protect their networks. 21. The above statements identified in ¶¶ 17-20 were materially false and/or misleading, and failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors: (1) that Intrusion’s Shield product was merely a repackaging of existing technology in the Company’s portfolio; (2) that Shield lacked the patents, certifications, and insurance critical to the sale of cybersecurity products; (3) that the Company had overstated the efficacy of Shield’s purported ability to protect against cyberattacks; (4) that, as a result of the foregoing, Intrusion’s Shield was reasonably unlikely to generate significant revenue; and (5) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis. Disclosures at the End of the Class Period 22. On April 14, 2021, White Diamond Research published a report alleging, among other things, that Intrusion’s product, Shield, “has no patents, certifications, or insurance, which are all essential for selling cybersecurity products” and that “Shield is based on open-source data already available to the public.” Thus, the report stated that “Shield is a repackaging of pre- existing technology rather than an innovative offering.” Specifically, it stated: Despite heavy promotion and a supposedly successful beta test, we do not believe Shield represents a novel offering from INTZ. In fact, we believe the company itself has said this. During INTZ’s Q420 Earnings Call, and in a buzz-word flurry (AI, cyber-, supercomputer, etc.), Blount revealed that Shield is simply a mashup of INTZ’s existing products. In Blount’s words: Shield is really all 3 of Intrusion’s technologies married together in a single product solution. While this may initially sound exciting, it hardly represents any ground-breaking innovation. Here are a few other statements that Blount made in the Q420 Earnings Call suggesting Shield is a repackaging of pre-existing technology rather than an innovative offering: • “The TraceCop database that we have created, managed, grown, used for 25 years, is the core of what makes Shield work today.” • “The Savant technology that we’ve had and improved for 12 years, again, is a core piece of the technology of Shield. How we open, inspect every packet of data is with the Savant technology. The only new thing that there is in Shield is the artificial intelligence that learns from the database, that can interpret what it finds when it opens a packet of data, and how it can decide if it’s good or bad, when humans could look at that packet of data and have not a clue whether it was normal traffic or not normal traffic.” • “You have to think about Shield as the combination of 25 years of R&D, 25 years of product and development, 25 years of expertise around cybercrime, combined into a single product.” * * * We believe the timeline of the announcement coupled with the lack of direct R&D investment into Shield preceding Blount’s appointment as CEO casts doubt on Shield as the culmination of a quarter-century master plan. • Though INTZ’s R&D accounts for ~39% of the company’s expenses (aside from a small peak in 2015/2016), R&D has remained reasonably proportional to its total operating expenses. • According to its accounting policies, INTZ expenses R&D as it is incurred, thus the recent uptick in R&D expense in 2020 would not be related to Shield (if it truly is a product launching on the back of years worth of R&D). • Recent financial statements provide no indication that INTZ has been ramping up to commercialize a cutting-edge cybersecurity product. 23. Moreover, the report alleged that Intrusion’s claims that Shield “stopp[ed] a total of 77,539,801 cyberthreats from 805,110 uniquely malicious entities . . . in the 90-day beta program” were “outlandish,” leading White Diamond to question “[h]ow have these companies been able to function so far, as they’ve been attacked many times per minute by ransomware, malware, data theft, phishing and DDoS attacks?” Specifically, the report stated: The Companies Featured From the Shield Beta Test Are Small And Have Existing Relationships with Intrusion In INTZ’s Needham Virtual Growth Conference presentation on 1/13/21, a slide shows the testimonials of three companies that were part of the Shield beta test. This slide is shown below: * * * All three customers have existing relationships with INTZ. • B. Riley Financial is INTZ’s investment banker who organized the equity raise in October 2020 and then issued a glowing initiation report on the stock. • Bard Associates is a shareholder of INTZ. • We interviewed the IT Manager for NovaTech, and he said the only reason why they got involved in the beta testing is because an IT securities guy works for both NovaTech and INTZ. We provide more details on this interview later in this section. In the PR, INTZ made a lot of bold claims for a product with no real traction in the market. It states: “Beta testing of INTRUSION Shield confirmed the solution’s efficacy by stopping a total of 77,539,801 cyberthreats from 805,110 uniquely malicious entities attempting to breach 13 companies that participated in the 90-day beta program. Shield was able to continuously protect these companies from ransomware, denial of service attacks, malware, data theft, phishing and more.” These numbers don’t seem real, but something out of a science fiction movie. This means that on average, over the 13 companies, each company was attacked 6M times over the 90-day trial period / 66k times per day / 2.7k per hour / 46 times per minute. [table omitted] How have these companies been able to function so far, as they’ve been attacked many times per minute by ransomware, malware, data theft, phishing and DDoS attacks? The company also claims that Shield is so good, it could have prevented the recent Sunburst malware attack. The PR states: “In fact, analysis by INTRUSION also concluded that Shield would have defended against the Sunburst malware that was at the heart of the recent cyberattacks involving SolarWinds and FireEye, which impacted many government agencies and 18,000 SolarWinds customers.” SolarWinds (SWI) is a $5B+ IT infrastructure management software company. It sells security and data protection products. It spent $32M in Research & Development (R&D) and $82M in Sales and Marketing (S&M) in Q420, and a whopping $126M for the entire year 2020. We don’t believe that INTZ has developed a more sophisticated malware defending software than SWI, given what each company has accomplished and that INTZ has invested so little in R&D. 24. White Diamond also expressed doubt that Intrusion’s recent purported sales agreements would lead to significant revenue. The report stated: On 3/31/21, INTZ announced that it signed a “new agreement” with leading global consumer products company Kimberly-Clark (KMB). One of the reasons why investors should be skeptical of this “agreement” is that the announcement doesn’t include any financial details or terms on duration. We are not convinced that the contract is revenue generating and believe the “generalizations” in the announcements could imply a pilot program. We don’t believe a company the size of KMB would agree to migrate its network to a cybersecurity software that doesn’t have any 3rd party certifications, without first testing it on a trial basis. On 4/6/21, INTZ announced a new Shield customer, Lippert Components from LCI Industries (LCII). We don’t think this sale is a big deal because Lippert was a former customer using INTZ’s Savant service. This is also another associated party sale. James Gero is on the Board of Directors of both Lippert and INTZ. As shown in the screen shots below: [images omitted] Notice the Lippert executive, Jamie A. Schnur, president of the aftermarket, used the buzzword “AI” when describing why it is a Shield customer. However, Schnur isn’t the IT guy in charge of cybersecurity. We spoke with the investor relations rep of LCII. He said that the CFO told him that there’s a wide range of programs they use for cybersecurity. From emails, to cell phones, to any of their machinery that’s hooked up to the internet. And they report to their audit committee about their cybersecurity measures. 25. On this news, the Company’s share price fell $4.50, or over 16%, to close at $23.75 per share on April 14, 2021, on unusually heavy trading volume. The share price continued to decline by $3.22, or 14%, over the next trading session to close at $20.53 per share on April 15, 2021. CLASS ACTION ALLEGATIONS 26. Plaintiffs bring this action as a class action pursuant to Federal Rule of Civil Procedure 23(a) and (b)(3) on behalf of a class, consisting of all persons and entities that purchased or otherwise acquired Intrusion securities between January 13, 2021 and April 13, 2021, inclusive, and who were damaged thereby (the “Class”). Excluded from the Class are Defendants, the officers and directors of the Company, at all relevant times, members of their immediate families and their legal representatives, heirs, successors, or assigns, and any entity in which Defendants have or had a controlling interest. 27. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, Intrusion’s shares actively traded on the NASDAQ. While the exact number of Class members is unknown to Plaintiffs at this time and can only be ascertained through appropriate discovery, Plaintiffs believe that there are at least hundreds or thousands of members in the proposed Class. Millions of Intrusion shares were traded publicly during the Class Period on the NASDAQ. Record owners and other members of the Class may be identified from records maintained by Intrusion or its transfer agent and may be notified of the pendency of this action by mail, using the form of notice similar to that customarily used in securities class actions. 28. Plaintiffs’ claims are typical of the claims of the members of the Class as all members of the Class are similarly affected by Defendants’ wrongful conduct in violation of federal law that is complained of herein. 29. Plaintiffs will fairly and adequately protect the interests of the members of the Class and have retained counsel competent and experienced in class and securities litigation. 30. Common questions of law and fact exist as to all members of the Class and predominate over any questions solely affecting individual members of the Class. Among the questions of law and fact common to the Class are: (a) whether the federal securities laws were violated by Defendants’ acts as alleged herein; (b) whether statements made by Defendants to the investing public during the Class Period omitted and/or misrepresented material facts about the business, operations, and prospects of Intrusion; and (c) to what extent the members of the Class have sustained damages and the proper measure of damages. 31. A class action is superior to all other available methods for the fair and efficient adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the damages suffered by individual Class members may be relatively small, the expense and burden of individual litigation makes it impossible for members of the Class to individually redress the wrongs done to them. There will be no difficulty in the management of this action as a class action. UNDISCLOSED ADVERSE FACTS 32. The market for Intrusion’s securities was open, well-developed and efficient at all relevant times. As a result of these materially false and/or misleading statements, and/or failures to disclose, Intrusion’s securities traded at artificially inflated prices during the Class Period. Plaintiffs and other members of the Class purchased or otherwise acquired Intrusion’s securities relying upon the integrity of the market price of the Company’s securities and market information relating to Intrusion, and have been damaged thereby. 33. During the Class Period, Defendants materially misled the investing public, thereby inflating the price of Intrusion’s securities, by publicly issuing false and/or misleading statements and/or omitting to disclose material facts necessary to make Defendants’ statements, as set forth herein, not false and/or misleading. The statements and omissions were materially false and/or misleading because they failed to disclose material adverse information and/or misrepresented the truth about Intrusion’s business, operations, and prospects as alleged herein. 34. At all relevant times, the material misrepresentations and omissions particularized in this Complaint directly or proximately caused or were a substantial contributing cause of the damages sustained by Plaintiffs and other members of the Class. As described herein, during the Class Period, Defendants made or caused to be made a series of materially false and/or misleading statements about Intrusion’s financial well-being and prospects. These material misstatements and/or omissions had the cause and effect of creating in the market an unrealistically positive assessment of the Company and its financial well-being and prospects, thus causing the Company’s securities to be overvalued and artificially inflated at all relevant times. Defendants’ materially false and/or misleading statements during the Class Period resulted in Plaintiffs and other members of the Class purchasing the Company’s securities at artificially inflated prices, thus causing the damages complained of herein when the truth was revealed. LOSS CAUSATION 35. Defendants’ wrongful conduct, as alleged herein, directly and proximately caused the economic loss suffered by Plaintiffs and the Class. 36. During the Class Period, Plaintiffs and the Class purchased Intrusion’s securities at artificially inflated prices and were damaged thereby. The price of the Company’s securities significantly declined when the misrepresentations made to the market, and/or the information alleged herein to have been concealed from the market, and/or the effects thereof, were revealed, causing investors’ losses. SCIENTER ALLEGATIONS 37. As alleged herein, Defendants acted with scienter since Defendants knew that the public documents and statements issued or disseminated in the name of the Company were materially false and/or misleading; knew that such statements or documents would be issued or disseminated to the investing public; and knowingly and substantially participated or acquiesced in the issuance or dissemination of such statements or documents as primary violations of the federal securities laws. As set forth elsewhere herein in detail, the Individual Defendants, by virtue of their receipt of information reflecting the true facts regarding Intrusion, their control over, and/or receipt and/or modification of Intrusion’s allegedly materially misleading misstatements and/or their associations with the Company which made them privy to confidential proprietary information concerning Intrusion, participated in the fraudulent scheme alleged herein. APPLICABILITY OF PRESUMPTION OF RELIANCE (FRAUD-ON-THE-MARKET DOCTRINE) 38. The market for Intrusion’s securities was open, well-developed and efficient at all relevant times. As a result of the materially false and/or misleading statements and/or failures to disclose, Intrusion’s securities traded at artificially inflated prices during the Class Period. On April 13, 2021, the Company’s share price closed at a Class Period high of $28.25 per share. Plaintiffs and other members of the Class purchased or otherwise acquired the Company’s securities relying upon the integrity of the market price of Intrusion’s securities and market information relating to Intrusion, and have been damaged thereby. 39. During the Class Period, the artificial inflation of Intrusion’s shares was caused by the material misrepresentations and/or omissions particularized in this Complaint causing the damages sustained by Plaintiffs and other members of the Class. As described herein, during the Class Period, Defendants made or caused to be made a series of materially false and/or misleading statements about Intrusion’s business, prospects, and operations. These material misstatements and/or omissions created an unrealistically positive assessment of Intrusion and its business, operations, and prospects, thus causing the price of the Company’s securities to be artificially inflated at all relevant times, and when disclosed, negatively affected the value of the Company shares. Defendants’ materially false and/or misleading statements during the Class Period resulted in Plaintiffs and other members of the Class purchasing the Company’s securities at such artificially inflated prices, and each of them has been damaged as a result. 40. At all relevant times, the market for Intrusion’s securities was an efficient market for the following reasons, among others: (a) Intrusion shares met the requirements for listing, and was listed and actively traded on the NASDAQ, a highly efficient and automated market; (b) As a regulated issuer, Intrusion filed periodic public reports with the SEC and/or the NASDAQ; (c) Intrusion regularly communicated with public investors via established market communication mechanisms, including through regular dissemination of press releases on the national circuits of major newswire services and through other wide-ranging public disclosures, such as communications with the financial press and other similar reporting services; and/or (d) Intrusion was followed by securities analysts employed by brokerage firms who wrote reports about the Company, and these reports were distributed to the sales force and certain customers of their respective brokerage firms. Each of these reports was publicly available and entered the public marketplace. 41. As a result of the foregoing, the market for Intrusion’s securities promptly digested current information regarding Intrusion from all publicly available sources and reflected such information in Intrusion’s share price. Under these circumstances, all purchasers of Intrusion’s securities during the Class Period suffered similar injury through their purchase of Intrusion’s securities at artificially inflated prices and a presumption of reliance applies. 42. A Class-wide presumption of reliance is also appropriate in this action under the Supreme Court’s holding in Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128 (1972), because the Class’s claims are, in large part, grounded on Defendants’ material misstatements and/or omissions. Because this action involves Defendants’ failure to disclose material adverse information regarding the Company’s business operations and financial prospects—information that Defendants were obligated to disclose—positive proof of reliance is not a prerequisite to recovery. All that is necessary is that the facts withheld be material in the sense that a reasonable investor might have considered them important in making investment decisions. Given the importance of the Class Period material misstatements and omissions set forth above, that requirement is satisfied here. NO SAFE HARBOR 43. The statutory safe harbor provided for forward-looking statements under certain circumstances does not apply to any of the allegedly false statements pleaded in this Complaint. The statements alleged to be false and misleading herein all relate to then-existing facts and conditions. In addition, to the extent certain of the statements alleged to be false may be characterized as forward looking, they were not identified as “forward-looking statements” when made and there were no meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the purportedly forward-looking statements. In the alternative, to the extent that the statutory safe harbor is determined to apply to any forward-looking statements pleaded herein, Defendants are liable for those false forward- looking statements because at the time each of those forward-looking statements was made, the speaker had actual knowledge that the forward-looking statement was materially false or misleading, and/or the forward-looking statement was authorized or approved by an executive officer of Intrusion who knew that the statement was false when made. FIRST CLAIM Violation of Section 10(b) of The Exchange Act and Rule 10b-5 Promulgated Thereunder Against All Defendants 44. Plaintiffs repeat and re-allege each and every allegation contained above as if fully set forth herein. 45. During the Class Period, Defendants carried out a plan, scheme and course of conduct which was intended to and, throughout the Class Period, did: (i) deceive the investing public, including Plaintiffs and other Class members, as alleged herein; and (ii) cause Plaintiffs and other members of the Class to purchase Intrusion’s securities at artificially inflated prices. In furtherance of this unlawful scheme, plan and course of conduct, Defendants, and each defendant, took the actions set forth herein. 46. Defendants (i) employed devices, schemes, and artifices to defraud; (ii) made untrue statements of material fact and/or omitted to state material facts necessary to make the statements not misleading; and (iii) engaged in acts, practices, and a course of business which operated as a fraud and deceit upon the purchasers of the Company’s securities in an effort to maintain artificially high market prices for Intrusion’s securities in violation of Section 10(b) of the Exchange Act and Rule 10b-5. All Defendants are sued either as primary participants in the wrongful and illegal conduct charged herein or as controlling persons as alleged below. 47. Defendants, individually and in concert, directly and indirectly, by the use, means or instrumentalities of interstate commerce and/or of the mails, engaged and participated in a continuous course of conduct to conceal adverse material information about Intrusion’s financial well-being and prospects, as specified herein. 48. Defendants employed devices, schemes and artifices to defraud, while in possession of material adverse non-public information and engaged in acts, practices, and a course of conduct as alleged herein in an effort to assure investors of Intrusion’s value and performance and continued substantial growth, which included the making of, or the participation in the making of, untrue statements of material facts and/or omitting to state material facts necessary in order to make the statements made about Intrusion and its business operations and future prospects in light of the circumstances under which they were made, not misleading, as set forth more particularly herein, and engaged in transactions, practices and a course of business which operated as a fraud and deceit upon the purchasers of the Company’s securities during the Class Period. 49. Each of the Individual Defendants’ primary liability and controlling person liability arises from the following facts: (i) the Individual Defendants were high-level executives and/or directors at the Company during the Class Period and members of the Company’s management team or had control thereof; (ii) each of these defendants, by virtue of their responsibilities and activities as a senior officer and/or director of the Company, was privy to and participated in the creation, development and reporting of the Company’s internal budgets, plans, projections and/or reports; (iii) each of these defendants enjoyed significant personal contact and familiarity with the other defendants and was advised of, and had access to, other members of the Company’s management team, internal reports and other data and information about the Company’s finances, operations, and sales at all relevant times; and (iv) each of these defendants was aware of the Company’s dissemination of information to the investing public which they knew and/or recklessly disregarded was materially false and misleading. 50. Defendants had actual knowledge of the misrepresentations and/or omissions of material facts set forth herein, or acted with reckless disregard for the truth in that they failed to ascertain and to disclose such facts, even though such facts were available to them. Such defendants’ material misrepresentations and/or omissions were done knowingly or recklessly and for the purpose and effect of concealing Intrusion’s financial well-being and prospects from the investing public and supporting the artificially inflated price of its securities. As demonstrated by Defendants’ overstatements and/or misstatements of the Company’s business, operations, financial well-being, and prospects throughout the Class Period, Defendants, if they did not have actual knowledge of the misrepresentations and/or omissions alleged, were reckless in failing to obtain such knowledge by deliberately refraining from taking those steps necessary to discover whether those statements were false or misleading. 51. As a result of the dissemination of the materially false and/or misleading information and/or failure to disclose material facts, as set forth above, the market price of Intrusion’s securities was artificially inflated during the Class Period. In ignorance of the fact that market prices of the Company’s securities were artificially inflated, and relying directly or indirectly on the false and misleading statements made by Defendants, or upon the integrity of the market in which the securities trades, and/or in the absence of material adverse information that was known to or recklessly disregarded by Defendants, but not disclosed in public statements by Defendants during the Class Period, Plaintiffs and the other members of the Class acquired Intrusion’s securities during the Class Period at artificially high prices and were damaged thereby. 52. At the time of said misrepresentations and/or omissions, Plaintiffs and other members of the Class were ignorant of their falsity, and believed them to be true. Had Plaintiffs and the other members of the Class and the marketplace known the truth regarding the problems that Intrusion was experiencing, which were not disclosed by Defendants, Plaintiffs and other members of the Class would not have purchased or otherwise acquired their Intrusion securities, or, if they had acquired such securities during the Class Period, they would not have done so at the artificially inflated prices which they paid. 53. By virtue of the foregoing, Defendants violated Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder. 54. As a direct and proximate result of Defendants’ wrongful conduct, Plaintiffs and the other members of the Class suffered damages in connection with their respective purchases and sales of the Company’s securities during the Class Period. SECOND CLAIM Violation of Section 20(a) of The Exchange Act Against the Individual Defendants 55. Plaintiffs repeat and re-allege each and every allegation contained above as if fully set forth herein. 56. Individual Defendants acted as controlling persons of Intrusion within the meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level positions and their ownership and contractual rights, participation in, and/or awareness of the Company’s operations and intimate knowledge of the false financial statements filed by the Company with the SEC and disseminated to the investing public, Individual Defendants had the power to influence and control and did influence and control, directly or indirectly, the decision-making of the Company, including the content and dissemination of the various statements which Plaintiffs contend are false and misleading. Individual Defendants were provided with or had unlimited access to copies of the Company’s reports, press releases, public filings, and other statements alleged by Plaintiffs to be misleading prior to and/or shortly after these statements were issued and had the ability to prevent the issuance of the statements or cause the statements to be corrected. 57. In particular, Individual Defendants had direct and supervisory involvement in the day-to-day operations of the Company and, therefore, had the power to control or influence the particular transactions giving rise to the securities violations as alleged herein, and exercised the 58. As set forth above, Intrusion and Individual Defendants each violated Section 10(b) and Rule 10b-5 by their acts and omissions as alleged in this Complaint. By virtue of their position as controlling persons, Individual Defendants are liable pursuant to Section 20(a) of the Exchange Act. As a direct and proximate result of Defendants’ wrongful conduct, Plaintiffs and other members of the Class suffered damages in connection with their purchases of the Company’s securities during the Class Period. PRAYER FOR RELIEF WHEREFORE, Plaintiffs pray for relief and judgment, as follows: (a) Determining that this action is a proper class action under Rule 23 of the Federal Rules of Civil Procedure; (b) Awarding compensatory damages in favor of Plaintiffs and the other Class members against all defendants, jointly and severally, for all damages sustained as a result of Defendants’ wrongdoing, in an amount to be proven at trial, including interest thereon; Awarding Plaintiffs and the Class their reasonable costs and expenses incurred in this action, including counsel fees and expert fees; and (c) Such other and further relief as the Court may deem just and proper. JURY TRIAL DEMANDED Plaintiffs hereby demand a trial by jury. Dated: May 14, 2021 Respectfully submitted, /s/ Willie Briscoe Willie C. Briscoe State Bar Number 24001788 THE BRISCOE LAW FIRM, PLLC 12700 Park Central Drive, Suite 520 Dallas, TX 75251 Telephone: 972-521-6868 Facsimile: 346-214-7463 [email protected] POMERANTZ LLP Jeremy A. Lieberman (pro hac vice application forthcoming) J. Alexander Hood II (pro hac vice application forthcoming) Thomas H. Przybylowski (pro hac vice application forthcoming) 600 Third Avenue, 20th Floor New York, New York 10016 Telephone: (212) 661-1100 Facsimile: (212) 661-8665 [email protected] [email protected] [email protected] BRONSTEIN, GEWIRTZ & GROSSMAN, LLC Peretz Bronstein (pro hac vice application forthcoming) 60 East 42nd Street, Suite 4600 New York, NY 10165 Telephone: (212) 697-6484 [email protected] Attorneys for Plaintiffs

securities

jlWgBIkBRpLueGJZTZIN

KAZEROUNI LAW GROUP, APC Abbas Kazerounian, Esq. (249203) [email protected] Matthew M. Loker, Esq. (279939) [email protected] 245 Fischer Avenue, Unit D1 Costa Mesa, CA 92626 Telephone: (800) 400-6808 Facsimile: (800) 520-5523 Attorneys for Plaintiff, Jordan Kohler UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA '19CV1870 BLM BEN JORDAN KOHLER, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, Plaintiff, v. Case No.: CLASS ACTION COMPLAINT FOR VIOLATIONS OF CALIFORNIA’S UNFAIR COMPETITION LAW, CALIFORNIA BUSINESS & PROFESSIONS CODE §§ 17200, ET SEQ. JURY TRIAL DEMANDED GARDEN COMMUNITIES, Defendant. 1. JORDAN KOHLER (“Plaintiff”), by Plaintiff’s attorneys, brings this Class Action Complaint for damages, injunctive relief, and any other available legal or equitable remedies, resulting from the unlawful and deceptive business practices of GARDEN COMMUNITIES (“Defendant”) with regard to Defendant’s unfair, unlawful, and fraudulent business practices pursuant California’s Unfair Competition Law, California Business & Professions Code §§ 17200, et seq. (“UCL”). 2. Consequently, Plaintiff also brings this Complaint for damages, injunctive relief, and any other available legal or equitable remedies, resulting from the above-mentioned practices of Defendant as they are also in violation of the UCL. 3. Defendant’s conduct is a scheme carried out by Defendant which involves making significant amounts of money from California consumers through false, deceptive, and misleading means throughout the period covered by the applicable statute of limitations. 4. Plaintiff makes these allegations on information and belief, with the exception of those allegations that pertain to a Plaintiff, or to a Plaintiff's counsel, which Plaintiff alleges on personal knowledge. 5. While many violations are described below with specificity, this Complaint alleges violations of the statutes cited in their entirety. 6. Unless otherwise stated, Plaintiff alleges that any violations by Defendant were knowing and intentional, and that Defendant did not maintain procedures reasonably adapted to avoid any such violation. 7. Unless otherwise indicated, the use of any Defendant’s name in this Complaint includes all agents, employees, officers, members, directors, heirs, successors, assigns, principals, trustees, sureties, subrogees, representatives, and insurers of that Defendant named. 8. Jurisdiction is proper under 28 U.S.C. § 1332(d)(2) because Plaintiff, a resident of the State of California, seeks relief on behalf of a national class, which will result in at least one class member belonging to a different state than that of Defendant, a company leasing apartments throughout California and Arizona. Plaintiff also alleges that the amount in controversy exceeds the sum of $5,000,000 when aggregating the damages of the proposed class. 9. Therefore, both diversity jurisdiction and the damages threshold under the Class Action Fairness Act of 2005 (“CAFA”) are present, and this Court has jurisdiction. 10. Venue is proper pursuant to 28 U.S.C. § 1391 for the following reasons: (i) Plaintiff resides in the County of San Diego, State of California which is within this judicial district; (ii) the conduct complained of herein occurred within this judicial district; and, (iii) Defendant conducted business within this judicial district at all times relevant. PARTIES 11. Plaintiff is, and at all times mentioned herein was, a citizen and resident of the County of San Diego, State of California. 12. Plaintiff is informed and believes and thereon alleges that Defendant is, and at all times mentioned herein was, a corporation conducting business in the State of California and incorporated in North Carolina. FACTUAL ALLEGATIONS 13. Plaintiff re-alleges and incorporates by reference all of the above paragraphs of this Complaint as though fully stated herein. 14. At all times relevant, Defendant has engaged, and continues to engage, in illegal business practices of withholding security deposits without legal justification. 15. On April 2, 2015, Plaintiff rented an apartment from Defendant in Torrey Gardens located at 10615 Calle Mar De Mariposa, San Diego, CA 92130. apartment. 17. In April 2017, Plaintiff began the move out process by permitting Defendant to preform a pre-move out inspection. 18. Said inspection concluded that Plaintiff would be charged $0 in move out charges. 19. Defendant’s move-out inspection failed to include notice as required by Cal. Civ. Code § 1950.5(f)(1). 20. Plaintiff vacated Plaintiff’s apartment on April 30, 2017 following written notice to Defendant. 21. Plaintiff’s apartment was inspected yet again on April 30, 2017 with no issues of any kind noted. 22. To date, Plaintiff has not received any portion of Plaintiff’s security deposit from Defendant. 23. To the contrary, Defendant now claims that Plaintiff is responsible for move out charges of $1,267.88 to replace the carpet in Plaintiff’s carpet. 24. Notably, the carpet was inspected during the pre-move out inspection and no cleaning or replacement was deemed necessary at that time. 25. Between the inspection and moving out, Plaintiff caused no further damage to the carpet. 26. Defendant failed to provide Plaintiff an itemization of alleged repairs as required by Cal. Civ. Code § 1950.5(g). 27. On July 25, 2017, Plaintiff demanded an itemization pursuant to Cal. Civ. Code § 1950.5(g)(4). 28. To date, Defendant has not provided the requested itemization. 29. Through this conduct, Defendant violated Cal. Civ. Code § 1950.5. 30. This action seeks, among other things, equitable and injunctive relief; restitution of all amounts illegally retained by Defendant; and disgorgement of all ill-gotten profits from Defendant’s wrongdoing alleged herein. The precise amount of damages will be proven at trial, in large part, by expert testimony. 31. Plaintiff and Class Members were undoubtedly injured as a result of Defendant’s practices since Plaintiff and the Class Members paid funds to Defendant not legally owed. CLASS ALLEGATIONS 32. Plaintiff re-alleges and incorporates by reference all above paragraphs of this Complaint as though fully stated herein. 33. Plaintiff brings this action individually and on behalf of all others similarly situated against Defendant, pursuant to the Federal Rules of Civil Procedure, Rule 23(a), 23(b)(1), 23(b)(2), and 23(b)(3). 34. Plaintiff represents, and is a member of, the class consisting of: All persons within the State of California who paid funds to Defendant following move out without receipt of an itemized statement within the four years prior to the filing of this Complaint. 35. Defendant and its employees or agents are excluded from the Class. 36. Plaintiff does not know the number of members in the Class, but believes the Class members number in the hundreds of thousands, if not more. Thus, this matter should be certified as a Class action to assist in the expeditious litigation of this matter. 37. There is a well-defined community of interest in the litigation, the proposed class is easily ascertainable, and Plaintiff is a proper representative of the Class because: numerous and so diversely located throughout the United States, that joinder of all the members of the Class impracticable. The class members are dispersed throughout country. Joinder of all members of the proposed class is therefore not practicable. b. Commonality: There are questions of law and fact common to Plaintiff and the Class that predominate over any questions affecting only individual members of the Class. These common questions of law and fact include, without limitation: i. Whether Defendant’s move out process complied with Cal. Civ. Code § 1950.5; ii. Whether Plaintiff and the Class are entitled to damages as a result of Defendant’s conduct; iii. Whether Plaintiff and the Class are entitled to reasonable attorneys’ fees; and, iv. Whether such practices violate California Business and Profession Code § 17200. c. Typicality: Plaintiff’s claims are typical of the claims of the Class. Plaintiff and Class members were forced to pay move out fees to Defendant that were not in compliance with Cal. Civ. Code § 1950.5. d. Adequacy of Representation: Plaintiff is a member of the Class and will fairly and adequately represent and protect the interests of the class members. Plaintiff’s interests do not conflict with those of class members. Counsel who represent Plaintiff are competent and experienced in litigating large class actions, and will devote sufficient time and resources to the case and otherwise adequately represent the Class. available means for the fair and efficient adjudication of this controversy. Individual joinder of all class members is not practicable, and questions of law and fact common to the Class predominate over any questions affecting only individual members of the Class. Plaintiff and class members have suffered or may suffer loss in the future by reason of Defendant’s unlawful policies and/or practices of not complying with the statutes described herein. Certification of this case as a class action will allow those similarly situated persons to litigate their claims in the manner that is most efficient and economical for the parties and the judicial system. Certifying this case as a class action is superior because it allows for efficient and full restitution to class members, and will thereby effectuate California’s strong public policy of protecting the California public from violations of its laws. If this action is not certified as a Class Action, it will be impossible as a practical matter for many or most class members to bring individual actions to recover monies due from Defendant, due to the relatively small amounts of such individual recoveries relative to the costs and burdens of litigation. 38. Plaintiff contemplates providing notice to the putative class members by direct mail in the form of a postcard and via publication. Said notice may be supplemented by a settlement website and/or a toll-free telephone number for consumers to call for more information. VIOLATION OF CALIFORNIA’S UNFAIR COMPETITION LAW CAL. BUS. & PROF. CODE §§ 17200, ET SEQ. [AGAINST ALL DEFENDANTS] 39. Plaintiff incorporates by reference all of the above paragraphs of this Complaint as though fully stated herein. 40. Plaintiff and Defendant are each “person[s]” as defined by California Business & Professions Code § 17201. California Bus. & Prof. Code § 17204 authorizes a private right of action on both an individual and representative basis. 41. “Unfair competition” is defined by Business and Professions Code Section § 17200 as encompassing several types of business “wrongs,” two of which are at issue here: (1) an “unlawful” business act or practice, (2) an “unfair” business act or practice, (3) a “fraudulent” business act or practice, and (4) “unfair, deceptive, untrue or misleading advertising.” The definitions in § 17200 are drafted in the disjunctive, meaning that each of these “wrongs” operates independently from the others. 42. By and through Defendant’s conduct alleged in further detail above and herein, Defendant engaged in conduct which constitutes (a) unlawful and (b) unfair business practices prohibited by Bus. & Prof. Code § 17200 et seq. “UNLAWFUL” PRONG 43. As a result of Defendant’s acts and practices described herein, Defendant has violated California’s Unfair Competition Law, Business & Professions Code §§ 17200 et seq., which provides a cause of action for an “unlawful” business act or practice perpetrated on members of the California public. 44. Defendant had other reasonably available alternatives to further its legitimate business interest, other than the conduct described herein, such as providing itemized receipts and move out notices in compliance with applicable law. legitimate business interest, other than the conduct described herein, such as providing the appropriate notices. 46. Plaintiff reserves the right to allege other violations of law, which constitute other unlawful business practices or acts, as such conduct is ongoing and continues to this date. “UNFAIR” PRONG 47. Defendant’s actions and representations constitute an “unfair” business act or practice under § 17200 in that Defendant’s conduct is substantially injurious to consumers, offends public policy, and is immoral, unethical, oppressive, and unscrupulous as the gravity of the conduct outweighs any alleged benefits attributable to such conduct. Without limitation, it is an unfair business act or practice for Defendant to refuse to return security deposits without compliance with Cal. Civ. Code § 1950.5. 48. At a date presently unknown to Plaintiff, but at least four years prior to the filing of this action, and as set forth above, Defendant has committed acts of unfair competition as defined by Cal. Bus. & Prof. Code §§ 17200 et seq., as alleged further detail above and herein. 49. Plaintiff could not have reasonably avoided the injury suffered herein. Plaintiff reserves the right to allege further conduct that constitutes other unfair business acts or practices. Such conduct is ongoing and continues to this date, as Defendant continues to require induce the business of unsuspecting consumers with misleading liquidation sale signs, arbitrarily applying discounts, and overcharging for some of its products. PRAYER FOR RELIEF WHEREFORE, Plaintiff respectfully requests the following damages against Defendant and relief as follows: • That this Action be certified as a class pursuant to Rule 23; Plaintiff and that Defendant has not returned the money; • An order requiring Defendant to pay restitution to Plaintiff due to Defendant’s UCL violations, pursuant to Cal. Bus. & Prof. Code §§ 17200- 17205 in the amount of Plaintiff’s overpayment for payment towards unauthorized move out fees; • An order requiring imposition of a constructive trust and and/or disgorgement of Defendant’s ill-gotten gains and to pay restitution to Plaintiff and to restore to Plaintiff all funds acquired by means of any act or practice declared to be an unlawful, fraudulent, or unfair business act or practice, in violation of laws, statutes or regulations, or constituting unfair competition; • That Plaintiff be awarded reasonable attorneys’ fees and costs of this suit pursuant to Code of Civil Procedure § 1021.5, and California Civil Code § 1780, and/or other applicable law; and, • Any and all other relief as deemed necessary or appropriate. Dated: September 27, 2019 Respectfully submitted, KAZEROUNI LAW GROUP, APC By: ___/s/ Matthew M. Loker___ MATTHEW M. LOKER, ESQ. ATTORNEY FOR PLAINTIFF

securities

oNIuD4cBD5gMZwczHORQ

CLASS ACTION COMPLAINT Plaintiffs, AND DEMAND FOR JURY V. TRIAL Civil Action No.: Defendants. NATURE OF CLAIM 1. This is a proceeding for declaratory relief and monetary damages to redress the JURISDICTION AND VENUE 2. The jurisdiction of this Court is invoked pursuant to 28 U.S.C. § 1331, 28 U.S.C. § 3. This Court's pendent jurisdiction for claims arising under applicable state law is also 4. Venue is appropriate in the District of Connecticut since defendants operate business COLLECTIVE AND CLASS ACTION ALLEGATIONS 5. Plaintiffs Nneka George and Brian Conzelman bring their FLSA claim as a collective 6. Plaintiffs Nneka George and Brian Conzelman bring their state law claims under Fed. 7. The state law claims are properly maintainable as a class action under Federal Rule of 8. The class action is maintainable under subsections (1), (2), (3) and (4) of Rule 23(a). 9. The FLSA Class is defined as all current and former employees whose primary job 10. The State Law Class is defined as all current and former employees whose primary job 2 - 11. The class includes those employees whose title has been reclassified as non-exempt. 12. The class size is believed to be over 50 employees. 13. The named plaintiffs will adequately represent the interests of the class members 14. Common questions of law and fact predominate in this action because the claims of 15. There are no known conflicts of interest between the named plaintiffs and the other 16. The class counsel, Garrison, Levin-Epstein, Richardson, Fitzgerald & Pirrotti, P.C and 17. The class counsel concentrate their practices in employment litigation, and their 18. The class action is maintainable under subsection (1) of Rule 23(b) because - 3 - 19. The class action is maintainable under subsection (2) of Rule 23(b) because plaintiffs 20. The class action is maintainable under subsection (3) of Rule 23(b) because common 21. The class is also maintainable under Rule 23(c)(4) with respect to particular legal and PARTIES A. Defendants 22. Defendant TD Bank, N.A. is a subsidiary of defendant TD Bank US Holding Company, 23. Defendant TD Auto Finance LLC is a subsidiary of defendant Toronto-Dominion 24. Defendant TD Bank US Holding Company is a subsidiary of defendant Toronto- 25. Defendant Toronto-Dominion Bank is a Canadian corporation with its principal place 26. TD Bank is an enterprise engaged in the sale of goods crossing interstate lines. 27. TD Bank employed 50 or more people during the relevant time of this lawsuit. 28. TD Bank is an enterprise engaged in interstate commerce whose annual gross volume - 4 -B. Plaintiffs and Class Members 29. Named plaintiff Nneka George was an employee of defendants under the relevant 30. Named plaintiff Brian Conzelman was an employee of defendants under the relevant 31. The Class Members are those employees of defendants who are similarly situated, as FACTUAL BACKGROUND 32. Named plaintiffs, and other employees similarly situated to named plaintiffs, 33. TD Bank is in the business of, among other things, providing credit products to 34. The product TD Bank produces for its customers is loans. 35. As part of TD Bank's production process, named plaintiffs, and other employees 36. Such Underwriting Job Functions are integral to TD Bank's production of these 5 - 37. TD Bank's policy is to not pay statutory overtime to employees who perform the job 38. This policy of not paying statutory overtime to employees who perform underwriting 39- This is a nationwide policy. 40. TD Bank's policy of not paying statutory overtime to employees who perform 41. This failure to pay overtime as required by the FLSA and applicable state laws was 42. Defendants have failed to maintain adequate and required records on the hours 43. Defendants have failed to pay named plaintiffs' and class members' wages as required - 6 - FIRST CAUSE OF ACTION FLSA 44. Named plaintiffs George and Conzelman reallege the above paragraphs as if fully 45. Defendants violated its obligations under the FLSA and are liable to named plaintiffs SECOND CAUSE OF ACTION Failure to Pay Overtime 46. Named plaintiffs George and Brian Conzelman reallege the above paragraphs as if 47. Pursuant to state laws, including Conn. Gen. Stat. §§ 31-60 and 31-76c, Pennsylvania 48. Defendants violated their obligations under the applicable state laws, including - 7 -THIRD CAUSE OF ACTION Failure to Provide Timely Wage Payments 49. Named plaintiffs George and Conzelman reallege the above paragraphs as if fully 50. Defendants willfully withheld the agreed upon wages in violation of state laws, WHEREFORE, plaintiffs demand judgment against defendant in their favor and that they a) an order preliminarily and permanently restraining defendants from engaging in the aforementioned pay violations; and b) an award to plaintiffs of the value of the hours and wages, including overtime pay, which were not properly compensated under the FLSA and applicable state law; and c) liquidated damages under the FLSA equal to the sum of the amount of wages and overtime which were not properly paid to plaintiffs; and d) liquidated damages under applicable state laws including without limitation, Conn. Gen. Stat. § 31-58, et seq.; e) all relief available under PMWA and WPCL including, without limitation, additional damages such as 25% of Plaintiffs' and Class Members' unpaid wages or $500, whichever is greater, and an additional amount equal to the unpaid wages; and f) an award of attorneys' fees, expenses, expert fees and costs incurred by plaintiffs in vindicating their rights; and g) an award of pre-and post-judgment interest; and h) such other and further legal or equitable relief as this Court deems to be just and appropriate. 8 - Respectfully submitted, GARRISON, LEVIN-EPSTEIN, RICHARDSON. FITZGERALD & PIRROTTI, P.C. Joseph Garrison, Esq. 405 Orange Street New Haven, Connecticut 06511 (203) 777-4425 [email protected] THOMAS & SOLOMON LLP J. Nelson Thomas, Esq. (pro hac vice admission anticipated) Sarah M. Born, Esq. (pro hac vice admission anticipated) 693 East Avenue Rochester, New York 14607 Telephone: (585) 272-0540 [email protected] [email protected] - -9- CLASS ACTION COMPLAINT Plaintiffs, AND DEMAND FOR JURY V. TRIAL Civil Action No.: Defendants. JURY TRIAL CLAIM The plaintiffs, Nneka George and Brian Conzelman, claim a trial by jury on all claims triable Respectfully submitted, GARRISON, LEVIN-EPSTEIN, RICHARDSON FITZGERALD & PIRROTTI, P.C. Joseph Garrison, Esq. 405 Orange Street New Haven, Connecticut 06511 (203) 777-4425 [email protected] THOMAS & SOLOMON LLP J. Nelson Thomas, Esq. (pro hac vice admission anticipated) Sarah M. Born, Esq. (pro hac vice admission anticipated) 693 East Avenue Rochester, New York 14607 Telephone: (585) 272-0540 [email protected] [email protected] - 10 -

employment & labor

PNs0EIcBD5gMZwczzybV

Case No. 20-cv-2313 CLASS ACTION COMPLAINT SHAKED LAW GROUP, P.C. Dan Shaked (DS-3331) 14 Harwood Court, Suite 415 Scarsdale, NY 10583 Tel. (917) 373-9128 Email: [email protected] Attorneys for Plaintiff and the Class UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK -----------------------------------------------------------X KAHLIMAH JONES, Individually and as the representative of a class of similarly situated persons, Plaintiff, - against - SYMPOZ LLC and NBCUNIVERSAL MEDIA, LLC d/b/a Bluprint, Defendants. -----------------------------------------------------------X Plaintiff, KAHLIMAH JONES. (hereinafter “Plaintiff”), on behalf of himself and all others similarly situated, by and through her undersigned attorney, hereby files this Class Action Complaint against Defendants, Sympoz LLC and NBCUniversal Media, LLC d/b/a Bluprint (hereinafter “NBC” or “Defendants”), and states as follows: INTRODUCTION 1. This class action seeks to put an end to systemic civil rights violations committed by Defendants against deaf and hard-of-hearing individuals in New York State and across the United States. Defendants deny deaf and hard-of-hearing individuals throughout the United States equal access to the goods and services that it provides to non-disabled individuals, through http://www.mybluprint.com (hereinafter the “Website”) and related domains owned by Defendants. Defendants provide a wide array of goods and services to the public through thier Website. However, the Website contains access barriers that make it difficult for deaf and hard-of-hearing individuals to use the Website. In fact, the access barriers make it impossible for deaf and hard-of-hearing users to deaf and hard of hearing from the full and equal participation in the growing Internet economy that is increasingly a fundamental part of the common marketplace and daily living. In the wave of technological advances in recent years, assistive technology is becoming an increasingly prominent part of everyday life, allowing deaf and hard-of-hearing people to fully and independently access a variety of services, including online videos. 2. Plaintiff, who currently lives in New York City, is a deaf individual. She brings this civil rights class action lawsuit against Defendants for failing to design, construct, and/or own or operate a website that is fully accessible to, and independently usable by, deaf and hard- of-hearing people. 3. Approximately 36 million people in the United States are deaf or hard of hearing. Many of these individuals require captioning to meaningfully comprehend the audio portion of video content. Just as buildings without ramps bar people who use wheelchairs, video content without captions excludes deaf and hard-of-hearing individuals. Closed captioning is a viewer- activated system that displays text on, for instance, online videos, television programming, or DVD movies. This is different from open captioning or subtitles, which are burned into the video file and automatically displayed for everyone to see, such as subtitles in foreign language movies. With closed captioning, deaf and hard-of-hearing individuals have the opportunity to watch videos by reading the captioned text. 4. Deaf and hard-of-hearing people watch videos just as aurally capable people do. The lack of closed captioning means that deaf and hard-of-hearing people are excluded from the rapidly expanding Internet media industry and from independently accessing videos posted on the Website. 5. Despite readily available accessible technology, such as the technology in use at other heavily trafficked websites, which makes use of closed captioning for hard-of-hearing individuals, such as YouTube and Netflix, Defendants have chosen to post videos without closed individuals. Without closed captioning, deaf and hard-of-hearing people cannot comprehend the audio portion of the videos on the Website. 6. By failing to make the Website accessible to deaf and hard-of-hearing persons, Defendants are violating basic equal access requirements under both state and federal law. 7. Congress provided a clear and national mandate for the elimination of discrimination against individuals with disabilities when it enacted the Americans with Disabilities Act. Such discrimination includes barriers to full integration, independent living, and equal opportunity for persons with disabilities, including those barriers created by websites and other public accommodations that are inaccessible to deaf and hard-of-hearing individuals. Similarly, New York state law requires places of public accommodation to ensure access to goods, services, and facilities by making reasonable accommodations for persons with disabilities. 8. During the recent and continuing period of shelter-in-place, Plaintiff was interested in furthering her education, skills, and personal development by viewing online courses with video content. During May 2020, Plaintiff browsed and intended to watch numerous videos. In order to determine which videos to watch, she attempted to watch the preview of several videos including, Pet Photography with Norah Levine; The Essential Guide to Photoshop with Skott Chandler; and Classic Croissants Modern Techniques with Colette Christian on the Website. However, unless Defendants remedy the numerous access barriers on the Website, Plaintiff and Class members will continue to be unable to independently watch videos on the Website. 9. This complaint seeks declaratory and injunctive relief to correct Defendants’ policies and practices to include measures necessary to ensure compliance with federal and state law, to include monitoring of such measures, and to update and remove accessibility barriers on the Website will be able to independently and privately view videos posted on the Website. This complaint also seeks compensatory damages to compensate Class members for having been subjected to unlawful discrimination. JURISDICTION AND VENUE 10. This Court has subject matter jurisdiction of this action pursuant to 28 U.S.C. § 1331 and 42 U.S.C. § 12188, for Plaintiff’s claims arising under Title III of the Americans with Disabilities Act, 42 U.S.C. § 12181, et seq., (“ADA”); and 11. 28 U.S.C. § 1332, because this is a class action, as defined by 28 U.S.C § 1332(d)(1)(B), in which a member of the putative Class is a citizen of a different state than Defendants, and the amount in controversy exceeds the sum or value of $5,000,000, excluding interest and costs. See 28 U.S.C. § 1332(d). 12. This Court has supplemental jurisdiction pursuant to 28 U.S.C. § 1367, over Plaintiff’s pendent claims under the New York State Human Rights Law, N.Y. Exec. Law, Article 15 (Executive Law § 290 et seq.) and the New York City Human Rights Law, N.Y.C. Administrative Code § 8-101 et seq. (“City Law”). 13. Venue is proper in the Eastern District of New York pursuant to 28 U.S.C. §§ 1391(b)-(c) and 1441(a). 14. Venue is proper in the Eastern District of New York because a substantial part of the acts and omissions giving rise to Plaintiff’s claims have occurred in the Eastern District of New York. Specifically, Plaintiff attempted to browse and view videos on the Website in Kings County. Defendants have been and is committing the acts alleged herein in the Eastern District of New York and has been and is violating the rights of consumers in the Eastern District of New York. 15. Several judges support the decision to place the venue in the district in which Supp. 3d 287 (D. Mass. 2017), Judge Patti B. Saris ruled that “although the website may have been created and operated outside of the district, the attempts to access the website in Massachusetts are part of the sequence of events underlying the claim. Therefore, venue is proper in [the District of Massachusetts].” Otter Prods., 280 F. Supp. 3d at 294. This satisfies Due Process because “the harm—the barred access to the website—occurred here.” Otter Prods., 280 F. Supp. 3d at 293. Additionally, in Access Now, Inc. v. Sportswear, Inc., No. 17-cv-11211-NMG, 2018 U.S. Dist. LEXIS 47318 (D. Mass. Mar. 22, 2018), Judge Nathaniel M. Gorton stated that the Defendants “availed itself of the forum state’s economic activities by targeting the residents of the Commonwealth . . . . Such targeting evinces a voluntary attempt to appeal to the customer base in the forum.” Sportswear, No. 1:17-cv-11211-NMG, 2018 U.S. Dist. LEXIS 47318, at *11. Thus, establishing a customer base in a particular district is sufficient cause for venue placement. Similarly, in Plixer International, Inc. v. Scrutinizer GmbH, No. 2:16-cv-578-DBH, 2017 U.S. Dist. LEXIS 172355 (D. Me. Oct. 18, 2017), Judge D. Brock Hornby asserted that the “Defendants can be said to have wanted, if not targeted, business outside its home country” because it had “accepted recurrent business from the United States in a substantial amount, and . . . it did so knowingly.” Plixer Int’l, No. 2:16-cv-578-DBH, 2017 U.S. Dist. LEXIS 172355, at *13-15. PARTIES 16. Plaintiff is and has been at all times material hereto a resident of Kings County, State of New York. 17. Plaintiff is legally deaf and a member of a protected class under the ADA, 42 U.S.C. § 12102(1)-(2), the regulations implementing the ADA set forth at 28 CFR § 36.101 et seq., the New York State Human Rights Law, and the New York City Human Rights Law. Plaintiff cannot access the audio portion of a video without the assistance of closed captioning. Plaintiff has been denied the full enjoyment of the facilities, goods, and services of the Website, the instructional videos Pet Photography with Norah Levine; The Essential Guide to Photoshop with Skott Chandler; and Classic Croissants Modern Techniques with Colette Christian but could not comprehend the content of the video due to its lack of closed captioning. The inaccessibility of the Website has deterred her and Class members from watching videos on the Website. 18. Defendant, Sympoz LLC. is a Virginia Foreign Limited Liability Company doing business in New York and is registered in the State of New York to do business. Defendants have a principal place of business at 999 18th Street, Denver, CO 80202. 19. Defendant, NBCUniversal Media, LLC. is a Delaware Foreign Limited Liability Company doing business in New York and is registered in the State of New York to do business. Defendants have a principal place of business at 100 Universal City Plaza, Universal City, CA 20. The failure of Defendants to provide equal access to deaf and hard-of-hearing individuals violates the mandate of the ADA to provide “full and equal enjoyment” of a public accommodation’s goods, services, facilities, and privileges. Places of public accommodation include, “place[s] of exhibition and entertainment,” “places[s] of recreation,” and “service establishments.” 28 C.F.R. § 36.201 (a); 42 U.S.C. §12181 (7). Because the Website is a “place of public accommodation,” denial of equal access to the videos available to hearing individuals violates the ADA. Remedying that violation is critical to the ADA’s goal of providing people with disabilities the same access that others take for granted. Accordingly, Plaintiff seeks injunctive and declaratory relief to ensure that deaf and hard-of-hearing individuals have equal access to the Website. 21. Plaintiff seeks full and equal access to the goods and services provided by Defendants through the Website. 22. Plaintiff, on behalf of herself and all others similarly situated, seeks certification of the following nationwide class pursuant to Rule 23(a) and 23(b)(2) of the Federal Rules of Civil Procedure: “all legally deaf and hard-of-hearing individuals in the United States who have attempted to access the Website and as a result have been denied access to the enjoyment of goods and services offered by the Website during the relevant statutory period.” 23. Plaintiff seeks certification of the following New York subclass pursuant to Fed. R. Civ. P. 23(a), 23(b)(2), and, alternatively, 23(b)(3): “all legally deaf and hard-of-hearing individuals in New York State who have attempted to access the Website and as a result have been denied access to the enjoyment of goods and services offered by the Website, during the relevant statutory period.” 24. There are hundreds of thousands of deaf or hard-of-hearing individuals in New York State. There are approximately 36 million people in the United States who are deaf or hard of hearing. Thus, the persons in the Class are so numerous that joinder of all such persons is impractical and the disposition of their claims in a class action is a benefit to the parties and to the Court. 25. This case arises out of Defendants’ policy and practice of maintaining an inaccessible website denying deaf and hard-of-hearing persons access to the goods and services of the Website. Due to Defendants’ policy and practice of failing to remove access barriers, deaf and hard-of-hearing persons have been and are being denied full and equal access to independently browse and watch videos on the Website. 26. There are common questions of law and fact common to the class, including without limitation, the following: a. Whether the Website is a “public accommodation” under the ADA; b. Whether the Website is a “place or provider of public accommodation” under the laws c. Whether Defendants through the Website deny the full and equal enjoyment of their goods, services, facilities, privileges, advantages, or accommodations to people with hearing disabilities in violation of the ADA; and d. Whether Defendants through the Website deny the full and equal enjoyment of their goods, services, facilities, privileges, advantages, or accommodations to people with hearing disabilities in violation of the laws of New York. 27. The claims of the named Plaintiff are typical of those of the Class. The Class, similarly to the Plaintiff, are deaf or hard of hearing, and claim that Defendants have violated the ADA, and/or the laws of New York by failing to update or remove access barriers on the Website, so it can be independently accessible to the Class of people who are legally deaf or hard of hearing. 28. Plaintiff will fairly and adequately represent and protect the interests of the members of the Class because Plaintiff has retained and is represented by counsel competent and experienced in complex class action litigation, and because Plaintiff has no interests antagonistic to the members of the Class. Class certification of the claims is appropriate pursuant to Fed. R. Civ P. 23(b)(2) because Defendants have acted or refused to act on grounds generally applicable to the Class, making appropriate both declaratory and injunctive relief with respect to Plaintiff and the Class as a whole. 29. Alternatively, class certification is appropriate under Fed. R. Civ. P. 23(b)(3) because questions of law and fact common to Class members clearly predominate over questions affecting only individual Class members, and because a class action is superior to other available methods for the fair and efficient adjudication of this litigation. in that it will avoid the burden that would be otherwise placed upon the judicial system by the filing of numerous similar suits by people with hearing disabilities throughout the United States. 31. References to Plaintiff shall be deemed to include the named Plaintiff and each member of the Class, unless otherwise indicated. FACTUAL ALLEGATIONS 32. Defendants operate the Website, which is an online subscription video on demand service featuring online courses and other forms of video content and provides and online store that sells products that tie into its video content. It delivers information to millions of people across the United States and the world. 33. The Website provides goods, service and benefit offered by Defendants throughout the United States, including New York State. The Website is owned, controlled and/or operated by Defendants. 34. The Website allows users to browse, view, and purchase video courses and goods about many topics and skills including photography and cooking and to browse and view previews prior to making purchases. Defendants’ videos are available with the click of a mouse and are played through the Internet on computers, cell phones, and other electronic devices. 35. This case arises out of Defendants’ policy and practice of denying the deaf and hard of hearing full and equal access to the Website, including the goods and services offered by Defendants through the Website. Due to Defendants’ failure and refusal to remove access barriers to the Website, deaf and hard-of-hearing individuals have been and are being denied equal access to the Website, as well as to the numerous goods, services and benefits offered to the public through the Website. information made available through the Website by preventing them from freely enjoying, interpreting, and understanding the content on the Website. 37. The Internet has become a significant source of information for conducting business and for doing everyday activities such as reading news, watching videos, etc., for deaf and hard-of-hearing persons. 38. The deaf and hard of hearing access videos through closed captioning, which is a transcription or translation of the audio portion of a video as it occurs, sometimes including description of non-speech elements. Except for a deaf or hard-of-hearing person whose residual hearing is still sufficient to apprehend the audio portion of the video, closed captioning provides the only method by which a deaf or hard-of-hearing person can independently access the video. Unless websites are designed to allow for use in this manner, deaf and hard-of-hearing persons are unable to fully access the service provided through the videos on the Website. 39. There are well-established guidelines for making websites accessible to disabled people. These guidelines have been in place for several years and have been followed successfully by other large business entities in making their websites accessible. The Web Accessibility Initiative (“WAI”), a project of the World Wide Web Consortium which is the leading standards organization of the Web, has developed guidelines for website accessibility, called the Web Content Accessibility Guidelines (“WCAG”). The federal government has also promulgated website accessibility standards under Section 508 of the Rehabilitation Act. These guidelines are readily available via the Internet, so that a business designing a website can easily access them. These guidelines recommend several basic components for making websites accessible, including but not limited to adding closed captioning to video content. 40. The Website contains access barriers that prevent free and full use by Plaintiff and other deaf or hard-of-hearing persons, including but not limited to the lack of closed captioning. contain captioning. 41. The Website contains numerous videos that lack captioning. The videos Pet Photography with Norah Levine; The Essential Guide to Photoshop with Skott Chandler; and Classic Croissants Modern Techniques with Colette Christian are amongst many others on the Website do not contain closed captioning. The lack of captioning prevents Plaintiff and other deaf or hard-of-hearing people from understanding the content of those videos, thus preventing them from learning about the topics being taught. 42. Due to the Website’s inaccessibility, Plaintiff and other deaf or hard-of-hearing individuals must in turn spend time, energy, and/or money to apprehend the audio portion of the videos offered by Defendants. Some deaf and hard-of-hearing individuals may require an interpreter to apprehend the audio portion of the video or require assistance from their friends or family. By contrast, if the Website was accessible, a deaf or hard-of-hearing person could independently watch the videos and enjoy the services provided by Defendants as hearing individuals can and do. 43. The Website thus contains access barriers which deny full and equal access to Plaintiff, who would otherwise use the Website and who would otherwise be able to fully and equally enjoy the benefits and services of the Website in New York State. 44. Plaintiff attempted to watch the preview videos to the courses Pet Photography with Norah Levine; The Essential Guide to Photoshop with Skott Chandler; and Classic Croissants Modern Techniques with Colette Christian on the Website most recently on May 21, 2020 but was unable to do so independently because of the lack of closed captioning on the Website, causing it to be inaccessible and not independently usable by deaf and hard-of-hearing individuals. Website contains access barriers causing the Website to be inaccessible, and not independently usable by, deaf and hard-of-hearing individuals. 46. These access barriers have denied Plaintiff full and equal access to, and enjoyment of, the goods, benefits, and services of Defendants and the Website. 47. Defendants engages in acts of intentional discrimination, including but not limited to the following policies or practices: (a) constructing and maintaining a website that is inaccessible to deaf and hard-of-hearing Class members with knowledge of the discrimination; and/or (b) constructing and maintaining a website that is sufficiently intuitive and/or obviously inaccessible to deaf and hard-of-hearing Class members; and/or (c) failing to take actions to correct access barriers in the face of substantial harm and discrimination to deaf and hard-of-hearing Class members. 48. Defendants utilize standards, criteria, and methods of administration that have the effect of discriminating or perpetuating the discrimination of others. FIRST CAUSE OF ACTION (Violation of 42 U.S.C. § 12181, et seq. — Title III of the Americans with Disabilities Act) (on behalf of Plaintiff and the Class) 49. Plaintiff realleges and incorporates by reference the foregoing allegations as if set forth fully herein. 50. Title III of the Americans with Disabilities Act of 1990, 42 U.S.C. § 12182(a), provides that “No individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation.” Title III also prohibits an entity from “[u]tilizing standards or disability.” 42 U.S.C. § 12181(b)(2)(D)(I). 51. Defendants operate a place of public accommodation as defined by Title III of ADA, 42 U.S.C. § 12181(7), a “place of education,” a “place of exhibition or entertainment,” a “place of recreation,” and “service establishments.” 52. Defendants have failed to make their videos accessible to individuals who are deaf or hard of hearing by failing to provide closed captioning for videos displayed on the Website. 53. Discrimination under Title III includes the denial of an opportunity for the person who is deaf or hard of hearing to participate in programs or services or providing a service that is not as effective as what is provided to others. 42 U.S.C. § 12182(b)(1)(A)(I-III). 54. Discrimination specifically includes the failure to provide “effective communication” to deaf and hard-of-hearing individuals through auxiliary aids and services, such as captioning, pursuant to 42 U.S.C. § 12182(b)(1)(A)(III); 28 C.F.R. § 36.303(C). 55. Discrimination also includes the failure to maintain accessible features of facilities and equipment that are required to be readily accessible to and usable by persons with disabilities. 28 C.F.R. §36.211. 56. Under Title III of the ADA, 42 U.S.C. § 12182(b)(1)(A)(I), it is unlawful discrimination to deny individuals with disabilities or a class of individuals with disabilities the opportunity to participate in or benefit from the goods, services, facilities, privileges, advantages, or accommodations of an entity. 57. Under Title III of the ADA, 42 U.S.C. § 12182(b)(1)(A)(II), it is unlawful discrimination to deny individuals with disabilities or a class of individuals with disabilities and the opportunity to participate in or benefit from the goods, services, facilities, privileges, individuals. 58. Specifically, under Title III of the ADA, 42 U.S.C. § 12182(b)(2)(A)(II), unlawful discrimination includes, among other things, “a failure to make reasonable modifications in policies, practices, or procedures, when such modifications are necessary to afford such goods, services, facilities, privileges, advantages, or accommodations to individuals with disabilities, unless the entity can demonstrate that making such modifications would fundamentally alter the nature of such goods, services, facilities, privileges, advantages or accommodations.” 59. In addition, under Title III of the ADA, 42 U.S.C. § 12182(b)(2)(A)(III), unlawful discrimination also includes “a failure to take such steps as may be necessary to ensure that no individual with a disability is excluded, denied services, segregated or otherwise treated differently than other individuals because of the absence of auxiliary aids and services, unless the entity can demonstrate that taking such steps would fundamentally alter the nature of the good, service, facility, privilege, advantage, or accommodation being offered or would result in an undue burden.” 60. The acts alleged herein constitute violations of Title III of the ADA, 42 U.S.C. § 12101 et seq., and the regulations promulgated thereunder. Individuals who are deaf and hard of hearing have been denied full and equal access to the Website have not been provided services that are provided to other patrons who are not disabled, and/or have been provided services that are inferior to the services provided to non-disabled patrons. 61. Defendants have failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 62. Modifying their policies, practices, and services by providing closed captions to make its videos accessible to deaf and hard-of-hearing individuals would not fundamentally alter company. 63. As such, Defendants discriminate, and will continue in the future to discriminate against Plaintiff and members of the proposed Class and Subclass on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, accommodations and/or opportunities of the Website in violation of Title III of the Americans with Disabilities Act, 42 U.S.C. § 12181 et seq. and/or its implementing regulations. 64. Unless the Court enjoins Defendants from continuing to engage in these unlawful practices, Plaintiff and members of the proposed Class and Subclass will continue to suffer irreparable harm. 65. The actions of Defendants were and are in violation of the ADA and therefore Plaintiff invokes his statutory right to injunctive relief to remedy the discrimination. 66. Plaintiff is also entitled to reasonable attorneys’ fees and costs. 67. Pursuant to 42 U.S.C. § 12188 and the remedies, procedures, and rights set forth and incorporated therein Plaintiff prays for judgment as set forth below. SECOND CAUSE OF ACTION (Violation of New York State Human Rights Law, N.Y. Exec. Law, Article 15 (Executive Law § 292 et seq.) (on behalf of Plaintiff and New York subclass) 68. Plaintiff realleges and incorporates by reference the foregoing allegations as though fully set forth herein. 69. N.Y. Exec. Law § 296(2)(a) provides that it is “an unlawful discriminatory practice for any person, being the owner, lessee, proprietor, manager, superintendent, agent or employee of any place of public accommodation . . . because of the . . . disability of any person, directly or indirectly, to refuse, withhold from or deny to such person any of the accommodations, advantages, facilities or privileges thereof.” Law § 292(9). 71. Defendants are subject to New York Human Rights Law because they own and operate the Website. Defendants are a person within the meaning of N.Y. Exec. Law § 292(1). 72. Defendants are violating N.Y. Exec. Law § 296(2)(a) in refusing to update or remove access barriers to the Website, causing the videos displayed on the Website to be completely inaccessible to the deaf and hard of hearing. This inaccessibility denies deaf and hard-of-hearing patrons full and equal access to the facilities, goods and services that Defendants make available to the non-disabled public. 73. Specifically, under N.Y. Exec. Law § 296(2)(c)(I), unlawful discriminatory practice includes, among other things, “a refusal to make reasonable modifications in policies, practices, or procedures, when such modifications are necessary to afford facilities, privileges, advantages or accommodations to individuals with disabilities, unless such person can demonstrate that making such modifications would fundamentally alter the nature of such facilities, privileges, advantages or accommodations.” 74. In addition, under N.Y. Exec. Law § 296(2)(c)(II), unlawful discriminatory practice also includes, “a refusal to take such steps as may be necessary to ensure that no individual with a disability is excluded or denied services because of the absence of auxiliary aids and services, unless such person can demonstrate that taking such steps would fundamentally alter the nature of the facility, privilege, advantage or accommodation being offered or would result in an undue burden.” 75. Defendants’ actions constitute willful intentional discrimination against the class on the basis of a disability in violation of the New York State Human Rights Law, N.Y. Exc. Law § 296(2) in that Defendants have: members with knowledge of the discrimination; and/or (b) constructed and maintained a website that is sufficiently intuitive and/or obvious that is inaccessible to deaf and hard-of-hearing Class members; and/or (c) failed to take actions to correct these access barriers in the face of substantial harm and discrimination to deaf and hard-of-hearing Class members. 76. Defendants have failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 77. As such, Defendants discriminate, and will continue in the future to discriminate against Plaintiff and members of the proposed Class and Subclass on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, accommodations and/or opportunities of the Website under § 296(2) et seq. and/or its implementing regulations. Unless the Court enjoins Defendants from continuing to engage in these unlawful practices, Plaintiff and members of the Subclass will continue to suffer irreparable harm. 78. The actions of Defendants were and are in violation of New York State Human Rights Law and therefore Plaintiff invokes her right to injunctive relief to remedy the discrimination. 79. Plaintiff is also entitled to compensatory damages, as well as civil penalties and fines pursuant to N.Y. Exc. Law § 297(4)(c) et seq. for each and every offense. 80. Plaintiff is also entitled to reasonable attorneys’ fees and costs. 81. Pursuant to N.Y. Exec. Law § 297 and the remedies, procedures, and rights set forth and incorporated therein Plaintiff prays for judgment as set forth below. THIRD CAUSE OF ACTION (Violation of New York State Civil Rights Law, NY CLS Civ R, 82. Plaintiff realleges and incorporates by reference the foregoing allegations as though fully set forth herein. 83. Plaintiff served notice thereof upon the attorney general as required by N.Y. Civil Rights Law § 41. 84. N.Y. Civil Rights Law § 40 provides that “all persons within the jurisdiction of this state shall be entitled to the full and equal accommodations, advantages, facilities and privileges of any places of public accommodations, resort or amusement, subject only to the conditions and limitations established by law and applicable alike to all persons. No persons, being the owner, lessee, proprietor, manager, superintendent, agent, or employee of any such place shall directly or indirectly refuse, withhold from, or deny to any person any of the accommodations, advantages, facilities and privileges thereof . . . . ” 85. N.Y. Civil Rights Law § 40-c(2) provides that “no person because of . . . disability, as such term is defined in section two hundred ninety-two of executive law, be subjected to any discrimination in his or her civil rights, or to any harassment, as defined in section 240.25 of the penal law, in the exercise thereof, by any other person or by any firm, corporation or institution, or by the state or any agency or subdivision.” 86. The Website is a public accommodations within the definition of N.Y. Civil Rights Law § 40-c(2). 87. Defendants are subject to New York Civil Rights Law because they own and operate the Website. Defendants are a person within the meaning of N.Y. Civil Law § 40-c(2). 88. Defendants are violating N.Y. Civil Rights Law § 40-c(2) in refusing to update or remove access barriers to the Website, causing videos on the Website to be completely inaccessible to the deaf and hard of hearing. This inaccessibility denies deaf and hard-of-hearing non-disabled public. 89. In addition, N.Y. Civil Rights Law § 41 states that “any corporation which shall violate any of the provisions of sections forty, forty-a, forty-b or forty-two . . . shall for each and every violation thereof be liable to a penalty of not less than one hundred dollars nor more than five hundred dollars, to be recovered by the person aggrieved thereby . . . . ” 90. Specifically, under N.Y. Civil Rights Law § 40-d, “any person who shall violate any of the provisions of the foregoing section, or subdivision three of section 240.30 or section 240.31 of the penal law, or who shall aid or incite the violation of any of said provisions shall for each and every violation thereof be liable to a penalty of not less than one hundred dollars nor more than five hundred dollars, to be recovered by the person aggrieved thereby in any court of competent jurisdiction in the county in which the Defendants shall reside . . . . ” 91. Defendants have failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 92. As such, Defendants discriminate, and will continue in the future to discriminate against Plaintiff and members of the proposed Class on the basis of disability are being directly or indirectly refused, withheld from, or denied the accommodations, advantages, facilities and privileges thereof in § 40 et seq. and/or its implementing regulations. 93. Plaintiff is entitled to compensatory damages of five hundred dollars per instance, as well as civil penalties and fines pursuant to N.Y. Civil Law § 40 et seq. for each and every offense. FOURTH CAUSE OF ACTION (Violation of New York City Human Rights Law, N.Y.C. Administrative Code § 8-102, et seq.) (on behalf of Plaintiff and New York subclass) forth fully herein. 95. N.Y.C. Administrative Code § 8-107(4)(a) provides that “It shall be an unlawful discriminatory practice for any person who is the owner, franchisor, franchisee, lessor, lessee, proprietor, manager, superintendent, agent or employee of any place or provider of public accommodation . . . [b]ecause of any person’s . . . disability . . . directly or indirectly . . . [t]o refuse, withhold from or deny to such person the full and equal enjoyment, on equal terms and conditions, of any of the accommodations, advantages, services, facilities or privileges of the place or provider of public accommodation.” 96. The Website is a public accommodation within the definition of N.Y.C. Administrative Code § 8-102. 97. Defendants are subject to City Law because they own and operates the Website. Defendants are a person within the meaning of N.Y.C. Administrative Code § 8-102. 98. Defendants are violating N.Y.C. Administrative Code § 8-107(4)(a) in refusing to update or remove access barriers to the Website, causing the Website and the services integrated with the Website to be completely inaccessible to the deaf. This inaccessibility deny deaf patrons full and equal access to the facilities, goods, and services that Defendants makes available to the non-disabled public. Specifically, Defendants are required to “make reasonable accommodation to the needs of persons with disabilities . . . it is an unlawful discriminatory practice for any person prohibited by the provisions of [§ 8-107 et seq.] from discriminating on the basis of disability not to provide a reasonable accommodation to enable a person with a disability to . . . enjoy the right or rights in question provided that the disability is known or should have been known by the covered entity.” N.Y.C. Administrative Code § 8-107(15)(a). 99. Defendants’ actions constitute willful intentional discrimination against the class on the basis of a disability in violation of the N.Y.C. Administrative Code § 8-107(4)(a) and § inaccessible to deaf and hard-of-hearing Class members with knowledge of the discrimination; and/or (b) constructed and maintained a website that is sufficiently intuitive and/or obvious that is inaccessible to deaf and hard-of-hearing Class members; and/or (c) failed to take actions to correct these access barriers in the face of substantial harm and discrimination to deaf and hard-of-hearing Class members. 100. Defendants have failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 101. As such, Defendants discriminate, and will continue in the future to discriminate against Plaintiff and members of the proposed Class and Subclass on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, accommodations, and/or opportunities of the Website under § 8-107(4)(a) and/or its implementing regulations. Unless the Court enjoins Defendants from continuing to engage in these unlawful practices, Plaintiff and members of the Subclass will continue to suffer irreparable harm. 102. The actions of Defendants were and are in violation of City Law and therefore Plaintiff invokes his right to injunctive relief to remedy the discrimination. 103. Plaintiff is also entitled to compensatory damages, as well as civil penalties and fines under N.Y.C. Administrative Code § 8-120(8) and § 8-126(a) for each offense. 104. Plaintiff is also entitled to reasonable attorneys’ fees and costs. 105. Pursuant to N.Y.C. Administrative Code § 8-120 and § 8-126 and the remedies, procedures, and rights set forth and incorporated therein Plaintiff prays for judgment as set forth below. FIFTH CAUSE OF ACTION 106. Plaintiff realleges and incorporates by reference the foregoing allegations as if set forth fully herein. 107. An actual controversy has arisen and now exists between the parties in that Plaintiff contends, and is informed and believes that Defendants deny, that the Website contains access barriers denying deaf and hard-of-hearing individuals the full and equal access to the goods and services of the Website, which Defendants owns, operates, and/or controls, fails to comply with applicable laws including, but not limited to, Title III of the Americans with Disabilities Act, 42 U.S.C. § 12182, et seq., N.Y. Exec. Law § 296, et seq., and N.Y.C. Administrative Code § 8-107, et seq. prohibiting discrimination against the deaf and hard of hearing. 108. A judicial declaration is necessary and appropriate at this time in order that each of the parties may know their respective rights and duties and act accordingly. PRAYER FOR RELIEF WHEREFORE, Plaintiff requests relief as follows: a) A preliminary and permanent injunction to prohibit Defendants from violating the Americans with Disabilities Act, 42 U.S.C. § 12182, et seq., N.Y. Exec. Law § 296, et seq., N.Y.C. Administrative Code § 8-107, et seq., and the laws of New York; b) A preliminary and permanent injunction requiring Defendants to take all the steps necessary to make the Website fully compliant with the requirements set forth in the ADA, and its implementing regulations, so that the Website is readily accessible to and usable by deaf and hard-of-hearing individuals; c) A declaration that Defendants own, maintain, and/or operate the Website in a manner which discriminates against the deaf and hard of hearing, and which fails to provide access for persons with disabilities as required by Americans with Disabilities Act, 42 U.S.C. § the laws of New York; d) An order certifying this case as a class action under Fed. R. Civ. P. 23(a) & (b)(2) and/or (b)(3), appointing Plaintiff as Class Representative, and her attorneys as Class Counsel; e) Compensatory damages in an amount to be determined by proof, including all applicable statutory damages and fines, to Plaintiff and the proposed Subclass for violations of their civil rights under New York State Human Rights Law and City Law; f) Plaintiff’s reasonable attorneys’ fees, statutory damages, expenses, and costs of suit as provided by state and federal law; g) For pre- and post-judgment interest to the extent permitted by law; and h) For such other and further relief which this court deems just and proper. DEMAND FOR TRIAL BY JURY Pursuant to Rule 38(b) of the Federal Rules of Civil Procedure, Plaintiff, on behalf of herself and all others similarly situated, demands a trial by jury on all questions of fact raised by the Complaint. Dated: Scarsdale, New York May 22, 2020 SHAKED LAW GROUP, P.C. Attorneys for Plaintiff By:/s/Dan Shaked_________ Dan Shaked (DS-3331) 14 Harwood Court, Suite 415 Scarsdale, NY 10583 Tel. (917) 373-9128 e-mail: [email protected]

civil rights, immigration, family

YQsvFocBD5gMZwczEz7A

Case No. 3:20-cv-1130 CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS JURY TRIAL DEMANDED UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION COOPER SCHULZE, Individually and On Behalf of All Others Similarly Situated, Plaintiff, v. HALLMARK FINANCIAL SERVICES, INC., NAVEEN ANAND, and JEFFREY R. PASSMORE, Defendants. Plaintiff Cooper Schulze (“Plaintiff”), individually and on behalf of all others similarly situated, by and through his attorneys, alleges the following upon information and belief, except as to those allegations concerning Plaintiff, which are alleged upon personal knowledge. Plaintiff’s information and belief is based upon, among other things, his counsel’s investigation, which includes without limitation: (a) review and analysis of regulatory filings made by Hallmark Financial Services, Inc. (“Hallmark Financial” or the “Company”) with the United States (“U.S.”) Securities and Exchange Commission (“SEC”); (b) review and analysis of press releases and media reports issued by and disseminated by Hallmark Financial; and (c) review of other publicly available information concerning Hallmark Financial. NATURE OF THE ACTION AND OVERVIEW 1. This is a class action on behalf of persons and entities that purchased or otherwise acquired Hallmark Financial securities between March 5, 2019 and March 17, 2020, inclusive (the “Class Period”). Plaintiff pursues claims against the Defendants under the Securities Exchange Act of 1934 (the “Exchange Act”). 2. Hallmark Financial is a diversified property/casualty insurance group. The Company’s Specialty Commercial Segment includes Commercial Auto, E&S Casualty, E&S Property, Professional Liability, and Aerospace & Programs. The Standard Commercial Segment includes Commercial Accounts and the run-off from the Company’s former Workers Compensation operating unit. The Personal Segment consists solely of its Specialty Personal Lines business unit. 3. On March 2, 2020, Hallmark Financial announced that it had decided to exit from its Binding Primary Commercial Auto business, and reported a $63.8 million loss development for prior underwriting years. 4. On this news, the Company’s share price fell $2.10, or more than 14%, to close at $12.23 per share on March 3, 2020, on unusually heavy trading volume. 5. On March 11, 2020, Hallmark Financial disclosed that it had dismissed its independent auditor, BDO USA, LLP (“BDO”) due to a disagreement regarding estimates for reserves for unpaid losses, among other things. 6. On this news, the Company’s share price fell $2.39, or over 29%, to close at $5.71 per share on March 12, 2020, on unusually heavy trading volume. 7. On March 17, 2020, Hallmark Financial filed with the SEC a letter from BDO in which BDO stated “BDO expanded significantly the scope of its audit on January 31, 2020, with respect to which a substantial portion of the requests had not been received and/or tested prior to our termination.” 8. On this news, the Company’s share price fell $0.08 per share, or 2.5%, to close at $3.12 per share on March 18, 2020. 9. Throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors: (1) the Company lacked effective internal controls over accounting and financial reporting related to reserves for unpaid losses; (2) that the Company improperly accounted for reserve for unpaid losses and loss adjustment expenses related to its Binding Primary Commercial Auto business; (3) that, as a result, Hallmark Financial would be forced to report a $63.8 million loss development for prior underwriting years; (4) that, as a result, Hallmark Financial would exit from its Binding Primary Commercial Auto business; and (5) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects, were materially misleading and/or lacked a reasonable basis. 10. As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s securities, Plaintiff and other Class members have suffered significant losses and damages. JURISDICTION AND VENUE 11. The claims asserted herein arise under Sections 10(b) and 20(a) of the Exchange Act (15 U.S.C. §§ 78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder by the SEC (17 C.F.R. § 240.10b-5). 12. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. § 1331 and Section 27 of the Exchange Act (15 U.S.C. § 78aa). 13. Venue is proper in this Judicial District pursuant to 28 U.S.C. § 1391(b) and Section 27 of the Exchange Act (15 U.S.C. § 78aa(c)). Substantial acts in furtherance of the alleged fraud or the effects of the fraud have occurred in this Judicial District. Many of the acts charged herein, including the dissemination of materially false and/or misleading information, occurred in substantial part in this Judicial District. In addition, the Company’s principal executive offices are located in this District. 14. In connection with the acts, transactions, and conduct alleged herein, Defendants directly and indirectly used the means and instrumentalities of interstate commerce, including the United States mail, interstate telephone communications, and the facilities of a national securities exchange. PARTIES 15. Plaintiff Cooper Schulze, as set forth in the accompanying certification, incorporated by reference herein, purchased Hallmark Financial securities during the Class Period, and suffered damages as a result of the federal securities law violations and false and/or misleading statements and/or material omissions alleged herein. 16. Defendant Hallmark Financial is incorporated under the laws of Nevada with its principal executive offices located in Dallas, Texas. Hallmark Financial’s common stock trades on the NASDAQ exchange under the symbol “HALL.” 17. Defendant Naveen Anand (“Anand”) was the Company’s Chief Executive Officer (“CEO”) at all relevant times. 18. Defendant Jeffrey R. Passmore (“Passmore”) was the Company’s Chief Financial Officer (“CFO”) at all relevant times. 19. Defendants Anand and Passmore (collectively the “Individual Defendants”), because of their positions with the Company, possessed the power and authority to control the contents of the Company’s reports to the SEC, press releases and presentations to securities analysts, money and portfolio managers and institutional investors, i.e., the market. The Individual Defendants were provided with copies of the Company’s reports and press releases alleged herein to be misleading prior to, or shortly after, their issuance and had the ability and opportunity to prevent their issuance or cause them to be corrected. Because of their positions and access to material non-public information available to them, the Individual Defendants knew that the adverse facts specified herein had not been disclosed to, and were being concealed from, the public, and that the positive representations which were being made were then materially false and/or misleading. The Individual Defendants are liable for the false statements pleaded herein. SUBSTANTIVE ALLEGATIONS Background 20. Hallmark Financial is a diversified property/casualty insurance group. The Company’s Specialty Commercial Segment includes Commercial Auto, E&S Casualty, E&S Property, Professional Liability, and Aerospace & Programs. The Standard Commercial Segment includes Commercial Accounts and the run-off from the Company’s former Workers Compensation operating unit. The Personal Segment consists solely of its Specialty Personal Lines business unit. Materially False and Misleading Statements Issued During the Class Period 21. The Class Period begins on March 5, 2019. On that day, Hallmark Financial announced its fourth quarter and full year 2018 financial results in a press release, stating in relevant part: Year End 2018 Highlights (all comparisons to prior year):  Gross premiums written of $663.0 million represented an increase of 10%  Net premiums written of $363.8 million were slightly lower than 2017 of $365.6 million  Net combined ratio of 97.1% compared to 107.9%  Net income of $10.3 million, or $0.57 per diluted share, compared to net loss of $11.6 million, or $0.63 per diluted share  Operating earnings of $18.4 million, or $1.01 per diluted share, compared to Operating loss of $11.4 million, or $0.62 per diluted share  Net investment losses of $10.2 million included $1.8 million in net realized gains from the sale of investment securities and a $9.3 million loss from a reduction in the amount of net unrealized capital gains that existed in our equity investments. The income statement recognition of changes in unrealized gains and losses of equity securities is related to the adoption in 2018 of new accounting rules and does not impact operating earnings. 22. On March 14, 2019, the Company filed its annual report on Form 10-K with the SEC for the period ended December 31, 2018, affirming the previously reported financial results. Therein, under “Reserves for Losses and Loss Adjustment Expenses,” Hallmark Financial stated, in relevant part: The $6.0 million unfavorable net development and $40.1 million unfavorable net development in prior accident years recognized in 2018 and 2017, respectively, represent changes in our loss reserve estimates. In 2018 and 2017, the aggregate loss reserve estimates for prior years were increased to reflect unfavorable loss development when the available information indicated a reasonable likelihood that the ultimate losses would be more than the previous estimates. The unfavorable prior year reserve development during the twelve months ended December 31, 2018 was primarily driven by the continued emergence of increased frequency and severity trends in our primary commercial auto lines of business within our Contract Binding operating unit, which was representative of industry trends, partially offset by net favorable development in our general liability lines within our Contract Binding and Standard Commercial P&C operating units. Generally, changes in reserves are caused by variations between actual experience and previous expectations and by reduced emphasis on the Bornhuetter-Ferguson method due to the aging of the accident years. Year ended December 31, 2018:  Specialty Commercial Segment. Our Contract Binding operating unit experienced net unfavorable development in the 2016 and prior accident years primarily in the commercial auto liability line of business, partially offset by favorable development primarily in the commercial auto and general liability lines of business in the 2017 accident year. Our Specialty Commercial operating unit experienced net unfavorable development in general aviation, commercial excess liability, satellite launch insurance products, primary/excess commercial property, professional liability and specialty risk programs lines of business. * * * Year ended December 31, 2017:  Specialty Commercial Segment. Our Contract Binding operating unit experienced net unfavorable development in the 2016 and prior accident years primarily driven by the continued emergence of increased frequency and severity trends in the commercial auto lines of business. Our Specialty Commercial operating unit experienced net unfavorable development in general aviation primarily in the 2016, 2013 and 2011 and prior accident years, commercial excess liability primarily in the 2013 accident year and specialty risk programs primarily in the 2015 and prior accident years, partially offset by net favorable development in the medical professional liability and primary/excess commercial property lines of business primarily in the 2016 accident years. * * * In the opinion of management, our reserves represent the best estimate of our ultimate liabilities, based on currently known facts, current law, current technology and assumptions considered reasonable where facts are not known. Due to the significant uncertainties and related management judgments, there can be no assurance that future favorable or unfavorable loss development, which may be material, will not occur. 23. On May 8, 2019, Hallmark Financial reported its first quarter 2019 financial results in a press release that stated, in relevant part: First Quarter 2019 Highlights (all comparisons to same prior year period):  Gross premiums written increased 22% to $187.3 million  Net premiums written increased 28% to $117.4 million  Net combined ratio improved to 96.5% compared to 97.4%  Net income of $15.0 million, or $0.83 per diluted share, compared to $0.6 million, or $0.04 per diluted share  Operating earnings of $5.6 million, or $0.31 per diluted share, compared to $4.5 million, or $0.24 per diluted share (see “Non-GAAP Financial Measures” below)  Net investment gains of $11.9 million, including $4.1 million in net realized gains and a $7.8 million increase in net unrealized capital gains, compared to net investment losses of $4.8 million 24. The same day, Hallmark Financial filed its quarterly report on Form 10-Q with the SEC for the period ended March 31, 2019, affirming the previously reported financial results. Therein, the Company reported that its consolidated reserve for unpaid losses and loss adjustment expenses was $530.23 million. Regarding the primary factors affecting each segment’s prior accident year reserve development, the report stated, in relevant part: Specialty Commercial Segment. Our Commercial Auto business unit experienced net unfavorable development in the 2017 and prior accident years primarily in the primary commercial auto liability line of business, partially offset by favorable development in the primary commercial auto line of business in the 2018 accident year. Our E&S Casualty business unit experienced net unfavorable development primarily in our E&S package insurance products in the 2017 and prior accident years, partially offset by favorable development in the 2018 accident year. We experienced net unfavorable development in our E&S Property and Aerospace & Programs business units, partially offset by favorable development in our Professional liability business unit. * * * Our Specialty Commercial Segment reported a $1.6 million decrease in losses and LAE which consisted of (a) a $10.0 million decrease in losses and LAE in our Commercial Auto Business unit due largely to lower net earned premiums, as well as $0.3 million of favorable prior year net loss reserve development recognized during the three months ended March 31, 2019 as compared to $3.5 million of unfavorable prior year net loss reserve development during the same period of 2018, partially offset by increased net current accident year loss trends, . . . 25. On August 7, 2019, Hallmark Financial reported its second quarter 2019 financial results in a press release that stated, in relevant part: Second Quarter 2019 Highlights (all comparisons to same prior year period):  Gross premiums written increased 26% to $218.2 million  Net premiums written increased 38% to $123.8 million  Net combined ratio improved to 94.5% compared to 97.0%  Net income of $13.0 million, or $0.71 per diluted share, compared to $5.1 million, or $0.28 per diluted share  Operating earnings of $7.6 million, or $0.42 per diluted share, compared to $4.7 million, or $0.26 per diluted share (see “Non-GAAP Financial Measures” below)  Net investment gains of $6.8 million, including $0.1 million in net realized gains and a $6.7 million increase in net unrealized gains, compared to net investment gains of $0.5 million 26. On August 9, 2019, the Company filed its quarterly report on Form 10-Q with the SEC for the period ended June 30, 2019, affirming the previously reported financial results. Therein, the Company reported that its consolidated reserve for unpaid losses and loss adjustment expenses was $551.54 million. Regarding the primary factors affecting each segment’s prior accident year reserve development, the report stated, in relevant part: Specialty Commercial Segment. Our Commercial Auto business unit experienced net unfavorable development in the 2017 and prior accident years primarily in the primary commercial auto liability line of business, partially offset by net favorable development in the primary commercial auto line of business in the 2018 accident year. Our E&S Casualty business unit experienced net unfavorable development primarily in our E&S package insurance products in the 2017 and prior accident years, partially offset by net favorable development in the 2018 accident year. We experienced net favorable development in our E&S Property and Professional Liability business units, partially offset by net unfavorable development in our Aerospace & Programs business unit. * * * Our Specialty Commercial Segment reported stable losses and LAE as the combined result of (a) a $8.0 million decrease in losses and LAE in our Commercial Auto business unit due largely to lower net earned premiums, as well as $2.8 million of unfavorable prior year net loss reserve development recognized during the three months ended June 30, 2019 as compared to $5.9 million of unfavorable prior year net loss reserve development during the same period of 2018, . . . 27. On November 7, 2019, Hallmark Financial announced its third quarter 2019 financial results in a press release that stated, in relevant part: Third Quarter 2019 Highlights (all comparisons to same prior year period):  Gross premiums written increased 33% to $224.2 million  Net premiums written increased 45% to $127.8 million  Net combined ratio improved to 95.8% compared to 98.1%  Net income of $5.3 million, or $0.29 per diluted share, compared to $9.7 million, or $0.53 per diluted share  Operating earnings of $6.3 million, or $0.35 per diluted share, compared to $4.2 million, or $0.23 per diluted share (see “Non-GAAP Financial Measures” below)  Net investment losses of $1.3 million, including $0.2 million in net realized gains and a $1.5 million decrease in net unrealized gains, compared to net investment gains of $7.0 million 28. The same day, the Company filed its quarterly report on Form 10-Q with the SEC for the period ended September 30, 2019, affirming the previously reported financial results. Therein, the Company reported that its consolidated reserve for unpaid losses and loss adjustment expenses was $565.29 million. Regarding the primary factors affecting each segment’s prior accident year reserve development, the report stated, in relevant part: Specialty Commercial Segment. Our Commercial Auto business unit experienced net unfavorable development in the 2017 and prior accident years primarily in the primary commercial auto liability line of business, partially offset by net favorable development in the primary commercial auto line of business in the 2018 accident year. Our E&S Casualty business unit experienced net unfavorable development primarily in our E&S package insurance products in the 2017 and prior accident years, partially offset by net favorable development in the 2018 accident year. We experienced net favorable development in our E&S Property and Professional Liability business units, partially offset by net unfavorable development in our Aerospace & Programs business unit. * * * Our Specialty Commercial Segment reported lower losses and LAE as the combined result of (a) a $5.9 million decrease in losses and LAE in our Commercial Auto business unit due largely to $5.1 million of unfavorable prior year net loss reserve development recognized during the three months ended September 30, 2019 as compared to $8.1 million of unfavorable prior year net loss reserve development during the same period of 2018 . . . 29. The above statements identified in ¶¶ 21-28 were materially false and/or misleading, and failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors: (1) the Company lacked effective internal controls over accounting and financial reporting related to reserves for unpaid losses; (2) that the Company improperly accounted for reserve for unpaid losses and loss adjustment expenses related to its Binding Primary Commercial Auto business; (3) that, as a result, Hallmark Financial would be forced to report a $63.8 million loss development for prior underwriting years; (4) that, as a result, Hallmark Financial would exit from its Binding Primary Commercial Auto business; and (5) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects, were materially misleading and/or lacked a reasonable basis. Disclosures at the End of the Class Period 30. On March 2, 2020, Hallmark Financial announced that it had exited from its Binding Primary Commercial Auto business and reported a $63.8 million loss development for prior underwriting years. In a press release, the Company stated, in relevant part: Hallmark Financial Services, Inc. (“Hallmark Financial” or the “Company”) (NASDAQ: HALL), a specialty property and casualty insurance company, announced last month to its brokers and agents that the Company had made the strategic decision to exit its Binding Primary Auto business. Despite several years of implementing proactive rate actions and policy changes, the Company has continued to experience increasing claim severity from prior accident years. As a result, Hallmark Financial has made the decision that its in-force policies will be placed into run-off and non-renewed in accordance with applicable state requirements. * * * The Company also announced that it will file its annual insurance statutory reports today, which will include pre-tax adverse prior year loss development of $63.8 million, net of reinsurance, for fiscal 2019, as provided in Schedule P, of which $56.1 million was recorded in the fourth quarter of 2019. These losses are primarily related to the Binding Primary Auto business for the 2016 and 2017 underwriting years, with a smaller remainder largely attributable to general liability. These amounts are unaudited and based on statutory requirements rather than generally accepted accounting principles. Current Operations At year-end 2019, the Binding Primary Auto business operated in only four states: Texas, Oklahoma, Arkansas and Missouri, having previously exited Louisiana and Mississippi in 2016. With its profile limited to only four states, and heavy concentration (87%) in Texas, the performance of the Binding Primary Auto book is highly influenced by the legal and regulatory environments of these states. Despite achieving significant rate increases in this portfolio and improving the overall risk profile of the book, the performance of this business continued to be volatile. Over the past five years, the Binding Primary Auto business was responsible for over 100% of the Company’s aggregate adverse reserve development. The Company worked to transform this book, bringing in new underwriting leadership, exiting states and segments of business, increasing analytical pricing support, developing predictive models and filing new rate structures. Despite these efforts, based on the increasing claim severity trends impacting this line of business, and the limitations of this customer base to absorb meaningful rate increases viewed as necessary to profitably write this business, the Company made the decision to exit this segment of the commercial auto market. 31. On this news, the Company’s share price fell $2.10, or over 14%, to close at $12.23 per share on March 3, 2020, on unusually heavy trading volume. 32. On March 11, 2020, after the market closed, Hallmark Financial disclosed that it had dismissed its independent auditor due to a disagreement regarding estimates for reserves for unpaid losses, among other things. In a Form 8-K filed with the SEC after the market closed, the Company stated, in relevant part: On March 5, 2020, Hallmark Financial Services, Inc. (the “Company”) dismissed BDO USA, LLP (“BDO”) as the Company’s independent registered public accounting firm, effective immediately. BDO’s audit reports on the Company’s consolidated financial statements as of and for the years ended December 31, 2017 and 2018, did not contain any adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles. The decision to change accountants was approved by the Audit Committee of the Company’s board of directors (the “Audit Committee”). During the two fiscal years ended December 31, 2018, and the subsequent interim periods through the filing of the Company’s Form 10-Q for the quarter ended September 30, 2019, there were no disagreements (as defined in Item 3.04 of Regulation S-K) between the Company and BDO. Subsequently, a disagreement arose regarding certain matters related to (a) the Company’s processes for estimating reserves for unpaid losses and loss adjustment expenses, (b) the resulting potential impact on the Company’s assessment of the associated internal controls over financial reporting, and (c) the resulting potential impact on recorded amounts of those reserves, all as of the quarter ended September 30, 2019, and the year ended December 31, 2019. The Audit Committee has discussed the subject matter of the disagreement with BDO and has authorized BDO to respond fully to the inquiries of any successor independent registered public accounting firm concerning the subject matter of such disagreement. (Emphasis added.) 33. On this news, the Company’s share price fell $2.39, or over 29%, to close at $5.71 per share on March 12, 2020, on unusually heavy trading volume. 34. On March 17, 2020, Hallmark Financial filed with the SEC a letter from BDO. Therein, BDO stated: We have been furnished with a copy of the response to Item 4.01 of Form 8-K for the event that occurred on March 11, 2020, to be filed by our former client, Hallmark Financial Services, Inc. (the “Company”). We agree with the statements made in response to that Item insofar as they relate to our Firm. In addition, with respect to the matters of disagreement, BDO expanded significantly the scope of its audit on January 31, 2020, with respect to which a substantial portion of the requests had not been received and/or tested prior to our termination. 35. On this news, the Company’s share price fell $0.08 per share, or 2.5%, to close at $3.12 per share on March 18, 2020. CLASS ACTION ALLEGATIONS 36. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil Procedure 23(a) and (b)(3) on behalf of a class, consisting of all persons and entities that purchased or otherwise acquired Hallmark Financial securities between March 5, 2019 and March 17, 2020, inclusive, and who were damaged thereby (the “Class”). Excluded from the Class are Defendants, the officers and directors of the Company, at all relevant times, members of their immediate families and their legal representatives, heirs, successors, or assigns, and any entity in which Defendants have or had a controlling interest. 37. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, Hallmark Financial’s common shares actively traded on the NASDAQ. While the exact number of Class members is unknown to Plaintiff at this time and can only be ascertained through appropriate discovery, Plaintiff believes that there are at least hundreds or thousands of members in the proposed Class. Millions of Hallmark Financial common stock were traded publicly during the Class Period on the NASDAQ. Record owners and other members of the Class may be identified from records maintained by Hallmark Financial or its transfer agent and may be notified of the pendency of this action by mail, using the form of notice similar to that customarily used in securities class actions. 38. Plaintiff’s claims are typical of the claims of the members of the Class as all members of the Class are similarly affected by Defendants’ wrongful conduct in violation of federal law that is complained of herein. 39. Plaintiff will fairly and adequately protect the interests of the members of the Class and has retained counsel competent and experienced in class and securities litigation. 40. Common questions of law and fact exist as to all members of the Class and predominate over any questions solely affecting individual members of the Class. Among the questions of law and fact common to the Class are: (a) whether the federal securities laws were violated by Defendants’ acts as alleged herein; (b) whether statements made by Defendants to the investing public during the Class Period omitted and/or misrepresented material facts about the business, operations, and prospects of Hallmark Financial; and (c) to what extent the members of the Class have sustained damages and the proper measure of damages. 41. A class action is superior to all other available methods for the fair and efficient adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the damages suffered by individual Class members may be relatively small, the expense and burden of individual litigation makes it impossible for members of the Class to individually redress the wrongs done to them. There will be no difficulty in the management of this action as a class action. UNDISCLOSED ADVERSE FACTS 42. The market for Hallmark Financial’s securities was open, well-developed and efficient at all relevant times. As a result of these materially false and/or misleading statements, and/or failures to disclose, Hallmark Financial’s securities traded at artificially inflated prices during the Class Period. Plaintiff and other members of the Class purchased or otherwise acquired Hallmark Financial’s securities relying upon the integrity of the market price of the Company’s securities and market information relating to Hallmark Financial, and have been damaged thereby. 43. During the Class Period, Defendants materially misled the investing public, thereby inflating the price of Hallmark Financial’s securities, by publicly issuing false and/or misleading statements and/or omitting to disclose material facts necessary to make Defendants’ statements, as set forth herein, not false and/or misleading. The statements and omissions were materially false and/or misleading because they failed to disclose material adverse information and/or misrepresented the truth about Hallmark Financial’s business, operations, and prospects as alleged herein. 44. At all relevant times, the material misrepresentations and omissions particularized in this Complaint directly or proximately caused or were a substantial contributing cause of the damages sustained by Plaintiff and other members of the Class. As described herein, during the Class Period, Defendants made or caused to be made a series of materially false and/or misleading statements about Hallmark Financial’s financial well-being and prospects. These material misstatements and/or omissions had the cause and effect of creating in the market an unrealistically positive assessment of the Company and its financial well-being and prospects, thus causing the Company’s securities to be overvalued and artificially inflated at all relevant times. Defendants’ materially false and/or misleading statements during the Class Period resulted in Plaintiff and other members of the Class purchasing the Company’s securities at artificially inflated prices, thus causing the damages complained of herein when the truth was revealed. LOSS CAUSATION 45. Defendants’ wrongful conduct, as alleged herein, directly and proximately caused the economic loss suffered by Plaintiff and the Class. 46. During the Class Period, Plaintiff and the Class purchased Hallmark Financial’s securities at artificially inflated prices and were damaged thereby. The price of the Company’s securities significantly declined when the misrepresentations made to the market, and/or the information alleged herein to have been concealed from the market, and/or the effects thereof, were revealed, causing investors’ losses. SCIENTER ALLEGATIONS 47. As alleged herein, Defendants acted with scienter since Defendants knew that the public documents and statements issued or disseminated in the name of the Company were materially false and/or misleading; knew that such statements or documents would be issued or disseminated to the investing public; and knowingly and substantially participated or acquiesced in the issuance or dissemination of such statements or documents as primary violations of the federal securities laws. As set forth elsewhere herein in detail, the Individual Defendants, by virtue of their receipt of information reflecting the true facts regarding Hallmark Financial, their control over, and/or receipt and/or modification of Hallmark Financial’s allegedly materially misleading misstatements and/or their associations with the Company which made them privy to confidential proprietary information concerning Hallmark Financial, participated in the fraudulent scheme alleged herein. APPLICABILITY OF PRESUMPTION OF RELIANCE (FRAUD-ON-THE-MARKET DOCTRINE) 48. The market for Hallmark Financial’s securities was open, well-developed and efficient at all relevant times. As a result of the materially false and/or misleading statements and/or failures to disclose, Hallmark Financial’s securities traded at artificially inflated prices during the Class Period. On October 22, 2019, the Company’s share price closed at a Class Period high of $19.88 per share. Plaintiff and other members of the Class purchased or otherwise acquired the Company’s securities relying upon the integrity of the market price of Hallmark Financial’s securities and market information relating to Hallmark Financial, and have been damaged thereby. 49. During the Class Period, the artificial inflation of Hallmark Financial’s shares was caused by the material misrepresentations and/or omissions particularized in this Complaint causing the damages sustained by Plaintiff and other members of the Class. As described herein, during the Class Period, Defendants made or caused to be made a series of materially false and/or misleading statements about Hallmark Financial’s business, prospects, and operations. These material misstatements and/or omissions created an unrealistically positive assessment of Hallmark Financial and its business, operations, and prospects, thus causing the price of the Company’s securities to be artificially inflated at all relevant times, and when disclosed, negatively affected the value of the Company shares. Defendants’ materially false and/or misleading statements during the Class Period resulted in Plaintiff and other members of the Class purchasing the Company’s securities at such artificially inflated prices, and each of them has been damaged as a result. 50. At all relevant times, the market for Hallmark Financial’s securities was an efficient market for the following reasons, among others: (a) Hallmark Financial shares met the requirements for listing, and was listed and actively traded on the NASDAQ, a highly efficient and automated market; (b) As a regulated issuer, Hallmark Financial filed periodic public reports with the SEC and/or the NASDAQ; (c) Hallmark Financial regularly communicated with public investors via established market communication mechanisms, including through regular dissemination of press releases on the national circuits of major newswire services and through other wide- ranging public disclosures, such as communications with the financial press and other similar reporting services; and/or (d) Hallmark Financial was followed by securities analysts employed by brokerage firms who wrote reports about the Company, and these reports were distributed to the sales force and certain customers of their respective brokerage firms. Each of these reports was publicly available and entered the public marketplace. 51. As a result of the foregoing, the market for Hallmark Financial’s securities promptly digested current information regarding Hallmark Financial from all publicly available sources and reflected such information in Hallmark Financial’s share price. Under these circumstances, all purchasers of Hallmark Financial’s securities during the Class Period suffered similar injury through their purchase of Hallmark Financial’s securities at artificially inflated prices and a presumption of reliance applies. 52. A Class-wide presumption of reliance is also appropriate in this action under the Supreme Court’s holding in Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128 (1972), because the Class’s claims are, in large part, grounded on Defendants’ material misstatements and/or omissions. Because this action involves Defendants’ failure to disclose material adverse information regarding the Company’s business operations and financial prospects—information that Defendants were obligated to disclose—positive proof of reliance is not a prerequisite to recovery. All that is necessary is that the facts withheld be material in the sense that a reasonable investor might have considered them important in making investment decisions. Given the importance of the Class Period material misstatements and omissions set forth above, that requirement is satisfied here. NO SAFE HARBOR 53. The statutory safe harbor provided for forward-looking statements under certain circumstances does not apply to any of the allegedly false statements pleaded in this Complaint. The statements alleged to be false and misleading herein all relate to then-existing facts and conditions. In addition, to the extent certain of the statements alleged to be false may be characterized as forward looking, they were not identified as “forward-looking statements” when made and there were no meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the purportedly forward-looking statements. In the alternative, to the extent that the statutory safe harbor is determined to apply to any forward-looking statements pleaded herein, Defendants are liable for those false forward- looking statements because at the time each of those forward-looking statements was made, the speaker had actual knowledge that the forward-looking statement was materially false or misleading, and/or the forward-looking statement was authorized or approved by an executive officer of Hallmark Financial who knew that the statement was false when made. FIRST CLAIM Violation of Section 10(b) of The Exchange Act and Rule 10b-5 Promulgated Thereunder Against All Defendants 54. Plaintiff repeats and re-alleges each and every allegation contained above as if fully set forth herein. 55. During the Class Period, Defendants carried out a plan, scheme and course of conduct which was intended to and, throughout the Class Period, did: (i) deceive the investing public, including Plaintiff and other Class members, as alleged herein; and (ii) cause Plaintiff and other members of the Class to purchase Hallmark Financial’s securities at artificially inflated prices. In furtherance of this unlawful scheme, plan and course of conduct, Defendants, and each defendant, took the actions set forth herein. 56. Defendants (i) employed devices, schemes, and artifices to defraud; (ii) made untrue statements of material fact and/or omitted to state material facts necessary to make the statements not misleading; and (iii) engaged in acts, practices, and a course of business which operated as a fraud and deceit upon the purchasers of the Company’s securities in an effort to maintain artificially high market prices for Hallmark Financial’s securities in violation of Section 10(b) of the Exchange Act and Rule 10b-5. All Defendants are sued either as primary participants in the wrongful and illegal conduct charged herein or as controlling persons as alleged below. 57. Defendants, individually and in concert, directly and indirectly, by the use, means or instrumentalities of interstate commerce and/or of the mails, engaged and participated in a continuous course of conduct to conceal adverse material information about Hallmark Financial’s financial well-being and prospects, as specified herein. 58. Defendants employed devices, schemes and artifices to defraud, while in possession of material adverse non-public information and engaged in acts, practices, and a course of conduct as alleged herein in an effort to assure investors of Hallmark Financial’s value and performance and continued substantial growth, which included the making of, or the participation in the making of, untrue statements of material facts and/or omitting to state material facts necessary in order to make the statements made about Hallmark Financial and its business operations and future prospects in light of the circumstances under which they were made, not misleading, as set forth more particularly herein, and engaged in transactions, practices and a course of business which operated as a fraud and deceit upon the purchasers of the Company’s securities during the Class Period. 59. Each of the Individual Defendants’ primary liability and controlling person liability arises from the following facts: (i) the Individual Defendants were high-level executives and/or directors at the Company during the Class Period and members of the Company’s management team or had control thereof; (ii) each of these defendants, by virtue of their responsibilities and activities as a senior officer and/or director of the Company, was privy to and participated in the creation, development and reporting of the Company’s internal budgets, plans, projections and/or reports; (iii) each of these defendants enjoyed significant personal contact and familiarity with the other defendants and was advised of, and had access to, other members of the Company’s management team, internal reports and other data and information about the Company’s finances, operations, and sales at all relevant times; and (iv) each of these defendants was aware of the Company’s dissemination of information to the investing public which they knew and/or recklessly disregarded was materially false and misleading. 60. Defendants had actual knowledge of the misrepresentations and/or omissions of material facts set forth herein, or acted with reckless disregard for the truth in that they failed to ascertain and to disclose such facts, even though such facts were available to them. Such defendants’ material misrepresentations and/or omissions were done knowingly or recklessly and for the purpose and effect of concealing Hallmark Financial’s financial well-being and prospects from the investing public and supporting the artificially inflated price of its securities. As demonstrated by Defendants’ overstatements and/or misstatements of the Company’s business, operations, financial well-being, and prospects throughout the Class Period, Defendants, if they did not have actual knowledge of the misrepresentations and/or omissions alleged, were reckless in failing to obtain such knowledge by deliberately refraining from taking those steps necessary to discover whether those statements were false or misleading. 61. As a result of the dissemination of the materially false and/or misleading information and/or failure to disclose material facts, as set forth above, the market price of Hallmark Financial’s securities was artificially inflated during the Class Period. In ignorance of the fact that market prices of the Company’s securities were artificially inflated, and relying directly or indirectly on the false and misleading statements made by Defendants, or upon the integrity of the market in which the securities trades, and/or in the absence of material adverse information that was known to or recklessly disregarded by Defendants, but not disclosed in public statements by Defendants during the Class Period, Plaintiff and the other members of the Class acquired Hallmark Financial’s securities during the Class Period at artificially high prices and were damaged thereby. 62. At the time of said misrepresentations and/or omissions, Plaintiff and other members of the Class were ignorant of their falsity, and believed them to be true. Had Plaintiff and the other members of the Class and the marketplace known the truth regarding the problems that Hallmark Financial was experiencing, which were not disclosed by Defendants, Plaintiff and other members of the Class would not have purchased or otherwise acquired their Hallmark Financial securities, or, if they had acquired such securities during the Class Period, they would not have done so at the artificially inflated prices which they paid. 63. By virtue of the foregoing, Defendants violated Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder. 64. As a direct and proximate result of Defendants’ wrongful conduct, Plaintiff and the other members of the Class suffered damages in connection with their respective purchases and sales of the Company’s securities during the Class Period. SECOND CLAIM Violation of Section 20(a) of The Exchange Act Against the Individual Defendants 65. Plaintiff repeats and re-alleges each and every allegation contained above as if fully set forth herein. 66. Individual Defendants acted as controlling persons of Hallmark Financial within the meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level positions and their ownership and contractual rights, participation in, and/or awareness of the Company’s operations and intimate knowledge of the false financial statements filed by the Company with the SEC and disseminated to the investing public, Individual Defendants had the power to influence and control and did influence and control, directly or indirectly, the decision- making of the Company, including the content and dissemination of the various statements which Plaintiff contends are false and misleading. Individual Defendants were provided with or had unlimited access to copies of the Company’s reports, press releases, public filings, and other statements alleged by Plaintiff to be misleading prior to and/or shortly after these statements were issued and had the ability to prevent the issuance of the statements or cause the statements to be corrected. 67. In particular, Individual Defendants had direct and supervisory involvement in the day-to-day operations of the Company and, therefore, had the power to control or influence the particular transactions giving rise to the securities violations as alleged herein, and exercised the 68. As set forth above, Hallmark Financial and Individual Defendants each violated Section 10(b) and Rule 10b-5 by their acts and omissions as alleged in this Complaint. By virtue of their position as controlling persons, Individual Defendants are liable pursuant to Section 20(a) of the Exchange Act. As a direct and proximate result of Defendants’ wrongful conduct, Plaintiff and other members of the Class suffered damages in connection with their purchases of the Company’s securities during the Class Period. PRAYER FOR RELIEF WHEREFORE, Plaintiff prays for relief and judgment, as follows: (a) Determining that this action is a proper class action under Rule 23 of the Federal Rules of Civil Procedure; (b) Awarding compensatory damages in favor of Plaintiff and the other Class members against all defendants, jointly and severally, for all damages sustained as a result of Defendants’ wrongdoing, in an amount to be proven at trial, including interest thereon; (c) Awarding Plaintiff and the Class their reasonable costs and expenses incurred in this action, including counsel fees and expert fees; and (d) Such other and further relief as the Court may deem just and proper. JURY TRIAL DEMANDED Plaintiff hereby demands a trial by jury. Dated: May 5, 2020 By: s/ Joe Kendall Joe Kendall Texas Bar No. 11260700 KENDALL LAW GROUP, PLLC 3811 Turtle Creek Blvd., Suite 1450 Dallas, Texas 75219 Telephone: (214) 744-3000 Facsimile: (214) 744-3015 Email: [email protected] GLANCY PRONGAY & MURRAY LLP Robert V. Prongay Charles H. Linehan Pavithra Rajesh 1925 Century Park East, Suite 2100 Los Angeles, CA 90067 Telephone: (310) 201-9150 Facsimile: (310) 201-9160 THE ROSEN LAW FIRM, P.A. Phillip Kim 275 Madison Avenue, 40th Floor New York, NY 10016 Telephone: (212) 686-1060 Attorneys for Plaintiff Cooper Schulze

securities

DsRvDYcBD5gMZwczfdDN

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN -- SOUTHERN DIVISION LAURA ANDRES Individually and on behalf of others similarly situated Plaintiff -vs- Case No. Hon. CLASS ACTION COMPLAINT DEMAND FOR JURY TRIAL SELLERS BUICK GMC, INC., dba Sellers GMC, dba Sellers Isuzu, dba Sellers Isuzu Truck, dba Sellers Buick, and dba Sellers Buick GMC, Defendant. COMPLAINT & JURY DEMAND Plaintiff, Laura Andres, individually and on behalf of others similarly situated, states the following claims for relief: Jurisdiction 1. This court has jurisdiction under the Equal Credit Opportunity Act ("ECOA"), 15 U.S.C. § 1691 et seq., and 28 U.S.C. §§ 1331,1337. Parties 2. The Plaintiff to this lawsuit is Laura Andres who resides in Royal Oak, Michigan. 3. The Defendant to this lawsuit is Sellers Buick GMC, Inc., which does business as Sellers GMC, Sellers Isuzu, Sellers Isuzu Truck, Sellers Buick and Sellers Buick GMC, (“Sellers”). Sellers is in the business of auto sales and repair and is located at 38000 Grand River Avenue, Farmington Hills MI 48335 and according to its 2017 Annual Report filed with the State of Michigan, its resident agent and the mailing address of the registered office is as follows: Samuel G Slaughter (“Mr. Slaughter”), 24501 Hathaway Street, Farmington Hills MI 48335 (signed by Authorized Agent, Andrew Haller). Its 2014 Annual Report filed with the State of Michigan identified Mr. Slaughter as the resident agent and the registered office address of 38000 Grand River Avenue, Farmington Hills MI 48335 and further identified Mr. Slaughter as President and John S. Sedlak (“Mr. Sedlak”) as Secretary, Treasurer, and Director and all providing a business address of 38000 Grand River Avenue, Farmington Hills MI 48335. Venue 4. The transactions and occurrences which give rise to this action occurred in Oakland County. 5. Ms. Andres is a citizen of the State of Michigan. 6. Venue is proper in the Eastern District of Michigan. General Allegations As To Sellers 7. On or about August 23, 2014, Ms. Andres went to the business place of Sellers for the purpose of purchasing a vehicle. 8. Ms. Andres completed a credit application for a vehicle. 9. On August 23, 2014, Sellers1 obtained a copy of Ms. Andres’ consumer credit report from Trans Union as disclosed on the inquiries log of her Trans Union consumer disclosure dated August 18, 2016. 10. Sellers denied credit to Ms. Andres on the terms she requested. 11. Sellers’s denial of credit constituted adverse action for purposes Ms. Andres's credit application. 12. Sellers failed to provide Ms. Andres with a notice of adverse action compliant with the requirements of the ECOA. 13. Sellers violated the adverse action requirements of the ECOA. Practices of Sellers 14. It is or was the practice and policy of Sellers to: a. Take adverse action for purpose of the ECOA as to consumers without issuing appropriate notices under the ECOA. b. Fail to issue adverse action notices when otherwise required under the ECOA. c. Fail to maintain records of its compliance with the ECOA. 1Appears on the Trans Union report for Ms. Andres as “Sellers Buick GMC via NCCSellers Buick GMC 2 (38000 Grand River, Farmington Hil, MI 48335, (248) 478-8000)” Class Allegations 15. Ms. Andres incorporates the preceding allegations by reference. 16. Ms. Andres brings this action on behalf of herself and the class of all other persons similarly situated, pursuant to Fed.R.Civ.P.23. 17. Ms. Andres proposes to represent the following class, initially defined as follows: All consumers in the State of Michigan, excluding the Court, Counsel and their staff, a) who applied for credit to Sellers, as evidenced by inquiries for consumer reports by Sellers b) to whom Sellers did not extend credit on the terms requested, and c) for whom Sellers has no record of an adverse action notice. 18. The class of persons to be represented are so numerous that joinder of all members is impractical. 19. The Court and Counsel can identify the proposed members of the class easily from the records of Sellers as a result of the record keeping requirements applicable to automobile dealers in the State of Michigan and the consumer reporting agencies through whom Sellers has made inquiries. 20. The names and addresses of the class members are identifiable through documents that Sellers itself maintains, and the class members may be notified of the pendency of this action by mailed notice. 21. The class claims present common questions of law and fact, including whether: a. Sellers is a creditor for purposes of ECOA. b. Sellers issued an adverse action notice to Ms. Andres and the class members; c. Sellers’ standard procedures to issue an adverse action notice were reasonable; d. Sellers knowingly and intentionally committed an act in conscious disregard of the rights of the consumer; and e. Sellers’ conduct constitutes violations of the ECOA. 22. Ms. Andres will fairly and adequately protect the interests of the class, specifically: a. Ms. Andres has no adverse interest to the class. b. Ms. Andres has retained counsel who is experienced in handling class actions and litigation under various Federal Consumer Protection Acts. c. Ms. Andres claims are typical of the claims of each class member, as Ms. Andres has suffered similar injuries to the members of the class she seeks to represent through this action. 23. The questions of law or fact common to the members of the class predominate over any questions affecting any individual member. 24. A class action is superior to other available methods for the fair and efficient adjudication of the controversy because no individual class member could be expected to hold a strong interest in individually controlling the prosecution of separate claims against Sellers because the claim amounts are likely small and involve statutory damages under the ECOA and FCRA, and because management of these claims will likely present few difficulties. 25. This complaint seeks monetary damages under Fed.R.Civ.P.23(b)(3). 26. Based upon the preceding allegations, the Court may certify this matter as a class under Rule 23(b)(3) of the Federal Rules of Civil Procedure. 27. Likewise, the Court may certify this matter as a class under Fed.R.Civ.P. 23(b)(2), because Sellers has acted on grounds generally applicable to the class, making equitable injunctive relief with respect to Ms. Andres and the putative class members appropriate. 28. There is no impediment to certification of the class to be represented. Count I – Equal Credit Opportunity Act (Sellers) 29. Ms. Andres incorporates the preceding allegations by reference. 30. Sellers is a creditor for purpose of the Equal Credit Opportunity Act (“ECOA”), 15 U.S.C. § 1691 et seq. 31. Following the receipt of the complete application for credit by Ms. Andres, Sellers was required to make a credit decision within 30 days. 32. Based upon that credit application, Sellers denied credit, or alternatively refused to extend credit on substantially similar terms to those applied for by Ms. Andres, or alternatively failed to render its credit decision within 30 days. 33. Ms. Andres did not accept any credit from Sellers. 34. Sellers took adverse action for purposes of the ECOA. 35. Sellers failed to issue the adverse action notice to Ms. Andres which the ECOA requires of users of consumer credit reports who take adverse action. 36. Sellers was otherwise required to provide an adverse action notice to Ms. Andres. 37. Sellers failed to provide an adverse action notice to Ms. Andres. 38. Sellers has inadequate policies or procedures in place to comply with the ECOA's adverse action notice requirement. 39. Sellers has failed to maintain proper records of its credit actions in violation of the ECOA. 40. This failure to issue an adverse action notice constituted a negligent violation of the ECOA, 15 U.S.C. § 1691 by Sellers; alternatively this failure to issue an adverse action notice constituted a willful violation of the ECOA, 15 U.S.C. § 1691 by Sellers. 41. This failure to properly maintain records constituted a negligent violation of the ECOA, 15 U.S.C. § 1691 et seq. by Sellers; alternatively this failure to properly maintain records constituted a willful violation of the ECOA, 15 U.S.C. § 1691 et seq. 42. Ms. Andres suffered damages by this violation of ECOA. Count II – Special Request For Equitable Relief (Sellers) 43. Ms. Andres incorporates the preceding allegations by reference. 44. Sellers failed or refused to put in place mechanisms to comply with the ECOA's adverse action notice requirements. 45. Those requirements serve as the primary means of record keeping to permit both private litigants and governmental entities to determine whether or not Sellers is in compliance with the Act's anti-discrimination purposes. 46. Similarly, the adverse action notice provisions of the ECOA serve an important consumer education function. 47. These salutatory purposes will be completely defeated if Sellers is allowed to continue operating without compliance. 48. Additionally, Sellers will gain an unfair competitive advantage over its competitors if is are permitted to continue operation without bearing the cost of compliance which are actually born by its market competitors who have complied with the adverse action notice requirements of the ECOA. 49. Accordingly, Ms. Andres requests that the Court enter an appropriate order requiring Sellers to issue notices to the class members and enjoining further violations of the ECOA by Sellers. Jury Demand 50. Ms. Andres demands a jury trial in this case. Request For Relief Plaintiff, on her own behalf and on behalf of the members of the Class, requests that this Honorable Court grant the following relief: a. Certify the proposed Class; b. Appoint Ms. Andres as representative of the Class and the undersigned counsel as counsel for the Class; c. Award Plaintiff and the Class damages, as allowed by law; d. Award Plaintiff and the Class attorneys’ fees and costs, as allowed by law and/or equity; e. A declaration that Sellers has violated the ECOA and award injunctive relief to prevent further violations; f. Any other relief as the Court deems necessary, just, and proper. Respectfully Submitted, LYNGKLIP & ASSOCIATES CONSUMER LAW CENTER, PLC By:/s/ Sylvia S. Bolos Sylvia S. Bolos ( P78715) Attorney For Laura Andres 24500 Northwestern Highway, Ste. 206 Southfield, MI 48075 (248) 208-8864 [email protected] Dated: July 31, 2017

discrimination

oFNYBIkBRpLueGJZwxCA

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF ARKANSAS CENTRAL DIVISION Master File No. 4:19-cv-00756-BSM CLASS ACTION In re UNITI GROUP INC. SECURITIES LITIGATION This Document Relates To: CONSOLIDATED AMENDED CLASS ACTION COMPLAINT ALL ACTIONS. DEMAND FOR JURY TRIAL ) ) ) ) ) ) ) ) Page   INTRODUCTION AND SUMMARY OF THE FRAUD ....................................... 2    JURISDICTION AND VENUE ............................................................................. 12    PARTIES ................................................................................................................ 12    ADDITIONAL PARTICIPANTS .......................................................................... 15    BACKGROUND TO THE SPIN-OFF AND DEFENDANTS’ KNOWLEDGE IT VIOLATED WINDSTREAM’S DEBT COVENANTS ........ 18  A.  Company Background ...................................................................... 18  B.  The Decision to Spin-Off Uniti and Execute a Sale-Leaseback Transaction ....................................................................................... 19  C.  Windstream Services’ Indenture Prohibits Sale-Leaseback Transactions ..................................................................................... 23  D.  Windstream, with Defendants’ Help, Gains Regulatory Approval of the Spin-Off and Conceals that the Spin-Off Violated the Indenture’s Prohibition on Sale-Leaseback Transactions ..................................................................................... 30  E.  Windstream, with Defendants’ Help Finalizes the Structure of the Spin-Off Including the Terms of the Master Lease ................... 38  F.  Defendants Finalize the Spin-Off ..................................................... 41  G.  Defendants Also Conceal that the Master Lease Was Not a True Lease, but a Financing in Disguise .......................................... 44    DEFENDANTS’ MATERIALLY FALSE AND MISLEADING STATEMENTS AND OMISSIONS DURING THE CLASS PERIOD ............... 50  A.  Uniti Begins Operations Following the Spin-Off and Defendants Conceal That the Master Lease Violated the Terms of the Indenture ..................................................................... 51    March 26, 2015 – Filing of the Form 8-K and Information Statement ........................................................... 51    April 24, 2015 Completion of Spin-Off ................................ 56  Page   June 10, 2015 – REITWeek 2015 ......................................... 56    July 2, 2015 – Registration of 8.25% Notes ......................... 57    August 13, 2015 – 2Q15 Results .......................................... 57    November 14, 2016 – 3Q16 Results ..................................... 59  B.  Materialization of the Risk and Defendants’ Continued Materially False and Misleading Statements and Omissions ........... 62    August 3, 2017 – 2Q17 Results and Windstream’s Announcement of Elimination of Dividend .......................... 62    August and September 2017 – Hedge Fund Increases Position in Uniti Notes .......................................................... 63    September 25, 2017 – Noteholder Aurelius Challenges the Spin-Off as a Violation of the Indenture ......................... 65    October 4, 2017 – Deutsche Bank Leveraged Finance Conference ............................................................................ 66    October 2017 –Aurelius Initiates Litigation Against Windstream and Windstream Responds with Counterclaims ....................................................................... 69    November 2017 – 3Q17 Results and Uniti’s Response to Windstream Notice of Default .......................................... 69    December 4, 2017 – UBS Global Media and Communications Conference ................................................ 74    March 1, 2018 – 4Q17 and Full Year 2017 Results ............. 74    Spring 2018 ........................................................................... 75    September 6, 2018 – Bank of America Merrill Lynch 2018 Media, Communications & Entertainment Conference ............................................................................ 75    October 3, 2018 – Deutsche Bank Leveraged Finance Conference ............................................................................ 76  Page   November 1, 2018 – 3Q18 Results ....................................... 76    February 15, 2019 –Judge Rules in Favor of Aurelius, Finding that the Spin-Off and the Master Lease Transaction Breached the Indenture; Uniti Stock Tumbles in Response ............................................................ 79    March 4, 2019 – Notification of Late Filing ......................... 81    March 2019 – Full Year 2018 Results; Defendants Continue to Conceal that the Master Lease was a Financing ............................................................................... 82    May 9, 2019 – 1Q19 Results ................................................. 86    May 14, 2019 – JPMorgan Global Technology, Media and Communications Conference ......................................... 87    May 29, 2019 – Cowen Technology, Media & Telecom Conference ............................................................. 88    June 5, 2019 – REITWeek 2019 ........................................... 88    June 20, 2019 – Wells Fargo Securities 2019 5G Forum .................................................................................... 90    June 24, 2019 – Defendants Announce $300 Million Note Offering, Admitting that External Capital was Necessary for Uniti to Navigate Windstream’s Bankruptcy ............................................................................ 92    POST-CLASS PERIOD REVELATIONS ............................................................ 92    ADDITIONAL EVIDENCE OF SCIENTER ........................................................ 94    LOSS CAUSATION .............................................................................................. 99  A.  Partial Disclosure – August 2017 ................................................... 101  B.  Partial Disclosure – September 25, 2017: Aurelius Notice of Default ............................................................................................ 102  Page C.  Partial Disclosure – February 15, 2019: Judge Furman’s Findings of Fact .............................................................................. 104  D.  Partial Disclosure – June 24, 2019: $300 Million Note Offering .......................................................................................... 105    APPLICABILITY OF THE PRESUMPTION OF RELIANCE: AFFILIATED UTE AND FRAUD ON THE MARKET PRESUMPTION ......... 108    INAPPLICABILITY OF STATUTORY SAFE HARBOR ................................. 110    CLASS ACTION ALLEGATIONS ..................................................................... 111    CLAIMS FOR RELIEF ........................................................................................ 113    PRAYER FOR RELIEF ....................................................................................... 118    JURY DEMAND .................................................................................................. 119  Lead Plaintiffs Zhengxu He, Trustee for the He & Fang 2005 Revocable Living Trust (“He”), Steamfitters Local 449 Pension Plan (“Local 449”), Wayne County Employees’ Retirement System (“Wayne County ERS”), and David McMurray, on behalf of himself and as sole beneficiary of the David McMurray R/O IRA (“McMurray,” together, “Lead Plaintiffs”), individually and on behalf of all others similarly situated, by their undersigned counsel, hereby bring this Consolidated Amended Class Action Complaint (the “Complaint”) against Uniti Group Inc. f/k/a Communications Sales & Leasing, Inc. (“Uniti,” “CS&L” or the “Company”), Chief Executive Officer (“CEO”) Kenneth A. Gunderman (“Kenny Gunderman”), and Chief Financial Officer (“CFO”) Mark A. Wallace (“Wallace” collectively, “Defendants”).1 The allegations herein are based on Lead Plaintiffs’ personal knowledge as to their own acts and on information and belief as to all other matters, such information and belief having been informed by the investigation conducted by and under the supervision of Co-Lead Counsel, which includes a review of: U.S. Securities and Exchange Commission (“SEC”) filings by Uniti and Windstream Holdings, Inc. (“Windstream Holdings,” as further defined herein); securities analysts’ reports and advisories about the Company and Windstream Holdings; press releases and other public statements issued by the Company and Windstream Holdings; media reports about the Company; trial exhibits and testimony in relevant litigation; and consultation with an expert in the areas of loss causation and damages. Co-Lead Counsel’s investigation into the matters alleged herein is ongoing and many relevant facts are known only to, or are exclusively within the custody or control of, the Defendants. Lead Plaintiffs believe that substantial 1 Kenny Gunderman and Wallace are collectively referred to as the “Individual Defendants.” additional evidentiary support will exist for the allegations set forth herein after a reasonable opportunity for discovery. On behalf of themselves and the class they seek to represent, Lead Plaintiffs allege as follows: INTRODUCTION AND SUMMARY OF THE FRAUD This is a federal securities class action on behalf of all persons and entities who purchased or otherwise acquired the publicly traded securities of Uniti during the period from April 24, 2015 to June 24, 2019, inclusive (the “Class Period”), and were damaged thereby. The action is brought against Uniti and certain of its officers and directors for violations of the Securities Exchange Act of 1934 (the “Exchange Act”) and SEC Rule 10b-5 promulgated thereunder (17 C.F.R. §240.10b-5). Defendant Uniti was formed on April 24, 2015, following the spin-off from its then-parent company Windstream Holdings (the “Spin-Off”). The origins of the Spin-Off date back to at least 2013, when Windstream Services, LLC – a then-publicly traded subsidiary of Windstream Holdings – found itself in a financial predicament. Windstream is a telecommunications provider that owns and operates wireless telecommunications networks, but, by 2013, its wireless networks desperately needed substantial investment to remain competitive. Windstream, however, lacked the cash needed to make this investment itself, in part, because Windstream’s investors were reliant upon, and expected, a steady dividend stream. To assess its options and find a solution to the problem, Windstream turned to its financial advisors at Stephens, Inc. (“Stephens”) – and specifically to a banker at Stephens named Kenny Gunderman. Defendant Kenny Gunderman proposed a novel way to solve Windstream’s problems: create and spin-off a Real Estate Investment Trust (“REIT”) owning Windstream’s assets. Although telecommunications network assets are not traditional REIT- like assets, the Internal Revenue Service (“IRS”) had recently issued a ruling that was interpreted as opening the door for REIT status to be applied to such non-traditional assets. The transaction Defendant Kenny Gunderman and Windstream’s advisors came up with contemplated that Windstream Holdings would create a REIT (i.e., Uniti), sell its aging telecommunications assets to it, and then lease them back – which would allow Windstream (through its operating subsidiaries) to use and operate those assets as before. The difference was that by selling the assets to Uniti, Windstream would receive in return significant cash and debt relief through the sale of those assets. And even better, Windstream had complete control over the transaction and could structure the transaction, and set the terms, that Windstream alone deemed suitable. Structuring the transaction was complex, however, because Defendants had to overcome a number of complicated legal and regulatory hurdles. First, the indenture governing certain unsecured notes (the “Notes,” as further defined herein) that Windstream had previously issued (the “Indenture”) contained restrictive covenants that specifically prohibited Windstream Services, or its operating subsidiaries, from selling any of Windstream’s network assets to an entity and then leasing them back. If such covenants were breached, noteholders representing 25 percent or more of the aggregate principal amount of the Notes could seek to accelerate payments on the Notes, a figure in the hundreds of millions of dollars that could potentially, trigger a Windstream bankruptcy. Second, in addition to obtaining the necessary regulatory approvals from various state agencies and the IRS, Windstream had to be sure that the lease it ultimately would enter into with Uniti (the “Master Lease”) appeared to be a “true lease” and not a financing. If the “Lease” entered into was really a financing in disguise, Windstream risked violating covenants in its Indenture. And if Windstream filed for bankruptcy and attempted to recharacterize the lease as a financing, Uniti’s “rent” payments from Windstream could cease, spelling financial ruin for Uniti. Internal emails reveal that Windstream and its executives were mindful of these restrictions in the Indenture at the time they contemplated the Spin-Off – which is why they settled on a structure for the transaction that appeared to comply with the restrictive covenants in the Indenture. Specifically, as laid out in an April 2013 email, discussed in greater detail herein, Windstream’s executives decided to create a holding company – i.e., Windstream Holdings which would be the entity that would technically “lease” the spun-off telecommunications assets from Uniti). Since Windstream Services and its operating subsidiaries – not the newly created holding company – were the only Windstream entities prohibited from engaging in sale-leaseback transactions using this “Holdco” structure could allow Windstream and its operating subsidiaries to “lease” the assets without actually signing the Master Lease. In the months that followed, Windstream and its advisors – including the Defendants – worked to execute the transaction. Internal documents and Board meeting minutes reveal that John P. Fletcher (“Fletcher”) (who at the time served as General Counsel for both Windstream and Uniti) and Defendant Kenny Gunderman were actively involved in structuring the transaction. Indeed, the Master Lease was specifically structured with the restrictions of the Indenture in mind – and there is no dispute that the Master Lease was not negotiated at arms’ length, as Fletcher has since admitted. Defendant Kenny Gunderman and Fletcher were on both sides of the Master Lease negotiation, and other relevant parties were seriously conflicted at the time of the transaction, including Uniti’s then-CEO Anthony Thomas (“Tony Thomas” or “Thomas”) (who would later become Windstream’s CEO) and Windstream’s then-SVP Robert “Bob” Gunderman (who is Kenny Gunderman’s brother, and would later become Windstream’s CFO). These conflicts allowed Windstream to settle on terms in the Master Lease that would benefit it. By March 2015, Windstream and Defendants finalized the Spin-Off and, on April 24, 2015, the Spin-Off was completed and the Master Lease signed. As a result of this transaction, Windstream became Uniti’s largest customer, accounting for at least two-thirds of Uniti’s annual revenues every year since the Spin-Off. To put it plainly, Uniti was financially dependent on Windstream for the majority of its revenue. At the time of the Spin-Off and in the months that followed, Windstream’s and Uniti’s management, including Defendants Kenny Gunderman and Wallace, settled on a public relations strategy aimed at concealing the known risk that the Spin-Off violated the Indenture. Internal documents from August 2014 and April 2015 reveal that Fletcher and Defendants Kenny Gunderman and Wallace were advised to hide the truth if ever asked why Windstream Holdings – rather than Windstream Services – signed the Master Lease. The goal, of course, was to conceal that the Spin-Off was an attempt to conceal a prohibited transaction – and the Master Lease was specifically designed to aid that deception. And deflect they did. Indeed, throughout the Class Period, Defendants repeatedly concealed that the Spin-Off violated the Indenture by hiding from the market and investors: (i) the material risk that the Spin-Off was a prohibited sale-leaseback transaction that violated the Indenture, and (ii) the true extent of the risk that the Master Lease was not a true lease, but rather a carefully disguised financing arrangement that: (a) violated various provisions of the Indenture (including debt and asset sale restrictions); (b) jeopardized Uniti’s existence as a REIT; and (c) put Uniti and its investors at materially greater financial risk in the event Windstream filed for bankruptcy. These risks were well known to Defendants, but never disclosed by them to the market. Defendants’ failure to disclose the true nature of the Master Lease and Spin-Off concealed risks related to the Master Lease, and Uniti’s main source of revenue, depriving investors of the ability to properly analyze the Company’s current state of affairs and prospects, and rendering Defendants’ Class Period statements false and misleading. It was foreseeable that the value of Uniti’s securities would be adversely affected when the truth about the propriety of the Spin-Off and Master Lease was revealed, and the concealed risks materialized. The truth and concealed risks materialized through a series of disclosures beginning in August 2017 when Windstream eliminated its dividend and rumors began swirling that the Spin-Off violated Windstream’s Indenture. On September 25, 2017, after the close of the market, Windstream filed a Report on Form 8-K disclosing that, on September 22, 2017, it had received a “purported notice of default” from a noteholder that claimed to hold greater than 25% in aggregate principal amount of Windstream’s 6 3/8% Senior Notes due 2023 (later disclosed as Aurelius Capital Master, Ltd. (“Aurelius”)) alleging that the transfer of certain assets and the subsequent lease of those assets in connection with the Spin-Off constituted a sale and leaseback transaction which did not comply with the sale and leaseback covenant under the Indenture. Windstream’s dividend elimination, the rumors the Spin-Off violated the Indenture, and the resulting Notice of Default from Aurelius, clobbered the price of Uniti’s securities. Uniti’s stock price declined 40% between August 3, 2017 and September 27, 2019 as a result of this information. Over the next few months, litigation followed (U.S. Bank N.A. v. Windstream Servs., LLC, No. 17-cv-07857-JMF (S.D.N.Y.) (the “Aurelius Litigation”)) – and all the while Defendants continued to conceal that the Master Lease violated Windstream’s Indenture as well as the extent of the effects of the concealed risk that the Spin-Off was a breach of the Indenture, which would immediately accelerate payment on the Notes, requiring Windstream to pay hundreds of millions of dollars. Uniti failed to address the disclosure of the receipt, by its largest customer Windstream, of a notice of default for nearly six weeks. But when Uniti finally spoke, rather than disclosing the truth, Defendants Kenny Gunderman and Wallace continued to perpetuate the fraud by denying the Master Lease violated the Indenture and downplaying the magnitude of the risk of Windstream defaulting on the Master Lease. At a November 7, 2017 investor conference, Gunderman assured the market that the risk of a Windstream default would never materialize: “We’ve looked very, very closely at the legal claim, and we’re very confident that the legal arguments are on Windstream’s side. So [we] think that that’s going to resolve itself . . . .” At a November 29, 2017 presentation, Wallace emphasized that Uniti had reviewed the lease and concluded that Windstream would receive a favorable outcome in the Aurelius Litigation: So we have a very high degree of confidence that Windstream is going to prevail in the litigation. We have a very high degree of confidence that they’re going to have [a] favorable outcome to this. And in many case, I would say that we think that there’s a good likelihood that it might be resolved in a relatively short period of time favorably for Windstream. . . . We’ve gone back and done a deep dive into it. We have every confidence in the strength of our lease agreement that we have been articulating from the very first days that we were spun off. So we have tremendous confidence in the lease. We have confidence in the lease protections, the way the lease was structured as a master lease. And so I think to your point, even in a downside scenario, no matter how low the probability, I think it is low, I think that we are – I think we’re as protected as any landlord can be. And so I think the Windstream lease[] was well-crafted, and we have [a] very high degree of confidence that Windstream will continue to make payments and will continue to receive an uninterrupted lease stream. On December 4, 2017, Defendant Wallace again stressed that Uniti was “highly confident that Windstream [would] have a favorable outcome in all the litigation.” Buoyed by Defendants’ positive statements and omissions concerning the Aurelius Litigation, Uniti’s stock price reversed its decline. From November 7, 2017 through February 15, 2019, Uniti’s stock price increased by more than 14%, from $16.53 to $19.98. But the truth about the Master Lease and the concealed risk it violated the Indenture further materialized on February 15, 2019, when, following a multi-day bench trial and the submission of substantial evidence, Judge Jesse Furman of the Southern District of New York ruled that the Spin-Off and signing of the Master Lease breached the Indenture. The court concluded that “[Windstream’s] financial maneuvers – and many of its arguments [in the Court proceeding] – are too cute by half.” The court ruled, among other things, that the fact that the Windstream operating subsidiaries used and paid for all their former assets “walks like a lease and talks like a lease . . . because it is a lease.” The court also held that Windstream was “judicially estopped from denying that the [Windstream Operating Subsidiaries] ‘lease’ the [assets transferred to Uniti].” With this strong rebuke, the court declared over $300 million of Windstream 6 3/8% notes due and payable. This news, which disclosed the true nature of the Master Lease and also was, in part, a materialization of the risk concealed by Defendants’ material misrepresentations and omissions alleged herein, caused Uniti’s stock price to plummet more than 37%, from $19.98 per share on February 15, 2019 to $12.51 per share on February 19, 2019. The entirety of the decline can be attributed to the ruling in the Aurelius Litigation, as there was no other material, Company-specific news disclosed to the market that day. Over the next three days, Uniti’s stock price declined even further, to a closing value of $9.23 on February 22, 2019. Judge Furman’s decision – and the $300 million judgment – had a significant negative impact on Windstream’s ability to operate as a going concern. On February 25, 2019, Windstream Holdings (and all its subsidiaries) filed for Chapter 11 bankruptcy protection. As a result of Windstream’s bankruptcy, Uniti’s stock price declined more than 9% over the three trading days following its filing. The Aurelius Litigation pushed Windstream into bankruptcy by revealing the true nature of the Spin-Off and Master Lease as a prohibited sale-leaseback transaction. Additionally, the bankruptcy placed a spotlight on the fraud related to the economic viability of the assets originally transferred from Windstream to Uniti, revealing that the Master Lease was actually a prohibited financing and not a “true lease.” Defendants knew, or recklessly disregarded, that the Master Lease was a prohibited financing. The risk that Windstream would seek to recharacterize the Master Lease in bankruptcy was apparent from the beginning to Defendants, but they failed to disclose the known risk was disclosed to investors such as Lead Plaintiffs and the Class Members. While Windstream has continued to make rent payments under the Master Lease since its bankruptcy filing, it has attempted to recharacterize the Master Lease as a financing in an Adversary Proceeding (as defined below) against Uniti in the Bankruptcy Court. Windstream’s filings in that Adversary Proceeding bring to light even more egregious behavior by both Windstream and Uniti, and their key executives (including the Defendants), during the lead-up to the Spin-Off. Windstream’s filings demonstrate that Windstream, Uniti and their key executives, knew the entire transaction was predicated upon false information – grossly inflated projections of the useful life of the copper wire assets that formed almost 80% of the assets transferred in the Spin-Off. Between February 19 and June 20, 2019, Defendants continued to disseminate materially false and misleading statements and omissions to the market, including but not limited to statements that Uniti would be able “to navigate the Windstream bankruptcy proceedings without having to raise external capital,” that the Master Lease was designed to withstand a bankruptcy filing by Windstream, and that Uniti was seeing no impact to its business due to Windstream’s bankruptcy. These misstatements and omissions artificially inflated and/or artificially maintained the price of Uniti’s securities. On June 24, 2019, after the close of the market, Uniti announced a $300 million notes offering that included an option to purchase an additional $45 million of notes, thus implicitly acknowledging, contrary to statements made by Defendants Uniti, Kenny Gunderman and Wallace earlier in the year, that Windstream’s bankruptcy was negatively impacting Uniti and that it could not maintain its business operations without accessing the capital markets. This news, which disclosed the true about the state of Uniti’s business, was also a materialization of the risk concealed by these material misrepresentations and omissions alleged herein, caused Uniti’s stock price to decline more than 10%, closing at $9.38 per share on June 25, 2019 on heavy trading volume. Defendants had a motive to hide the true nature of the Master Lease and the risks associated with the Spin-Off and the Master Lease from Uniti investors. Uniti’s financial viability – as well as the employment and lucrative compensation packages of Defendant Kenny Gunderman at Uniti and Robert (“Bob”) Gunderman, his brother, at Windstream – in turn, depended on Windstream’s continued success. If it were publicly disclosed that Windstream violated – or had engaged in a transaction that risked violating – the Indenture, and risked causing a default, the value of Uniti securities would crater (as it did when the truth was finally revealed). As a result of Defendants’ materially false and misleading statements and omissions, the precipitous decline in the price of Uniti’s securities – and Lead Plaintiffs’ and other Class members’ significant losses – were foreseeable to Defendants. JURISDICTION AND VENUE The claims asserted herein arise under and pursuant to §§10(b) and 20(a) of the Exchange Act [15 U.S.C. §§78j(b) and 78t(a)], and Rule 10b-5 promulgated thereunder [17 C.F.R. §240.10b-5]. This Court has jurisdiction over this action pursuant to §27 of the Exchange Act [15 U.S.C. §78aa] and 28 U.S.C. §1331. Venue is properly laid in this District pursuant to §27 of the Exchange Act, and 28 U.S.C. §1391(b). The Company is headquartered in this District and many of the acts charged herein, including the preparation and dissemination of materially false and misleading information, occurred in substantial part in this District. In connection with the acts and conduct alleged in this Complaint, Defendants directly or indirectly, used the means and instrumentalities of interstate commerce, including the mails and telephonic communications and the facilities of the national securities markets. PARTIES Lead Plaintiff He is an individual who resides in Reno, Nevada and purchased Uniti common stock during the Class Period as set forth in the Certification previously filed (ECF No. 34-2) and incorporated herein, and was damaged thereby. Lead Plaintiff Local 449 is a union pension fund that is based in Pittsburgh, Pennsylvania. It represents approximately 29,700 union-trained steamfitters and their beneficiaries and is a sophisticated institutional investor that had $558 million in total pension assets under management as of March 2020. Local 449 purchased Uniti common stock during the Class Period as set forth in the Certification previously filed (ECF No. 30-1) and incorporated herein, and was damaged thereby. Lead Plaintiff Wayne County ERS is a pension fund that is based in Wayne County, Michigan which provides retirement services for active, deferred, and retired Wayne County employees, Wayne County Airport Authority employees and Wayne County 3rd Circuit Court employees. Wayne County ERS represents approximately 8,300 participants (including 5,000 retirees and 3,300 active employees) and is a sophisticated institutional investor that had $1.6 billion in total pension assets under management as of March 2020. Wayne County ERS purchased Uniti common stock during the Class Period as set forth in the Certification previously filed (ECF No. 30-1) and incorporated herein, and was damaged thereby. Lead Plaintiff McMurray purchased Uniti common stock during the Class Period as set forth in the Certification previously filed (ECF No. 30-1) and incorporated herein, and was damaged thereby. Defendant Uniti (formerly known as CS&L) at all relevant times was a REIT engaged in the acquisition and construction of communications infrastructure, and is a provider of wireless infrastructure solutions for the communications industry. Uniti is a Maryland corporation with its principal executive offices located at 10802 Executive Center Drive, Benton Building Suite 300, Little Rock, Arkansas 72211. At the time it went public, CS&L’s common stock traded under the ticker “CSAL” on the NASDAQ, an efficient market.2 On February 27, 2017, CS&L changed its name to Uniti and began trading its 2 The terms “Uniti” and “CS&L” are used interchangeably herein. common stock under the ticker “UNIT” on the NASDAQ, an efficient market. From the date of its incorporation in February 20143 until after the Spin-Off, Uniti management was dominated by Windstream executives and former Windstream advisors. Defendant Kenny Gunderman has been the Company’s CEO and President since March 2, 2015, and a member of Uniti’s Board of Directors. Kenny Gunderman is a Certified Public Accountant and experienced investment banker advising clients on real estate matters. In fact, Kenny Gunderman was lead adviser/relationship person at Stephens, a privately held investment banking and financial services firm located in Little Rock, Arkansas, and advised Windstream on the Spin-Off transaction. Kenny Gunderman left Stephens right before the Spin-Off was completed to become Uniti’s first post-Spin-Off President and CEO. He still serves in both positions today, and he is well compensated for his work. According to Uniti’s annual proxy filings, Kenny Gunderman has received over $5 million in compensation every year since the Spin-Off. Defendant Wallace has served as the Company’s CFO, Treasurer, and Executive Vice President since April 1, 2015. Wallace is a Certified Public Accountant licensed in Texas. The Individual Defendants and the Company are collectively referred to herein as “Defendants.” The Individual Defendants made, or caused to be made, materially false and misleading statements or omissions that caused the price of Uniti securities to be artificially inflated or artificially maintained during the Class Period. 3 Uniti was initially incorporated in the state of Delaware but reorganized in the state of Maryland in September 2014. The Individual Defendants, because of their positions, possessed the power and authority to control the contents of the Company’s quarterly reports, shareholder letters, press releases, securities offering materials and presentations to securities analysts, money and portfolio managers and institutional investors, i.e., the market. They were provided with copies of and/or contributed to the Company’s reports and press releases alleged herein to be misleading prior to or shortly after their issuance and had the ability and opportunity to prevent their issuance or cause them to be corrected. Because of their positions, and their access to material non-public information available to them but not to the public, the Individual Defendants knew or recklessly disregarded that the adverse facts specified herein had not been disclosed to and were being concealed from the public and that the positive representations and omissions being made were then materially false and misleading. The Individual Defendants are liable for the false and misleading statements and material omissions pleaded herein. ADDITIONAL PARTICIPANTS Windstream Holdings, Inc. (“Windstream Holdings”) is a publicly traded holding company incorporated in the state of Delaware and the parent of Windstream Services, LLC (“Windstream Services,” together with Windstream Holdings, “Windstream”). Following its delisting on March 6, 2019, Windstream Holdings’ common stock no longer trades on the NASDAQ, but still trades on the Over-the-Counter (“OTC”) Pink Sheets market under the ticker symbol “WINMQ.” Prior to the Spin-Off, Windstream Holdings was the parent of Uniti with 100% control and ownership. Windstream Holdings is not named as a defendant herein because on February 25, 2019, it filed for bankruptcy protection pursuant to Chapter 11 of the U.S. Bankruptcy Code, which triggered an automatic stay preventing lawsuits against it. Windstream Services is a Delaware limited liability company with its principal place of business in Little Rock, Arkansas. Windstream Services is a wholly owned subsidiary of Windstream Holdings. Windstream Services is itself a holding company, and its subsidiaries include the operating entities of Windstream (the “Windstream Operating Subsidiaries”). Through its Windstream Operating Subsidiaries – which hold the required authorization and licensure from the Federal Communications Commission (“FCC”) and state regulators – Windstream Services provides telephone exchange services and other telecommunications services in localities throughout the United States. Prior to February 28, 2015, Windstream Services was organized as a Delaware corporation named Windstream Corporation. Effective February 28, 2015, the company converted into a Delaware limited liability company with the name Windstream Services, LLC.4 Windstream Services is not named as a defendant herein because on February 25, 2019, it filed for bankruptcy protection pursuant to Chapter 11 of the U.S. Bankruptcy Code, which triggered an automatic stay preventing lawsuits against it. Tony Thomas was Windstream’s CFO from August 2009 until September 2014. As alleged herein, Thomas was intimately involved in all parts of planning, preparation, and implementation of the Spin-Off. In addition to being Windstream’s CFO, he also served as Head of REIT Operations at Windstream from September 2014 to 4 Both Windstream Services LLC and Windstream Corporation are defined herein as “Windstream Services.” December 2014, and during this time, was also Uniti’s President and CEO. Although he was a long-time Windstream executive, he led the “Uniti Group” that negotiated against Fletcher’s “Windstream Group” over the terms of the Spin-Off, including much of the Master Lease. In December 2014, and prior to the Master Lease becoming effective in April 2015, Thomas was hired as Windstream’s CEO, and has served in the role since. Robert Gunderman has been Windstream’s CFO since December 2014. Before that, Robert Gunderman served as Windstream’s Senior Vice President, Financial Planning and Treasurer from May 2012 to December 2014, while also serving as Windstream’s interim CFO from October 2014 to December 2014. As alleged herein, Robert Gunderman also was intimately involved in all parts of planning, preparation, and implementation of the 2015 Uniti Spin-Off. Robert Gunderman is the brother of Defendant Kenny Gunderman. John Fletcher was General Counsel to both Windstream Services and Windstream Holdings, until departing in March 2018. Windstream tapped Fletcher to direct and implement Windstream’s legal and regulatory strategy for the proposed REIT (Uniti) and Fletcher served as Uniti’s Executive Vice President, Secretary, and General Counsel until at least February 10, 2015.5 At all relevant times leading up to the Spin-Off, which eventually resulted in Uniti holding assets formerly owned by Windstream, Fletcher served as General Counsel of Windstream. Together with Defendants, Windstream, Thomas, Fletcher and Robert Gunderman engaged in a scheme to defraud Lead Plaintiffs and the class through the 5 Fletcher signed SEC filings on behalf of CS&L until February 10, 2015 as the Company’s Executive Vice President, Secretary and General Counsel. creation and structuring of the Uniti Spin-Off from Windstream, which they knew, or recklessly disregarded, at the time of the transaction to be in violation of Windstream’s Indenture. BACKGROUND TO THE SPIN-OFF AND DEFENDANTS’ KNOWLEDGE IT VIOLATED WINDSTREAM’S DEBT COVENANTS A. Company Background Based in Little Rock, Arkansas, Uniti operates as a REIT that owns and leases the use of its wireless networks to telecommunications companies. Uniti principally focuses on acquiring and constructing fiber optic broadband networks, wireless communication towers, copper and coaxial broadband networks, and data centers. Operations are managed in four separate lines of business: Uniti Fiber, Uniti Towers, Uniti Leasing, and Talk America. Uniti was formed on April 24, 2015, following the separation and completion of its Spin-Off from its then-parent company Windstream Holdings, a publicly traded company that provides (through its subsidiary, Windstream Services) advanced network communications, including cloud computing and managed services, to residential and business customers throughout the United States. As detailed more thoroughly below, in connection with the Spin-Off transaction, Windstream sold certain of its telecommunications network to Uniti, and Uniti then leased those assets back to Windstream Holdings via a long-term lease agreement (i.e., the Master Lease). Windstream is Uniti’s largest customer by far. Indeed, a substantial portion of Uniti’s revenues are derived from the Master Lease with Windstream Holdings – specifically accounting for 87.9%, 74.8%, and 68.2% of Uniti’s annual revenue in 2016, 2017, and 2018, respectively. Uniti’s financial success is therefore highly dependent on Windstream’s viability. B. The Decision to Spin-Off Uniti and Execute a Sale-Leaseback Transaction The origins of the Spin-Off date back to at least 2013. At the time, Windstream’s aging telecommunications network needed substantial investment to remain competitive and as a yield stock, Windstream’s investors expected consistent dividend payments. As a result, Windstream’s cash position and its options to finance the critical upgrade to its telecommunications network, were limited. In or around 2013, Windstream searched for a way to both maintain its dividend and make much-needed investments to its telecommunications network.6 It was critical that Windstream upgrade its broadband network to remain competitive in its industry where its peers were able to offer faster network speeds as a result of investments they made in new technologies. But the failure to pay a dividend would cripple Windstream’s ability to attract investment and raise capital.7 Simply put, Windstream did not have the cash to both pay its dividend and upgrade its network infrastructure. 6 Complaint, Windstream Holdings, Inc., et al. v. Uniti Grp., Inc., et al., No. 19-08279 (Bankr. S.D.N.Y. Jan. 22, 2020), ECF No. 71 (“Adversary Proceeding Complaint”), ¶43. Windstream, including Bob Gunderman, assessed its options with its financial advisors at Stephens – the lead adviser at Stephens being Bob’s own brother Defendant Kenny Gunderman. After considering a wide range of solutions, Windstream and its advisors finally settled on a novel way to solve the company’s challenges: structuring a REIT based on telecommunications networks.8 The idea, which was, in part, the brainchild of Kenny Gunderman, was to create and spin-off a REIT that owned Windstream’s primary assets – copper wire and fiber optic cable networks.9 Although telecommunications network assets were not traditional REIT-like assets, the IRS had recently issued a ruling that was interpreted as opening the door for REIT status to be applied to such non-traditional assets.10 The structure of the transaction contemplated that: (1) Windstream Services would create Windstream Holdings (a holding company that would be created specifically for purposes of the transaction); (2) Windstream Services would then direct the Windstream Operating Subsidiaries to execute an intra-company transfer of certain critical assets, including 300,000 miles of copper wires and fiber optic cables, as well as related real estate, to a newly formed REIT (i.e., Uniti) that would be a wholly owned subsidiary of Windstream Holdings; (3) the REIT would then lease those assets back to Windstream Holdings; and (4) the REIT would then be spun off as an independent public company. Importantly, the Windstream Operating Subsidiaries, which owned and operated the applicable Windstream network assets, would continue to use and occupy the 8 Id., ¶44. assets as before and fulfill all obligations toward the assets, including maintenance, tax payments and capital improvements. The Windstream Operating Subsidiaries would also fund the rent owed on the Master Lease by making dividend payments to Windstream Holdings. Windstream Holdings would then use those dividend payments to pay the rent owed to Uniti. The sale and leaseback of its network assets would offer Windstream greater financial flexibility, including the ability to make critical investments to its broadband network to help it meet increasing demand for high-speed internet and remain competitive in the industry. It also would create two viable companies designed to appeal to different investors – the REIT (i.e., Uniti) more attractive to value investors wanting a steady dividend and the new Windstream (i.e., Windstream Holdings) more attractive to growth investors. In addition, the Spin-Off provided Windstream with significant cash and debt relief through the sale of assets (which were overvalued because the Master Lease contained inflated information about the useful life of copper wire (see §V.G) at a time when the Company was heavily indebted (i.e., Indenture) (see §§V.B-C). While an accelerated payment of the Notes was sufficient to drive Windstream into bankruptcy, the Spin-Off offered Windstream an avenue to try to put its assets out of reach from creditors while still retaining effective control over them by using and profiting from the assets, and benefiting from the conflicted relationships between Windstream and Uniti. See §§V.D-E. Before the Spin-Off could be executed and Windstream could reap the above- mentioned benefits, however, a number of structural issues had to be addressed, and Windstream’s General Counsel – Fletcher – worked with Windstream’s advisors, including Defendant Kenny Gunderman (then still at Stephens) – to address the legal and regulatory hurdles. First, Windstream and Defendants Uniti and Kenny Gunderman would need to obtain required regulatory approvals, including from the IRS, which needed to approve REIT treatment for Uniti. The transaction also had to be reviewed by various state regulatory authorities, which regulate telecommunications companies like Windstream, and had to sign off on the transfer of assets, to ensure it would not interfere with citizens’ access to critical telecommunications services. Second, it was crucial that Windstream and Defendants Uniti and Kenny Gunderman obtain opinions that the Master Lease was a “true lease.” If the Master Lease did not meet the legal standards of a true lease, the transaction could be recharacterized as a financing putting Windstream in violation of the Indenture. Also, should the Master Lease not meet the legal standards of a “true lease,” it would put Uniti and its shareholders at greater risk should Windstream file bankruptcy. Uniti’s claim to rent from Windstream under the terms of the Master Lease would be unsecured, and structurally subordinated, to other creditors’ claims if the Master Lease were recharacterized as a financing. Third, and most importantly, Windstream and Defendants Uniti and Kenny Gunderman had to ensure that it appeared that the structure of the transaction did not breach the terms (including the restrictive covenants) of the agreements governing Windstream’s long-term debt. If any such covenants were breached, Noteholders representing 25% or more of the aggregate principal amount of the notes could seek to accelerate payments on the Notes, potentially triggering a Windstream bankruptcy that would spell financial disaster for Addressing these issues, and others, was critical to Windstream and Defendants Uniti and Kenny Gunderman’s ability to execute the Spin-Off. C. Windstream Services’ Indenture Prohibits Sale-Leaseback Transactions Windstream and Defendants Uniti and Kenny Gunderman understood that it was critical to structure the Spin-Off transaction in a way that would make it appear as though the terms of the Indenture that governed certain unsecured Notes that Windstream Services issued on January 23, 2013 were not breached.11 The Indenture contains a number of typical restrictive covenants. One such restrictive covenant prohibits Windstream Services and certain of its subsidiaries – including the Windstream Operating Subsidiaries – from entering into sale-leaseback transactions, absent certain conditions (none of which are applicable here). Specifically, §4.19 of the Indenture states as follows: Sale and Leaseback Transactions. [Windstream Services] shall not, and shall not permit any of its Restricted Subsidiaries12 to, enter into any Sale and Leaseback Transaction . . . . The Indenture defines “Sale and Leaseback Transaction” as: 11 The Notes are guaranteed by certain of Windstream Services’ subsidiaries in an aggregate principal amount of $700 million and are due in 2023, bearing interest at an annual rate of 6 3/8%. 12 “Restricted Subsidiar[ies]” is defined in the Indenture to include the Windstream Operating Subsidiaries. [W]ith respect to any Person,13 any transaction involving any of the assets or properties of such Person whether now owned or hereafter acquired, whereby such Person sells or otherwise transfers such assets or properties and then or thereafter leases such assets or properties or any part thereof or any other assets or properties which such Person intends to use for substantially the same purpose or purposes as the assets or properties sold or transferred. Thus, the Indenture specifically prohibits the Windstream Operating Subsidiaries – i.e., the Windstream Services subsidiaries that owned (at the time of the Indenture) and operated a substantial portion of Windstream’s telecommunications network – from selling any of Windstream’s network assets to an entity and then leasing them back. In addition, the Indenture prohibits Windstream Services and the Windstream Operating Subsidiaries from incurring any additional debt unless, after giving effect to the additional debt, Windstream kept its “Consolidated Leverage Ratio” below a certain ratio. Section 4.09 of the Indenture states: The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness; provided, however, that the Company or any of its Restricted Subsidiaries that are Guarantors may Incur Indebtedness, if the Company’s Consolidated Leverage Ratio at the time of the Incurrence of such additional Indebtedness, and after giving effect thereto, is less than 4.50 to 1. Thus, the Indenture prohibits certain financing transactions in which the network assets could be used to support additional loans to Windstream. Windstream and its executives were mindful of the Indenture’s restrictions early on, while they were still contemplating the structure of the Spin-Off. In an April 15, 13 “Person” was defined broadly to include “any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.” 2013 email to Robert Gunderman (Windstream’s then-Treasurer and Defendant Kenny Gunderman’s brother), Windstream’s then-CFO, Tony Thomas wrote: Here are some questions I have related to the Captive. We need a capital structure that works with the Indenture; we may be able to use the HoldCo strategy here. Create HoldCo and put Windstream Financial underneath HoldCo. . . . Remember, the sales – leaseback provision in the Indenture can be a limiting factor here. The “HoldCo strategy” was precisely what Windstream and Defendants Uniti and Kenny Gunderman employed to evade the restrictive covenants in the Indenture: Windstream would: (1) form Windstream Holding (i.e., “HoldCo”), which would own Windstream Services and its subsidiaries (i.e., the Windstream Operating Subsidiaries); (2) cause the Windstream Operating Subsidiaries to sell certain network assets to an internally- controlled REIT entity (i.e., Uniti – “the Captive”); and (3) have Windstream Holdings, which is not a party to the Indenture, lease the assets back from Uniti at the time the REIT was spun off as an independent public company. This meant, in effect, that the Windstream Operating Subsidiaries would not sign the Master Lease with Uniti (which would clearly violate the terms of the Indenture), but would retain use of the assets as before and continue providing telecommunications services to Windstream’s customers. On August 30, 2013, Windstream Services’ Board approved the formation of Windstream Holdings. Windstream Holdings was formed, not to provide telecommunications services in its own right, but to serve merely as a holding company for its indirect subsidiaries, including the Windstream Operating Subsidiaries, which are the entities licensed and approved by the applicable federal or state regulators to provide telecommunications services. Uniti was incorporated as a wholly-owned subsidiary of Windstream Holdings in the state of Delaware in February 2014 and reorganized in the state of Maryland in September 2014. From the date of its incorporation until after the Spin-Off, Uniti management was dominated by Windstream executives and former Windstream advisors. On February 12, 2014, around the time Uniti was incorporated, Windstream’s Board of Directors held a meeting at the Dallas Fort Worth Grand Hyatt in the Europe Conference Room. The meeting began at 7:45 a.m. and adjourned at 10:30 a.m. In addition to Windstream’s Board members, Tony Thomas, Fletcher and Defendant Kenny Gunderman were also in attendance. One of the topics of discussion at this meeting was the potential Spin-Off of the newly formed Uniti. According to the minutes from the meeting, prepared by Fletcher as Corporate Secretary, the group discussed in detail many aspects of the Spin- Off transaction, including “key financial attributes” of the Spin-Off and “significant execution risks” to proceeding with the Spin-Off. In conjunction with the February 12, 2014 Board meeting, a detailed and extensive power-point was provided to the attendees for the “Strategic Planning Session.” This 75-page power-point was prepared, in part, by Defendant Kenny Gunderman and his team at Stephens. Included in the power-point was a description of the history of Windstream’s consideration of forming a REIT subsidiary and the steps that had been taken, and the timing of those steps, for obtaining the required IRS approval. “Key Considerations” for the transaction were also outlined, including that it would be “difficult to pursue M&A aggressively” and that Windstream had “no clear path to deleverage meaningfully” should it decide not to proceed with the Spin-Off. Also included in this power point was a detailed graphic showing the corporate structure of Windstream and Uniti as a result of the Spin-Off. Several valuation scenarios for Windstream and Uniti were also highlighted. On May 6-7, 2014, Windstream’s Board met again to discuss “Project RITE,” i.e., the Spin-Off. The meeting was held in the Quapaw Parlor at the Capital Hotel in Little Rock, Arkansas. Windstream’s Board was present for the meeting, as well as Tony Thomas, Fletcher and Defendant Kenny Gunderman, among others. According to the minutes of this meeting, again prepared by Fletcher as Corporate Secretary, the attendees, including specifically Fletcher and Defendant Kenny Gunderman, discussed in great detail the “steps required to effect the transaction,” “the structure of the lease between the resulting companies,” the Spin-Off’s impact on Windstream’s “plans to retire and replace copper plant,” and the underlying valuations scenarios. The minutes also indicate that Thomas presented to the group an overview of “the methodology utilized by Ernst & Young to prepare a preliminary estimate of ranges for the fair market value of assets to be transferred to [Uniti] and the initial lease rate under the Master Lease.” The attendees of the May 6-7, 2014 Board meeting were provided with a 300- page packet of information about the Spin-Off, including specific outlines of various valuation scenarios as well as potential financial and economic impacts to Windstream and Uniti as a result of the transaction. These materials also provided a schematic of the “[s]tructure & [r]elationship between [Windstream] & [Uniti],” and a detailed “[o]verview of [the] Master Lease,” including a discussion of the parties to the Master Lease, the term, the rent to be paid, and the assets to be transferred to Uniti. The May 6-7, 2014 Board meeting materials also provided specific breakdowns of the financial benefits the Spin-Off would have for Windstream, including eliminating the “limit[ations]” to Windstream’s ability to “invest for growth, pursue strategic acquisitions and/or delever.” Indeed, the materials outlined in detail how completing the Spin-Off would permit Windstream to make essential and critical upgrades to its networks and systems that would not have been made absent the Spin-Off, specifically its ability to replace its aging “copper DSLAMs to fiber-fed in competitive areas and create entire fiber- fed communities.” The meeting attendees were also provided a detailed overview of Ernst & Young’s (“E&Y”) valuation analysis for the network assets to be transferred to Uniti, the estimation for the fair value of the rent to be assessed, and the residual life of the transferred assets at the end of the lease term. The May 6-7, 2014 Board meeting materials also outlined the “communications strategy” to be employed with “regulators,” “stakeholder[s],” and “investors.” This strategy included “a 2-3 day IR roadshow to visit top shareholders” as well as “attending 2 previously scheduled investor conferences in May.” A draft of the investor presentation entitled “WIN to Pursue Separation of its Real-Estate Assets/From its Operating Assets” dated May 19, 2014 was provided in the May 6-7, 2014 Board meeting materials. A few weeks later, on May 22, 2014, the Board convened a meeting via teleconference to discuss the Spin-Off. In particular, the meeting was meant to answer questions that the Windstream Board had following the May 6-7, 2014 meeting. The attendees of this meeting included the Windstream Board members, in addition to Tony Thomas, Fletcher and Defendant Kenny Gunderman. As with the other Board meetings concerning the Spin-Off, extensive and detailed information was gathered and provided to the meeting attendees. According to the meeting minutes and the 52-page packet of materials provided to the attendees, the meeting participants discussed in detail the economics of the Spin-Off, the benefits the transaction would provide to Windstream’s ability to make capital improvements, as well as follow-up discussions concerning the valuation analysis being performed by E&Y. As a result of these meetings, Windstream and Defendants Uniti and Kenny Gunderman determined that Windstream Holdings would be the only Windstream entity to sign the Master Lease. Fletcher has since admitted that one reason that Windstream Holdings was the only Windstream entity to sign the Master Lease was to avoid “a clear violation” of the Indenture.14 Robert Gunderman has testified similarly.15 Although the structure of the transaction was settled, in order for the Spin-Off to proceed, Windstream and Uniti’s representatives and executives – including Fletcher and Defendant Kenny Gunderman – needed to convince state regulators (for the reasons detailed below) that the Windstream Operating Subsidiaries would continue using and operating Windstream’s assets as they always had. On the other hand, Defendants simultaneously needed to conceal from the market the true nature of the transaction and extent of the risk that the Spin-Off violated the terms of the Indenture, as the transaction was critical to Windstream’s ability to upgrade its aging telecommunications network – something Windstream could not do without successfully executing the Spin-Off. 14 Aurelius Litigation, ECF No. 230 (“Aurelius Litigation Trial Transcript”) at 123, 131-132, 269. 15 Aurelius Litigation Trial Transcript at 269:2-9. D. Windstream, with Defendants’ Help, Gains Regulatory Approval of the Spin-Off and Conceals that the Spin-Off Violated the Indenture’s Prohibition on Sale-Leaseback Transactions On July 29, 2014, Windstream publicly announced that it would spin-off its network assets into a publicly traded REIT (i.e., Uniti).16 Around this same time, Windstream and Defendants Uniti and Kenny Gunderman worked to obtain the necessary approvals for the transaction from state regulators. Because Windstream is a telecommunications provider, it is governed by state regulations that require approval for certain types of asset transfers. Regulators needed to ensure that any such transactions did not interfere with citizens’ access to critical telecommunication services. It was imperative to the regulatory approval of the Spin-Off that Windstream and Uniti assure regulators that, despite the structure of the Spin-Off, the Windstream Operating Subsidiaries would still continue to operate the assets and discharge their regulatory requirements. Indeed, in connection with the Aurelius Litigation, Fletcher testified that: Q. Would you agree that, in general, the regulators were focused on whether the transferor subsidiaries would be able to continue to operate and discharge their regulatory requirements? A. Yes.17 16 Less than two weeks earlier, on July 17, 2014, the IRS approved Windstream’s telecommunications assets to be used to structure a REIT. 17 Aurelius Litigation Trial Transcript, 29:20-24. To convince state regulators that the Spin-Off would not disrupt access to its network, Windstream’s advisors – including Fletcher, who, at the time, served as General Counsel for both Windstream and Uniti – with the knowledge, support, and approval of Windstream’s officers and directors – drafted, reviewed, and signed various applications, affidavits, and other regulatory documents designed to convince state utility regulatory bodies that they should approve Windstream’s sale of the assets to Uniti. These regulatory filings represented that although Uniti would actually own the network assets after the Spin- Off, there would be no functional change to the status quo, because those assets would continue to be operated by the Windstream Operating Subsidiaries. On August 6, 2014, in the midst of the effort to obtain regulatory approvals which began in July 2014, Mary Michaels, Windstream’s Vice President of Capital Markets and Investor Relations, sent an email to Thomas, Robert Gunderman, Fletcher and Windstream’s Board of Directors. This email summarized the market’s reaction to the announced Spin-Off. It also revealed Windstream’s messaging strategy aimed at avoiding discussing the details surrounding the structure’s impact on the Notes, and that the Master Lease was specifically drafted with the Indenture’s restrictions in mind. Ms. Michaels’s email also attached a 26-page document entitled “Project RITE: Master Question & Answer Document.” That document catalogued potential questions and responses on a wide variety of topics including, “[r]ationale for transaction,” “[a]lternative strategies considered,” and “[v]aluation of REIT.” If asked whether the transaction complied with Windstream’s credit and debt agreements, the talking points encouraged a vague and non-responsive answer and instructed to “not go into detail . . . unless specifically asked” about each different type of covenant or restriction, but to respond as follows, “([if] pressed)”:  We do not believe that the Windstream indentures require any consents or waivers to effect the transaction (do not go into detail . . . unless specifically asked on each point). * * *  If pressed on sale/leaseback provision: Given that the lease is being implemented at Windstream Holdings, it does not impact any covenants in the Windstream indentures, including the sale-leaseback provisions. The “Master Question & Answer Document” also guided vague and unresponsive answers to questions about the reason for forming Windstream Holdings in the first place: Was Windstream Holding Company created for the purposes of this transaction?  No, it’s a best practice corporate structure. ONLY IF PRESSED: What are the benefits of the HoldCo structure?  We believe that having a multi-layer holding company structure creates more options to allow us to improve our cost of capital and access the capital markets over time * * * Could you have done this transaction without the HoldCo structure?  This transaction is an example of how the Holdco structure afforded Windstream the flexibility to pursue a value creating transaction benefitting all of our stakeholders Windstream and Defendant Uniti assured State regulators, that, among other things: (a) in connection with the Master Lease, the Windstream Operating Subsidiaries would have “exclusive” and “long-term” “usage rights” and “control” over the transferred assets, and would have the same obligations with respect to the assets that they had always had; (b) the Windstream Operating Subsidiaries would have no obligations to pay rent under the Master Lease; and (c) the Master Lease was being executed by Windstream “for the benefit of the [Windstream Operating Subsidiaries].” In fact, Fletcher has since admitted that regulators were “‘repeatedly assured’” that the Windstream Operating Subsidiaries “would have long-term exclusive control of the property they had transferred.”18 For example: (a) In support of the application submitted to the Alabama Public Service Commission (“Alabama PSC”), which was filed in Montgomery, Alabama on July 31, 2014, Fletcher (who signed the application) requested authorization to transfer certain assets of the “WIN Companies” (companies that made up the Windstream Operating Subsidiaries) to Uniti, who would then lease them back to Windstream Holdings on a long-term basis, for the exclusive use and benefit of the WIN Companies. Fletcher assured the Alabama PSC that the “WIN Companies can continue to operate their telecommunications business as they do currently.” Fletcher also stated that the transaction would be “virtually invisible to the WIN Companies’ customers” but was being done simply to, among other things, “enable the WIN Companies to improve their financial condition.”19 (b) In support of the application submitted to the Kentucky Public Service Commission (“Kentucky PSC”), Robert Gunderman – during a November 13, 2014 hearing – testified that the Windstream Operating Subsidiaries had no obligation to pay rent under the Master Lease.20 Robert Gunderman also repeatedly represented that the Master Lease was being entered into by Windstream Holdings for the exclusive use of the Windstream Operation Subsidiaries.21 In support of the Kentucky application, Fletcher also testified that “the [Windstream Operating 18 Aurelius Litigation Trial Transcript at 46:19-47:3. 19 Application of Windstream Subsidiaries for Approval, In the Matter of Windstream Alabama LLC, et al., Alabama Public Service Commission (July 31, 2014), ¶¶1-2, 26. 20 Transcript, In re Application of Windstream Kentucky East, LLC and Windstream Kentucky West, LLC, No. 2014-00283 (Nov. 13, 2014) (“KY Transcript”) at 34:7-35:25. 21 KY Transcript at 109:20-110:8. Subsidiaries] will have an exclusive . . . right to use and occupy all the assets that are within their system today.” (c) Regulators in North Carolina were told: Under the transaction proposed, certain fixed assets of the [Windstream Operating Subsidiaries], including copper, fiber, real estate and other network assets will be transferred to [Uniti] and [Uniti] will lease those assets back to Windstream [Holdings] on a long-term basis for the exclusive use and benefit of the [Windstream Operating Subsidiaries]. The [Windstream Operating Subsidiaries] will be responsible for the operation and maintenance of the assets and will continue to have responsibility for quality of service standards and fulfillment of all regulatory obligations. 22 The North Carolina regulators were also assured that Windstream Operating Subsidiaries would continue to provide services to its North Carolina customers even though the lease agreement was between Uniti and Windstream Holdings: According to the Applicants, as the transaction is now structured, [Uniti]’s exclusive customer is Windstream [Holdings] and not the public writ large; the [Windstream Operating Subsidiaries] and not [Uniti] will provide service to the [Windstream Operating Subsidiaries]’ customers using equipment which the [Windstream Operating Subsidiaries] previously owned; and the equipment and facilities previously owned by the [Windstream Operating Subsidiaries] are now owned by [Uniti] and leased by [Uniti] to Windstream [Holdings] for the benefit of the [Windstream Operating Subsidiaries].23 (d) Georgia regulators were given the same description of the Spin-Off: Under the Transaction, certain fixed assets of the [Windstream Operating Subsidiaries], including copper, fiber, real estate and other distribution related assets, as 22 Declaratory Ruling, In the Matter of Windstream North Carolina, LLC, et al., North Carolina Utilities Commission (Oct. 13, 2014) at 3. 23 Id. at 8-9. more fully described in this Application (the “Subject Assets”) will be transferred to [Uniti], a newly established corporation, and [Uniti] will lease them back to Windstream [Holdings] on a long term basis for the exclusive use and benefit of the [Windstream Operating Subsidiaries,] and that “[t]he long-term lease arrangement will allow the [Windstream Operating Companies] to continue to operate their telecommunications businesses as they do now.24 (e) In the Application for Approval of the Spin-Off, signed by Fletcher, Ohio Regulators were, likewise, given the same description of the Spin-Off: Under the Transaction, certain fixed assets of the [Windstream Operating Subsidiaries], including copper, fiber, real estate and other network assets, as more fully described in this Application (the “Subject Assets”), will be transferred to [Uniti], a newly established corporation, and [Uniti] will lease them back to Windstream [Holdings] on a long-term basis for the exclusive use and benefit of the [Windstream Operating Subsidiaries]. [Uniti] will elect to operate as a Real Estate Investment Trust (“REIT”), and both [Uniti] and Windstream [Holdings] will thereafter be independent publicly traded companies. Under the terms of the exclusive lease from [Uniti], the [Windstream Operating Subsidiaries] will be responsible for the operation and maintenance of the Subject Assets and will continue to have responsibility for service quality standards and fulfillment of all regulatory obligations.25 (f) The Pennsylvania Application, which included a verified statement from Robert Gunderman, likewise described the Spin-Off transaction as providing: [C]ertain fixed assets of the [Windstream Operating Subsidiaries], including copper, fiber, real estate and other network assets (“Subject Assets”), will be 24 Application for Declaratory Ruling, In re Georgia Windstream, LLC, et al., Georgia Public Service Commission at 4-5, 8. 25 Telecommunications Filing Form, In the Matter of the Application of Windstream Holdings, Inc., et al. to Transfer, Public Utilities Commission of Ohio (Aug. 19, 2014) at 13. transferred to [Uniti], a newly established corporation. [Uniti] will lease the transferred assets back to [Windstream] Holdings for the exclusive use and benefit of the [Windstream Operating Subsidiaries] under a long-term master lease that, at [Windstream] Holdings option, will be in effect for thirty-five years.26 (g) In their application to the West Virginia Public Service Commission, Windstream represented that “Windstream [Holdings] is proposing an intra- corporate transaction (the ‘Transaction’) in which its business will be divided into two independent units: an operating unit that will continue to provide telecommunications and related services, and a real estate investment trust unit that will hold title to certain distribution plant assets (the ‘Subject Assets’)” and “[t]he Subject Assets of the [Windstream Operating Subsidiaries, including copper, fiber, real estate and other network assets, will be transferred to [Uniti], a newly established corporation, and [Uniti] will lease them back to Winstream [Holdings] on a long term basis for the exclusive use and benefit of the [Windstream Operating Subsidiaries].”27 These representations, and others, were designed to convince regulators that the “intra-corporate transaction” would be “virtually invisible” and “seamless” to customers, and on this basis, regulators granted approval of the asset transfer. While Fletcher told state regulators that the Windstream Operating Subsidiaries would retain an exclusive right to use and access the transferred assets, he knew at the same time that the Master Lease structure violated the terms of the Indenture. Fletcher has since testified as follows during the Aurelius Litigation: Q. The question is, at the time that this transaction was being planned, you were aware that if the transferor subsidiaries [i.e., Windstream Operating Subsidiaries] signed the master lease, that would have been a clear violation of the indenture at issue in this case. 26 Joint General Rule Application, In re Cavalier Telephone Mid-Atlantic, LLC, et al., Pennsylvania Public Utility Commission (Aug. 26, 2014) at 5. 27 Petition for Approval of Transfer, In the Matter of Talk America Services, LLC, et al., Public Service Commission of West Virginia (Aug. 29, 2014) at 2-3. A. Yes.28 Yet, despite that Windstream and Defendant Uniti knew this fact, Robert Gunderman affirmatively represented to regulators, during the November 2014 hearing before the Kentucky PSC, that the contemplated Spin-Off and lease transaction would not violate any of Windstream’s debt agreements or restrictive covenants, stating that “[a]s part of this transaction, [Windstream] ha[d] no concerns with any covenants within [its] indentures or [its] existing credit agreement.”29 Fletcher was present during this testimony.30 And Robert Gunderman affirmed that he and Fletcher were “speaking for both companies,” i.e., Windstream and Defendant Uniti.31 Thus, Windstream, Defendant Uniti and their advisors, including Fletcher, represented to state regulators that the Windstream Operating Subsidiaries would retain exclusive access and control of the assets owned by Uniti and that the Master Lease did not violate any of Windstream’s debt covenants (which was necessary in order to obtain regulatory approval) despite knowledge that such an arrangement violated the terms of the Indenture – a fact that was concealed from the market. Defendants’ deception worked. On August 13, 2014, Covenant Review issued a report titled “Windstream: How Would the Bond Covenants be Implicated by the Proposed REIT Spin-Off.” Covenant Review, whose tag line on the top of their reports reads “The 28 Aurelius Litigation Trial Transcript at 123:2-6. 29 KY Transcript at 116:11-117:9. 30 Id. at 150:14-17. 31 Id. at 71:2. Authority on Bond and Loan Covenants,” tracked the covenants disclosed by Uniti and analyzed the likelihood that the Spin-Off would result in a violation of the restrictive covenants found in §4.07 (Restricted Payments), §4.14 (Change of Control), and §5.01 (Merger) of the Indenture. But, because it was not disclosed, the analyst was unaware of the possibility that §4.19’s prohibition on sale-leaseback transactions could be violated by the Spin-Off. The analyst was also unaware of the true risk that the terms of, and assumptions underlying, the Master Lease, particularly the inflated projections of the useful life of copper wire, rendered it not a “true lease,” but a financing arrangement which violated §4.09’s leverage ratio covenant. E. Windstream, with Defendants’ Help Finalizes the Structure of the Spin-Off Including the Terms of the Master Lease While the regulatory approval process was underway, Windstream, Defendant Uniti, Thomas, Robert Gunderman, Fletcher and Defendant Kenny Gunderman worked simultaneously on finalizing the Master Lease.32 As described in ¶¶56-87, the Master Lease was structured as a workaround to the Indenture’s prohibitions on sale-leaseback transactions. Indeed, Windstream had total control over structuring the transaction and drafting the Master Lease. At all relevant times during the “negotiation” of the Master Lease, the officers of Windstream Holdings were also officers of Uniti. Fletcher has openly admitted that the Master Lease was not negotiated at arm’s-length.33 32 Amended Complaint, SLF Holdings, LLC v. Uniti Fiber Holdings, Inc., et al., No. 1:19-cv- 01813-LPS (D. Del. Nov. 18, 2019) ECF No. 71 (“SLF Complaint”), ¶97. 33 Aurelius Litigation Trial Transcript at 92:18-93:4. Fletcher in particular, as leader of the “Windstream Group” during these “negotiations,” was simultaneously General Counsel of both Windstream and Uniti. He therefore had a client on both sides of the transaction while formally negotiating on behalf of the “Windstream Group.” The Windstream Group also included Dan King and Willis Kemp, with representation from Skadden Arps Slate Meagher & Flom (“Skadden”). The “Uniti Group” was led by Windstream’s former CFO, its then Head of REIT Operations and future CEO, Thomas. Thomas’s involvement in the Spin-Off is clear – during 2014 Thomas first served as Windstream’s CFO, then Head of REIT Operations at the same time he was Uniti’s President and CEO, before being appointed CEO of Windstream in December 2014. Although he was a long-time senior executive of Windstream, Thomas led the “Uniti Group” that negotiated against Fletcher’s “Windstream Group” over the structure and terms of the Spin-Off, including the terms of the Master Lease. Jeff Small and the law firm Bryan Cave LLP also served on the Uniti Group.34 In early 2015, management and Board positions were filled for Uniti, including the hiring of Defendant Kenny Gunderman as Uniti’s CEO and President on March 2, 2015. Immediately prior to his joining Uniti, Kenny Gunderman was employed at Stephens advising Windstream on the Spin-Off, and attending Windstream Board meetings where the Spin-Off strategy and transaction was being discussed in detail. 34 Jeff Small (a Windstream employee) had been designated to join Thomas at the newly-formed REIT company after the Spin-Off was complete. Francis X. Frantz (“Frantz”), a director on Windstream’s Board, and its former Chairman of the Board, was named the Chairman of Uniti’s Board of Directors. Frantz also attended the Windstream Board meetings described in ¶¶79-85, 109-110. As demonstrated below, the relevant parties were conflicted parties to the Spin- Off, and as a result, the transaction was not created at “arm’s length,” but rather was the opposite – an “arm-in-arm” transaction. On March 17, 2015, Fletcher and Defendant Kenny Gunderman participated in a Windstream Board of Director teleconference. According to the minutes of the meeting, the purpose of the teleconference was “to provide the Board a status update on the proposed REIT transaction.” The attendees discussed the timeline for closing the Spin-Off and the status of the financing activities necessary to close the transaction, among other topics. Kenny Gunderman, then CEO of Uniti, gave a presentation concerning Uniti’s “operational readiness” at the meeting. On March 25, 2015, the Windstream Services Board approved the Spin-Off transaction.35 Fletcher and Defendant Kenny Gunderman participated in the Board teleconference where the Spin-Off was approved. F. Defendants Finalize the Spin-Off On March 26, 2015, Uniti, Windstream Holdings and Windstream Services entered into a Separation and Distribution Agreement. This agreement provided that on April 24, 2015, Windstream Services would cause the Windstream Operating Subsidiaries to transfer to Uniti various telecommunications assets, including fiber optic and copper cable lines, office land and buildings, rights to certain permits, agreements, and easements, and a local exchange carrier business. These assets were valued at $7.45 billion. The assets to be transferred included substantial and critical parts of Windstream’s network in thirty-seven states and the District of Columbia. In an April 12, 2015 email received by Defendants Kenny Gunderman and Wallace, talking points attached acknowledged that the transferred assets were “essential and the only means for [Windstream] to serve clients,” and to which continued access was essential for Windstream “to have a business and continue to generate cash flows.” In return for these assets, Windstream Services received all of Uniti’s common stock, $1.035 billion in cash, and $2.5 billion in debt comprised of term loans and unsecured notes. On April 24, 2015, Windstream Services transferred 80.4% of Uniti’s common stock 35 Current Report on SEC Form 8-K (Mar. 26, 2015) (the “March 26, 2015 Form 8-K”). to its parent company, Windstream Holdings, and Windstream Holdings distributed those shares to Windstream Holdings’ stockholders, at which time Uniti’s stock became a separate publicly traded stock listed on the NASDAQ. On April 24, 2015, pursuant to the Separation and Distribution Agreement, Windstream Holdings and a number of Uniti subsidiaries signed the Master Lease. The Master Lease gave Windstream Holdings the exclusive right to use the assets transferred to Uniti for fifteen years, with options to extend the term up to a total of thirty-five years. Rent was set at $650 million per year (and increased to $653.5 million during the first year of the lease), payable in monthly installments, with annual increases of 0.5% per year beginning with the fourth year of the term. In addition to the fixed rent, the Master Lease was a “‘triple-net’ lease,” requiring the tenant to maintain, repair and pay for taxes, utilities, and insurance on the transferred assets. The Master Lease provided that all capital improvements paid for by the tenant to maintain, repair, overbuild, upgrade, or replace the leased property “shall automatically become a part of the Leased Property” – that is, property of Uniti, the owner of the assets. Because Uniti and Windstream shared officers at the time the Spin-Off was conceived and completed, and because Uniti’s new CEO, Defendant Kenny Gunderman, had been Windstream’s financial advisor during this transaction, Defendants Uniti and Kenny Gunderman knew, or recklessly disregarded the fact that the Master Lease violated the terms of the Indenture, and that Windstream (and, as a result, Uniti) faced significant risk if a Noteholder challenged the transaction on that basis. On April 12, 2015, a “messaging call” was held with members of Windstream’s management, Uniti’s management, and investment bankers from JPMorgan and Bank of America. Defendants Kenny Gunderman and Wallace participated on the call, along with Robert Gunderman and other members of Windstream’s management. Prior to the call, the participants received an email attaching a “Consolidated Q&A list for discussions with lender” – a set of talking points to use in addressing how the Master Lease and the Windstream relationship should be publicly discussed. The April 12, 2015 talking points advised that if asked if “WIN in Distressed Situation/What happens in WIN Bankruptcy?” to “always lead with” that “WIN is a very reliable tenant.” Additionally, the talking points also counseled Defendants Kenny Gunderman and Wallace to stress that the “Lease Structure [was] Well Designed and Iron- Clad” and that “WIN and CS&L’s collective intent in negotiating the lease was for it to be impossible to reject it in a bankruptcy.” Defendants stuck with this message throughout the Class Period. If asked “[w]hy is the lease with WIN Holdings VS WIN Services?,” the April 12, 2015 talking points directed Defendants Kenny Gunderman and Wallace and Windstream’s executives to conceal the truth by offering the following responses: “[t]his is a complex transaction and after considering many factors we concluded that having the lease at WIN Holdings was the best structure.” And “[i]f [p]ressed,” they were not to provide a direct response but should only point out the “[f]actors evaluated,” including “corporate structure, tax, accounting, [and] debt.” This messaging is consistent with Windstream’s earlier strategy, reflected in Mary Michaels’s August 6, 2014 email, described in ¶¶92-94, that management avoid getting into details surrounding how the structure of the Master Lease impacts Windstream’s Indenture. Robert Gunderman forwarded the April 12, 2015 email to Thomas and updated him on the discussions had on the messaging call. Robert Gunderman explained to Thomas that during the messaging call it was decided that Defendant Kenny Gunderman and his team would “reinforce their message” about the Spin-Off to “holdout []” accounts using the attached talking points. G. Defendants Also Conceal that the Master Lease Was Not a True Lease, but a Financing in Disguise In addition to the concealed risk that Noteholders could successfully challenge the Spin-Off as a violation of the Indenture, Defendants knew, or recklessly disregarded, that the Master Lease was a financing in which Windstream really owned the network assets and Uniti simply provided financing to Windstream, ostensibly secured by those assets. Defendants were aware of the risk that the Master Lease could be “recharacterized” as a financing arrangement and that such arrangement also violated the Indenture. The magnitude of this risk was significant. Defendants knew that if Windstream filed for bankruptcy protection and was able to successfully recharacterize the Master Lease as a financing (rather than a “true lease”), then Uniti’s claim in a Windstream bankruptcy to “rent” payments would be almost entirely unsecured and structurally subordinated to other creditors’ claims. Thus, by concealing the true nature of the risk that the Master Lease could be recharacterized as a financing, Defendants failed to disclose to investors that Uniti’s most significant driver of revenue – i.e., rent from Windstream pursuant to the Master Lease – would effectively disappear in the event of a Windstream bankruptcy, devastating Uniti’s ability to continue as a going concern. This is precisely what happened. In connection with Windstream’s bankruptcy filing (as discussed more thoroughly below), Windstream has taken the position in an adversary proceeding (the “Adversary Proceeding”) against Uniti that “[t]he ‘Master Lease’ is not a true lease,” but is actually a financing. See Adversary Proceeding Complaint, ¶2. Indeed, in the Adversary Proceeding, Windstream argues that it, not Uniti, is the true owner of the network assets and has sought to recharacterize the Master Lease as a financing transaction. According to Windstream, the Master Lease is actually a financing because: (a) Windstream, the ostensible tenant under the Master Lease, actually bears all the risk related to the real estate. “The Master Lease is at the extreme end of triple net leases, and “is more akin to a bondable lease – a variant of a triple net lease where the tenant carries every imaginable risk related to the real estate.” Indeed, Windstream must pay “‘full rent’” even if the leased networks become compromised, deteriorate physically, age to obsolescence, or are otherwise impaired such that they cannot generate revenue to fund the rent.36 (b) The $650 million in “rent” that Windstream owed annually to Uniti “was predetermined to provide a sufficient yield to attract equity investors” to Uniti and was “based on Uniti’s projected capital needs to service its debt.” Unlike a normal “rent” that should decline as the networks Windstream was renting depreciated, the Master Lease includes a rent escalator. This was done in an attempt to shoehorn the Master Lease into the framework of traditional real estate leases with traditional REITs – considering that, unlike copper wire and fiber optic cables, real estate is not a rapidly deteriorating asset. In other words, the rent is not tied to the fair market value of the assets.37 (c) Windstream bears the burden under the Master Lease of making improvements to the networks, thereby paying to improve an asset it is purportedly leasing, an 36 Adversary Proceeding Complaint, ¶6. arrangement Windstream likens to a lessee paying to replace the engine in a leased vehicle.38 (d) Windstream accounted for the transaction on its books as a “failed sale- leaseback transaction,” with the “rent” split into principal and interest and the transferred assets remaining on Windstream’s books.39 Of particular note is Windstream’s claim in bankruptcy that the Master Lease’s rent was chosen specifically to shoehorn the Master Lease into the framework of traditional real estate leases with traditional REITs – which required glossing over the fact that the assets here (i.e., copper wire and fiber optic cables), unlike real estate assets, are depreciating In fact, Defendants were aware that defining the Master Lease as a “true lease” depended on false and inflated information about the useful life of copper wire – i.e., the leased asset. In order for the Master Lease to be deemed a “true lease,” Windstream and Uniti needed to assume that the useful life of these assets was more than double their true useful life, or the assets being leased would be depreciated to zero during the term of the Master Lease. In connection with seeking approval for Uniti REIT-treatment, Windstream and its advisors, including Fletcher and Defendant Kenny Gunderman (who championed the idea of forming the Uniti REIT), told the IRS that the estimated useful life of copper wire in the to-be-spun-off networks was 30 to 40 years. Windstream, Fletcher and Defendant Kenny Gunderman knew this estimate was at odds with valuations of those assets that it possessed at that time, and with what it now claims in bankruptcy to be its own accounting treatment 38 Id., ¶215. for copper wire at the time – which is depreciated over 20 years, a treatment that it recognizes is “on the longer side of actual expectation.”40 Further, this inflated information about the useful life of these assets also formed the basis of an analysis by Windstream’s advisor E&Y, and a “true lease” opinion delivered by Skadden to Uniti’s management. Indeed, Windstream now represents in its bankruptcy that “[f]or many locations, Windstream’s copper will be uncompetitive on or around 2025,”41 i.e., five years before the initial term of the Master Lease expires. Likewise, based upon the allegations in Windstream’s complaint in the Adversary Proceeding and the Skadden “true lease” opinion, Uniti also provided inflated projections of the leased networks’ remaining useful life and economic value, and then represented and warranted to its own outside advisors that these projections were reasonable. These inflated projections that the assets would have a useful life beyond the initial term of the Master Lease, and the first renewal term, provided one of the bases on which Skadden concluded that the Master Lease would be treated for tax purposes as a “true lease.” Fletcher knew that the useful life projections provided to E&Y and Skadden were inflated, considering that he served as leader of the “Windstream Group” during the Master Lease negotiations, which was represented by Skadden during those negotiations. Indeed, E&Y’s valuation analysis was discussed in detail at several Board meetings attended by Fletcher and Defendant Kenny Gunderman. ¶¶81-85. 40 Adversary Proceeding Complaint, ¶105. 41 Adversary Proceeding Complaint, ¶99. The inflated projections of remaining useful life and economic value were also the basis for an opinion by E&Y that the copper network (which constituted 80% of the network assets transferred to Uniti) had a total useful life in excess of 40 years. Defendant Uniti either provided the projections that E&Y relied upon, or, alternatively, knew or recklessly disregarded that the projections were inaccurate and unsupportable. Further, Windstream also alleges in bankruptcy that it had other analysts examine the remaining economic life of copper cables, and those analysts had reached conclusions markedly different than E&Y’s. Duff & Phelps, for example, prepared depreciation reports of Windstream’s copper wire networks and concluded as early as 2011 and 2012 that the remaining economic life of those copper wire cables was between 3.9 and 7.7 years.42 Another analyst, CostQuest Associates, concluded in 2016 that the average remaining life for metallic cables was between 1.3 and 7.5 years, depending on the type of cable.43 BCRI Valuation Services, in a 2015 Depreciation & Cost Manual, assigned a 4 to 7 year useful life for metallic cables.44 Despite its own accounting policy, when Windstream requested a private letter ruling from the IRS in 2013 regarding the REIT spinoff, Windstream and its advisors, including Fletcher and Defendant Kenny Gunderman, represented to the IRS that the copper wiring to be distributed to Uniti had a useful life of approximately 30 to 40 years. 42 Adversary Proceeding Complaint, ¶101. 43 Adversary Proceeding Complaint, ¶103. 44 Adversary Proceeding Complaint, ¶104. Uniti made similar statements, representing in its Information Statement to shareholders in connection with the Spin-Off that its copper wiring had a useful life of 7 to 40 years. But Defendants knew this was false and that the actual useful life was much shorter than the upper end of the range that it disclosed in the Information Statement. As alleged in ¶¶81-85, Fletcher and Defendant Kenny Gunderman, knew or recklessly disregarded, based on information and discussion at various Windstream Board meetings, that Windstream’s representations to the IRS and Uniti’s representations in its Information Statement in connection with the Spin-Off about the copper wire cables could not be squared with the initial term of the Master Lease and the follow-on five-year renewal What’s more, although Skadden determined that the Master Lease was a “true lease” (an opinion that expressly relied on E&Y’s useful life projections that Fletcher and Defendants Uniti and Kenny Gunderman knew to be inflated and unreasonable), the opinion also confirmed for Uniti’s executives, including Defendant Kenny Gunderman, the significant risks associated with the Spin-Off transaction – risks Defendants concealed from investors. Skadden’s opinion warned that the IRS “‘may argue that the proposed lease is merely a financing arrangement and that the purported lessor [Uniti] is, in substance, a secured creditor but holds no equity interest in the property.’”45 Windstream is making this very argument in the Adversary Proceeding. 45 SLF Complaint, ¶85. Skadden’s analysis also anticipated the exact argument that Aurelius would later advance in declaring an event of default on the Notes: that the economic substance of the Spin-Off was analogous to a sale-leaseback transaction. In fact, Skadden concluded: “‘the Spin-Off and Master Lease involve a contribution of property to [Uniti] by Windstream and a leaseback of those properties from [Uniti] to Windstream. Thus, there is a transfer of legal ownership of the Distribution Systems followed by a leaseback of that property that could be viewed as similar to a sale-leaseback arrangement.’”46 Skadden’s “true lease” opinion therefore identified for Uniti management both the very risk that ultimately brought Windstream to bankruptcy, and the argument Windstream ultimately advanced in connection with its bankruptcy to recharacterize the Master Lease as a financing – both of which Defendants concealed from the market. DEFENDANTS’ MATERIALLY FALSE AND MISLEADING STATEMENTS AND OMISSIONS DURING THE CLASS PERIOD Lead Plaintiffs allege that the statements highlighted in bold and italics within this section were materially false and misleading because, among other reasons, the statements omitted material information of which Defendants were aware, or recklessly disregarded. As alleged herein, such statements artificially inflated, or artificially maintained, the price of Uniti’s publicly traded securities and operated as a fraud or deceit on all persons and entities who purchased or otherwise acquired those securities during the Class Period. Because Defendants chose to speak on the issues described below, they were obligated to not mislead investors or withhold material information. As described below, 46 Id., ¶86. Defendants created an impression of a state of affairs at Uniti that differed in a material way from the one that actually existed. A. Uniti Begins Operations Following the Spin-Off and Defendants Conceal That the Master Lease Violated the Terms of the Indenture March 26, 2015 – Filing of the Form 8-K and Information Statement On March 26, 2015, Uniti announced the completion of the Spin-Off stating that it would be finalized on April 24, 2015. Defendants also represented to investors that upon the completion of the Spin-Off and signing of the Master Lease on April 24, 2015, Windstream Holdings would be the lessee of Uniti’s network assets, failing to disclose to the Company’s investors that the Master Lease was actually a prohibited sale-leaseback between Uniti and the Windstream Operating Subsidiaries, in violation of the Windstream Indenture’s restrictive covenants, and that the Master Lease was not a lease at all, but instead a financing arrangement. On March 26, 2015, Defendant Kenny Gunderman – Uniti’s President and CEO – wrote a letter to “Future Shareholder of Communications Sales & Leasing, Inc.,” (i.e., Uniti), which was filed in connection with the March 26, 2015 Form 8-K. In the letter, Gunderman described the sale and leaseback arrangement – stating in part that Uniti was leasing its network assets to Windstream Holdings: Our initial properties will include, among other things, an extensive communications distribution system, comprised of approximately 66,000 route miles of fiber optic cable lines, 235,000 route miles of copper cable lines, and central office land and buildings across 37 states that are currently owned by Windstream. This distribution system will be leased to Windstream Holdings on a long-term, triple-net basis. We expect to diversify our tenant base in the future by acquiring additional properties and leasing them to other local, regional and national telecommunications providers. We also expect to grow and diversify our portfolio through the acquisition of properties in different geographic markets, and in different asset classes. On March 26, 2015, Amendment No. 4 of the Registration Statement on Form 10 (the “Information Statement”) – related to the Spin-Off filed by Uniti on March 25, 2015 and signed by Defendant Kenny Gunderman – was declared effective. Uniti’s March 26, 2015 Information Statement echoed Defendant Kenny Gunderman’s assertion in his letter to “Future Shareholders” discussed at ¶141, that “the Distribution Systems” – i.e., the copper and fiber network assets Uniti acquired from the Windstream Operating Subsidiaries – “will be leased to Windstream Holdings” pursuant to the Master Lease. Uniti’s March 26, 2015 Information Statement also omitted material information. Though Defendants communicated to investors that certain restrictive covenants in Windstream’s debt agreements had affected the structure of the Spin-off, they failed to mention the Indenture’s clear prohibition on sale-leaseback transactions. Specifically, Defendants disclosed to investors that “[i]n order to comply with restrictions under Windstream’s debt agreements . . . Windstream [would] retain ownership of certain distribution systems in select states.” Indeed, Defendants disclosed the “Restricted Payment” covenant under §4.07, the Mergers covenant under §5.01, and the Change of Control covenant under §4.14. Defendants therefore disclosed certain restrictions in Windstream’s Indenture while choosing to conceal that the Master Lease violated the Indenture’s restriction on sale-leaseback transactions under §4.19. Similarly, Defendants made no mention of §4.09’s leverage ratio covenant, which concealed that the Master Lease was not in fact a “true lease,” but was a financing arrangement. See ¶¶122-138. Uniti’s March 26, 2015 Information Statement also included materially false and misleading statements with respect to Uniti’s risk disclosures. One such risk disclosure concerned the impact to the Company’s business from the reaction of third parties to the Spin-Off: The Spin-Off may lead to increased operating and other expenses, of both a nonrecurring and a recurring nature, and to changes to certain operations, which expenses or changes could arise pursuant to arrangements made between Windstream and us or could trigger contractual rights of, and obligations to, third parties. Disputes with third parties could also arise out of these transactions, and we could experience unfavorable reactions to the Spin-Off from employees, lenders, ratings agencies, regulators or other interested parties. These increased expenses, changes to operations, disputes with third parties, or other effects could materially and adversely affect our business, financial position or results of operations. Another risk disclosure in Uniti’s March 26, 2015 Information Statement attempted to warn of events that could affect its payments under the Master Lease: “We will be dependent on Windstream Holdings to make payments to us under the Master Lease, and an event that materially and adversely affects Windstream’s business, financial position or results of operations could materially and adversely affect our business, financial position or results of operation.” Further, the March 26, 2015 Information Statement included materially false and misleading statements regarding its relationship with Windstream and Windstream’s ability to pay its rent pursuant to the Master Lease: Immediately following the Spin-Off, Windstream will be our only tenant. Windstream is a leading provider of advanced network communications, including cloud computing and managed services, to businesses nationwide. Windstream also offers broadband, phone and digital TV services to consumers primarily in rural areas. Following the Spin-Off, Windstream will continue to operate the leased communications facilities, hold the associated regulatory licenses and own and operate other assets, including distribution systems in select states not included in the Spin-Off. Windstream will retain ownership of distribution systems in select states in order to achieve a transaction size that in its determination is optimal in terms of assets transferred, debt extinguishment and fair market rental. For the year ended December 31, 2014, Windstream generated annual revenue of approximately $5.8 billion and net cash from operations of $1.5 billion. Windstream’s liquidity position, modest leverage and ability to generate significant free cash flow should provide it with the ability to pay the annual lease obligations to CS&L for the foreseeable future. The materially false or misleading statements and omissions alleged in ¶¶143- 148 from Uniti’s March 26, 2015 Information Statement were also incorporated into other Information Statements filed with the SEC as attachments to: (1) a Form 10 filed by Uniti on October 24, 2014, and signed by Thomas as CEO of Uniti; (2) Amendment No. 1 to the Form 10 filed on December 22, 2014, and signed by Fletcher as General Counsel of Uniti; and (3) Amendment No. 2 to the Form 10 filed on February 10, 2015, and also signed by Fletcher. The March 26, 2015 Form 8-K also included, as an exhibit, the March 26, 2015 Separation and Distribution Agreement signed by Defendant Kenny Gunderman, which None of the execution, delivery or performance of this Agreement, or the consummation of the Transactions does or will, with or without the giving of notice, lapse of time, or both, violate, conflict with, result in a material breach of, or constitute a material default under or give to others any right of termination, acceleration, cancelation or other right under (a) the organizational documents of WHI or Windstream, (b) any material agreement, document or instrument to which WHI or Windstream is a party or by which WHI or Windstream (or their assets or properties) are bound or (c) any term or provision of any judgment, order, writ, injunction or decree binding on WHI or Windstream (or their assets or properties). Despite Defendants’ statements made in connection with the completion of the Spin-Off in the March 26, 2015 Form 8-K and Information Statement, the true reason that Windstream Holdings signed the Master Lease (rather than Windstream Services or Windstream Operating Subsidiaries) was to make it appear that the Master Lease did not violate the restrictions in the Indenture prohibiting sale-leaseback transactions as Fletcher has admitted. See ¶¶56-58. However, guided by talking points described in ¶¶92-94, 118- 121, Defendants continued, throughout the Class Period, to conceal that the Master Lease and the Spin-Off violated the Indenture, and the true nature and extent of the risk to Uniti’s investors should the truth about the Spin-Off structure become known which would spell financial disaster for Uniti. Based on Defendants’ representations, investors and analysts understood that Windstream Holdings would be the lessee of the network assets upon the signing of the Master Lease on April 24, 2015 (but not that the Spin-Off violated the Indenture). Defendants’ statements in the Information Statement and March 26, 2015 Form 8-K misleadingly characterized Windstream Holdings as the lessee of Uniti’s newly acquired network assets under the terms of the Master Lease, without disclosing that, in reality, the Windstream Operating Subsidiaries were the de facto lessees. Defendants’ deception worked. In a report announcing the initiation of coverage of Uniti on June 22, 2015, analysts at JPMorgan stated as follows: “The primary source of revenue for [Uniti] is the 15-year, triple-net, exclusive Master Lease agreement with Windstream Holdings whereby Windstream pays [Uniti] $650 million a year for the exclusive rights to use the wireline assets located in 36 markets across 29 states Windstream sold to [Uniti] as part of the spin-off and sale-leaseback transaction.” April 24, 2015 Completion of Spin-Off The Class Period begins on April 24, 2015, the day that Windstream completed the Spin-Off of Uniti. On that day, Windstream distributed over 120 million shares of Uniti shares to Windstream stockholders on a pro rata basis as described in the March 26, 2015 Information Statement. The Company’s stock began trading on the NASDAQ on April 27, 2015 with the false and misleading statements, and material omissions, outlined in ¶¶141- 150, informing investors about Uniti and its relationship with Windstream. In addition to issuing Uniti common stock as part of the Spin-Off, the Company also “completed private offerings by certain selling security holders of $400 million aggregate principal amount of the Issuers’ 6.00% Senior Secured Notes due 2023” and “$1.11 billion aggregate principal amount of the Issuers’ 8.25% Senior Notes due 2023.” Copies of the Indentures which described the terms and conditions of the Company’s issuance of these notes were attached to the Form 8-K filed by the Company on April 27, June 10, 2015 – REITWeek 2015 On June 10, 2015, before the market opened, Defendants Kenny Gunderman and Wallace gave a presentation during REITWeek 2015, the National Association of Real Estate Investment Trust (“NAREIT”)’s Investor Forum, held at the New York Hilton Midtown in New York City on June 9-11, 2015. In a presentation for analysts and investors, Gunderman and Wallace discussed the Company’s strategy to grow its business portfolio and dilute its dependence on the revenues from the Master Lease with Windstream. In discussing the “Universe of Potential Partners” in the “Fragmented Telecom Industry” (including potential business partners in the Fiber/Competitive, ILEC/RLEC, Cable, and other data center segments) available to the Company, Gunderman and Wallace touted their “Deep Familiarity with Sale Leaseback Transactions,” which was, according to them, one of the ways the Company could structure future growth transactions. July 2, 2015 – Registration of 8.25% Notes On July 2, 2015, Defendants caused Uniti to file a Form S-4 with the SEC offering to register under the Securities Act of 1933 the $1.1 billion of 8.25% Senior Notes due in 2023 that were previously issued in the Spin-Off (discussed above in ¶155) via an Exchange Offer. The Form S-4 was declared effective by the SEC on July 31, 2015. The Exchange Offer was conducted pursuant to the July 2, 2015 Form S-4, a Prospectus dated August 5, 2015 and a Prospectus Supplement dated August 13, 2015 (the “Senior Notes Registration Statement”). The Senior Notes Registration Statement indicated that the deadline to submit the originally issued Senior Notes was September 2, 2015. The Senior Notes Registration Statement repeated the statements alleged in ¶¶141-150, 160-162. August 13, 2015 – 2Q15 Results On August 13, 2015, before the market opened, Defendants issued a press release announcing Uniti’s financial results for 2Q15. The press release stated: “We are extremely pleased with the successful launch of [Uniti] as an independent publicly traded REIT,” commented Kenny Gunderman, President and Chief Executive Officer. “We have developed a strong pipeline of acquisition and capital funding opportunities, and believe we are well positioned to create substantial shareholder value as we grow and diversify our portfolio.” The press release also outlined “[f]actors which could have a material adverse effect on our operations and future prospects or which could cause actual results to differ materially from our expectations” including “the ability and willingness of Windstream Holdings and any other customers to meet and/or perform their obligations under any contractual agreements that are entered into with us, including master lease arrangements.” On August 13, 2015, Defendants also filed with the SEC the Company’s 2Q15 Form 10-Q, signed by Defendant Wallace. The 2Q15 Form 10-Q repeated the “factors which could have a material adverse impact” on the Company’s operations contained in the August 13, 2015 press release alleged in ¶160. The 2Q15 Form 10-Q also updated Defendants’ statements concerning the impact to the Company’s business as a result of disputes with third parties to the Spin-Off: The Spin-Off may lead to increased operating and other expenses, of both a nonrecurring and a recurring nature, and to changes to certain operations, which expenses or changes could arise pursuant to arrangements made between Windstream and us or could trigger contractual rights of, and obligations to, third parties. Disputes with third parties could also arise out of these transactions. These increased expenses, changes to operations, disputes with third parties, or other effects could materially and adversely affect our business, financial position or results of operations . . . . On August 13, 2015, at 11:00 a.m. Eastern Time, Defendants held a conference call with analysts and investors to discuss the Company’s 2Q15 financial results and the state of its business. The conference call was also webcast live on the Company’s website. Defendants Kenny Gunderman and Wallace, and Rob Clancy, then Uniti’s Vice President of Investor Relations, participated in the call. Gunderman ended the conference call by assuring investors that the Company had put forth “extraordinary efforts over the last several months to launch [Uniti],” which put it on a “solid foundation for success.” Defendants’ statements drove the price of Uniti’s stock up nearly 5% to close at $22.21 per share on August 13, 2015. November 14, 2016 – 3Q16 Results Doubling down on their representation that the Master Lease arrangement with Windstream was appropriate, during a November 14, 2016 conference call with analysts and investors to discuss Uniti’s 3Q16 financial results and the state of its business held before the market opened, Defendant Kenny Gunderman emphasized that the Company was “always look[ing] at potential sale-leaseback options [and] additional sale-leaseback options with Windstream.” Defendants repeated the statements alleged in ¶¶160-162 in the press releases issued by the Company and the Forms 10-K and 10-Q, signed by Defendants Kenny Gunderman and Wallace, and filed with the SEC, relating to Uniti’s 3Q15-3Q17 financial reports. The statements referenced above in ¶¶157-163, 165-166 were each false and misleading when made in that each omitted and/or misrepresented material facts. The true facts, which were then known to or recklessly disregarded by Defendants were: (a) The Spin-Off constituted a sale-leaseback transaction between Uniti and the Windstream Operating Subsidiaries in direct violation of Windstream’s Indenture’s restrictive covenants. ¶¶56-86. Indeed, Fletcher admitted that he knew at the time that “if the transferor . . . signed the master lease, that would have been a clear violation of the indenture at issue in this case.” ¶86. Furthermore, throughout the Class Period, internal documents demonstrate that Defendants were aware of and concerned about the appearance that the Master Lease violated the terms of the Indenture. ¶¶68-86. Specifically, prior to the Spin-Off, Windstream and Uniti executives, including each of the Individual Defendants, were told to not go into detail unless “pressed” about the structure of the Master Lease and to give general canned responses. ¶¶92-94, 118-121. (b) Windstream Holdings was the only Windstream entity to sign the Master Lease so that Defendants could evade the restrictions in the Windstream Operating Subsidiaries’ Indenture prohibiting sale-leaseback transactions, and make it appear publicly that the Master Lease did not violate the Indenture. ¶¶68-86. (c) Despite warning that “[d]isputes with third parties could also arise out of [the] transactions” and that the Company “could experience unfavorable reactions to the Spin-Off,” this risk had already materialized as the Spin-Off violated Windstream’s covenant restricting the sale and leaseback of Windstream’s assets, and the violation of the Indenture increased the risk that Noteholders representing 25% or more of the aggregate principal amount on the Notes would seek to accelerate payments on the Notes, potentially triggering a Windstream bankruptcy. ¶¶56-86. (d) Uniti was not launched as an “independent publicly traded REIT,” as the Spin-Off was tailor-made with Windstream executives on both sides of the deal. ¶¶102- 110. Indeed, at all relevant times during the “negotiation” of the Master Lease, the officers of Windstream Holdings were also officers of Uniti. ¶108. For example, Fletcher was the General Counsel for both Windstream and Uniti, and Tony Thomas was both the CFO and Head of REIT Operations for Windstream and Uniti’s President and CEO. ¶¶104-105. (e) Defendants knew the Master Lease was a financing arrangement, in which Windstream owned the network assets and Uniti simply provided financing to Windstream. This was a breach of §4.09 of the Indenture, and also carried with it the significant risk that if Windstream filed for bankruptcy protection and was able to successfully recharacterize the Master Lease, Uniti’s claim in a Windstream bankruptcy to rent payments would be almost entirely unsecured and structurally subordinated to other creditors’ claims. ¶¶122-138. (f) Uniti’s determination that the Master Lease was a “true lease” depended on false and inflated information about the useful life of the primary leased asset – copper wire. ¶¶122-138. In truth, the transferred assets did not have a useful life beyond the initial term of the Master Lease and the first renewal. Id. As detailed by Duff & Phelps’s depreciation reports, as early as 2011 and 2012, the remaining economic life of Windstream’s copper wire networks was between 3.9 and 7.7 years, not the 7 to 40 years Defendants represented to investors. Id. (g) Uniti was not “well positioned to create substantial shareholder value,” did not have a “solid foundation for success,” and “Windstream’s liquidity positions” could not “generate significant free cash flow [to] provide it with the ability to pay the annual lease obligations to [Uniti] for the foreseeable future” as Defendants concealed that: (i) the Spin- Off was a prohibited sale-leaseback transaction and could be successfully challenged by a Noteholder owning 25% or more of Windstream’s debt; and (ii) the Master Lease was actually a financing, which in the event of a Windstream bankruptcy, Uniti’s most significant driver of revenue – rent from Windstream pursuant to the Master Lease – could effectively disappear, or be materially reduced. ¶¶56-86, 122-138. (h) Uniti could not engage in “additional sale-leaseback options with Windstream” as Defendants were aware that the Master Lease transaction was a sale- leaseback in clear violation of the Indenture, eliminating the possibility of additional sale- leaseback transactions with Windstream. ¶¶56-86. B. Materialization of the Risk and Defendants’ Continued Materially False and Misleading Statements and Omissions August 3, 2017 – 2Q17 Results and Windstream’s Announcement of Elimination of Dividend On the morning of August 3, 2017, Windstream announced that it was eliminating its dividend. In response to this information, Uniti’s stock price immediately began to fall. Later that day, after the market closed, Defendants held a conference call with analysts and investors to discuss Uniti’s 2Q17 financial results and the state of its business, which were also released on August 3, 2017. In an effort to stop Uniti’s stock price from falling further, during the conference call, when questioned about the sustainability of Windstream given its announced dividend elimination, Defendant Kenny Gunderman insisted that the lease payment from Windstream was “very, very safe and a very high- priority payment from their perspective” and that Defendants “remain highly confident in that lease payment.” Despite Defendant Kenny Gunderman’s assurances, Uniti’s stock price fell nearly 12% on August 3 and August 4, 2017, on trading volumes exceeding 7 million shares – more than three times the average daily trading volume during the Class Period – as the market absorbed this information. A few days later, on August 8, 2017, Defendant Kenny Gunderman gave a presentation to investors, analysts, and market participants at the Cowen Communications Infrastructure Summit on behalf of Uniti. When questioned about ongoing concerns with Windstream and its decision to eliminate its dividend, Gunderman acknowledged Windstream’s direct effect on Uniti’s stock price, but again repeated his assurance that the lease payment from Windstream was safe, and that Defendants had built into the Master Lease protections that safe-guard the Company “in all cases”: Yes. So yes, our stock showed weakness on Thursday and Friday, which is at a time when we had a really strong quarter where we met or beat expectations and raised our guidance for the year, and we showed weakness, and which is frustrating in and of itself, but we understand the importance of Windstream to our story. . . . And ultimately, when you put it all together, and I said it last week and I will say it again, we feel very, very confident in the lease payment coming from Windstream, not only because of the credit- enhancing actions that they’ve taken, but because of the nature of the payment itself. It is – we own 80% of Windstream’s network, and that is the very definition of a mission-critical payment. And so we’ve obviously done an exhaustive amount of work on the protections associated with that lease payment in any sort of scenario, whether it’s steady-state, distressed, bankruptcy, any scenario you want to work through, and feel confident that we’re protected in all cases. August and September 2017 – Hedge Fund Increases Position in Uniti Notes Additionally, during August 2017, rumors began to circulate that New York- based hedge fund Aurelius was buying Notes to obtain a 25% position of the aggregate principal amount, fueling speculation that Aurelius believed the Spin-Off violated the Indenture. This speculation caused Uniti’s stock price to slide. On July 31, 2017, for instance, Uniti’s stock price reached $26.31, but, as these rumors circulated in August 2017, Uniti’s stock price fell precipitously, closing at $19.26 on August 31, 2017. A September 5, 2017 report issued by Covenant Review detailed these rumors as “recent market speculation that the separation of the Uniti business from Windstream’s remaining businesses may have violated the Asset Sales covenant of the various Windstream bonds.” On September 8, 2017, Jim Volk, then Uniti’s Vice President, Finance and Investor Relations and Defendant Wallace gave a presentation to investors, analysts, and market participants at the Bank of America Merrill Lynch Media, Communications & Entertainment Conference on behalf of Uniti. In response to analyst concerns regarding Aurelius’s recent acquisition of Windstream Notes, again Wallace insisted that the Master Lease was properly structured: So ever since we were spun off from Windstream 2 years ago, we’ve always – we were spun out as a single [tenant] REIT, which is not ideal, which has been part of the reason we’ve been very focused on first flying away from Windstream. . . . I think on the lease itself, I don’t really view the lease itself as, to your point, as the problem. I think the lease, when it was structured – keep in mind it was structured by Windstream. We were spun off from Windstream. It was designed and it was priced to be a fair market value lease. . . . So I think the lease is fair. On September 13, 2017, Defendant Wallace gave a presentation to investors, analysts, and market participants at the Goldman Sachs Communacopia Conference. In discussing Uniti’s relationship with Windstream, Wallace repeatedly expressed “confidence” in Windstream and Windstream’s management. Specifically, Wallace emphasized that he had “gotten to know . . . Tony and Bob and a lot of other people at Windstream since [he had] been associated with Uniti Group. Kenny has known them for a long period of time. And we have a lot of confidence in them. I think they’re very – I think Tony is a very good operator.” At that same Goldman Sachs conference, when questioned about the structure of the Master Lease, Defendant Wallace again repeatedly claimed that the Master Lease was “well structured”: Yes. So I think that Windstream – our lease agreement with Windstream is very well structured. And just – if you remember, from the spinout 2 years ago, it’s actually structured by Windstream. So I think it’s a well-structured – it is structured as a master lease agreement. Like most master lease agreement[s], it is designed to be well structured for distressed situations, meaning master lease is designed to be accepted, if you go into a bankruptcy proceeding or reorganization, it’s designed to be accepted or rejected in a whole. . . . So I think for all those reasons, we continue to think that our lease is well structured, and – [for] all those reasons and others, we think our lease is well structured. The statements referenced above in ¶¶169, 171-175 were each false and misleading when made in that each omitted and/or misrepresented material facts. The true facts, which were then known to or recklessly disregarded by Defendants are outlined in September 25, 2017 – Noteholder Aurelius Challenges the Spin-Off as a Violation of the Indenture On September 25, 2017, after the market closed, Windstream filed a Form 8-K with the SEC disclosing that it had received a “purported notice of default” from Aurelius (the “Notice of Default”): On September 22, 2017, Windstream Services, LLC (the “Company”) received a purported notice of default dated September 21, 2017 (the “Notice”) from a noteholder that claims to hold greater than 25% in aggregate principal amount of the Company’s 6 3/8% Senior Notes due 2023 (the “Notes”) issued under the indenture dated January 23, 2013 (as amended and supplemented, the “Indenture”), between the Company (as successor to Windstream Corporation), as issuer, Windstream Finance Corp., as co-issuer, the guarantors party thereto and U.S. Bank National Association, as trustee (the “Trustee”). The Notice alleges that the transfer of certain assets and the subsequent lease of those assets in connection with the spinoff of Communications Sales & Leasing, Inc. (now known as Uniti Group, Inc.) in April 2015 constituted a Sale and Leaseback Transaction (as defined in the Indenture) which did not comply with the Sale and Leaseback covenant under the Indenture. The transactions did not constitute a Sale and Leaseback Transaction, and the Company asserts no default occurred, and that no default is continuing, under the Sale and Leaseback covenant under the Indenture. This news, which was at least in part a materialization of the risk concealed by Defendants’ material misrepresentations and omissions alleged herein, caused Uniti’s stock price to plummet, closing at $15.66 per share on September 26, 2017, a decline of nearly 10% from the prior day’s closing price, with over 11 million shares traded, more than five times the average daily trading volume during the Class Period. The price of Uniti’s stock continued to decline on September 27, 2017, closing at $14.73 per share as the market absorbed the import of the September 25, 2017 information, a loss of another 5% on an over 11 million share trading volume. October 4, 2017 – Deutsche Bank Leveraged Finance Conference Defendants used a series of appearances at conferences sponsored by Wall Street investment banks, and Uniti’s 3Q17 earnings announcement, to stem the bleeding in Uniti’s securities prices. The first conference occurred on October 4, 2017, nine days after the announcement of Aurelius’s Notice of Default. Volk and Defendant Wallace gave a presentation to investors, analysts, and market participants at the Deutsche Bank Leveraged Finance Conference on behalf of Uniti. In an effort to convince the market that the claims in Aurelius’s Notice of Default were meritless, Defendant Wallace, in his prepared remarks We do think the Windstream lease in and of itself is well-structured. It is structured, as I mentioned, to be as a master lease. It is important to Windstream from an operations standpoint in terms of the scale and the number of customers that they serve by having access to the lease. It is a master leases [sic]. As we’ve said before, they are designed to be in the – as a single lease, they’re designed to be indivisible. It is a single rent payment, so it’s not – it’s designed so that it can’t be subdivided or cherry picked. It is – in any sort of a distress situation, it is required to be either accepted or rejected in full. And acceptance would require that the lease be – that the tenant be in compliance. Windstream is the carrier last resort, so it’s important for Windstream to continue to have access to the lease network to serve the customers and to fulfill the regular required obligations as well. So we think the master lease is well-crafted and we think it’s a priority payment from our standpoint and from Windstream’s standpoint as well. During the same conference, Defendant Wallace had the following exchange with an analyst: [Analyst:] Okay. All right. So getting to some Q&A. Towards the end of the presentation, we talked about Uniti Leasing. And I just want to get [to] the elephant in the room with Windstream. So Windstream is a financial situation. It’s been a key focus for investors, especially considering 70% of your revenue still comes from them. Especially true, I think, following a weaker second quarter where Windstream eliminated its dividend. So maybe to start, can you talk about Windstream’s decision to cut its dividend? And more importantly, I guess, what that implies for your rental revenues coming from them? [Defendant Wallace:] Sure. So I think Windstream, on their decision to eliminate the dividend, I think from our standpoint, from a landlord standpoint, we find it to be credit-enhancing. So obviously, with that decision, they’ll be retaining more cash flows in their business. So we think it’s credit-enhancing from that standpoint. Now obviously, I would say that I think the market had a negative reaction to it based on the pressure that resulted on their securities from that. And I think, as far as I can tell, I think that’s a result of, I think, people viewed the dividend elimination as being a harbinger of – or a foreshadowing that there’s – that Windstream’s future results would not be what the market was expecting those to be, and that, that was – that would be the reason for them to eliminate the dividend. I don’t think that’s what they intended at all. I think they intended it to be just a capital finance position. They felt like they weren’t getting credit for the dividend. But – so we were certainly surprised by the reaction to it. I think they were as well. I do think that to the extent that there was – that I’m correct about what I believe, people took it to mean from a perception standpoint. I think Windstream has been at conferences. They hosted a separate conference with investors, and they tried to make sure that – correct any misperceptions in the marketplace. So as I’ve kind of heard them articulate their strategy, they’re focused on, and certainly, you should pay attention to what Windstream says about its own operations, so they should be the primary spokesman, not me. But as I understand it, I think they have a lot of initiatives going on right now that I fully expect them to be successful at executing on, whether it be the synergy realization from Earthlink and Broadview, whether it be the reduction of interconnection costs. I think they’ve spoken about CapEx and working capital being improved in the second half of the year versus first half of the year. They’ve also talked recently about asset sales and looking at monetizing some of their unutilized fiber. So I think all those things were good. I think they’ve got a lot of things they’re focused on right now. And as I said earlier, I think I’ll expect them to be successful to execute. * * * [Analyst:] How about when we think about leverage for the business, can you talk about your preferred target leverage range for the company? And whether you would consider potentially taking that lower given some of the concern around Windstream’s financial situation? [Defendant Wallace:] So our – what we’ve said is that we’ve been on a net leverage basis at about 5.7 to 5.8x. We’ve been in that – have said for a while, that’s our target range and there’s no change in that target range. The actual kind of month- to-month leverage will change as we draw down on the revolver for acquisitions and then term out and replace that with permanent capital. But the target range is still about the same as it has been. October 2017 –Aurelius Initiates Litigation Against Windstream and Windstream Responds with Counterclaims Meanwhile, Aurelius pushed forward with litigation against Windstream. On October 12, 2017, Aurelius, exercising authority by virtue of its controlling position in the Notes, caused the trustee of the Notes – U.S. Bank National Association (“U.S. Bank” or “Trustee”) – to file suit in the U.S. District Court for the Southern District of New York, alleging that Windstream Services had breached a covenant in the Indenture restricting sale- leaseback transactions, in a litigation captioned U.S. Bank N.A. v. Windstream Servs., LLC, No. 17-cv-07857-JMF (S.D.N.Y. Oct. 12, 2017).47 The alleged default, if uncured, would trigger an acceleration provision in the Indenture that would make the Notes’ entire aggregate principal amount, plus any unpaid interest, due immediately – a figure in the hundreds of millions of dollars. On October 13, 2017, in the Aurelius Litigation, Windstream Services brought counterclaims against the Trustee and Aurelius, seeking (among other things) a judicial declaration that the Spin-Off did not breach the Indenture’s restrictive covenants.48 November 2017 – 3Q17 Results and Uniti’s Response to Windstream Notice of Default On November 2, 2017, as part of Uniti’s announcement of its 3Q17 financial results, Defendants filed with the SEC Uniti’s 3Q17 Form 10-Q, signed by Defendant 47 Aurelius Litigation, ECF No. 1. 48 Aurelius Litigation, ECF No. 10. In response, on November 21, 2017, Aurelius brought counterclaims of its own, seeking both a declaration that Windstream Services was in default (despite Windstream Services’ efforts to secure a waiver through issuance of the New Notes) and a money judgment for the aggregate principal amount of its Notes plus interest. Aurelius Litigation, ECF No. 64. Wallace. The 3Q17 Form 10-Q acknowledged that Windstream received a Notice of Default, but Defendants did not disclose that they had been aware of the risk that a Noteholder could challenge the Spin-Off as a violation of Windstream’s debt covenants and that, all along, they knew that the risk of a notice of default on this basis was more than theoretical: On September 22, 2017, Windstream Services, LLC (“Windstream Services”), Windstream’s primary operating subsidiary, received a purported notice of default dated September 21, 2017 from a large purported holder of Windstream Services’ 6 3/8% Senior Notes due 2023 (the “Windstream Notes”). The notice alleged, among other things, that Windstream Services violated certain restrictive covenants of the indenture governing the Windstream Notes in connection with Windstream’s Spin-Off of Uniti Group. Windstream is challenging the alleged default in federal court and recently launched an exchange offer and consent solicitation to obtain a waiver of the alleged default from holders representing a majority of the aggregate principal amount of the Windstream Notes. If the alleged defaults claimed by the noteholder are not waived, the noteholder or the Windstream Notes’ trustee may allege that an “event of default” has occurred under the Windstream Notes’ indenture. An actual “event of default” would permit the Windstream Notes’ trustee or holders of at least 25% in aggregate principal amount of outstanding of the Windstream Notes to declare the principal amount of all outstanding Windstream Notes to be immediately due and payable. Such an outcome would trigger cross-default provisions in Windstream’s other debt instruments, including Windstream Services existing credit facility, which, in turn, would trigger a default under the Master Lease. In addition, Windstream Services’ ability to pay dividends to Windstream Holdings under the terms of its indentures is subject to certain conditions, including the absence of a default or event of default, and any actual default or event of default could prevent Windstream Services from providing sufficient funding to Windstream Holdings to make payments on the Master Lease. Accordingly, we monitor the credit quality of Windstream through numerous methods, including by (i) reviewing the credit ratings of Windstream by nationally recognized credit rating agencies, (ii) reviewing the financial statements of Windstream that are publicly available and that are required to be delivered to us pursuant to the Master Lease, (iii) monitoring news reports regarding Windstream and its businesses, (iv) conducting research to ascertain industry trends potentially affecting Windstream, and (v) monitoring the timeliness of its lease payments. On November 2, 2017, after the markets closed, Defendants held a conference call with analysts and investors to discuss Uniti’s 3Q17 financial results and the state of its business. The conference call was also webcast live on the Company’s website. Defendants Kenny Gunderman and Wallace spoke on the call. In his prepared remarks, Gunderman expressly disclaimed the possibility of a ruling in favor of Aurelius in the pending litigation – insisting that Windstream “had very competent counsel and advisers involved in the initial spin-off and additional well-respected law firms” and as a result “Windstream [would] ultimately have a favorable outcome.” On that same conference call, when questioned about the history and context of the Master Lease with Windstream, Defendant Kenny Gunderman responded: I think what I would say – rather than getting into a lot of detail there, what I would say is advisers were hired at the time to establish a fair market value for the spin-off business and then to also establish a fair market value lease payment associated with those assets. And there was a fairly exhaustive analysis behind that, and actually, 2 different advisers, 1 of the big 4 accounting firms, sort of led that analysis, and then there was another adviser to supplement that. So that was the process leading up to the spinoff. A few days later, on November 7, 2017, Defendants Kenny Gunderman and Wallace gave a presentation to investors, analysts, and market participants at the Wells Fargo Media & Telecom Conference on behalf of Uniti. Immediately, analysts questioned Uniti about the Notice of Default sent by Aurelius to Windstream. In response, Gunderman again emphasized that Uniti had meticulously reviewed the lease and insisted that Aurelius’s claims were “manufactured”: [Jennifer Fritzsche – Wells Fargo Analyst:] So I’m just going to start with a “let’s get it out of the way” question . . . . With over 80% of your revenue coming from Windstream, the inevitable question we’re getting is, talk about that leased revenue. Is there talks [sic] about renegotiating? Is there any – that is the key question right now. And then we’ll get to the fundamentals. . . . [Defendant Kenny Gunderman:] But – so we realize the Windstream question is a big question. There’s a lot of fear and confusion out there right now driving our securities, largely attributable to the – kind of the alleged default notice. We find it extremely frustrating, especially on behalf of our shareholders that there’s so much turmoil going on, and especially when we think the claim itself is just manufactured. We’ve been following it very, very closely. . . . We’ve done a deeper dive on our lease and our different scenarios than we ever have before and continue to be highly confident in the leased, lease payment, the protections that we have in all scenarios. So none of that has changed. . . . And we do think that the trends and the tide are moving in Windstream’s favor in terms of the things that they’re dealing with. . . . [Jennifer Fritzsche – Wells Fargo Analyst:] And 2 just housekeeping items, I want to confirm that way back when, when we – it seems like years can turn into decades the last few months, but that Windstream was the one who agreed to – I mean, they actually approached you with the lease terms, correct? And then the auditors have looked at it every which way. [Defendant Kenny Gunderman:] Yes, that’s right. I mean, we were a spinout from Windstream. So essentially, we didn’t exist until the lease had already been fully negotiated and we were spun out. So essentially, Windstream and their attorneys and advisers, including law firms and accounting firms, devised the lease. And it was blessed by very reputable law firms and at least one, maybe 2 of the big 4 accounting firms. [Jennifer Fritzsche - Wells Fargo Analyst:] Got it. And on the bondholder situation with them, you feel comfortable that they are headed in the right . . . [Defendant Kenny Gunderman:] Highly confident. We’ve looked very, very closely at the legal claim, and we’re very confident that the legal arguments are on Windstream’s side. So [I] think that that’s going to resolve itself, if it ever gets to that point. And in the exchange and consent process that’s ongoing, we think that’s going to end very favorably as well. At that same conference when he was later questioned about Uniti’s ability to diversify, Defendant Kenny Gunderman again insisted that Aurelius’s claims against Windstream were “manufactured,” stating: “[W]e need to continue to demonstrate our ability to grow with our organic businesses, and we also need to work through these current issues with Windstream and this threat, which we think is manufactured, in order to get back to our real growth strategy, and we expect that to happen.” On November 29, 2017, Defendant Wallace gave a presentation to investors, analysts, and market participants at the Bank of America Merrill Lynch Leveraged Finance Conference on behalf of Uniti. When questioned about ongoing concerns that Windstream might end up in a default scenario, Wallace again emphasized that Uniti had reviewed the Master Lease and concluded that Windstream would receive a favorable outcome in the Aurelius Litigation: Yes, so let me start with Windstream. So we have a very high degree of confidence that Windstream is going to prevail in the litigation. We have a very high degree of confidence that they’re going to have favorable outcome to this. And in many [sic] case, I would say that we think that there’s a good likelihood that it might be resolved in a relatively short period of time favorably for Windstream. So with that respect, I would say that we would echo a similar degree of confidence that Windstream has stated as well. Look, I think that we have – the situation, since the volatility some of the claims have been made, we’ve gone back and looked at our lease agreement. We’ve consulted our counsel about the lease agreement. We’ve gone back and done a deep dive into it. We have every confidence in the strength of our lease agreement that we have been articulating from the very first days that we were spun off. So we have tremendous confidence in the lease. We have confidence in the lease protections, the way the lease was structured as a master lease. And so I think to your point, even in a downside scenario, no matter how low the probability, I think it is low, I think that we are – I think we’re as protected as any landlord can be. And so I think the Windstream lease was well-crafted, and we have [a] very high degree of confidence that Windstream will continue to make payments and will continue to receive an uninterrupted lease stream. December 4, 2017 – UBS Global Media and Communications Conference The following week, on December 4, 2017, in a presentation to investors, analysts, and market participants at the UBS Global Media and Communications Conference on behalf of Uniti, Defendant Wallace again stressed that Uniti was “highly confident that Windstream [would] have a favorable outcome in the litigation.” March 1, 2018 – 4Q17 and Full Year 2017 Results On March 1, 2018, Defendants issued a press release announcing Uniti’s financial results for 4Q and fiscal year 2017. As in each of its previous press releases, the press release contained a list of “factors which could materially alter our expectations” including “the ability and willingness of our customers to meet and/or perform their obligations under any contractual arrangements entered into with us.” On March 1, 2018, Defendants filed with the SEC Uniti’s 2017 Form 10-K, signed by Defendants Kenny Gunderman and Wallace. The 2017 Form 10-K contained the following “risk factor” related to the Company’s relationship with Windstream: In recent years, Windstream has experienced annual declines in its total revenue and sales. Most recently, Windstream has endured a challenge from an entity who acquired certain Windstream debt securities for the purpose of seeking an “event of default” under such securities relating to the Spin- Off. An actual “event of default” would permit the trustee or holders of at least 25% in aggregate principal amount of outstanding of such Windstream debt securities to declare the principal amount of all outstanding Windstream debt to be immediately due and payable. Such an outcome would trigger cross-default provisions in Windstream’s other debt instruments, including Windstream’s existing credit facility, which, in turn, would trigger a default under the Master Lease. A default by Windstream under the Master Lease could materially adversely affect our business, assets, financial position, and results of operations, including our ability to pay dividends to our stockholders as required to maintain our status as a REIT. Defendants repeated the statements alleged in ¶¶190-191 in the press releases issued by the Company and the Forms 10-Q filed with the SEC, and signed by Defendant Wallace, relating to Uniti’s 1Q18-3Q18 earnings announcements. Spring 2018 Then, beginning in the Spring of 2018, Defendants again appeared at a series of investor conferences. Defendants used their appearances at these conferences, and the Company’s 3Q18 earnings announcement, to continue to reinforce their message, and the market’s perception, that the Master Lease was not in jeopardy, and that the claims of default by Aurelius were meritless. During a conference call held on May 16, 2018, Lawrence Gleason, President of Uniti Towers and Defendant Wallace gave a presentation to investors, analysts, and market participants at the JPMorgan Global Technology, Media and Communications Conference, where Wallace again assured investors that Uniti “expect[ed] Windstream to have a favorable outcome” in the Aurelius Litigation. September 6, 2018 – Bank of America Merrill Lynch 2018 Media, Communications & Entertainment Conference Defendants next appeared at the Bank of America Merrill Lynch 2018 Media, Communications & Entertainment Conference, on September 6, 2018. Defendant Wallace and Gleason, gave a presentation to investors, analysts, and market participants on behalf of Uniti. When questioned about the Aurelius Litigation, Wallace acknowledged the impact of the litigation on Uniti, but again insisted that Windstream would receive a favorable ruling: But I think it also – it is also the lawsuit relative to us. And because it would be – with the litigation overhang there and then there’s always some risk, I’ll admit, small, as to what the impact of an unfavorable position could be. Now that said, we fully expect – I believe Windstream fully expects as well, but I think they’re speaking at the conference and I think they’ll affirm it. We fully expect to have a favorable decision. And sooner is better from that standpoint, and I think they fully expect to have a favorable outcome on the court ruling as well. Later when questioned again about the effect of the Aurelius Litigation on the Company, Defendant Wallace stated: “[O]ur story has been pretty consistent. We’ve always felt good about the master lease. We’ve always felt good about the protections in the master lease. We always thought it was a priority payment for Windstream.” October 3, 2018 – Deutsche Bank Leveraged Finance Conference On October 3, 2018, Defendant Wallace gave a presentation to investors, analysts, and market participants at the Deutsche Bank Leveraged Finance Conference where Wallace stated: “I expect that the litigation will be favorably settled here for Windstream, and we’ll get a ruling from the judge pretty soon.” November 1, 2018 – 3Q18 Results Defendants repeated these assurances during the Company’s November 1, 2018 conference call with analysts and investors to discuss Uniti’s 3Q18 financial results. The conference call, which was held after the market closed, was webcast live on the Company’s website. Defendants Kenny Gunderman and Wallace spoke on the call. In his opening remarks, Gunderman again acknowledged the “overhang from the Windstream litigation,” but reiterated “that Windstream [would] receive a favorable ruling.” Later, when again questioned by analysts about any future Windstream ruling, Gunderman reassured analysts that Uniti “anticipate[d] a favorable ruling” and that he was “very confident in that and believe[d] it[] [was] coming.” The statements referenced above in ¶¶179-180, 183-192, 194-198 were each false and misleading when made in that each omitted and/or misrepresented material facts. The true facts, which were then known to or recklessly disregarded by Defendants were: (a) Defendants’ claim that they had done a “[f]airly exhaustive analysis of” the Master Lease failed to disclose that the Spin-Off constituted a sale-leaseback transaction between Uniti and the Windstream Operating Subsidiaries in direct violation of Windstream’s Indenture’s restrictive covenants. ¶¶56-86. Indeed, Fletcher admitted that he knew at the time that “if the transferor . . . signed the master lease, that would have been a clear violation of the indenture at issue in this case.” ¶86. (b) Contrary to Defendants’ representations, Uniti’s lease payment from Windstream was not “very, very, safe” nor did the Master Lease have protections that safe- guarded the Company “in all cases.” Instead, Defendants were aware that the Master Lease was a financing arrangement. This not only resulted in a breach of §4.09 of the Indenture, but it also carried with it the significant risk that if Windstream filed for bankruptcy protection, and was able to successfully recharacterize the Master Lease as a financing, Uniti’s claim in a Windstream bankruptcy to rent payments would be almost entirely unsecured and structurally subordinated to other creditors’ claims. ¶¶122-138. (c) Defendants were not in fact “confiden[t]” in Windstream’s management because they knew that Windstream executives, who were on both sides of the Spin-Off deal, structured the Master Lease as a workaround to the Indenture’s prohibition of sale-leaseback transactions, and knew that the Spin-Off was in violation of that covenant. ¶¶56-86, 102- 110. Indeed, as early as 2013, while still contemplating the structure of the Spin-Off, Windstream’s then CFO Tony Thomas wrote an email to Robert Gunderman highlighting their knowledge of the Indenture’s restrictions on sale-leaseback transactions. ¶75. (d) The Master Lease was, in fact, far from “well-structured” or “well- crafted” as Defendants concealed that: (i) the Spin-Off was a prohibited sale-leaseback transaction and could be successfully challenged by a Noteholder, such as Aurelius; and (ii) the Master Lease was a financing, which in the event of a Windstream bankruptcy, Uniti’s most significant driver of revenue – rent from Windstream pursuant to the Master Lease – would effectively disappear or be materially reduced. ¶¶56-86, 122-138. (e) Despite Defendants’ repeated assurances that Aurelius’s claim against Windstream was “manufactured,” and that it was “highly confident” that Windstream would receive a “favorable ruling” or “favorable outcome” from the court, Defendants knew all along that the Spin-Off constituted a sale-leaseback transaction between Uniti and the Windstream Operating Subsidiaries in direct violation of Windstream’s Indenture’s restrictive covenants and that a risk of Aurelius succeeding in its notice of default was more than theoretical. ¶¶56-86. Indeed, throughout the Class Period, internal documents demonstrate that Defendants were aware of and concerned about the appearance that the Master Lease violated the terms of the Indenture. Specifically, prior to the Spin-Off, Windstream and Uniti executives, including Individual Defendants, were told to not go into detail unless “pressed” about the structure of the Spin-Off and to give general canned responses. ¶¶92-94, 118-121. Defendants’ false and misleading statements assuring the market that the Spin- Off did not violate Windstream’s debt covenants and downplaying the risk of a Windstream default to the Master Lease if in fact it was determined that the Spin-Off did violate the debt covenants, had their intended effect: Following the negative reaction to the initial news of a potential default by Windstream of its debt covenants, Uniti’s stock price reversed its decline over the following 15 months. From October 4, 2017 through February 15, 2019, Uniti’s stock price increased by over 22%, from $15.56 to $19.98 per share. February 15, 2019 –Judge Rules in Favor of Aurelius, Finding that the Spin-Off and the Master Lease Transaction Breached the Indenture; Uniti Stock Tumbles in Response On February 15, 2019, U.S. District Court Judge Jesse M. Furman – the judge presiding over the Aurelius Litigation – entered his Findings of Fact and Conclusions of Law (which followed a bench trial held in July 2018), finding that the Spin-Off and execution of the Master Lease violated the Indenture. Specifically, Judge Furman found that, given the realities of the structure of the transaction and Master Lease, the Windstream Operating Subsidiaries “leased” the Transferred Assets in violation of the terms of the Indenture, notwithstanding that Windstream Holdings was the Master Lease signatory: “In short, the [Operating] Subsidiaries hold the Transferred Assets – that is, they have the right to use and occupy the property – for a fixed term in exchange for consideration. Thus, the labels used by the parties to the [Spin-Off] aside, the [Operating] Subsidiaries ‘lease[d]’ the Transferred Assets within the ordinary meaning of the term ‘lease.’”49 49 Aurelius Litigation, ECF No. 245 (“Aurelius Litigation Order”) at 33. In addition, the court found that Windstream’s efforts to issue New Notes to create a majority to outvote Aurelius and waive the default was improper and violated the Indenture. Judge Furman stated: “[T]he Court holds that some or all of the New Notes issued in connection with the 2017 Transaction – enough, in any event, to deprive the consenting Noteholders of a majority – did not qualify as ‘Additional Notes’ under the Indenture and, thus, the 2017 Transaction [i.e., the Notes exchange] did not succeed in waiving or ‘curing’ the default caused by the [Spin-Off].”50 As a result of these findings, the Court declared over $300 million of Aurelius Notes due and payable.51 On February 19, 2019, the first trading day after Judge Furman’s ruling, Uniti issued a statement about it and the impact the ruling had on the Company’s business and the Master Lease. In that statement, Defendant Kenny Gunderman stated: “‘It is our understanding that Windstream intends to take action and pursue all available options. The validity of our master lease agreement with Windstream was not impacted by the ruling, and access to our network remains critical to Windstream’s operations and its ability to serve its customers.’” Gunderman also assured Uniti’s investors that: “‘We are focused on working through the challenges related to the court ruling and continue to be committed to serving the interest of our stockholders, our customers, and our other partners.’” This shocking news, which was at least in part a materialization of the risk concealed by Defendants’ material misrepresentations and omissions alleged herein, caused 50 Id. at 51. Uniti’s stock price to drop on February 19, 2019, an astounding 37%, on a trading volume of nearly 49 million shares, nearly 25 times Uniti’s average daily trading volume during the Class Period. On February 21, 2019, Fitch Ratings (“Fitch”) and Standard & Poor’s Global Ratings (“S&P”) both downgraded Uniti’s credit ratings, and revised their outlooks to “Negative” citing Judge Furman’s February 15, 2019 ruling as the catalyst for the changes. On this news, Uniti’s stock price continued its free fall, with over 24 million shares trading, closing at $9.99, a loss of another 18%. Judge Furman’s decision – and the $300 million judgment – also had a significant negative impact on Windstream’s ability to operate as a going concern. On February 25, 2019, Windstream Holdings (and all its subsidiaries) filed for Chapter 11 bankruptcy protection. As a result of Windstream’s bankruptcy, Uniti’s stock price declined more than 9% from a close of $10.60 on February 25, 2019 to a close of $9.64 on February 28, 2019. On February 27, 2019, the Company issued a statement commenting on Windstream’s bankruptcy filing. Defendant Kenny Gunderman told investors: “‘We continue to closely monitor Windstream’s situation, and believe it will successfully navigate through the reorganization process. We were pleased to see Windstream state its intent to continue operations in the ordinary course and pay in full its service providers.’” March 4, 2019 – Notification of Late Filing Then, on March 4, 2019, the Company filed a “Notification of Late Filing” on Form 12b-25 with respect to Uniti’s Annual Report on Form 10-K for the fiscal year ending December 31, 2018 (“2018 Form 10-K”). In it, the Company informed the SEC that it was unable to timely file its 2018 Form 10-K because: Certain subsidiaries of the Company are the landlords under a long- term exclusive triple-net lease (the “Master Lease”), pursuant to which these subsidiaries lease telecommunications network assets, including fiber and copper networks and other real estate (the “Distribution Systems”) to Windstream Holdings, Inc. (“Windstream Holdings” and, together with its subsidiaries, “Windstream”). For the year ended December 31, 2018, 68.2% of the Company’s revenues were derived from leasing the Distribution Systems to Windstream Holdings pursuant to the Master Lease. On February 25, 2019, Windstream filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York. As of the prescribed time for filing the Annual Report, the Company and its auditors, PricewaterhouseCoopers LLP (“PwC”), are continuing to assess the impact of Windstream’s bankruptcy petition on the Company’s financial statements. Based on currently available information as of the date of this Form 12b-25, PwC expects its audit opinion for fiscal year ended December 31, 2018 will include an explanatory paragraph indicating there is substantial doubt as to the Company’s ability to continue as a going concern. If the Company receives a going concern opinion, it would constitute an event of default under the Company’s credit agreement, and the Company is seeking a waiver from its lenders. The Company has taken, and intends to continue to take, actions to ensure that it can continue to operate as a going concern as a result of Windstream’s bankruptcy petition. The Company believes that on or before the fifteenth calendar day following the prescribed due date of the Annual Report it will be able to finalize its financial statements reflecting the impact of Windstream’s bankruptcy petition. March 2019 – Full Year 2018 Results; Defendants Continue to Conceal that the Master Lease was a Financing The filing of Windstream’s bankruptcy on February 25, 2019 triggered concerns that Windstream would seek to recharacterize the Master Lease as a financing – a risk that Defendants knew of throughout the Class Period, but failed to disclose the true extent of to investors. Defendants continued to conceal that the Master Lease was a financing and downplay the extent of the risk posed by recharacterization even after Windstream’s bankruptcy filing. On March 18, 2019, Defendants filed with the SEC Uniti’s 2018 Form 10-K, signed by Defendants Kenny Gunderman and Wallace. The 2018 Form 10-K, disclosed that Uniti’s auditors, PricewaterhouseCoopers LLP, have “substantial doubt as to whether [Uniti] could continue as a going concern within one year after the date the financial statements are issued as a result of Windstream’s bankruptcy petition and its potential uncertain effects on the Master Lease.” The 2018 Form 10-K, however, provided financial statements that did not include any adjustment that might be necessary if the Company was unable to continue as a going concern, underscoring Defendants’ message, and the market’s expectation, that Windstream’s bankruptcy was not adversely impacting Uniti. The 2018 Form 10-K also stated: In bankruptcy, Windstream has the option to assume or reject the Master Lease. Because the Master Lease is a single indivisible Master Lease with a single rent payment, the lease must be assumed or rejected in whole and cannot be sub-divided by facility or market. A significant amount of Windstream’s revenue is generated from the use of our network included in the Master Lease, and we believe that the Master Lease is essential to Windstream’s operations. Furthermore, Windstream is designated as a “carrier of last resort” in certain markets where it utilizes the Master Lease to provide service to its customers, and Windstream would require approval from the Public Utility Commissions and the Federal Communications Commission to cease providing service in those markets. As a result, we believe the probability of Windstream rejecting the lease in bankruptcy to be remote. On March 20, 2019, at 4:15 p.m. Eastern Time, Defendants held a conference call with analysts and investors to discuss Uniti’s 2018 financial results. The conference call was also webcast live on the Company’s website. Defendants Kenny Gunderman and Wallace spoke on the call. Gunderman, in his prepared remarks, addressed Windstream’s bankruptcy and its impact on Uniti’s business and operations. Gunderman told investors that the Company had the “ability to navigate the Windstream bankruptcy proceedings without having to raise external capital” and will continue “to invest uninterrupted” in its business platforms: As most of you are aware, Windstream recently received an unfavorable court ruling related to its Aurelius lawsuit. As a reminder, Uniti was not a party to this litigation and the validity of our master lease agreement was not challenged by the court’s ruling. Subsequently, on February 25, Windstream commenced voluntary restructuring proceedings under Chapter 11 of the U.S. Bankruptcy Code. Obviously, we’re disappointed by this outcome, but we’ve been contingency planning with our board and advisers for this possibility for some time . . . . As a result and as a result of several other steps we’re taking, we believe we now have the ability to navigate the Windstream bankruptcy proceedings without having to raise external capital and still be able to invest uninterrupted in our premier fiber, tower and leasing businesses, including potentially pursuing smaller M&A transactions. We feel confident that Windstream will successfully restructure its balance sheet and remain focused on operating its business in normal course in the meantime. It is in all parties’ interest to minimize disruption and service to customers, and we’re pleased that Windstream has consented to remain current with all critical vendors, including Uniti. Our network leased to Windstream is vitally important to Windstream, and we fully expect our commercial relationship to remain in place during and after bankruptcy. Also as Uniti and Windstream have been saying for almost 2 years now, we remain open to pursuing mutually beneficial transactions between the 2 companies that could be credit enhancing for Windstream and value accretive to Uniti. The volatility in our stock price since the court’s ruling and subsequent bankruptcy filing are largely related to an impression that our relationship with Windstream will be impaired to the detriment of our stockholders. We disagree with this impression. In fact, we believe that our relationship could be strengthened to both companies’ benefit. At the conclusion of the bankruptcy proceedings, we are optimistic that Windstream will not only be a stronger tenant, which will be beneficial to Uniti, but we believe our commercial relationship could be enhanced. During the March 20, 2019 conference call, Defendants addressed several questions from analysts concerning Windstream’s bankruptcy and its impact on Uniti’s status as a REIT: [Philip Cusick – JPMorgan:] That sort of leads me to a different question. Is there a risk? And what would the argument be at this point where Windstream bond holders are trying to come after you and collapse the whole structure? How do you address that with potential partners as you talk to them and sort of maintain momentum through this process? . . . [Defendant Kenny Gunderman:] But I would say is [sic] we find that extremely unlikely and what we have found so far in the process – the bankruptcy process, is basically what we would expect, which is that all parties, including Windstream from what we hear, from creditors, regulators is that there is a very strong focus on maintaining operations, no disruption of service, continue to provide service to customers and meet the regulatory obligations, which is a rational point of view. That’s what all parties should be focused on, and we think that’s going to continue throughout the process. And so when we engage with our customers and our vendors and our potential M&A counterparties and we talk about the facts related to the bankruptcy and what’s really going on, I think folks are reassured about the ultimate outcome. It’s less a question of uncertainty at that point and more just a question of timing. Defendant Kenny Gunderman also emphasized during his discussions with analysts on the March 20, 2019 conference call that Uniti’s partnership with Windstream would be stronger as a result of Windstream’s bankruptcy and that there was no real risk that Windstream would default on its obligations under the Master Lease: [Philip Cusick – JPMorgan:] Okay. And you seem really constructive on the potential outcome and the partnership with Windstream being strengthened on the other side of this, but do you anticipate some sort of recharacterization of the REIT, the lease and the payments being substantially different than they are today? Or is your base case that we sort of go from the current payment structure and then maybe assets and payments change, but only on sort of differences in the asset mix? [Defendant Kenny Gunderman:] Yes. . . . So – and I think in a nutshell, what I’d say, is our view hasn’t changed from what it was before the filing or before the Aurelius ruling a year ago or 2 years ago. And what I mean by that is, we’ve always said that our network that we’re leasing to Windstream is mission critical. It’s mission critical to their business and the lease arrangement between the 2 of us is a master lease and is structured explicitly to anticipate a bankruptcy as a downside scenario. And in that scenario, it has to be accepted or rejected in its entirety. We can’t be forced to negotiate. And so we’ve always said that we believe a scenario of rejection of the lease is remote because of the significance of the network to their business. We’ve also said that we would be open to – Uniti would be open to mutually-beneficial negotiations to enhance the lease to both of our benefit, consensual negotiations. So you take that as the backdrop, we still believe a lot of those things today. And when you consider the significance of the network to the operations of Windstream to the cash flow generation, capability to satisfy creditors to the regulatory obligations, we just don’t see a risk of rejection of the lease, and we do think that there are some opportunities to enhance it and those opportunities are similar to the ones we’ve talked about in the past. Nothing new there. Your point about some of the – what we would characterize as more frivolous claims of recharacterization or fraudulent conveyance and other things. We’ve heard of those types of claims over the past couple of years or so. And as you would expect, we are – we have a point of view on those and believe they are not grounded in strong basis. We believe, we have a strong defense against any of those and don’t believe they’re going to be – they would ever be successful. And so ultimately, we believe that the lease will be accepted in its current form or accepted in some form that is changed to a mutually beneficial way for Uniti and for Windstream. May 9, 2019 – 1Q19 Results On May 9, 2019, Defendants issued a press release announcing Uniti’s financial results for 1Q19. That same day, at 4:15 p.m. Eastern Time, Defendants held a conference call with analysts and investors to discuss Uniti’s 1Q19 financial results and the state of its business. Defendant Kenny Gunderman repeated his statement that the Company did not need to raise external capital to “navigate the Windstream bankruptcy proceedings”: Windstream continues to remain current on its monthly lease payments, which have been paid in full and on time through May. We continue to be open to pursuing mutually beneficial outcomes with Windstream that could potentially be credit-enhancing to Windstream and its stakeholders and value accretive to Uniti. We still believe we have the ability to navigate the Windstream bankruptcy proceedings without having to raise external capital and still be able to invest in all of our valuable business units, including potentially pursuing smaller M&A transactions. We remain confident that Windstream will successfully emerge from the restructuring process and continue to remain focused on operating its business in normal course, resulting in a potentially stronger tenant and a commercial relationship that could be enhanced. On May 9, 2019, Uniti filed its 1Q19 Form 10-Q, signed by Defendant Wallace. The 1Q19 Form 10-Q repeated Defendants’ assertions that they believed “the probability of Windstream rejecting the Master Lease in bankruptcy to be remote,” and “[b]ased on our analysis, including consideration of the timing of [Windstream’s] requirements to make post-petition lease payments under U.S. bankruptcy law, we believe that we have adequate liquidity to continue to fund our operations for twelve months after the issuance of the financial statements.” May 14, 2019 – JPMorgan Global Technology, Media and Communications Conference A few days later, on May 14, 2019, Bill DiTullio (then Uniti’s Director of Finance and Investor Relations) and Defendant Wallace gave a presentation to investors, analysts, and market participants at the JPMorgan Global Technology, Media and Communications Conference on behalf of Uniti. In discussing the Company’s relationship with Windstream and the impact of Windstream’s bankruptcy to Uniti, Wallace emphasized that there was no real risk of Windstream defaulting on the Master Lease: The bankruptcy process so far has played out pretty much as we expected. . . . [T]here is a recognition that the Windstream network that we leased to them is mission-critical, so that’s good to – that everybody has that understanding, which we’ve always have [sic] said that its mission-critical to their operations. And as I’ve – as we’ve talked to even investors and even this morning. I think there’s a recognition more and more that it’s in everybody’s interest to proceed through the bankruptcy process as quickly as possible. Defendant Wallace also told investors at the conference that Windstream’s bankruptcy was actually a positive event for Uniti: I think once Windstream emerges in kind of the base cases, the lease either gets assumed as is or gets consensually renegotiated on good terms for both parties. I think we’re pretty optimistic again about how that plays out in terms of Uniti’s long-term success here. And by that, what I mean is that expecting Windstream to come – to emerge from bankruptcy lower leveraged and there – and also – and therefore, a better credit profile, I think that’s going to enhance the cost of capital for Uniti Group significantly. May 29, 2019 – Cowen Technology, Media & Telecom Conference On May 29, 2019, Bill DiTullio and Defendant Wallace gave a presentation to investors, analysts, and market participants at the Cowen Technology, Media & Telecom Conference on behalf of Uniti. In discussing the impact of Windstream’s bankruptcy on Uniti, DiTullio, Uniti’s Director of Finance, stated that “we really haven’t seen an impact to our business and we continue to operate the business as usual.” June 5, 2019 – REITWeek 2019 Defendants again appeared at NAREIT’s annual REITWeek, on June 5, 2019 on behalf of Uniti. In response to a question from David Barden from Bank of America Merrill Lynch about how Windstream’s bankruptcy was affecting the Company, Defendant Kenny Gunderman repeated the refrain that Uniti was operating without impact from Windstream’s bankruptcy and again emphasized Windstream’s bankruptcy was actually a positive thing for the Company: And so we’re now a couple of months into the filing, and I would say that I’m very, very pleased with the preparation that we had done in advance and I’m [very] pleased with our execution on our plan since then. And so as it relates to the 3 operating businesses that we have or the 3 businesses that we have, we’ve really had no disruption of service. We’ve had no hiccups. We’ve just continued to move along, investing in our business uninterrupted at Uniti Fiber, Uniti Towers and Uniti Leasing. And so I’m very pleased with our progress there, both organic growth and even some inorganic growth. * * * So we’ve been pleased at the desire to move quickly. We’ve been pleased that the various constituents have universally recognized the mission- critical nature of the network that we provide to Windstream . . . . At some point, this process, the bankruptcy process is going to be behind us sometime in the next couple of quarters, several quarters. And when that day comes, we’re going to emerge as a stronger company and we’re going to have a stronger, large tenant in Windstream, and so we’re looking forward to that day. Defendant Kenny Gunderman also told attendees at REITWeek that the possibility of Windstream rejecting the Master Lease was “irrational”: [David Barden – Bank of America Merrill Lynch:] But just to your point on the concept of lease rejection, Windstream has a legal and regulatory obligation as a carrier of last resort to provide services in the states in which it operates. Is a rejection even a theoretical possibility? [Defendant Kenny Gunderman:] We don’t think so. We’ve always said that, and back to your earlier comment, I think if you go back and listen to comments that Windstream made before the circumstances that they’re in now, I think they would also say that. So I think talking about it is – you kind of get further and further out into the world of irrational by even speculating on it. . . . So again, all of that is what we would expect, and I think that’s going to play out as we expected. Defendant Kenny Gunderman also repeated the statement that the “lease” with Windstream was a “true master lease” and that it was “specifically designed for a bankruptcy scenario to protect [Uniti].” June 20, 2019 – Wells Fargo Securities 2019 5G Forum On June 20, 2019, Defendants caused Uniti to file a Form 8-K with the SEC. The Form 8-K attached a copy of an investor presentation to be given at the Wells Fargo Securities 2019 5G Forum on June 20, 2019. In that presentation, Defendants represented that the Company’s “[l]iquidity [would] [b]uild [t]hroughout 2019”. The statements referenced above in ¶¶212-225 were each false and misleading when made in that each omitted and/or misrepresented material facts. The true facts, which were then known to or recklessly disregarded by Defendants were: (a) Despite Defendants’ repeated assurances that the validity of Uniti’s Master Lease agreement with Windstream was not impacted by Judge Furman’s ruling in the Aurelius Litigation and that there was no “risk of rejection” of the Master Lease, Defendants knew that Windstream could successfully recharacterize the lease as a financing arrangement, which would result in a breach of §4.09 of the Indenture and cause Uniti’s claim in bankruptcy to Windstream’s rent payments to be entirely unsecured and structurally subordinated to other creditors’ claims. ¶¶122-138. (b) The Master Lease was not “essential” or “critical” to Windstream’s operations. Instead, Windstream did not intend and, in fact, could not renew the Master Lease because the depreciating nature of the transferred assets caused Windstream’s copper assets to be economically obsolete on or around 2025 –five years before expiration of the initial Master Lease term. ¶¶122-138. As detailed by Duff & Phelps’s depreciation reports, as early as 2011 and 2012, the remaining economic life of Windstream’s copper wire networks was between 3.9 and 7.7 years, not the 7 to 40 years as Defendants represented to investors. ¶131. (c) The Company did not, in fact, have the “ability to navigate the Windstream bankruptcy proceedings without having to raise external capital” should Windstream challenge the validity of the Master Lease in bankruptcy, putting two-thirds of Uniti’s revenue in jeopardy – a risk Defendants downplayed but knew to be more than a “remote” possibility that was “irrational.” (d) As a result of the significant possibility that Windstream would seek to recharacterize the Master Lease as a financing arrangement, Uniti could not in fact “emerge as a stronger company” without any “hiccups” or “impact” to its business from Windstream’s bankruptcy. Instead, if Windstream successfully recharacterized the lease, Uniti’s claims in a Windstream bankruptcy to rent payments would be inferior to other creditors’ claims and as a result Uniti’s most significant driver of revenue – rent from Windstream pursuant to the Lease – would effectively disappear or be materially reduced. ¶¶122-138. (e) The claims of recharacterization were not “frivolous” and the Master Lease with Windstream was not a “true master lease.” Instead, Defendants knew that Uniti’s determination that the Master Lease as a “true lease” depended on false and grossly inflated information about the useful life of the primary leased asset – copper wire. ¶¶81-85, 122- 138. In truth, the transferred assets did not have a useful life beyond the initial term of the Master Lease and the first renewal. Id. Indeed, Skadden recognized that the IRS could argue that the proposed lease was merely a financing arrangement and that the purported lessor, Uniti, was, in substance, a secured creditor that held no equity interest in the property. ¶136. June 24, 2019 – Defendants Announce $300 Million Note Offering, Admitting that External Capital was Necessary for Uniti to Navigate Windstream’s Bankruptcy Despite Defendants’ repeated assertions that they did not have any liquidity concerns, and would not need to raise external capital to fund Uniti’s operations, on June 24, 2019, after the close of the market, Defendants caused the Company to issue a press release announcing a $300 million aggregate principle amount of exchangeable senior notes due 2024, with an option to purchase an additional $45 million aggregate principle amount of exchangeable senior notes during a 13-day period beginning on, and including, the first day on which the exchangeable notes are issued. This news, which was a materialization of the risk that Windstream’s bankruptcy was not impacting Uniti’s business concealed by Defendants’ misrepresentations and omissions alleged herein. This information caused Uniti’s stock price to fall more than 10% from the closing price on June 24, 2019, closing at $9.38 per share on June 25, 2019, with more than 10 million shares trading, five times the average daily trading volume during the Class Period. POST-CLASS PERIOD REVELATIONS On June 28, 2019, U.S. Bank and UMB Bank, trustees for $1.1 billion in Windstream bonds, asked the bankruptcy court to order that Windstream cease its monthly payment to Uniti under the Master Lease. The Trustees asserted that the Master Lease was really a disguised loan and that such payments could not continue during Windstream’s bankruptcy. Defendant Kenny Gunderman responded to the Trustees’ assertions on July 1, 2019 reiterating his confidence that the Master Lease was a “true lease,” stating that Windstream “‘must continue to pay rent in order to maintain access to the network – otherwise it will not be able to operate its business.’” His statement continued: “‘This latest effort by out-of-the-money junior creditors of Windstream to extract value from Uniti does nothing to change that essential fact . . . [W]e believe that the lease is a true lease and will be respected and enforced as such, and we will vigorously contest any argument to the contrary.’”52 On July 25, 2019, Windstream initiated the Adversary Proceeding against Uniti in connection with its bankruptcy action. In the Adversary Proceeding, Windstream argued that the Master Lease was not a true lease at all – but was instead a disguised financing. The complaint Windstream filed in the Adversary Proceeding lays out the scheme that Windstream and Uniti participated in to effectuate the Spin-Off – including the back-filled financial terms of the Master Lease through the “negotiation” of above-market lease payments based on unsupportable and unreasonable projections of copper’s useful life (and thus the value of all the assets transferred). 52 Andrew Scurria, Windstream Creditors Want Uniti Rent Stopped, The Wall Street Journal (July 1, 2019), https://www.wsj.com/articles/windstream-creditors-want-uniti-rent-stopped-11561760927. The allegations in the Adversary Proceeding laid bare the fact that Defendants knew that the Master Lease was a financing and could be recharacterized as such in the event of Windstream bankruptcy. On March 2, 2020, on the eve of trial in the Adversary Proceeding, Windstream and Uniti announced that they had reached an agreement in principle to resolve the dispute. Nevertheless, the damage inflicted on Uniti’s investors by Defendants’ false and misleading statements, and material omissions, was done. ADDITIONAL EVIDENCE OF SCIENTER As alleged herein, Defendants acted with scienter in that Defendants knew, or recklessly disregarded, that the public documents and statements issued or disseminated in the name of the Company, or in their own name, were materially false and misleading; Defendants knew or recklessly disregarded that such statements or documents would be issued or disseminated to the investing public; and Defendants knowingly and substantially participated or acquiesced in the issuance or dissemination of such statements or documents as primary violations of the federal securities laws. Defendants – by virtue of their receipt of, or access to, information reflecting the true facts regarding Windstream and Uniti, their control over, or receipt of, or modification of Uniti’s materially misleading misstatements – were active participants in the fraudulent scheme alleged herein. Defendants knew, or recklessly disregarded, the false and misleading nature of the information which they caused to be disseminated to the investing public. The ongoing fraudulent scheme described herein could not have been perpetrated during the Class Period without the knowledge and complicity, or at least, the reckless disregard, of Uniti and Windstream personnel at the highest levels of those companies. The scienter of both Windstream’s and Uniti’s corporate officers, including Defendants Kenny Gunderman and Wallace can be attributed to Defendant Uniti. The following allegations additionally support a strong inference of scienter. At the time of the Spin-Off, Defendants knew that the Master Lease violated Windstream’s Indenture. Indeed, at a presentation during REITWeek 2015, for analysts and investors, Defendants Kenny Gunderman and Wallace touted their “Deep Familiarity with Sale Leaseback Transactions.” ¶156. This violation of Windstream’s Indenture put Windstream’s future payments to Uniti, totaling nearly $10 billion over 15 years, under the Master Lease, at a heightened risk of default.53 The facts below support Defendants’ knowledge, or reckless disregard, that the structure of the 2015 Uniti Spin-Off and Uniti’s execution of the Master Lease with Windstream Holdings violated – or seriously risked violating – the restrictive covenants in the Indenture:54 (a) Prior to joining Uniti as its CEO, while at Stephens, Defendant Kenny Gunderman, was a long-term advisor to Windstream on various transactions, including the 53 The Master Lease provides that Windstream would pay $650 million per year (and increased to $653.5 million during the first year of the lease), with annual increases of 0.5% per year beginning with the fourth year of the term, for a 15-year term. 54 Defendants, Windstream, and other relevant parties proceeded with the Spin-Off in light of the known risk that the Spin-Off was in violation of the Indenture because they were motivated by the numerous benefits it offered, including: (1) a new position for Defendant Kenny Gunderman as CEO of Uniti; (2) financial flexibility, asset protection, and significant capital for Windstream; and (3) the creation of two options for investment – the Uniti REIT, which was designed for a steady dividend, and the new Windstream (i.e., Windstream Holdings), which was more attractive to growth investors. See §V. structuring of the Spin-Off and the Master Lease. Therefore, he was in a prime position to understand the potential Indenture breach and the risk of default under the Master Lease. ¶56-86; (b) Prior to the Spin-Off, Windstream and Uniti executives, including each of the Individual Defendants, were coached to tell bondholders and credit agencies that there was no issue with a potential Indenture breach, to not to go into detail and that “if pressed” to give general canned responses. ¶¶92-96, 118-121. These facts suggest that prior to the Spin-Off, the Indenture breach was known within Windstream and Uniti and their advisor network, including Fletcher, Defendants Kenny Gunderman and Wallace; (c) Defendants Kenny Gunderman and Wallace were copied on an email dated April 12, 2015 that coached Windstream and Uniti executives to tell investors the reason they structured the Master Lease with Windstream Holding as the lessee (instead of the Windstream Operating Subsidiaries that issued the Notes) was “complex” with “many factors.” This email suggests that Windstream and Uniti executives deflect questions about the use of Windstream’s holding company structure to avoid any discussion about the potential Indenture breach. ¶¶118-121; (d) Defendant Kenny Gunderman earned more than $5 million annually as CEO and President of Uniti following the Spin-Off. Therefore, Gunderman was financially motivated to conceal the Windstream Indenture breach and any resulting risks to Uniti; (e) Windstream Holdings was created at the time the sale-leaseback structure was being contemplated. Windstream Holdings was a shell company that did not have employees or generate the revenue necessary to make lease payments to Uniti. Moreover, accounting records of the Windstream Operating Subsidiaries and Windstream Holding indicate that the Windstream Operating Subsidiaries were the de facto lessee of the Master Lease. The weight of this evidence supported the ruling by Judge Furman in the Aurelius Litigation, and strongly suggests that Defendants knew about Windstream’s Indenture breach and its risk to Uniti at the time of the Spin-Off; and (f) Windstream completely divested its equity interest in Uniti stock shortly after the Spin-Off and prior to the revelation of the alleged fraud and profited handsomely – transferring the remaining 19.6% of Uniti’s common stock to its secured bank creditors in exchange for the retirement of $672 million of aggregate borrowings outstanding under its revolver and to satisfy transaction-related expenses. This fact suggests that Windstream and its advisors, including Fletcher and Defendant Kenny Gunderman, who were paid millions of dollars to consult on the Spin-Off and Master Lease, were financially motivated to conceal the Indenture breach and its risk to Uniti. Defendants had a motive to conceal that the Master Lease and Spin-Off violated Windstream’s Indenture as well as the extent of the risks associated with the 2015 Uniti Spin-Off and the Master Lease from Uniti’s investors. The IRS private letter ruling that permitted Uniti to exist as a REIT in the first place was based in part on Windstream and Uniti’s representation to the IRS that the useful life of the copper wires that made up approximately 80% of the assets to be spun off to Uniti was 30 to 40 years, in contravention of analyses that Windstream possessed at the time and, on information and belief based upon the allegations of Windstream’s complaint in the Adversary Proceeding, in contravention of Windstream’s own accounting policy of depreciating copper wire assets in its Competitive Local Exchange Carrier networks over 20 years. ¶¶122-138. So too was the E&Y analysis of the useful life of the assets to be spun off to Uniti based on inflated and unsupportable projections provided by Uniti. Id. And Uniti knew that these projections were inflated and unrealistic: its own accounting for those assets carried them at a useful life of 7 to 40 years until 2017, when, without explanation, the accounting treatment in its financial statements changed to a useful life of 20 years. A useful life of 20 years or less would not support the “true lease” treatment of the Master Lease, which would in turn jeopardize the tax treatment of Uniti as a REIT. Similarly, Defendants had immediate economic incentives to hide the truth about the Spin-Off and the Master Lease from Uniti investors. Windstream’s financial viability depended on not defaulting on its Notes. And Uniti’s financial viability – as well as the employment and lucrative compensation packages of Defendant Kenny Gunderman at Uniti and Robert Gunderman, his brother, at Windstream – in turn, depended on Windstream’s continued success. If it were publicly disclosed that Windstream violated – or had engaged in a transaction that risked violating – the Indenture, and causing a default, the value of Uniti securities would crater. Moreover, Defendants knew, or recklessly disregarded, that if they publicly identified the true nature of the risk that Windstream was in violation of the Indenture, then they essentially would be inviting Windstream’s noteholders to do exactly what Aurelius did – cause the Indenture Trustee to file a breach of contract action against Windstream. Only by concealing the true nature of these risks could Uniti and Windstream, and the Individual Defendants, hope to possibly avoid the collapse of this “house of cards.” LOSS CAUSATION During the Class Period, as detailed herein, Uniti and the Individual Defendants engaged in a course of conduct that artificially inflated, or artificially maintained, the price of Uniti’s securities and operated as a fraud or deceit on all persons and entities who purchased or otherwise acquired Uniti’s securities during the Class Period. The material misstatements and omissions regarding the Master Lease’s violation of Windstream’s Indenture concealed risks related to the true nature of Spin-Off as violative of Windstream’s Indenture, and it was foreseeable that the value of Uniti’s securities would be adversely affected when the market learned the truth and the concealed risks materialized. When the truth about the Spin-Off and the hidden risks materialized and became known to the market, the price of Uniti’s securities declined precipitously as the prior artificial inflation was removed from the price of the stock. As a result of their purchases and acquisitions of Uniti’s securities at artificially inflated prices during the Class Period, Lead Plaintiffs and other members of the Class suffered a substantial economic loss (i.e., damages under the federal securities laws). The price decline in Uniti’s securities was a foreseeable and direct result of the nature and extent of Defendants’ materially false and misleading statements, and omissions. Thus, the Defendants’ wrongful conduct, as alleged herein, directly and proximately caused the damages suffered by Lead Plaintiffs and the None of the partial disclosures were sufficient on their own to fully remove the inflation from Uniti’s securities, because each only partially revealed the truth and risks associated with the Spin-Off causing a default to Windstream’s debt covenants, and the impact of Windstream’s default on Uniti’s business, that had been concealed from investors. As a result of these partial disclosures of the fraud, the price of Uniti’s stock fell from $24.69 per share at the close of trading on August 2, 2017 (the day before the truth began to enter the market) to $9.38 per share at the close of trading on June 25, 2019 – a 62% decline. Additionally, as a result of these partial disclosures of the fraud, the price of Uniti’s 8.25% bond fell from $103.84 per unit at the close of trading on August 2, 2017 (the day before the truth began to enter the market) to $93.39 per unit at the close of trading on June 25, 2019 – a 10.07% decline. Internal discussions at Uniti and Windstream confirm that this motive to attract investment – while hiding the true nature of the Spin-Off from potential investors – drove Defendants’ false and misleading public disclosures. Before the Spin-Off, Windstream’s Vice President of Capital Markets and Investor Relations instructed executives that were intimately involved with the 2015 Uniti Spin-Off not to go into detail unless “[p]ressed” on why the Master Lease would be implemented with Windstream Holdings – according to an August 2014 email sent in the midst of seeking required regulatory approval of the transaction. ¶¶92-94. And at Uniti, Defendants Kenny Gunderman’s and Wallace’s role were to “reinforce the message” about the viability of the 2015 Uniti Spin-Off. Even then, the “talking points” counseled to actively avoid any discussion of the existential risks to Windstream and Uniti that the Spin-Off and Master Lease posed, and that Defendants had concealed. ¶¶118-121. The truth and concealed risks materialized through a series of disclosures as detailed below. The following price declines in Uniti’s securities are not necessarily comprehensive since fact and expert discovery are not complete. These price declines in Uniti’s securities were due to firm-specific, fraud-related disclosures and not the result of market, industry, or firm-specific non-fraud factors. A. Partial Disclosure – August 2017 As detailed in ¶168, on August 3, 2017, Windstream announced that it was eliminating its dividend payment to its investors. This caused the price of Uniti’s stock to immediately and dramatically decline. As a result of Windstream’s disclosure, the price of Uniti’s stock fell more than 8% on August 3, 2017 on a volume of more than 4 million shares to close at $22.57 per share, and another nearly 4% on August 4, 2017 to close at $21.84, with over 7 million shares trading that day. On August 3, 2017, Defendants, in an attempt to reverse the decline in Uniti’s stock, made false statements reassuring the market that despite Windstream’s elimination of its dividend, its lease payments from Windstream were “very, very safe.” ¶169. On August 8, 2017, Defendants again falsely reassured the market that the lease payment from Windstream was not in jeopardy and that the Master Lease had safeguards to protect the Company “in all cases.” ¶171. Uniti’s stock price, however, continued its collapse falling more than 12% between August 8 and August 11, 2017 as the market absorbed this information, closing on August 11, 2017 at $19.37 per share. Additionally, partial disclosures relating to the default of Windstream’s debt covenants caused by the Spin-Off began to enter the market during August 2017 when rumors circulated that the Spin-Off violated Windstream’s debt covenants. ¶172. This information also caused Uniti’s stock price to fall during August 2017. In contrast to the decline in Uniti’s stock, the MSCI US REIT Index, which includes Uniti, remained flat. Analysts tied the declines in Uniti’s stock price to news about Windstream’s business and rumors that the Spin-Off violated Windstream’s debt covenants putting it in default of its Indenture. On September 19, 2017, Jennifer Fritzsche of Wells Fargo Securities issued a report noting: There are a couple short reports circling that question UNIT’s original REITco spin. The questions center around part of the transfer of WIN’s ownership in UNIT shares a few years back to a third-party entity. At the time, WIN used the proceeds of this sale to lower its borrowings under its outstanding revolver. This short report is arguing that WIN violated the debt agreement as deals such as this are supposed to be done with 75% cash or more. It is our understanding (although we have not seen all the reports) that the majority of the covenant review shops do not view this as a gray area of concern as these assets were done from an unrestricted subsidiary of WIN and were used to pay down debt (through the revolver). B. Partial Disclosure – September 25, 2017: Aurelius Notice of Default Then, Windstream filed a Form 8-K, after market close on September 25, 2017, disclosing that it had received a “purported notice of default” from Aurelius claiming that the Spin-Off violated Windstream’s debt covenants. As alleged in ¶177, Windstream reassured its investors, as well as Uniti’s investors, that no such default had occurred. Analysts tied the disclosure of an alleged default in Windstream’s debt covenants caused by the Spin-Off to the decreased price of Uniti stock. JPMorgan analyst, Philip Cusick, noted that: Uniti shares have fallen 40% to $14.66 (vs SPX +2%) since reporting in-line 2Q17 earnings on August 3rd, driven by fears surrounding the stability of the Windstream business and the viability of the WIN/UNIT spin structure. Windstream shares have fallen 52% in the same period. In the last two weeks news surrounding the S&P downgrade on September 19th and Windstream’s dispute with creditors have boosted fears even more. While we initially defended Uniti shares on the premise that the company’s lease with Windstream should be advantaged in or out of bankruptcy, today we downgrade Uniti to a Neutral as the theme of Windstream’s distress continues to increase in volume. Although we expect UNIT to report in-line earnings on November 2, we believe the equity could weaken further before its relationship with WIN is confirmed. Due to elevated risk and volatility associated with the companies we downgrade UNIT to Neutral and lower our price target to $16 from $27 based on a higher cost of capital (discount rate now 10% vs. 8% previously). SunTrust Robinson Humphrey’s analyst, Greg P. Miller, also reported, “Under pressure since WIN cut its dividend, last week’s disclosure that a 25%WIN noteholder issued the company a notice of default alleging breach of the Sale and Leaseback covenant two years ago from the spin-off that added to the UNIT sell-off.” As a result of this partial disclosure, the price of Uniti’s stock declined more than 10% on a trading volume of nearly 12 million shares to close at $15.66 per share on September 26, 2017, and another 5% on September 27, 2017 to close at $14.73 per share. In contrast to the decline in Uniti stock, the MSCI US REIT Index increased by 0.13% on September 26, 2017 and decreased by .87% on September 27, 2017. Defendants’ continued false and misleading statements, and material omissions, that the Master Lease was “well- crafted” and the claims of default “manufactured,” made in the following 15 months, however, maintained the artificial inflation in the price of Uniti’s securities. ¶¶179-180, 183- 192, 194-198. C. Partial Disclosure – February 15, 2019: Judge Furman’s Findings of Fact After the close of the market on February 15, 2019, another partial disclosure was made. As described in ¶¶201-204, Judge Furman, who presided over the trial between Windstream and Aurelius concerning whether the Spin-Off violated Windstream’s debt covenants, issued his ruling determining that the Spin-Off did violate Windstream’s Indenture, and finding that a $300 million judgment should be entered against Windstream. As a result of this information, the price of Uniti stock declined more than 37% on a trading volume of almost 49 million shares to close at $12.51 per share on February 19, 2019, the first trading day after Judge Furman’s decision was issued. In contrast to the decline in the price of Uniti’s stock, the MSCI US REIT Index increased by .13% that day. JPMorgan’s analyst agreed that Uniti’s stock suffered as a result of Windstream’s legal issues: Although we believe Uniti will eventually be seen as an important infrastructure provider with uniquely structured partnerships, as long as the Windstream process is in question, UNIT shares are likely to trade poorly as Windstream’s lease payment supplies the cash for Uniti’s $2.40 ($422m) annual dividend. We downgrade Uniti Group to Underweight from Neutral, and reduce our Dec-19 price target to $16 from $23. As analysts at RBC Capital Markets succinctly stated, “With Windstream planning to appeal the ruling, the continued uncertainty around the Uniti story is extended and legal headlines will likely be the primary driver of stock price movements.” Credit rating agencies likewise reacted negatively. As alleged in ¶207, on February 21, 2019, S&P and Fitch, respectively, downgraded the credit ratings of Uniti as the markets digested the revelations about the Spin-Off. As a direct result, the price of Uniti’s stock fell further, over 18%, to close at $9.99 per share with over 24 million shares trading. Uniti’s stock price continued to fall on February 22, 2019 as the market absorbed this news, losing another 8%, to close at $9.23 per share on heavy trading of nearly 20 million shares. Analysts once again tied the decrease in Uniti’s stock price to news that the Spin-Off violated Windstream’s debt covenants. Morgan Stanley analyst, Simon Flannery, issued a report stating: What’s next for Uniti?: Following the surprise court defeat for key tenant Windstream (~85% of EBITDA, 100%+ of cash flow) last Friday, Uniti’s debt (Exhibit 1) and equity (Exhibit 2) securities have continued to be pressured as investors become increasingly concerned about the financial condition of Windstream. Windstream’s stock has fallen 75% ($37m market cap) since the ruling, while Uniti’s stock is down 54% ($1.7b market cap). We expect the next few weeks (if not days) to be pivotal, as we await news on Windstream’s next steps and Uniti’s upcoming dividend decision. We retain our Underweight rating on Uniti and continue to see risks despite the stock price decline. Between February 19 and June 20, 2019, Defendants continued to disseminate the false and misleading statements and material omissions alleged in ¶¶205, 212-225 that Uniti would be able “to navigate the Windstream bankruptcy proceedings without having to raise external capital,” that the Master Lease was designed structurally to withstand a bankruptcy filing by Windstream, and that Uniti was seeing no impact to its business due to Windstream’s bankruptcy. Defendants’ misstatements and omissions maintained the artificial inflation in the price of Uniti’s securities. D. Partial Disclosure – June 24, 2019: $300 Million Note Offering As detailed in ¶227, after the close of the market on June 24, 2019, Defendants announced a $300 million note offering that included an option to purchase an additional $45 million notes, thus implicitly acknowledging that Uniti’s business was impacted by Windstream’s bankruptcy and, as a result, Uniti could not maintain its business operations without accessing the capital markets, contrary to the Company’s and Defendants Kenny Gunderman’s and Wallace’s repeated representations. See ¶¶212-225. Uniti’s stock price immediately declined closing at $9.38, an over 10% loss from the prior day’s closing price, with over 10 million shares traded. In contrast, the MSCI US REIT Index declined only 1.17% on June 25, 2019. The chart below shows Uniti’s stock price reaction on the dates of partial disclosures and the clear divergence to its peer index: As depicted in the below chart, the price of Uniti’s debt securities also declined as a result of the partial disclosures beginning on August 3, 2017, as news of the corrective disclosures penetrated the market. The price of Uniti’s debt securities diverged widely from the Bloomberg Barclays U.S. Corp. Index: The declines in the price of Uniti’s securities pled herein were a direct result of the nature, extent, and impact of Defendants’ prior material false and misleading statements and omissions, and the materialization of the risks they concealed, being revealed to investors and the market. The timing and magnitude of the price declines of Uniti’s securities negate any inference that the loss suffered by Lead Plaintiffs and other Class members was caused by changed market conditions, macroeconomic or industry factors, or Company-specific factors unrelated to Defendants’ wrongful conduct. APPLICABILITY OF THE PRESUMPTION OF RELIANCE: AFFILIATED UTE AND FRAUD ON THE MARKET PRESUMPTION Lead Plaintiffs allege that throughout the Class Period, Defendants omitted material information of which Defendants were aware or reckless in not knowing. Such statements artificially inflated, or artificially maintained, the price of Uniti publicly traded securities and operated as a fraud or deceit on all persons and entities who purchased or otherwise acquired those securities during the Class Period. Because Defendants chose to speak on the issues described in §VI, they were obligated to not mislead investors or withhold material information. To the extent that the Defendants concealed or improperly failed to disclose material facts with respect to the risks detailed herein, Lead Plaintiffs are entitled to a presumption of reliance in accordance with Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128, 153 (1972). Lead Plaintiffs are also entitled to a presumption of reliance on Defendants’ material misrepresentations and omissions pursuant to the fraud-on-the-market theory because, among other things: (a) Defendants made public representations or failed to disclose material facts during the Class Period; (b) The omissions and misrepresentations were material; (c) The Company’s securities traded in an efficient market; (d) The omissions and misrepresentations alleged would tend to induce a reasonable investor to misjudge the value of the Company’s securities; and (e) Lead Plaintiffs and other members of the Class purchased the Company’s securities between the time Defendants misrepresented or failed to disclose material facts and the time the true facts were disclosed, without knowledge of the misrepresented or omitted facts. At all relevant times, the market for the Company’s securities was efficient for the following reasons, among others: (a) The Company’s securities met the requirements for listing, and were listed and actively traded on the NASDAQ, a highly efficient and automated market; (b) As a regulated issuer, the Company filed periodic public reports with the SEC; (c) The Company regularly communicated with public investors via established market communication mechanisms, including through regular dissemination of press releases on the major news wire services and through other wide-ranging public disclosures, such as communications with the financial press, securities analysts and other similar reporting services; (d) According to the Company’s 2019 Form 10-K, as of March 4, 2020, there were 193,263,981 shares of Uniti stock outstanding, demonstrating a very active and broad market for Uniti common stock; (e) Uniti was followed by several securities analysts employed by major brokerage firm(s) including Stephens, Wells Fargo Securities, Cowen & Co., RBC Capital Markets, JPMorgan, Deutsche Bank and SunTrust Robinson Humphrey, which wrote reports which were distributed to the sales force and certain customers of their respective brokerage firm(s), were publicly available, and entered the public marketplace; and (f) Unexpected material news about Uniti was rapidly reflected in and incorporated into the Company’s stock price during the Class Period. As a result of the foregoing, the market for Uniti securities promptly digested current information regarding Uniti from publicly available sources and reflected such information in the price of Uniti securities. Under these circumstances, all persons and entities who purchased or otherwise acquired the publicly traded securities of Uniti during the Class Period suffered similar injury through their purchase of Uniti securities at artificially inflated and/or artificially maintained prices and the presumption of reliance applies. INAPPLICABILITY OF STATUTORY SAFE HARBOR The statutory safe harbor provided for forward-looking statements under certain circumstances does not apply to any of the allegedly false statements pleaded in this Complaint. The statements alleged to be false and misleading herein all relate to then- existing facts and conditions. To the extent certain statements alleged to be false or misleading are determined to be mixed statements of historical or present information and future information, such statements are not entitled to the safe harbor with respect to the part of the statement that refers to historical or present conditions. To the extent certain of the statements alleged to be false or misleading may be characterized as forward-looking, they were not identified as “forward-looking statements” when made and there were no meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the purportedly forward-looking statements. In the alternative, to the extent that the statutory safe harbor is determined to apply to any forward-looking statements pleaded herein, Defendants are liable for those false forward-looking statements because at the time each of the forward-looking statements were made, the speaker had actual knowledge that the forward-looking statement was materially false or misleading, or the forward-looking statement was authorized or approved by an executive officer of Uniti who knew that the statement was false or misleading when made. CLASS ACTION ALLEGATIONS Lead Plaintiffs bring this action as a class action pursuant to Rule 23 of the Federal Rules of Civil Procedure on behalf of all persons and entities who purchased or otherwise acquired the publicly traded securities of Uniti during the period from April 24, 2015 to June 24, 2019, inclusive, and were damaged thereby (the “Class”). Excluded from the Class are: (i) Defendants; (ii) members of the immediate family of any Defendant who is an individual; (iii) any person who was an officer or director of Uniti during the Class Period; (iv) any firm, trust, corporation, or other entity in which any Defendant has or had a controlling interest; (v) Uniti’s employee retirement and benefit plan(s) and their participants or beneficiaries, to the extent they made purchases through such plan(s); and (vi) the legal representatives, affiliates, heirs, successors-in-interest, or assigns of any such excluded person; (vii) Windstream; and (vii) any person who was an officer or director of Windstream during the Class Period. The members of the Class are so numerous that joinder of all members is impracticable. The Company’s stock is currently actively traded on the NASDAQ, and there were 193,263,981 shares of Uniti stock outstanding as of March 4, 2020. While the exact number of Class members is unknown to Lead Plaintiffs at this time and can only be ascertained through appropriate discovery, Lead Plaintiffs believe that there are thousands of members in the proposed Class. Record owners and other members of the Class may be identified from records maintained by Uniti or its transfer agents and may be notified of the pendency of this action by mail, using the form of notice similar to that customarily used in securities class actions. Common questions of law and fact predominate and include: (i) whether Defendants violated the 1934 Act; (ii) whether Defendants omitted and/or misrepresented material facts; (iii) whether Defendants knew or recklessly disregarded that their statements were false and misleading; and (iv) whether Defendants’ statements and/or omissions artificially inflated and/or artificially maintained the price of Uniti’s securities; and (v) the extent of damages sustained by Class members and the appropriate measure of damages. Lead Plaintiffs’ claims are typical of the claims of the members of the Class as all members of the Class are similarly affected by Defendants’ wrongful conduct in violation of federal law that is complained of herein. Lead Plaintiffs will fairly and adequately protect the interests of the members of the Class and have retained counsel competent and experienced in class action and securities litigation. A class action is superior to all other available methods for the fair and efficient adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the damages suffered by individual Class members may be relatively small, the expense and burden of individual litigation make it impossible for members of the Class to individually redress the wrongs done to them. There will be no difficulty in the management of this action as a class action. CLAIMS FOR RELIEF COUNT I For Violation of §10(b) of the 1934 Act and Rule 10b-5(b) Promulgated Thereunder Against All Defendants Lead Plaintiffs incorporate ¶¶1-279 by reference. This Count is asserted pursuant to §10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder by the SEC, on behalf of Lead Plaintiffs, against Defendants Uniti, Kenny Gunderman, and Wallace. During the Class Period, Defendants carried out a plan that was intended to, and did: (a) deceive the investing public, including Lead Plaintiffs, and the Class; and (b) artificially manipulate the price of Uniti securities. During the Class Period, Defendants disseminated or approved the false statements specified above, which they knew or recklessly disregarded were misleading in that they contained misrepresentations and failed to disclose material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. Defendants violated §10(b) of the 1934 Act and Rule 10b-5 promulgated thereunder in that they: (a) Employed devices, schemes and artifices to defraud; (b) Made untrue statements of material facts or omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or (c) Engaged in acts, practices and a course of business that operated as a fraud or deceit upon Lead Plaintiffs and others similarly situated in connection with their purchases of Uniti securities during the Class Period. Defendants are sued as primary participants in the wrongful and illegal conduct charged herein. Defendants, individually and in concert, directly and indirectly, by the use, means or instrumentalities of interstate commerce and/or of the mails, engaged and participated in a continuous course of conduct to conceal the adverse material information as specified herein. Defendants’ liability arises from the fact that they developed and engaged in a scheme to manipulate the price of Uniti’s securities and were aware of the dissemination of information to the investing public that they knew or recklessly disregarded was materially false and misleading. Defendants had actual knowledge of the misrepresentations, omissions, and deceptive conduct alleged herein, or acted with reckless disregard for the truth. Defendants’ acts were done for the purpose and effect of concealing the scheme alleged herein from the investing public, and to artificially manipulate the market price of Uniti’s securities. Lead Plaintiffs and the Class have suffered damages in that, in reliance on the integrity of the market, they paid artificially inflated prices for Uniti’s securities. Lead Plaintiffs and the Class would not have purchased Uniti’s securities at the prices they paid, or at all, if they had been aware that the market prices had been artificially and falsely inflated by Defendants’ misleading statements and omissions. As a direct and proximate result of Defendants’ wrongful conduct, Lead Plaintiffs and the other members of the Class suffered damages in connection with their purchases of Uniti securities during the Class Period. COUNT II For Violation of §10(b) of the Exchange Act and Rule 10b-5(a) and (c) Promulgated Thereunder Against All Defendants Lead Plaintiffs repeat, incorporate, and reallege every allegation set forth above as though fully set forth herein. This Count is brought solely and exclusively under the provisions of Rule 10b- 5(a) and (c). Accordingly, Lead Plaintiffs need not allege in this Count nor prove in this case that any of the Defendants made any misrepresentations or omissions of material fact for which they may also be liable under Rule 10b-5(b) and/or any other provisions of law. During the Class Period, Defendants carried out a common plan, scheme, and unlawful course of conduct that was intended to, and did: (i) deceive the investing public, including Lead Plaintiffs and the Class; (ii) artificially inflate the market price of Uniti securities; and (iii) cause Lead Plaintiffs and other Class members to purchase Uniti securities at artificially inflated prices. In furtherance of this unlawful plan, scheme, and course of conduct, Defendants employed devices, schemes, and artifices to defraud, and knowingly and/or recklessly engaged in acts, transactions, practices, and courses of business that operated as a fraud and deceit upon Lead Plaintiffs and the Class in connection with their purchases of Uniti securities in violation of §10(b) of the Exchange Act and Rule 10b- 5(a) and (c) promulgated thereunder. Defendants’ fraudulent devices, schemes, artifices, and deceptive acts, practices, and course of business included the creation of Uniti through structuring a Spin- Off from Windstream – which was known at the time of the transaction to be in violation of Windstream’s Indenture – while simultaneously disseminating false and misleading information to the market regarding the “well-structured” nature of the Master Lease and repeated assurances that the Spin-Off would not violate Windstream’s Indenture, which would put Uniti’s business in serious jeopardy, as alleged herein. Lead Plaintiffs and the Class reasonably relied upon the integrity of the market in which Uniti’s securities traded. During the Class Period, Lead Plaintiffs and the Class were unaware of Defendants’ fraudulent scheme and unlawful course of conduct. Had Lead Plaintiffs and the Class known of Defendants’ unlawful scheme and unlawful course of conduct, they would not have purchased Uniti’s securities, or if they had, would not have done so at the artificially inflated prices paid for such stock. As a direct and proximate result of Defendants’ scheme to defraud and such unlawful course of conduct, Lead Plaintiffs and the Class suffered damages in connection with their purchases of Uniti securities during the Class Period. By reason of the foregoing, Defendants violated §10(b) of the Exchange Act and Rule 10b-5(a) and (c) promulgated thereunder and are liable to Lead Plaintiffs and the Class for damages suffered in connection with their purchases of Uniti securities during the Class Period. COUNT III For Violation of §20(a) of the 1934 Act Against Defendants Kenny Gunderman and Wallace Lead Plaintiffs incorporate ¶¶1-298 by reference. During the Class Period, Defendants Kenny Gunderman and Wallace acted as controlling persons of Uniti within the meaning of §20(a) of the 1934 Act. By virtue of their positions and their power to control public statements about the Company, Defendants Kenny Gunderman and Wallace had the power and ability to control the actions of the Company and their employees. Uniti controlled Defendants Kenny Gunderman and Wallace and its other officers and employees. By reason of such conduct, Defendants Kenny Gunderman and Wallace are liable pursuant to §20(a) of the 1934 Act. Defendants Kenny Gunderman and Wallace were provided with or had unlimited access to the Company’s internal reports, press releases, public filings, and other statements alleged by Lead Plaintiffs to be misleading prior to or shortly after these statements were issued, and had the ability to prevent the issuance of the statements or cause them to be corrected. In particular, Defendants Kenny Gunderman and Wallace had direct involvement in and responsibility over the day-to-day operations of the Company and, therefore, are presumed to have had the power to control or influence the particular transactions giving rise to the securities violations as alleged herein. Uniti, in turn, controlled Defendants Kenny Gunderman and Wallace and all of its employees. By reason of such wrongful conduct, Defendants Kenny Gunderman and Wallace are liable pursuant to §20(a) of the Exchange Act. As a direct and proximate result of Defendants Kenny Gunderman and Wallace’s wrongful conduct, Lead Plaintiffs and the other members of the Class suffered damages in connection with their purchases of the Company’s securities during the Class Period. PRAYER FOR RELIEF WHEREFORE, Lead Plaintiffs pray for judgment as follows: A. Determining that this action is a proper class action, certifying Lead Plaintiffs as Class representatives under Rule 23 of the Federal Rules of Civil Procedure, and designating Lead Plaintiffs’ counsel as Class Counsel; B. Awarding compensatory damages in favor of Lead Plaintiffs and the other Class members against all Defendants, jointly and severally, for all damages sustained as a result of Defendants’ wrongdoing, in an amount to be proven at trial, including interest thereon; C. Awarding Lead Plaintiffs and the Class their reasonable costs and expenses incurred in this action, including counsel fees and expert fees; and D. Awarding such other and further relief as the Court may deem just and proper. JURY DEMAND Lead Plaintiffs demand a trial by jury. DATED: May 11, 2020 ROBBINS GELLER RUDMAN & DOWD LLP DEBRA J. WYMAN TING H. LIU s/ Debra J. Wyman DEBRA J. WYMAN 655 West Broadway, Suite 1900 San Diego, CA 92101-8498 Telephone: 619/231-1058 619/231-7423 (fax) [email protected] [email protected] LABATON SUCHAROW LLP CAROL C. VILLEGAS CHRISTINE M. FOX ROSS KAMHI s/ Christine M. Fox CHRISTINE M. FOX 140 Broadway, 34th Floor New York, NY 10005 Telephone: 212/907-0700 212/818-0477 (fax) [email protected] [email protected] [email protected] Lead Counsel for Lead Plaintiffs PATTON TIDWELL & CULBERTSON, LLP GEOFFREY P. CULBERTSON 2800 Texas Blvd. Texarkana, TX 75503 Telephone: 903/792-7080 903/792-8233 (fax) [email protected] Liaison Counsel for the Class Brian Schall THE SCHALL LAW FIRM 1880 Century Park East, Suite 404 Los Angeles, CA 90067 Tel: (424) 303-1964 Email: [email protected] Guillaume Buell THORNTON LAW FIRM LLP 1 Lincoln Street, 25th Floor Boston, MA 02111 Tel: (617) 720-1333 Email: [email protected] Additional Plaintiffs’ Counsel

securities

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UNITED STATES DISTRICT COURT EASTERN DISTRICT OF TEXAS SHERMAN DIVISION SHIQIANG CHEN, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, Plaintiff, vs. Case No.: CLASS ACTION COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS CLASS ACTION JURY TRIAL DEMANDED NQ MOBILE INC., VINCENT WENYONG SHI, ROLAND WU, and ZEMIN XU, Defendants. TO THE HONORABLE COURT: Plaintiff Shiqiang Chen (“Plaintiff”) individually and on behalf of all other persons similarly situated, by Plaintiff’s undersigned attorneys, for Plaintiff’s complaint against Defendants (defined below), alleges the following based upon personal knowledge as to Plaintiff and Plaintiff’s own acts, and upon information and belief as to all other matters based on the investigation conducted by and through Plaintiff’s attorneys, which included, among other things, a review of Securities and Exchange Commission (“SEC”) filings by NQ Mobile Inc. (“NQ Mobile” or the “Company”), as well as media and analyst reports about the Company. Plaintiff believes that substantial evidentiary support will exist for the allegations set forth herein after a reasonable opportunity for discovery. NATURE OF THE ACTION 1. This is a federal securities class action on behalf of a class consisting of all persons and entities, other than Defendants and their affiliates, who purchased publicly traded NQ Mobile securities from March 30, 2017 through February 6, 2018, both dates inclusive (“Class Period”), seeking to recover compensable damages caused by Defendants’ violations of federal securities laws and pursue remedies under the Securities Exchange Act of 1934 (the “Exchange Act”). JURISDICTION AND VENUE 2. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of the Exchange Act (15 U.S.C. §§ 78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder (17 C.F.R. § 240.10b-5). 3. This Court has jurisdiction over the subject matter of this action pursuant to Section 27 of the Exchange Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1331. 4. Venue is proper in this judicial district pursuant to Section 27 of the Exchange Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1391(b) as the Company conducts business in this judicial district. 5. In connection with the acts, conduct and other wrongs alleged herein, Defendants either directly or indirectly used the means and instrumentalities of interstate commerce, including but not limited to the United States mails, interstate telephone communications, and the facilities of the national securities exchange. PARTIES 6. Plaintiff, as set forth in the accompanying PSLRA Certification, acquired NQ Mobile securities at artificially inflated prices during the Class Period and was damaged upon the revelation of the alleged corrective disclosures. 7. Defendant NQ Mobile provides internet services in the People’s Republic of China (“PRC”) and internationally. The Company is incorporated in the Cayman Islands with its principle executive offices located in Beijing, PRC. NQ Mobile securities trade on New York Stock Exchange (“NYSE”) under the symbol “NQ.” 8. Defendant Vincent Wenyong Shi (“Shi”) has been the Company’s Chairman since December 2014 and Chief Operating Officer since October 2005. 9. Defendant Roland Wu (“Wu”) has been the Company’s Chief Financial Officer since June 2015. 10. Defendant Zemin Xu (“Xu”) has been the Company’s Chief Executive Officer since December 2014 and President since December 2010. 11. Defendants Shi, Wu, and Xu are herein referred to as “Individual Defendants.” 12. Collectively, Defendant NQ Mobile and Individual Defendants are herein referred to as “Defendants.” 13. Each of the Individual Defendants: a. directly participated in the management of the Company; b. was directly involved in the day-to-day operations of the Company at the highest levels; c. was privy to confidential proprietary information concerning the Company and its business and operations; d. was directly or indirectly involved in drafting, producing, reviewing and/or disseminating the false and misleading statements and information alleged herein; e. was directly or indirectly involved in the oversight or implementation of the Company’s internal controls; f. was aware of or recklessly disregarded the fact that the false and misleading statements were being issued concerning the Company; and/or g. approved or ratified these statements in violation of the federal securities laws. 14. NQ Mobile is liable for the acts of the Individual Defendants and its employees under the doctrine of respondeat superior and common law principles of agency as all of the wrongful acts complained of herein were carried out within the scope of their employment with authorization. 15. The scienter of the Individual Defendants and other employees and agents of the Company is similarly imputed to NQ Mobile under respondeat superior and agency principles. SUBSTANTIVE ALLEGATIONS Defendants’ False and Misleading Class Period Statements 16. On March 30, 2017, NQ Mobile issued the press release “NQ Mobile Inc. Enters into Definitive Agreements to complete the FL Mobile Divestment and for the Sale of Showself’s Live Social Video Business.” The press release stated in relevant part: BEIJING, March 30, 2017 /PRNewswire/ -- NQ Mobile Inc. (“NQ Mobile” or the “Company”), a leading global provider of mobile Internet services, today announced that the Company had entered into definitive agreements (the “Agreements”) with Tongfang Investment Fund Series SPC (the “Investor”), an affiliate of Tsinghua Tongfang. Pursuant to the terms of the Agreements, the Investor will acquire (i) 63% equity interests in FL Mobile Jiutian Technology Co., Ltd. (“FL Mobile”), being all of the equity interests beneficially owned by the Company, for a cash consideration of RMB2,520 million, valuing the entire FL Mobile business at RMB4 billion and (ii) 65% equity interests in Beijing Showself Technology Co., Ltd (“Beijing Showself”), a live social video business, being all of the equity interests beneficially owned by the Company, for a cash consideration of RMB800 million, valuing the entire Beijing Showself live social video business at RMB1,230 million (together, the “Transactions”). The Investor will pay RMB150 million in cash as the non-refundable earnest money which will be counted towards the payment of the purchase price. The Investor will pay the remaining amount of the total consideration on or before May 31, 2017 after the Company delivers all of its equity interests in FL Mobile and Beijing Showself. In addition to purchasing FL Mobile and Beijing Showself, within three months after the date of the full payment of the purchase price for the 63% equity interests in FL Mobile, the Investor has an option to subscribe for US$100 million value of class A common shares of the Company at the price of US$1.05 per share, or US$5.25 per ADS. The Company also announced that, the proposed investment of US$101 million from management as announced in a press release on March 29, 2016 is now expected to take place within 3 months following the consummation of the sale of FL Mobile under the Transactions. Dr. Vincent Wenyong Shi, the chairman and chief operating officer of the Company, has equity interest in FL Mobile and will continue to participate with the Investor in the future. The Transactions and the execution of the Agreements have been approved by the board of directors of the Company and its audit committee. The consummation of the Transactions are subject to customary closing conditions. (Emphasis added). 17. On April 26, 2017, NQ Mobile filed an annual report on Form 20-F for the fiscal year ended December 31, 2016 (the “2016 20-F”) with the SEC, which provided the Company’s annual financial results and position. The 2016 20-F was signed by Defendant Shi. The 2016 20- F contained signed certifications pursuant to the Sarbanes-Oxley Act of 2002 by Defendants Wu and Xu attesting to the accuracy of financial reporting, the disclosure of any material changes to the Company’s internal control over financial reporting and the disclosure of all fraud. 18. The 2016 20-F stated the following regarding related party transactions and NQ Mobile’s transaction with Tongfang Investment Fund Series SPC (“Tongfang”)’s acquisition of interests in FL Mobile and Beijing Showself (the “Transaction”), in relevant part: Further, in late March 2016, Dr. Vincent Wenyong Shi, our chairman of the board and chief operating officer as well as the chairman of FL Mobile, entered into a termination and share purchase agreement with FL Mobile and Xinjiang NQ, pursuant to which, Dr. Shi acquired 22% equity interest in FL Mobile by terminating the relevant contractual arrangements and paying Xinjiang NQ a total consideration of RMB880 million. The transaction with Dr. Shi contains provisions to allow Dr. Shi or us to revert the transfer in certain circumstances, including: (i) in the event that the A-share listing is cancelled or fails to receive necessary governmental approvals, both NQ and Dr. Shi may revert the transaction; (ii) Dr. Shi and FL Mobile shall endeavor to complete the A-share listing within two years after the date of this agreement. In the event such A-share listing is not completed within such two-year period, we may revert the transaction; and (iii) No party may revert the transaction after the A-share listing is approved by relevant government authorities. In November 2016, we and Dr. Shi cancelled the plan for A-share listing because it was reasonably determined that the A-share listing was unlikely to happen due to difficulties in obtaining regulatory approvals, and therefore agreed to revert part of this transaction. As a result, and the equity interests in FL Mobile purchased by Dr. Shi under this termination and share purchase agreement was changed to 16.34% and the consideration was adjusted proportionately to RMB653.6 million * * * As part of FL Mobile Divestment, (i) the Group sold 22% of equity interests in FL Mobile to Dr. Vincent Wenyong Shi, the Company’s chairman and chief operating officer, for a consideration of RMB880 million (US$127million) via a termination and share purchase agreement in March 2016, however, 5.66% of the equity interests transferred was reverted in November 2016, as both the Company and Dr. Vincent Wenyong Shi have the right to revert the transaction entirely, such consideration was recorded as consideration received from shareholder on the balance sheet as of December 31, 2016, (ii) the Group sold 12% of equity interests in FL Mobile to Xinjiang Yinghe Equity Investment Management Limited Partnership (“Xinjiang Yinghe”), an affiliate of the management of FL Mobile, however, such transaction was terminated and reverted in November 2016, (iii) the Group sold a total of 20.66% of equity interests in FL Mobile to several affiliates of Beijing Jinxin in May 2016 and August 2016. In March 2017, the Group entered into definitive agreements (the “Agreements”) with Tongfang Investment Fund Series SPC (the “Investor”), affiliate private equity investment fund of Tsinghua Tongfang. Pursuant to the terms of the Agreements, the Investor will acquire (i) 63% equity interests in FL Mobile, being all of the equity interests beneficially owned by the Company, for a cash consideration of RMB2,520 million and (ii) 65% equity interests in Showself (Beijing) Technology Co., Ltd (“Showself (Beijing)”), a live social video business, being all of the equity interests beneficially owned by the Company, for a cash consideration of RMB 800 million. The Investor had paid RMB150 million in cash as the non-refundable earnest money which will be counted towards the payment of the purchase price. The Investor will pay the remaining amount of the total consideration on or before May 31, 2017 after the Company delivers all of its equity interests in FL Mobile and Showself (Beijing). The consummation of the Transactions is subject to customary closing conditions (see Note 24(b)). The Company has transferred their equity interests in FL Mobile and Showself (Beijing) to these purchasers pursuant to their contracts with them, and are in the process to collect remaining purchase price and close the whole FL Mobile and Showself (Beijing) Divestment. In addition to purchasing FL Mobile and Showself (Beijing), the affiliate private equity fund of Tsinghua Tongfang also has the option to purchase US$100 million worth of Class A Common shares of the Company at a price of US$1.05 per share, or US$5.25 per ADS within 3 months after the date of the full payment pursuant to the agreements to purchase FL Mobile. (Emphasis added). 19. On May 31, 2017, NQ Mobile provided an update on the Transaction by issuing the press release entitled “NQ Mobile Inc. Provides An Update on the Divestment of FL Mobile and Showself Businesses” which stated in relevant part: BEIJING, May 31, 2017 /PRNewswire/ -- NQ Mobile Inc. (NYSE: NQ) (“NQ Mobile” or “the Company”), a leading global provider of mobile Internet services, today provided an update on the FL Mobile Divestment. The Company was notified by Tongfang Investment Fund Series SPC (the “Purchaser”) that additional time is needed for making the payment of the remaining purchase price for the sale of FL Mobile Jiutian Technology Co., Ltd. and Beijing Showself Technology Co., Ltd (the “Transactions”). The Purchaser has further communicated its confidence to the Company and is making final preparations for completing the Transactions. The Company will continue to work with the Purchaser to close the Transactions as soon as possible. 20. On August 31, 2017, NQ Mobile provided an updated on the Transaction on its blog located at: http://blog.nq.com/nq-mobile-update-3/, stating in relevant part: Since our latest press release on May 31, 2017 about the information that Tongfang Investment Fund Series SPC (the “Purchaser”) needs additional time to complete the transaction to acquire FL Mobile Jiutian Technology Co., Ltd. and Beijing Showself Technology Co., Ltd., (“the Transaction”) we have received some queries from our investors about the status of the Transaction. We are working closely with the Purchaser, and doing our best to move the Transaction forward. Currently, the Purchaser still needs additional time to complete the Transaction. However, both the Purchaser and us are confident that this Transaction will be completed soon. In addition, we expect to announce our financial results for the first half of 2017 shortly after the completion of the Transaction. 21. On November 9, 2017, NQ Mobile provided an update on the Transaction by issuing the press release entitled “NQ Mobile Inc. Provides an Update on the FL Mobile Divestment and the Sale of Showself’s Live Social Video Business” which stated in relevant BEIJING, Nov. 9, 2017 /PRNewswire/ -- NQ Mobile Inc. (“NQ Mobile” or the “Company”), a leading global provider of mobile internet services, today provided an update on the FL Mobile Divestment and the sale of Showself’s live social video business. The Company today received an additional RMB800 million cash which is in addition to the RMB150 million cash received at the time of the signing of the definitive agreements on March 30, 2017. This brings the total cash received by the Company pursuant to the definitive agreements of the divestments to RMB950 million. Tongfang Investment Fund Series SPC (the “Investor”), an affiliate of Tongfang Securities Limited, a part of Tsinghua Tongfang, remains committed to completing the entire divestments consisting of acquiring i) 63% equity interests in FL Mobile Jiutian Technology Co., Ltd. (“FL Mobile”), being all of the equity interests beneficially owned by the Company, for a cash consideration of RMB2,520 million, valuing the entire FL Mobile business at RMB4 billion and (ii) 65% equity interests in Beijing Showself Technology Co., Ltd (“Beijing Showself”), a live social video business, being all of the equity interests beneficially owned by the Company, for a cash consideration of RMB800 million, valuing the entire Beijing Showself live social video business at RMB1,230 million. The Investor is making final preparations for completing these divestments and the Company is working with the Investor to ensure this occurs as soon as possible. All parties involved remain confident this will complete quickly 22. On November 20, 2017, NQ Mobile provided an update on the Transaction by issuing the press release entitled “NQ Mobile Inc. Provides an Update on the FL Mobile Divestment and the Sale of Showself’s Live Social Video Business” which stated in relevant BEIJING, Nov. 20, 2017 /PRNewswire/ -- NQ Mobile Inc. (“NQ Mobile” or the “Company”), a leading global provider of mobile internet services, today provided an update on the FL Mobile Divestment and the sale of Showself’s live social video business. The Company today received an additional RMB400 million cash which brings the total cash received by the Company pursuant to the definitive agreements of the divestments to RMB1.350 billion. Tongfang Investment Fund Series SPC, an affiliate of Tongfang Securities Limited, a part of Tsinghua Tongfang, remains committed to completing the entire divestments, and all parties involved remain confident this will complete quickly. 23. On December 14, 2017, NQ Mobile announced the completion of the Transaction by issuing the press release entitled “NQ Mobile Inc. Completes the FL Mobile Divestment and the Sale of Showself’s Live Social Video Business” which stated in relevant part: BEIJING, December 14, 2017 — NQ Mobile Inc. (“NQ Mobile” or the “Company”), a leading global provider of mobile internet services, today announced that it has completed the FL Mobile Divestment and the Sale of Showself’s Live Social Video Business. The Company today received additional approximately RMB1.97 billion of consideration for the transaction, consisting of approximately RMB200 million, in cash and RMB1,770 million in a senior note from Tongfang Investment Fund Series SPC (the “Investor”), an affiliate of Tongfang Securities Limited, a part of Tsinghua Tongfang. This brings the total consideration received to approximately RMB3.32 billion, or 100% of the agreed upon price pursuant to the definitive agreements between the Company and the Investor in March 2017. As compensation to the Company, the senior note issued to the Company bears an interest of 8% per annum. This one-year senior note may be extended by another 12 months at the Company’s option, and can be redeemed early by the Investor for principle plus accrued interest to the Company at any time. 24. The statements referenced in ¶¶ 16-23 above were materially false and/or misleading because they misinterpreted and failed to disclose the following adverse facts pertaining to the Company’s business and operations which were known to Defendants or recklessly disregarded by them. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (1) NQ Mobile failed to disclose related party transactions involving the Transaction between NQ Mobile and Tongfang; (2) due to the related parties involved in the Transaction, NQ Mobile agreed to consideration in the form of a note with a high likelihood of default; (3) Defendant Shi’s interest in the Transaction was not fully disclosed; and (4) as a result, Defendants’ statements about NQ Mobile’s business, operations and prospects were materially false and misleading and/or lacked a reasonable basis at all relevant times. The Truth Emerges 25. On February 6, 2018, the report entitled “NQ Mobile: Undisclosed Transfer Of Subsidiaries To Chairman Introduces Significant Risks - Price Target $0” written by Rota Fortunae was published on SeekingAlpha.com. The report revealed the undisclosed related party transactions involved with the Transaction between NQ Mobile and Tongfang, stating in relevant Records filed with the Beijing Enterprise Credit Information Network (BECIN) show that on March 31st, 2017, one day after the deal was announced, NQ transferred its interests in both FL Mobile and Showself to Wenyong Shi. We found no disclosure that Wenyong Shi would become an equity owner in Showself, let alone the recipient of NQ’s entire equity interest. In fact, the purchase agreement states a portion of the interest to be transferred to Tongfang was to come from Wenyong Shi’s share. Our research leads us to believe that Tongfang is controlled by NQ insiders and therefore NQ sold FL Mobile and Showself to insiders. An undisclosed sale to insiders would be highly concerning given that NQ failed three times to sell FL Mobile and ended up accepting a $270 million note after Tongfang delayed payment several times. The note represents 90% of NQ’s market cap and the remaining business loses $50 million pre-tax per year. * * * As noted above, Wenyong Shi’s interest in FL Mobile had already been disclosed, so this was not news. However, the press release did not state that Wenyong Shi would acquire an interest in Showself nor did it disclose that NQ would transfer its shares in both companies to Wenyong Shi instead of Tongfang. But, BECIN records show that on the very next day, NQ and Xinjiang Yinghe transferred their respected interests in FL Mobile and Showself to Wenyong Shi. * * * According to Section 2.3B of the FL Mobile agreement, NQ was to transfer its 63% aggregate interest to Tongfang. Furthermore, Section 4.3 states that part of NQ’s 63% interest in FL Mobile included a 5.66% equity interest held by Wenyong Shi that NQ had the power to direct its disposition. So, per the agreement, Wenyong Shi’s 22% interest should have been reduced. Instead it increased to 79.34%. Section 7.5 states that the obligation of Tongfang to pay the last installment of the purchase price was subject to the satisfaction or waiver by Tongfang of NQ completing the registration evidencing Tongfang as the record owner of 63% equity interest. Not only was Tongfang never recorded as the owner, but Wenyong Shi was recorded as the owner nearly eight months before the final payment was made in December 2017. The only way we see that NQ did not default on this agreement is if Tongfang waived its rights to the share transfer, which we find it hard to believe an independent thirty party would do. Put another way, what are the chances an unrelated party would pay hundreds of millions of dollars to acquire a business only to agree to transfer ownership to the seller’s chairman? We see two potential explanations for the share transfers to Wenyong Shi. Either Tongfang never acquired the businesses or, more likely, Tongfang acquired them thru a VIE. Like NQ, Tongfang is domiciled in the Cayman Islands and is legally prohibited from directly owning certain Chinese companies. Therefore, FL Mobile and Showself would need to be held by a Chinese entity or individual, such as Wenyong Shi. Further evidence that Tongfang used a VIE is Section 5.5 – Holding Entities for Future VIE Structure in which NQ would transfer a VIE subsidiary to Tongfang for $1. We note that there is nothing wrong with Wenyong Shi having a majority interest in a Tongfang VIE, but if the transaction was not meant to obfuscate the extent of his involvement why were the share transfers not disclosed to shareholders? All this leads us to ask, who controls Tongfang? Who Controls Tongfang Investment Fund? In the March 30th, 2017 press release, NQ stated Tongfang Investment Fund is an affiliate of Tsinghua Tongfang. Later press releases changed the language to say Tongfang Investment Fund is an affiliate of Tongfang Securities Limited, a part of Tsinghua Tongfang. Tongfang Securities is wholly-owned by Neo-Neon, a publicly traded company in Hong Kong, which in turn is 64% owned by Tsinghua Tongfang (pg. 15). According to Rule 405 of the Securities Act (pg. 54), an Affiliate is defined as: A person that directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with, the issuer. The definition would suggest that Tongfang Securities/Neo-Neon has a control relationship with Tongfang Investment Fund. But Neo-Neon’s publicly available financials do not report an interest in or a relationship with Tongfang Investment Fund. As of June 30th, 2017, Neo-Neon reported a book value of $230 million. We would think if a wholly-owned subsidiary of Neo-Neon purchased a company for $500 million, it would be considered material and thus reported. Furthermore, it does not appear that Tongfang Securities has the financial capability to support a $500 million deal. As of June 30th, Neo-Neon only had $87 million in cash (pg. 27). And if Tongfang Securities funded the deal, Neo- Neon’s financials should show approximately $23 million in investing cash outflow for the March 2017 earnest money payment to NQ (as reported in the March 30th, 2017 press release). But the only sizeable outflow was for the purchase of an available-for-sale investment (pg. 31), which Note 9 states was an investment into a Hong Kong based bond fund. There was also a $728 thousand cash outflow “arising from investing activities” which had no corresponding note. We think this is strong evidence that Tongfang Securities (and therefore Neo- Neon and Tsinghua Tongfang) do not control Tongfang Investment Fund and did not invest in FL Mobile and Showself. Our opinion is further supported by the fact that Wenyong Shi remains the legal representative of FL Mobile (as seen in the BECIN records above). Every business in China is required to have a legal representative. He/she is the main principal of the company and is the employee with the legal power to represent and enter into binding obligations on behalf of the company. According to the linked article above, PRC Company Law states the legal representative may be one of three people: 1) the chairman of the board; 2) the executive director (if there is not board of directors); or 3) the general manager. If Tongfang were an independent party, we would expect to see and independent legal representative. We believe this is strong evidence that Wenyong Shi is the controlling member of Tongfang. But perhaps the best supporting evidence is the fact that NQ announced it would sell FL Mobile to Wenyong Shi three months before the Tongfang deal was announced, but changed the deal after an SEC inquiry. Wenyong Shi To Acquire FL Mobile On January 23rd, 2017, just months after failing to sell FL Mobile for a third time, NQ announced it entered into a non-binding letter of intent to sell FL Mobile and part of Showself to Wenyong Shi and an unnamed private equity investment fund (the “Investor Group”). We think the failure to disclose the other party is highly suspect. In all the announced attempts to sell FL Mobile, NQ always disclosed who the buyers were. Apparently, the SEC was also curious. On February 14th, 2017, an SEC comment letter (question #5) requested 1) the name of the private equity fund; 2) the individuals associated with the fund; and 3) if the fund or any of the individuals have a relationship with the company. On March 1st, 2017, NQ responded to the SEC stating that: [NQ] is currently in confidential negotiations with the investor group… to the best knowledge of the company after due inquiry, the private investment fund in the investor group is not an affiliate of [NQ]. We note that NQ’s response only said the fund was not an affiliate of NQ (and apparently, this took some inquiry which suggests there was some legitimate question). NQ did not say the individuals associated with the fund NQ. The com failed to pr rovide the names of mpany also fund. were not aff he individua w th filiates of N als associate ed with the hree weeks s incorporat We think thi efused to p Cayman Islan inction beca he fund Ton NQ announc with Tongf NQ transf after NQ ted in the fang (with ferred the ause just th ngfang was ced the deal e next day, Shi. W re C n sh o mention hares in FL is is an imp provide the nds and six of Wenyong Mobile and portant disti name of th days later N g Shi as a d Showself to buyer). The o Wenyong S We also note e that the ad ayman addr July 2017 an ay before it ddress listed ress. But fo nd reincorpo delayed pa in Tongfang or reasons u orated using ayment to N ng’s corpora unknown to g another add NQ for a sec ate record is o us, Tong dress on Au cond time ( the same fang was ugust 30th, (discussed W as d 2 b s NQ’s Ca issolved in J 017, one da elow). Source: Caym S man Island G General Regi istry & NQ 2 20-F ould come ned facts sug Mobile and usions, but ontrolled by An undiscl nvestors sho foremention NQ sold FL would be hig to their o gest that Ton d Showself ing given th own conclu ngfang is co to insiders. hat over half f the purchas in our opi insiders and losed sale to se price was inion the d therefore o insiders s paid in a In af N w n ote receivab ghly concern ble. The Note Rec T ceivable press release and agreed yed payment , Tongfang p to pay the b t multiple ti put up $23 m balance on imes ( May million of or before 31st press According to he $507 mill May 31st, 20 elease, Augu A th M re the March lion as earn 17. But Ton ust 31st blog 30th, 2017 p nest money a ngfang delay update). Then, on November 9th and November 20th NQ claimed it received a total of $184 million, which combined with the earnest money was still $300 million shy of the purchase price. Finally, on December 14th, nearly seven months after the original deadline (and eight months after the transfer to Wenyong Shi), NQ announced it received an additional $30M and agreed to accept the remaining balance in a $270 million note. Even if Tongfang were an affiliate of Berkshire Hathaway, its payment history would give us pause. But given that NQ failed to sell FL Mobile three times and our concerns related to the share transfer, we believe the note carries a high risk of default. A default on the note would not be an insignificant event. $270 million is 90% of NQ’s market cap. Equally concerning is NQ’s ability to extend maturity. The note has a term of one year, but can be extended for an additional year at NQ’s discretion. So if we are correct, insiders could push off payment to nearly three years after the share transfers occurred! Based on the third quarter financials, FL Mobile and Showself earn $40 million pre-tax per year. Three years of delayed payment would provide $120 million in pre-tax profits before shareholders receive their money. Meanwhile the remaining business is losing $50 million pre-tax per year. (Emphasis added). 26. On this news, shares of NQ Mobile fell $1.30 per share or over 44.3% to close at $1.68 per share on February 6, 2018, damaging investors. 27. As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s common shares, Plaintiff and other Class members have suffered significant losses and damages. PLAINTIFF’S CLASS ACTION ALLEGATIONS 28. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all those who purchased or otherwise acquired the publicly traded securities of NQ Mobile during the Class Period (the “Class”); and were damaged upon the revelation of the alleged corrective disclosure. Excluded from the Class are Defendants herein, the officers and directors of the Company, at all relevant times, members of their immediate families and their legal representatives, heirs, successors or assigns and any entity in which Defendants have or had a controlling interest. 29. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, the Company’s securities were actively traded on NYSE. While the exact number of Class members is unknown to Plaintiff at this time and can be ascertained only through appropriate discovery, Plaintiff believes that there are hundreds or thousands of members in the proposed Class. Record owners and other members of the Class may be identified from records maintained by the Company or its transfer agent and may be notified of the pendency of this action by mail, using the form of notice similar to that customarily used in securities class actions. 30. Plaintiff’s claims are typical of the claims of the members of the Class as all members of the Class are similarly affected by Defendants’ wrongful conduct in violation of federal law that is complained of herein. 31. Plaintiff will fairly and adequately protect the interests of the members of the Class and has retained counsel competent and experienced in class and securities litigation. Plaintiff has no interests antagonistic to or in conflict with those of the Class. 32. Common questions of law and fact exist as to all members of the Class and predominate over any questions solely affecting individual members of the Class. Among the questions of law and fact common to the Class are: (a) whether Defendants’ acts as alleged violated the federal securities laws; (b) whether Defendants’ statements to the investing public during the Class Period misrepresented material facts about the financial condition, business, operations, and management of the Company; (c) whether Defendants’ statements to the investing public during the Class Period omitted material facts necessary to make the statements made, in light of the circumstances under which they were made, not misleading; (d) whether the Individual Defendants caused the Company to issue false and misleading SEC filings and public statements during the Class Period; (e) whether Defendants acted knowingly or recklessly in issuing false and misleading SEC filings and public statements during the Class Period; (f) whether the prices of the Company’s securities during the Class Period were artificially inflated because of the Defendants’ conduct complained of herein; and (g) whether the members of the Class have sustained damages and, if so, what is the proper measure of damages. 33. A class action is superior to all other available methods for the fair and efficient adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the damages suffered by individual Class members may be relatively small, the expense and burden of individual litigation make it impossible for members of the Class to individually redress the wrongs done to them. There will be no difficulty in the management of this action as a class action. 34. Plaintiff will rely, in part, upon the presumption of reliance established by the fraud-on-the-market doctrine in that: (a) Defendants made public misrepresentations or failed to disclose material facts during the Class Period; (b) the omissions and misrepresentations were material; (c) the Company’s securities are traded in efficient markets; (d) the Company’s securities were liquid and traded with moderate to heavy volume during the Class Period; (e) the Company traded on the NYSE, and was covered by multiple analysts; (f) the misrepresentations and omissions alleged would tend to induce a reasonable investor to misjudge the value of the Company’s securities; Plaintiff and members of the Class purchased and/or sold the Company’s securities between the time the Defendants failed to disclose or misrepresented material facts and the time the true facts were disclosed, without knowledge of the omitted or misrepresented facts; and (g) Unexpected material news about the Company was rapidly reflected in and incorporated into the Company’s stock price during the Class Period. 35. Based upon the foregoing, Plaintiff and the members of the Class are entitled to a presumption of reliance upon the integrity of the market. 36. Alternatively, Plaintiff and the members of the Class are entitled to the presumption of reliance established by the Supreme Court in Affiliated Ute Citizens of the State of Utah v. United States, 406 U.S. 128, 92 S. Ct. 2430 (1972), as Defendants omitted material information in their Class Period statements in violation of a duty to disclose such information, as detailed above. COUNT I Violation of Section 10(b) of The Exchange Act and Rule 10b-5 Against All Defendants 37. Plaintiff repeats and realleges each and every allegation contained above as if fully set forth herein. 38. This Count is asserted against the Company and the Individual Defendants and is based upon Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder by the SEC. 39. During the Class Period, the Company and the Individual Defendants, individually and in concert, directly or indirectly, disseminated or approved the false statements specified above, which they knew or deliberately disregarded were misleading in that they contained misrepresentations and failed to disclose material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. 40. The Company and the Individual Defendants violated §10(b) of the 1934 Act and Rule 10b-5 in that they: employed devices, schemes and artifices to defraud; made untrue statements of material facts or omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and/or engaged in acts, practices and a course of business that operated as a fraud or deceit upon plaintiff and others similarly situated in connection with their purchases of the Company’s securities during the Class Period. 41. The Company and the Individual Defendants acted with scienter in that they knew that the public documents and statements issued or disseminated in the name of the Company were materially false and misleading; knew that such statements or documents would be issued or disseminated to the investing public; and knowingly and substantially participated, or acquiesced in the issuance or dissemination of such statements or documents as primary violations of the securities laws. These defendants by virtue of their receipt of information reflecting the true facts of the Company, their control over, and/or receipt and/or modification of the Company’s allegedly materially misleading statements, and/or their associations with the Company which made them privy to confidential proprietary information concerning the Company, participated in the fraudulent scheme alleged herein. 42. Individual Defendants, who are the senior officers and/or directors of the Company, had actual knowledge of the material omissions and/or the falsity of the material statements set forth above, and intended to deceive Plaintiff and the other members of the Class, or, in the alternative, acted with reckless disregard for the truth when they failed to ascertain and disclose the true facts in the statements made by them or other personnel of the Company to members of the investing public, including Plaintiff and the Class. 43. As a result of the foregoing, the market price of the Company’s securities was artificially inflated during the Class Period. In ignorance of the falsity of the Company’s and the Individual Defendants’ statements, Plaintiff and the other members of the Class relied on the statements described above and/or the integrity of the market price of the Company’s securities during the Class Period in purchasing the Company’s securities at prices that were artificially inflated as a result of the Company’s and the Individual Defendants’ false and misleading statements. 44. Had Plaintiff and the other members of the Class been aware that the market price of the Company’s securities had been artificially and falsely inflated by the Company’s and the Individual Defendants’ misleading statements and by the material adverse information which the Company’s and the Individual Defendants did not disclose, they would not have purchased the Company’s securities at the artificially inflated prices that they did, or at all. 45. As a result of the wrongful conduct alleged herein, Plaintiff and other members of the Class have suffered damages in an amount to be established at trial. 46. By reason of the foregoing, the Company and the Individual Defendants have violated Section 10(b) of the 1934 Act and Rule 10b-5 promulgated thereunder and are liable to the Plaintiff and the other members of the Class for substantial damages which they suffered in connection with their purchases of the Company’s securities during the Class Period. COUNT II Violation of Section 20(a) of The Exchange Act Against The Individual Defendants 47. Plaintiff repeats and realleges each and every allegation contained in the foregoing paragraphs as if fully set forth herein. 48. During the Class Period, the Individual Defendants participated in the operation and management of the Company, and conducted and participated, directly and indirectly, in the conduct of the Company’s business affairs. Because of their senior positions, they knew the adverse non-public information regarding the Company’s business practices. 49. As officers and/or directors of a publicly owned company, the Individual Defendants had a duty to disseminate accurate and truthful information with respect to the Company’s financial condition and results of operations, and to correct promptly any public statements issued by the Company which had become materially false or misleading. 50. Because of their positions of control and authority as senior officers, the Individual Defendants were able to, and did, control the contents of the various reports, press releases and public filings which the Company disseminated in the marketplace during the Class Period. Throughout the Class Period, the Individual Defendants exercised their power and authority to cause the Company to engage in the wrongful acts complained of herein. The Individual Defendants therefore, were “controlling persons” of the Company within the meaning of Section 20(a) of the Exchange Act. In this capacity, they participated in the unlawful conduct alleged which artificially inflated the market price of the Company’s securities. 51. Each of the Individual Defendants, therefore, acted as a controlling person of the Company. By reason of their senior management positions and/or being directors of the Company, each of the Individual Defendants had the power to direct the actions of, and exercised the same to cause, the Company to engage in the unlawful acts and conduct complained of herein. Each of the Individual Defendants exercised control over the general operations of the Company and possessed the power to control the specific activities which comprise the primary violations about which Plaintiff and the other members of the Class complain. 52. By reason of the above conduct, the Individual Defendants are liable pursuant to Section 20(a) of the Exchange Act for the violations committed by the Company. PRAYER FOR RELIEF WHEREFORE, Plaintiff demands judgment against Defendants as follows: A. Determining that the instant action may be maintained as a class action under Rule 23 of the Federal Rules of Civil Procedure, and certifying Plaintiff as the Class representative; B. Requiring Defendants to pay damages sustained by Plaintiff and the Class by reason of the acts and transactions alleged herein; C. Awarding Plaintiff and the other members of the Class prejudgment and post- judgment interest, as well as their reasonable attorneys’ fees, expert fees and other costs; and D. Awarding such other and further relief as this Court may deem just and proper. DEMAND FOR TRIAL BY JURY Plaintiff hereby demands a trial by jury. Dated: February 10, 2018 Respectfully submitted, STECKLER GRESHAM COCHRAN PLLC /s/ Dean Gresham Dean Gresham Texas Bar No. 24027215 Bruce W. Steckler Texas Bar No. 00785039 L. Kirstine Rogers Texas Bar No. 24033009 12720 Hillcrest Rd., Suite 1045 Dallas, Texas 75230 Telephone: (972) 387-4040 Facsimile: (972) 387-4041 Email: [email protected] [email protected] [email protected] -AND- THE ROSEN LAW FIRM, P.A. Laurence M. Rosen, Esq. (to be admitted PHV) Phillip Kim, Esq. (to be admitted PHV) 275 Madison Avenue, 34th Floor New York, NY 10016 Telephone: (212) 686-1060 Fax: (212) 202-3827 Email: [email protected] [email protected] Counsel for Plaintiff

securities

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LEE LITIGATION GROUP, PLLC William Brown (WB 6828) Anne Seelig (AS 3976) 148 West 24th Street, Eighth Floor New York, NY 10011 Tel.: 212-465-1180 Fax: 212-465-1181 Attorneys for Plaintiff and the Class UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK C.K. LEE, on behalf of himself and all others similarly situated, Plaintiff, --------------------------------------------------------- x Case No. - against - CLASS ACTION COMPLAINT AMERICANPEARL.COM, INC., : JURY TRIAL DEMANDED : : : : : : : : : : : Defendant. --------------------------------------------------------- x Plaintiff C.K. LEE (hereinafter “Plaintiff” or “Plaintiff LEE”), on behalf of himself and all others similarly situated, by his undersigned attorneys, as for his Complaint against the Defendant, AMERICANPEARL.COM, INC., alleges the following: NATURE OF ACTION 1. This action is brought by Plaintiff C.K. LEE on behalf of himself and all consumers in the United States who have received unsolicited and unconsented-to commercial text messages to their mobile phones from AMERICANPEARL.COM, INC. (herein “Defendant or “AMERICAN PEARL”) in violation of the Telephone Consumer Protection Act 47 U.S.C. § 227 1 JURISDICTION AND VENUE 2. The Court has federal question jurisdiction over this action under 28 U.S.C. § 1331 because this action arises out of a violation of federal law - 7 U.S.C. § 227(b). See Mims v. Arrow Fin. Serv., LLC 132 S. Ct. 740 (2012). 3. Venue is proper in this District under 28 U.S.C § 1391 because Defendant’s violation of the Telephone Consumer Protection Act (TCPA) took place in this District, and Defendant is subject to personal jurisdiction in this District because its principal place of business is located in Manhattan, NY. PARTIES Plaintiff 4. Plaintiff LEE is a citizen of the state of New York and a resident of New York County. Defendant 5. Defendant, AMERICANPEARL.COM, INC., is an online/department store with a principle executive office and address for service of process located at 576 5th Ave, STE 1102, New York, NY 10036. FACTUAL ALLEGATIONS The Telephone Consumer Protection Act 6. The Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227 et seq., was enacted by Congress in 1991 and is implemented by the Federal Communications Commission (“FCC”). In its June 18, 2015 Declaratory Ruling and Order (“2015 TCPA Order”), the FCC explained the original purposes of the TCPA: As its very name makes clear, the Telephone Consumer Protection Act is a broad “consumer protection” statute that addresses the telemarketing practices not just of 2 bad actors attempting to perpetrate frauds, but also of “legitimate businesses” employing calling practices that consumers find objectionable… The TCPA makes it unlawful for any business—“legitimate” or not—to make robocalls that do not comply with the provisions of the statute. While the Commission has traditionally sought to “reasonably accommodate[] individuals’ rights to privacy as well as the legitimate business interests of telemarketers,”…, we have not viewed “legitimate” businesses as somehow exempt from the statute, nor do we do so today. 2015 TCPA Order ¶ 2 n.6 7. The 2015 TCPA Order also explained the continuing relevance of the TCPA, especially in connection with wireless consumers: Month after month, unwanted robocalls and texts, both telemarketing and informational, top the list of consumer complaints received by the Commission. The Telephone Consumer Protection Act (TCPA) and our rules empower consumers to decide which robocalls and text messages they receive, with heightened protection to wireless consumers, for whom robocalls can be costly and particularly intrusive… With this Declaratory Ruling and Order, we act to preserve consumers’ rights to stop unwanted robocalls, including both voice calls and texts, and thus respond to the many who have let us, other federal agencies, and states know about their frustration with robocalls. 2015 TCPA Order ¶ 1 8. The TCPA makes it “unlawful for any person… to make any call (other than a call made for emergency purposes or made with the prior express consent of the called party) using any automatic telephone dialing system or an artificial or prerecorded voice… to any telephone number assigned to a paging service, cellular telephone service… or any service for which the called party is charged for the call…” 47 U.S.C. § 227(b)(1)(A)(iii). 9. “Prior express content” requires: an agreement, in writing, bearing the signature of the person called that clearly authorizes the seller to deliver or cause to be delivered to the person called advertisements or telemarketing messages using an automatic telephone dialing system or an artificial or prerecorded voice, and the telephone number to which the signatory authorizes such advertisements or telemarketing messages to be delivered. 47 C.F.R. § 64.1200(f)(8) 3 10. In addition, the written agreement must include a clear and conspicuous disclosure informing the signer that: By executing the agreement, such person authorizes the seller to deliver or cause to be delivered to the signatory telemarketing calls using an automatic telephone dialing system or an artificial or prerecorded voice; § 64.1200(f)(8)(i)(A) and The person is not required to sign the agreement (directly or indirectly), or agree to enter into such an agreement as a condition of purchasing any property, goods, or services. § 64.1200(f)(8)(i)(B) 11. The 2015 TCPA Order reaffirmed the FCC’s longstanding position that text messages qualify as “calls” under the TCPA. ¶107. 12. Additionally, the 2015 TCPA Order confirmed that text messages which originate from the Internet fall within the ambit of the TCPA’s prohibitions. The text and legislative history of the TCPA revealed “Congress’s intent to give the Commission broad authority to enforce the protections from unwanted robocalls as new technologies emerge.” ¶ 113 Defendant Violated the TCPA 13. Plaintiff LEE has purchased products from American Pearl in the past but has not done so in over ten years. Plaintiff LEE never consented to receiving promotional and marketing text messages on his mobile phone. 14. In November of 2018, years after he purchased products, Plaintiff LEE received the text below promoting Defendant’s Black Friday sales: 4 15. The impersonal nature of the message sent to Plaintiff LEE from a short code number shows that AMERICAN PEARL uses an auto dialer/texter to send its messages. Short code numbers are widely used in automated services.1 The word automation is defined in the dictionary as “the technique, method, or system of operating or controlling a process by highly automatic means, as by electronic devices, reducing human intervention to a minimum”2. Defendant does not send messages to its customers on an individual basis that requires human 1 https://www.techopedia.com/definition/22052/short-code 2 http://www.dictionary.com/browse/automation 5 intervention for each message sent. Defendant’s unsolicited messages and the process is automated. Other members of the class received the exact same messages at around the same time. 16. Defendant sent similar unsolicited marketing texts using an automated telephone texting system to other similarly situated persons, who likewise never consented to receiving them. The text message sent to Plaintiff LEE was unwanted, annoying, and a nuisance. Plaintiff LEE often expects important business and personal messages and updates, and had to open his phone to Defendant’s invasive message instead. In order to identify the sender, Plaintiff would have to unlock his phone and view the actual message. The message was disruptive and diminished the Plaintiff’s usage and enjoyment of his phone. The Second Circuits recent decision has acknowledged that such non-financially related injury allegations are enough to support standing under the TCPA; See Mejia v Time Warner Cable, Inc., 2017 US Dist LEXIS 120445 [SDNY Aug. 1, 2017, No. 15-CV-6445 (JPO)].) Plaintiff LEE has a concrete injury sufficient to confer Article III standing. See Van Patten v Vertical Fitness Group, LLC, 847 F3d 1037(9th Cir. 2017) (“Unsolicited telemarketing phone calls or text messages, by their nature, invade the privacy and disturb the solitude of their recipients. A plaintiff alleging a violation under the TCPA "need not allege any additional harm beyond the one Congress has identified.”); Melito v. Am. Eagle Outfitters, Inc., No. 14-CV-2440 (VEC), 2017 U.S. Dist. LEXIS 146343 (S.D.N.Y. Sep. 8, 2017). CLASS ACTION ALLEGATIONS 17. Plaintiff LEE seeks to represent a class consisting of: All persons in the United States who, beginning four years prior to the filing of this action, received unsolicited text messages to their cellular phones from Defendant3 (the “Nationwide Class”) 3 See Fitzhenry-Russell v. Dr. Pepper Snapple Grp., No. 17-cv-00564 NC, 2017 U.S. Dist. LEXIS 155654, at *15 (N.D. Cal. Sep. 22, 2017) (“Yet the Supreme Court did not extend its reasoning to bar the nonresident plaintiffs' claims here, and Bristol-Myers is meaningfully distinguishable based on that case concerning a mass tort action, in which each plaintiff was a named plaintiff.”);In re Chinese-Manufactured Drywall Prods. Liab. Litig., No. 09-2047, 2017 U.S. Dist. LEXIS 197612, at *52-53 (E.D. La. Nov. 28, 2017) (“it is clear and beyond dispute that Congress has 6 18. In the Alternative, Plaintiff LEE seeks to represent a class consisting of All persons in New York who, beginning four years prior to the filing of this action, received unsolicited text messages to their cellular phones from Defendant (the “New York Class”) 19. The proposed Classes exclude current and former officers and directors of Defendant, members of the immediate families of the officers and directors of Defendant, Defendant’s legal representatives, heirs, successors, assigns, and any entity in which it has or has had a controlling interest, and the judicial officer to whom this lawsuit is assigned. 20. Plaintiff reserves the right to revise the Class definition based on facts learned in the course of litigating this matter. 21. Class members are so numerous that joinder of all members is impracticable. While the exact number of Class members is unknown to Plaintiff at this time and can only be ascertained through the appropriate discovery, Plaintiff believes that there are thousands of Class members, who may be identified from records maintained by Defendant or by their own record of text messages. These members may be notified of the pendency of this action by mail, or by advertisement, using the form of notice customarily used in class actions such as this. 22. Plaintiff’s claims are typical of the claims of all Class members as all Class members are similarly affected by Defendant’s wrongful conduct. constitutional authority to shape federal court's jurisdiction beyond state lines to encompass nonresident parties” and interpreting Bristol-Meyers as barring nationwide class actions where jurisdiction over defendant is specific “would require plaintiffs to file fifty separate class actions in fifty or more separate district courts across the United States — in clear violation of congressional efforts at efficiency in the federal courts.”); Horton v. USAA Cas. Ins. Co., 266 F.R.D. 360, 364 (D. Ariz. 2009) (“Objectors argue that this Court lacks jurisdiction to certify a nationwide class. This argument is frivolous. A federal court applying Rule 23 of the Federal Rules of Civil Procedure may certify a nationwide class if the requirements for certification are satisfied.”). 7 23. Plaintiff will fairly and adequately protect the interests of Class members because Plaintiff has no interests antagonistic to theirs. Plaintiff has retained experienced and competent counsel. 24. A class action is superior to other available methods for the fair and efficient adjudication of this controversy. Since the damages sustained by individual Class members may be relatively small, the expense and burden of individual litigation make it impracticable for Class members to individually seek redress for the wrongful conduct alleged herein. If class treatment of these claims were not available, Defendant would likely be able to persist in its unlawful conduct with impunity. 25. Common questions of law and fact exist as to all Class and predominate over any questions solely affecting individual Class members. Among the questions of law and fact common to the Classes are: a. whether Defendant sent unsolicited marketing text messages to cellular phones belonging to Plaintiff and the Classes; b. whether Defendant used an automated telephone texting system to do so; c. whether text recipients provided their prior express consent; d. whether the number of texts received by Class members was in excess of the number allowed for by any consent agreement; e. whether Defendant’s conduct is intentional or negligent; and f. whether Plaintiff and the Classes are entitled to damages for Defendant’s conduct. 26. Class membership is readily ascertainable from electronic records. 8 27. The prosecution of this action as a class action will reduce the possibility of repetitious litigation. Plaintiff knows of no difficulty which will be encountered in the management of this litigation which would preclude its maintenance as a class action. 28. A class action is superior to other available methods for the fair and efficient adjudication of this controversy. The damages suffered by any individual class member are too small to make it economically feasible for an individual class member to prosecute a separate action, and it is desirable for judicial efficiency to concentrate the litigation of the claims in this forum. Furthermore, the adjudication of this controversy through a class action will avoid the potentially inconsistent and conflicting adjudications of the claims asserted herein. 29. The prerequisites to maintaining a class action for injunctive relief or equitable relief pursuant to Rule 23(b)(2) are met, as Defendant acts or refuses to act on grounds generally applicable to the Classes, thereby making appropriate final injunctive or equitable relief with respect to the Classes as a whole. 30. The prerequisites to maintaining a class action for injunctive relief or equitable relief pursuant to Rule 23(b)(3) are met, as questions of law or fact common to the Classes predominate over any questions affecting only individual members and a class action is superior to other available methods for fairly and efficiently adjudicating the controversy. 31. The prosecution of separate actions by Class members would create a risk of establishing inconsistent rulings and/or incompatible standards of conduct for Defendant. Additionally, individual actions may be dispositive of the interest of all members of the Class, although certain members of the proposed Class are not parties to such actions. 32. Defendant’s conduct is generally applicable to the Class as a whole and Plaintiff seeks, inter alia, equitable remedies with respect to the Class as a whole. As such, Defendant’s 9 systematic policies and practices make declaratory relief with respect to the Classes as a whole appropriate. CAUSES OF ACTION COUNT I VIOLATION OF THE TELEPHONE CONSUMER PROTECTION ACT 47 U.S.C. § 227 et seq. (Brought on behalf of Plaintiff and Class) 33. Plaintiff LEE realleges and incorporates herein by references the allegations contained in all preceding paragraphs and further alleges as follows: 34. Plaintiff LEE brings this claim individually and on behalf of the other members of the Class for Defendant’s violations of the TCPA. 35. Defendant directly or vicariously violates the TCPA when it uses an automated telephone texting system to send unsolicited and unauthorized marketing texts to the cellular phones of Plaintiff and the Class. 36. The TCPA, 47 U.S.C. § 227(b)(3), provides: (1) Private right of action. A person or entity may, if otherwise permitted by the laws or rules of court of a State, bring in an appropriate court of that State-- (A) an action based on a violation of this subsection or the regulations prescribed under this subsection to enjoin such violation, (B) an action to recover for actual monetary loss from such a violation, or to receive $ 500 in damages for each such violation, whichever is greater, or (C) both such actions. 37. Additionally, the TCPA provides that the Court may, at its discretion, treble the statutory damages if it finds that Defendant’s violation are willful or knowing. 47 U.S.C. § 227(b)(3) 10 38. Defendant’s violations of the TCPA were willful and knowing. Defendant would be liable to Plaintiff and the Class even if their actions were negligent. 39. Defendant should also be enjoined from engaging in similar unlawful conduct in the future. 40. Accordingly, Plaintiff and the Class are entitled to all damages referenced herein, attorney’s fees, costs, treble damages, injunctive relief, and any other remedies allowed by the PRAYER FOR RELIEF WHEREFORE, Plaintiff, on behalf of himself and all others similarly situated, prays for relief and judgment against Defendant as follows: (A) For an Order certifying the Class under Rule 23 of the Federal Rules of Civil Procedure and naming Plaintiff as representative of the Class and Plaintiff’s attorneys as Class Counsel to represent members of the Class; (B) For an Order declaring that Defendant’s conduct violates the TCPA; (C) For an Order finding in favor of Plaintiff and members of the Class; (D) For statutory or treble damages for each violation of the TCPA, as determined by the evidence presented at trial; (E) For prejudgment interest on all amounts awarded; (G) For an Order enjoining Defendant from further violations of the TCPA; (H) For an Order awarding Plaintiff and members of the Class their reasonable attorney’s fees and expenses and costs of suit; and (I) For such other and further relief as the Court deems just and proper. 11 DEMAND FOR TRIAL BY JURY Pursuant to Rule 38(b) of the Federal Rule of Civil Procedure, Plaintiff, on behalf of himself and the Class, demand a trial by jury on all questions of fact raised by this Complaint. Dated: August 14, 2019 Respectfully submitted, LEE LITIGATION GROUP, PLLC By: /s/ William Brown William Brown, Esq. William Brown (WB 6828) Anne Seelig (AS 3976) 148 West 24th Street, Eighth Floor New York, NY 10011 Tel.: 212-465-1180 Fax: 212-465-1181 Attorneys for Plaintiff and the Class 12

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IN THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF ILLINOIS PEORIA DIVISION Case No. 13-cv-01285 DANA CRAIG, ROY FREEMAN, MARY ALICE FREEMAN, TERI-LYN CALHOUN, and GEORGE CALHOUN, individually on behalf of themselves and all other persons similarly situated, Plaintiffs, v. OSF HEALTHCARE SYSTEM, an Illinois Not-For-Profit Corporation, Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) COMPLAINT Plaintiffs Dana Craig, Roy Freeman, Mary Alice Freeman, Teri-Lyn Calhoun, and George Calhoun, individually on behalf of themselves and all other persons similarly situated, by their attorneys, Jennifer M. Sender, Robert M. Winter, Andrés J. Gallegos, and Catherine A. Cooke of Robbins Salomon & Patt, Ltd., complain of Defendant OSF Healthcare System (“OSF”), an Illinois Not-For-Profit Corporation, as follows: JURISDICTION AND VENUE 1. This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331 as the Plaintiffs’ claims alleged herein arise under the Americans with Disabilities Act (“ADA”), 42 U.S.C. § 12101, et seq., and the Rehabilitation Act of 1973 (“Rehabilitation Act”), 29 U.S.C. § 794, et seq. Declaratory relief is authorized by 28 U.S.C. §§ 2201(a) and 2202 and Rule 57 of the Federal Rules of Civil Procedure. Injunctive relief is authorized by Rule 65 of the Federal Rules of Civil Procedure. 2. Venue is proper in this district pursuant to 28 U.S.C. § 1391(b). Defendant resides in this district and a substantial part of the events or omissions giving rise to Plaintiffs’ claims occurred in this district. THE PARTIES 3. Plaintiff Dana Craig is a 45 year old female who has been deaf since birth and is a person with a disability within the meaning of all applicable statutes. Dana Craig resides in Chenoa, McLean County, Illinois. 4. Plaintiff Roy Freeman is a 47 year old male with a traumatic brain injury, severe hearing loss, and who utilizes a wheelchair to ambulate. Roy Freeman is a person with a disability within the meaning of all applicable statutes and resides in Pontiac, Livingston County, Illinois. 5. Plaintiff Mary Alice Freeman is a 77 year old female who is deaf, and who uses a walker to ambulate. Mary Alice Freeman is a person with a disability within the meaning of all applicable statutes and resides in Pontiac, Livingston County, Illinois. 6. Plaintiff Teri-Lyn Calhoun is a 54 year old female who is deaf and is a person with a disability within the meaning of all applicable statutes. Teri-Lyn Calhoun resides in Chillicoth, Peoria County, Illinois. 7. Plaintiff George (a/k/a Kent) Calhoun is a 60 year old male who is deaf and is a person with a disability within the meaning of all applicable statutes. George Calhoun is the husband of Plaintiff Teri-Lyn Calhoun, and resides in Chillicoth, Peoria County, Illinois. 8. Defendant OSF, an Illinois Not-For-Profit Corporation, also doing business as “OSF Healthcare,” is based in Peoria, Illinois. OSF is owned and operated by The Sisters of the Third Order of St. Francis, Peoria, Illinois, and consists of eight acute care facilities and two colleges of nursing. OSF also has a primary care physician network consisting of over 600 primary care physicians, specialist physicians, and advanced practice providers. OSF is a multi- state corporation, operating facilities in Illinois and Michigan, and provides state-of-the-art healthcare services to more than 2.5 million people in the communities it serves. CLASS ALLEGATIONS 9. Pursuant to Fed. R. Civ. P. 23(a), Plaintiffs bring this action on their own behalf and on behalf of all other persons similarly situated. The class that Plaintiffs seek to represent is composed of all disabled persons: (i) who are deaf or hearing impaired and who depend on the use of auxiliary aids, sign language interpreters, or other means to communicate; and (ii) with ambulatory impairments who depend upon the use of wheelchairs or other mobility devices, and who are denied, on the basis of their disability, the full and equal enjoyment of facilities, equipment and health care services offered by Defendant due to its failure to comply with the ADA and the Rehabilitation Act. 10. The persons in the class are so numerous that joinder of all persons is impracticable and the disposition of their claims in a class action is a benefit to the parties and the Court. Plaintiffs are informed and believe that thousands of disabled individuals seeking health care services from Defendant have suffered and will continue to suffer systemic discrimination. 11. There are common questions of law and fact involved that affect the parties to be represented in that they are all being denied, or will be denied their civil rights of full and equal enjoyment Defendant’s facilities, equipment, and health care services due to the barriers described herein. 12. The claims of Plaintiffs are typical of the claims of the class because Plaintiffs are similarly affected by Defendant’s failure to provide the legally required access to its facilities, equipment and health care services. 13. Plaintiffs are adequate class representatives because each of them has been directly impacted by Defendant’s failure to provide, on the basis of disability, the full and equal enjoyment of facilities, equipment and health care services operated by or provided by OSF. The interests of Plaintiffs are not antagonistic to or otherwise in conflict with the interests of the class as a whole. The attorneys representing the class are experienced in representing clients in class actions and class action civil rights claims. 14. Class certification is appropriate under Fed. R. Civ. P. 23(b)(2) because Defendant has acted and/or failed to act on grounds applicable to the class as a whole, making final declaratory and injunctive relief for the class as a whole superior to all other methods of disposition. 15. Class certification is appropriate under Fed. R. Civ. P. 23(b)(3) because questions of law and fact common to class members predominate over other available methods for the fair and efficient adjudication of this litigation. Common questions of fact and law include, but are not limited to the following: a. Whether Defendant’s failure to remove architectural barriers that are structural in nature, where such removal is readily achievable, deprives individuals with disabilities of full and equal enjoyment of Defendant’s health care services; and where Defendant can show that such removal is not readily achievable, whether alternative methods of barrier removal are available and readily achievable; b. Whether Defendant has taken such steps as may be necessary to ensure that Plaintiffs and the class members are not excluded, denied services or otherwise treated differently than other individuals because of the absence of auxiliary aids, sign language interpreters, or other means to effectively communicate, where the taking of such steps would not fundamentally alter the nature of its offered services or would not result in an undue burden; c. Whether Defendant’s failure to provide medical and diagnostic equipment that is accessible to individuals with disabilities excludes, denies or otherwise causes such individuals to be treated differently, and as a result deprives individuals with disabilities of full and equal enjoyment of Defendant’s health care services, unless provision of such medical and diagnostic equipment is a fundamental alteration or undue burden; d. Whether Defendant’s failure to make reasonable modifications to its policies, practices and procedures for making appointments, admitting patients for care, interviewing patients, conducting medical examinations, conducting diagnostic procedures, weighing patients, and generally providing healthcare services, deprives individuals with disabilities of full and equal enjoyment of such goods and services, unless making such modifications would fundamentally alter the nature of the goods and services provided; e. Whether Defendant has made alterations to existing facilities but has failed to make alterations in such a manner that, to the maximum extent feasible, the altered portions of the facility are readily accessible to and usable by individuals with disabilities; f. Whether Defendant has imposed or applied eligibility criteria that screen out or tend to screen out individuals with disabilities unless such criteria can be shown to be necessary in the provision of goods and services; and g. Whether Defendant has otherwise discriminated against Plaintiffs and the class members on the basis of disabilities. 16. Upon information and belief, the interests of members of the class in individually controlling the prosecution of a separate action is low, in that most class members would be unable to individually prosecute an action because the amounts at stake for individuals, while significant, are relatively small for most or all of the class members contrasted with the costs of prosecution. Concentrating litigation in a single forum will promote judicial efficiency by resolving common questions of law and fact in a single forum instead of across multiple courts. 17. A class action would be manageable. Individualized litigation presents a potential for inconsistent or contradictory judgments. By contrast, the class action device presents far fewer management difficulties, allows the hearing of claims that might otherwise go unaddressed because of the relative expense of bringing individual lawsuits, and provides the benefits of single adjudication, economies of scale, and comprehensive supervision by a single court. References to Plaintiffs shall be deemed to include the named Plaintiffs and each member of the class, unless otherwise indicated. DEFENDANT’S CONDUCT 18. Full and equal access to medical care and treatment is critical for persons with disabilities. In an October 2011 published study in the Disability and Health Journal comparing health disparities between persons in the U.S. with no disabilities and those with cognitive limitations and physical disabilities, it was revealed that individuals with physical disabilities or cognitive limitations had higher prevalence rates for 7 chronic diseases than those with no disability when adjusted for age.1 Compared to adults without disability, those with physical disabilities and those with cognitive limitations experienced more cardiac disease, diabetes, stroke, arthritis and asthma, as well as higher blood pressure and cholesterol levels. The study also noted that persons with disabilities are far less likely to receive preventive screenings.2 A main reason for the lack of access to preventative screenings can be attributed to the pervasive existence of access barriers – i.e., architectural, programmatic, communication and other barriers, to include the lack of (disability-specific) cultural competence among healthcare providers. 1 See A. Reichard, Ph.D. et al., Health Disparities among Adults with Physical Disabilities or Cognitive Limitations Compared to Individuals with No Disabilities in the United States. Disability and Health Journal, Vol. 4, Issue 4, October 2011, pp. 59-67. Available at http://www.disabilityandhealthjnl.com/. 2 Id. at p. 65. “Not only were the screening rates worse than the ‘‘no disability’’ group, the rates at which each group received preventive cancer screenings and dental care was far below accepted standards of care suggested by the U.S. Preventive Services Task Force and the American Dental Association (even though most people with disabilities have a primary care source). 19. Despite its renowned excellence, OSF fails to provide persons with disabilities, whether they are in-patients or out-patients, the same quality of care as other patients, because of their disabilities. This unequal treatment occurs because, among other things: architectural barriers exist throughout OSF; clinicians and support staff are not provided the proper training and support on interacting with and caring for persons with disabilities; adaptable, accessible equipment is not available; patients using wheelchairs are rarely weighed, contrary to widely accepted practice standards; patients using wheelchairs are often examined while seated in their chairs, when good practice would require them to be examined on a table; transfers of patients with disabilities are frequently risky and conducted without consideration of the individual’s needs; diagnostic procedures such as MRIs, X-rays, ultrasounds and bone density scans are often done only after a patient is transferred with great difficulty and risk by unqualified individuals; and, while hospitalized, patients are not guaranteed accommodations such as accessible inpatient rooms, beds, personal care services and assistive equipment. 20. Additionally, OSF has failed to provide adequate and appropriate auxiliary aids, sign language interpreters, or other effective means to communicate with patients who are deaf or have hearing disabilities, including: failure to provide individuals with disabilities with TTY phone devices while in hospital or examining rooms; failure to activate closed captioned televisions; failure to provide effective methods of communication between individuals who are deaf or hearing impaired with their nurses or treating physicians; failure to provide in-room call buttons or menu services accessible to persons who are deaf or hearing impaired; and reliance on family members to facilitate communication between physicians and nurses and patients who are deaf or hearing impaired. 21. Because of the lack of attention to their needs, Plaintiffs report that they are afraid for their personal safety and feel frustrated, humiliated or angry on many occasions during their visits to OSF. 22. Defendant’s denial of full and equal access to Plaintiffs manifests itself in at least the following fundamental ways: (1) pervasive architectural barriers at OSF facilities; (2) a lack of accessible medical and diagnostic equipment at OSF facilities; (3) failure to provide adequate auxiliary aids, sign language interpreters, or other means to effectively communicate with patients at its facilities who are deaf or hearing impaired; and (4) an absence of comprehensive policies and procedures to accommodate Plaintiffs’ disabilities. These violations deprive Plaintiffs and members of the proposed class full and equal access to Defendant’s programs, services, and facilities. 23. Defendant’s hospital and health care facilities are characterized by multiple and pervasive barriers to access, and as a result, people with disabilities face significant difficulty securing health services, do not receive the same level of care as nondisabled patients, and in some cases are denied health services altogether. 24. Defendant has failed to provide architecturally accessible facilities. Plaintiffs frequently confront architectural barriers such as inaccessible elevators, waiting rooms and examination rooms, inaccessible paths of travel, inaccessible parking areas and entrances, inaccessible alternate methods of transporting patients in and out of the hospital, and other physical barriers. 25. Defendant has failed to provide accessible medical equipment, including height adjustable examination tables that lower to allow an individual to transfer from a wheelchair, wheelchair accessible scales, and other types of diagnostic equipment that can be made accessible to a person who uses a wheelchair, including but not limited to MRI, mammogram, and x-ray machines. 26. Defendant has failed to implement comprehensive policies, practices and procedures to make its facilities and services accessible to individuals with disabilities. 27. Defendant has failed to provide necessary auxiliary aids and interpreter services to insure that individuals who are deaf or hearing impaired are not denied services, segregated or otherwise treated differently than other individuals. Specifically, OSF fails to provide TTY phones, video phones, or other accessible telephone devices in patient rooms, fails to make its telephonic meal ordering services available to persons with hearing impairments, fails to provide adequate or any sign language interpreters to patients, and fails to provide other auxiliary aids to individuals who are deaf or hearing impaired, the result of which is that they are denied the same level of care as nondisabled patients. 28. OSF is a “public accommodation” within the meaning of the ADA. EXPERIENCES OF THE NAMED PLAINTIFFS Dana Craig 29. Dana Craig has been deaf since birth. She is able to lip read only when a person gestures and also uses sign language. Absent a sign language interpreter, she must rely on texting or handwritten notes. She can vocalize some portions of her speech. Ms. Craig has been using OSF St. Joseph Medical Center in Bloomington, Illinois and OSF St. James Medical Center in Pontiac, Illinois, as the hospitals for her and her family’s medical care since 2002. Ms. Craig’s experiences as described hereinafter are part of a continuing and ongoing pattern of unlawful discrimination on the basis of disability. 30. Plaintiff Craig has encountered a number of accessibility barriers at both OSF hospitals she has visited. These barrier include, but are not limited to, the failure of OSF to provide a sign language interpreter before, during, and after her surgery and for the duration of her hospital stay, the failure to provide auxiliary aids in her patient room during a hospital stay, and the failure to provide a sign language interpreter or other means to effectively communicate during emergency visits. 31. In March 2007, Ms. Craig visited OSF St. Joseph Medical Center for a pre- surgery evaluation. At the time of making the appointment, Ms. Craig specifically requested that a sign language interpreter be made available to her for that appointment and during her surgery, and also requested an accessible patient room. On the date of her surgery, OSF failed to provide a sign language interpreter, and no one at OSF could answer Ms. Craig’s inquiries as to why no sign language interpreter was available. Ms. Craig’s pre-operation preparation, surgery, and post- operation treatment were all performed without a sign language interpreter available, or any other form of auxiliary aid to allow her to effectively communicate with her physicians and nurses. The lack of ability to communicate to healthcare professional before, during, and after the surgery was extremely frightening, upsetting, and frustrating for her under the already stressful circumstances of having surgery. 32. When Ms. Craig was brought into her assigned patient room after the surgery, the room was not accessible. There was no closed captioning on the television, TTY phone, or any other method for her to communicate. Ms. Craig attempted to communicate with the nursing manager about the availability of TTY and other accessible services, however it was very difficult to communicate or lip read as Ms. Craig had various tubes taped to her face. It was not until a day or two after her surgery that Ms. Craig’s patient room was made accessible by providing her with a TTY phone and activating closed captioning on the television. With each successive shift of nursing staff on duty, Ms. Craig encountered communication barriers as the staff was not aware that she was deaf. 33. On May 7, 2012, Ms. Craig had to visit the emergency room at OSF St. James in Pontiac, Illinois, to accompany her adult son as he had sustained a knee injury and was in severe pain. Ms. Craig requested that she be provided a sign language interpreter so that she could communicate with her son’s doctor but the OSF information desk personnel did not respond. After she was able to say “hello” loudly, a nurse nearby finally assisted her. While Ms. Craig’s son was in triage, after learning Ms. Craig was deaf, the nurse said he would have to relay any communications to his mother, did not make any attempts to communicate with Ms. Craig, and otherwise ignored Ms. Craig because she was deaf. Ms. Craig attempted to interject certain information about her son’s previous operation but was ignored by the examining doctor. Her presence or inability to effectively communicate with her son’s treating physician was treated as a nuisance, and she remained quiet for the remainder of the 2-3 hour visit without ever having been provided an interpreter. 34. On May 10, 2012, three days after her May 7th visit with her son, Ms. Craig rushed her husband to the OSF St. James emergency room as he was in intense pain. He was admitted immediately. Ms. Craig informed the staff at the desk that she was deaf and needed a sign language interpreter during the time her husband was hospitalized. While he was being treated, Ms. Craig’s husband repeatedly told the hospital personnel attending to him that his wife was deaf and that he had to be able to look at her in order to communicate. Mr. Craig’s requests were ignored. When Mr. Craig was asked for a person as his emergency contact, he named his wife, Ms. Craig. The staff stated that he would need to give a different emergency contact person because Ms. Craig was deaf. 35. On May 10, 2012, Plaintiff Craig’s husband was at OSF St. James Hospital for approximately 5 hours. At no time while at the hospital did a sign language interpreter arrive to assist Ms. Craig in communicating with OSF physicians or personnel. Even when the doctor came in to discuss the results of the CAT scan performed, the physician did not communicate the information to Ms. Craig while he discussed the results in her presence. As such, Ms. Craig was not able to ask any questions due to the lack of interpreter services. It was not until the next day, after Mr. Craig had left the hospital, that Ms. Craig learned they found a cyst on his lung and he was strongly encouraged to follow up with his physician. 36. OSF’s continuing failure to provide auxiliary aids or other accessible services to allow its personnel, nurses, and physicians to effectively communicate with patients and/or their family members who are deaf or hearing impaired has created significant difficulty and frustration for Plaintiff Craig. Roy Freeman 37. Plaintiff Roy Freeman suffered a traumatic brain injury in 2004 as a result of an automobile accident and has limited mobility. Mr. Freeman is able to stand and walk short distances with the use of a walker with arm rests due to arm spasms, and with the assistance of two people, both walking in front and behind him, for balance and stability. Mr. Freeman primarily relies on the use of a manual wheelchair, but is not able to push himself and must be pushed by another person. Mr. Freeman also has severe hearing loss. Plaintiff Freeman has been a patient at OSF St. James – John W. Albrecht Medical Center, in Pontiac, Illinois for his medical care and outpatient therapy since 2004. Mr. Freeman and his experiences, as described hereinafter, are part of a continuing and ongoing pattern of unlawful discrimination on the basis of disability. 38. At OSF St. James, Plaintiff Freeman has encountered a number of barriers, starting in the hospital’s exterior parking lots. While there are designated accessible parking spots, there are a limited number of curb cut outs to allow someone in a wheelchair to access the sidewalk and enter the hospital. There are no safe paths to use to access that curb cut outs that do exist, and to access such curb cut outs in order to reach the sidewalk, a person using a wheelchair must roll behind all of the other vehicles parked in the accessible parking spots, jeopardizing his or her safety due to reduced visibility. The parking spot that is closest to the curb cut outs is the farthest parking spot from the hospital’s main entrance. Although OSF has a golf cart shuttle service to transport people to and from the parking lot and hospital, the golf cart service is not available for use by Mr. Freeman because it is not wheelchair accessible. 39. Plaintiff Freeman’s sister, Renia Holzhauer, is his full time caregiver. At least 7 years ago, Ms. Holzhauer first addressed the parking lot curb issues with OSF. After several meetings, OSF provided Ms. Holzhauer with a swipe card to access the employee’s entrance when entering the hospital with her brother. However, that entrance did not have an automatic door opener and Ms. Holzhauer either struggled to open the door and push Mr. Freeman’s wheelchair or waited for another person to open and hold the door. 40. Additionally, Plaintiff Freeman encounters accessibility barriers in the elevators at OSF. In the main area of the OSF St. James Hospital, the elevators are too small to accommodate a wheelchair. Ms. Holzhauer must push Mr. Freeman’s wheelchair in sideways, which is the only way it will fit. Then, it is an extremely tight fit for her to accompany him, let alone others. The larger elevator in the hospital is only to be used by employees as they transport patients in their beds and is not available to other individuals using the hospital, including those in wheelchairs. 41. Plaintiff Freeman is never weighed during his visits to OSF or by his primary care doctor, a member of the OSF Medical Group, at his regular or annual examinations because OSF does not have lift equipment available to safely transfer him from his wheelchair onto a scale and does not have wheelchair accessible weight scales. Physicians and nursing staff consistently ask Ms. Holzhauer for his weight and accept whatever amount she provides, or use his weight recorded from a prior visit. These and other barriers prevent Mr. Freeman from receiving comprehensive healthcare treatment services at OSF. Mary Alice Freeman 42. Plaintiff Mary Alice Freeman uses a walker to ambulate. She is also deaf and uses sign language to communicate. Ms. Freeman uses OSF St. James for hospital services and her experiences, as described hereinafter, are part of a continuing and ongoing pattern of unlawful discrimination on the basis of disability. 43. Plaintiff Mary Alice Freeman is the mother of Plaintiff Roy Freeman, and frequently is accompanied to hospital and medical appointments by her daughter, Renia Holzhauer. The barriers to accessibility in the parking lots and elevators at OSF described above are also applicable to Ms. Freeman because of her use of a walker. Ms. Freeman is not able to climb the curb safely on her own, and as a result of the lack of curb cut outs allowing her to maneuver her walker onto the sidewalk, she must walk slowly through the parking lot traffic and behind cars in order to locate the closest curb cut out to permit her access to the hospital entrances, which poses a safety risk. 44. OSF does not provide sign language interpreters during Ms. Freeman’s inpatient stays or during emergency room visits, and only provides sign language interpreters when scheduled in advance for outpatient appointments. On October 28, 2012, Ms. Freeman was taken to the OSF St. James emergency room. Ms. Holzhauer requested a sign language interpreter for her mother, but none was provided. Ms. Freeman was admitted to the OSF St. James Hospital through October 31, 2012, and at no point during her inpatient stay was she provided with an interpreter. Fearful for her mother’s safety, Ms. Holzhauer would try to be present at the hospital as much as her schedule would allow in order to communicate with her mother and staff. During her entire inpatient stay, Ms. Freeman was unable to communicate with her doctors, nurses, and staff due to the failure of OSF to provide her an interpreter. 45. Ms. Freeman also encountered barriers when using OSF services to order meal service and requesting assistance from nursing staff. OSF uses a meal ordering process that requires patient to call the cafeteria to place their orders from a menu; meals are not delivered unless a patient orders them. The meal ordering process does not make it possible for a hearing impaired person to order a meal without assistance. Additionally, when using the call button to notify nurses that she needed assistance with meal ordering or otherwise, Ms. Freeman was unable to respond to the person on the other end of the call button because she is deaf. There was no TTY phone or other accessible phone device which would allow Ms. Freeman to communicate with nurses or the meal ordering service without assistance. Teri-Lyn Calhoun and George Calhoun 46. Plaintiff Teri-Lyn Calhoun is deaf and uses American Sign Language to communicate. She can lip read and can verbalize speech. Teri-Lyn Calhoun’s husband, Plaintiff George Calhoun is also deaf and communicates using American Sign Language. The Calhouns have been using OSF St. Francis Medical Center in Peoria, Illinois as their primary hospital for approximately 15-20 years, and have had numerous visits/appointments at the hospital in the past 2 years. Their experiences, as described hereinafter, are part of a continuing and ongoing pattern of unlawful discrimination on the basis of disability. 47. The Calhouns have experienced continued difficulty communicating with doctors and nurses at OSF because OSF has failed to provide qualified sign language interpreters, has failed to provide sign language interpreters at all in many instances, and has failed to provide other auxiliary aids to allow them to effectively communicate. 48. In December 2012, George Calhoun was rushed to OSF St. Francis from work with chest pressure and discomfort. At George’s request, his work health clinic’s staff attempted to contact a sign language interpreter whom George previously used for unrelated health issues, but they could not reach the interpreter and left a voicemail message. George then asked the EMT in the ambulance to contact the same interpreter and he did. The interpreter, having received the message from George’s workplace, was already en route to the hospital. The interpreter then informed Teri-Lyn that George was being rushed to the hospital. Upon her arrival at the emergency room, Teri-Lyn had to request that a nurse call her son because OSF did not have video phones, TTY phones, or other telephone devices in the immediate area for persons who are deaf. The nurse did not provide information as to any other areas of the hospital that would have such phones for her use. 49. The aforementioned sign language interpreter arrived at the hospital and stayed with George during his stay for approximately 24 hours. OSF refused to pay the interpreter for her services on the basis that she was not on their approved list of contracted interpreters. OSF never advised the Calhouns at the time regarding the policy, and never offered to provide a substitute interpreter during that time. The Calhouns did not learn that the interpreter was not paid until much later. Not all OSF-provided interpreters are fully qualified in American Sign Language, and the Calhouns have had a negative experience with one of the sign language interpreters provided to them by OSF in the past. OSF does not allow the patients to have a choice of interpreter. 50. In April 2011, Teri-Lyn took George to the hospital’s emergency room due to complications from a prostate biopsy. Upon arrival, she requested that a sign language interpreter be provided. Because George was in extreme discomfort, she did not want to delay his treatment by waiting for an interpreter. Teri-Lyn is able to speak quite clearly but has very limited hearing. Repeatedly throughout the visit, she had to remind the staff that she was not an interpreter and was still waiting for the requested interpreter to arrive. Teri-Lyn’s ability to accurately interpret was hampered, because as she signed to George, she would verbally repeat what she was lip reading to ensure she was accurately conveying the information, and in several instances the physicians had to correct her for relaying incorrect information based on her mistakes in reading read their lips. Moreover, Teri-Lyn’s ability to read lips is often adversely affected when under stress, as she was in that situation. OSF never explained why they failed to provide an interpreter. 51. In 2003, Teri Lyn Calhoun went to the emergency room at OSF St. Francis. She was alone and in pain. Her ability to read lips is also adversely affected when she is in pain. After she was admitted, she was attended to by a doctor who without any explanation, left her unattended for about 20 minutes. She did not know what was happening and had no way to call for assistance. Alone, in pain, and without the ability to hear or communicate, she was very frightened, frustrated, confused, and distressed. COUNT I VIOLATION OF THE AMERICANS WITH DISABILITIES ACT 52. At all times relevant, there was in full force and effect a statute known as the Americans with Disabilities Act, 42 U.S.C. §§ 12101 – 12189, (the “ADA”), and its implementing regulations, 28 C.F.R. §§ 36.101 – 36.608, which provide in pertinent part as follows: a. No individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation. 42 U.S.C. § 12182(a); 28 C.F.R. § 36.201. b. It shall be discriminatory to subject an individual or class of individuals on the basis of a disability or disabilities of such individual or class, directly, or through contractual, licensing, or other arrangements, to a denial of the opportunity of the individual or class to participate in or benefit from the goods, services, facilities, privileges, advantages, or accommodations of an entity. 42 U.S.C. § 12182(b) (1)(A)(i); 28 C.F.R. § 36.202(a). c. It shall be discriminatory to afford an individual or class of individuals, on the basis of a disability or disabilities of such individual or class, directly, or through contractual, licensing, or other arrangements with the opportunity to participate in or benefit from a good, service, facility, privilege, advantage, or accommodation that is not equal to that afforded to other individuals. 42 U.S.C. § 12182(b)(1)(A)(ii); 28 C.F.R. § 36.202(b). d. It shall be discriminatory to impose or apply eligibility criteria that screen out or tend to screen out an individual with a disability or any class of individuals with disabilities from fully and equally enjoying any goods, services, facilities, privileges, advantages, or accommodations, unless such criteria can be shown to be necessary for the provision of the goods, services, facilities, privileges, advantages, or accommodations being offered. 42 U.S.C. § 12182(b) (2)(A)(i); 28 C.F.R. § 36.301(a). e. It shall be discriminatory to fail to make reasonable modifications in policies, practices, or procedures, when such modifications are necessary to afford such goods, services, facilities, privileges, advantages, or accommodations to individuals with disabilities, unless the entity can demonstrate that making such modifications would fundamentally alter the nature of such goods, services, facilities, privileges, advantages, or accommodations. 42 U.S.C. § 12182(b) (2)(A)(ii); 28 C.F.R. § 36.302(a). f. It shall be discriminatory to fail to remove architectural barriers that are structural in nature in existing facilities where such removal is readily achievable. 42 U.S.C. § 12182(b) (2)(A)(iv); 28 C.F.R. § 36.304(a). DEFENDANT’S VIOLATIONS 53. Defendant’s acts and omissions alleged herein violated and continue to violate the ADA and its implementing regulations in one or more or all of the following manners: a. Defendant has discriminated against Plaintiffs and the class members by denying them the opportunity for the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of the departments and facilities owned, operated and/or contracted for use by Defendant. b. Defendant has discriminated against Plaintiffs and the class members by denying them the opportunity to participate in or benefit from the goods, services, facilities, privileges, advantages, or accommodations of Defendant’s facilities. c. Defendant has discriminated against Plaintiffs and the class members by offering or affording them services that are not equal to those services afforded to other individuals without ambulatory or hearing impairments. d. Defendant has discriminated against Plaintiffs and the class members by imposing or applying eligibility criteria that screen out or tend to screen out disabled individuals with ambulatory impairments where such criteria is not necessary for the provision of health care services. e. Defendant has discriminated against Plaintiffs and the class members by failing to make reasonable modifications in policies, practices, or procedures, which are necessary to afford its goods, services and facilities to Plaintiffs and the class members where such modifications would not fundamentally alter the nature of its goods, services or facilities. f. Defendant has discriminated against Plaintiffs and the class members by failing to remove architectural barriers that are structural in nature in existing facilities where such removal is readily achievable. g. Defendant has discriminated against Plaintiffs and the class members by failing to provide auxiliary aids, sign language interpreters, or other means to effectively communicate with individuals who are deaf or hearing impaired, where the taking of such steps would not fundamentally alter the nature of its offered services or would not result in an undue burden. h. Defendant has otherwise discriminated against Plaintiffs and the class members. 54. Defendant’s conduct constitutes ongoing and continuing violations of the ADA. Unless restrained from doing so, Defendant will continue to violate the ADA. This conduct, unless enjoined, will continue to inflict injuries on Plaintiffs and the members of the class for which Plaintiffs and the class will have no adequate remedy at law. Therefore, pursuant to section 308 of the ADA (42 U.S.C. § 12188), Plaintiffs and members of the class are entitled to injunctive relief. 55. Plaintiffs and members of the class are entitled to reasonable attorneys’ fees and costs, pursuant to 42 U.S.C. § 12205. PRAYER FOR RELIEF WHEREFORE, Plaintiffs and members of the class pray for the following relief: a. A preliminary injunction and a permanent injunction, prohibiting Defendant from violating the ADA, 42 U.S.C. § 12181, et seq., and compelling Defendant to comply with the ADA; b. A declaration that Defendant is operating in a manner which discriminates against disabled individuals who are ambulatory impaired and who depend upon the use of wheelchairs or mobility aids and individuals who have hearing impairments and who depend on the use of auxiliary aids, sign language interpreters, video remote interpreting (“VRI”), or other means to communicate, and that Defendant fails to provide access for persons with disabilities as required by law; c. An order certifying the case as a class action pursuant to FED. R. CIV. P. 23(a) and (b)(2), and/or (b)(3), and appointing Plaintiffs as class representative and their attorneys as class counsel; d. An award of attorneys’ fees and costs; and e. Such other relief as the Court deems just. COUNT II VIOLATION OF THE REHABILITATION ACT 1. This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1331 and 28 U.S.C. § 1343(a). Plaintiffs’ claims in Count II arise under the Rehabilitation Act, 29 U.S.C. § 701 et sequitur, Public Law 93-112, 87 Stat. 355, as amended. 2-8. Plaintiffs incorporate by reference paragraphs 2 to 8 of Count I. 9. Pursuant to Fed. R. Civ. P. 23(a), Plaintiffs brings this action on their own behalf and on behalf of all other persons similarly situated. The class Plaintiffs seeks to represent is composed of all disabled persons (i) who are deaf or hearing impaired and who depend on the use auxiliary aids, sign language interpreters, or other means to communicate; and (ii) with ambulatory impairments who depend upon the use of wheelchairs or other mobility devices, and who have been denied the full and equal enjoyment of facilities, equipment and health care services offered by Defendant in violation of Section 504 of the Rehabilitation Act, 29 U.S.C. § 10-51. Plaintiffs incorporate by reference paragraphs 10 to 51 of Count I. 52. OSF receives federal financial assistance in the form of reimbursement from the federal Medicare and Medicaid programs and is therefore subject to the antidiscrimination provisions of the Rehabilitation Act, as herein described 53. At all times relevant, there was in full force and effect a statute known as the Rehabilitation Act of 1973, 29 U.S.C. § 701 et sequitur, and its implementing regulations, 45 C.F.R. § 84.4(a), which provide in pertinent part as follows: a. “No otherwise qualified individual with a disability…shall, solely by reason of her or his disability, be excluded from the participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance…” 29 U.S.C. § 794(a) b. An individual with a disability is “otherwise qualified” to participate in covered programs and activities if that individual “meets the essential eligibility requirements for the receipt of such services.” 45 C.F.R. § 84.3(l)(4). c. “Program or activity” means all of the operations of an entire corporation if assistance is extended to such corporation as a whole or the corporation is principally engaged in the business of providing health care services, and any part of the corporation receives federal financial assistance. 29 U.S.C. § 794(b)(3)(A)(i) and (ii); 45 C.F.R. §84.3(k)(3)(i)(A) and (ii). d. “Federal financial assistance” means “any grant, loan, contract…or any other arrangement by which the Department [of Health and Human Services] provides or otherwise makes available assistance in the form of…[f]unds.” 45 C.F.R. § 84.3(h). e. “No qualified handicapped person shall, because a recipient’s facilities are inaccessible to or unusable by handicapped persons, be denied the benefits of, be excluded from participation in, or otherwise be subjected to discrimination under any program or activity to which this part applies.” 45 C.F.R. § 84.21. f. “Accessibility. A recipient shall operate its program or activity so that when each part is viewed in its entirety, it is readily accessible to handicapped persons.” 45 C.F.R. § 84.22. g. “In providing health, welfare, or other social services or benefits, a recipient may not, on the basis of handicap: (1) Deny a qualified handicapped person these benefits or services…(3) Provide a qualified handicapped person with benefits or services that are not as effective as the benefits or services provided to others…(4) Provide benefits or services in a manner that limits or has the effect of limiting the participation of qualified handicapped persons.” 45 C.F.R. § 84.52(a). 54. OSF’s acts and omissions alleged herein violated and continue to violate the Rehabilitation Act and its implementing regulations in one or more or all of the following manners: a. Defendant has discriminated against Plaintiffs and the class members by denying them the opportunity for the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of the facilities owned, operated and/or contracted for use by Defendant. b. Defendant has discriminated against Plaintiffs and the class members by denying them the opportunity to participate in or benefit from the goods, services, facilities, privileges, advantages, or accommodations of Defendant’s facilities. c. Defendant has discriminated against Plaintiffs and the class members by offering or affording them services that are not equal to those services afforded to other individuals without ambulatory or hearing impairments. d. Defendant has discriminated against Plaintiffs and the class members by imposing or applying eligibility criteria that screen out or tend to screen out disabled individuals with ambulatory impairments who cannot independently transfer from their wheelchairs onto examination chairs where such criteria is not necessary for the provision of health care services. e. Defendant has discriminated against Plaintiffs and the class members by failing to make reasonable modifications in policies, practices, or procedures, which are necessary to afford its goods, services and facilities to Plaintiffs and the class members where such modifications would not fundamentally alter the nature of its goods, services or facilities. f. Defendant has discriminated against Plaintiffs and the class members by failing to remove architectural barriers that are structural in nature in existing facilities where such removal is readily achievable; g. Defendant has discriminated against Plaintiffs and the class members by failing to provide auxiliary aids, sign language interpreters, or other means to effectively communicate with individuals who are deaf or hearing impaired, where the taking of such steps would not fundamentally alter the nature of its offered services or would not result in an undue burden; and h. Defendant has otherwise discriminated against Plaintiffs and the class members. 55. Section 505(a)(2) of the Rehabilitation Act, 29 U.S.C. § 794(a)(2), states that the “remedies, procedures and that the rights set forth in title VI of the Civil Rights Act of 1964 [being 42 U.S.C. § 2000(d) et sequitur] shall be available” for violations of section 504 of the Rehabilitation Act. By law, such remedies include compensatory monetary damages. Barnes v. Gorman, 536 U.S. 181 (2002). 56. Defendant’s conduct has inflicted injury and damages upon Plaintiffs and the class members, including loss of a civil right, mental anguish, humiliation and mental pain and suffering. 57. Plaintiffs and members of the class are entitled to reasonable attorneys’ fees and costs, pursuant to section 505(b) of the Rehabilitation Act, 29 U.S.C. § 794a. WHEREFORE, Plaintiffs and members of the class pray for the following relief: a. A declaration that Defendant is operating in a manner which discriminates against disabled individuals with ambulatory impairments or mobility aids and individuals who have hearing impairments and who depend on the use of auxiliary aids, sign language interpreters, video remote interpreting (“VRI”), or other means to communicate, and that Defendant fails to provide access for persons with disabilities as required by law; b. An order certifying the case as a class action pursuant to Fed. R. Civ. P. 23(a) and (b)(2) and/or (b)(3), and appointing Plaintiffs as class representatives and their attorneys as class counsel; c. An award of compensatory monetary damages; d. An award of attorneys’ fees and costs; and e. Such other relief as the Court deems just. DANA CRAIG, ROY FREEMAN, MARY ALICE FREEMAN, TERI-LYN CALHOUN, AND GEORGE CALHOUN, individually on behalf of themselves and all other persons similarly situated, Plaintiffs By: /s/ Jennifer M. Sender One of Their Attorneys Jennifer M. Sender (ARDC No. 6207774) Robert M. Winter (ARDC No. 3122228) Andrés J. Gallegos (ARDC No. 6212168) Catherine A. Cooke (ARDC No. 6289263) Attorneys for Plaintiff ROBBINS, SALOMON & PATT, LTD. 180 North LaSalle Street, Suite 3300 Chicago, Illinois 60601 (312) 782-9000 - Telephone (312) 782-6690 - Facsimile [email protected] [email protected] [email protected] [email protected]

civil rights, immigration, family

_qfOCYcBD5gMZwczQpNs

James R. Patterson, CA Bar No. 211102 Allison H. Goddard, CA Bar No. 211098 Elizabeth A. Mitchell CA Bar No. 204853 PATTERSON LAW GROUP 402 West Broadway, 29th Floor San Diego, CA 92101 Telephone: (619) 756-6990 Facsimile: (619) 756-6991 [email protected] [email protected] [email protected] Attorneys for Plaintiff BUCKEYE TREE LODGE AND SEQUOIA VILLAGE INN, LLC UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA BUCKEYE TREE LODGE AND SEQUOIA VILLAGE INN, LLC, a California limited liability company, on behalf of itself and all others similarly situated, Plaintiff, Case No. CLASS ACTION COMPLAINT FOR DAMAGES, PENALTIES, RESTITUTION, INJUNCTIVE RELIEF AND OTHER EQUITABLE RELIEF 1. Violation of the Lanham Act, 15 U.S.C. § 1125 (False Association) 2. Violation of the Lanham Act, 15 U.S.C. § 1125 (False Advertising) 3. Violation of California Business & Professions Code §§ 17200, et seq. (Unfair Competition) 4. Violation of California Business & Professions Code §§ 17500, et seq. (False Advertising) 5. Intentional Interference with Prospective Economic Advantage vs. EXPEDIA, INC., a Washington corporation; HOTELS.COM, L.P., a Texas limited partnership; HOTELS.COM GP, LLC, a Texas limited liability company; ORBITZ, LLC, a Delaware limited liability company; TRIVAGO GmbH, a German limited liability company; and DOES 1 through 100, Defendants. 6. Negligent Interference with Prospective Economic Advantage 7. Unjust Enrichment and Restitution [Demand for Jury Trial] Plaintiff Buckeye Tree Lodge and Sequoia Village Inn, LLC (“Buckeye Tree Lodge”) on behalf of itself and all others similarly situated, alleges upon personal knowledge, information and belief as follows: I. NATURE OF ACTION 1. The classic bait and switch. Defendants run a network of on-line travel services and websites under popular brands like Hotels.com, Expedia.com, Orbitz and Trivago (collectively, “Expedia”). Expedia baits consumers with on-line deals for vacation and hotel stays at the Buckeye Tree Lodge and other Class Member hotels, even though these hotels are not affiliated with Expedia. In fact, Expedia has no way to book these hotels. 2. After Expedia baits consumers with the false impression that they can book these hotels through its website, the switch begins. Expedia’s website falsely shows that there is no availability at the hotel, but then pushes the consumers to “deals” at Expedia’s nearby member hotels, who pay Expedia a fee for every room booked through its website. 3. Expedia’s deceit is brazen. Expedia posts fake telephone numbers for Buckeye Tree Lodge and other Class Member hotels to divert callers to Expedia’s own operators, who then try to book the consumers at Expedia member hotels. 4. Worse, Expedia then targets social media advertisements – for hotels it cannot book – to those consumers, using the brands of Class Member hotels to divert business from them to Expedia members. 5. Believing Expedia’s representation that there is no availability at a Class Member hotel, consumers take their business to Expedia member hotels. And the bait and switch is complete. 6. Expedia’s conduct violates the Lanham Act (15 U.S.C. § 1125), California Business and Professions Code §§ 17200, et seq. and 17500, et seq., and constitutes unfair competition, false advertising, false affiliation, trademark infringement, interference with prospective economic advantage and unjust enrichment. II. JURISDICTION 7. This Court has subject matter jurisdiction over Plaintiff’s Lanham Act claims pursuant to 28 U.S.C. § 1331. 8. This Court has supplemental subject matter jurisdiction over Plaintiff’s state-law claims pursuant to 28 U.S.C. § 1367. 9. This Court also has subject matter jurisdiction under the Class Action Fairness Act, 28 U.S.C. § 1332(d), because there are more than 100 putative class members, the amount in controversy exceeds $5 million, and there is minimal diversity. Plaintiff Buckeye Tree Lodge, a California citizen, is diverse from Defendant Expedia, Inc., a Washington citizen, Defendant Hotels.com, L.P., a Texas citizen, Defendant Hotels.com GP, LLC, a Texas citizen, Orbitz, LLC, a Delaware citizen, and Trivago GmbH, a German citizen. III. VENUE 10. This Court is the proper venue for this action pursuant to 28 U.S.C. § 1391(b). Defendants reside in this District under 28 U.S.C. § 1391(c); and a substantial amount of the events giving rise to the claims occurred in this District. IV. PARTIES 11. Plaintiff Buckeye Tree Lodge and Sequoia Village Inn, LLC is a California limited liability company. 12. Defendant Expedia, Inc. is a Washington corporation with its headquarters in Bellevue, Washington. 13. Defendant Hotels.com, L.P. is a Texas limited partnership with its headquarters in Dallas, Texas. Hotels.com, L.P. also has offices in Bellevue, Washington, which it shares with Expedia, Inc. and other defendants. 14. Defendant Hotels.com GP, LLC is a Texas limited liability company with its headquarters in Bellevue, Washington, which it shares with Expedia, Inc. and other defendants. Hotels.com GP, LLC is the general partner of Hotels.com, L.P. 15. Defendant Orbitz, LLC is a Delaware limited liability company with offices in Chicago, Illinois. Orbitz, LLC also has offices in Bellevue, Washington, which it shares with Expedia, Inc. and other defendants. 16. Defendant Trivago, GmbH is a German limited liability company headquartered in Düsseldorf, Germany with offices in New York, New York. 17. Plaintiff is unaware of the true names or capacities of the Defendants sued herein under the fictitious names DOES 1-100, but prays for leave to amend and serve such fictitiously named Defendants once their names and capacities become known. 18. Plaintiff is informed and believes, and based thereon alleges, that each and all of the acts and omissions alleged herein were performed by, or are attributable to, Defendants and DOES 1-100 (collectively “Defendants”), each acting as the agent for the other, with legal authority to act on the other’s behalf. The acts of any and all Defendants were in accordance with, and represent the official policies of each of the named Defendants. 19. Plaintiff is informed and believes, and based thereon alleges that, at all times herein mentioned, Defendants, and each of them, ratified each and every act or omission complained of herein. At all times herein mentioned, Defendants, and each of them, aided and abetted the acts and omissions of each and all the other Defendants in proximately causing the damages herein alleged. 20. Plaintiff is informed and believes, and based thereon alleges, that each of said Defendants is in some manner intentionally, negligently, or otherwise responsible for the acts, omissions, occurrences, and transactions alleged herein. V. STANDING 21. Plaintiff has standing to bring the claims alleged in this complaint because, as further detailed below, Defendants’ wrongful conduct proximately caused Plaintiff to suffer injuries to its commercial interests in its reputation and sales. VI. FACTUAL BACKGROUND Defendants Lure Consumers With False Google Ads 22. Defendants own and operate various websites that they identify as their brands, including, but not limited to, Expedia.com, Hotels.com, Orbitz.com and Trivago.com (collectively, the “Websites”). 23. Through these Websites, Defendants offer travel services to consumers in this District, throughout California and the United States, and across the world. 24. For a fee, hotels and vacation lodges can sign up to be members of Defendants’ websites. 25. Buckeye Tree Lodge and the Class Members are not members of Defendants’ websites or otherwise affiliated with Defendants. Buckeye Tree Lodge and, on information and belief, the Class Members have not consented to the Defendants’ use of their names, marks or any information concerning their booking, accommodations or availability. 26. Buckeye Tree Lodge and, on information and belief, the Class Members, own their names and marks. 27. Defendants push “deals” for stays at their members’ hotels and lie about the availability of rooms at non-member hotels. Consumers visiting these Websites have no way of knowing which hotels are members and which are not. 28. But the deception starts even before consumers visit the Websites. Defendants purchase false and misleading advertisements on internet search engines like Google, to funnel traffic to their Websites. 29. For example, when a consumer uses Google to search for the Buckeye Tree Lodge, the engine’s top result returns an advertisement purchased by Defendants to “Book Buckeye Tree Lodge” and promising “Incredible Offers on Great Hotels. Buckeye Tree Lodge.” 30. Plaintiff alleges on information and belief that Defendants had a pattern and practice, when available, to purchase similarly deceptive advertisements on Google and other search engines regarding the Class Members (collectively, the “Google Advertisements”). 31. The Google Advertisements were false, misleading and omitted material facts necessary to make them not misleading because they stated or implied that Defendants had an affiliation with the Class Members and that Defendants could book stays at the Class Members’ hotels on behalf of consumers. 32. In truth, at all relevant times, Defendants had no affiliation with Buckeye Tree Lodge and the Class Members, and Defendants had no way to actually book stays at Buckeye Tree Lodge or at the Class Members’ hotels on behalf of consumers. 33. The Google Advertisements funneled consumers away from legitimate websites that could book rooms at Buckeye Tree Lodge and at the Class Members and lured consumers onto Defendants’ Websites, where Defendants’ unlawful conduct continued. Defendants’ Unfair and Fraudulent Practices on the Websites 34. At all relevant times, when a consumer searches for Class Members on Defendants’ Websites, the Websites prompt consumers to enter prospective travel dates to check for room availability. 35. Defendants’ travel date searches are misleading in that they falsely lead consumers to believe that Defendants have an affiliation with Buckeye Tree Lodge and the Class Members and that Defendants can book stays with Buckeye Tree Lodge and the Class Members on behalf of travelers. 36. Plaintiff alleges on information and belief that after baiting consumers to enter their prospective travel dates, Defendants’ Websites, as a standard practice, represent that there are “no rooms available” at the Buckeye Tree Lodge or Class Member hotels, that the Buckeye Tree Lodge and Class Members are “sold out,” or that there are “no deals available at this time” at the Buckeye Tree Lodge and Class Members, regardless of the actual vacancy rates. 37. In returning these false and misleading “sold out” search results, Defendants use the names and addresses of the Buckeye Tree Lodge and Class Members together with fake phone numbers. These phone numbers do not connect would be travelers to the Buckeye Tree Lodge and Class Members. Instead, these phone numbers are owned and operated by Defendants. 38. At the same time that the Websites return false and misleading “sold out” search results with phony 800 numbers for the Buckeye Tree Lodge and Class Members, the Websites offer “deals” at their own member hotels during the same travel dates. 39. Plaintiff alleges on information and belief that at all relevant times, when consumers call the fake phone numbers, Defendants’ operators confirm there is no availability at the Buckeye Tree Lodge and Class Members’ hotels (regardless of their actual vacancy rates) and offer to book stays at nearby Defendants’ member hotels. Defendants Continue Pursing Consumers with False Social Media Ads 40. If a consumer does not immediately book a room through the Websites, Defendants continue pursuing their business with misleading social media advertisements. 41. For example, at all relevant times, Defendants ran targeted Facebook advertisements that would encourage consumers to “Book Buckeye Tree Lodge Now!” after the consumer has searched for Buckeye Tree Lodge on Defendants’ Websites. 42. At all relevant times, Defendants also ran targeted Twitter advertisements that would encourage consumers to book at Buckeye Tree Lodge after searching Defendants’ Websites. 43. Plaintiff alleges on information and belief that Defendants had a policy and practice of running targeted advertisements on Facebook, Twitter and other social media platforms referring to Buckeye Tree Lodge and the Class Members (collectively, the “Facebook Advertisements”) in an effort to mislead consumers and get them to return to the Websites to book with Defendants’ member hotels. VII. CLASS ALLEGATIONS 44. Classes: Plaintiff brings its claims on behalf of the following classes of persons, as alleged more specifically in each claim for relief set forth herein: a. National Class: Pursuant to Fed. R. Civ. P. 23, Plaintiff seeks to certify a class of the following persons: All hotels, lodges, inns, motels and providers of overnight accommodations whose names appeared on Hotels.com, Expedia.com, Orbitz.com or Trivago.com with whom Defendants did not have a booking agreement during the relevant time period from four (4) years preceding the filing of this Complaint, up to and through the time of trial for this matter (hereinafter the “National Class”). b. California Sub-Class: Pursuant to Fed. R. Civ. P. 23, Plaintiff seeks to certify a sub-class of the following persons: All California-based hotels, lodges, inns, motels and providers of overnight accommodations whose names appeared on Hotels.com, Expedia.com, Orbitz.com or Trivago.com with whom Defendants did not have a booking agreement during the relevant time period from four (4) years preceding the filing of this Complaint, up to and through the time of trial for this matter (hereinafter the “California Sub- Class”). 45. Excluded from the Classes: Excluded from the classes are Defendants, their corporate parents, subsidiaries and affiliates, officers and directors, any entity in which any Defendant has a controlling interest, and the legal representatives, successors, or assigns of any such excluded persons or entities, and Plaintiff’s attorneys. Also excluded are any judges presiding over these proceedings and their immediate family. 46. Numerosity: The class members are so numerous that joinder of all members is impracticable. While the exact numbers of class members are unknown to Plaintiff at this time, Buckeye Tree Lodge is informed and believes that the classes consist of more than one hundred individuals. Members are readily ascertainable through appropriate discovery from records maintained by Defendants and their agents. 47. Common Questions of Law and Fact Predominate: Questions of law and fact common to the Class predominate over questions affecting only individuals, including: a. What algorithms Defendants used on their Websites to return search results to consumers; b. Whether Defendants’ search engines accessed actual vacancy rates of their non- member hotels; c. How Defendants used smart technology to track consumer search history; d. Whether Defendants online advertisements were part of a pattern and practice to divert business unfairly toward their member hotels; e. Whether Defendants’ offers to book stays at hotels with whom they had no affiliation violated the Lanham Act, 15 U.S.C. § 1125(a)(1)(A); f. Whether Defendants’ use of Plaintiff and Class Members’ names and identifying information violated section 43(a) of the Lanham Act; g. Whether Defendants’ false representation that Plaintiff and Class Members’ hotels were sold out, had no rooms available or had no deals violated section 43(a) of the Lanham Act; h. Whether Defendants’ systematic acts and practices violated California Business and Professions Code §§ 17200 et seq.; i. Whether Defendants’ systematic acts and practices violated California Business and Professions Code §§ 17500 et seq.; j. Whether Defendants were unjustly enriched under California law; k. Whether restitution, lost profits or another damages measure is most appropriate to compensate Plaintiff and the Class Members; and l. Whether Defendants’ conduct should be enjoined. 48. Typicality: Buckeye Tree Lodge’s claims are typical of other Class Members’ claims. Like the other Class Members, Buckeye Tree Lodge was subjected to Defendants’ common advertising and website policies and practices. Defendants’ representations, advertisements and treatment of Buckeye Tree Lodge were and are typical of those of other Class Members. 49. Adequacy: Buckeye Tree Lodge can fairly and adequately represent the Class’s interests. It has no conflicts of interest with other Class Members, and it retained counsel who are competent and experienced in class actions and unfair competition litigation. 50. Superiority: The nature of this action and the nature of laws available to Buckeye Tree Lodge and the Class make the use of the class action format a particularly efficient and appropriate procedure to afford relief to Buckeye Tree Lodge and the Classes for the wrongs alleged because: a. The individual amounts of damages involved, while not insubstantial, are such that individual actions or other individual remedies are impracticable and litigating individual actions would be too costly and burdensome; b. This case involves a small number of tight knit Defendants operating four Websites under a common scheme, and a large number of individual small and medium size hotels and lodges with many relatively small claims with common issues of law and fact; and c. If each class member were required to file an individual lawsuit, Defendants would necessarily gain an unconscionable advantage since it would be able to exploit and overwhelm the limited resources of each individual class member. VIII. CLAIMS FOR RELIEF FIRST CLAIM FOR RELIEF Violation of the Lanham Act, 15 U.S.C. § 1125(a)(1)(A) (False Association and Trademark Infringement) (By Plaintiff and the National Class Members Against All Defendants) 51. Plaintiff incorporates every preceding paragraph as if fully set forth herein. 52. In acting as alleged above, Defendants violated section 43(a) of the Lanham Act (15 U.S.C. § 1125(a)(1)(A)), in connection with on-line travel and booking services, by using in commerce words, terms, names, or symbols, or a combination thereof, which were likely to cause confusion, mistake or deception as to the affiliation, connection, or association of Defendants with Buckeye Tree Lodge and the National Class Members, or as to the origin, sponsorship, or approval of their services or commercial activities. 53. In acting as alleged above, Defendants also violated section 43(a) of the Lanham Act (15 U.S.C. § 1125(a)(1)(A)), in connection with on-line travel and booking services, by using in commerce false designations of origin, false or misleading descriptions of fact, or false or misleading representations of fact, which were likely to cause confusion, mistake, or deception as to the affiliation, connection, or association of Defendants with Buckeye Tree Lodge and the National Class Members, or as to the origin, sponsorship, or approval of their services or commercial activities. 54. Defendants’ misrepresentations and actions in violation of 15 U.S.C. § 1125(a)(1)(A) proximately caused an injury to a commercial interest in sales or business reputation of Buckeye Tree Lodge and the National Class Members. 55. Defendants’ misrepresentations and actions in violation of 15 U.S.C. § 1125(a)(1)(A) have also deprived and will continue to deprive Buckeye Tree Lodge and the National Class Members of the ability to control the consumer perception of its products and services offered under their names and marks, placing the valuable reputation and goodwill of Buckeye Tree Lodge and the National Class Members in the hands of Defendants. 56. Defendants had direct and full knowledge of Buckeye Tree Lodge and the National Class Members’ prior use of and rights in their names and marks before the acts complained of herein. The knowing, intentional and willful nature of the acts set forth herein renders this an exceptional case under 15 U.S.C. § 1117(a). 57. Accordingly, pursuant to 15 U.S.C. § 1117, Buckeye Tree Lodge and the National Class Members are entitled to recover: (1) Defendants’ profits, or an amount that is adequate, which the Court finds to be just according to the circumstances of the case, as compensation; (2) the damages sustained by Buckeye Tree Lodge and the National Class Members, in a sum above the amount found as actual damages, not exceeding three times such amount; (3) the costs of the action; and (4) reasonable attorney 58. As a result of Defendants’ aforesaid conduct and in addition to other damages, Buckeye Tree Lodge and the National Class Members have suffered the continuing loss of the goodwill and reputation established by their names and marks. This continuing loss of goodwill cannot be properly calculated and thus constitutes irreparable harm and an injury for which Buckeye Tree Lodge and the National Class Members have no adequate remedy at law. Buckeye Tree Lodge and the National Class Members will continue to suffer irreparable harm unless this Court enjoins Defendants’ conduct. SECOND CLAIM FOR RELIEF Violation of the Lanham Act, 15 U.S.C. § 1125(a)(1)(B) (False Advertising and Trademark Infringement) (By Plaintiff and the National Class Members Against All Defendants) 59. Plaintiff incorporates every preceding paragraph as if fully set forth herein. 60. In acting as alleged above, Defendants violated section 43(a) of the Lanham Act (15 U.S.C. § 1125(a)(1)(B)), in connection with on-line travel and booking services, by using in commerce words, terms, names, or symbols, or a combination thereof, which in commercial advertising or promotion, misrepresented the nature, characteristics, or qualities of Buckeye Tree Lodge and the National Class Members’ services or commercial activities. 61. In acting as alleged above, Defendants also violated section 43(a) of the Lanham Act (15 U.S.C. § 1125(a)(1)(B)), in connection with on-line travel and booking services, by using in commerce false designations of origin, false or misleading descriptions of fact, or false or misleading representations of fact, which in commercial advertising or promotion, misrepresented the nature, characteristics, or qualities of Buckeye Tree Lodge and the National Class Members’ services or commercial activities. 62. Defendants’ misrepresentations and actions in violation of 15 U.S.C. § 1125(a)(1)(B) proximately caused an injury to a commercial interest in sales or business reputation of Buckeye Tree Lodge and the National Class Members. 63. Defendants’ misrepresentations and actions in violation of 15 U.S.C. § 1125(a)(1)(A) have also deprived and will continue to deprive Buckeye Tree Lodge and the National Class Members of the ability to control the consumer perception of their products and services offered under their names and marks, placing the valuable reputation and goodwill of Buckeye Tree Lodge and the National Class Members in the hands of Defendants. 64. Defendants had direct and full knowledge of Buckeye Tree Lodge and the National Class Members’ prior use of and rights in their names and marks before the acts complained of herein. The knowing, intentional and willful nature of the acts set forth herein renders this an exceptional case under 15 U.S.C. § 1117(a). 65. Accordingly, pursuant to 15 U.S.C. § 1117, Buckeye Tree Lodge and the National Class Members are entitled to recover: (1) Defendants’ profits, or an amount that is adequate, which the Court finds to be just according to the circumstances of the case, as compensation; (2) the damages sustained by Buckeye Tree Lodge and the National Class Members, in a sum above the amount found as actual damages, not exceeding three times such amount; (3) the costs of the action; and (4) reasonable attorney fees should the Court find this to be an exceptional action. 66. As a result of Defendants’ aforesaid conduct and in addition to other damages, Buckeye Tree Lodge and the National Class Members have suffered the continuing loss of the goodwill and reputation established by their names and marks. This continuing loss of goodwill cannot be properly calculated and thus constitutes irreparable harm and an injury for which Buckeye Tree Lodge and the National Class Members have no adequate remedy at law. Buckeye Tree Lodge and the National Class Members will continue to suffer irreparable harm unless this Court enjoins Defendants’ conduct. THIRD CLAIM FOR RELIEF Unfair Competition – Violations of California Business & Professions Code §§ 17200, et seq. (By Plaintiff and the California Sub-Class Members Against All Defendants) 67. Plaintiff incorporates every preceding paragraph as if fully set forth herein. 68. Defendants’ conduct, as alleged herein, has been, and continues to be, unfair, unlawful, and harmful to Buckeye Tree Lodge, the California Sub-Class Members, consumers and the general public. Buckeye Tree Lodge seeks to enforce important rights affecting the public interest within the meaning of California Code of Civil Procedure § 1021.5. 69. Defendants’ activities, as alleged herein, are violations of federal and California law, and constitute unfair competition and unlawful business acts and practices in violation of California Business & Professions Code §§ 17200, et seq. 70. Buckeye Tree Lodge and the California Sub-Class Members have been personally aggrieved by Defendants’ unfair competition and unlawful business acts and practices as alleged herein, including but not necessarily limited to, by the loss of money or property. 71. Pursuant to California Business & Professions Code §§ 17200, et seq., Buckeye Tree Lodge and the California Sub-Class Members are entitled to disgorgement and restitution of the income that Defendants earned during a period that commences four years prior to the filing of this Complaint; an award of attorneys’ fees pursuant to California Code of Civil Procedure § 1021.5 and other applicable law; and an award of costs. 72. As a result of Defendants’ aforesaid conduct and in addition to other damages, Buckeye Tree Lodge and the California Sub-Class Members have suffered the continuing loss of the goodwill and reputation established by their names and marks. This continuing loss of goodwill cannot be properly calculated and thus constitutes irreparable harm and an injury for which Buckeye Tree Lodge and the California Sub-Class Members have no adequate remedy at law. Buckeye Tree Lodge and the California Sub-Class Members will continue to suffer irreparable harm unless this Court enjoins Defendants’ conduct. FOURTH CLAIM FOR RELIEF False Advertising– Violations of California Business & Professions Code §§ 17500, et seq. (By Plaintiff and the California Sub-Class Members Against All Defendants) 73. Plaintiff incorporates every preceding paragraph as if fully set forth herein. 74. Defendants’ conduct, as alleged herein, has been, and continues to be, unfair, unlawful, and harmful to Buckeye Tree Lodge, the California Sub-Class Members, consumers and the general public. Buckeye Tree Lodge seeks to enforce important rights affecting the public interest within the meaning of California Code of Civil Procedure § 1021.5. 75. Defendants’ activities, as alleged herein, are violations of federal and California law, and constitute false advertising in violation of California Business & Professions Code §§ 17500, et seq. 76. Buckeye Tree Lodge and the California Sub-Class Members have been personally aggrieved by Defendants’ false advertising as alleged herein, including but not necessarily limited to, by the loss of money or property. 77. Pursuant to California Business & Professions Code §§ 17500, et seq., Buckeye Tree Lodge and the California Sub-Class Members are entitled to disgorgement and restitution of the income that Defendants earned during a period that commences four years prior to the filing of this Complaint; an award of attorneys’ fees pursuant to California Code of Civil Procedure § 1021.5 and other applicable law; and an award of costs. 78. As a result of Defendants’ aforesaid conduct and in addition to other damages, Buckeye Tree Lodge and the California Sub-Class Members have suffered the continuing loss of the goodwill and reputation established by their names and marks. This continuing loss of goodwill cannot be properly calculated and thus constitutes irreparable harm and an injury for which Buckeye Tree Lodge and the California Sub-Class Members have no adequate remedy at law. Buckeye Tree Lodge and the California Sub-Class Members will continue to suffer irreparable harm unless this Court enjoins Defendants’ conduct. FIFTH CLAIM FOR RELIEF Intentional Interference with Prospective Economic Advantage (By Plaintiff and the California Sub-Class Members Against All Defendants) 79. Plaintiff incorporates every preceding paragraph as if fully set forth herein. 80. Buckeye Tree Lodge and the California Sub-Class Members, on the one hand, and consumers who were looking to book stays at their hotels, on the other hand, were in an economic relationship that probably would have resulted in a future economic benefit to Buckeye Tree Lodge and the Class Members (the “Relationship”). 81. Defendants knew of the Relationship. 82. Defendants intended to disrupt the Relationship. 83. Defendants, in acting as alleged above, engaged in wrongful conduct by, without limitation, violating the Lanham Act, violating California Business & Professions Code §§ 17200, et seq. and 17500, et seq., violating California common law, engaging in acts of unfair competition, false advertising, false affiliation and misrepresentation. 84. The Relationship was disrupted. 85. Buckeye Tree Lodge and the California Sub-Class Members suffered harm. 86. Defendants’ wrongful conduct, as alleged above, was a substantial factor in causing Buckeye Tree Lodge and the California Sub-Class Members’ harm. 87. Defendants engaged in the conduct alleged above with malice, oppression, or fraud in that Defendants’ conduct was done with a willful and knowing disregard of Plaintiff and the California Sub- Class Members’ rights, Defendants’ conduct subjected Plaintiff and the California Sub-Class Members’ to cruel and unjust hardship in knowing disregard of their rights, or Defendants intentionally misrepresented the true facts or concealed material facts and did so intending to harm Plaintiff and the California Sub-Class Members or in reckless disregard that such harm would result. 88. As a result, in addition to other remedies available, Plaintiff and the California Sub-Class Members may also recover damages to punish Defendants and deter future similar wrongful conduct. 89. As a result of Defendants’ aforesaid conduct and in addition to other damages, Buckeye Tree Lodge and the California Sub-Class Members have suffered the continuing loss of the goodwill and reputation established by their names and marks. This continuing loss of goodwill cannot be properly calculated and thus constitutes irreparable harm and an injury for which Buckeye Tree Lodge and the California Sub-Class Members have no adequate remedy at law. Buckeye Tree Lodge and the California Sub-Class Members will continue to suffer irreparable harm unless this Court enjoins Defendants’ conduct. SIXTH CLAIM FOR RELIEF Negligent Interference with Prospective Economic Advantage (By Plaintiff and the California Sub-Class Members Against All Defendants) 90. Plaintiff incorporates every preceding paragraph as if fully set forth herein. 91. Buckeye Tree Lodge and the California Sub-Members, on the one hand, and consumers who were looking to book stays at their hotels, on the other hand, were in a Relationship that probably would have resulted in a future economic benefit to Buckeye Tree Lodge and the California Sub-Class Members. 92. Defendants knew or should have known of this Relationship. 93. Defendants knew or should have known that this Relationship would be disrupted if they failed to act with reasonable care. 94. Defendants failed to act with reasonable care. 95. Defendants, in acting as alleged above, engaged in wrongful conduct by, without limitation, violating the Lanham Act, violating California Business & Professions Code §§ 17200, et seq. and 17500, et seq., violating California common law, engaging in acts of unfair competition, false advertising, false affiliation and misrepresentation. 96. The Relationship was disrupted. 97. Buckeye Tree Lodge and the California Sub-Class Members suffered harm. 98. Defendants’ wrongful conduct, as alleged above, was a substantial factor in causing Buckeye Tree Lodge and the Class Members’ harm. 99. As a result of Defendants’ aforesaid conduct and in addition to other damages, Buckeye Tree Lodge and the California Sub-Class Members have suffered the continuing loss of the goodwill and reputation established by their names and marks. This continuing loss of goodwill cannot be properly calculated and thus constitutes irreparable harm and an injury for which Buckeye Tree Lodge and the California Sub-Class Members have no adequate remedy at law. Buckeye Tree Lodge and the California Sub-Class Members will continue to suffer irreparable harm unless this Court enjoins Defendants’ conduct. SEVENTH CLAIM FOR RELIEF Unjust Enrichment and Restitution (By Plaintiff and the California Sub-Class Members Against All Defendants) 100. Plaintiff incorporates every preceding paragraph as if fully set forth herein. 101. In acting as alleged above, Defendants have been unjustly enriched in that Defendants have knowingly benefitted at the expense of Buckeye Tree Lodge and the California Sub-Class Members in a manner such that allowance of Defendants to retain the benefits that they received would be unjust. 102. Buckeye Tree Lodge and the California Sub-Class Members are entitled to disgorgement and restitution of the income that Defendants earned during a period that commences four years prior to the filing of this Complaint; a temporary and permanent injunction requiring Defendants to refrain from their unlawful activities; an award of attorneys’ fees pursuant to California Code of Civil Procedure § 1021.5 and other applicable law; and an award of costs. 103. As a result of Defendants’ aforesaid conduct and in addition to other damages, Buckeye Tree Lodge and the California Sub-Class Members have suffered the continuing loss of the goodwill and reputation established by their names and marks. This continuing loss of goodwill cannot be properly calculated and thus constitutes irreparable harm and an injury for which Buckeye Tree Lodge and the California Sub-Class Members have no adequate remedy at law. Buckeye Tree Lodge and the California Sub-Class Members will continue to suffer irreparable harm unless this Court enjoins Defendants’ conduct. IX. PRAYER FOR RELIEF 104. Plaintiff and the Classes prays for relief and judgment against Defendants, jointly and severally, as follows: Class Action Certification 1. That Plaintiff’s claims be certified as a class action under Federal Rule of Civil Procedure 23; 2. That the Court certify the National Class; and 3. That the Court certify the California Sub-Class. As to the First Claim For Relief (False Affiliation, the Lanham Act (15 U.S.C. § 1125(a)(1)(A) violations) 1. Defendants’ profits, or an amount that is adequate, which the Court finds to be just according to the circumstances of the case, as compensation, pursuant to 15 U.S.C. § 1117; 2. The damages sustained by Buckeye Tree Lodge and the National Class Members, in a sum above the amount found as actual damages, not exceeding three times such amount, pursuant to 15 U.S.C. § 1117; 3. For temporary and permanent injunctive relief; 4. The costs of the action pursuant to 15 U.S.C. § 1117; 5. For reasonable attorneys’ fees pursuant to 15 U.S.C. § 1117; and 6. For such other and further relief as the Court may deem equitable and appropriate. As to the Second Claim For Relief (False Advertising, Lanham Act (15 U.S.C. § 1125(a)(1)(B) violations) 1. Defendants’ profits, or an amount that is adequate, which the Court finds to be just according to the circumstances of the case, as compensation, pursuant to 15 U.S.C. § 1117; 2. The damages sustained by Buckeye Tree Lodge and the National Class Members, in a sum above the amount found as actual damages, not exceeding three times such amount, pursuant to 15 U.S.C. § 1117; 3. For temporary and permanent injunctive relief; 4. The costs of the action pursuant to 15 U.S.C. § 1117; 5. For reasonable attorneys’ fees pursuant to 15 U.S.C. § 1117; and 6. For such other and further relief as the Court may deem equitable and appropriate. As to the Third Claim For Relief (Unfair Competition) 1. The disgorgement of any and all income in connection with Defendants’ on-line booking, according to proof; 2. For restitution of income to Plaintiff and all California Sub-Class Members and prejudgment interest from the day such amounts were due and payable; 3. For the appointment of a receiver to receive, manage and distribute any and all funds disgorged from Defendants and determined to have been wrongfully acquired by Defendants as a result of violations of California Business & Professions Code §§ 17200, et seq.; 4. For all actual, consequential, and incidental losses and damages, according to proof; 5. For temporary and permanent injunctive relief; 6. For reasonable attorneys’ fees and costs pursuant to California Code of Civil Procedure § 1021.5; and 7. For such other and further relief as the Court may deem equitable and appropriate. As to the Fourth Claim For Relief (False Advertising) 1. The disgorgement of any and all income in connection with Defendants’ on-line booking, according to proof; 2. For restitution of income to Plaintiff and all California Sub-Class Members and prejudgment interest from the day such amounts were due and payable; 3. For the appointment of a receiver to receive, manage and distribute any and all funds disgorged from Defendants and determined to have been wrongfully acquired by Defendants as a result of violations of California Business & Professions Code §§ 17500, et seq.; 4. For all actual, consequential, and incidental losses and damages, according to proof; 5. For temporary and permanent injunctive relief; 6. For reasonable attorneys’ fees and costs pursuant to California Code of Civil Procedure § 1021.5; and 7. For such other and further relief as the Court may deem equitable and appropriate As to the Fifth Claim For Relief (Intentional Interference with Prospective Economic Advantage) 1. For all actual, consequential, and incidental losses and damages, according to proof; 2. For punitive damages according to proof; 3. For temporary and permanent injunctive relief; and 4. For such other and further relief as the Court may deem equitable and appropriate. As to the Sixth Claim For Relief (Negligent Interference with Prospective Economic Advantage) 1. For all actual, consequential, and incidental losses and damages, according to proof; and 2. For such other and further relief as the Court may deem equitable and appropriate. As to the Seventh Claim For Relief (Unjust Enrichment) 1. The disgorgement of any and all income in connection with on-line booking, according to proof; 2. For restitution of income to Plaintiff and all California Sub-Class Members and prejudgment interest from the day such amounts were due and payable; 3. For the appointment of a receiver to receive, manage and distribute any and all funds disgorged from Defendants and determined to have been wrongfully acquired by Defendants; 4. For all actual, consequential, and incidental losses and damages, according to proof; 5. For temporary and permanent injunctive relief; 6. For reasonable attorneys’ fees and costs pursuant to California Code of Civil Procedure § 1021.5; and 7. For such other and further relief as the Court may deem equitable and appropriate. Dated: August 17, 2016 PATTERSON LAW GROUP By: /s/ James R. Patterson James R. Patterson, CA Bar No. 211102 Allison H. Goddard, CA Bar No. 211098 Elizabeth A. Mitchell CA Bar No. 204853 PATTERSON LAW GROUP 402 West Broadway, 29th Floor San Diego, CA 92101 Telephone: (619) 756-6990 Facsimile: (619) 756-6991 [email protected] [email protected] [email protected] Attorneys for Plaintiff and the Class

intellectual property & communication

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BRODSKY & SMITH, LLC Evan J. Smith, Esquire (SBN 242352) [email protected] Ryan P. Cardona, Esquire (SBN 302113) [email protected] 9595 Wilshire Boulevard, Suite 900 Beverly Hills, CA 90212 Phone: (877) 534-2590 Facsimile: (310) 247-0160 Attorneys for Plaintiff IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA GERALD CLARKE, on behalf of himself and all others similarly situated, Plaintiff, vs. Civil Action No. ______________ CLASS ACTION COMPLAINT FOR BREACH OF FIDUCIARY DUTIES AND VIOLATIONS OF SECTIONS 14(a) AND 20(a) OF THE SECURITIES EXCHANGE ACT OF 1934 JURY TRIAL DEMANDED QUANTENNA COMMUNICATIONS, INC., SAM HEIDARI, GLENDA DORCHAK, NED HOOPER, HAROLD HUGHES, JACK LAZAR, JOHN SCULL, and MARK A. STEVENS, Defendants. Plaintiff, Gerald Clarke (“Plaintiff”), by his attorneys, on behalf of himself and those similarly situated, files this action against the defendants, and alleges upon information and belief, except for those allegations that pertain to him, which are alleged upon personal knowledge, as follows: SUMMARY OF THE ACTION 1. Plaintiff brings this stockholder class action on behalf of himself and all other public stockholders of Quantenna Communications, Inc. (“Quantenna” or the “Company”), against Quantenna and the Company’s Board of Directors (the “Board” or the “Individual Defendants,” collectively with the Company, the “Defendants”), for violations of Sections 14(a) and 20(a) of the Securities and Exchange Act of 1934 (the “Exchange Act”) and breaches of fiduciary duty as a result of Defendants’ efforts to sell the Company to ON Semiconductor (“Parent”), and Raptor Operations Sub, Inc. (“Merger Sub,” collectively with Parent, “ON Semiconductor”) as a result of an unfair process for an unfair price, and to enjoin an upcoming stockholder vote on a proposed all cash transaction valued at approximately $936 million (the “Proposed Transaction”). 2. The terms of the Proposed Transaction were memorialized in a March 27, 2018, filing with the Securities and Exchange Commission (“SEC”) on Form 8-K attaching the definitive Agreement and Plan of Merger (the “Merger Agreement”). Under the terms of the Merger Agreement, Quantenna will become an indirect wholly-owned subsidiary of ON Semiconductor, and Quantenna stockholders will receive $24.50 in cash for each share of Quantenna common stock they own. As a result of the Proposed Transaction, Plaintiff and other Quantenna stockholders will be frozen out of any future ownership interest in the Corporation. 3. Thereafter, on May 3, 2019, Quantenna filed a Preliminary Proxy Statement on Schedule 14A (the “Preliminary Proxy”) with the SEC in support of the Proposed Transaction. 4. In addition, the Proposed Transaction is unfair and undervalued for a number of reasons. Significantly, the Preliminary Proxy describes an insufficient sales process in which the Board rushed through an inadequate “sales process” in which the only end goal was a sale to ON Semiconductor, and in which no disinterested committee of Quantenna directors was created to run the sales process. 5. Such a sales process, or lack thereof, clearly indicates that the only end-goal acceptable to the Defendants was an acquisition of Quantenna by ON Semiconductor. 6. In approving the Proposed Transaction, the Individual Defendants have breached their fiduciary duties of loyalty, good faith, due care and disclosure by, inter alia, (i) agreeing to sell Quantenna without first taking steps to ensure that Plaintiff and Class members (defined below) would obtain adequate, fair and maximum consideration under the circumstances; and (ii) engineering the Proposed Transaction to benefit themselves and/or ON Semiconductor without regard for Quantenna public stockholders. Accordingly, this action seeks to enjoin the Proposed Transaction and compel the Individual Defendants to properly exercise their fiduciary duties to Quantenna stockholders. 7. Next, it appears as though the Board has entered into the Proposed Transaction to procure for themselves and senior management of the Company significant and immediate benefits with no thought to the Company’s public stockholders. For instance, pursuant to the terms of the Merger Agreement, upon the consummation of the Proposed Transaction, Company Board Members and executive officers will be able to exchange all Company equity awards for the merger consideration. Moreover, certain Directors and other insiders will also be the recipients of lucrative change-in-control agreements, triggered upon the termination of their employment as a consequence of the consummation of the Proposed Transaction. 8. According to the Preliminary Proxy, “[a]ssuming the merger was completed on April 29, 2019, the estimated aggregate amount that would be payable to Quantenna’s executive officers (i.e., Messrs. Heidari, Sobers and Carroll) as a group for their Quantenna equity awards is as follows: (a) with respect to vested Quantenna stock options (including stock options that will vest in connection with the merger), $28,693,117, (b) with respect to unvested Quantenna stock options (that may become payable after the effective time as described above), $5,638,675, (c) with respect to vested Quantenna RSUs (including RSUs that will vest in connection with the merger), $0, and (d) with respect to unvested Quantenna RSUs (that may become payable after the effective time as described above and assuming PSUs will be eligible to vest as to 100% of the target number of shares subject to the award based on the actual level of achievement of the applicable performance goals through the effective time), $10,795,925 (or $11,815,125 assuming the PSUs would be eligible to vest as to the maximum number of PSUs subject to the award based on the actual level of achievement of the applicable performance goals through the effective 9. In violation of sections 14(a) and 20(a) of the Exchange Act and in further violation of their fiduciary duties, Defendants caused to be filed the materially deficient Preliminary Proxy on May 3, 2019 with SEC in an effort to solicit stockholders to vote their Quantenna shares in favor of the Proposed Transaction. The Preliminary Proxy is materially deficient, deprives Quantenna stockholders of the information they need to make an intelligent, informed and rational decision of whether to vote their shares in favor of the Proposed Transaction, and is thus in breach of the Defendants fiduciary duties. As detailed below, the Preliminary Proxy omits and/or misrepresents material information concerning, among other things: (a) the sales process and in particular certain conflicts of interest for management; (b) the financial projections for Quantenna and ON Semiconductor, provided by Quantenna and ON Semiconductor to the Company’s financial advisor Qatalyst Partners (“Qatalyst”) for use in its financial analyses; and (c) the data and inputs underlying the financial valuation analyses that purport to support the fairness opinions provided by the Company’s financial advisor, Qatalyst. 10. Absent judicial intervention, the Proposed Transaction will be consummated, resulting in irreparable injury to Plaintiff and the Class. This action seeks to enjoin the Proposed Transaction or, in the event the Proposed Transaction is consummated, to recover damages resulting from violation of the federal securities laws by Defendants. PARTIES 11. Plaintiff is a citizen of Illinois and, at all times relevant hereto, has been a Quantenna stockholder. 12. Defendant Quantenna designs, develops, and markets wireless communication solutions enabling wireless local area networking in the Asia-Pacific, Europe, the Middle East, Africa, and the Americas. Quantenna is incorporated under the laws of the State of Delaware and has its principal place of business at 1704 Automation Parkway San Jose, CA 95131. Shares of Quantenna common stock are traded on the NasdaqGS under the symbol “QTNA.” 13. Defendant Sam Heidari (“Heidari") has been a Director of the Company at all relevant times. In addition, Heidari serves as the Chairman of the Company Board and the Company’s Chief Executive Officer (“CEO”). 14. Defendant Michael Hurlston ("Hurlston") has been a director of the Company at all relevant times. In addition, Hurlston serves as the Company’s Chief Executive Officer (“CEO”). 15. Defendant Glenda Dorchak ("Dorchak") has been a director of the Company at all relevant times. In addition, Dorchack serves as the Chairperson of the Board’s Compensation Committee. 16. Defendant Ned Hooper ("Hooper") has been a director of the Company at all relevant times. In addition, Hooper serves as a member on the Board’s Nominating and Corporate Governance Committee. 17. Defendant Harold Hughes ("Hughes") has been a director of the Company at all relevant times. In addition, Hughes serves as the Chairperson of the Board’s Audit Committee and as a member on the Board’s Compensation Committee. 18. Defendant Jack Lazar (“Lazar”) has been a director of the Company at all relevant times. In addition, Lazar serves as the Chairperson of the Board’s Nominating and Corporate Governance Committee and as a member on the Board’s Audit Committee. 19. Defendant John Scull (“Scull”) has been a director of the Company at all relevant times. In addition, Scull serves as a member on the Board’s Nominating and Corporate Governance Committee. 20. Defendant Mark A. Stevens (“Stevens”) has been a director of the Company at all relevant times. In addition, Stevens serves as a member on the Board’s Audit and Compensation Committees. 21. Defendants identified in ¶¶ 13 - 20 are collectively referred to as the “Individual Defendants.” 22. Defendant ON Semiconductor Corporation manufactures and sells semiconductor components for various electronic devices worldwide. Parent is a corporation organized under the laws of the State of Delaware and has its principal place of business at 5005 East McDowell Road, Phoenix, AZ 85008. Parent common stock is traded on the NasdaqGS under the ticker symbol 23. Defendant Merger Sub is a wholly owned subsidiary of Parent created to effectuate the Proposed Transaction. JURISDICTION AND VENUE 24. This Court has subject matter jurisdiction pursuant to Section 27 of the Exchange Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1331 (federal question jurisdiction) as Plaintiff alleges violations of Sections 14(a) and Section 20(a) of the Exchange Act. This action is not a collusive one to confer jurisdiction on a court of the United States, which it would not otherwise have. 25. Personal jurisdiction exists over each defendant either because the defendant conducts business in or maintains operations in this District, or is an individual who is either present in this District for jurisdictional purposes or has sufficient minimum contacts with this District as to render the exercise of jurisdiction over defendant by this Court permissible under traditional notions of fair play and substantial justice. 26. Venue is proper in this District pursuant to 28 U.S.C. § 1391, because Quantenna has its principal place of business is located in this District, and each of the Individual Defendants, as Company officers or directors, has extensive contacts within this District. CLASS ACTION ALLEGATIONS 27. Plaintiff brings this action pursuant to Federal Rule of Civil Procedure 23, individually and on behalf of the stockholders of Quantenna common stock who are being and will be harmed by Defendants’ actions described herein (the “Class”). The Class specifically excludes Defendants herein, and any person, firm, trust, corporation or other entity related to, or affiliated with, any of the Defendants. 28. This action is properly maintainable as a class action because: a. The Class is so numerous that joinder of all members is impracticable. According to the Preliminary Proxy, as of July 27, 2018, there were over 266 million shares of Quantenna common stock outstanding. The actual number of public stockholders of Quantenna will be ascertained through discovery; b. There are questions of law and fact which are common to the Class, including inter alia, the following: i. Whether Defendants have violated the federal securities laws; ii. Whether Defendants made material misrepresentations and/or omitted material facts in the Preliminary Proxy; and iii. Whether Plaintiff and the other members of the Class have and will continue to suffer irreparable injury if the Proposed Transaction is consummated. c. Plaintiff is an adequate representative of the Class, has retained competent counsel experienced in litigation of this nature and will fairly and adequately protect the interests of the Class; d. Plaintiff’s claims are typical of the claims of the other members of the Class and Plaintiff does not have any interests adverse to the Class; e. The prosecution of separate actions by individual members of the Class would create a risk of inconsistent or varying adjudications with respect to individual members of the Class which would establish incompatible standards of conduct for the party opposing the Class; f. Plaintiff anticipates that there will be no difficulty in the management of this litigation and, thus, a class action is superior to other available methods for the fair and efficient adjudication of this controversy; and g. Defendants have acted on grounds generally applicable to the Class with respect to the matters complained of herein, thereby making appropriate the relief sought herein with respect to the Class as a whole. THE INDIVIDUAL DEFENDANTS’ FIDUCAIRY DUTIES 29. By reason of the Individual Defendants’ positions with the Company as officers and/or directors, said individuals are in a fiduciary relationship with Quantenna and owe the Company the duties of due care, loyalty, and good faith. 30. By virtue of their positions as directors and/or officers of Quantenna, the Individual Defendants, at all relevant times, had the power to control and influence, and did control and influence and cause Quantenna to engage in the practices complained of herein. 31. Each of the Individual Defendants are required to act with due care, loyalty, good faith and in the best interests of the Company. To diligently comply with these duties, directors of a corporation must: a. act with the requisite diligence and due care that is reasonable under the circumstances; b. act in the best interest of the company; c. use reasonable means to obtain material information relating to a given action or decision; d. refrain from acts involving conflicts of interest between the fulfillment of their roles in the company and the fulfillment of any other roles or their personal affairs; e. avoid competing against the company or exploiting any business opportunities of the company for their own benefit, or the benefit of others; and f. disclose to the Company all information and documents relating to the company’s affairs that they received by virtue of their positions in the company. 32. In accordance with their duties of loyalty and good faith, the Individual Defendants, as directors and/or officers of Quantenna, are obligated to refrain from: a. participating in any transaction where the directors’ or officers’ loyalties are divided; b. participating in any transaction where the directors or officers are entitled to receive personal financial benefit not equally shared by the Company or its public stockholders; and/or c. unjustly enriching themselves at the expense or to the detriment of the Company or its stockholders. 33. Plaintiff alleges herein that the Individual Defendants, separately and together, in connection with the Proposed Transaction, violated, and are violating, the fiduciary duties they owe to Quantenna, Plaintiff and the other public stockholders of Quantenna, including their duties of loyalty, good faith, and due care. 34. As a result of the Individual Defendants’ divided loyalties, Plaintiff and Class members will not receive adequate, fair or maximum value for their Quantenna common stock in the Proposed Transaction. SUBSTANTIVE ALLEGATIONS Company Background 35. Quantenna designs, develops, and markets wireless communication solutions enabling wireless local area networking in the Asia-Pacific, Europe, the Middle East, Africa, and the Americas. 36. The Company’s solutions portfolio comprises radio frequency chips and digital baseband chips, which support the IEEE Wi-Fi standards, including 802.11n, 802.11ac, and the draft Wi-Fi 6 standard. 37. Quantenna offers its products for home networking applications, including home gateways, repeaters, and set-top boxes, as well as retail, outdoor, small and medium business, enterprise, industrial, and consumer electronics applications. 38. The Company sells its Wi-Fi solutions directly to original equipment manufacturers and original design manufacturers; and third-party distributors. 39. The Company’s most recent financial performance press release before the announcement of the Proposed Transaction indicated sustained and solid financial performance. For example, in a February 4, 2019 press release announcing its Q4 and Fiscal 2018 financial results, the Company highlighted such milestones as revenue of $220.5 million in fiscal year 2018, a 25% increase in revenue year-on-year, as well as a revenue of $62.6 million for Q4 2018, a 52% increase in revenue year-on-year. 40. Speaking on these positive results, CEO Defendant Heidari stated, “Our strong fourth quarter and annual operating results showcase the success of our broad product portfolio as both our premium Wave 3 10G product and high-performance mainstream Wave 2 product experienced record revenue.” 41. Defendant Heidari went on to comment on a strong future outlook for Quantenna noting “We continue to experience strong customer engagement with our products, including our family of Wi-Fi 6 product offerings.” 42. These positive results are not an anomaly, but rather, are indicative of a trend of continued financial success by Quantenna. Clearly, based upon these positive financial results, the Company is likely to have tremendous future success and should command a much higher consideration than the amount contained within the Proposed Transaction. 43. Despite this upward trajectory and continually increasing financial results, the Individual Defendants have caused Quantenna to enter into the Proposed Transaction for insufficient consideration. The Flawed Sales Process 44. As detailed in the Preliminary Proxy, the process deployed by the Individual Defendants was flawed and inadequate, was conducted out of the self-interest of the Individual Defendants, and was designed with only one concern in mind – to effectuate a sale of the Company to ON Semiconductor. 45. The Preliminary Proxy also notes that the Quantenna Board executed the merger agreement with ON Semiconductor while an interested third party (“Party H”) who had previously provided the highest bid for the Company remained active in the sales process. Indeed, the Preliminary Proxy indicates that the Quantenna Board did not even attempt to contact Party H after March 24, 2019 and before executing such agreement to solicit a concrete bid in order to drive any potential price up or to address the claimed differences between certain requirements of Party H and ON Semiconductor with respect to Dr. Heidari’s options and certain due diligence. 46. In addition, the Preliminary Proxy indicates that no committee of independent board members was created to run the sales process. This is especially concerning given that the decision by the Board to allow the Merger Agreement to be executed with a bidder – Party H – that had previously provided the highest bid and which wanted the Chairman and CEO, Dr. Heidari, to forego certain vesting. 47. Moreover, the Preliminary Proxy is also unclear as to any differences that may exist between the various non-disclosure agreements entered into between Quantenna and any interested third parties. 48. It is not surprising, given this background to the overall sales process, that it was conducted in a completely inappropriate and misleading manner. The Proposed Transaction 49. On March 27, 2019, ON Semiconductor and Quantenna issued a press release announcing the Proposed Transaction. The press release stated, in relevant part: PHOENIX & SAN JOSE, Calif.--(BUSINESS WIRE)--Mar. 27, 2019-- ON Semiconductor Corporation (Nasdaq: ON) (“ON Semiconductor”) and Quantenna Communications, Inc. (Nasdaq: QTNA) (“Quantenna”) today announced that they have entered into a definitive agreement for ON Semiconductor to acquire Quantenna for $24.50 per share in an all cash transaction. The acquisition consideration represents equity value of approximately $1.07 billion and enterprise value of approximately $936 million, after accounting for Quantenna’s net cash of approximately $136 million at the end of fourth quarter of 2018. The acquisition significantly enhances ON Semiconductor’s connectivity portfolio with the addition of Quantenna’s industry leading Wi-Fi technology and software capabilities. “We are very pleased to welcome Quantenna to ON Semiconductor’s team. The acquisition of Quantenna is another step towards strengthening our presence in industrial and automotive markets. The combination of ON’s expertise in highly efficient power management and broad sales and distribution reach, and Quantenna’s industry leading Wi-Fi technologies and software expertise creates a formidable platform for addressing fast growing markets for low-power connectivity in industrial and automotive applications,” said Keith Jackson, president and chief executive officer of ON Semiconductor. “I am very excited about the opportunity this acquisition creates for customers, shareholders, and employees of the two companies.” “Today’s announcement is great news for Quantenna employees and customers worldwide. As part of ON Semiconductor, Quantenna will benefit from a world- class organization in our commitment to providing the best end user experience for our customers,” stated Dr. Sam Heidari, chairman and chief executive officer of Quantenna. “We are proud of our accomplishments and look forward to a smooth transition with the ON Semiconductor team to pursue exciting new opportunities for Quantenna’s talented employees and reinforce our longstanding position as a leading Wi-Fi technology innovator.” Following consummation, the transaction is expected to be immediately accretive to ON Semiconductor’s non-GAAP earnings per share and free cash flow, excluding any non-recurring acquisition related charges, the fair value step-up inventory amortization, and amortization of acquired intangibles. The transaction is not subject to a financing condition. ON Semiconductor intends to fund the transaction through cash on hand and available capacity under its existing revolving credit facility. Completion of the transaction is subject to approval by Quantenna’s stockholders, regulatory approvals and other customary closing conditions. The transaction has been approved by ON Semiconductor’s and Quantenna’s boards of directors and is expected to close in the second half of 2019. No approval of the stockholders of ON Semiconductor is required in connection with the proposed transaction. Morrison & Foerster LLP served as legal advisor to ON Semiconductor. Qatalyst Partners acted as exclusive financial advisor to Quantenna, along with O’Melveny & Myers LLP, who served as legal advisor. The Inadequate Merger Consideration 50. Significantly, the Company’s financial prospects, opportunities for future growth, and synergies with ON Semiconductor establish the inadequacy of the merger consideration. 51. First, the compensation afforded under the Proposed Transaction to Company stockholders significantly undervalues the Company. The proposed valuation does not adequately reflect the intrinsic value of the Company. Moreover, the valuation does not adequately take into consideration how the Company is performing, considering key financial improvements of the Company in recent years. 52. For example, as shown above Quantenna’s future success is extremely likely, given the consistent positive financial results it has posted over the past several quarters. Obviously, the opportunity to invest in such a company on the rise is a great coup for ON Semiconductor, however it undercuts the investment of Plaintiff and all other public stockholders. 53. Moreover, the Proposed Transaction represents a significant synergistic benefit to ON Semiconductor, which operates in the same industry as Quantenna, and will use the new assets, operational capabilities, and brand capital to bolster its own position in the market. Specifically, Keith Jackson, President and CEO of ON Semiconductor stated in the press release announcing the Proposed Transaction, “The acquisition of Quantenna is another step towards strengthening our presence in industrial and automotive markets. The combination of ON’s expertise in highly efficient power management and broad sales and distribution reach, and Quantenna’s industry leading Wi-Fi technologies and software expertise creates a formidable platform for addressing fast growing markets for low-power connectivity in industrial and automotive applications.” 54. Clearly, while the deal will be beneficial to ON Semiconductor it comes at great expense to Plaintiff and other public stockholders of the Company. 55. Moreover, post-closure, Quantenna stockholders will be frozen out of any ownership interest in the Company, forever foreclosing the ability to see the true return on their investments. 56. It is clear from these statements and the facts set forth herein that this deal is designed to maximize benefits for ON Semiconductor at the expense of Quantenna stockholders, which clearly indicates that Quantenna stockholders were not an overriding concern in the formation of the Proposed Transaction. Preclusive Deal Mechanisms 57. The Merger Agreement contains certain provisions that unduly benefit ON Semiconductor by making an alternative transaction either prohibitively expensive or otherwise impossible. Significantly, the Merger Agreement contains a termination fee provision that is especially onerous and impermissible. Notably, in the event of termination, the merger agreement requires Quantenna to pay up to $32,165,000 to ON Semiconductor, if the Merger Agreement is terminated under certain circumstances. Moreover, under one circumstance, Quantenna must pay this termination fee even if it consummates any competing Acquisition Proposal (as defined in the Merger Agreement) within 12 months following the termination of the Merger Agreement. The termination fee will make the Company that much more expensive to acquire for potential purchasers. The termination fee in combination with other preclusive deal protection devices will all but ensure that no competing offer will be forthcoming. 58. The Merger Agreement also contains a “No Solicitation” provision that restricts Quantenna from considering alternative acquisition proposals by, inter alia, constraining Quantenna’s ability to solicit or communicate with potential acquirers or consider their proposals. Specifically, the provision prohibits the Company from directly or indirectly soliciting, initiating, proposing or inducing any alternative proposal, but permits the Board to consider an unsolicited bona fide “Acquisition Proposal” if it constitutes or is reasonably calculated to lead to a “Superior Proposal” as defined in the Merger Agreement. 59. Moreover, the Merger Agreement further reduces the possibility of a topping offer from an unsolicited purchaser. Here, the Individual Defendants agreed to provide ON Semiconductor information in order to match any other offer, thus providing ON Semiconductor access to the unsolicited bidder’s financial information and giving ON Semiconductor the ability to top the superior offer. Thus, a rival bidder is not likely to emerge with the cards stacked so much in favor of ON Semiconductor. 60. These provisions, individually and collectively, materially and improperly impede the Board’s ability to fulfill its fiduciary duties with respect to fully and fairly investigating and pursuing other reasonable and more valuable proposals and alternatives in the best interests of the Company and its public stockholders. 61. Accordingly, the Company’s true value is compromised by the consideration offered in the Proposed Transaction. Potential Conflicts of Interest 62. The breakdown of the benefits of the deal indicate that Quantenna insiders are the primary beneficiaries of the Proposed Transaction, not the Company’s public stockholders. The Board and the Company’s executive officers are conflicted because they will have secured unique benefits for themselves from the Proposed Transaction not available to Plaintiff and the public stockholders of Quantenna. 63. Certain insiders stand to receive massive financial benefits as a result of the Proposed Transaction. Notably, Company insiders, including the Individual Defendants, currently own large, illiquid portions of Company stock that will be exchanged for large cash pay days upon the consummation of the Proposed Transaction. 64. Furthermore, upon the consummation of the Proposed Transaction, each outstanding Company option or equity award, will be canceled and converted into the right to receive certain consideration according to the merger agreement. According to the Preliminary Proxy, “[a]ssuming the merger was completed on April 29, 2019, the estimated aggregate amount that would be payable to Quantenna’s executive officers (i.e., Messrs. Heidari, Sobers and Carroll) as a group for their Quantenna equity awards is as follows: (a) with respect to vested Quantenna stock options (including stock options that will vest in connection with the merger), $28,693,117, (b) with respect to unvested Quantenna stock options (that may become payable after the effective time as described above), $5,638,675, (c) with respect to vested Quantenna RSUs (including RSUs that will vest in connection with the merger), $0, and (d) with respect to unvested Quantenna RSUs (that may become payable after the effective time as described above and assuming PSUs will be eligible to vest as to 100% of the target number of shares subject to the award based on the actual level of achievement of the applicable performance goals through the effective time), $10,795,925 (or $11,815,125 assuming the PSUs would be eligible to vest as to the maximum number of PSUs subject to the award based on the actual level of achievement of the applicable performance goals through the effective time).” 65. Moreover, certain employment agreements with certain Quantenna executives, entitle such executives to severance packages should their employment be terminated under certain circumstances. These ‘golden parachute’ packages are significant, and will grant each director or officer entitled to them millions of dollars, compensation not shared by Quantenna’s common stockholders. 66. These payouts will be paid to Quantenna insiders, as a consequence of the Proposed Transaction’s consummation, as follows: Perquisites/ Equity Benefits Name Cash ($)(1) ($)(2) ($)(3) Total Sam Heidari 1,185,000 10,575,887 30,000 11,790,887 Sean Sobers 612,167 4,246,019 30,000 4,888,186 David Carroll 583,433 2,631,894 30,000 3,245,327 67. Moreover, the Preliminary Proxy is silent as to any post-close employment agreements Company insiders may have signed with ON Semiconductor. 68. Thus, while the Proposed Transaction is not in the best interests of Quantenna stockholders, it will produce lucrative benefits for the Company’s officers and directors. The Materially Misleading and/or Incomplete Preliminary Proxy 69. On May 3, 2019, the Quantenna Board caused to be filed with the SEC a materially misleading and incomplete Preliminary Proxy that, in violation of their fiduciary duties, failed to provide the Company’s stockholders with material information and/or provides them with materially misleading information critical to the total mix of information available to the Company’s stockholders concerning the financial and procedural fairness of the Proposed Transaction. Omissions and/or Material Misrepresentations Concerning the Sales Process leading up to the Proposed Transaction 70. Specifically, the Preliminary Proxy fails to provide material information concerning the process conducted by the Company and the events leading up to the Proposed Transaction. In particular, the Preliminary Proxy fails to disclose: a. Why the confidentiality agreement entered into with Party B did not include a standstill agreement; b. The nature of any differences that exist between the various non-disclosure agreements entered into between Quantenna and any interested third parties c. The reasoning as to why no private equity sponsors were contacted during the sales process; d. Why no committee of independent board members was created to run the sales process; e. The specific reasoning as to why the Quantenna Board failed to communicate with Party H after March 24, 2019 and did not attempt to contact Party H before executing the Merger Agreement with ON Semiconductor and why the Board believed the Party H merger agreement draft was not “competitive”; f. The basis for the Board’s decision to discontinue negotiations with Party H, the party that had made the highest unsolicited offer in the process due to Party H’s requirements that Dr. Heidari and other management enter into retention agreements, the need for customer due diligence, and that Dr. Heidari forego acceleration of unvested equity. g. What were the “potential completive dynamics and other considerations” that caused the Board to not reach out to Party B in and around March 14, 2019; and h. Communications regarding post-transaction employment during the negotiation of the underlying transaction must be disclosed to stockholders. This information is necessary for stockholders to understand potential conflicts of interest of management and the Board, as that information provides illumination concerning motivations that would prevent fiduciaries from acting solely in the best interests of the Company’s stockholders. Omissions and/or Material Misrepresentations Concerning Quantenna’s Financial Projections 71. The Preliminary Proxy fails to provide material information concerning financial projections provided by Quantenna’s management and relied upon by Qatalyst in its analyses. The Preliminary Proxy discloses management-prepared financial projections for the Company which are materially misleading. The Preliminary Proxy indicates that in connection with the rendering of Qatalyst’ fairness opinions, “[w]ith respect to the management projections, Qatalyst Partners was advised by Quantenna’s management, and Qatalyst Partners assumed, that the management projections had been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of Quantenna of the future financial performance of Quantenna and other matters covered thereby. With respect to the sensitivities, Qatalyst Partners was advised by the management of Quantenna, and Qatalyst Partners assumed, that they were also reasonable estimates and judgments as to the future financial performance of Quantenna and the other matters covered thereby, and Quantenna’s management consented to Qatalyst Partners’ use of the sensitivities for purposes of its opinion. Accordingly, the Preliminary Proxy should have, but fails to provide, certain information in the projections that Quantenna management provided to the Board, Qatalyst and BofA Merill Lynch. Courts have uniformly stated that “projections … are probably among the most highly-prized disclosures by investors. Investors can come up with their own estimates of discount rates or [] market multiples. What they cannot hope to do is replicate management’s inside view of the company’s prospects.” In re Netsmart Techs., Inc. S’holders Litig., 924 A.2d 171, 201-203 (Del. Ch. 2007). 72. With respect to the “Management Projections,” the Preliminary Proxy fails to provide material information concerning the financial projections prepared by Quantenna management. Specifically, the Preliminary Proxy fails to disclose material line items for Non- GAAP financial measures. 73. Specifically, the Preliminary Proxy provides non-GAAP financial metrics, but fails to disclose a reconciliation of all non-GAAP to GAAP metrics. 74. Further, the Preliminary Proxy fails to provide the sensitized management projections in an understandable format. While incomplete, the Management Projections are set forth in a chart by category and fiscal year. In contrast, the sensitivities are only partially presented and only in narrative form – as a result, Company stockholders cannot adequately assess the sensitivities. 75. This information is necessary to provide Company stockholders a complete and accurate picture of the sales process and its fairness. Without this information, stockholders were not fully informed as to Defendants’ actions, including those that may have been taken in bad faith, and cannot fairly assess the process. 76. Without accurate projection data presented in the Preliminary Proxy, Plaintiff and other stockholders of Quantenna are unable to properly evaluate the Company’s true worth, the accuracy of Qatalyst’s financial analyses, or make an informed decision whether to vote their Company stock in favor of the Proposed Transaction. As such, the Board has breached their fiduciary duties by failing to include such information in the Preliminary Proxy. Omissions and/or Material Misrepresentations Concerning the Financial Analyses by Qatalyst 77. In the Preliminary Proxy, Qatalyst describes its respective fairness opinion and the various valuation analyses performed to render such opinion. However, the descriptions fail to include necessary underlying data, support for conclusions, or the existence of, or basis for, underlying assumptions. Without this information, one cannot replicate the analyses, confirm the valuations or evaluate the fairness opinions. 78. With respect to the Selected Transactions Analysis, the Preliminary Proxy fails to disclose the following: a. The total value of each selected transaction; and b. The specific date on which each selected transaction closed. 79. With respect to the Discounted Cash Flow Analysis, the Preliminary Proxy fails to disclose the following: a. The specific inputs and assumptions used to calculate the discount rate range of 10.5% to 14.0%; as well as the WACC for the Company; b. The specific inputs and assumptions used to calculate EV/NTM of 12.0x to 22.0x; c. The number of Fully-Diluted shares and the Cash Net of Debt of the Company as of December 31, 2018; 80. These disclosures are critical for stockholders to be able to make an informed decision on whether to vote their shares in favor of the Proposed Transaction. FIRST COUNT Claim for Breach of Fiduciary Duties (Against the Individual Defendants) 81. Plaintiff repeats all previous allegations as if set forth in full herein. 82. The Individual Defendants have violated their fiduciary duties of care, loyalty and good faith owed to Plaintiff and the Company’s public stockholders. 83. By the acts, transactions and courses of conduct alleged herein, Defendants, individually and acting as a part of a common plan, are attempting to unfairly deprive Plaintiff and other members of the Class of the true value of their investment in Quantenna. 84. As demonstrated by the allegations above, the Individual Defendants failed to exercise the care required, and breached their duties of loyalty and good faith owed to the stockholders of Quantenna by entering into the Proposed Transaction through a flawed and unfair process and failing to take steps to maximize the value of Quantenna to its public stockholders. 85. Indeed, Defendants have accepted an offer to sell Quantenna at a price that fails to reflect the true value of the Company, thus depriving stockholders of the reasonable, fair and adequate value of their shares. 86. Moreover, the Individual Defendants breached their duty of due care and candor by failing to disclose to Plaintiff and the Class all material information necessary for them to make an informed decision on whether to vote their shares in favor of the Proposed Transaction. 87. The Individual Defendants dominate and control the business and corporate affairs of Quantenna, and are in possession of private corporate information concerning Quantenna’s assets, business and future prospects. Thus, there exists an imbalance and disparity of knowledge and economic power between them and the public stockholders of Quantenna which makes it inherently unfair for them to benefit their own interests to the exclusion of maximizing stockholder 88. By reason of the foregoing acts, practices and course of conduct, the Individual Defendants have failed to exercise due care and diligence in the exercise of their fiduciary obligations toward Plaintiff and the other members of the Class. 89. As a result of the actions of the Individual Defendants, Plaintiff and the Class will suffer irreparable injury in that they have not and will not receive their fair portion of the value of Quantenna’s assets and have been and will be prevented from obtaining a fair price for their common stock. 90. Unless the Individual Defendants are enjoined by the Court, they will continue to breach their fiduciary duties owed to Plaintiff and the members of the Class, all to the irreparable harm of the Class. 91. Plaintiff and the members of the Class have no adequate remedy at law. Only through the exercise of this Court’s equitable powers can Plaintiff and the Class be fully protected from the immediate and irreparable injury which Defendants’ actions threaten to inflict. SECOND COUNT Aiding and Abetting the Board’s Breaches of Fiduciary Duty Against Defendant Quantenna 92. Plaintiff incorporates each and every allegation set forth above as if fully set forth 93. Defendant Quantenna, knowingly assisted the Individual Defendants’ breaches of fiduciary duty in connection with the Proposed Acquisition, which, without such aid, would not have occurred. 94. As a result of this conduct, Plaintiff and the other members of the Class have been and will be damaged in that they have been and will be prevented from obtaining a fair price for their shares. 95. Plaintiff and the members of the Class have no adequate remedy at law. THIRD COUNT Violations of Section 14(a) of the Exchange Act (Against All Defendants) 96. Plaintiff repeats all previous allegations as if set forth in full herein. 97. Defendants have disseminated the Preliminary Proxy with the intention of soliciting stockholders to vote their shares in favor of the Proposed Transaction. 98. Section 14(a) of the Exchange Act requires full and fair disclosure in connection with the Proposed Transaction. Specifically, Section 14(a) provides that: It shall be unlawful for any person, by the use of the mails or by any means or instrumentality of interstate commerce or of any facility of a national securities exchange or otherwise, in contravention of such rules and regulations as the [SEC] may prescribe as necessary or appropriate in the public interest or for the protection of investors, to solicit or to permit the use of his name to solicit any proxy or consent or authorization in respect of any security (other than an exempted security) registered pursuant to section 78l of this title. 99. As such, SEC Rule 14a-9, 17 C.F.R. 240.14a-9, states the following: No solicitation subject to this regulation shall be made by means of any proxy statement, form of proxy, notice of meeting or other communication, written or oral, containing any statement which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of a proxy for the same meeting or subject matter which has become false or misleading. 100. The Preliminary Proxy was prepared in violation of Section 14(a) because it is materially misleading in numerous respects and omits material facts, including those set forth above. Moreover, in the exercise of reasonable care, Defendants knew or should have known that the Preliminary Proxy is materially misleading and omits material facts that are necessary to render them non-misleading. 101. The Individual Defendants had actual knowledge or should have known of the misrepresentations and omissions of material facts set forth herein. 102. The Individual Defendants were at least negligent in filing an Preliminary Proxy that was materially misleading and/or omitted material facts necessary to make the Preliminary Proxy not misleading. 103. The misrepresentations and omissions in the Preliminary Proxy are material to Plaintiff and the Class, and Plaintiff and the Class will be deprived of its entitlement to decide whether to vote its shares in favor of the Proposed Transaction on the basis of complete information if such misrepresentations and omissions are not corrected prior to the stockholder vote regarding the Proposed Transaction. FOURTH COUNT Violations of Section 20(a) of the Exchange Act (Against All Individual Defendants) 104. Plaintiff repeats all previous allegations as if set forth in full herein. 105. The Individual Defendants were privy to non-public information concerning the Company and its business and operations via access to internal corporate documents, conversations and connections with other corporate officers and employees, attendance at management and Board meetings and committees thereof and via reports and other information provided to them in connection therewith. Because of their possession of such information, the Individual Defendants knew or should have known that the Preliminary Proxy was materially misleading to Company stockholders. 106. The Individual Defendants were involved in drafting, producing, reviewing and/or disseminating the materially false and misleading statements complained of herein. The Individual Defendants were aware or should have been aware that materially false and misleading statements were being issued by the Company in the Preliminary Proxy and nevertheless approved, ratified and/or failed to correct those statements, in violation of federal securities laws. The Individual Defendants were able to, and did, control the contents of the Preliminary Proxy. The Individual Defendants were provided with copies of, reviewed and approved, and/or signed the Preliminary Proxy before its issuance and had the ability or opportunity to prevent its issuance or to cause it to be corrected. 107. The Individual Defendants also were able to, and did, directly or indirectly, control the conduct of Quantenna’s business, the information contained in its filings with the SEC, and its public statements. Because of their positions and access to material non-public information available to them but not the public, the Individual Defendants knew or should have known that the misrepresentations specified herein had not been properly disclosed to and were being concealed from the Company’s stockholders and that the Preliminary Proxy was misleading. As a result, the Individual Defendants are responsible for the accuracy of the Preliminary Proxy and are therefore responsible and liable for the misrepresentations contained herein. 108. The Individual Defendants acted as controlling persons of Quantenna within the meaning of Section 20(a) of the Exchange Act. By reason of their position with the Company, the Individual Defendants had the power and authority to cause Quantenna to engage in the wrongful conduct complained of herein. The Individual Defendants controlled Quantenna and all of its employees. As alleged above, Quantenna is a primary violator of Section 14 of the Exchange Act and SEC Rule Preliminary Proxy. By reason of their conduct, the Individual Defendants are liable pursuant to section 20(a) of the Exchange Act. WHEREFORE, Plaintiff demands injunctive relief, in its favor and in favor of the Class, and against the Defendants, as follows: A. Ordering that this action may be maintained as a class action and certifying Plaintiff as the Class representatives and Plaintiff’s counsel as Class counsel; B. Enjoining the Proposed Transaction; C. In the event Defendants consummate the Proposed Transaction, rescinding it and setting it aside or awarding rescissory damages to Plaintiff and the Class;

securities

NMn-DYcBD5gMZwczjVHi

THE ROSEN LAW FIRM, P.A. Laurence Rosen, Esq. 609 W. South Orange Avenue, Suite 2P South Orange, NJ 07079 Tel: (973) 313-1887 Fax: (973) 833-0399 Email: [email protected] Counsel for Plaintiff Case No.: CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS JURY TRIAL DEMANDED UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY BING LI, Individually and on Behalf of All Others Similarly Situated, Plaintiff, v. AETERNA ZENTARIS, INC., DAVID A. DODD, JUERGEN ENGEL, DENNIS TURPIN, JUDE DINGES, RICHARD SACHSE, and PAUL BLAKE, Defendants, Plaintiff Bing Li (“Plaintiff”), by and through his attorneys, alleges the following upon information and belief, except as to those allegations concerning Plaintiff, which are alleged upon personal knowledge. Plaintiff’s information and belief is based upon, among other things, his counsel’s investigation, which includes without limitation: (a) review and analysis of regulatory filings made by Aeterna Zentaris, Inc. (“AEZS” or the “Company”), with the United States Securities and Exchange Commission (“SEC”); (b) review and analysis of press releases and media reports issued by and disseminated by AEZS; and (c) review of other publicly available information concerning AEZS. Plaintiff believes that substantial evidentiary support will exist for the allegations set forth herein after a reasonable opportunity for discovery. NATURE OF THE ACTION 1. This is a class action on behalf of persons or entities that purchased or otherwise acquired AEZS securities between October 18, 2012 and November 6, 2014 (the “Class Period”). Plaintiff seeks to pursue remedies under the Securities Exchange Act of 1934 (the “Exchange Act”). JURISDICTION AND VENUE 2. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of the Exchange Act, 15 U.S.C. §§ 78j(b), 78b-1 and 78t(a), and Rule 10b-5 promulgated thereunder by the SEC, 17 C.F.R. §240.10b-5. 3. This Court has jurisdiction over the subject matter of this action pursuant to Section 27 of the Exchange Act (15 U.S.C. § 78aa) and 28 U.S.C. § - 2 - 4. Venue is proper in this Judicial District pursuant to Section 27 of the Exchange Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1391(b) as a substantial part of the conduct complained of herein occurred in this District. 5. In connection with the acts, conduct, and other wrongs alleged in this Complaint, Defendants, directly or indirectly, used the means and instrumentalities of interstate commerce, including but not limited to, the United States mails, interstate telephone communications and the facilities of the national securities exchange. PARTIES 6. Plaintiff, as set forth in the accompanying certification, incorporated by reference herein, purchased AEZS securities at artificially inflated prices during the Class Period and has been damaged thereby. 7. Defendant AEZS is a biopharmaceutical company primarily engaged in developing treatments in oncology and endocrinology. AEZS is incorporated in Canada, with wholly-owned subsidiaries operating in New Jersey and Germany. During the Class Period, AEZS’ common stock was actively traded on NASDAQ, under the ticker “AEZS.” 8. AEZS maintains an office at 25 Mountainview Blvd., Suite 203, Basking Ridge, New Jersey. - 3 - 9. Defendant David A. Dodd (“Dodd”) has served as the Company’s President and CEO since April 2013. 10. Defendant Juergen Engel (“Engel”) was the Company’s President and CEO from September 2008 to April 2013. 11. Defendant Dennis Turpin (“Turpin”) has been the Company’s CFO and a Senior Vice President since August 2007. 12. Defendant Jude Dinges (“Dinges”) has been the Company’s Chief Commercial Officer and a Senior Vice President since November 2013. 13. Defendant Richard Sachse (“Sachse”) has been the Company’s Chief Medical Officer and a Senior Vice President since March 2014. 14. Defendant Paul Blake (“Blake”) was the Company’s Chief Medical Officer from August 2007 until early 2014. 15. Defendants Dodd, Engel, Turpin, Dinges, Sachse, and Blake are collectively the “Individual Defendants.” PLAINTIFF’S CLASS ACTION ALLEGATIONS 16. Plaintiff brings this action as a class action pursuant to Federal Rules of Civil Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all persons who purchased the common stock of AEZS during the Class Period and who were damaged thereby. Excluded from the Class are Defendants, the officers and - 4 - directors of the Company at all relevant times, members of their immediate families and their legal representatives, heirs, successors or assigns and any entity in which defendants have or had a controlling interest. 17. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, AEZS’s securities were actively traded on the NASDAQ. While the exact number of Class members is unknown to Plaintiff at this time and can only be ascertained through appropriate discovery, Plaintiff believes that there are at least hundreds of members in the proposed Class. Members of the Class may be identified from records maintained by AEZS or its transfer agent and may be notified of the pendency of this action by mail, using a form of notice customarily used in securities class actions. 18. Plaintiff’s claims are typical of the claims of the members of the Class, as all members of the Class are similarly affected by Defendants’ wrongful conduct in violation of federal law that is complained of herein. 19. Plaintiff will fairly and adequately protect the interests of the members of the Class and has retained counsel competent and experienced in class and securities litigation. - 5 - 20. Common questions of law and fact exist as to all members of the Class and predominate over any questions solely affecting individual members of the Class. Among the questions of law and fact common to the Class are: (a) whether the federal securities laws were violated by Defendants’ acts as alleged herein; (b) whether statements made by Defendants to the investing public during the Class Period misrepresented material facts about the business, operations and management of AEZS; and (c) to what extent the members of the Class have sustained damages and the proper measure of damages. 21. A class action is superior to all other available methods for the fair and efficient adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the damages suffered by individual Class members may be relatively small, the expense and burden of individual litigation make it impossible for members of the Class to redress individually the wrongs done to them. There will be no difficulty in the management of this action as a class action. DEFENDANTS’ MISCONDUCT - 6 - 22. On October 19, 2009, AEZS announced that they had initiated clinical development of a drug that would be used to evaluate growth hormone deficiency, or AGHD. This drug was developed as “AEZS-130”, and would be marketed under the brand name “Macrilen.” 23. On December 20, 2010, AEZS agreed to a Special Protocol Assessment (“SPA”) with the FDA. This meant that AEZS-130’s Phase 3 trials must be conducted pursuant to the SPA, and that the FDA would approve AEZS- 130 if the Phase 3 trial results met the objectives outlined in the SPA. 24. On October 18, 2012, AEZS issued a press release announcing that the Phase 3 clinical results of AEZS-130 “confirm AEZS-130’s potential as possibly the first approved oral diagnostic for AGHD.” 25. On November 5, 2013, AEZS submitted a New Drug Application (“NDA”) for Macrilen with the FDA. 26. The developments detailed in ¶¶ 22-25 were touted in AEZ’s year 2013 Form 20-F, filed with the SEC on March 21, 2014. 27. On November 6, 2014, AEZ announced that the FDA declined to approve Macrilen’s NDA, because the Phase 3 trial did not actually meet the objectives outlined in the SPA. The FDA’s Complete Response Letter (“CRL”) stated, in relevant part: - 7 - “[T]hat the planned analysis of the Company's pivotal trial did not meet its stated primary efficacy objective as agreed to in the Special Protocol Assessment agreement letter between the Company and the FDA. The CRL further mentioned issues related to the lack of complete and verifiable source data for determining whether patients were accurately diagnosed with AGHD. The FDA concluded that, "in light of the failed primary analysis and data deficiencies noted, the clinical trial does not by itself support the indication." To address the deficiencies identified above, the CRL states that the Company will need to demonstrate the efficacy of macimorelin as a diagnostic test for growth hormone deficiency in a new, confirmatory clinical study.” (emphasis added). 28. On this adverse news, AEZS’ stock price dropped from $1.29 to $0.65 29. On November 7, 2014, AEZS disclosed on an investors’ conference call that the Phase 3 trial results for AEZ-130 failed to meet SPA objectives when patients with confirmed AGHD were included. As a result, AEZS decided to leave out such patients from the clinical trial. Applicability of Presumption of Reliance: Fraud-on-the-Market Doctrine 30. At all relevant times, the market for AEZS’ common stock was an efficient market for the following reasons, among others: (a) AEZS’ stock met the requirements for listing, and is listed and actively traded on the Nasdaq, both highly efficient and automated markets; (b) During the class period, on average, over several hundreds of thousands of shares of AEZS stock were traded on a weekly basis, demonstrating a very active and - 8 - broad market for AEZS stock and permitting a very strong presumption of an efficient market; (c) As a regulated issuer, AEZS filed periodic public reports with the (d) AEZS regularly communicated with public investors via established market communication mechanisms, including through regular disseminations of press releases on the national circuits of major newswire services and through other wide-ranging public disclosures, such as communications with the financial press and other similar reporting services; (e) Numerous NASD member firms were active market-makers in AEZS stock at all times during the Class Period; and (f) Unexpected material news about AEZS was rapidly reflected and incorporated into the Company’s stock price during the Class Period. 31. As a result of the foregoing, the market for AEZS common stock promptly digested current information regarding AEZS from all publicly available sources and reflected such information in AEZS stock price. Under these circumstances, all purchasers of AEZS common stock during the Class Period suffered similar injury through their purchase of AEZS common stock at artificially inflated prices, and a presumption of reliance applies. - 9 - Affiliated Ute 32. Neither Plaintiff nor the Class need prove reliance – either individually or as a class because under the circumstances of this case, positive proof of reliance is not a prerequisite to recovery, pursuant to ruling of the United States Supreme Court in Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128 (1972). All that is necessary is that the facts withheld be material in the sense that a reasonable investor might have considered the omitted information important in deciding whether to buy or sell the subject security. FIRST CLAIM Violation of Section 10(b) Of The Exchange Act Against and Rule 10b-5 Promulgated Thereunder Against All Defendants 33. Plaintiff repeats and realleges each and every allegation contained above as if fully set forth herein. 34. This claim is brought against all Defendants. 35. During the Class Period, Defendants carried out a plan, scheme and course of conduct that was intended to and, throughout the Class Period, did: (1) deceive the investing public, including plaintiff and other Class members, as alleged herein; and (2) cause plaintiff and other members of the Class to purchase - 10 - AEZS common stock at artificially inflated prices. In furtherance of this unlawful scheme, plan and course of conduct, Defendants, and each of them, took the actions set forth herein. 36. Defendants (a) employed devices, schemes, and artifices to defraud; (b) made untrue statements of material fact and/or omitted to state material facts necessary to make the statements not misleading; and (c) engaged in acts, practices, and a course of business that operated as a fraud and deceit upon the pur- chasers of the Company’s common stock in an effort to maintain artificially high market prices for AEZS common stock in violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. All Defendants are sued either as primary participants in the wrongful and illegal conduct charged herein or as controlling persons as alleged below. 37. Defendants, individually and in concert, directly and indirectly, by the use, means or instrumentalities of interstate commerce and/or of the mails, engaged and participated in a continuous course of conduct to conceal adverse material information about the business, operations and future prospects of AEZS as specified herein. 38. These Defendants employed devices, schemes and artifices to defraud, while in possession of material adverse non-public information and engaged in - 11 - acts, practices, and a course of conduct as alleged herein in an effort to assure investors of AEZS’ value and performance and continued substantial growth, which included the making of, or participation in the making of, untrue statements of material facts and omitting to state material facts necessary in order to make the statements made about AEZS and its business operations and future prospects in the light of the circumstances under which they were made, not misleading, as set forth more particularly herein, and engaged in transactions, practices and a course of business that operated as a fraud and deceit upon the purchasers of AEZS’ common stock during the Class Period. 39. Each of the Defendants’ primary liability, and controlling person liability, arises from the following facts: (1) the individual defendants were high- level executives, directors, and/or agents of the Company during the Class Period and members of the Company’s management team or had control thereof; (2) each of these defendants, by virtue of his or her responsibilities and activities as a senior officer and/or director of the Company, was privy to and participated in the creation, development and reporting of the Company’s financial condition; (3) each of these defendants enjoyed significant personal contact and familiarity with the other defendants and was advised of and had access to other members of the Company’s management team, internal reports and other data and information - 12 - about the Company’s finances, operations, and sales at all relevant times; and (4) each of these defendants was aware of the Company’s dissemination of information to the investing public which they knew or recklessly disregarded was materially false and misleading. 40. Defendants had actual knowledge of the misrepresentations and omissions of material facts set forth herein, or acted with reckless disregard for the truth in that they failed to ascertain and to disclose such facts, even though such facts were available to them. Such Defendants’ material misrepresentations and/or omissions were done knowingly or recklessly. 41. As a result of the dissemination of the materially false and misleading information and failure to disclose material facts, as set forth above, the market price of AEZS’ common stock was artificially inflated during the Class Period. In ignorance of the fact that market prices of AEZS’ publicly-traded common stock were artificially inflated, and relying directly or indirectly on the false and misleading statements made by Defendants, or upon the integrity of the market in which the common stock trades, and/or on the absence of material adverse information that was known to or recklessly disregarded by Defendants but not disclose in public statements by Defendants during the Class Period, Plaintiff and - 13 - the other members of the Class acquired AEZS’ common stock during the Class Period at artificially high prices and were or will be damaged thereby. 42. At the time of said misrepresentations and omissions, Plaintiff and other members of the Class were ignorant of their falsity, and believed them to be true. Had Plaintiff and the other members of the Class and the marketplace known the truth regarding AEZS’ business operations and future prospects, which were not disclosed by defendants, Plaintiff and other members of the Class would not have purchased or otherwise acquired their AEZS’ common stock, or, if they had acquired such common stock during the Class Period, they would not have done so at the artificially inflated prices that they paid. 43. By virtue of the foregoing, Defendants have violated Section 10(b) of the Exchange Act, and Rule 10b-5 promulgated thereunder. 44. As a direct and proximate result of Defendants’ wrongful conduct, Plaintiff and the other members of the Class suffered damages in connection with their respective purchases and sales of the Company’s common stock during the Class Period. 45. This action was filed within two years of discovery of the fraud and within five years of each plaintiff’s purchases of securities giving rise to the cause of action. - 14 - SECOND CLAIM Violation of Section 20(a) Of The Exchange Act Against the Individual Defendants 46. Plaintiff repeats and realleges each and every allegation contained above as if fully set forth herein. 47. By virtue of their high-level positions, agency, and their ownership and contractual rights, participation in and/or awareness and/or intimate knowledge of the misleading statements disseminated to the investing public, the Individual Defendants had the power to influence and control, and did influence and control, directly or indirectly, the decision-making of the primary violator, including the content and dissemination of the various statements that plaintiff contends are false and misleading. In particular, each defendant had the power to control or influence the particular transactions giving rise to the securities violations as alleged herein, and exercised the same. 48. As set forth above, AEZS’ violated Section 10(b) and Rule 10b-5 by their acts and omissions as alleged in this Complaint. 49. By virtue of their positions as controlling persons, the Individual Defendants are liable pursuant to Section 20(a) of the Exchange Act. As a direct and proximate result of Defendants’ wrongful conduct, Plaintiff and other - 15 - members of the Class suffered damages in connection with their purchases of the Company’s common stock during the Class Period. 50. This action was filed within two years of discovery of the fraud and within five years of each Plaintiff’s purchases of securities giving rise to the cause of action. WHEREFORE, Plaintiff prays for relief and judgment, as follows: (A) Determining that this action is a proper class action, certifying Plaintiff as class representative under Rule 23 of the Federal Rules of Civil Procedure and Plaintiff’s counsel as Lead Counsel; (B) Awarding compensatory damages in favor of Plaintiff and the other Class members against all defendants, jointly and severally, for all damages sustained as a result of defendants’ wrongdoing, in an amount to be proven at trial, including interest thereon; (C) Awarding Plaintiff and the Class their reasonable costs and expenses incurred in this action, including counsel fees and expert fees; and (D) Such other and further relief as the Court may deem just and proper. JURY TRIAL DEMANDED Plaintiff hereby demands a trial by jury. - 16 - Dated: November 11, 2014 Respectfully submitted, THE ROSEN LAW FIRM, P.A. /s/ Laurence Rosen Laurence Rosen, Esq. 609 W. South Orange Avenue, Suite 2P South Orange, NJ 07079 Tel: (973) 313-1887 Fax: (973) 833-0399 Email: [email protected] Counsel for Plaintiff - 17 -

consumer fraud

-QV5FYcBD5gMZwczdohW

BARSHAY SANDERS, PLLC 100 Garden City Plaza, Suite 500 Garden City, New York 11530 Tel: (516) 203-7600 Fax: (516) 706-5055 Email: [email protected] Attorneys for Plaintiff Our File No.: 118480 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK Deborah Berger, individually and on behalf of all others similarly situated, Plaintiff, Docket No: CLASS ACTION COMPLAINT vs. JURY TRIAL DEMANDED Client Services, Inc., Defendant. Deborah Berger, individually and on behalf of all others similarly situated (hereinafter referred to as “Plaintiff”), by and through the undersigned counsel, complains, states and alleges against Client Services, Inc. (hereinafter referred to as “Defendant”), as follows: INTRODUCTION 1. This action seeks to recover for violations of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. (the “FDCPA”). JURISDICTION AND VENUE 2. This Court has federal subject matter jurisdiction pursuant to 28 U.S.C. § 1331 and 15 U.S.C. § 1692k(d). 3. Venue is proper under 28 U.S.C. § 1391(b) because a substantial part of the events or omissions giving rise to the claim occurred in this Judicial District. 4. At all relevant times, Defendant conducted business within the State of New PARTIES 5. Plaintiff Deborah Berger is an individual who is a citizen of the State of New York residing in Nassau County, New York. 6. Plaintiff is a natural person allegedly obligated to pay a debt. 7. Plaintiff is a “consumer” as defined by 15 U.S.C. § 1692a(3). 8. On information and belief, Defendant Client Services, Inc., is a Missouri Corporation with a principal place of business in Saint Charles County, Missouri. 9. Defendant regularly collects or attempts to collect debts asserted to be owed to others. 10. Defendant is regularly engaged, for profit, in the collection of debts allegedly owed by consumers. 11. The principal purpose of Defendant's business is the collection of such debts. 12. Defendant uses the mails in its debt collection business. 13. Defendant is a “debt collector” as defined by 15 U.S.C. § 1692a(6). THE FDCPA AS IT RELATES TO THE CLAIMS HEREIN 14. Congress enacted the FDCPA upon finding that debt collection abuse by third party debt collectors was a widespread and serious national problem. See S. Rep. No. 95-382, at 2 (1977) reprinted in U.S.C.C.A.N. 1695, 1696; 15 U.S.C § 1692(a). 15. The purpose of the FDCPA is to protect consumers from deceptive or harassing actions taken by debt collectors, with the aim of limiting the suffering and anguish often inflicted by independent debt collectors. Kropelnicki v. Siegel, 290 F.3d 118, 127 (2d Cir. 2002); Russell v. Equifax A.R.S., 74 F.3d 30, 34 (2d Cir. 1996). 16. To further these ends, “the FDCPA enlists the efforts of sophisticated consumers ... as 'private attorneys general' to aid their less sophisticated counterparts, who are unlikely themselves to bring suit under the Act, but who are assumed by the Act to benefit from the deterrent effect of civil actions brought by others.” Jacobson v. Healthcare Fin. Servs., Inc., 516 F.3d 85, 91 (2d Cir. 2008). 17. As such, the circumstances of the particular debtor in question have no bearing as to the question of whether there has been a violation of the FDCPA. See Easterling v. Collecto, Inc., 692 F.3d 229, 234 (2d Cir. 2012). Indeed, it is not necessary for a plaintiff to show that he or she was confused by the communication received. Jacobson, 516 F.3d at 91. Likewise, the plaintiff consumer's actions or inaction in response to a communication from a debt collector are irrelevant. Thomas v. Am. Serv. Fin. Corp., 966 F. Supp. 2d 82, 90 (E.D.N.Y. 2013). 18. Instead, “the test is how the least sophisticated consumer—one not having the astuteness of a 'Philadelphia lawyer' or even the sophistication of the average, everyday, common consumer—understands the notice he or she receives.” Russell, 74 F.3d at 34. 19. If a debt collector's communication is “reasonably susceptible to an inaccurate reading” by the least sophisticated consumer, it violates the FDCPA. DeSantis v. Computer Credit, Inc., 269 F.3d 159, 161 (2d Cir. 2001). Similarly, a communication violates the FDCPA if it is “open to more than one reasonable interpretation, at least one of which is inaccurate,” or if the communication “would make the least sophisticated consumer uncertain as to her rights.” Clomon v. Jackson, 988 F.2d 1314, 1319 (2d Cir. 1993); Jacobson, 516 F.3d at 90. 20. The FDCPA is a strict liability statute, and a debt collector's intent may only be considered as an affirmative defense. 15 U.S.C. § 1692k(c); Ellis v. Solomon & Solomon, P.C., 591 F.3d 130, 135 (2d Cir. 2010). Likewise, “the degree of a defendant's culpability may only be considered in computing damages.” Bentley v. Great Lakes Collection Bureau, 6 F.3d 60, 63 (2d Cir. 1993). A single violation of the FDCPA to establish civil liability against the debt collector. ALLEGATIONS SPECIFIC TO PLAINTIFF 21. Defendant alleges Plaintiff owes a debt (“the alleged Debt”). 22. The alleged Debt is an alleged obligation of Plaintiff to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes. 23. The alleged Debt does not arise from any business enterprise of Plaintiff. 24. The alleged Debt is a “debt” as defined by 15 U.S.C. § 1692a(5). 25. At an exact time known only to Defendant, the alleged Debt was assigned or otherwise transferred to Defendant for collection. 26. At the time the alleged Debt was assigned or otherwise transferred to Defendant for collection, the alleged Debt was in default. 27. In its efforts to collect the alleged Debt, Defendant contacted Plaintiff by letter (“the Letter”) dated August 5, 2019. (A true and accurate copy is annexed hereto as “Exhibit 28. The Letter conveyed information regarding the alleged Debt. 29. The Letter is a “communication” as defined by 15 U.S.C. § 1692a(2). 30. The Letter was received and read by Plaintiff. 31. 15 U.S.C. § 1692e protects Plaintiff's concrete interests. Plaintiff has the interest and right to be free from deceptive and/or misleading communications from Defendant. As set forth herein, Defendant deprived Plaintiff of this right. 32. The deprivation of Plaintiff's rights will be redressed by a favorable decision FIRST COUNT Violations of 15 U.S.C. §§ 1692e and 1692e(10) 33. Plaintiff repeats and realleges the foregoing paragraphs as if fully restated herein. 34. 15 U.S.C. § 1692e prohibits a debt collector from using any false, deceptive, or misleading representation or means in connection with the collection of any debt. 35. 15 U.S.C. § 1692e(10) prohibits the use of any false representation or deceptive means to collect or attempt to collect any debt. 36. A debt collection practice can be a “false, deceptive, or misleading” practice in violation of 15 U.S.C. § 1692e even if it does not fall within any of the subsections of 15 U.S.C. § 1692e. Clomon, 988 F.2d at 1318. 37. A collection letter violates 15 U.S.C. § 1692e if, in the eyes of the least sophisticated consumer it is open to more than one reasonable interpretation, at least one of which is inaccurate. Clomon, 988 F.2d at 1319. 38. A collection letter also violates 15 U.S.C. § 1692e if it is reasonably susceptible to an inaccurate reading by the least sophisticated consumer. DeSantis, 269 F.3d at 161. 39. For purposes of 15 U.S.C. § 1692e, the failure to clearly and accurately identify the owner of a debt is unfair and deceptive to the least sophisticated consumer. 40. The owner of a debt must be clearly conveyed from the perspective of the least sophisticated consumer. 41. The owner of a debt must be accurately conveyed from the perspective of the least sophisticated consumer. 42. The owner of a debt must be conveyed without ambiguity from the perspective of the least sophisticated consumer. 43. The identity of the owner of a debt is a material piece of information to a consumer. 44. Knowing the identity of the owner of a debt affects how a consumer responds to a debt collector's attempts to collect the debt. 45. The Letter fails to identify by name and label any entity as “creditor,” “original creditor,” “current creditor,” “account owner,” or “creditor to whom the debt is owed.” 46. The Letter states “Re:”, followed by the name of an entity 47. The Letter fails to indicate whether the “Re:” refers to the owner of the alleged 48. The Letter fails to indicate whether the “Re:” refers to Plaintiff's creditor. 49. The Letter fails to indicate whether the “Re:” refers to Plaintiff's current creditor. 50. The Letter fails to indicate whether the “Re:” refers to Plaintiff's original creditor. 51. The Letter fails to indicate whether the “Re:” refers to the creditor to whom the alleged Debt is owed. 52. The Letter fails to indicate who referred the account to Defendant. 53. The Letter fails to indicate who Defendant represents. 54. The Letter fails to indicate who is Defendant's client. 55. Defendant failed to explicitly state the owner of the alleged Debt. 56. Defendant failed to clearly state the owner of the alleged Debt. 57. The least sophisticated consumer would likely be confused as to the owner of the alleged Debt. 58. The least sophisticated consumer would likely be uncertain as to owner of the alleged Debt. 59. Because the Letter can reasonably be read by the least sophisticated consumer to have two or more meanings concerning the owner of the alleged Debt, one of which is inaccurate as described, it is deceptive within the meaning of 15 U.S.C. § 1692e. Steffek v. Client Servs., Inc., 948 F.3d 761 (7th Cir. 2020). 60. Because the Letter is reasonably susceptible to an inaccurate reading by the least sophisticated consumer concerning the owner of the alleged Debt as described, it is deceptive within the meaning of 15 U.S.C. § 1692e. 61. The least sophisticated consumer would likely be deceived by the Letter. 62. The least sophisticated consumer would likely be deceived in a material way by the Letter. 63. For the foregoing reasons, Defendant violated 15 U.S.C. §§ 1692e and 1692e(10) and is liable to Plaintiff therefor. SECOND COUNT Violations of 15 U.S.C. §§ 1692e and 1692e(10) 64. Plaintiff repeats and realleges the foregoing paragraphs as if fully restated herein. 65. 15 U.S.C. § 1692e prohibits a debt collector from using any false, deceptive, or misleading representation or means in connection with the collection of any debt. 66. 15 U.S.C. § 1692e(10) prohibits the use of any false representation or deceptive means to collect or attempt to collect any debt. 67. A debt collection practice can be a “false, deceptive, or misleading” practice in violation of 15 U.S.C. § 1692e even if it does not fall within any of the subsections of 15 U.S.C. § 1692e. Clomon, 988 F.2d at 1318. 68. A collection letter violates 15 U.S.C. § 1692e if, in the eyes of the least sophisticated consumer it is open to more than one reasonable interpretation, at least one of which is inaccurate. Clomon, 988 F.2d at 1319. 69. A collection letter also violates 15 U.S.C. § 1692e if, it is reasonably susceptible to an inaccurate reading by the least sophisticated consumer. DeSantis, 269 F.3d at 161. 70. The Letter states “We are offering you a settlement amount of $20,585.00 to settle this USAA SAVINGS BANK account for less than the balance due. This offer is valid until 8/25/2019.” 71. The Letter fails to state whether the settlement payment must be sent by the consumer, or received by the Defendant, by the stated deadline in order to accept the settlement 72. Whether a payment would actually settle the debt is, by definition, a material term of a settlement offer and must be communicated clearly and effectively. 73. The Letter can be interpreted by least sophisticated consumer to mean that such payment must be mailed to the Defendant by the stated deadline in order to accept the settlement 74. The Letter can also be interpreted by least sophisticated consumer to mean that such payment must be received by the Defendant by the stated deadline in order to accept the settlement offer. 75. The least sophisticated consumer reading the Letter would be left to wonder about a material term of the offer. 76. As a result of the foregoing, in the eyes of the least sophisticated consumer the Letter is open to more than one reasonable interpretation, at least one of which is inaccurate. 77. Because the Letter is open to more than one reasonable interpretation by least sophisticated consumer it violates 15 U.S.C. §§ 1692e and 1692e(10). 78. Because the Letter is reasonably susceptible to an inaccurate reading by the least sophisticated consumer, it violates 15 U.S.C. §§ 1692e and 1692e(10). 79. For the foregoing reasons, Defendant violated 15 U.S.C. §§ 1692e and 1692e(10) and is liable to Plaintiff therefor. CLASS ALLEGATIONS 80. Plaintiff brings this action individually and as a class action on behalf of all persons similarly situated in the State of New York. 81. Plaintiff seeks to certify two classes of: i. All consumers to whom Defendant sent a collection letter failing to explicitly state the owner of the alleged Debt, substantially and materially similar to the Letter sent to Plaintiff, which letter was sent on or after a date one year prior to the filing of this action to the present. ii. All consumers to whom Defendant sent a collection letter failing to state whether the settlement payment must be sent by the consumer, or received by the Defendant, by the stated deadline in order to accept the settlement offer, substantially and materially similar to the Letter sent to Plaintiff, which letter was sent on or after a date one year prior to the filing of this action to the present. 82. This action seeks a finding that Defendant's conduct violates the FDCPA, and asks that the Court award damages as authorized by 15 U.S.C. § 1692k. 83. The Class consists of more than thirty-five persons. 84. Plaintiff's claims are typical of the claims of the Class. Common questions of law or fact raised by this action affect all members of the Class and predominate over any individual issues. Common relief is therefore sought on behalf of all members of the Class. A class action is superior to other available methods for the fair and efficient adjudication of this controversy. 85. The prosecution of separate actions by individual members of the Class would create a risk of inconsistent or varying adjudications with respect to the individual members of the Class, and a risk that any adjudications with respect to individual members of the Class would, as a practical matter, either be dispositive of the interests of other members of the Class not party to the adjudication, or substantially impair or impede their ability to protect their interests. Defendant has acted in a manner applicable to the Class as a whole such that declaratory relief is warranted. 86. Plaintiff will fairly and adequately protect and represent the interests of the Class. The management of the class is not extraordinarily difficult, and the factual and legal issues raised by this action will not require extended contact with the members of the Class, because Defendant's conduct was perpetrated on all members of the Class and will be established by common proof. Moreover, Plaintiff has retained counsel experienced in actions brought under consumer protection laws. JURY DEMAND 87. Plaintiff hereby demands a trial of this action by jury. PRAYER FOR RELIEF WHEREFORE Plaintiff respectfully requests judgment be entered: a. Certifying this action as a class action; and b. Appointing Plaintiff as Class Representative and Plaintiff's attorneys as Class Counsel; c. Finding Defendant's actions violate the FDCPA; and d. Granting damages against Defendant pursuant to 15 U.S.C. § 1692k; and e. Granting Plaintiff's attorneys' fees pursuant to 15 U.S.C. § 1692k; and f. Granting Plaintiff's costs; all together with g. Such other relief that the Court determines is just and proper. DATED: March 17, 2020 BARSHAY SANDERS, PLLC By: _/s/ Craig B. Sanders Craig B. Sanders, Esquire 100 Garden City Plaza, Suite 500 Garden City, New York 11530 Tel: (516) 203-7600 Fax: (516) 706-5055 [email protected] Attorneys for Plaintiff Our File No.: 118480

consumer fraud

ruRrEYcBD5gMZwcz_fHQ

GLANCY BINKOW & GOLDBERG LLP LIONEL Z. GLANCY (134180) MARC L. GODINO (182689) KARA M. WOLKE (#241521) 1925 Century Park East, Suite 2100 Los Angeles, CA 90067 Telephone: (310) 201-9150 Facsimile: (310) 201-9160 Email: [email protected] [email protected] [email protected] Attorneys for Plaintiff Shane Lee [Additional counsel on signature page] UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA Case No. CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FAIR CREDIT REPORTING ACT, 15 U.S.C. § 1681 et seq. JURY TRIAL DEMANDED SHANE LEE, on Behalf of Himself and All Other Persons Similarly Situated, Plaintiff, v. WHOLE FOODS MARKET CALIFORNIA, INC., a California Corporation, and DOES 1 THROUGH 100, Defendant. Plaintiff Shane Lee (“Plaintiff”), on behalf of himself and all others similarly situated, and by and through his undersigned counsel, hereby brings this class action against Defendant Whole Foods Market California, Inc. (“Defendant”), a subsidiary of Whole Foods Market, Inc. (together “Whole Foods” or the “Company”), based upon personal knowledge as to his own acts, and as to all other matters upon information and belief based upon, inter alia, the investigation made by and through his attorneys. PRELIMINARY STATEMENT 1. Defendant Whole Foods is an American foods supermarket chain specializing in natural and organic foods with stores throughout the United States, including within the State of California. According to Whole Foods, there are at least 347 Whole Foods in 40 U.S. States and the District of Columbia with 73 locations in the state of California. Additionally, Whole Foods most recent annual report disclosed that it had approximately 78,400 team members, which is how Whole Foods refers to its store employees. 2. Defendant routinely obtains and uses information in consumer background reports to conduct background checks on prospective employees and existing employees. Furthermore, Defendant frequently relies on such information, in whole or in part, as a basis for hiring, promoting, reassigning, reduction of hours, or terminating its employees. This conduct violates the Fair Credit Reporting Act (“FCRA”) . 3. While the use of consumer report information for employment purposes is not per se unlawful, it is subject to strict disclosure and authorization requirements under the FCRA. For example, under 15 U.S.C. § 1681b(b)(2)(A), Defendant is required to first disclose to the applicant or employee its intent to use a consumer report in its hiring decision “in a document that consists solely of the disclosure” prior to obtaining a copy of the consumer report. 15 U.S.C. § 1681b(b)(2)(A). Additionally, Defendant improperly included liability waivers in the authorization forms provided to employees or prospective employees, which again violates the provisions of the FCRA. 4. On behalf of himself and all others similarly situated, Plaintiff seeks statutory damages, costs and attorneys’ fees, equitable relief, and other appropriate relief from Defendant for its violations of the FCRA. THE PARTIES 5. Plaintiff Shane Lee is an adult individual, who at all relevant times referenced herein, resided in Los Angeles County, California. Plaintiff is a former employee of Defendant. 6. Whole Foods Market California, Inc., is a subsidiary of Whole Foods Market, Inc., a corporation with its headquarters and principal place of business located at 550 Bowie Street, Austin, Texas 78703. Defendant is a California corporation. JURISDICTION AND VENUE 7. This Court has subject matter jurisdiction over Plaintiff’s FCRA claims pursuant to 28 U.S.C. § 1331. 8. This Court has personal jurisdiction over Defendant because Defendant is incorporated with California, does sufficient business in California, has substantial, continuous and systematic contacts with California or otherwise intentionally avails itself of the markets within California through sales and marketing to render the exercise of jurisdiction by this Court permissible under traditional notions of fair play and substantial justice. Furthermore, Plaintiff is a citizen of the State of California and therefore subject to personal jurisdiction in this court. 9. Venue is proper in this Court pursuant to 28 U.S.C. § 1391, because Defendant’s acts occurred in this Judicial District. Venue is also proper in this County because Plaintiff resides in Los Angeles County, and Defendant conducts business within this County. FACTUAL ALLEGATIONS 10. Section 1681b(b)(2)(A) of the FCRA outlines the permissible purposes of employers accessing consumer reports. Under this section, it is unlawful to procure a consumer report or cause a consumer report to be procured for employment purposes, unless: (i) a clear and conspicuous disclosure has been made in writing to the consumer at any time before the report is procured or caused to be procured, in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes; and (ii) the consumer has authorized in writing (which authorization may be made on the document referred to in clause (i)) the procurement of the report by that person. 15 U.S.C. 1681b(b)(2)(A)(i)-(ii) (emphasis added). 11. Section 1681b(b)(2)(A) therefore imposes upon employers the duty to provide a “clear and conspicuous” disclosure to prospective or current employees that a consumer report about them will be procured. Further, Section 1681b(b)(2)(A) prohibits employers from including or obtaining other information as part of the disclosure such as a release or waiver of rights or by using multiple, conflicting documents to obtain the authorization. 12. Defendant conducts background checks on all of its job applicants as part of its standard screening process. Defendant also conducts background checks on existing employees on a periodic basis during the course of their employment. 13. Throughout the “Class Period,” which is the statutory period allowed under the FCRA, Plaintiff and all members of the putative Class executed an online authorization form in connection with their online applications for employment. These authorization forms purportedly allowed Defendant to procure consumer reports, including credit checks, criminal background checks, and other similar reports, on the employee applicant. 14. However, Defendant’s online authorization forms are improper in that they contain language releasing those who obtained the consumer reports from liability for this act. This violates the FCRA’s requirement that the authorizations be limited to contain only the required disclosures and the required authorization. 15. In or around September of 2011, Plaintiff Lee applied for work through Defendant’s website by completing an online job application. In connection with his employment application, Plaintiff completed Defendant’s standard employment application. 16. The employment application completed by Plaintiff Lee contained a background check disclosure and authorization form. It stated that Defendant intended to conduct a background investigation on the applicant (Plaintiff Lee) that would include an investigation of his work history, references, and educational background. Also contained within the background check disclosure and authorization form was a liability waiver provision. 17. Upon information and belief, after Plaintiff electronically initialed the background check disclosure and authorization form and electronically submitted his employment application, Defendant obtained Plaintiff’s consumer reports. It was unlawful for Defendant to procure a consumer report on Plaintiff without making the proper disclosures required by the FCRA. 18. Upon information and belief, Defendant obtained Plaintiff’s consumer reports along with the consumer reports of thousands of other members of the putative Class throughout the Class Period despite not having authorization/disclosure forms that complied with the FCRA. CLASS ACTION ALLEGATIONS 19. Pursuant to Federal Rule of Civil Procedure Rule 23, Plaintiff brings this action on behalf of himself and the following Class, initially defined as follows: All employees or prospective employees of Defendant that executed online authorization forms permitting Defendant to obtain a consumer report during the Class Period. 20. Numerosity: Upon information and belief, the Class comprises at least thousands of individuals and is so numerous that joinder of all members of the Class is impracticable. While the exact number of Class members is presently unknown and can only be ascertained through discovery, Whole Foods most recent annual report disclosed that it had approximately 78,400 team members. Therefore, Plaintiff reasonably believes that there are thousands of Class members. 21. Common Questions of Law and Fact Predominate: There are questions of law and fact common to the Class, which predominate over any individual issues, including, but not limited to: (A) Whether Defendant uses consumer report information to conduct background checks on employees and prospective employees; (B) Whether Defendant requires prospective applicants and its employees to sign an authorization form allowing Defendant to obtain consumer reports pertaining to the prospective applicant and its employees; (C) Whether it was proper under FCRA for Defendant to integrate an authorization form allowing Defendant to obtain consumer reports pertaining to the prospective applicant and its employees within a multi- page job application; (D) Whether Defendant violated the FCRA through its common conduct of performing background checks without providing proper disclosures; (E) Whether Plaintiff and the other Class members are entitled to recover punitive damages under section 1681n(a)(2) of the FCRA and, if so, the amount and calculation of such punitive damages; and (F) The proper form of injunctive and declaratory relief. 22. Typicality: Plaintiff’s claims are typical of the claims of the members of the putative Class. Defendant has a common course of practice of using consumer reports to conduct background checks on employees and prospective employees. Defendant commonly requires job applicants to sign an authorization form that includes a liability release. 23. Adequacy of Representation: Plaintiff will fairly and adequately represent and protect the interest of the Class. Plaintiff has retained counsel with substantial experience in handling complex class action litigation. Plaintiff and his counsel are committed to prosecuting this action vigorously on behalf of the Class and have the financial resources to do so. 24. Superiority of the Class Action: A class action is superior to all other available methods for the fair and efficient adjudication of this lawsuit because individual litigation of the claims of all Class members is economically unfeasible and procedurally impracticable. While the aggregate damages sustained by the Class are likely in the millions of dollars, the individual damages incurred by each Class member resulting from Defendant’s wrongful conduct are too small to warrant the expense of individual suits. The likelihood of individual Class members prosecuting their own separate claims is remote, and even if every Class member could afford individual litigation, the court system would be unduly burdened by individual litigation of such cases. Individual members of the Class do not have a significant interest in individually controlling the prosecution of separate actions, and individualized litigation would also present the potential for varying, inconsistent, or contradictory judgments, and would magnify the delay and expense to all of the parties and to the court system because of multiple trials of the same factual and legal issues. Plaintiff knows of no difficulty to be encountered in the management of this action that would preclude its maintenance as a class action. In addition, Defendant has acted or refused to act on grounds generally applicable to the Class and, as such, final injunctive relief or corresponding declaratory relief with regard to the members of the Class as a whole is appropriate. 25. Plaintiffs intend to send notice to all members of the Class to the extent required by Rule 23. The names and addresses of the putative Class members are available through discovery from Defendant’s records. FIRST CLAIM FOR RELIEF Failure to Make Proper Disclosure in Violation of FCRA 15 U.S.C. § 1681(b)(2)(A)(i) 26. Plaintiff, on behalf of himself and all others similarly situated, incorporates by reference each of the preceding paragraphs as though they were set forth in full herein. 29. Plaintiff and other members of the Class were required to complete an authorization form, allowing Defendant to obtain consumer reports in connection with Defendant’s online job application. This authorization form contained or was accompanied by a waiver of liability provision. 30. Under the FCRA, an employer must provide a clear and conspicuous disclosure in writing to an applicant a stand-alone document and obtain the applicant’s authorization in writing to obtain the reports on the applicant. 31. When Defendant included its waiver provision in its authorization form, it violated the FCRA’s requirement that a “clear and conspicuous” disclosure appear “in a document that consists solely of the disclosure.” 15 U.S.C. § 1681(b)(2)(A)(i). 32. Defendant willfully violated the FCRA by procuring consumer reports relating to Plaintiff and the putative Class members without first making the proper disclosures in the format required by 15 U.S.C. § 1681(b)(2)(A)(i). 33. The foregoing violations were willful. Defendant knew that the authorization form must be a stand-alone form, separate and apart from the employment application, which contained only the necessary information. Defendant’s willful conduct is reflected by, among other things, the following facts: a. Whole Foods is a large corporation with access to legal advice through its own general counsel’s office and outside employment counsel, and there is no contemporaneous evidence that it determined that its conduct was lawful; and b. Defendant knew or had reason to know that its conduct was inconsistent with published FTC guidance and case law interpreting the FCRA and the plain language of the statute. 34. Plaintiff and the putative Class are entitled to statutory damages of not less than $100 and not more than $1,000 for each and every one of these violations, pursuant to 15 U.S.C. § 1681n(a)(1)(A). 35. Plaintiff and the putative Class are entitled to recover punitive damages, as the court may allow, pursuant to 15 U.S.C. § 1681n(a)(2). 36. Plaintiff and the putative Class are further entitled to recover their costs and attorneys’ fees pursuant to 15 U.S.C. § 1681n(a)(3). SECOND CLAIM FOR RELIEF Failure to Obtain Proper Authorization in Violation of FCRA 15 U.S.C. § 1681(b)(2)(A)(ii) 37. Plaintiff, on behalf of himself and on behalf of all others similarly situated, incorporates by reference each of the preceding paragraphs as though they were set forth in full herein. 38. Defendant violated the FCRA by procuring consumer reports relating to Plaintiff and the putative Class members without proper authorization. 39. The foregoing violations were willful. Defendant’s willful conduct is reflected by, among other things, the facts set forth in the First Claim above. 40. Plaintiff and the putative Class are entitled to statutory damages of not less than $100 and not more than $1,000 for each and every one of these violations, pursuant to 15 U.S.C. § 1681n(a)(1)(A). 41. Plaintiff and the putative Class are entitled to recover punitive damages, as the court may allow, pursuant to 15 U.S.C. § 1681n(a)(2). 42. Plaintiff and the putative Class are further entitled to recover their costs and attorneys’ fees pursuant to 15 U.S.C. § 1681n(a)(3). PRAYER FOR RELIEF WHEREFORE, Plaintiff on behalf of himself and other members of the Class, prays for relief as follows: A. Determination that this action may proceed as a class action under Rule 23 of the Federal Rules of Civil Procedure; B. Designating Plaintiff as class representative and designating Plaintiff’s counsel as counsel for the Class; C. Declaring that Defendant violated the FCRA; D. Declaring that Defendant acted willfully in deliberate or reckless disregard of Plaintiff’s rights and its obligations under the FCRA; E. Issuing proper notice to the Class at Defendant’s expense; F. Awarding statutory damages to Plaintiff and the Class members as provided by the FCRA; G. Awarding punitive damages to Plaintiff and the Class members as provided by the FCRA; H. Awarding reasonable attorneys’ fees and costs as provided by the FCRA; and I. Granting other and further relief, in law or equity, as this Court may deem appropriate and just. JURY DEMAND Plaintiff demands a trial by jury. DATED: May 16, 2014 GLANCY BINKOW & GOLDBERG LLP By: s/ Lionel Z. Glancy Lionel Z. Glancy Marc L. Godino Kara M. Wolke 1925 Century Park East, Suite 2100 Los Angeles, California 90067 Telephone: (310) 201-9150 Facsimile: (310) 201-9160 Email: [email protected] TOSTRUD LAW GROUP, P.C. Jon A. Tostrud, Esq. 1925 Century Park East, Suite 2125 Los Angeles, CA 90067 Telephone: (310) 278-2600 Facsimile: (310) 278-2640 Attorneys for Plaintiff Shane Lee

consumer fraud

sa6zCocBD5gMZwczlspM

LEE LITIGATION GROUP, PLLC C.K. Lee (CL 4086) Anne Seelig (AS 3976) 30 East 39th Street, Second Floor New York, NY 10016 Tel.: (212) 465-1188 Fax: (212) 465-1181 Attorneys for Plaintiff, FLSA Collective Plaintiffs and the Class UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK LAZARO REYES CRUZ, on behalf of himself, FLSA Collective Plaintiffs and the Class, Plaintiff, Case No.: CLASS AND COLLECTIVE v. ACTION COMPLAINT 70-30 AUSTIN STREET BAKERY INC. Jury Trial Demanded d/b/a MARTHA’S COUNTRY BAKERY, 41-06 BELL BLVD. BAKERY LLC d/b/a MARTHA’S COUNTRY BAKERY G.V.S. BAKERY, INC. d/b/a MARTHA’S COUNTRY BAKERY, MARTHA’S COUNTRY BAKERY 2 LLC d/b/a MARTHA’S COUNTRY BAKERY MARTHA’S COUNTRY BAKERY 3 LLC d/b/a MARTHA’S COUNTRY BAKERY GEORGE STERTSIOS and ANTONIO ZANNIKOS, Defendants. Plaintiff, LAZARO REYES CRUZ (“Plaintiff”), on behalf of himself and others similarly situated, by and through his undersigned attorney, hereby files this Class and Collective Action Complaint against Defendants, 41-06 BELL BLVD. BAKERY LLC d/b/a MARTHA’S COUNTRY BAKERY, 70-30 AUSTIN STREET BAKERY INC. d/b/a MARTHA’S COUNTRY BAKERY, G.V.S. BAKERY, INC. d/b/a MARTHA’S COUNTRY BAKERY, MARTHA’S COUNTRY BAKERY 2 LLC d/b/a MARTHA’S COUNTRY BAKERY, MARTHA’S COUNTRY BAKERY 3 LLC d/b/a MARTHA’S COUNTRY BAKERY (“Corporate Defendants”), GEORGE STERTSIOS and ANTONIO ZANNIKOS (“Individual Defendants,” and together with Corporate Defendants, “Defendants”) and states as follows: INTRODUCTION 1. Plaintiff alleges, pursuant to the Fair Labor Standards Act, as amended, 29 U.S.C. §§ 201 et seq. (“FLSA”), that he is entitled to recover from Defendants: (1) unpaid overtime compensation, (2) liquidated damages, and (3) attorneys’ fees and costs. 2. Plaintiff further alleges that, pursuant to the New York Labor Law (“NYLL”), he is entitled to recover from Defendants: (1) unpaid overtime compensation, (2) unpaid spread-of-hours premium (3) statutory penalties, (4) liquidated damages and (5) attorneys’ fees and costs. JURISDICTION AND VENUE 3. This Court has jurisdiction over this controversy pursuant to 29 U.S.C. § 216 (b), 28 U.S.C. §§ 1331, 1337 and 1343, and has supplemental jurisdiction over Plaintiff’s state law claims pursuant to 28 U.S.C. § 1367. 4. Venue is proper in the Southern District pursuant to 28 U.S.C. § 1391. PARTIES 5. Plaintiff LAZARO REYES CRUZ is a resident of Bronx County, New York. 6. Defendants own and operate five (5) bakeries under the common trade name “Martha’s Country Bakery” with addresses as follows: (a) 41-06 Bell Boulevard, Bayside, New York 11361 (“Martha’s Bayside Location”); (b) 70-28 Austin Street, Forest Hills, New York 11375 (“Martha’s Forest Hills Location”); (c) 36-21 Ditmars Boulevard, Astoria, New York 11105 (“Martha’s Astoria Location”); (d) 263 Bedford Avenue, Brooklyn, New York 11211 (“Martha’s Williamsburg – 263 Location”); and (e) 175 Bedford Avenue, Brooklyn, New York 11211 (Martha’s Williamsburg – 175 Location”); (collectively, “Martha’s Country Bakeries”). Defendants operate Martha’s Country Bakeries as a single integrated enterprise. Specifically, Martha’s Country Bakeries are engaged in related activities, share common ownership and have a common business purpose. Martha’s Country Bakeries are commonly owned by the Individual Defendants, GEORGE STERTSIOS and ANTONIO ZANNIKOS. Martha’s Country Bakeries share a common logo, share a common feel and look, serve similar dessert menu items and are advertised jointly on Defendants’ website http://marthascountrybakery.com (see attached Exhibit 1), Facebook page and Twitter account. In addition, supplies and employees are interchangeable among Martha’s Country Bakeries. 7. Corporate Defendant 41-06 BELL BLVD. BAKERY LLC d/b/a MARTHA’S COUNTRY BAKERY, is a domestic limited liability company organized under the laws of the State of New York, with a principal place of business and an address for service of process located at 41-06 Bell Boulevard, Bayside, New York 11361. Defendants operate “Martha’s Bayside Location” through 41-06 BELL BLVD. BAKERY LLC. 8. Corporate Defendant 70-30 AUSTIN STREET BAKERY INC. d/b/a MARTHA’S COUNTRY BAKERY, is a domestic business corporation organized under the laws of the State of New York, with a principal place of business and an address for service of process located at 70-28 Austin Street, Forest Hills, New York 11375. Defendants operate “Martha’s Forest Hills Location” through 70-30 AUSTIN STREET BAKERY INC. 9. Corporate Defendant G.V.S. BAKERY, INC. d/b/a MARTHA’S COUNTRY BAKERY, is a domestic business corporation organized under the laws of the State of New York, with a principal place of business and an address for service of process located at 36-21 Ditmars Boulevard, Astoria, New York 11105. Defendants operate “Martha’s Astoria Location” through G.V.S. BAKERY, INC. 10. Corporate Defendant MARTHA’S COUNTRY BAKERY 2 LLC d/b/a MARTHA’S COUNTRY BAKERY, is a domestic limited liability company organized under the laws of the State of New York, with a principal place of business and address for service of process located at 263 Bedford Avenue, Brooklyn, New York 11211. Defendants operate “Martha’s Williamsburg – 263 Location” through MARTHA’S COUNTRY BAKERY 2 11. Coporate Defendant MARTHA’S COUNTRY BAKERY 3 LCC d/b/a MARTHA’S COUNTRY BAKERY, is a domestic limited liability company organized under the laws of the State of New York, with a principal place of business located at 175 Bedford Avenue, Brooklyn, New York 11211, and with an address for service of process located at 263 Bedford Avenue, Brooklyn, New York 11211. Defendants operate “Martha’s Williamsburg – 175 Location” through MARTHA’S COUNTRY BAKERY 3 LLC. 12. Individual Defendant GEORGE STERTSIOS is an owner and senior executive officer of Corporate Defendants. GEORGE STERTSIOS exercised control over the employment terms and conditions of Plaintiff, FLSA Collective Plaintiffs and Class members. GEORGE STERTSIOS had and exercised the power and authority to (i) fire and hire, (ii) determine rate and method of pay, (iii) determine work schedules and (iv) otherwise affect the quality of employment of Plaintiff, FLSA Collective Plaintiffs and Class members. At all times, employees could complain to GEORGE STERTSIOS regarding any of the terms of their employment, and GEORGE STERTSIOS would have the authority to effect any changes to the quality and terms of employees’ employment. GEORGE STERTSIOS regularly visited Martha’s Country Bakeries and directly reprimanded any employee who did not perform his duties correctly. GEORGE STERTSIOS ensured that employees effectively serve customers and that the business is operating efficiently and profitably. GEORGE STERTSIOS exercised functional control over the business and financial operations of Corporate Defendants. 13. Individual Defendant ANTONIO ZANNIKOS is an owner and senior executive officer of Corporate Defendants. ANTONIO ZANNIKOS exercised control over the employment terms and conditions of Plaintiff, FLSA Collective Plaintiffs and Class members. ANTONIO ZANNIKOS had and exercised the power and authority to (i) fire and hire, (ii) determine rate and method of pay, (iii) determine work schedules and (iv) otherwise affect the quality of employment of Plaintiff, FLSA Collective Plaintiffs and Class members. At all times, employees could complain to ANTONIO ZANNIKOS regarding any of the terms of their employment, and ANTONIO ZANNIKOS would have the authority to effect any changes to the quality and terms of employees’ employment. ANTONIO ZANNIKOS regularly visited Martha’s Country Bakeries and directly reprimanded any employee who did not perform his duties correctly. ANTONIO ZANNIKOS ensured that employees effectively serve customers and that the business is operating efficiently and profitably. ANTONIO ZANNIKOS exercised functional control over the business and financial operations of Corporate Defendants. 14. At all relevant times, each of the Corporate Defendants was and continues to be an “enterprise engaged in commerce” within the meaning of the FLSA. 15. At all relevant times, the work performed by Plaintiff, FLSA Collective Plaintiffs and Class members was directly essential to the business operated by Defendants. FLSA COLLECTIVE ACTION ALLEGATIONS 16. Plaintiff brings claims for relief as a collective action pursuant to FLSA Section 16 (b), 29 U.S.C. § 216 (b), on behalf of all non-exempt employees, including but not limited to bakers, baristas, cake decorators, counter staff members and wait staff members, employed by Defendants on or after the date that is six (6) years before the filing of the Complaint in this case as defined herein (“FLSA Collective Plaintiffs”). 17. At all relevant times, Plaintiff and FLSA Collective Plaintiffs are and have been similarly situated, have had substantially similar job requirements and pay provisions, and are and have been subjected to Defendants’ decisions, policies, plans, programs, practices, procedures, protocols, routines, and rules, all culminating in a willful failure and refusal to pay them proper overtime compensation at the rate of one and one half times the regular hourly rate for work in excess of forty (40) hours per workweek. The claims of Plaintiff stated herein are essentially the same as those of FLSA Collective Plaintiffs. 18. The claims for relief are properly brought under and maintained as an opt-in collective action pursuant to § 16 (b) of the FLSA, 29 U.S.C. § 216 (b). The FLSA Collective Plaintiffs are readily ascertainable. For purposes of notice and other purposes related to this action, their names and addresses are readily available from Defendants. Notice can be provided to the FLSA Collective Plaintiffs via first class mail to the last address known to Defendants. RULE 23 CLASS ALLEGATIONS – NEW YORK 19. Plaintiff brings claims for relief pursuant to the Federal Rules of Civil Procedure (“F.R.C.P.”) Rule 23, on behalf of all non-exempt employees, including but not limited to bakers, baristas, cake decorators, dishwashers, counter staff members and wait staff members, employed by Defendants on or after the date that is six years before the filing of the Complaint in this case as defined herein (the “Class Period”). 20. All said persons, including Plaintiff, are referred to herein as the “Class.” The Class members are readily ascertainable. The number and identity of the Class members are determinable from the records of Defendants. The hours assigned and worked, the position held, and rates of pay for each Class member are also determinable from Defendants’ records. For purposes of notice and other purposes related to this action, their names and addresses are readily available from Defendants. Notice can be provided by means permissible under F.R.C.P. 23. 21. The proposed Class is so numerous that a joinder of all members is impracticable, and the disposition of their claims as a class will benefit the parties and the Court. Although the precise number of such persons is unknown, the facts on which the calculation of that number are presently within the sole control of Defendants, there is no doubt that there are more than forty (40) members of the Class. 22. Plaintiff’s claims are typical of those claims, which could be alleged by any member of the Class, and the relief sought is typical of the relief, which would be sought by each member of the Class in separate actions. All the Class members were subject to the same corporate practices of Defendants, as alleged herein, of (i) failing to pay overtime compensation, (ii) failing to pay waged due to time-shaving, (iv) failing to provide proper wage statements per requirements of the New York Labor Law, and (v) failing to provide proper wage and hour notices, at date of hiring and annually, per requirements of the New York Labor Law. Defendants’ corporate-wide policies and practices affected all Class members similarly, and Defendants benefited from the same type of unfair and/or wrongful acts as to each Class member. Plaintiff and other Class members sustained similar losses, injuries and damages arising from the same unlawful policies, practices and procedures. 23. Plaintiff is able to fairly and adequately protect the interests of the Class and has no interests antagonistic to the Class. Plaintiff is represented by attorneys who are experienced and competent in both class action litigation and employment litigation and have previously represented plaintiffs in wage and hour cases. 24. A class action is superior to other available methods for the fair and efficient adjudication of the controversy – particularly in the context of the wage and hour litigation where individual class members lack the financial resources to vigorously prosecute a lawsuit against a corporate defendant. Class action treatment will permit a large number of similarly situated persons to prosecute common claims in a single forum simultaneously, efficiently, and without the unnecessary duplication of efforts and expense that numerous individual actions engender. Because losses, injuries and damages suffered by each of the individual Class members are small in the sense pertinent to a class action analysis, the expenses and burden of individual litigation would make it extremely difficult or impossible for the individual Class members to redress the wrongs done to them. On the other hand, important public interests will be served by addressing the matter as a class action. The adjudication of individual litigation claims would result in a great expenditure of Court and public resources; however, treating the claims as a class action would result in a significant saving of these costs. The prosecution of separate actions by individual members of the Class would create a risk of inconsistent and/or varying adjudications with respect to the individual members of the Class, establishing incompatible standards of conduct for Defendant and resulting in the impairment of class members’ rights and the disposition of their interests through actions to which they were not parties. The issues in this action can be decided by means of common, class-wide proof. In addition, if appropriate, the Court can, and is empowered to, fashion methods to efficiently manage this action as a class action. 25. Defendants and other employers throughout the state violate the New York Labor Law. Current employees are often afraid to assert their rights out of fear of direct or indirect retaliation. Former employees are fearful of bringing claims because doing so can harm their employment, future employment, and future efforts to secure employment. Class actions provide class members who are not named in the Complaint a degree of anonymity, which allows for the vindication of their rights while eliminating or reducing these risks. 26. There are questions of law and fact common to the Class which predominate over any questions affecting only individual class members, including: (a) Whether Defendants employed Plaintiff and Class members within the meaning of the New York law; (b) What are and were the policies, practices, programs, procedures, protocols and plans of Defendants regarding the types of work and labor for which Defendants did not pay the Class members properly; (c) At what common rate, or rates subject to common methods of calculation, was and are Defendants required to pay Plaintiff and Class members for their work; (d) Whether Defendants properly notified Plaintiff and Class members of their regular hourly rate and overtime rate; (e) Whether Defendants improperly paid Plaintiff and Class members on a fixed salary basis, when New York law requires that all non-exempt employees be paid on an hourly basis; (f) Whether Defendants paid Plaintiffs and Class members for all hours worked given the Defendants’ policy of time shaving; (g) Whether Defendants paid Plaintiff and Class members the proper overtime compensation under the New York Labor Law; (h) Whether Defendants provided proper wage statements to Plaintiff and Class members per requirements of the New York Labor Law; and (i) Whether Defendants provided proper wage and hour notices to Plaintiff and Class members, at date of hiring and annually, per requirements of the New York Labor STATEMENT OF FACTS 27. From in or about January 2007 until in or about February 2018, Plaintiff LAZARO REYES CRUZ was employed by Defendants to work as a baker for Defendants’ “Martha’s Country Bakery” located at 70-28 Austin Street, Forest Hills, NY 11375. Throughout Plaintiff’s employment with Defendants, Plaintiff was also requried to work at the following “Martha’s Country Bakery” locations: (1) 41-06 Bell Boulevard, Bayside, New York 1136 (“Martha’s Bayside Location”); (2) 36-21 Ditmars Boulevard, Astoria, New York 11105 (“Martha’s Astoria Location”); and (3) 263 Bedford Avenue, Brooklyn, New York 11211 (“Martha’s Williamsburg – 263 Location”). 28. From the beginning of his employment, with Defendants, until in or about December 2014, Plaintiff LAZARO REYES CRUZ regularly worked sixty (60) hours per week for 6 days per week from 3:00 p.m. to 1:00 a.m., for ten (10) hours per day, without any meal break. 29. From in or about January 2015 until in or about February 2018, Plaintiff LAZARO REYES CRUZ regularly worked forty-two (42) hours per week, for six (6) days per week, with the following schedule: for four (4) days a week, from 4:00 p.m. to 11:30 p.m., for seven and a half (7 ½) hours per day; and for two (2) days a week, from 4:00 p.m. to 10:00 p.m., for six (6) hours per day. Plaintiff LAZARO REYES CRUZ was not required to clock in or out until in or about January 2017. 30. From in or about January 2012 until in or about December 2012, Plaintiff LAZARO REYES CRUZ was paid a fixed salary of $950.00 per workweek regardless of actual hours worked. From in or about January 2013, until in or about December 2013, Plaintiff LAZARO REYES CRUZ was paid a fixed salary of $1,000.00 per workweek regardless of actual hours worked. From in or about January 2014 until in or about December 2015, Plaintiff LAZARO REYES CRUZ was paid a fixed salary of $1,050.00 per workweek regardless of actual hours worked. From in or about January 2016 until in or about December 2016, Plaintiff LAZARO REYES CRUZ was paid a fixed salary of $1,100.00 per workweek regardless of actual hours worked. From in or about January 2017 until the end of his employment, Plaintiff LAZARO REYES CRUZ was paid a fixed salary of $1,250.00 per workweek regardless of actual hours worked. Throughout his employment with Defendants, there was never any understanding that the fixed weekly salary was intended to cover any overtime hours worked by Plaintiff LAZARO REYES CRUZ. 31. From the beginning of his employment with Defendants, until in or about November 2017, Plaintiff LAZARO REYES CRUZ was always paid in cash and did not receive any wage statements from Defendants. 32. Based on Plaintiff LAZARO REYES CRUZ’s direct observations and conversations with other employees at Martha’s Bakeries, all FLSA Collective Plaintiffs and Class members worked similar hours and were paid similarly. 33. Plaintiff, FLSA Collective Plaintiffs and Class members had workdays that regularly exceeded 10 hours in length. Defendants never paid them the “spread of hours” premium as required by NYLL. 34. At all relevant times, Plaintiff, FLSA Collective Plaintiffs and Class members regularly worked over forty (40) hours per week, but Defendants failed to pay them the proper overtime compensation in violation of the FLSA and NYLL. 35. At no time during the relevant time periods did Defendants provide Plaintiff or Class members with proper wage and hour notices or proper wage statements as required by NYLL. 36. Defendants knowingly and willfully operated their business with a policy of not paying either the FLSA minimum wage or the New York State minimum wage to Plaintiffs, FLSA Collective Plaintiffs and Class members. 37. Defendants knowingly and willfully operated their business with a policy of not paying either the FLSA overtime rate (of time and one-half) or the New York State overtime rate (of time and one-half) to Plaintiff, FLSA Collective Plaintiffs and Class members for all hours worked in excess of forty (40) hours per week. 38. Defendants knowingly and willfully operated their business with a policy of not providing proper wage statements to Plaintiff and Class members, in violation of the NYLL. 39. Defendants knowingly and willfully operated their business with a policy of not providing proper wage and hour notices to Plaintiff and Class members, at the beginning of employment and annually thereafter, in violation of the NYLL. 40. Plaintiff retained Lee Litigation Group, PLLC to represent Plaintiff, FLSA Collective Plaintiffs and Class members in this litigation and has agreed to pay the firm a reasonable fee for its services. STATEMENT OF CLAIM COUNT I VIOLATION OF THE FAIR LABOR STANDARDS ACT 41. Plaintiff realleges and reavers Paragraphs 1 through 40 of this class and collective action Complaint as if fully set forth herein. 42. At all relevant times, Defendants were and continue to be employers engaged in interstate commerce and/or the production of goods for commerce within the meaning of the FLSA, 29 U.S.C. §§ 206 (a) and 207 (a). Further, Plaintiff and FLSA Collective Plaintiffs are covered individuals within the meaning of the FLSA, 29 U.S.C. §§ 206 (a) and 207 (a). 43. At all relevant times, Defendants employed Plaintiff and FLSA Collective Plaintiffs within the meaning of the FLSA. 44. At all relevant times, Corporate Defendants had gross annual revenues in excess of $500,000. 45. At all relevant times, Defendants had a policy and practice of failing to pay overtime compensation at the statutory rate of time and one-half to Plaintiff and FLSA Collective Plaintiffs for their hours worked in excess of forty (40) hours per workweek. 46. Defendants knew of and/or showed a willful disregard for the provisions of the FLSA as evidenced by their failure to compensate Plaintiff and FLSA Collective Plaintiffs the full and proper regular and overtime wages when Defendants knew or should have known such was due. 47. Defendants failed to properly disclose or apprise Plaintiff and FLSA Collective Plaintiffs of their rights under the FLSA. 48. As a direct and proximate result of Defendants’ willful disregard of the FLSA, Plaintiff and FLSA Collective Plaintiffs are entitled to liquidated (i.e. double) damages pursuant to the FLSA. 49. Due to the intentional, willful and unlawful acts of Defendants, Plaintiff and FLSA Collective Plaintiffs suffered damages in an amount not presently ascertainable of unpaid overtime wages, plus an equal amount as liquidated damages. 50. Records, if any, concerning the number of hours worked by Plaintiff and FLSA Collective Plaintiffs and the actual compensation paid to Plaintiff and FLSA Collective Plaintiffs are in the possession and custody of Defendants. Plaintiff intends to obtain these records by appropriate discovery proceedings to be taken promptly in this case and, if necessary, will then seek leave of Court to amend this Complaint to set forth the precise amount due. 51. Plaintiff and FLSA Collective Plaintiffs are entitled to an award of their reasonable attorneys’ fees and costs pursuant to 29 U.S.C. § 216 (b). COUNT II VIOLATION OF THE NEW YORK LABOR LAW 52. Plaintiff realleges and reavers Paragraphs 1 through 51 of this class and collective action Complaint as if fully set forth herein. 53. At all relevant times, Plaintiff and Class members were employed by Defendants within the meaning of the New York Labor Law §§ 2 and 651. 54. Defendants knowingly and willfully violated Plaintiff’s and Class members’ rights by failing to pay them the proper overtime compensation at rates of not less than one and one-half times the regular rate of pay for each hour worked in excess of forty (40) hours in a workweek. 55. Defendants willfully violated Plaintiff’s and Class members’ rights by failing to pay the spread-of-hours premium required by the New York Labor Law. 56. Defendants knowingly and willfully failed to provide proper wage and hour notices, at the date of hiring and annually thereafter, to Plaintiff and Class members, as required by New York Labor Law § 195(1). 57. Defendants knowingly and willfully failed to provide proper wage statements to Plaintiff and Class members with every wage payment, as required by New York Labor Law § 195(3). 58. Due to Defendants’ New York Labor Law violations, Plaintiff and Class members are entitled to recover from Defendants unpaid overtime compensation, unpaid spread-of-hour premium, damages for unreasonably delayed payments, statutory penalties, liquidated damages, reasonable attorneys’ fees and costs and disbursements of the action, pursuant to the New York Labor Law. PRAYER FOR RELIEF WHEREFORE, Plaintiff on behalf of himself, FLSA Collective Plaintiffs and Class members, respectfully requests that this Court grant the following relief: a. A declaratory judgment that the practices complained of herein are unlawful under the FLSA and NYLL; b. An injunction against Defendants and their officers, agents, successors, employees, representatives and any and all persons acting in concert with them as provided by law, from engaging in each of the unlawful practices, policies and patterns set forth herein; c. An award of unpaid overtime compensation under the FLSA and NYLL; d. An award of statutory penalties as a result of Defendants’ failure to comply with the NYLL wage notice and wage statement requirements; e. An award of unpaid spread-of-hours premium due under the New York Labor Law; f. An award of liquidated and/or punitive damages as a result of Defendants’ willful failure to pay overtime compensation, pursuant to the FLSA; g. An award of liquidated and/or punitive damages as a result of Defendants’ willful failure to pay overtime compensation, pursuant to the NYLL; h. An award of prejudgment and postjudgment interest, costs and expenses of this action together with reasonable attorneys’ and expert fees; i. Designation of Plaintiff as Representative of the FLSA Collective Plaintiffs; j. Designation of this action as a class action pursuant to F.R.C.P. 23; k. Designation of Plaintiff as Representative of the Class; and l. Such other and further relief as this Court deems just and proper. JURY DEMAND Pursuant to Rule 38 (b) of the Federal Rules of Civil Procedure, Plaintiff demands trial by jury on all issues so triable as of right by jury. Dated: August 15, 2018 Respectfully submitted, By: /S/ C.K. Lee C.K. Lee, Esq. LEE LITIGATION GROUP, PLLC C.K. Lee (CL 4086) Anne Seelig (AS 3976) 30 East 39th Street, Second Floor New York, NY 10016 Tel.: (212) 465-1188 Fax: (212) 465-1181 Attorneys for Plaintiff, FLSA Collective Plaintiffs and the Class

employment & labor

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IN THE UNITED STATES DISTRICT COURT WESTERN DISTRICT OF PENNSYLVANIA 2:20-cv-1061 Civil Action No. ___________ PRINZO & ASSOCIATES LLC, individually and on behalf of all others similarly situated, Plaintiff, v. CLASS ACTION (Jury Trial Demanded) HUNTINGTON BANCSHARES INC.; HUNTINGTON NATIONAL BANK; and DOES 1 through 100, inclusive, Defendants. CLASS ACTION COMPLAINT Plaintiff Prinzo & Associates LLC (“Prinzo” or “Plaintiff”) brings this Class Action Complaint and Demand for Jury Trial against Defendants Huntington Bancshares Inc., Huntington National Bank (together “Huntington”) and Does 1 through 100, inclusive (collectively “Defendants”), seeking compensation from Defendants, who refuse to comply with the CARES Act that requires it to pay out of the compensation it received for processing PPP loans, for services Plaintiff Prinzo and a large number of other agents rendered on behalf of recipients of Small Business Administration (“SBA”) emergency loans. Plaintiff alleges as follows upon personal knowledge as to itself and its own acts and experiences, and, as to all other matters, upon information and belief. NATURE OF THE ACTION 1. In response to the shut-down of virtually every business across all non-essential industries due to COVID-19, the federal government has raced over the past few months to ease the impact of the shut-down on the U.S. economy. In order to keep afloat small businesses, and to encourage those businesses to avoid massive worker layoffs and furloughs further damaging the economy, Congress decided to create an economic relief program to distribute money to small businesses. 2. In order to distribute the money swiftly to small businesses, Congress decided to utilize the nation’s financial institutions to take applications and distribute the funds that would be fully guaranteed by the federal government. However, in order to avoid delay, Congress decided that the financial institutions would not be required to verify the accuracy of the applications. Instead, the burden to provide accurate information was put directly and solely on the small businesses submitting applications. 3. The applications would need to be simple and the amount of the economic relief would be based on historical payroll information with specific limitations. However, as the lenders would not be verifying the information, there would need to be a number of representations and certifications, and specific warnings because the failure to provide true and accurate information could subject the small business owner to five years in prison and a $250,000 fine. 4. In order for these small businesses to be able to make timely, truthful and accurate applications, Congress understood that small businesses would need assistance from the nation’s professional accountants, tax preparers, financial advisors, attorneys, and other such agents normally relied upon by small businesses. 5. On March 27, 2020, Congress passed the SBA’s Paycheck Protection Program (“PPP”) which initially authorized up to $349 billion in forgivable loans to small businesses to cover payroll and other expenses (PPP I). After the initial funds quickly dried up, Congress added $310 billion additional dollars to the program (PPP II). 6. The PPP was designed to be fast and straightforward, allowing business to apply through SBA-approved lenders and await approval. Once approved, lenders would be compensated in the form of a generous origination fee paid by the federal government, with the requirement that the lender would be responsible for paying the fee owed to the loan applicant’s agent (e.g., attorney or accountant). Both the lender and the agents were specifically forbidden by the PPP from charging the small business borrower any amounts for the loan or the assistance in preparing the application for the loan. The amount of the total compensation and the allocation between the lender and the agents assisting the borrowers in preparing the application was specifically set out in the PPP. For the majority of loans (those under $350,000), the lender would receive an amount equal to 5% of the loan as compensation, and if the borrower used an agent such as a CPA or accountant, the lender was to pay an amount equal to 1% of the loan amount to the agent. In other words, compensation from the federal government to the lender and the borrower’s agent was allocated as 80% to the lender and 20% to the CPA or attorney assisting the small business borrower. 7. Huntington operates more than 800 branches, across seven states and has reported approval of approximately 35,283 PPP applications totaling approximately $6.5 billion in borrowed funds.1 The average PPP loan approved by Defendants was approximately $183,067. Assuming a conservative average fee of four percent, Huntington has, accordingly, been allocated over $260 million in origination fees, from which it was required to pay the agents who assisted the borrowers in submitting applications. 8. However, Defendants apparently decided that they do not need to complete the final step of the process and based on information and belief have refused to pay the agents who assisted PPP loan recipients with their applications. This practice seemed to be a deliberate scheme from the beginning as even though they were required to pay agents that assisted in the 1 See Many of the Biggest PPP Lenders Nationwide Operate in Pittsburgh available at https://www.bizjournals.com/pittsburgh/news/2020/06/11/these-banks-dominate-ppp- lending.html (last accessed June 25, 2020). application process, Defendants did not set up a structure or ask any questions to determine whether borrowers utilized an agent in completing applications. It appears that this scheme was to claim ignorance of the existence of the agent as an excuse not to pay the agent its share of the compensation. This refusal is harming accountants, attorneys, and other agents who dropped everything (in the midst of tax season) to assist their customers in filling out these vital loan applications correctly and in compliance with the PPP, and who were specifically only allowed to be paid for these services out of the compensation paid to the lender. The Defendants’ failure to pay agents is in blatant violation of PPP regulations stating that agent fees “will be paid by the lender out of the fees the lender receives from SBA.” 9. These agents, including Plaintiff, have no other recourse for collecting fees for assisting borrowers on PPP loan applications because the PPP regulations delegate the responsibility for paying agents to the lenders alone. And yet, Defendants have disregarded the regulations and refused to pay agents who assisted small businesses in receiving PPP funds. 10. Plaintiff has been harmed by Defendants’ practice. As a CPA firm that does payroll and other small business support functions, Plaintiff assisted four small business clients who submitted applications to Defendant and were then funded through the PPP program. Based on information and belief, Defendants have received the proscribed compensation related to the loans (5% for three and 3% for the other), but have not paid Plaintiff the appropriate agent fees (1% for three and .50% for the other) related to the loans. 11. As a result of Defendants’ acts and omissions, Plaintiff and a large number of others like it have been deprived of payment for their critical work in supporting their clients’ PPP loan applications. As such, Plaintiff brings this Class Action Complaint and Demand for Jury Trial in order to vindicate its rights and those of agents everywhere who are similarly situated, and to force Defendants to account for their blatant violation of the PPP and to pay agents their portion of the compensation. PARTIES 12. Plaintiff Prinzo & Associates is a Certified Public Accounting (“CPA”) firm organized in Pennsylvania, with its principal place of business located in McMurray, Pennsylvania. 13. Defendant Huntington Bancshares Inc. is a bank holding company incorporated in Columbus, Ohio, which provides banking services through branches in seven states, including more than 50 in Pennsylvania, through its subsidiary, Huntington National Bank. 14. In this Complaint, references made to any act of any Defendant shall be deemed to mean that officers, directors, agents, employees, or representatives of the Defendants named in this lawsuit committed or authorized such acts, or failed and/or omitted to adequately supervise or properly control or direct their employees while engaged in the management, direction, operation or control of the affairs of the Defendants and did so while acting within the scope of their employment or agency. 15. Plaintiff is unaware of the names, identities or capacities of the Defendants sued as Doe Defendants 1 through 100, but is informed and believes and thereon alleges that such fictitiously-named defendants are responsible in some manner for the damages and unfair business practices and violation of rights as described herein. Plaintiff will amend this Complaint to state the true names, identities, or capacities of such fictitiously-named Defendants when ascertained. JURISDICTION AND VENUE 16. This Court has subject matter jurisdiction over this action under the Class Action Fairness Act, 28 U.S.C. § 1332(d), because, as to the proposed Class and Subclasses, (a) at least one member of the proposed Class, which consists of at least 100 members, is a citizen of a different state than Defendants; (b) the claims of the proposed Class Members exceed $5,000,000 in the aggregate, exclusive of interest and costs, and (c) none of the exceptions under that subsection apply to this action. 17. Personal jurisdiction over Defendants is proper because Defendants transact business in the State of Pennsylvania, and a substantial number of the events giving rise to the claims alleged herein took place in Pennsylvania. 18. This Court has jurisdiction to grant declaratory relief under 28 U.S.C. § 2201 because an actual controversy exists between the parties as to their respective rights and obligations under 85 Fed. Reg. 20816 § (4)(c) (hereinafter, the “PPP regulations”). 19. Venue is proper in this judicial District pursuant to 28 U.S.C. § 1391(b)(2) because a substantial part of the events, acts or omissions giving rise to the claim occurred in this judicial District, including work performed by Plaintiff on behalf of business clients within this District. FACTUAL BACKGROUND 20. The spread of COVID-19 was declared a pandemic by the World Health Organization (“WHO”) on March 11, 2020. 21. On March 13, 2020, President Donald Trump issued the Coronavirus Disease 2019 (COVID-19) Emergency Declaration, which declared that the pandemic was of “sufficient severity and magnitude to warrant an emergency declaration for all states, territories and the District of Columbia.” 22. The Federal Government expressly recognized that with the COVID-19 emergency, “many small businesses nationwide are experiencing economic hardship as a direct result of the Federal, State and local public health measures that are being taken to minimize the public’s exposure to the virus.”2 23. The economic fallout from COVID-19, and the national response to it, was immediate and enormous. As “stay at home” issues were ordered by states across the nation, countless businesses were forced by law to overhaul their business models, scale back their business dramatically, or shutter–either temporarily or permanently. Business were further 2 See Business Loan Program Temporary Changes; Paycheck Protection Program, 13 CFR Part 120, Interim Final Rule (“SBA PPP Final Rule”). harmed as the public began to avoid all public spaces. Furloughs and layoffs were rampant in the private sector. 24. On March 25, 2020, in response to the economic damage caused by the COVID- 19 crisis and to overwhelming public pressure, the U.S. Senate passed the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act. The CARES Act was passed by the House of Representatives the following day and signed into law by President Trump on March 27, 2020. Amounting to approximately $2 trillion, the CARES Act was the single-largest economic stimulus bill in American history. 25. Critically, the CARES Act created a $659 billion loan program for business with fewer than five hundred employees, called the “Paycheck Protection Program” (“PPP”).3 The goal of the PPP was to provide American small businesses with eight weeks of cash-flow assistance, with a certain percentage forgivable if utilized to retain employees and fund payrolls. The loans are fully federally guaranteed and administered by the Small Business Administration (“SBA”).4 26. Basically, PPP loans operate more like grants if the recipient follows certain rules, including that at least 75 percent of the loan goes toward payroll.5 Businesses that follow the rules are permitted to submit a request to their SBA lender for total forgiveness. Otherwise, the loan matures in two years and carries a one percent interest rate.6 27. The SBA was charged with creating the PPP implementing regulations. It issued the first interim final rule (“Initial Rule”) on April 2, 2020, allowing businesses to begin applying for PPP loans with all SBA lenders on April 3, 2020. 3 The first phase of the PPP was for $349 billion, and when that quickly ran out, a second phase was funded for $310 billion. 4 Small Bus. Admin., Docket No. SBA-2020-0015, 13 CFR Part 120, Paycheck Protection Program 3245-AH34, Interim Final Rule, 85 Fed. Reg. 20814 § (2)(o) (Apr. 15, 2020). 5 85 Fed. Reg. 20812 § (2)(e); id. at 20813 § (2)(o). 6 Id. at 20813 § (2)(j). 28. An important piece of the PPP was that applications were to be processed and funded on a “first-come, first-served” basis—that is, the SBA was to process applications and distribute funds based on the order in which they were received. This made the SBA’s list of approved lenders key gatekeepers in this process, which the lenders certainly understood. Because the PPP was to be administered only through SBA-approved lenders, and because applicants were applying for funds from the single pot allocated for the program, submitting an accurate application for a loan through the SBA-approved lender as quickly as possible was critical. 29. Congress added an incentive for the SBA-affiliated lenders, knowing they would face a crush of PPP loan applications: for each loan processed and approved, the bank would receive an origination fee of five percent for loans up to $350,000; three percent for loans between $350,000 and $2 million; and one percent for loans between $2 million and $10 million.7 30. With similar incentives in mind, Congress and the SBA also carved out a specific benefit for the countless accountants, attorneys, and advisors who would need to lead or assist their clients in preparing and filing PPP loan applications. These individuals and entities are referred to as “agents” in the CARES Act and PPP implementing regulations. 31. As explained in an Information Sheet provided for “lenders,” the SBA states that ‘[a]n ‘Agent’ is an authorized representative and can be: an attorney; an accountant; a consultant; someone who prepares an applicant’s application for financial assistance and is employed and compensated by the applicant; someone who assists a lender with originating, disbursing, servicing, liquidating, or litigating SBA loans; a loan broker; or any other individual or entity representing an applicant by conducting business with the SBA.”8 7 Id. 8 U.S. Dep’t of Treasury, Paycheck Protection Program (PPP) Information Sheet Lenders, https://home.treasury.gov/system/files/136PPP%20%Lender%20Information%20Fact%20Sheet. pdf (last accessed May 25, 2020). 32. In addition, the SBA Regulations provide that “Agent fees will be paid out of lender fees. The lender will pay the agent. Agents may not collect any fees from the applicant. The total amount that an agent may collect from the lender for assistance in preparing an application for a PPP” (emphasis added) loan is as follows (“Agent Fees”): one percent (1%) for loans up to $350,000; 0.50% for loans between $350,000 and $2 million; and 0.25% for loans between $2 million and $10 million.9 33. Within this context, Congress and the SBA set up a straightforward system for the disbursement of PPP loan funds where the applicant is assisted by an agent: (i) the agent prepares the application and/or necessary supporting documents for the client’s application; (ii) the client applies for the PPP loan through the lender; (iii) the lender submits the application to the SBA; (iv) the SBA approves the loan and sends the client the money, through the lender, and eventually pays the lender’s origination fee; and (v) the agent submits the request for fee payment to the lender with the agent’s fee based upon (a) the work performed for the client and (b) the caps on agent fees provided by the SBA’s PPP regulations. 34. Unfortunately, based on information and belief, Defendants are refusing to pay the fees of agents for their assistance in providing an accurate and truthful application for funding. 35. Upon information and belief, this refusal is a company-wide policy. Further, the fact that Defendants set up the application process without even asking the borrower if they utilized the assistance of an agent, suggests that the Defendants did not want to have any record of the agent information in their files. 36. This policy of refusal to pay to agents “Agent Fees” that are due, and that only the lenders are authorized to pay, stands as an immediate threat to these agents’ abilities to receive payment. In the midst of an unprecedented economic/pandemic crisis, this policy represents short-sighted profit-padding at best, and blatantly illegal conduct, at worst. 9 85 Fed. Reg. 20816 § (4)(c). 37. Huntington’s CEO Steve Steinor has expressed confidence in the Bank’s efforts during the pandemic, stating, “I am pleased with our ability to effectively adapt our businesses to meet the current challenges and adjust to changing customer needs," Also, he pledged that the bank would “continue to support our customers and communities during these hard times". 10 But this purported dedication to helping small businesses thrive did not extend to all: Huntington had failed the agents that assisted in preparing accurate applications to smooth the process and permit small business clients to receive their funds quickly. 38. Refusing to pay Agent Fees is also inconsistent with agreements Defendants made in order to become approved PPP lenders. Specifically, based on information and belief, Defendants were required to fill out and sign the “CARES Act Section 1102 Lender Agreement” for each loan.11 This submission requires each putative PPP lender to certify, under penalty of perjury, that it (i) “is in compliance and will maintain compliance with all applicable requirements of the [PPP], and PPP Loan Program Requirements[,]” (ii) will “service and liquidate all covered loans made under the Paycheck Protection Program in accordance with PPP Loan Requirements[,] and (iii) will “close and disburse each covered loan in accordance with the terms and conditions of the PPP Authorization and PPP Loan Requirements.” 39. To the extent Defendants had to certify, at any point, that they would follow the PPP’s regulations in making PPP loans, they were not being truthful. Defendants’ policy to refuse to pay Agent Fees directly violates the PPP’s implementing regulations. 40. It is pursuant to these representations that Huntington has approved approximately 35.283 PPP applications totaling approximately $6.5 billion in borrowed funds. The average PPP loan approved by Defendants was approximately $183,067. Assuming a conservative 10 See Huntington Bank Income dives 87% Amid Covid-19 Crisis, available at https://www.bizjournals.com/columbus/news/2020/04/23/huntington-bank-income-dives-87- amid-covid-19.html (last accessed June 25, 2020). 11 U.S. Small Bus. Admin., CARES Act Section 1102 Lender Agreement, https://www.sba.gov/sites/default/files/2020-04/PP--Agreement-for-New-Lenders-Banks-Credit- Unions-FCS-w-seal-fillable.pdf (last accessed May 25, 2020). average fee of four percent, Huntington has, accordingly, been allocated over $260 million in origination fees, from which it was required to pay the agents who assisted the borrowers in submitting applications. 41. Knowing that they were required to pay agents a percentage of PPP loan origination fees if an agent assisted an applicant in preparing and submitting the application, Defendants elected not to ask borrowers whether they utilized an “agent” to assist them in the application process and have not paid Plaintiff or similarly situated agents compensation from funded PPP loans. PLAINTIFF PRINZO’S EXPERIENCE 42. Plaintiff Prinzo is a Pennsylvania CPA firm which has provided financial services to clients in the Mid-Atlantic geographic area for over 30 years, including bookkeeping, taxation, payroll services, financial planning and consulting for small businesses and individuals. In March, Plaintiff became aware that the CARES Act had been signed into law. Plaintiff, knowing that the COVID-19 crisis would significantly impact clients’ businesses, sought to obtain PPP loans through various SBA-approved lenders on behalf of clients. 43. Plaintiff’s professionals spent considerable time familiarizing themselves with the Act and the related SBA Regulations, in particular, (a) Section 1102, which permits the SBA to guarantee 100% of Section 7(a) loans under the PPP and (b) Section 1106 of the Act, which provides forgiveness of up to the full principal amount of qualifying loans guaranteed under the 44. In or about March, April, and May 2020, Plaintiff assisted many clients in the gathering and analysis of their documents, as well as the calculations and preparation of the loan applications. 45. Based on the SBA Regulations, Plaintiff understood that it was not allowed to charge clients a fee relating to the application process. The agents were only allowed to receive compensation from the agents’ share of the estimated $20 billion in fees that the Federal Government paid the Lenders for originating the PPP loans. 46. For its clients, Plaintiff had the primary role in calculating the payroll information needed for the application, and providing the clients’ accounting information, advice, documentation in support of the PPP loan application. Plaintiff will have ongoing responsibility for advising clients on the forgiveness of the PPP loan. 47. Plaintiff provided all of these services to four clients who obtained PPP loans from Huntington in the amounts of $625,500, $37,476, $17,250, and $8,975. Based on information and belief, Huntington was paid or will be paid, origination fees of $18,765, $1,873.80, $862.50, and $448.75 respectively for such loans, of which Plaintiff is entitled to $3,127.50, $374.76, $172.50 and $89.75 (.50% of the total loan amount for the loan in excess of $350,000 and 1% of the other loan amounts) of these fees for its work as the agent of the borrowers in submitting the applications and documentation. 48. Defendants did not comply with the SBA Regulations because they have not paid Plaintiff the Agent Fees to which it is entitled despite awarding PPP loans to Plaintiff’s clients for whom Plaintiff acted as a PPP agent. Instead, Defendants retained all of the Agent Fees for themselves. 49. As a result of Defendants’ unlawful and unfair actions, Plaintiff and the Class have suffered financial harm by being deprived of the statutorily mandated compensation for the professional services provided to clients in assisting them with obtaining PPP loans. CLASS ALLEGATIONS 50. Plaintiff brings this action on behalf of itself and all others similarly situated as a nationwide Class and Sub-Class, defined as follows: All persons and businesses who served as an agent in relation to, and provided assistance to a client in relation to, the preparation and/or submission of a client’s PPP loan application to Huntington which resulted in a loan being funded under the PPP. Plaintiff further brings this action on behalf of a subclass of individuals defined as follows: Pennsylvania Subclass. All persons and businesses in Pennsylvania who served as an agent in relation to, and provided assistance to a client in relation to, the preparation and/or submission of a client’s PPP loan application to Huntington which resulted in a loan being funded under the PPP. 51. Excluded from this Class and Subclass (hereinafter “the Class” unless otherwise indicated) are: (1) any Judge or Magistrate presiding over this action and members of their families; (2) Defendants, Defendants’ subsidiaries, parents, successors, predecessors, and any entity in which Defendants or its parents have a controlling interest and its current or former employees, officers and directors; (3) persons who properly execute and file a timely request for exclusion from the Class; (4) persons whose claims in this matter have been finally adjudicated on the merits of otherwise released; (5) Plaintiff’s counsel and Defendants’ counsel; and (6) the legal representatives, successors, and assigns of any such excluded persons. 52. Plaintiff reserves the right to expand, limit, modify, or amend the Class definition, including the addition of one or more subclasses, in connection with Plaintiff’s motion for class certification, or any other time, based upon new facts obtained during discovery. 53. Numerosity: The Class is composed of hundreds of Agents (“Class Members”) whose joinder in this action would be impracticable. The disposition of their claims through this class action will benefit all Class Members, the parties, and the courts. 54. Commonality and Predominance: There is a commonality in questions of law and fact affecting the Class. These questions of law and fact predominate over individual questions affecting individual Class Members, including, but not limited to, the following: a. Whether Defendants’ conduct violates the CARES Act and/or its implementing regulations; b. Whether Defendants are required to compensate Plaintiff out of the origination fees obtained from SBA through the PPP; c. Whether Plaintiff is entitled to compensation by Defendants for its work assisting in its client’s PPP loan applications; d. Whether Defendants’ conduct was willful and knowing; e. Whether Defendants submission of completed Form 2484 constituted an agreement; f. Whether Defendants breached that agreement; g. Whether Defendants’ conduct was pursuant to a company-wide policy or policies; and h. Whether Defendants’ conduct constitutes unjust enrichment. 55. Superiority: This case is also appropriate for class certification because class proceedings are superior to all other available methods for the fair and efficient adjudication of this controversy given that joinder of all parties is impracticable. The damages suffered by the individual members of the Class will likely be relatively small, especially given the burden and expense of individual prosecution of the complex litigation necessitated by Defendants’ actions. Thus, it would be difficult and not economical for the individual members of the Class to obtain effective relief from Defendants’ misconduct. Even if members of the Class could sustain such individual litigation, it would still not be preferable to a class action, because individual litigation would increase the delay and expense to all parties due to the complex legal and factual controversies presented in this Complaint. By contrast, a class action presents far fewer management difficulties and provides the benefits of single adjudication, economy of scale, and comprehensive supervision by a single court. Economies of time, effort and expense will be fostered, and uniformity of decisions ensured. 56. Typicality: Plaintiff’s claims are typical of, and are not antagonistic to, the claims of all Class Members, in that Plaintiff and members of the Class sustained damages arising out of Defendants’ uniform wrongful conduct. 57. Adequacy: Plaintiff will fairly and adequately represent and protect the interests of the Class and has retained counsel with substantial experience in litigating complex cases, including consumer fraud and class actions. Plaintiff’s claims are representative of the claims of the other members of the Class. That is, Plaintiff and members of the Class sustained damages as a result of Defendants’ uniform conduct. Plaintiff also has no interests antagonistic to those of the Class, and Defendants have no defenses unique to Plaintiff. Both Plaintiff and its counsel will vigorously prosecute this action on behalf of the Class and have the financial ability to do so. Neither Plaintiff nor counsel have any interest adverse to other Class Members. 58. Ascertainability: Plaintiff is informed and believes that Defendants keep extensive computerized records of their loan applications through, inter alia, computerized loan application systems and federally-mandated record-keeping practices. Defendants have one or more databases through which all of the borrowers may be identified and ascertained, and it maintains contact information, including electronic mail and mailing address. From this information, the existence of the Class Members (i.e., borrowers’ Agents) can be determined, and thereafter, a notice of this action can be disseminated in accordance with due process requirements. 59. Defendants have acted, and refused to act, on grounds generally applicable to the Class, thereby making appropriate final equitable relief with respect to the Class as a whole. CAUSES OF ACTION COUNT I – DECLARATORY RELIEF 60. Plaintiff incorporates by reference each preceding and succeeding paragraph as though fully set forth at length herein. 61. Plaintiff and the Class represent individuals who are “agents” as defined by the SBA regulations for the PPP. 62. Plaintiff and the Class have assisted clients with the process of preparing applications, and applying for, PPP loan funds. Defendants, despite the clear command of the SBA’s PPP regulations, have refused to make these payments. An actual controversy has arisen between Plaintiff and the Class, on one hand, and Defendants on the other, wherein Defendants deny by their refusal to pay that they are obligated to pay Plaintiff’s and the Class’s “agent” fees pursuant to PPP regulations. 63. Plaintiff and the Class seek a declaration, in accordance with SBA regulations and pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201, that Defendants are obligated to set aside money to pay, and pay third-party agents –within the SBA-approved limits—for the work performed on behalf of a client in relation to the preparation and/or submission of a PPP loan application that resulted in a funded PPP loan. COUNT II – BREACH OF CONTRACT, THIRD PARTY BENEFICIARY 64. Plaintiff incorporates by reference each preceding and succeeding paragraph as though fully set forth at length herein. 65. Based on information and belief, Defendants entered into an agreement with the SBA in connection with the loans funded in the PPP. 66. The agreements required that Defendants would adhere to all PPP rules and regulations and incorporate these requirements by reference. Defendants and the SBA understood that agents involved in the preparation and submission of PPP loan applications would need to be compensated. 67. The SBA’s PPP regulations specifically require that PPP lenders pay the fees of any “agent” that assists with the PPP loan application process, within limits. 68. Defendants understood that Plaintiff and the Class were intended beneficiaries in this agreement. Nevertheless, Defendants have refused to live up to their end of the bargain and have uniformly refused to pay Agent Fees to Plaintiff and the Class. 69. By refusing to pay Agent Fees in accordance with SBA regulations, Defendants are violating the terms of their agreement, thereby damaging Plaintiff and the Class. Plaintiff and the Class thus ask this Court to award them damages sufficient to make them whole, and compensate them for work they did in preparing clients’ PPP loan application for loans that were funded, consequential damages, and all other damages available at law. COUNT III - VIOLATIONS OF THE PENNSYLVANIA UNFAIR TRADE PRACTICES AND CONSUMER PROTECTION LAW (73 P.S. § 201-1, et seq.) 70. Plaintiff incorporates by reference each preceding and succeeding paragraph as though fully set forth at length herein. 71. Defendants’ conduct as set forth herein constitutes unfair or deceptive acts or practices, including, but not limited to, failing to adhere to the PPP’s rules and regulations in withholding payment from agents who assisted in the preparation of PPP loans. 72. The SBA’s PPP regulations specifically provide that “lenders” who provide loans under the program will be responsible for paying “agent” fees, within prescribed limits. 73. Defendants’ actions as set forth above occurred in the conduct of trade or commerce. 74. Defendants’ actions impact the public interest because Plaintiff and Class members incurred hours of manpower and costs to assist small businesses in satisfying the SBA’s demands in submitting timely and accurate information in the middle of a deadly pandemic and the worst economic conditions since the Great Depression. Defendants’ refusal to recompense agents for their efforts disincentivizes agents from assisting the public with future SBA and PPP requirements, including those requirements necessary to obtain partial loan forgiveness under the PPP program. 75. Plaintiff and the Class members suffered ascertainable loss as a result of Defendants’ conduct. Plaintiff has not been paid as legally required by the PPP. All of the wrongful conduct alleged herein occurred, and continues to occur, in the conduct of Defendants’ business. 76. Defendants’ conduct proximately caused the injuries to Plaintiffs and the Class. 77. Defendants are liable to Plaintiff and the Class for damages in amounts to be proven at trial, including attorneys’ fees, costs, and treble damages. COUNT IV – UNJUST ENRICHMENT 78. Plaintiff incorporates by reference each preceding and succeeding paragraph as though fully set forth at length herein. 79. Unjust enrichment, or restitution, may be alleged where a Defendant unjustly obtains and retains a benefit to the Plaintiff’s detriment, where such retention violates fundamental principles of equity, justice, and good conscience. 80. Here, Defendants have obtained millions of dollars in benefits in the form of PPP loan origination fees. A portion of those fees were to be paid to agents, like and including Plaintiff, who assisted in their clients’ PPP loan applications. But Defendants are refusing to pay those fees, in contravention of PPP regulations. 81. Principles of justice, equity, and good conscience demand that Defendants not be allowed to retain these Agent Fees. Defendants have fallen short in their duties as lenders, and during a crisis no less. As a result, Plaintiff and the Class have been unable to obtain the Agent Fees due to them. 82. Accordingly, Defendants must disgorge the portion of any and all PPP origination fees that they have retained to the extent they are due to Plaintiff and the Class in their capacities as agents. COUNT V – CONVERSION 83. Plaintiff incorporates by reference each preceding and succeeding paragraph as though fully set forth at length herein. 84. Under the SBA regulations, Plaintiff and the Class, as PPP agents, have a right to Agent Fees that must be paid from the amount of lender fees provided to Defendants for processing the funded PPP loan applications of Plaintiff’s clients and the Class’s clients. 85. The SBA regulations state that “[a]gent fees will be paid out of lender fees” (emphasis added) and provide guidelines on the amount of Agent Fees that should be paid to the PPP agent, based upon the size of the PPP loan. 86. Additionally, the SBA regulations require that lenders, not loan recipients, pay the Agent Fees. The SBA regulations unequivocally state that “[a]gents may not collect fees from the applicant.” 87. Plaintiff and the Class assisted clients with applying for PPP loans, including gathering and curating information necessary for completing PPP loan applications that were subsequently funded. Due to Plaintiff’s and the Class’s efforts, their clients were awarded PPP loans, through applications made with Defendants. As such, Plaintiff and the members of the Class have a right to immediate possession of the Agent Fees. 88. Although Plaintiff and the Class are entitled to Agent Fees under the SBA regulations, Defendants have refused to provide those fees to Plaintiff and the Class, thus keeping the Agent Fees that were paid to it for purposes of being passed on to the agents. By withholding these fees, Defendants have maintained wrongful control over Plaintiff’s and the Class’s property inconsistent with Plaintiff’s and the Class’s entitlements under the SBA regulations. 89. Defendants committed civil conversion by retaining monies owed to Plaintiff and Class members. 90. Plaintiff and the Class have been injured as a direct and proximate cause of Defendants’ misconduct. Plaintiff and the Class, as such, seek recovery from Defendants in the amount of the owed Agent Fees, and all other relief afforded under the law. DEMAND FOR JURY TRIAL 91. Plaintiff demands a trial by jury on all issues to the fullest extent permitted under applicable law. PRAYER FOR RELIEF WHEREFORE, Plaintiff Prinzo & Associates, individually and on behalf of the Class, respectfully prays for the following relief: (a) An order certifying the Class as defined above, appointing Plaintiff as the representative of the Class, and appointing its counsel as Class Counsel; (b) An order declaring that Defendants’ actions, as set out above, constitute unjust enrichment, conversion, breach of contract on behalf of third-party beneficiary, violate Pennsylvania Unfair Trade Practices and Consumer Protection Law (P.S. § 201-1, et seq.), and violate the SBA’s PPP regulations; (c) An award of all economic, monetary, actual, consequential, compensatory, and punitive damages available under the law and caused by Defendants’ conduct, including without limitation, actual damages for past, present and future expenses caused by Defendants’ misconduct, lost time and interest, and all other damages suffered, including any damages likely to be incurred by Plaintiff and the Class; (d) An award of reasonable litigation expenses and attorneys’ fees; (e) An award of pre- and post-judgment interest, to the extent allowable; (f) The entry of an injunction and/or declaratory relief as necessary to protect the interests of the Plaintiff and the Class; and (g) Such other further relief that the Court deems reasonable and just. Dated: July 15, 2020 Respectfully submitted, GOLOMB & HONIK, P.C. By: /s/ Kenneth Grunfeld Kenneth Grunfeld, PA ID #84121 GOLOMB & HONIK, P.C. 1835 Market Street, Suite 2900 Philadelphia, PA 19103 Telephone: (215) 985-9177 Facsimile: (215) 985-4169 Email: [email protected] Elaine S. Kusel, PA ID #328238 MCCUNE WRIGHT AREVALO LLP One Gateway Center, Suite 2600 Newark, New Jersey 07102 Telephone: (973) 737-9981 Email: [email protected] Richard D. McCune, CA Bar #132124* Michele M. Vercoski, CA Bar #244010* Tuan Q. Nguyen, CA Bar #312153* MCCUNE WRIGHT AREVALO LLP 18565 Jamboree Road, Suite 550 Irvine, California 92612 Telephone: (909) 557-1250 Facsimile: (909) 557-1275 Email: [email protected] [email protected] [email protected] *Pro Hac Vice applications to be submitted Attorneys for Plaintiff and Putative Class JURY DEMAND Plaintiff, on behalf of itself and the Class, demands a trial by jury on all issues so triable. GOLOMB & HONIK, P.C. By: /s/ Kenneth Grunfeld Kenneth Grunfeld, PA ID #84121 GOLOMB & HONIK, P.C. 1835 Market Street, Suite 2900 Philadelphia, PA 19103 Telephone: (215) 985-9177 Facsimile: (215) 985-4169 Email: [email protected] Elaine S. Kusel, PA ID #328238 MCCUNE WRIGHT AREVALO LLP One Gateway Center, Suite 2600 Newark, New Jersey 07102 Telephone: (973) 737-9981 Email: [email protected] Richard D. McCune, CA Bar #132124 Michele M. Vercoski, CA Bar #244010 Tuan Q. Nguyen, CA Bar #312153 MCCUNE WRIGHT AREVALO LLP 18565 Jamboree Road, Suite 550 Irvine, California 92612 Telephone: (909) 557-1250 Facsimile: (909) 557-1275 Email: [email protected] [email protected] [email protected] Attorneys for Plaintiff and Putative Class

healthcare

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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS DEREK AMARAL, Individually and on behalf of all Current and former similarly-situated employees of Defendants Plaintiffs, v. C.A. No. ________________ ADVANTAGE WEATHERIZATION, INC., and JOHN KELLY, Defendants. COMPLAINT I. PARTIES, JURISDICTION, AND VENUE 1. Derek Amaral is a resident and domiciliary of Fall River, Massachusetts. 2. Advantage Weatherization, Inc. (“Advantage”) is a Domestic Profit Corporation located in Quincy, Massachusetts. 3. At all times relevant to this action, Mr. Amaral worked throughout Massachusetts out of Advantage’s Brockton, Massachusetts, location. At all times relevant to this action, Mr. Amaral handled products and provided services in the stream of intrastate commerce. 4. Defendant John Kelly (“Kelly”) is a resident of 425 Canton Avenue, Milton, Massachusetts. 5. At all times relevant to this Complaint, Kelly has been President and a director of Advantage. 6. This Court has jurisdiction over this matter according to 28 U.S.C. § 1331. 7. This Court has personal jurisdiction over Advantage because the company does significant business in Massachusetts, can be served in Massachusetts, is registered with the Massachusetts Secretary of State, maintains an agent for service of process in Massachusetts, and committed most, if not all, the acts giving rise to Mr. Amaral’s claims in Massachusetts. Advantage is headquartered in Massachusetts. 8. This Court has personal jurisdiction over defendant Kelly because he works in Massachusetts, can be served in Massachusetts, committed the acts giving rise to these claims in Massachusetts, and, upon information and belief, resides in Massachusetts. 9. Pursuant to 28 U.S.C. § 1391(b), venue is proper in this Court because (1) it is the Court for the judicial district in which all of the events or omissions giving rise to the claim occurred; (2) it is a judicial district in which any defendant may be found; (3) and it is a judicial district where all Defendants reside. 10. Over 90 days have passed since Mr. Amaral filed a complaint of defendants’ failure to pay wages with the Massachusetts Office of the Attorney General. II. FACTS 11. Mr. Amaral was hired by Advantage on June 27, 2010, as a Weatherization Worker and assigned to work from its Brockton, Massachusetts location. 12. When Mr. Amaral was hired, his pay rate was $20.00 per hour. 13. In approximately September, 2010, Mr. Amaral’s straight time wage became $20.30 per hour, which he was paid until termination. 14. At all times relevant to this Complaint, Mr. Amaral was qualified for his position. 15. On September 10, 2010, the Residential Weatherization Local Union 7 (“Union”) was organized. 16. Mr. Amaral’s employment was governed by a collective bargaining agreement which established his hourly wage to be $22.00 an hour (plus payment of a certain sum into a health & wellness fund and plus a payment of union dues). 17. Mr. Amaral’s pay rate should have increased to $22.00 per hour once the Union was organized. 18. Mr. Amaral’s pay rate did not change from $20.30 per hour after the Union was organized. 19. Mr. Amaral’s work was funded, at least in part, by funds from the American Recovery and Reinvestment Act of 2009 (“ARRA”). 20. Jobs funded by the ARRA required payment of prevailing wage under the Davis Bacon Act. 21. Mr. Amaral realized shortly after he was hired that he was usually not paid any wage for hours he worked over forty (40) hours per week. 22. Advantage supervisors Joe Lambalot and Brian Machado required Mr. Amaral, and several other peers he worked with, to report to work, load an Advantage truck with provisions and be transported to a work site prior to the start of work at the job site. 23. Employees were not paid anything for this time. 24. Defendant Kelly knew this was occurring and ratified it. 25. After the end of their work at the job site, Advantage managers Joe Lambalot and Brian Machado required Mr. Amaral, and several other peers he worked with, to load the Advantage truck, travel back to headquarters, and unload the truck. 26. Employees were not compensated for this time. 27. Defendant Kelly knew this was occurring and ratified it. 28. Between May and August, 2011, Mr. Amaral regularly complained to Advantage managers Scott Gusterson and Joe Lambalot, and Defendant John Kelly about Advantage’s illegal practice of not paying Mr. Amaral wages or overtime for overtime hours worked, a violation of the Fair Labor Standards Act and state law equivalents. 29. On these occasions, Mr. Amaral complained to Advantage managers Scott Gusterson and Joe Lambalot, and Defendant John Kelly about Defendants’ illegal practice of not paying Mr. Amaral overtime wages for work suffered or permitted over the 40-hour mark each workweek. 30. On these occasions, Mr. Amaral complained to Advantage managers Scott Gusterson and Joe Lambalot, and Defendant John Kelly about Defendants’ illegal practice of not paying Mr. Amaral wages for work suffered or permitted during work breaks as required under state law. 31. On these occasions, Mr. Amaral complained to Advantage managers Scott Gusterson and Joe Lambalot, and Defendant John Kelly about Defendants’ illegal policy of not paying Mr. Amaral any wage for work suffered or permitted by Advantage before the beginning of Mr. Amaral’s shift. 32. On these occasions, Mr. Amaral complained to Advantage managers Scott Gusterson and Joe Lambalot, and Defendant John Kelly about Defendants’ illegal policy of not paying Mr. Amaral any wage for work suffered or permitted by Advantage after the end of Mr. Amaral’s shift. 33. Co-workers witnessed some of Mr. Amaral’s complaints to Advantage and Mr. Kelly. 34. In approximately October, 2010, Mr. Amaral submitted a timecard indicating all the hours he actually worked that week. 35. When Mr. Lambalot saw the timecard, he changed it to reflect fewer hours. 36. Mr. Lambalot told Mr. Amaral that Defendants were not going to pay Mr. Amaral more than 8 hours a day regardless of how many hours Mr. Amaral and his co- workers worked. 37. Defendants regularly changed Mr. Amaral’s timecards when Mr. Amaral put more than 8 hours a day on his timesheets. 38. Defendants regularly changed the timecards of similarly-situated co-workers when said similarly-situated co-workers put more than 8 hours a day on their timesheets. 39. In the summer of 2011, Mr. Amaral drafted and subsequently distributed to co- workers in his Fair Labor Standards Act classification a leaflet which outlined workers right to wages and defendants’ illegal non-payment of wages for work beyond forty hours per week. 40. On June 30, 2011, Mr. Amaral filed a complaint with the Massachusetts Office of the Attorney General for non-payment of wages. 41. Shortly after Mr. Amaral distributed the leaflet and filed a complaint with the Massachusetts Office of the Attorney General for non-payment of wages, defendants gave Mr. Amaral less desirable work assignments unrelated to his previous weatherization work. 42. Mr. Amaral’s complaints to Advantage’s leadership were not addressed until Advantage issued a statement on September 17, 2010, stating that it intended to follow guidelines written into the Laborers’ New England Region Residential Weatherization Agreement. 43. These guidelines purport to follow state and federal law concerning meal break and overtime requirements. 44. On October 31, 2011, Mr. Amaral met with a United States Department of Labor Investigator to complete an affidavit regarding Advantage’s non-payment of wages. 45. In November, 2011, Mr. Amaral again informed Mr. Kelly about his concerns regarding Advantage’s non-payment of wages and overtime. 46. On December 8, 2011, Mr. Amaral was terminated. 47. For the week ending July 3, 2010, Mr. Amaral worked fifty-five hours. 48. For the week ending July 3, 2010, Mr. Amaral was paid for forty hours. 49. For this week, Mr. Amaral was not paid straight time or overtime for 15.00 hours. 50. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 51. During this week, similarly-situated co-workers were not paid any wage for any time worked over the 8-hour-per-day mark.. 52. For the week ending July 10, 2010, Mr. Amaral worked thirty-three hours. 53. For the week ending July 10, 2010, Mr. Amaral was paid for twenty-four hours. 54. For this week, Mr. Amaral was not paid straight time or overtime for 9.00 hours. 55. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 56. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 57. For the week ending July 17, 2010, Mr. Amaral worked fifty-five hours. 58. For the week ending July 17, 2010, Mr. Amaral was paid for forty hours. 59. For this week, Mr. Amaral was not paid straight time or overtime for 15.00 hours. 60. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 61. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 62. For the week ending July 24, 2010, Mr. Amaral worked fifty-five hours. 63. For the week ending July 24, 2010, Mr. Amaral was paid for forty hours. 64. For this week, Mr. Amaral was not paid straight time or overtime for 15.00 hours. 65. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 66. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 67. For the week ending July 31, 2010, Mr. Amaral worked fifty-five hours. 68. For the week ending July 31, 2010, Mr. Amaral was paid for forty hours. 69. For this week, Mr. Amaral was not paid straight time or overtime for 15.00 hours. 70. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 71. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 72. For the week ending August 7, 2010, Mr. Amaral worked fifty-five hours. 73. For the week ending August 7, 2010, Mr. Amaral was paid for forty hours. 74. For this week, Mr. Amaral was not paid straight time or overtime for 15.00 hours. 75. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 76. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 77. For the week ending August 14, 2010, Mr. Amaral worked fifty-five hours. 78. For the week ending August 14, 2010, Mr. Amaral was paid for forty hours. 79. For this week, Mr. Amaral was not paid straight time or overtime for 15.00 hours. 80. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 81. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 82. For the week ending August 21, 2010, Mr. Amaral worked fifty-five hours. 83. For the week ending August 21, 2010, Mr. Amaral was paid for forty hours. 84. For this week, Mr. Amaral was not paid straight time or overtime for 15.00 hours. 85. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 86. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 87. For the week ending August 28, 2010, Mr. Amaral worked fifty-five hours. 88. For the week ending August 28, 2010, Mr. Amaral was paid for forty hours. 89. For this week, Mr. Amaral was not paid straight time or overtime for 15.00 hours. 90. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 91. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 92. For the week ending September 4, 2010, Mr. Amaral worked fifty-five hours. 93. For the week ending September 4, 2010, Mr. Amaral was paid for forty hours. 94. For this week, Mr. Amaral was not paid straight time or overtime for 15.00 hours. 95. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 96. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 97. For the week ending September 11, 2010, Mr. Amaral worked forty-four hours. 98. For the week ending September 11, 2010, Mr. Amaral was paid for thirty-two hours. 99. For this week, Mr. Amaral was not paid straight time or overtime for 12.00 hours. 100. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 101. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 102. For the week ending September 18, 2010, Mr. Amaral worked fifty-five hours. 103. For the week ending September 18, 2010, Mr. Amaral was paid for forty hours. 104. For this week, Mr. Amaral was not paid straight time or overtime for 15.00 hours. 105. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 106. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 107. For the week ending September 25, 2010, Mr. Amaral worked fifty-five hours. 108. For the week ending September 25, 2010, Mr. Amaral was paid for 40.5 hours. 109. For this week, Mr. Amaral was not paid straight time or overtime for 14.5 hours. 110. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 111. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 112. For the week ending October 2, 2010, Mr. Amaral worked fifty-five hours. 113. For the week ending October 2, 2010, Mr. Amaral was paid for forty hours. 114. For this week, Mr. Amaral was not paid straight time or overtime for 15.00 hours. 115. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 116. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 117. For the week ending October 9, 2010, Mr. Amaral worked sixty and one-half hours. 118. For the week ending October 9, 2010, Mr. Amaral was paid for forty-four hours. 119. For this week, Mr. Amaral was not paid straight time or overtime for 16.50 hours. 120. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 121. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 122. For the week ending October 16, 2010, Mr. Amaral worked thirty-eight hours. 123. For the week ending October 16, 2010, Mr. Amaral was paid for thirty and one- half hours. 124. For this week, Mr. Amaral was not paid straight time or overtime for 6.50 hours. 125. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 126. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 127. For the week ending October 23, 2010, Mr. Amaral worked fifty-nine and one- half hours. 128. For the week ending October 23, 2010, Mr. Amaral was paid for forty-three and one-half hours. 129. For this week, Mr. Amaral was not paid straight time or overtime for 16.00 hours. 130. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 131. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 132. For the week ending November 6, 2010, Mr. Amaral worked fifty-six hours. 133. For the week ending November 6, 2010, Mr. Amaral was paid for 40.5 hours. 134. For this week, Mr. Amaral was not paid straight time or overtime for 15.50 hours. 135. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 136. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 137. For the week ending November 13, 2010, Mr. Amaral worked fifty-five hours. 138. For the week ending November 13, 2010, Mr. Amaral was paid for forty hours. 139. For this week, Mr. Amaral was not paid straight time or overtime for 15.00 hours. 140. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 141. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 142. For the week ending November 20, 2010, Mr. Amaral worked fifty-five hours. 143. For the week ending November 20, 2010, Mr. Amaral was paid for forty hours. 144. For this week, Mr. Amaral was not paid straight time or overtime for 15.00 hours. 145. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 146. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 147. For the week ending November 27, 2010, Mr. Amaral worked thirty-three hours. 148. For the week ending November 27, 2010, Mr. Amaral was paid for twenty-four hours. 149. For this week, Mr. Amaral was not paid straight time or overtime for 9.00 hours. 150. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 151. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 152. For the week ending December 4, 2010, Mr. Amaral worked fifty-five hours. 153. For the week ending December 4, 2010, Mr. Amaral was paid for forty hours. 154. For this week, Mr. Amaral was not paid straight time or overtime for 15.00 hours. 155. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 156. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 157. For the week ending December 11, 2010, Mr. Amaral worked fifty-five hours. 158. For the week ending December 11, 2010, Mr. Amaral was paid for forty hours. 159. For this week, Mr. Amaral was not paid straight time or overtime for 15.00 hours. 160. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 161. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 162. For the week ending December 18, 2010, Mr. Amaral worked fifty-five hours. 163. For the week ending December 18, 2010, Mr. Amaral was paid for forty hours. 164. For this week, Mr. Amaral was not paid straight time or overtime for 15.00 hours. 165. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 166. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 167. For the week ending December 25, 2010, Mr. Amaral worked forty-four hours. 168. For the week ending December 25, 2010, Mr. Amaral was paid for thirty-two hours. 169. For this week, Mr. Amaral was not paid straight time or overtime for 12.00 hours. 170. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 171. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 172. For the week ending January 1, 2011, Mr. Amaral worked thirty-three hours. 173. For the week ending January 1, 2011, Mr. Amaral was paid for twenty-four hours. 174. For this week, Mr. Amaral was not paid straight time or overtime for 9.00 hours. 175. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 176. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 177. For the week ending January 8, 2011, Mr. Amaral worked fifty-five hours. 178. For the week ending January 8, 2011, Mr. Amaral was paid for forty hours. 179. For this week, Mr. Amaral was not paid straight time or overtime for 15.00 hours. 180. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 181. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 182. For the week ending January 15, 2011, Mr. Amaral worked fifty-five hours. 183. For the week ending January 15, 2011, Mr. Amaral was paid for forty hours. 184. For this week, Mr. Amaral was not paid straight time or overtime for 15.00 hours. 185. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 186. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 187. For the week ending January 29, 2011, Mr. Amaral worked fifty-five hours. 188. For the week ending January 29, 2011, Mr. Amaral was paid for forty hours. 189. For this week, Mr. Amaral was not paid straight time or overtime for 15.00 hours. 190. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 191. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 192. For the week ending February 5, 2011, Mr. Amaral worked sixty-six hours. 193. For the week ending February 5, 2011, Mr. Amaral was paid for forty-eight hours. 194. For this week, Mr. Amaral was not paid straight time or overtime for 18.00 hours. 195. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 196. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 197. For the week ending February 19, 2011, Mr. Amaral worked fifty-five hours. 198. For the week ending February 19, 2011, Mr. Amaral was paid for forty hours. 199. For this week, Mr. Amaral was not paid straight time or overtime for 15.00 hours. 200. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 201. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 202. For the week ending February 26, 2011, Mr. Amaral worked forty-five and one- half hours. 203. For the week ending February 26, 2011, Mr. Amaral was paid for thirty-three hours. 204. For this week, Mr. Amaral was not paid straight time or overtime for 12.50 hours. 205. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 206. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 207. For the week ending March 5, 2011, Mr. Amaral worked fifty-five hours. 208. For the week ending March 5, 2011, Mr. Amaral was paid for forty hours. 209. For this week, Mr. Amaral was not paid straight time or overtime for 15.00 hours. 210. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 211. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 212. For the week ending March 12, 2011, Mr. Amaral worked fifty-seven and one- half hours. 213. For the week ending March 12, 2011, Mr. Amaral was paid for forty-two hours. 214. For this week, Mr. Amaral was not paid straight time or overtime for 15.50 hours. 215. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 216. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 217. For the week ending April 9, 2011, Mr. Amaral worked fifty-five hours. 218. For the week ending April 9, 2011, Mr. Amaral was paid for forty hours. 219. For this week, Mr. Amaral was not paid straight time or overtime for 15.00 hours. 220. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 221. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 222. For the week ending April 16, 2011, Mr. Amaral worked fifty-five hours. 223. For the week ending April 16, 2011, Mr. Amaral was paid for forty hours. 224. For this week, Mr. Amaral was not paid straight time or overtime for 15.00 hours. 225. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 226. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 227. For the week ending April 23, 2011, Mr. Amaral worked fifty-one and one-half hours. 228. For the week ending April 23, 2011, Mr. Amaral was paid for thirty-eight hours. 229. For this week, Mr. Amaral was not paid straight time or overtime for 13.50 hours. 230. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 231. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 232. For the week ending April 30, 2011, Mr. Amaral worked fifty-five hours. 233. For the week ending April 30, 2011, Mr. Amaral was paid for forty hours. 234. For this week, Mr. Amaral was not paid straight time or overtime for 15.00 hours. 235. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 236. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 237. For the week ending May 7 2011, Mr. Amaral worked fifty-five hours. 238. For the week ending May 7, 2011, Mr. Amaral was paid for forty hours. 239. For this week, Mr. Amaral was not paid straight time or overtime for 15.00 hours. 240. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 241. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 242. For the week ending May 14 2011, Mr. Amaral worked fifty-five hours. 243. For the week ending May 14, 2011, Mr. Amaral was paid for forty hours. 244. For this week, Mr. Amaral was not paid straight time or overtime for 15.00 hours. 245. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 246. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 247. For the week ending May 21, 2011, Mr. Amaral worked fifty-five hours. 248. For the week ending May 21, 2011, Mr. Amaral was paid for forty hours. 249. For this week, Mr. Amaral was not paid straight time or overtime for 15.50 hours. 250. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 251. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 252. For the week ending May 28, 2011, Mr. Amaral worked fifty-five hours. 253. For the week ending May 28, 2011, Mr. Amaral was paid for forty hours. 254. For this week, Mr. Amaral was not paid straight time or overtime for 15.00 hours. 255. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 256. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 257. For the week ending June 4, 2011, Mr. Amaral worked thirty-eight and one-half hours. 258. For the week ending June 4, 2011, Mr. Amaral was paid for thirty-two hours. 259. For this week, Mr. Amaral was not paid straight time or overtime for 6.50 hours. 260. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 261. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 262. For the week ending June 11, 2011, Mr. Amaral worked fifty-nine hours. 263. For the week ending June 11, 2011, Mr. Amaral was paid for forty-eight hours. For this week, Mr. Amaral was not paid straight time or overtime for 11.00 hours. 264. During this week, similarly-situated co-workers were not paid time and a half for all time worked over the 40-hour-per-week mark. 265. During this week, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 266. After Mr. Amaral was terminated, similarly-situated co-workers continued to work more than forty hours per week. 267. After Mr. Amaral was terminated, similarly-situated co-workers continued to work more than eight hours per day. 268. After Mr. Amaral was terminated, similarly-situated co-workers were not paid any wage or overtime for any work suffered or permitted over the forty-hour-per week mark each week. 269. After Mr. Amaral was terminated, similarly-situated co-workers were not paid any wage for at least some time worked over the 8-hour-per-day mark. 270. At all times relevant to this Complaint, Defendants did not use a timeclock. III. COLLECTIVE ACTION / CLASS ACTION ALLEGATIONS 271. Mr. Amaral, Local 7 Laborer/Weatherization Workers, Local 7 laborer/Door and Window Installers, Local 7 Laborer/Energy Auditors, and other similarly-situated non-supervisory Advantage employees who were not exempt from the requirements of the Fair Labor Standards Act (“FLSA”) nor equivalent Massachusetts statutes, are hereinafter referred to as “Collective/Class Action Members.” 272. Advantage issued a memorandum on September 17, 2010, stating that it intended to follow guidelines written into the Laborers’ New England Region Residential Weatherization Agreement concerning meal break and overtime requirements for all field employees. 273. In this memorandum, Advantage quoted a provision in the CBA stating that neither “travel time, nor commuting time, lunch or other scheduled breaks shall constitute or be calculated as hours of work…except when an employee is directed by the employer, a supervisor or crew chief to report to load or offload materials or equipment before normal working hours . . . .” 274. Advantage also made it clear in the September 17, 2010, memorandum that “hours worked in excess of forty hours per week shall be paid for at the rate of time and one-half the straight time rate….” 275. Advantage also made it clear in the September 17, 2010, memorandum that “employees are encouraged . . . to come to the warehouse and get a ride . . . to the jobsite” or risk not working that day. 276. All Collective/Class Action Members frequently worked an average of up to an additional approximately three hours each day loading and unloading the trucks and commuting to a work site. 277. Between June, 2010 (at the latest) and the present, Defendants have had a policy and practice of not paying Collective/Class Action Members any pay for work, suffered or permitted, after Collective/Class Action Members worked beyond forty hours per week. 278. Between June, 2010 (at the latest) and the present, Defendants have had policy and practice of not paying any Collective/Class Action Members any pay for any work loading and unloading equipment and materials into or from Defendants’ trucks at beginning and end of each weekday. 279. Between June 27, 2010, (at the latest), and his termination, Mr. Amaral worked beyond forty hours almost every week with the full knowledge and ratification of his supervisors and co-workers. 280. Between June 27, 2010, and Mr. Amaral’s termination, defendants almost always did not pay Mr. Amaral any wage for Mr. Amaral’s work suffered or permitted beyond forty hours per week. 281. Between June 27, 2010, and Mr. Amaral’s termination, defendants usually did not pay Mr. Amaral any wage for Mr. Amaral’s work suffered or permitted beyond the eight-hour per day mark. 282. Upon information and belief, after June 27, 2010 (at the latest), all Collective/Class Action Members worked beyond forty hours per week with the full knowledge and ratification of their supervisors and defendants. 283. Upon information and belief, after June 27, 2010 (at the latest), defendants almost always failed to pay Collective Action Members any wages for work suffered or permitted after Collective/Class Action Members worked beyond forty hours per week. 284. Upon information and belief, after June 27, 2010 (at the latest), defendants almost always failed to pay Collective Action Members any wages for work suffered or permitted after Collective/Class Action Members worked beyond eight hours in a day. 285. After approximately June 27, 2010, at the latest, defendants did not compensate Collective/Class Action Members for all of the hours they worked despite Collective/Class Action Members’ performance of the principal duties for which Advantage employed the Collective/Class Action Members, which were an integral part of the principal activities for which Collective/Class Action Members were employed, which were indispensable to the performance of such principal activities, and which were controlled and required by defendants for Advantage’s benefit. 286. After approximately June 27, 2010, at the latest, defendants knowingly and willfully refused to comply with Advantage’s known obligation to pay Collective/Class Action Members full wages for all hours worked. 287. After approximately June 27, 2010, at the latest, defendants knowingly and willfully refused to comply with Advantage’s known obligation to pay Collective/Class Action Members full wage payments by properly computing overtime premiums based upon full wage payments for all hours worked and all earned overtime pay for each hour worked in excess of forty hours in each workweek. 288. Pursuant to 29 U.S.C. § 216(b), Mr. Amaral seeks to prosecute his FLSA claim as a collective action on behalf of all persons who are or were formerly employed by Advantage as Local 7 Laborer/Weatherization Workers, Local 7 laborer/Door and Window Installers, Local 7 Laborer/Energy Auditors, or other similar non- supervisory positions over the last three years. 289. Pursuant to Massachusetts Rules of Civil Procedure Rule 23, Mr. Amaral seeks to prosecute his Massachusetts wage and overtime claim as a class action on behalf of Collective/Class Action Members. 290. At all times relevant to this action, Collective/Class Action Members’ work involved non-discretionary duties and non-salaried compensation under the direction of a supervisor. Rarely, if ever, did their duties involve discretion or independent judgment, work directly related to management operations or any exercise of judgment beyond complying with repetitive routines practiced by Advantage’s standard operating procedures. 291. Neither Mr. Amaral nor any Collective/Class Action Members are exempt from the FLSA or state law equivalents. 292. The precise number of Collective/Class Action Members is known to Advantage. Due to the numerous numbers of Local 7 Laborer/Weatherization Workers, Local 7 laborer/Door and Window Installers, Local 7 Laborer/Energy Auditors and other non-exempt professionals that were/are still employed by Advantage, there are likely over 20 Collective/Class Action Members. 293. A collective and class action is superior to other available methods of adjudication of this controversy because joinder of all Collective/Class Action Members is impractical and undesirable. 294. The damages of some Collective/Class Action Members may be so small as to make the expense and burden of individual litigation impractical and redress of Collective/Class Action Members’ harm impossible. 295. This Court will have no difficulty managing this as a collective and class action. 296. Mr. Amaral and the Collective/Class Action Members are similarly-situated to each other, making collective action treatment of their FLSA claim proper. 297. Common facts and questions of law are shared by Mr. Amaral and the Collective/Class Action Members. 298. Mr. Amaral is aware of no difficulty that will be encountered in the management of this litigation that would preclude its approval as a collective and class action. COUNT I WILLFUL REFUSAL TO PAY PROPERLY-COMPUTED OVERTIME PREMIUMS 29 U.S.C. §§ 207 and 215(a)(2) 299. Plaintiffs repeat and incorporates by reference all allegations above and below as if fully set forth here. 300. Mr. Amaral was regularly scheduled to work forty hours a week. 301. By working after regular work hours an average of approximately three hours per shift with knowledge of his supervisors, Mr. Amaral worked an average of an additional approximately fifteen hours of unscheduled, unpaid time per week. 302. Upon information and belief, since June 27, 2010 (at the latest), Collective/Class Action Members have worked approximately one to fifteen hours of overtime each week, for which Collective/Class Action Members have received no straight time wages or overtime pay, in violation of 29 U.S.C. § 207. 303. At all times relevant to this action, defendant Kelly acted directly or indirectly in the interest of Advantage in relation to Mr. Amaral for purposes of the FLSA. 304. At all times relevant to this action, defendant Kelly had ultimate control over the Advantage’s day-to-day scheduling, pay practices, and operations involving Collective/Class Action Members. 305. Defendants willfully and repeatedly violated and are willfully violating the provisions of 29 U.S.C. §§ 207 and 215(a)(2) by employing Collective/Class Action Members for workweeks longer than forty (40) hours without paying overtime for all hours worked in excess of forty (40) hours in each workweek as required by the FLSA. 306. Defendants are jointly and severally liable to Collective/Class Action Members for willful violations of the overtime wage payment requirements of the FLSA by refusing to pay properly computed overtime premiums to each Collective Action Member for all overtime hours worked in each workweek. 307. Defendants are jointly and severally liable to Collective/Class Action Members for all unpaid wages and an additional equal amount as liquidated damages given the knowing and willful character of Advantage’s violations of the FLSA. COUNT II WILLFUL REFUSAL TO MAKE TIMELY FULL WAGE PAYMENTS 29 C.F.R. § 778.106 & 29 U.S.C. §§ 207 and 215(a)(2) 308. Plaintiffs repeat and incorporates by reference all allegations above and below as if fully set forth here. 309. By the aforementioned acts and omissions, defendants willfully and repeatedly violated and are willfully violating the provisions of 29 U.S.C. §§ 207 and 215(a)(2) and 29 C.F.R. § 778.106 by employing Collective/Class Action Members for workweeks longer than forty (40) hours without paying each Plaintiff each week on Advantage’s established payday for all overtime premiums earned by each Plaintiff in the preceding workweek as required by the FLSA. 310. Defendants are jointly and severally liable to Collective/Class Action Members for willful violations of the wage payment requirements of the FLSA by refusing to pay each Plaintiff each week on the Advantage’s established payday all overtime premiums earned by each Plaintiff in the preceding workweek as required by the FLSA. 311. Defendants are jointly and severally liable to Collective/Class Action Members for all unpaid wages and an additional equal amount as liquidated damages given the knowing and willful character of Advantage’s violations of the FLSA. COUNT III FLSA RETALIATION 29 U.S.C. § 215(a)(3) 312. Plaintiffs repeat and incorporates by reference all allegations above and below as if fully set forth here. 313. Mr. Amaral’s demotion to less desirable work was temporally proximate to his filing complaints about Advantage’s illegal failure to pay Mr. Amaral’s overtime as required by the FLSA. 314. Mr. Amaral’s demotion to less desirable work was caused by his repeatedly filing complaints about Advantage’s failure to pay overtime under the FLSA, causing Mr. Amaral damages. 315. Mr. Amaral’s termination was temporally proximate to his filing complaints about Advantage’s illegal failure to pay Mr. Amaral’s overtime as required by the FLSA. 316. Mr. Amaral’s termination was caused by his repeatedly filing complaints about Advantage’s failure to pay overtime under the FLSA, causing Mr. Amaral damages. COUNT IV WRONGFUL DISCHARGE IN VIOLATION OF PUBLIC POLICY 317. Plaintiffs repeat and incorporates by reference all allegations above and below as if fully set forth here. 318. Mr. Amaral’s termination was caused by his complaining about Advantage’s illegal pay practices, which is contrary to the public policy in this state. COUNT V WILLFUL REFUSAL TO PAY FOR HOURS WORKED Mass. Gen. Laws ch. 149, §§ 148 & 150 319. Plaintiffs repeat and incorporates by reference all allegations above and below as if fully set forth here. 320. Since June, 2010 (at the latest), Collective/Class Action Members have worked approximately one to fifteen hours each week without pay, a violation of state law. 321. Defendants willfully and repeatedly violated and are willfully violating Mass. Gen. Laws ch. 149, §§ 148 and 150 by failing or refusing to pay Collective/Class Action Members wage payments for each hour worked by each such Collective Action Member, as required by Massachusetts law. 322. Defendants stand jointly and severally liable to Collective/Class Action Members for willful violations of the wage payment requirements of Massachusetts law by refusing to pay Collective/Class Action Members wage payments for all hours worked as required by Mass. Gen. Laws ch. 149, §148. 323. Defendants stand jointly and severally liable to Collective/Class Action Members for all unpaid wages and an additional treble damages as liquidated damages given the knowing and willful character of defendants’ violations of Massachusetts wage and hour laws and wage underpayments thereby resulting. COUNT VI WILLFUL REFUSAL TO PAY OVERTIME Mass. Gen. Laws ch. 151, §§ 1A, 1B & 19 324. Plaintiffs repeat and incorporates by reference all allegations above and below as if fully set forth here. 325. Defendants stand jointly and severally liable to Collective/Class Action Members for willful violations of the wage payment requirements of Massachusetts law by refusing to pay Collective/Class Action Members wage payments for all hours worked as required by Mass. Gen. Laws ch. 151, §1A et seq. WHEREFORE, Plaintiff Derek Amaral respectfully requests that this Honorable Court: (1) Designate this action as a collective action under the FLSA on behalf of the Collective/Class Action Members and prompt issuance of notice pursuant to 29 U. S. C. § 216(b) to all Collective/Class Action Members, apprising them of the pendency of this action, permitting them to assert timely FLSA claims in this action by filing individual Consents to Sue pursuant to 29 U. S. C. § 216(b); (2) appoint Plaintiff and his counsel to represent the Collective/Class Action Members; (3) find that Defendants stand jointly and severally liable to Collective/Class Action Members for willful violations of the overtime and wage payment requirements of the FLSA and Massachusetts wage and hours laws; (4) award Collective/Class Action Members for all overtime and wage underpayments required to be paid by the FLSA, award an additional equal amount as liquidated damages, and award all other relief appropriate under the FLSA; (5) designate this action as a class action under Mass. Gen. Laws c. 151, §1A on behalf of the Collective/Class Action Members and allow prompt issuance of notice to all Collective/Class Action Members, apprising them of the pendency of this action; (6) appoint Plaintiff and his counsel to represent the Collective/Class Action Members on behalf of their state law claims; (7) find that Defendants stand jointly and severally liable to Collective/Class Action Members for willful violations of the overtime and wage payment requirements of the Massachusetts wage and hours laws; (8) award Collective/Class Action Members for all overtime and wage underpayments required to be paid by the Massachusetts Wage and Hour laws, award two times an additional equal amount as liquidated damages, and award all other relief appropriate under Massachusetts wage and hour laws; (9) award Mr. Amaral front pay, back pay, compensatory damages, punitive damages, consequential damages, special damages, injunctive relief, reinstatement, and equitable relief for his FLSA retaliation claims, Mass. Gen. Laws c. 149 claims, and all other federal and state law claims above; (10) award Mr. Amaral and all Collective/Class Action Members attorneys’ fees and costs under relevant federal and Massachusetts laws; and (11) all other relief this Honorable Court deems just and proper. DEREK AMARAL By His Attorney, __/s/ Chip Muller______________ Chip Muller, Esq. (BBO # 672100) Muller Law, LLC 155 South Main Street, Suite 101 Providence, RI 02903 (401) 256-5171 (ph) (401) 256-5178 (fax) [email protected] DEREK AMARAL by and through his attorney demands a TRIAL BY JURY on all counts so triable. ______/s/ Chip Muller ___________ Chip Muller, Esq. (BBO # 672100) Dated: August 23, 2012

employment & labor

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IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF LOUISIANA Civil Action No. 2:21-cv-974 CLASS ACTION COMPLAINT JURY TRIAL DEMANDED PARK 80 HOTELS LLC, a Louisiana limited liability company, PL HOTELS, LLC, a Louisiana limited liability company, individually, and on behalf of a class of similarly situated individuals and entities, Plaintiffs, v. HOLIDAY HOSPITALITY FRANCHISING, LLC, SIX CONTINENTS HOTELS, INC. d/b/a INTERCONTINENTAL HOTELS GROUP and IHG OWNERS ASSOCIATION, INC., Defendants. __________________________________________ CLASS ACTION COMPLAINT INTRODUCTION 1. Defendant Six Continents Hotels, Inc. (“SCH”) is the world’s largest hotel company by room count, and does business under the name InterContinental Hotels Group (“IHG”) (SCH and IHG may hereinafter be collectively referred to as “IHG”). 2. IHG operates approximately some 5,600 hotels across more than 15 brands. IHG takes an asset-light approach, owning, franchising and/or managing hotels for third parties, with Holiday Inn as its mainstay chain, under such brands as Holiday Inn, Holiday Inn Express and Holiday Inn Resorts, each bearing the identification as “an IHG Hotel.” 3. IHG also owns, manages and/or franchises other hotel brands such as Crowne Plaza, InterContinental, Staybridge Suites, Candlewood Suites, Hotel Indigo, Regent and Kimpton. 4. IHG’s Holiday Inn brands account for approximately 70% of its total hotel count. 5. IHG owns Defendant Holiday Hospitality Franchising, LLC (“HHF”), its affiliate which offers and sells Holiday Inn brand franchises including, but not limited to, Holiday Inn, 1 Holiday Inn Express and Holiday Inn Resort. 6. Defendant IHG owns and acts through its franchising affiliate, HHF and its agent and representative IHG Owners Association (“IHGOA”). 7. HHF enters into franchise agreements titled “Holiday Hospitality Franchising, LLC License Agreement(s)” (“License Agreement”) with HHF franchisees. 8. Plaintiff, Park 80 Hotels, LLC (“Park 80”) is a franchisee that owns and operates one or more hotels that bear a HHF brand mark pursuant to a License Agreement. 9. Plaintiff, PL Hotels, LLC (“PLH”) is a franchisee that owns and operates one or more hotels that bear a HHF brand mark pursuant to a License Agreement. (Park 80 and PLH may be referred to collectively as “Plaintiff” or “Franchisee”). 10. Plaintiff, along with the vast majority of HHF Franchisees are individuals, single member limited liability companies or closely held corporations who are either immigrants or second-generation Americans of Indian or other South Asian origin. 11. The hotel franchise industry holds particular appeal and attraction to these HHF Franchisees by providing investment and traditional family business ownership opportunities which they can build through diligence, dedication and hard work. 12. This class action lawsuit seeks to put an end to IHG/HHF’s unlawful, abusive, fraudulent, anticompetitive and unconscionable practices designed solely to benefit and enrich IHG/HHF’s shareholders and to do so at the expense and to the detriment of Plaintiff and the class members, namely, similarly situated franchisees. 13. As detailed below, Defendants have and continue to engage in unconscionable, fraudulent, unlawful, anticompetitive and discriminatory business practices in connection with the IHG Hotel franchise system. 14. At the heart of IHG/HHF’s unlawful scheme is its requirement that its franchisees 2 use certain mandated vendors and suppliers for the purchase of goods and services necessary to run a hotel. IHG/HHF’s forced exclusive use of certain chosen vendors and suppliers imposes well above-market procurement costs on franchisees which include, but are not limited to, those associated with its onerous and exorbitant Property Improvement Plan (“PIP”). 15. Under the guise of improving the franchisees’ hotels to maintain “brand standards”, IHG/HHF forces its franchisees to frequently undertake expensive renovations, remodeling, and construction as part of the PIP, and in so doing manipulates and shortens the warranty periods on mandated products the franchisees must purchase, then disingenuously uses this to justify PIP requirements as purportedly necessary to meet “brand standards” when, in reality, IHG/HHF’s sole purpose is to maximize its kickbacks and unjustifiably run up costs on their franchisees in bad faith. 16. IHG/HHF deceitfully represent to their franchisees that they select vendors with the laudable goal of using the franchisees’ collective bargaining power to secure a group discount and to ensure adequate quality and supply of products and services, and refer to these procurement programs as the “IHG Marketplace.” 17. In fact, however, IHG/HHF’s primary goal in negotiating with vendors has little to nothing to do with the best interests of franchisees but rather is to secure the largest possible kickback for itself, which vendors finance through the above-market rates charged to franchisees in collusion with IHG/HHF. 18. Furthermore, the above-market priced products which IHG/HHF forces franchisees to purchase through the IHG Marketplace and related programs is overwhelmingly of inferior quality. These low-quality “IHG Approved” purchases are forced upon franchisees and disingenuously characterized as meeting supposed brand standards of quality, when in truth the sole purpose is to maximize kickbacks for IHG/HHF and unjustifiably run up costs on their franchisees in bad faith. 3 19. Upon information and good faith belief, IHG/HHF have each netted tens of millions of ill-gotten dollars from this fraudulent kickback scheme. 20. Additionally, IHG/HHF engages in other oppressive, bad-faith, fraudulent and unconscionable conduct as more fully described herein. For instance, IHG holds itself out to the public as offering discounts, travel benefits and other perks to repeat guests through its IHG Rewards Club loyalty program. IHG has a mobile booking app as well as cloud-based hotel solutions which it represents as driving demand for its hotel owners and which ostensibly allow hotel owners to reach potential guests at a lower cost. Hotel guests can accumulate points per dollars spent which can be redeemed at IHG hotels. When those points are then redeemed at a hotel, however, only a small fraction of the value is reimbursed to franchisees while beginning in 2018 IHG/HHF has required that Plaintiff and franchisees (and not IHG/HHF) also pay sales tax on the full value of the product or service obtained by hotel guests. Furthermore, in instances where hotel guests’ accumulated reward points from stays at Plaintiff’s (or other franchisees’) hotel expire, the points never return to Plaintiff or to any source-of-origin franchisees. 21. IHG/HHF also routinely introduces new marketing programs under the guise of providing franchisees with a “choice” as to whether they should participate or not. In reality, however, all such marketing programs are forced upon the franchisees insofar as any and all decisions to “opt out” are met with vindictive, punitive and retaliatory action by IHG/HHF. These programs are in addition to all marketing fees contracted and paid for by the franchisees, and serve as an abusive way to impose additional fees and fines for the sole profit and benefit of IHG/HHF, and to do so without disclosure or agreement by deceit, implied threat and actual retribution rendering franchisees’ supposed “opt-out” choice completely illusory. 22. Furthermore, although the facts set forth herein predominantly existed before March, 2020 and continuously thereafter, IHG/HHF has ceased all of its marketing since the imposition of 4 Covid-19 related restrictions in early 2020. Despite the fact that IHG/HHF has not been engaged in any marketing activities or efforts for approximately a year, it continues to require franchisees to pay significant marketing related fees for which they receive nothing in return. 23. Moreover, IHG/HHF routinely assesses additional fees and penalties against franchisees which are not authorized by the applicable License Agreement and fundamentally excessive and unfair. These fees and penalties are disingenuously assessed as a means to intimidate franchisees, including to serve as bad faith bases for default notices and threatened termination, as well as to harm the economic viability, profitability and creditworthiness of franchisees. 24. For instance, IHG/HHF routinely requires its franchisees to pay multiple fees for the same product or service. And, IHG/HHF routinely asseses additional fees against franchisees for services and products that IHG/HHF either does not, in fact, provide or provides at an inferior 25. IHG/HHF imposes requirements on its franchisees to undergo hotel inspections any time there are conversions, construction, changes in ownership, brand changes or re-licensing. In conjunction with IHG/HHF’s unilaterally imposed mandates for any such hotel changes, IHG/HHF requires its franchisees to pay for the inspections, IHG/HHF’s written reports and any re-evaluations and re-inspections that IHG/HHF alone deems necessary. In practice, IHG/HHF stages these inspections to maximize criticism of franchisee Hotels as a pretext for imposing additional inspections, reports and fines, all deliberately interposed for IHG/HHF’s own financial benefit and to the detriment of franchisees. 26. IHG/HHF arbitrarily imposes rules and regulations and/or unreasonably interprets rules and regulations in order to justify assessing monetary penalties against franchisees. 27. Quite egregiously, IHG/HHF routinely discriminates, demeans, and is both explicitly and implicitly hostile and bigoted towards Plaintiff, and towards Indian-American and South Asian- 5 American franchisees. 28. IHG/HHF corrupts its Owners Association, the IHGOA, the function of which IHG/HHF represents in the License Agreement “to function in a manner consistent with the best interests of all persons using the System” but instead is staffed almost exclusively with IHG/HHF representatives to the exclusion of franchisees and operates to undermine and to harm the very hotel owners and franchisees it purports to represent. 29. HHF’s actions are unconscionable and outrageous, and have pushed franchisees to the financial breaking point. 30. This class action lawsuit seeks monetary damages, injunctive and other relief for: (a) Count I - breach of contract; (b) Count II - breach of the implied covenant of good faith and fair dealing; (c) Count III - breach of fiduciary duty; (d) Count IV – declaratory judgment; (e) Count V - recovery for violations of the Sherman Act, 15 U.S.C. § 1; and, (f) Count VI – an accounting. JURISDICTION AND VENUE 31. This Court has subject matter jurisdiction over the federal law claims raised in this class action lawsuit pursuant to pursuant to 28 U.S.C. § 1331 as Plaintiff alleges violations of a federal statute, the Sherman Act, 15 U.S.C. § 1. 32. This Court has subject matter jurisdiction over this action pursuant to the Class Action Fairness Act of 2005, Pub. L. No. 109-2 Stat. 4 (“CAFA”), which, inter alia, amends 28 U.S.C. § 1332, at new subsection (d), conferring federal jurisdiction over class actions where, as here: (a) there are 100 or more members in the proposed class; (b) some members of the proposed Class have a different citizenship from Defendants and (c) the claims of the proposed class members exceed the sum or value of five million dollars ($5,000,000) in aggregate. See 28 U.S.C. § 1332(d)(2) & (6). 33. This Court has subject matter jurisdiction over the state law claims raised in this 6 action pursuant to 28 U.S.C. § 1367, because they arise from the same set of operative facts as the federal law claims. 34. This Court has personal jurisdiction over Defendants IHG, HHF and IHGOA because all Defendants regularly transact business within the geographic boundaries of this District by, inter alia, entering into franchising agreements with franchisees and engaging in routine, systematic and continuous contacts with persons in this District. 35. Venue is proper in this judicial district pursuant to 18 U.S.C. §§ 1965(a), 1965(b), because Defendants HHF, IHG and IHGOA have agent(s) in, and regularly transact their business affairs in, this District by, inter alia, entering into franchising agreements with franchisees, because said Defendants regularly transact business within the geographic boundaries of this District by, inter alia¸ collecting membership fees from franchisees, and, in the alternative, because the ends of justice require said Defendants to be summoned to this District. 36. Venue is proper in this judicial district pursuant to the Louisiana Revised Statutes, Title 12, Section 1042 which provides: §1042. Franchise agreements; provisions for dispute resolution Unless provisions of a business franchise agreement provide otherwise, when the business to be conducted pursuant to the agreement and the business location of the franchisee are exclusively in this state, disputes arising under a business franchise agreement shall be resolved in a forum inside this state and interpretation of the provisions of the agreement shall be governed by the laws of this state. LSA-R.S. 12:1042. 37. The business conducted by Plaintiff Park 80 is pursuant to a franchise agreement with HHF, and the business to be conducted pursuant to said agreement and the business location of Park 7 80 are both exclusively in Louisiana. 38. The business conducted by Plaintiff PLH is pursuant to a franchise agreement with HHF, and the business to be conducted pursuant to said agreement and the business location of PLH are both exclusively in Louisiana. PARTIES 39. Plaintiff Park 80 operates a HHF franchise hotel, specifically a Holiday Inn Express Hotel located in Louisiana. 40. Plaintiff PLH operates a HHF franchise hotel, specifically a Staybridge Suites Hotel located in Louisiana. 41. Defendant HHF is a Delaware-registered limited liability company with its principal place of business located at Three Ravinia Drive, Suite 100, Atlanta, Georgia 30346. 42. Defendant IHG is a Delaware-registered corporation with its principal place of business is Three Ravinia Drive, Suite 100 Atlanta, Georgia 30346. 43. Defendant IHGOA is a Georgia non-profit corporation with its principal place of business is Three Ravinia Drive, Suite 100 Atlanta, Georgia 30346. COMMON FACTUAL ALLEGATIONS The Parties’ Relationship 44. IHG has been in operation since 2003. 45. Throughout its history, IHG has created and acquired hotel brands, including, but not limited to, Holiday Inn, Holiday Inn Express and Holiday Inn Resort. 46. IHG’s franchising affiliate, HHF, licenses the right to use these hotel brand marks to franchisees, including Plaintiff, by entering into franchise agreements with them, which in many cases are referred to as “License Agreements.” 47. IHG owns HHF and has developed relationships with various vendors and suppliers 8 to IHG/HHF franchisees. 48. By virtue of its ownership of HHF and control over the IHG Marketplace, IHG is an intended third-party beneficiary of the License Agreements. 49. In connection with the License Agreements, HHF uses its superior bargaining power to coerce the franchisees into accepting onerous, unequal and unconscionable terms in its License Agreements. 50. These onerous terms put immense financial stress on franchisees, threatening their economic viability. 51. HHF’s abuse of its position and unfair practices result in the imposition of needless and costly fees, above-market costs for necessary supplies and other goods and results in substantial impacts on HHF franchisees’ ability, who manage and operate their properties commensurate with the highest standards, to operate their properties profitably. 52. Plaintiff Park 80 is an HHF Franchisee1 pursuant to a franchise agreement with HHF dated February 25, 2014 entitled “Holiday Hospitality Franchising, LLC Holiday Inn Express Hotel New Development License Agreement” (the “License Agreement”, a copy of which is attached hereto as Exhibit A)2 for a Holiday Inn Express Hotel #17137, 2280 Business Park Road, Donaldsonville, Louisiana 70346 (the “Holiday Inn Express Hotel”). 53. Plaintiff PLF is an HHF Franchisee pursuant to a franchise agreement with HHF dated October 30, 2014 entitled “Holiday Hospitality Franchising, LLC Staybridge Suites Hotel New 1 Pursuant to the First Addendum to License Agreement dated November 9, 2016, Kishorbhai S. Patel was replaced as the Licensee by Park 80 Hotels LLC, a Louisiana limited liability company. 2 This License Agreement is attached as an exemplar with all citations and references equally applicable to both Plaintiffs, Park 80 and PLH, insofar as the respective License Agreements contain identical provisions. 9 Development License Agreement” (see, e.g. Exhibit A)3 for a Staybridge Suites Hotel #17547, Intersection of Interstate 220 and West Prien Lake Road, Lake Charles, Louisiana 70605 (the “Staybridge Suites Hotel”) (the “Holiday Inn Express Hotel” and the “Staybridge Suites Hotel” may be referred to individually or collectively as the “Hotel”) 54. Pursuant to the subject License Agreement, Defendant HHF granted Plaintiff a non- exclusive license to use Defendant’s System (as defined therein) only at the Hotel and in accordance with the License Agreement. See License Agreement, §§1(b), 2. Vendor Mandates and Kickbacks – the IHG Marketplace Programs 55. A particular manner by which IHG/HHF undermines the viability and profitability of its franchisees is by mandating Plaintiff and HHF franchisees utilize only HHF approved third- party vendors, the purpose of which is for Defendants to derive a significant financial benefit at the direct expense and to the financial detriment of the HHF franchisees. 56. IHG/HHF’s fraudulent and unconscionable scheme cannot operate without franchisees paying excessive, above-market rates for the goods and services necessary to run a hotel, including, but not limited to: (a) its computerized credit card processing system, Secure Payment Solution (“SPS”) which all Hotels are required to use; (b) high speed guest internet services, designated workstations and multi-function printers in Hotel business centers (“Public Access Computers”), and a designed communication service referred to as “SCH Merlin”; (c) HHF’s approved Keycard System; (d) televisions and in-room entertainment compatible with SCH Studio; 3 The Park 80 License Agreement attached as an exemplar applies equally to Plaintiff PLH insofar as it contains identical provisions to the License Agreement referenced herein. 10 (e) an alert system that enables employees to notify hotel management of an emergency (“Employee Safety Devices”); (f) equipment, software, and services for property-level technology and telecommunications systems; (g) equipment associated with the Defendants’ gift card program; (h) mandated food and beverage programs; (i) furniture, furnishing, linens, food products, utensils, and goods for guests’ consumption and (j) additional advertising materials, products, services, equipment or supplies, from which IHG/HHF profits. 57. The above-market rate pricing charged by vendors and paid by Plaintiff and the franchisees provides the money necessary for those vendors to pay IHG/HHF’s unreasonable and unconscionable kickbacks. 58. IHG/HHF knowingly and willfully engage in conduct that ensures franchisees pay above-market prices for goods and services necessary in conjunction with operation of the hotels. 59. IHG/HHF requires that Plaintiff and HHF Franchisees strictly comply with its requirements for the types of services and products that may be used, promoted or offered at the hotel, and comply with all of HHF’s “standards and specifications for goods and services used in the operation of the Hotel and other reasonable requirements to protect the System and the hotel from unreliable sources of supply.” See License Agreement generally. 60. If IHG/HHF requires HHF franchisees to purchase equipment, furnishings, supplies or other products for the hotel from a designated or approved supplier or service provider, whether pursuant to the License Agreement, Standards, or any communication from HHF, then HHF franchisees must purchase the mandated product(s) from mandated vendors and cannot under any 11 circumstances deviate from those vendor mandates without prior approval from HHF. 61. Defendants IHG and HHF run a program under the guise of being voluntary and which they falsely represent as delivering value and lower cost purchasing opportunities to HHF franchisees. Nothing could be further from the truth. Defendants refer to these procurement programs as the “IHG Marketplace.” 62. IHG Marketplace operates on a cost recovery basis with fees for both procurement and technical ordering transaction services included in the supplier invoiced price. 63. HHF franchisees purchase goods and services directly from suppliers at prices negotiated by HHF and/or IHG. 64. These prices are invariably above-market prices which do not permit the HHF franchisees to seek competitive pricing for their own benefit. 65. Rather, these inflated prices allow for rebates that go to IHG and HHF directly by suppliers which generally range from approximately 1-5% of the amount of the invoice price for the goods and services purchased by franchisees. 66. These kickbacks to IHG and HHF are the primary—if not the sole—reason HHF franchisees are forced to use expensive vendors and suppliers not of their own choosing at supra- competitive pricing. 67. Some primary examples of the IHG Marketplace sourced vendor mandates involve credit card processing and high speed internet agreements, with Defendants requiring franchisees to execute these infrastructure related agreements. 68. Although IHG/HHF represent that franchisees have a choice between vendors, it is usually only between no more than three vendors hand-picked by Defendants from whom they obtain significant rebates. 69. Although franchisees are able to secure far more reasonable rates for, for example, 12 credit card processing from alternate sources, IHG/HHF do not permit franchisees to do so on the open market and instead require franchisees to pay the higher rates of Defendants’ selected vendors. 70. This is similarly true in the case of hotel internet services which IHG/HHF does not permit franchisees to purchase on the open market and instead requires franchisees, in most instances, to pay more than double the price for lower speeds than what franchisees could purchase independently from the same or alternate sources. 71. This mandated lack of choice invariably increases franchisees’ costs and expenses, and benefits only IHG/HHF in the form of kickbacks. 72. The costs charged to franchisees in the IHG/HHF procurement programs such as the IHG Marketplace are almost always higher than if the same product or service were purchased by an independent hotel outside of the HHF System. 73. Defendants frequently use the pretext that the vendor requirements imposed on franchisees are necessary for standardization or—more curiously—for security. In the case of security, however, IHG has recently been the victim of a significant data hack. This is but one factor illuminating that Defendants’ assertion of security, for example, is merely a pretext to charge franchisees higher vendor rates in order for IHG and HHF to profit from kickbacks. 74. In fact, many products and services that HHF franchisees are required to obtain based on Defendants’ vendor mandates are at an excessive cost but inferior quality. Franchisee Fees & the Property Improvement Plan 75. As a prerequisite to becoming an HHF Franchisee, IHG/HHF charges (and Plaintiff actually paid) an initial application fee of $500 per guest room (sometimes referred to as a “key”) and up to $50,000 simply for the privilege of submitting an application for an HHF franchise or license. This application fee applies for new development, conversion, change of ownership or re- licensing. 13 76. Only then does IHG/HHF determine whether it will approve the application for a license, and in the case of unapproved applications, IHG/HHF retains $15,000 which is forfeited by franchise/license applicants for absolutely no return benefit. 77. If IHG/HHF does approve an application, IHG/HHF still has the sole discretion to revoke its approval thereafter and to retain an applicant’s entire application fee and to deem it “non- refundable,” again providing applicants with no benefit in return for IHG/HHF taking an amount up to $50,000 and leaving applicants without recourse. 78. IHG/HHF also maintains what it calls its “Property Improvement Plan” (PIP). 79. Before any HHF franchisee submits an application for conversion, change of ownership, brand change or re-licensing, franchisees must arrange for HHF to conduct an inspection of the Hotel so that IHG/HHF can prepare written specifications for the upgrading, construction and furnishing of the Hotel in accordance with its HHF’s defined “Standards.” 80. Under the PIP, HHF franchisees must pay a non-refundable $6,500 fee to have their Hotel inspected and for preparation of a PIP report. In the case of conversion hotels, IHG/HHF will not authorize reopening unless and until it has determined that all PIP requirements have been completed, including the submission of plans before the start of construction in accordance with the dates specific in the License Agreement. 81. As part of PIP, IHG/HHF charges up to an additional $5,000 for each re-evaluation and re-inspection it may deem necessary in the event any hotel fails its opening inspection. IHG/HHF frequently uses this, and imposes further fines, as a means to enrich themselves to the detriment of the franchisees. 82. IHG/HHF neither requires nor imposes its inspections, re-inspections, re- evaluations and/or written reports in good faith. To the contrary, IHG/HHF uses these inspections as a pretext to generate the aforesaid fees and fines, and prepares disingenuously negative reports in 14 order to generate revenue for itself in the form of fines and required re-inspections, reports and impact studies, all intended to harm the economic viability and creditworthiness of its franchisees. 83. Franchisee objections to this bad faith process are disregarded and dismissed, and met with derision, threats, intimidation and retaliation. 84. The license that IHG/HHF grants to Plaintiff and HHF franchisees to “use the System only at the Hotel, but only in accordance with this License” (and during the License Term) defines the System broadly and with significant open-ended discretion for HHF. 85. This discretion allows IHG/HHF to put a stranglehold on franchisees and broadly impose onerous costs and obligations on franchisees: The System is composed of all elements which are designed to identify Holiday Inn, Holiday Inn Express and Holiday Inn Resort branded hotels to the consuming public or are designed to be associated with those hotels or to contribute to such identification or association and all elements which identify or reflect the quality standards and business practices of such hotels, all as specified in this License or as designated from time to time by Licensor. The System at present includes, but is not limited to, the service marks Holiday Inn®, Holiday Inn Express®, Holiday Inn Express® & Suites, Holiday Inn® & Suites and Holiday Inn® Resort, (as appropriate to the specific hotel operation to which it pertains), Holidex® and the other Marks (as defined in paragraph 7.B below), and intellectual property rights made available to licensees of the System by reason of a license; all rights to domain names and other identifications or elements used in electronic commerce as may be designated from time to time by Licensor in accordance with Licensor's specifications to be part of the System; access to a reservation service operated in accordance with specifications established by Licensor from time to time; distribution of advertising, publicity and other marketing 15 programs and materials; architectural drawings and architectural works; the furnishing of training programs and materials; confidential or proprietary information standards, specifications and policies for construction, furnishing, operation, appearance and service of the Hotel, and other requirements as stated or referred to in this License and from time to time in Licensor's brand standards for System hotels (the "Standards") or in other communications to Licensee; and programs for inspecting the Hotel, measuring and assessing service, quality and consumer opinion and consulting with Licensee. Licensor may add elements to the System or modify, alter or delete elements of the System in its sole judgment from time to time. License Agreement, §1(B) (emphasis added). 86. There is no limitation on the extent to which HHF can alter, modify or revise its “Standards” or impose costs and obligations on HHF franchisees, which it does not disclose and have never been the subject of any arms’ length agreement. See id., §§1(B), 4(E), 5. 87. The IHG/HHF PIPs are designed with substandard products and designs, purposefully limit vendor choices for HHF franchisees and impose above-market procurement costs. 88. For example, most furniture items that IHG/HHF mandates its franchisees purchase from required vendors is of such inferior quality that they break, disassemble, and damage upon initial delivery and/or assembly and are rendered unusable. IHG/HHF then forces additional costs upon its franchisees to replace the mandated but damaged products, and also the costs to clean the resultant broken parts strewn and littered in the franchisees’ hotels. 89. Although the IHG Owners Association (IHGOA, defined below) purports to “consider and discuss, and make recommendations relating to the operation” of franchisees’ hotels, and “function in a manner consistent with the best interests of all persons using the System”, IHG/HHF, and the IHGOA routinely dismiss, ridicule, and disregard franchisee concerns about its 16 inferior mandated products and exorbitant costs. (See License Agreement, §6(A)-(B)) 90. IHG/HHF forces its franchisees to repeat these PIP multimillion dollar projects every 6-8 years irrespective of the actual condition of hotels purely to generate fees and vendor kickbacks for themselves to the detriment of Plaintiff and HHF franchisees. 91. As part of PIP, IHG/HHF deliberately scale back and manipulate standard manufacturer furniture warranties as another means purely to fit their PIP cycles, cause harm to the franchisees and, ultimately, raise prices for hotel customers. 92. As such, HHF has imposed and continues to impose onerous PIP terms on Plaintiff and HHF franchisees which, in the sole discretion of HHF, force HHF franchisees to spend approximately $10,000 – $30,000 per guest room, which amounts to millions of dollars in forced renovation costs being foisted upon HHF franchisees. 93. HHF further does so under the threat of retaliation against its franchisees in the event of noncompliance as determined subjectively by HHF in its sole discretion, which can result in termination of their franchise or other punitive measures. IHG/HHF’s Double-Dipping on Commissions & Introduction of Supposedly Voluntary Programs under Pressure & Retaliation for Opt-Outs 94. HHF franchisees pay initial marketing contributions and annual marketing fees which are represented as being applied to such things as marketing. Not content with those fees, however, IHG/HHF routinely introduce “new programs” requiring franchisees to pay additional fees, all of which go directly to said Defendants. 95. The fees set forth in the License Agreement are based on a fixed percentage of Plaintiff’s and HHF franchisees’ revenue. (See License Agreement, §3(B)). 96. The License Agreement, however, also purports to give HHF the unfettered, unilateral and unspecified right to impose additional fees, penalties, rules and regulations, namely 17 “all fees due for travel agent commission programs . . . .” (See id. §3(B)(1)(d)). 97. One such program for booking and commissions is known as the Global Distribution System (“GDS”). GDS is a worldwide conduit between travel bookers and suppliers, such as hotels and other accommodation providers. It communicates live product, price and availability data to travel agents and online booking engines, and allows for automated transactions. 98. The idea of GDS is for hotels to increase their reach to attract more customers, increase revenue and ultimtately make additional profits. A GDS passes on hotel inventory and rates to travel agents and travel sites that request it and also accepts reservations. Today, the databases also include online travel agencies (“OTA”s) (such as Booking.com and Expedia). 99. IHG/HHF arbitrarily exercises this purported right to impose fees including, but not limited to, travel agent commission fees, in bad faith. IHG/HHF does so in order to capture a continually increasing share of Plaintiff’s and the HHF franchisees’ revenue. HHF franchisees are charged multiple additional fees such as transaction fees, booking fees, GDS fees and excess and additional commissions through marketing and other programs. 100. One example is IHG/HHF’s imposition of the BTI (Business Traveler International) program, under which IHG/HHF double-dips on its commissions by imposing an additional 2.5% commission on HHF franchisees over and above the aforesaid traditional GDS bookings and commissions. 101. Another example is IHG/HHF’s “double-dip” on commissions for the aforesaid third-party OTA bookings, from which IHG/HHF, upon information and belief, receive kickbacks in sums unknown to HHF franchisees since IHG/HHF keep their contractual arrangements confidential while charging the franchisees multiple fees for the same products or services that HHF is already contractually obligated to perform. 102. IHG/HHF have also allowed OTAs to share and misappropriate discounted booking 18 codes with third party websites who impose substantial taxes, fees and costs on unsuspecting customers and, despite knowing that such misconduct is ongoing, IHG/HHF have failed to enjoin such misconduct on the part of OTAs to IHG/HHF’s benefit and the substantial detriment of franchisees. 103. IHG/HHF also sends sales leads to Plaintiff’s hotel and to HHF franchisees, the origin of which is unknown to the franchisees, through its Meeting Broker program. These leads have 3% commissions if they actualize and franchisees are billed based on revenue speculated by IHG/HHF unless franchisees reports updated actual numbers. 104. Plaintiff and other franchisees will frequently turn away these leads due to the fact that they have previously built their own relationships prior to the duplicate lead coming from Meeting Broker. Nonetheless, IHG/HHF uses this as a tactic to charge additional commissions and to demand that the franchisees prove the prior relationship, in essence stealing sales leads and revenues developed by Plaintiff and HHF franchisees. 105. IHG/HHF further abuses its discretion by requiring franchisees to provide bank account information to the OTAs that IHG/HHF contracts with. These OTAs will then automatically debit the HHF franchisee accounts on a monthly basis for all reservations sent to the hotel. The onus thus falls on Plaintiff and HHF franchisees to reconcile and to dispute commission charges for no- shows, cancellations or invalid credit cards, without any support from IHG/HHF. 106. The result is that funds are taken from the franchisees without recourse, the OTAs collect unearned commissions, IHG/HHF receive kickbacks and franchisees are damaged without recourse nor any franchisor support. 107. IHG/HHF further abuses its position by introducing marketing programs and other programs solely to its General Manager and Director of Sales, bypassing the HHF franchisees entirely. These programs are represented as voluntary and consensual programs which Plaintiff and 19 HHF franchisees can, in theory, choose whether to participate or not. 108. However, neither Plaintiff nor franchisees have any direct access to the program information and can only gain access through IHG/HHF’s general manager or sales director, depriving them of any real choice or opt-out alternative. 109. Additionally, such programs purportedly offered by IHG/HHF to franchisees as optional truly are not since IHG/HHF accompanies the presented “option” with threats of retaliation including, but not limited to, being told that franchisees’ hotels will be suppressed or removed from search engine results. 110. Faced with threats of retaliatory action from Defendants that further undermine the HHF franchisees profitability and/or economic viability, the representation that Plaintiff or HHF franchisees have any true choice is truly illusory. 111. In short and in sum, IHG/HHF introduces new or “additional” programs solely as a basis to create additional revenue streams and profit to the detriment and cost of the HHF franchisees. IHG Rewards Program; Points Plus Cash 112. Defendants introduced, maintain and run an IHG Rewards Club Program by which Hotel guests can earn points by staying at hotels within IHG’s network, as well as by purchasing goods and services with IHG partner vendors, including Groupon, Grubhub and OpenTable, provided these services are purchased through an SCH channel. 113. Points can also be earned for activities booked on the SCH Trip Extras page. For IHG Rewards Club Premier Credit Card holders or IHG Rewards Club Traveler Credit Card holders, additional points can be earned at IHG/HHF properties worldwide and on purchases made. 114. Defendants’ actual management of this program, however, is yet another bad faith means by which IHG and HHF profit off the backs of and to the detriment of their franchisees. 115. Participating members earn 10 reward points for every $1 spent. When those points 20 are earned from staying in the hotel of Plaintiff or other HHF franchisees, that hotel serves as the point of origination for the points. In effect, when a customer redeems points to earn free hotel night(s), the Plaintiff or other HHF Franchisee Hotel does not receive payment. 116. If a franchisee hotel is at 96% occupancy, IHG/HHF reimburses the participating franchisee hotel for the full room rate. 117. However, if a franchisee hotel is at less than 96% occupancy, IHG/HHF only reimburses the participating Franchisee hotels $30 for the value of products or services that redeemed points were applied to, retaining the remainder for themselves and leaving IHG/HHF franchisees to earn only a small fraction of such things as nightly room rates to their economic detriment. 118. IHG/HHF also has a Points Plus Cash Program which it has never disclosed in its FDD or License Agreement. If participating members do not have enough points to fully redeem a full night’s stay at a hotel or they do not desire to pay local sales tax, they have the option to combine rewards points with cash. In this instance, the nightly hotel rate is lowered and all cash paid by the customer is retained by IHG/HHF and none goes to the HHF franchisee hotel. This violates the License Agreement which provides that direct revenue from hotel guests goes to the HHF franchisee while IHG/HHF should only be entitled to collect fees from franchisees as provided therein. See License Agreement. 119. There is no transparency by IHG/HHF regarding the IHG Rewards Club Hotel Rewards Program, as franchisees have no access to financial information and data regarding all awards, redemptions or amounts reimbursed to any Franchisee, or collected, retained, or funneled by or to IHG and/or HHF in conjunction with the IHG Rewards Club Hotel Rewards Program. 21 HHF’s Fraudulent & Inconsistent Representations Regarding the Nature of its Relationship with Approved Suppliers 120. Under the License Agreement, HHF requires that franchisees purchase some or all of the products and services necessary (“Mandatory Products and Services”) to operate a hotel from vendors and suppliers of its own choosing (the “Approved Suppliers”). 121. HHF represents to franchisees that it will limit the number of Approved Suppliers for given products and services for the purposes of obtaining a group or volume discount and ensuring uniform quality and supply of those Mandatory Products and Services. 122. However, upon information and belief, limiting the number of Approved Suppliers has very little to do with obtaining greater discounts or improving brand quality. 123. Rather, upon information and belief, HHF limits the number of Approved Suppliers as part of a scheme to reduce competition within the HHF Franchise System, which in turn, allows HHF to extract larger kickbacks from vendors. 124. HHF does not disclose to franchisees when it receives a kickback (or “rebate”), or the amount of any such “rebate.” 125. The intended purpose and effect of HHF’s kickback scheme is that Approved Suppliers charge above-market rates for their goods and services. 126. HHF does not help franchisees save time and money on their purchasing needs. 127. Upon information and belief, HHF does not obtain group or volume discounts on behalf of its franchisees. 128. Moreover, HHF does not ensure adequate brand quality and supply; rather, HHF at times forces franchisees to purchase, often at inflated prices, inferior Mandatory Products and Services. 129. HHF is not attempting to promote brand quality, but is constantly auctioning off the 22 right to sell Mandatory Products and Services to franchisees to the highest bidding vendors. 130. HHF is leveraging its Franchise System to secure massive “rebates” from vendors. 131. Upon information and belief, to be approved as an Approved Supplier and to gain access to HHF’s franchisees, HHF requires a quid pro quo in the form of kickbacks. 132. The kickbacks include both fixed fees paid by Approved Suppliers to HHF, and transactional fees based on a percentage of Approved Suppliers’ total sales to franchisees and their 133. The transactional fees are inextricably tied to the cost of the goods and services, meaning that as HHF’s revenue from transactional fees increases as the cost of goods and services increases. 134. HHF therefore has an inherent conflict of interest that it never discloses to franchisees. 135. Upon information and belief, HHF’s conflict of interest has led to abuse. 136. Upon information and belief, HHF has placed its interests and financial gain, as well as the interests of Approved Suppliers over those of its franchisees. 137. Upon information and belief, HHF has conspired with manufacturers and distributors to increase cost of goods and services that are sold to its franchisees. 138. Upon information and belief, HHF colludes with manufacturers and/or distributors to increase the wholesale price of products, which in turn, increases the retail prices Approved Suppliers must sell to franchisees. 139. Upon information and belief, HHF effectively fixes the retail pricing of goods and services sold to franchisees. 23 140. Upon information and belief, HHF knows that Approved Suppliers cannot sell goods and services to its franchisees at competitive prices. 141. Upon information and belief, HHF knows that Approved Suppliers must increase the cost of goods and services to account for the increased wholesale costs and well as the fixed and transactional fees that must be paid to HHF. 142. Upon information and belief, HHF knows that Approved Suppliers will pass these costs onto franchisees. 143. Upon information and belief, franchisees ultimately are the ones harmed by HHF’s price fixing and kickback scheme. 144. While HHF purports to give franchisees the right to, at HHF’s discretion, purchase Mandatory Products and Services from vendors other than the Approved Suppliers, in practice HHF rarely, if ever, grants franchisees permission to do so. 145. Essentially, HHF offers it franchisees no meaningful choice in vendors. 146. HHF misrepresents to franchisees and/or conceals the nature of its relationship with Approved Suppliers, in order to lock them into the onerous License Agreements and to create excessive switching costs. HHF’s Imposition of Marketing Fees While Engaging in No Marketing 147. The License Agreement requires franchisees to pay HHF various fees, for which HHF promises to provide certain services in return. Among these required fees are marketing fees. (See License Agreement, §3(B)(1)(b), (d)) 148. The License Agreement provides that HHF franchisees shall make monthly fee payments to HHF for: 24 (b) a “Services Contribution” equal to the percentage of Gross Rooms Revenue set forth in paragraph 15 below, to be used by Licensor for marketing, reservations, and other related activities which, in Licesnor’s sole business judgment as to the long-term interests of the System, support marketing, reservations and other related functions. … Licensor may, in its sole judgment, upon 30 days’ prior notice, increase this Contribution by an amount not to exceed 1% of Gross Rooms Revenue and such increase shall be effective for a period no longer than 12 months … (d) all fees … due in connection with mandatory marketing … and other systems and programs established by the Licensor, its parents, subsidiaries or its affiliated entities relating to the System. Id., §3(B)(1)(b), (d). 149. The percentage of Gross Rooms Revenue that Plaintiff pays to HHF as the Services Contribution referenced in Section 3 of the License Agreement is 3%. (See id., §15(a)(2)). 150. Following the imposition of Covid-19 restrictions in or about March 2020, HHF ceased all marketing efforts and activities which the franchisees’ “Services Contribution” is contractually represented as being paid to support, and said HHF marketing is the explicit benefit of the bargain which franchisees are entitled to receive in exchange for their payment to HHF. 151. HHF has continuously required, demanded payment of and collected marketing fees from its franchisees despite providing no marketing services or programs for nearly a year. IHG Owners Association: IHG/HHF Collusion with the IHGOA & its Illusory Provision of Franchisee Participation 152. The License Agreement provides for franchisee membership in the IHGOA, and states in relevant part that: 25 The purposes of the IHG Owners Association will be to consider and discuss, and make recommendations on common problems relating to the operation of System Hotels. Licensor will seek the advice and counsel of the IHG Owners Association’s Board of Directors or, subject to the approval of Licensor, such committees, directors or officers of the IHG Owners Association to which or to whom the IHG Owners Association Board of Directors may delegate such responsibilities. (License Agreement, §6(A)). 153. The License Agreement provides further that HHF “recogniz[es] that the IHG Owners Association must function in a manner consistent with the best interests of all persons using the System . . . .” (Id., §6(B)). 154. HHF represents to Plaintiff and HHF franchisees that it makes a good faith effort to protect the best interests of HHF franchisees. 155. Despite these representations, however, the IHGOA board members are essentially handpicked by IHG/HHF, and receive incentives in exchange for their loyalty to IHG/HHF’s agenda and interests. 156. Overwhelmingly, the IHGOA board members and members are not franchisee hotel owners, but rather employees of the management companies that operate IHG/HHF properties. They have no stake in, and do not share the interests, objectives, or concerns of the HHF franchisees they purport to represent. 157. While IHGOA’s board members are nominally elected by all franchise owners, it is essentially impossible for dissenting voices to gain seats on the board. 158. IHG/HHF controls the nominating process through the imposition of onerous and vague requirements for candidacy, which ensures that IHG/HHF can carefully select candidates and thus the elections to the IHGOA are noncompetitive. 26 159. The collusion between the IHGOA and IHG/HHF is a fraudulent attempt to create the appearance of legitimacy to IHG/HHF’s exploitative practices. 160. IHG/HHF scoffs at the stated purposes and functions of the Owners Association as set forth in the License Agreement, affording Plaintiff and its franchisees only the illusory role of having a voice in the System, or discussing any operational recommendations for common problems at the hotels, with IHG/HHF instead acting in complete disregard for “the best intertests of all persons using the System.” 161. In short, IHG/HHF pursues only its own self interest to the deliberate detriment of its franchisees. 162. The “committees, directors or officers of the IHG Owners Association” rarely include franchisees, but instead are populated by IHG and/or HHF employees to collude with said Defendants, utterly disregard genuine franchisee complaints, and to instead implement, avoid accountability for, and rubber stamp all matters decided unilaterally by and for these Defendants for the sole purpose of enriching themselves and requiring payments from franchisees. IHG’s Racial Discrimination Against Indian-American & South Asian-American Franchisees 163. In its relations with its franchises, IHG/HHF is hostile to and routinely discriminates in favor of white, black and Latino franchisees and against Indian-American and South Asian- American franchisees, by offering preferential treatment to the former, and engaging in derogatory and demeaning rhetoric and behavior and more strictly enforcing rules and regulations against the 164. IHG/HHF applies PIP enforcement, inspections and fines unequally, with unduly harsh and unequal application against its franchisees of Indian-American and South Asian-American 165. IHG/HHF applies its discretionary brand “standards” unequally, with unduly harsh 27 and unequal application against its franchisees of Indian-American and South Asian-American 166. IHG/HHF applies its discretionary brand “standards” unequally, with online manipulation of guest scores, reviews and ratings against its franchisees of Indian-American and South Asian-American descent. 167. IHG/HHF terminates franchises more frequently and arbitrarily against its franchisees of Indian-American and South Asian-American descent, and similarly denies the granting and transfer of franchises to Indian-Americans and South Asian-Americans. 168. IHG/HHF executives routinely make racially derogatory comments to and about Plaintiff and their Indian-American and South Asian-American franchisees. CLASS ACTION ALLEGATIONS 169. Pursuant to Federal Rules of Civil Procedure 23(a) and (b), Plaintiff bring this action on behalf of itself and the Class (“Class”) of similarly situated persons defined as: All United States residents (including persons and business entities) that operate or have operated a Holiday Hospitality Franchising LLC hotel in the State of Louisiana pursuant to a License Agreement from January 1, 2014 through the date of Class Certification. Excluded from the Class are the officers, directors and employees of Defendants and their respective legal representatives, heirs, successors and assigns. Rule 23(a) Requirements 170. Numerosity: Members of the Class are so numerous that their individual joinder is impractical. The precise identities, number and addresses of members of the Class are presently unknown to Plaintiffs, but may and should be known with proper and full discovery of Defendants, third-parties and all relevant records and documents. 28 171. Upon information and belief, the Class has more than 40 members. 172. All members of the Class assert claims for violation of the law as set forth herein. 173. Existence of Common Questions of Fact and Law: There is a well-defined commonality and community of interest in the questions of fact and law affecting the members of the Class. Among other things, the common questions of fact and law include: (a) Whether and to what extent Defendants’ practices, conduct and misrepresentations violate the covenant of good faith and fair dealing; (b) Whether and to what extent Defendants’ practices, conduct and misrepresentations violate federal or state law; (c) Whether HHF breached terms of the License Agreements; (d) Whether and to what extent Defendants maintained a closed market vendor marketplace in order to derive illicit profits; (e) Whether the Class sustained injury as a result of HHF’s breaches of the License Agreement; (f) Whether any of the provisions of the subject HHF License Agreements are void and/or unenforceable; (g) Whether Plaintiff and Class members are entitled to recover compensatory, consequential, exemplary, treble, statutory or punitive damages based on Defendants’ fraudulent, illegal, anticompetitive conduct or practices and/or otherwise; (h) Whether temporary and permanent injunctive relief is appropriate for all class members and (i) Whether Plaintiff and Class members are entitled to an award of reasonable attorneys’ fees, prejudgment interest, and costs of suit. 174. Typicality: Plaintiff is a members of the Class. Plaintiff’s claims have a common origin and share common bases with the Class members. They originate from the same illegal, 29 fraudulent and confiscatory practices of Defendants, and Defendants have acted in the same way toward Plaintiff and all other Class members. If brought and prosecuted individually, the claims of each Class member would necessarily require proof of the same material and substantive facts, rely upon the same remedial theories and seek the same relief. 175. Adequacy: Plaintiff is an adequate representative of the Class because its interests do not conflict with the interests of the members of the Class they seek to represent. Plaintiff has retained competent counsel, and intends to prosecute this action vigorously. Plaintiff’s counsel will fairly and adequately protect the interests of the members of the Class. Rule 23(b)(2) & (3) Requirements 176. This lawsuit may be maintained as a class action pursuant to Federal Rule of Civil Procedure 23(b)(2) because Plaintiff and the Class seek declaratory and injunctive relief, and all of the above requirements of numerosity, common questions of fact and law, typicality and adequacy are satisfied. Moreover, Defendants have acted on grounds generally applicable to Plaintiffs and the Class as a whole, thereby making declaratory and/or injunctive relief proper and suitable remedies. 177. This lawsuit may also be maintained as a class action under Federal Rule of Civil Procedure 23(b)(3) because questions of fact and law common to the Class predominate over the questions affecting only individual members of the Class, and a class action is superior to other available means for the fair and efficient adjudication of this dispute. The damages suffered by each individual class member may be disproportionate to the burden and expense of individual prosecution of complex and extensive litigation to proscribe Defendants’ conduct and practices. 178. Additionally, effective redress for each and every class member against Defendants may be limited or even impossible where serial, duplicate or concurrent litigation occurs arising from these disputes. Even if individual class members could afford or justify the prosecution of their 30 separate claims, such an approach would compound judicial inefficiencies, and could lead to incongruous and conflicting judgments against Defendants. COUNT I Breach of Contract (Against HHF, SCH & IHG) 179. Plaintiff incorporates by reference all of the foregoing allegations as if set forth at length herein. 180. At all times relevant to this litigation, Defendant HHF possessed individual contractual relationships with each Franchisee through the License Agreements. 181. By virtue of their ownership of HHF and control over the IHG Marketplace, IHG and SCH are intended third-party beneficiaries of the License Agreements. 182. HHF breached its obligations under the License Agreement by, inter alia: (a) Without any limitation or stated parameters, to generally and arbitrarily alter, modify, or revise its “Standards” or “System”, in its sole judgment, as a bad faith means to impose undisclosed costs and obligations on franchisees without any Franchisee input, agreement, or recourse; (b) Using its PIP program as a means to apply unfettered and open-ended discretion extract otherwise undisclosed fees and fees not contracted for from franchisees, by mandating exorbitant construction and renovation mandates and costs upon franchisees; (c) As part of the PIP program, forcing franchisees to pay non- refundable fees for mandatory Hotel inspections and preparation of PIP report(s), without any Franchisee consent or agreement, and charging additional undisclosed fees for re-inspections and re-evaluations solely as HHF deems necessary and mandates, and to arbitrarily require such re- inspections and also impose fines solely as a means of 31 enriching HHF; (d) Forcing franchisees to utilize only HHF’s Approved Suppliers for the goods and services necessary to run the Hotel(s) because such vendors and suppliers provide HHF with rebates and kickbacks; (e) Falsely representing that the Approved Suppliers in HHF’s procurement programs, including but not limited to the “IHG Marketplace” allow for Franchisee choice, and deliver value and lower cost purchasing opportunities to franchisees when, in fact, franchisees are involuntarily forced to use these Approved Suppliers, charging franchisees above- market rates, rates which are higher than the same Approved Suppliers charge hotel operators not within the HHF System, and often the Mandatory Products and Services forced upon franchisees are of inferior quality; (f) HHF represents to franchisees that its limited number of Approved Suppliers is for the purpose of obtaining group or volume discounts, or to ensure uniform quality and supply, when it is instead engaged in a scheme to reduce competition within the HHF Franchise System and extract larger kickbacks from these vendors. HHF does not obtain group or volume discounts on behalf of its franchisees; (g) HHF leverages its Franchise System as a means to secure massive fees from vendors, granting approval to Approved Suppliers who gain access to HHF’s franchisees as a quid pro quo for kickbacks in the form of both fixed fees and percentage-based transactional fees, enriching HHF from increased costs borne by franchisees for the Mandatory Products and Services. HHF never discloses to its franchisees this inherent and abusive conflict of interest from its collusion with manufacturers and/or distributors to increase its own revenue on the backs of its franchisees; 32 (h) Despite the fact that franchisees pay initial and annual fees associated with marketing, HHF introduces additional undisclosed marketing (and other) programs and fees as a means to generate additional revenue for itself to the detriment of franchisees, and without any prior disclosure to or agreement of HHF franchisees; (i) HHF ceased and suspended all of its marketing efforts and activities during the time of the Covid pandemic, yet continues to charge fracnhisees for the services HHF is not providing; (j) Use the threat and imposition of retaliation and retribution against franchisees who in any way dispute or raise questions about HHF’s introduction of programs, fees, or expenses forced on franchisees without any prior disclosure or agreement, or against franchisees who, when presented with HHF programs falsely represented as optional, opt out of same; (k) Using its customer rewards program as a means to allow customers to redeem points earned at point-of-origin franchisee hotels for free hotel stays, depriving the franchisees of this direct revenue, but then reimbursing franchisees only a small percentage of the redeemed points (usually less than 30%) and retaining the remainder for itself and (l) Maintaining an IHG Owners Association, represented as a means for franchisees to consider and discuss, and make recommendations on common problems relating to the operation of System Hotels which HHF will seek the advice of and to promote the best interests of all persons using the System but, in reality, this representation is false and illusory. Franchisees are afforded no voice, their recommendations are summarily disregarded, and the 33 Owners Association if populated almost entirely by IHG employees to serve the purpose of enriching IHG, HHF, and SCH, avoiding accountability, and imposing additional financial hardship on franchisees. 183. Due to HHF’s, IHG’s and SCH’s ongoing breach of the License Agreements, franchisees have suffered monetary damages. COUNT II Breach of the Implied Covenant of Good Faith and Fair Dealing (Against HHF, SCH & IHG) 184. Plaintiff incorporates by reference all of the foregoing allegations as if set forth at length herein. 185. At all times relevant to this litigation, Defendant HHF possessed individual contractual relationships with each Franchisee through the License Agreements. 186. By virtue of their ownership of HHF and control over the IHG Marketplace, IHG and SCH are intended third-party beneficiaries of the License Agreements 187. Beyond the written terms of the License Agreement, HHF, IHG and SCH owe a duty of good faith and fair dealing to franchisees in relation to its performance under the License Agreement and any related agreements. 188. In its performance of the License Agreements, in addition to the misconduct set forth hereinabove, HHF, IHG and SCH routinely violate the duty of good faith and fair dealing with franchisees, by, inter alia: (a) Instead of using the collective bargaining power of its franchisees to negotiate discounted rates on products necessary to the operation of the hotels from Approved Suppliers, allowing – and effectively requiring – the Approved Suppliers to charge rates for Mandatory Products 34 and Services well in excess of the market rate, by requiring the Approved Suppliers to pay large kickbacks (“rebates”) to HHF in order to earn the privilege of doing business with franchisees; (b) In negotiations with Approved Suppliers, prioritizing the size of the kickback an Approved Supplier is willing to pay HHF over the securing of a group discount or ensuring high quality of Mandatory Products and Services; (c) Forcing franchisees to use a specific credit card processor, which charges higher fees and other chargebacks causing franchisees to lose significant monies; (d) Forcing franchisees to purchase other Mandatory Products and Services from Approved Suppliers, when the Mandatory Products and Services provided by certain Approved Suppliers are of low quality and priced above a fair market rate; (e) Unfairly and wrongfully penalizing franchisees who “opt out” of allegedly voluntary programs; (f) Refusing to negotiate in good faith with franchisees in the wake of the Covid-19 pandemic; (g) Otherwise imposing onerous and unnecessary fees, penalties, and upon franchisees and (h) Otherwise acting to profit at the expense of franchisees’ financial health. 189. Due to HHF’s and SCH’s ongoing breach of the implied covenant of good faith and fair dealing, Plaintiff and other franchisees have suffered damages in an amount to be determined at COUNT III Breach of Fiduciary Duty (Against IHGOA) 190. Plaintiff incorporates by reference all the foregoing allegations as if set forth at length 35 191. Although franchisees are not required to be members of the IHGOA, and may voluntarily opt-in or opt-out, franchisees who opt-in become IHGOA members and are required to pay membership dues annually Irrespective of franchisee opt-ins (or opt-outs), however, the IHGOA holds itself out as, is required to, and purports to act and negotiate on behalf of all franchisees as the ostensible “voice of the owners”. 192. IHGOA assumed a fiduciary duty to represent the interests of its member Franchisees in negotiations with HHF, because: a. IHGOA represents in its mission statement to the Franchisees that its purposes is to “advocate responsibly for the greater good of the membership”, b. IHGOA represents that it “instill[s] trust with open and honest communications”, c. IHGPA promotes that its “core values guide our everyday actions as we seek to fulfill our mission of helping members maximize their investment in IHG hotel brands”, d. In cooperation with HHF, the IHGOA acceptsannual fees from Franchisees who opt-in, and does so with the implied and/or explicit representation that these fees are in exchange for IHGOA’s faithful representation of the interests of all Franchisees, including those who do not opt-in as IHGOA members. 193. IHGOA routinely violates its duty of loyalty to Franchisees, in that its board members accept preferential treatment and other benefits from HHF in exchange for their compliance with and approval of onerous measures proposed by HHF, including but not limited to the imposition of new or increased fees on Franchisees, the imposition of new requirements and penalties through modification of the System, and the entry into new agreements with Approved Suppliers for 36 Mandatory Products and Services that inure to the benefit of HHF while imposing onerous costs on Franchisees. 194. Upon information and belief, the kickbacks received by IHGOA board members include, but are not limited to, algorithmic preferences in HHF’s reservation system, such that their franchised properties appear higher in guests’ hotel search results than the properties of other franchisees. 195. The IHGOA board is utterly unresponsive to Franchisee’s concerns with relation to franchising. 196. Franchisees have suffered damages due to IHGOA’s failure to loyally represent them in an amount to be determined at trial. 197. IHGOA’s actions and omissions were willful, outrageous, oppressive, and wanton. COUNT IV Declaratory Judgment (Against HHF) 198. Plaintiff incorporates by reference all the foregoing allegations as if set forth at length 199. As a condition of receiving the benefits of operating a HHF franchise, HHF uses its vastly superior bargaining power to require all franchisees to accept the grossly unequal terms of the Agreements, which, as to many key provisions, is essentially a “take it or leave it” contract of adhesion. 200. The following provisions of the License Agreement (hereafter “the Unconscionable Provisions”) together and/or individually are substantively unconscionable: (a) HHF’s open-ended right to impose mandates, fees and costs on franchisees by adding, modifying, altering or deleting elements of its System or its Standards in its sole judgment 37 and discretion, which extends to (but is not limited to): marketing programs and materials; specifications and policies for construction; programs for inspecting the Hotel; and vague, arbitrary and amorphous “other requirements as stated or referred to in this License and from time to time in Licensor’s brand standards for System Hotels” (defined as the “Standards”). (Agreement, §1); (b) HHF’s open-ended imposition upon Plaintiff as one of its responsibilities to “strictly comply in all respects with the Standards (as they may from time to time be modified or revised by [HHF]” which does no less than attempt to allow HHF to impose upon Plaintiff and demand compliance with whatever it deems beyond any explicit contractual agreement. (Agreement, §3(A)(5)); (c) HHF’s mandate that Plaintiff strictly comply with its “standards and specifications for goods and services used in the operation of the Hotel and other reasonable requirements to protect the System and the Hotel from unreliable sources of supply”, and with all HHF’s requirements for services and products used in Hotels, which serves as a pretext for HHF’s collusion and kickback scheme with vendors and suppliers. (Agreement, §3(A)(7)); (d) HHF’s unlimited ability to maintain and alter its “Standards” imposed upon and required of franchisees with “wide latitude”, and to modify or revise same at any time in its sole discretion and without Franchisee knowledge or agreement. (Agreement, §4(D)-(E)); (e) HHF’s illusory provision of a means by which franchisees can approve its changes in the Standards only through HHF’s Franchise Committee, and by purporting to afford Plaintiff a means to appeal such changes while at the same time severely restricting Plaintiff’s appeal rights which 38 cannot be “arbitrary, capricious or unreasonable” or not “for the purpose for which intended” vis-à-vis not only HHF changes in standards but also as to any other rights explicitly afforded by the agreement. (Agreement, §5(A)-(D)); (f) HHF’s right to termination of the agreement for any violation thereof, when HHF has given itself the right to extra-contractually alter, modify, or revise Plaintiff’s obligations at any time and for any reason it may deem. (Agreement, §§1(B), 12(B)-(C)); (g) HHF’s right to termination if Plaintiff “refuses to cooperate with” inspections or audits when, in fact, HHF charges Plaintiff for all inspections and can impose them for any reason at any time as a means to impose costs and fines on Plaintiff and merely as a tool to enrich itself. (Agreement §12(C)(13)); (h) A provision providing for liquidated damages against franchisees in the event of Franchisee’s early termination of the Agreement, or HHF’s termination of the Agreement due to Franchisee’s alleged breach, but not providing for liquidated damages against HHF under any circumstances (Agreement §12(E)); (i) Provisions prohibiting Franchisee’s rights to pursue claims and damages against HHF for HHF’s breaches of the parties’ agreement (Agreement §§14(B)(3), 14(E), 14(H)); (j) A requirement that franchisees broadly reimburse HHF, its affiliates, subsidiaries, officers, directors, agents, partners, and employees, for any litigation regardless of which party initiates same. (Agreement §§14(J)); and, (k) A provision requiring affirmative advisement of any trier of fact that HHF has rights to make changes to the parties’ agreement “in the exercise of business judgment” and in every such instance those rights which are not explicitly 39 contracted for are “adopted in good faith and is consistent with the long-term overall interests of the System”, and further prohibits any and all judges, mediators, and/or triers of fact from applying their own judgment as opposed to HHF’s. (Agreement, §14(N)). 201. The License Agreements are procedurally unconscionable because, at the inception of the Agreements, HHF used its vastly superior bargaining position to require franchisees to accept the grossly unequal Unconscionable Terms outlined above. 202. Specifically, as to the Unconscionable Terms, the License Agreements are contracts of adhesion offered on a “take it or leave it” basis. 203. The Unconscionable Terms are not subject to negotiation. 204. HHF drafts the Agreements in their entirety. 205. An actual, present, and justiciable controversy exists between Plaintiff and HHF regarding the enforceability of the Unconscionable Provisions. 206. Pursuant to the Uniform Declaratory Judgment Act, 28 U.S.C. § 2201, Plaintiff seeks declaratory judgment from this Court that the Unconscionable Provisions listed above are unconscionable, illusory and/or unenforceable. COUNT V Violation of the Sherman Act, 15 U.S.C. § 1 (Against HHF) 207. Plaintiff incorporates by reference all of the foregoing allegations as if set forth at length herein. 208. There exists markets for ownership interests in hospitality franchises, in which HHF maintains substantial market power. 209. A separate market exists for the related goods and services associated with the operations of hospitality franchises, including but not limited to services, software, physical 40 furnishings, financial services, and food products (the “Mandatory Products and Services”). 210. HHF requires that franchisees purchase some or all of the Mandatory Products and Services from vendors of its own choosing (the “Approved Suppliers”). 211. In order to obtain HHF’s approval to sell Mandatory Products and Services to franchisees, HHF requires Approved Suppliers to pay substantial kickbacks to HHF, which it refers to euphemistically as “rebates.” 212. Although HHF represents to franchisees that, in limiting the number of Approved Suppliers from which franchisees may purchase Mandatory Products and Services, it seeks only to obtain group discounts for Franchises and/or ensure consistent quality and adequate supplies for the franchise brand, in reality HHF chooses Approved Suppliers exclusively or primarily based upon how large a kickback those Approved Suppliers are willing to pay HHF. 213. In actuality, the Mandatory Products and Services purchased from Approved Suppliers are often of inferior quality, and sold at above-market prices, relative to similar products sold by other vendors. 214. While HHF does purport to give franchisees the right to, at HHF’s discretion, purchase Mandatory Products and Services from vendors other than the Approved Suppliers, in practice HHF rarely, if ever, grants franchisees permission to do so. 215. At the time they entered into the Agreements, HHF concealed the nature of its relationship with Approved Supplier from franchisees, in order to lock them into the onerous Agreements and create excessive switching costs. 216. HHF also creates excessive switching costs through imposing onerous termination terms on franchisees, such that upon termination or expiration of the Agreement, they may be liable to pay (1) liquidated damages and (2) all outstanding fees and penalties in full, which, by virtue of HHF’s right under the Agreements to unilaterally impose additional fees and penalties, may be 41 sufficient to prevent franchisees from exercising their termination rights, locking them into the franchise system. 217. At all times relevant HHF had monopoly power, market power, and/or economic power in the relevant Hospitality Franchise market, sufficient to force franchisees to purchase and accept Mandatory Products and Services from Approved Suppliers. 218. By reason of the terms of the Agreements and the investments franchisees have made in their franchises, coupled with the difficulties franchisees face in leaving the franchise system, HHF has substantial power in the market for both Hospitality Franchises and the market for Mandatory Products and Services. 219. HHF manipulated its economic power in the Hospitality Franchise market to coerce franchisees to purchase Mandatory Products and Services solely from Approved Suppliers, through contractual provisions contained in the Agreements, as well as exploitation of pre-contractual information deficiencies and post-contractual switching costs. Through these and other means, HHF can and does coerce franchisees to purchase nearly of the Mandatory Products and Services from Approved Suppliers. 220. Through the exercise of HHF’s economic power as alleged herein, HHF has conditioned the purchase by franchisees of their franchises and their continued existence as franchises upon the purchase of Mandatory Products and Services from Approved Suppliers. 221. As a direct and proximate result of HHF’s anti-competitive tying activity, franchisees have been injured by being forced to pay above-market rates for inferior Mandatory Products and Services. 222. A substantial amount of interstate commerce in Mandatory Products and Services has been adversely affected by HHF’s actions. These actions impose an unreasonably negative effect on competition in the marketplace, because HHF’s policy of coercing and condition the purchase and 42 operation of a franchise and on purchase by franchisees of Mandatory Products and Services from Approved Suppliers forecloses the ability of vendors unwilling to pay kickbacks to HHF from selling their Mandatory Products and Services to franchisees, even though the quality of such Mandatory Products and Services is equal to if not better than the quality of what is supplied by Approved Suppliers. 223. HHF’s tie of purchases of its franchises to purchase of Mandatory Products and Services from Approved Suppliers imposes an unreasonable restraint upon commerce and is therefore per se unlawful in violation of Section One of the Sherman Act, 15 U.S.C. § 1, and has caused damage to franchisees. 224. Alternatively, if HHF’s tying conduct is not per se unlawful, it is unlawful under the rule of reason, in that the anti-competitive consequences of HHF’s conduct outweigh any pro- competitive effects thereof. Not only does HHF’s conduct impose supra-competitive prices on franchisees, it impedes the ability of other vendors to engage in competition with Approved Suppliers to provide high quality Mandatory Products and Services at lower costs. Moreover, consumers are injured in that they are forced to indirectly pay the kickbacks and excessive prices for products charged to franchises by Approved Suppliers. There is no pro-business or efficiency justification for the kickbacks and supra-competitive pricing, nor does any legitimate business purpose require these practices. COUNT VI Accounting (Against HHF & IHGOA) 225. Plaintiff incorporates by reference the foregoing allegations as if set forth at length 226. HHF owed franchisees express contractual duties not to charge fees which were not 43 contractually proscribed but nevertheless charges direct and indirect fees to Plaintiff which were not authorized by the Agreements. 227. Defendant IHGOA owed Franchisees express and common law fiduciary duties of care, obedience, information and loyalty as a result of its special position of trust and confidence, including as agent of Franchisees, to act in the best interests of Franchisees. 228. HHFs owes a duty to account for monies, including, but not limited to: (a) An accounting of the rebates it has taken from Approved Suppliers; (b) An accounting of all charges associated with the PIP program and all fees charged for Hotel inspections, re- inspections, evaluations, preparation of PIP reports, and any and all fines; (c) An accounting of all awards, redemptions, amounts reimbursed to any Franchisee, to HHF, SCH, and IHG associated with the IHG Rewards Club Hotel Rewards Program; (d) An accounting of any and all IHG Marketplace programs; (e) An accounting of the Secure Payment Solution credit card processing system; (f) An accounting of all internet services and the SCH Merlin communication service; (g) An accounting of HHF’s Keycard System; (h) An accounting of all in-room entertainment, SCH Studio, Employee Safety Devices, reservation and all other equipment, software, and services for property-level technology and telecommunications; (i) An accounting of the gift card program; (j) An accounting of all mandated food and beverage programs; (k) An accounting of all furniture, furnishings, linens, food products, utensils, and goods for guests; and, 44 (l) An accounting of its use of all other fees and penalties imposed upon franchisees. 229. IHGOA owes a duty to account for monies, specifically its use of the association fee provided by Franchisees who have opted-in. 230. Upon information and belief, a request for such an accounting from HHF or IHGOA would be futile. 231. Franchisees are unable to determine the amounts due to them without an accounting and there is no adequate remedy at law without such an accounting, or such legal remedies would be difficult, inadequate, or incomplete. PRAYER FOR RELIEF WHEREFORE, Plaintiffs Park 80 Hotels LLC and PL Hotels LLC respectfully request that this Honorable Court: A. Enter an order against HHF, IHG and SCH in favor of all Plaintiffs for consequential and/or compensatory damages in an amount to be proven at trial, and specific performance of the License Agreements; B. Enter an order against HHF in favor of all Plaintiffs for actual damages and treble damages, and reasonable attorney’s fees arising out of HHF’s violations of the Sherman Act; C. Enter a permanent injunction prohibiting HHF’s unlawful tying conduct; D. Enter a judgment against IHGOA in favor of all Plaintiffs for compensatory and punitive damages; E. Declare that the Unconscionable Provisions of the Agreements, specified above, are unconscionable illusory, and/or unenforceable against Plaintiffs; F. Enter an order against HHF in favor of all Plaintiffs entitling Plaintiffs to an accounting of all fees paid by them to SCH and HHF, and all rebate payments made to HHF, IHG and SCH by Approved Suppliers and G. Award such other relief as this Court deems necessary and appropriate. 45 JURY DEMAND Plaintiff demands a trial by jury on all issues properly so tried. Dated: May 19, 2021 Respectfully submitted, /s/ Joseph C. Peiffer Joseph C. Peiffer (La. Bar No. 27349) Daniel J. Carr (La. Bar No. 31088) Peiffer Wolf Carr Kane & Conway, APLC 1519 Robert C. Blakes Sr. Drive New Orleans, Louisiana 70130 Telephone: (504) 523-2434 Facsimile: (504) 608-1465 [email protected] [email protected] Andrew P. Bleiman (pro hac vice forthcoming) Mark Fishbein (pro hac vice forthcoming) Marks & Klein, LLP 1363 Shermer Road, Suite 318 Northbrook, Illinois 60062 T: (312) 206-5162 F: (732) 219-0625 [email protected] mark@ marksklein.com Justin M. Klein (pro hac vice forthcoming) Marks & Klein, LLP 63 Riverside Avenue Red Bank, New Jersey 07701 T: (732) 747-7100 F: (732) 219-0625 [email protected] Justin E. Proper, TA, (pro hac vice forthcoming) WHITE AND WILLIAMS LLP 1650 Market Street One Liberty Place, Suite 1800 Philadelphia, PA 19103-7395 Phone: 215.864.7165 [email protected] Attorneys for Plaintiffs, Park 80 Hotels LLC and PL Hotels LLC, & the Putative Class 46

antitrust

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UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA Case No. JURY TRIAL DEMANDED DOUGLAS WRIGHT and SAM MENDENHALL (d/b/a MENDENHALL FARMS), individually and on behalf of others similarly situated, Plaintiffs, v. TYSON FOODS, INC.; TYSON FRESH MEATS, INC.; JBS S.A.; JBS USA FOOD COMPANY; SWIFT BEEF COMPANY; JBS PACKERLAND, INC.; CARGILL, INCORPORATED; CARGILL MEAT SOLUTIONS CORPORATION; MARFRIG GLOBAL FOODS S.A.; and NATIONAL BEEF PACKING COMPANY, LLC, Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) CLASS ACTION COMPLAINT Plaintiffs Douglas Wright and Sam Mendenhall D/B/A Mendenhall Farms, on behalf of themselves and all those similarly situated, for their Complaint against Defendants NATURE OF THE CASE 1. This case arises from Defendants’ unlawful conspiracy to lower the prices they paid for fed cattle in violation of the Sherman Antitrust Act and the Commodities 1 Exchange Act. Plaintiffs are cattle farmers who sold fed cattle to one or more Defendants and/or who traded cattle futures contracts on the Chicago Mercantile Exchange (CME) and have been damaged by Defendants’ anticompetitive and unlawful conduct. 2. Beginning no later than January 2015 and continuing today Defendants conspired to suppress the price of fed cattle they purchased in the United States. Defendants’ coordinated conduct, including slashing their respective slaughter volumes and curtailing their purchases of fed cattle in the cash cattle market, caused an unprecedented collapse in fed cattle prices in 2015. Defendants continued to suppress the price of fed cattle through coordinated procurement practices and periodic slaughter restraint. Defendants’ conspiracy impacted both the physical fed cattle market and the market for live cattle futures and options traded on the CME. 3. As middle-men in the supply chain, Defendants’ profitability is driven by the “meat margin,” which is the spread between the price packers pay for fed cattle and the price they charge for beef. Because the supply of fed cattle is insensitive to short-term price changes – owing to the long life cycle of fed cattle, their perishable nature, and their lack of any alternative use – and as beef demand is relatively insensitive to changes in price, the meat margin is very sensitive to changes in aggregate industry slaughter levels. Consequently, Defendants can increase their meat margin, and thus their profitability, by colluding to reduce their respective slaughter volumes, thereby depressing the price of fed cattle. 2 4. Because Defendants have not passed on their illicitly-gained lower prices to their customers (indeed such a pass-through would defeat the purpose of Defendants’ conspiracy) producers and end consumers both lose: producers are deprived of fair price competition at the top of the supply chain, and consumers are unlawfully overcharged at the bottom of the supply chain. The only parties that win are the large beef packers who use their collective market power to squeeze both producers and consumers. As the DOJ has noted, the Sherman Act was enacted to prevent such buying cartels: The 1890 debates in both houses of the United States Congress demonstrated concern with the exercise of market power on both the buying and selling sides of the market. Many legislators singled out large meat packers for condemnation, and they were condemned as much for reducing the prices paid to cattle farmers as for raising prices to consumers. In response, Congress passed the Sherman Act, aimed at preserving free and unfettered competition as the rule of trade. The Act is comprehensive in its terms and coverage, protecting all who are made victims of the forbidden practices by whomever they may be perpetrated. The Sherman Act prohibits anticompetitive agreements and exclusionary conduct and both may be found unlawful on the basis of effects on the buying side of the market. Buyer cartels are unlawful per se and prosecuted criminally…. One of the earliest Sherman Act cases involved, among other things, a conspiracy among meat packers to reduce the price they paid for cattle. Monopsony and Buyer Power, Note by the United States, at 245-46, available at https://www.oecd.org/daf/competition/44445750.pdf (internal quotations and citations omitted). 3 5. Fed cattle are steers and heifers raised and fed for the production and sale of beef products. Defendants are beef packers who purchase fed cattle from Plaintiff and the Producer Class (defined below) for slaughter. Defendants then process the resulting carcasses into beef for sale to other processers, wholesalers, and retail outlets, as depicted below: Cattle and Beef Industry from Breeding to Consumption U.S. Gov’t Accountability Off., GAO-18-296, U.S. Department of Agriculture: Additional Data Analysis Could Enhance Monitoring of U.S. Cattle Market (Apr. 2018) (“2018 GAO Report”), at 6, https://www.gao.gov/assets/700/691178.pdf. 4 6. Live cattle futures contracts are standardized contracts traded on the CME in which the contract buyer agrees to take delivery, from the seller, of a specific quantity of fed cattle, at a predetermined price on a future delivery date. 7. Defendants control the U.S. market for the purchase of slaughter-weight fed cattle. Since 2011, Defendants have slaughtered over 80% of all fed cattle sold within the United States on an annual basis. The chart below demonstrates Defendants’ overwhelming market share for the purchase of fed cattle. Defendants’ Market Share of Annual U.S. Fed Cattle Slaughter Volumes Cattle Buyers Weekly, “Steer And Heifer Slaughter Market Share”, http://www.cattlebuyersweekly.com/users/rankings/packerssteerheifer.php (subscription required). 5 8. Defendants procure most of their fed cattle though alternative marketing agreements (“AMAs”), such as “formula” and “forward” contracts. Under these contracts, the producer agrees to deliver its cattle to a Defendant once they have reached slaughter-weight, at a price to be determined at or around the time of delivery. The price formulas used by formula contracts typically incorporate reported prices of fed cattle sold in the weekly cash cattle trade, the industry’s spot market. The price formulas used by forward contracts incorporate live cattle futures prices, which, in turn, are directly impacted by reported cash cattle prices. As a result, the prices paid for fed cattle in the cash cattle trade – which constitute a minority of all fed cattle sold in the United States – determines the price of almost all fed cattle bought by Defendants. 9. Fed cattle prices increased steadily between 2009 and 2014 in response to strong beef demand and a shortage of fed cattle following the droughts of 2011 through 2013. After prices peaked in November 2014, the industry expected the price of fed cattle to stabilize in 2015 and continue at or around that higher level for years. 10. This widely-predicted price stability did not occur. Instead, Defendants used their market power, price sensitivities, and the thin cash cattle trade to their advantage and conspired to depress fed cattle prices. Their conspiracy to reduce fed cattle prices, and thereby increase the meat margin, was carried out through at least the following coordinated conduct: (1) Defendants periodically reduced their slaughter volumes to reduce demand for fed cattle; (2) Defendants curtailed their purchase and slaughter of 6 cash cattle during those same periods; (3) Defendants coordinated their procurement practices for cash cattle; (4) Defendants imported foreign cattle at a loss so as to reduce domestic demand; and (5) Defendants, simultaneously, closed and idled plants. 11. Defendants’ conspiracy caused an unprecedented collapse in fed cattle prices in the second half of 2015 and continued to suppress fed cattle prices thereafter. 12. Despite the drastic collapse in fed cattle prices caused by Defendants’ conspiracy, Defendants continued to benefit from record beef prices. This disconnect allowed Defendants to reap record per-head anticompetitive meat margins at the expense of fed cattle producers who were paid below competitive market prices. 13. The market for purchase of fed cattle is highly conducive to collusion for multiple reasons: the small number of big market beef packers, high barriers to entry, and frequent, easily accessible means of communication among Defendants, including through the subscription-only service Express Markets. Defendants’ field buyers had ample opportunity to meet and exchange commercially sensitive information with each other every week as they inspected feedlots within their respective territories. Field buyers routinely communicated “market color” obtained from the field – including reports of their competitors’ activities obtained from producers – back to their head office and their firms’ other field buyers through daily conference calls. Defendants were also members of various trade and industry organizations, which provided additional opportunities to conspire. 7 14. Defendants were also each other’s customers, purchasing and selling each other’s protein products. These transactions and intertwined business operations provide further opportunities to collude, share competitive information and police the supply restrictions and purchase boycotts described herein. 15. Trade records and economic evidence all confirm that Defendants expressly conspired to depress the price of fed cattle bought during the Class Period. Transactional data and slaughter volume reported by Defendants and published by the USDA all show the desired impact of Defendants’ conspiracy. 16. The same data demonstrate that Defendants drastically reduced their purchases of cash cattle during these periods of slaughter restraint. Defendants restrained slaughter to create a glut of slaughter-ready cash cattle and coerce producers to take lower prices for their highly perishable product. Doing so not only dropped cash cattle prices, but also the prices paid under Defendants’ formula and forward contracts. Once Defendants broke the cash cattle trade and created a relative supply glut, Defendants collectively ramped up their cash cattle purchases and reaped supra-competitive profits at the expense of producers. 17. In addition, Defendants also engaged in various collusive bidding practices that further unlawfully suppressed prices. Defendants enforced, through boycott threats, a “queuing protocol” that significantly limited cash cattle sellers’ ability to generate price competition among Defendants. Defendants also typically conducted all, or substantially 8 all, of their weekly cash cattle purchasing during a short 30- to 60-minute window late on Fridays and would adhere to the price established by the Defendant that had opened the weekly cash cattle trade. Defendants’ bidding practices differed from the practices of regional packers (a small percentage of the fed cattle purchasers), which bid on and purchased cash cattle throughout the week during the Class Period. 18. Defendants employed other procurement methods to depress the cash cattle price incorporated directly into their formula contracts and indirectly into their forward contracts. Import data show that Defendants imported large numbers of live cattle for slaughter from Canada and Mexico even after it became economically irrational for them to do so. Such conduct was not economically rational but for Defendants’ agreement to curtail their domestic cash cattle purchases. 19. The economic facts further support the existence of the alleged conspiracy. Supply and demand drivers of fed cattle prices, and other commonly proffered explanations, do not explain the 2015 collapse in fed cattle prices. Rather, fed cattle prices have been artificially depressed by Defendants’ collusive conduct every year since January 2015. 20. Because of Defendants’ misconduct, Plaintiffs and other producers who sold fed cattle to Defendants (the “Producer Class”) received significantly lower prices for their cattle than they would have in a competitive market, and purchasers of live cattle futures and options (the “Exchange Class”), including Plaintiffs Douglas Wright and Mendenhall Farms, suffered significant harm because of Defendants’ misconduct. 9 PARTIES I. Plaintiffs 21. Plaintiff Douglas Wright owns and operates a farming operation in Holt County, Nebraska. Mr. Wright has raised and sold varying amounts of cattle every year since 2015. Most of Plaintiff’s sales of fed cattle since 2015 have been to defendant JBS. 22. Plaintiff Sam Mendenhall D/B/A Mendenhall Farms owns and operates a farming operation in Decatur County, Iowa. Mendenhall Farms has raised and sold various amounts of cattle every year since 2015. Most of Plaintiff’s sales of fed cattle since 2015 have been to defendants Tyson and National Beef Packing Company. During the Class Period Plaintiff traded futures contracts for fed cattle on the CME to manage price risk associated with sales of his fed cattle. II. Defendants A. The Tyson Defendants. 23. Defendant Tyson Foods, Inc. (“Tyson Foods”) is a Delaware corporation with its principal place of business in Springdale, Arkansas. 24. Defendant Tyson Fresh Meats, Inc. (“Tyson Fresh Meats” and collectively with Tyson Foods, “Tyson” or the “Tyson Defendants”) is a wholly owned subsidiary of Tyson Foods. Tyson Fresh Meats is a Delaware corporation with its principal place of business in Dakota Dunes, South Dakota. 10 25. During the Class Period, the Tyson Defendants shared a unity of corporate interest and operated as part of a single enterprise in furtherance of the conspiracy that purposefully directed conduct causing injury to and derived direct benefit from members of both Classes in the United States and in this District. B. The JBS Defendants. 22. Defendant JBS S.A. (“JBS”) is a Brazilian corporation with its principal place of business located in Sao Paulo, Brazil. 23. Defendant JBS USA Food Company (“JBS USA”) is a Delaware corporation with its principal place of business in Greeley, Colorado. 24. Defendant Swift Beef Company (“Swift”) is a Delaware corporation with its principal place of business in Greeley, Colorado. 25. Defendant JBS Packerland, Inc. (“JBS Packerland”) is a Delaware corporation with its principal place of business in Greeley, Colorado. 26. Defendants JBS USA, Swift, and JBS Packerland were, throughout the Class Period, wholly-owned, direct or indirect subsidiaries of JBS. Defendants JBS, JBS USA, Swift, and JBS Packerland are referred to collectively herein as the “JBS Defendants.” 27. During the Class Period, the JBS Defendants shared a unity of corporate interest and operated as part of a single enterprise in furtherance of the conspiracy that purposefully directed conduct causing injury to and derived direct benefit from members of both Classes in the United States and in this District. 11 C. The Cargill Defendants. 28. Defendant Cargill, Incorporated (“Cargill”) is a Delaware corporation with its principal place of business in Wayzata, Minnesota. 29. Defendant Cargill Meat Solutions Corporation (“Cargill Meat” and, collectively with Cargill, the “Cargill Defendants”), a subsidiary of Cargill, is a Delaware corporation with its principal place of business in Wichita, Kansas. 30. During the Class Period, the Cargill Defendants shared a unity of corporate interest and operated as part of a single enterprise in furtherance of the conspiracy that purposefully directed conduct causing injury to and derived direct benefit from members of both Classes in the United States and in this District. D. The National Beef Defendants. 31. Defendant Marfrig Global Foods S.A. (“Marfrig”) is a Brazilian corporation with its principal place of business in Sao Paulo, Brazil. Marfrig is a meat packing conglomerate that owns a controlling interest in National Beef Packing Company, LLC. 32. Defendant National Beef Packing Company, LLC (“National Beef” and, collectively with Marfrig, the “National Beef Defendants”) is a Delaware limited liability company with its principal place of business in Kansas City, Missouri. 33. During at least part of the Class Period, the National Beef Defendants shared a unity of corporate interest and operated as part of a single enterprise in furtherance of the conspiracy that purposefully directed conduct causing injury to and derived direct 12 benefit from members of both Classes in the United States and in this District. E. The Defendants Conspired With Each Other. 34. During the Class Period, each Defendant purchased fed cattle in the United States. In 2017, the Tyson, JBS, Cargill, and National Beef Defendants accounted for 26%, 21%, 22%, 12.5% of the total U.S. fed cattle slaughter, respectively.1 In their 2017 fiscal years, the Tyson, JBS, Cargill, National Beef Defendants had approximately $14.8 billion, $13.4 billion, $13.1 billion, $7.3 billion, in sales in their respective beef segments.2 35. During the Class Period, each Defendant exploited the relationship between physical cash cattle and the CME live cattle market and transacted in cattle futures and/or options at prices they had suppressed. 36. Each Defendant was a co-conspirator with the other Defendants and committed overt acts in furtherance of the conspiracy alleged herein in the United States and in this District. F. Agents and Affiliates. 37. “Defendants” refers to and includes each of the named Defendants’ predecessors, successors, parents, wholly-owned or controlled subsidiaries or affiliates, employees, officers, and directors. 1 CBW Market Share. 2 Jefferies 2018 Annual Report at 38; National Cattlemen’s Beef Association “Directions statistics” (2018), at 2, http://www.beefusa.org/CMDocs/BeefUSA/Publications/CattleFaxSection.pdf; Cattle Buyers Weekly; “Top 30 Beef Packers 2018,” http://www.cattlebuyersweekly.com/users/rankings/beefpackers2018.php (last accessed May 6, 2019). 13 38. Whenever reference is made to any act, deed, or transaction of any corporate group, corporation, or partnership, the allegation means that the corporate group, corporation, or partnership engaged in the act, deed, or transaction by or through its officers, directors, agents, employees, representatives, parents, predecessors, or successors-in-interest while they were actually engaged in the management, direction, control, or transaction of business or affairs of the corporation or partnership. JURISDICTION, VENUE AND COMMERCE 39. This action arises under Section 1 of the Sherman Act (15 U.S.C. §1), Sections 4 and 16 of the Clayton Act (15 U.S.C. §§ 15, 26), Sections 202 and 308 of the Packers & Stockyards Act (7 U.S.C. §§ 192, 209), and Sections 2(a), 6(c) and 22 of the Commodity Exchange Act, 7 U.S.C. §1 et. seq. Plaintiffs, on behalf of themselves and the Classes, seek injunctive relief, compensatory damages, treble damages, and costs, including reasonable attorneys’ fees. 40. This Court has federal question subject matter jurisdiction under 28 U.S.C. §§ 1331, 1332(d), and 1337, 15 U.S.C. §§ 15 and 26, and 7 U.S.C. §25. 41. Venue is proper in this District under 15 U.S.C. §§ 15 and 22 and 28 U.S.C. §1391(b), (c), and (d) because at all times relevant to the Complaint: (a) Defendants transacted business, were found, or acted through subsidiaries or agents present in this District; (b) a substantial part of the events giving rise to Plaintiffs’ claims occurred in this District; 14 and (c) a substantial portion of the affected interstate trade and commerce described below has been carried out in this District. Specifically: a. Cargill’s corporate headquarters are in this District, in Wayzata, Minnesota; b. Defendants purchased fed cattle owned or located in this District,3 including from members of the Class, processed the resultant beef at plants located in this District, and/or sold resultant beef products to customers located in this District.4 42. Defendants’ conspiracy and conduct were within the flow of, were intended to, and did, in fact, have a substantial effect on the interstate commerce of the United States. During the Class Period, Defendants used the instrumentalities of interstate commerce, including interstate wires, in furtherance of their illegal scheme. 43. This Court has personal jurisdiction over each Defendant because each Defendant transacted business, maintained substantial contacts, is located, or its co-conspirators committed overt acts in furtherance of the illegal conspiracy and manipulation of the cattle futures and options market, in the United States, including in this District. Defendants should, therefore, have foreseen the possibility of being brought before this Court to answer for any illegal acts related to their business conducted here. 3 Feedlots operated in this District during the Class Period include, without limitation: Valley Oaks Steaks Co. (Johnson County); Circle A Feeders (headquartered in Miller County with operations in Cedar County). 4 See, e.g. National Cattleman’s Beef Association, Directions Statistics available at https://www.ncba.org/CMDocs/BeefUSA/Publications/CattleFaxSection.pdf (reporting that Minnesota had 2,350,000 head of cattle in 2018. 15 44. During the Class Period, all Defendants, foreign and domestic, engaged in conduct within the United States related to these allegations. Defendants’ misconduct was purposefully directed at the United States and was specifically intended to affect the prices of fed cattle bought within the United States and live cattle futures and options. Defendants’ acts in furtherance of the conspiracy provide specific personal jurisdiction over all conspirators. 45. The conspiracy and the overt acts taken in furtherance of it, were directed at, and had the intended effect of, causing injury to persons residing in, located in, or doing business in the United States, including in this District. 46. Defendants’ conspiracy was motivated by profits. As members of the conspiracy, foreign-based Defendants are liable for acts taken in furtherance of the conspiracy by domestic Defendants, as well as their own actions taken in the United States, and personal jurisdiction attaches, regardless of whether some portion of the conduct in furtherance of the conspiracy might have occurred overseas. OVERVIEW OF THE FED CATTLE MARKET 47. In 2017, roughly 25.8 million fed cattle were slaughtered and processed into beef products, accounting for 80% of the roughly 32.2 million commercial cattle slaughtered across the United States.5 5 The remaining volume comprised slaughter cows (female cattle that have birthed a calf) and bulls, whose meat is typically used for lesser quality beef products such as hamburger patties. “2017 Meat & Poultry Facts, 46th Ed.,” NORTH AMERICAN MEAT INSTITUTE, 2018, at 11 (“2017 Meat & Poultry Facts”). 16 48. The cattle production cycle, running from birth to slaughter, typically ranges between 15 to 24 months, and is the longest of all animals typically raised for meat. Fed cattle availability varies seasonally, with supplies being more plentiful over the summer months because most calves are born in the spring. 49. Fed cattle progress through three interrelated sectors before slaughter: cow/calf; stocking and background. 50. Once cattle reach between around 950 and 1,500 pounds they are marketed, transported to, and slaughtered at a packing plant operated by a beef packer such as Defendants. Defendants process the carcasses into various primal cuts that are then vacuum-packed and boxed for sale to customers of “boxed beef” who process it into cuts that are ultimately sold to consumers at retail, restaurants, and other foodservice operations. Customers of boxed beef include foodservice companies such as Sysco and U.S. Foods and large retailers such as Costco and Sam’s Club. 51. Boxed beef is a commodity product, and competition to sell boxed beef is primarily on price as between boxes of equivalent USDA quality and yield grades. Defendants also process boxed beef in-house and sell case-ready beef and other value-added products (e.g., sausages) directly to retailers, restaurants, hospitals, and others at a premium over boxed beef prices. 17 52. As a perishable product, most beef sold domestically is sold on short-term contracts. Some large purchasers purchase some of their beef on “forward” contracts (where beef is sold before delivery) and other long-term supply agreements. 53. Historically, beef-packing was a high volume, low margin business.6 54. Each Defendant operates a live cattle procurement team, run by a head buyer, who is supported by “field buyers” who are responsible for territories. Field buyers buy cattle from feedlots situated inside their territory. They conduct negotiations directly with the fed cattle producers and their agents within the parameters set by their head buyer.7 55. Each Defendant seeks to procure enough fed cattle to operate its slaughter plants at its chosen utilization rates without interruption. Weekly plant capacity is determined both by plant size and the number and length of shifts run in a given week. Defendants’ average cost of production increases if they underutilize their plant capacity. 56. Before the packing industry became consolidated, almost all fed cattle were sold through the “cash” or “negotiated” cattle trade. Meat packers’ buyers went to feedlots and auctions and paid a cattle price set each day at the dollar mark where supply and demand met. 6 See Amended Complaint, ¶ 24, U.S. v. JBS SA (N.D. Ill., Eastern Division) (08-cv-05992), filed on November 7, 2008 (“U.S. v. JBS Amended Complaint”). 7 Producers commonly delegate marketing authority to the commercial feedlot or to third-party marketing cooperatives. A small portion of the fed cattle sales to Defendants also occur at public auctions. 18 57. By 2015, the cash cattle trade drastically thinned, now accounting for a minority of national fed cattle sales. Nevertheless, the cash cattle trade remains the industry’s price discovery mechanism and continues to determine the price of fed cattle bought using “formula” or “forward” contracts – which now constitute the majority of fed cattle sales. Under these “captive supply” agreements, producers commit to deliver their cattle to a packer once they reach slaughter-weight at a price to be determined at or around the point of delivery pursuant to an agreed formula. 58. The price of cattle delivered under formula contracts is determined by reference to a stipulated measure of cash cattle prices at, or just prior to, the delivery date. These contracts commonly incorporate a specified average cash price reported by the USDA Agricultural Marketing Service’s (“AMS”) Livestock Mandatory Reporting’s (“LMR”) cattle transaction price summaries.8 Moreover, the price of cattle delivered under forward contracts is typically established by reference to the price of the live cattle futures contract settling in the month of or adjacent to the expected delivery date. The price of live cattle futures contracts is directly impacted by current and expected cash cattle prices. The price of cash cattle thus sets or drives the price of the bulk of Defendants’ fed cattle purchases, despite constituting only a small percentage of total fed cattle purchases.9 8 These price series collate the information Defendants and others are required to submit to the USDA on a daily and weekly basis regarding their live cattle purchases and deliveries under the Livestock Mandatory Reporting Act of 1999. The Act imposes similar reporting obligations on packers for their boxed beef sales. 9 The base prices used in negotiated grid contracts are also impacted by changes in cash cattle prices. 19 59. Each Defendant uses captive supply agreements for the bulk of its procurement needs. Captive supply agreements have incentivized and enabled Defendants’ suppression of cash cattle prices. The greater a Defendant’s supply of captive cattle, the less reliant it becomes on participating in the cash cattle trade to procure enough cattle to operate its slaughter plants at its desired throughput. This, in turn, allows a Defendant to abstain from purchasing cash cattle when it regards market prices to be too high. All things being equal, a reduction in demand for cash cattle causes cash cattle prices to drop, as producers are forced to lower their asking price to attract a buyer willing to purchase and slaughter the producer’s perishable product. And because cash cattle prices are used to set the prices paid under formula contracts and directly impact the live cattle futures prices incorporated into forward agreements, a reduction in cash cattle prices reduces the price paid by Defendants for cattle bought on such contracts. 60. Because the cost of fed cattle is the largest cost of production, Defendants’ profitability is driven by the “meat margin,” which is the spread between the price packers pay for fed cattle and the price they charge for beef.10 The meat margin is very sensitive to changes in industry aggregate slaughter levels, and Defendants can, by conspiring, increase it. As noted by the U.S. Department of Justice (“DOJ”), “all else being 10 Jefferies Financial Group Inc., Annual Report, (Form 10-K) (Jan. 10, 2019) https://www.sec.gov/Archives/edgar/data/96223/000009622319000009/jfg2018113010kcombodoc.htm (“Jefferies 2018 Annual Report”), at 38 (“National Beef’s profitability is dependent, in large part, on the spread between its costs for live cattle, the primary raw material for its business, and the value received from selling boxed beef and other products, coupled with its overall volume.”). 20 equal, when the meat Packer industry reduces production levels, feedlots and cattle producers are paid less for fed cattle because fewer fed cattle are demanded and customers pay more for [beef] because less is available for purchase. Because the supply of fed cattle and demand for [beef] are relatively insensitive to short-term changes in price, even small changes in industry production levels can significantly affect packer profits.”11 Defendants can thus increase their profitability by coordinating their respective slaughter levels at or below the prevailing supply of slaughter-weight fed cattle. 61. As noted by the DOJ: “The major packers obtain significant information about each other’s past and future output decisions, including the number of days and shifts that competitors’ plants operate. Information about production levels is obtained by directly observing plant operation and from third party sources, including USDA reports showing aggregate industry slaughter of fed cattle. Major packers use this information to calculate market shares based on output and consider this information when setting their own production schedules.”12 62. The fed cattle market is highly concentrated. In fact, during the Class Period, Defendants have collectively purchased and slaughtered between 81 to 85% of the 23 to 27 million fed cattle slaughtered in the United States annually.13 11 U.S. v. JBS Amended Complaint, ¶¶ 26-27. 12 Id. at ¶ 27. 13 2017 Meat & Poultry Facts at 11; CBW Market Share. 21 63. During this same period, Defendants’ respective shares of annual fed cattle slaughter have remained stable despite yearly variation in slaughter numbers. The remainder of the U.S.’s fed cattle slaughter capacity is predominantly provided by regional independent packer businesses such as Greater Omaha and Nebraska Beef, which typically only operate one plant (the “Regional Packers”).14 DEFENDANTS CONSPIRED TO DEPRESS FED CATTLE PRICES 64. Fed cattle prices increased consistently from 2009 through 2014, peaking in November 2014 at approximately $170 per hundredweight (“CWT”).15 Market analysts, such as the USDA Economic Research Service, predicted that the price levels established in 2014 would continue for a number of years before experiencing a gradual decline.16 Some forecasters even foresaw no drastic change from 2014 prices “barring any outside market shocks like drought or a U.S. economic recession.”17 14 Lee Schulz, et al., “Economic Importance of Iowa’s Beef Industry,” IOWA STATE UNIVERSITY (Dec. 2017), https://store.extension.iastate.edu/product/Economic-Importance-of-Iowas-Beef-Industry; and CBW Market Share. 15 Cattle are typically priced on a live-weight basis (the price per CWT applied to the live-weight of the animal prior to slaughter) or a carcass-weight or “dressed” basis (the price per CWT applied to the animal once “dressed,” i.e., slaughtered with its head, hide, and internal organs removed). References to fed cattle prices herein are on a live-weight basis unless otherwise stated. Live-weight and carcass-weight prices typically move together, as both are based on the expected value of the cattle once slaughtered. 16 U.S. Dep’t of Agric., OCE-2015-1, Off. of the Chief Economist: USDA Agricultural Projections to 2024, Interagency Agricultural Projections Committee (February 2015) at 81, https://www.usda.gov/oce/commodity/projections/USDA_Agricultural_Projections_to_2024.pdf. 17 “Livestock Monitor, A Newsletter for Extension Staff, ”LIVESTOCK MARKETING INFORMATION CENTER, STATE EXTENSION SERVICES IN COOPERATION WITH USDA (Jan. 12, 2015), at 2; and “Cattle Fax Predicts Strong Prices to Remain in 2015,” AGWEB (Feb. 6, 2015), https://www.agweb.com/article/cattlefax-predicts-strong-prices-to-remain-in-2015-naa-news-release/ 22 65. While Defendants initially benefited from the rise in fed cattle prices because wholesale beef prices rose in parallel, the meat margin fell to a low of approximately $50 in the months leading up to 2015, sending the packers’ margins into the red. 66. In response, Defendants commenced and/or accelerated their conspiracy to depress and stabilize the price of fed cattle purchased in the United States. At the heart of their conspiracy was an agreement to reduce and then manage their respective slaughter volumes: a classic abuse of monopsony power and a classic feature of buying cartels. Defendants implemented their buying cartel, by, among other conduct, agreeing to: (1) periodically restrain or reduce slaughter numbers so as to reduce demand for fed cattle; (2) curtail their purchases of cash cattle during these periods; (3) coordinate their procurement practices with respect to the cash cattle they did in fact purchase; (4) import foreign cattle to depress demand for cheaper domestic cattle; and (5) close or idle slaughter plant and refrain from expanding their remaining slaughtering capacity. I. Defendants Agreed to Coordinated Slaughter Reductions. 67. Defendants agreed to periodically reduce slaughter volumes in response to actual or anticipated rises in fed cattle prices during the Class Period. 68. On multiple occasions, beginning in or around 2015, Defendants agreed to collectively reduce their slaughter volumes in response to rising fed cattle prices. (“Analyst[s] . . . expect fed cattle prices averaging in the mid-$150s [per CWT in 2015], slightly higher than last year. Prices will trade in a range from the near $140 [per CWT] in the lows to near $170 [per CWT] in the highs in the year ahead.”). 23 69. The purpose of the agreed slaughter reductions was to force cattle producers (in particular, cash cattle producers) to feed their cattle for longer periods, and in doing so, create a condition of oversupply that would force producers to either accept lower cash prices for their cattle or commit their cattle in advance on captive supply agreements. Put another way, by creating and encouraging fear for producers that they might not be able to “get their cattle dead,” Defendants aimed to increase their collective leverage over producers because once cattle are fed beyond their ideal slaughter-weight, producers face increasing pressure to drop their prices to get rid of their highly perishable cattle. 70. On information and belief, the slaughter reduction varied from plant to plant, depending on, among other things, their slaughter capacity and the supply of fed cattle in the surrounding region. Slaughter plants appear to have implemented Defendants’ agreement through planned and unplanned maintenance shutdowns, as well as deliberately reducing slaughter output below slaughter capacity. 71. On information and belief, Defendants’ agreement extended to proportionate slaughter reductions designed to suppress seasonal rises in fed cattle prices, such as those traditionally experienced in the late winter/early spring, and in the fall.18 18 See, e.g., Cassandra Fish, “And the Beat Goes On,” THE BEEF (Feb. 14, 2019), https://www.thebeefread.com/2019/02/14/and-the-beat-goes-on-2/. (“Packers also know that February is typically the lightest slaughter month and even though they are killing more cattle than a year ago – some plant ‘dark days’ began yesterday as plans to keep the balance between supply and demand are paramount. Some plants will undertake maintenance or upgrade projects and some will honor holidays such as Monday’s President’s Day. Others will pull back hours to 36-hour work week.”). 24 II. Defendants Agreed to Slash Cash Cattle Purchases During Slaughter Reductions. 72. To further depress cattle prices, Defendants–on information and belief–agreed to drastically reduce their purchase of cash cattle during periods of agreed slaughter reduction or restraint. When doing so, Defendants could still obtain the cattle needed to satisfy their curtailed kill numbers by leaning on their own cattle and cattle deliverable under previously-agreed formula and forward contracts.19 And, because Defendants had successfully thinned the cash cattle trade in the decade preceding 2015, even small reductions in their cash cattle purchases had an outsized impact on cash cattle demand. 73. By reducing their purchases of cash cattle, Defendants sought to reduce the price of all cattle by utilizing the link between cash cattle prices and the prices paid under formula and forward contracts. By reducing their cash cattle purchases for a period of weeks or months, Defendants could back-up the volume of slaughter-ready cash cattle, thereby coercing producers to overfeed their cattle and/or accept lower prices or enter captive supply agreements to timely market their perishable product.20 19 See Cassandra Fish, “Futures Treading Water; Packers Keep Pressure On” The Beef (June 17, 2015), https://www.thebeefread.com/2015/06/17/futures-treading-water-packers-keep-pressure-on/ (“The news is well known this week and the packer has the upper hand. Boxes are higher and margins are black but packers are keeping kills small. The reliance of packers on captive supply coupled with enormous kill cuts enabled the packer to buy a limited number of negotiated cattle in June and to buy them cheaper.”). 20 Cassandra Fish, “Whatever Happened to a Fair Fight,” The Beef (Nov. 10, 2015), https://www.thebeefread.com/2015/11/10/whatever-happened-to-a-fair-fight/ (“The conversation is no longer, what’s cash going to be, but rather, who needs any.... The smaller feeder is left to fight it out. Hoping he can get a buyer to come by and look at his cattle. Pressured to sell cattle with time. Anything to get cattle gone. Those that attempt to fight the market run the risk of making cattle too big even by today’s standards or worse, alienate their local buyer. Powerlessness is widely felt by smaller producers on a regular basis.”). 25 74. Producers have limited if any meaningful leverage to bid up Defendants in such circumstances, because if producers don’t accept basis bids21 and thereby add to the packers’ captive supply, they bear the risk that the cash price will drop. 75. In turn, producers’ incentive to avoid the risk of a price drop creates downward pressure on the cash price, which in turn creates downward pressure on the formula and forward contracts. 76. The lower reported cash prices were then incorporated into Defendants’ formula and forward contacts – the latter via a depression of live cattle future prices – thereby lowering the costs of all the cattle delivered to Defendants’ plants.22 And once a condition of actual or perceived oversupply had been created, Defendants could gradually increase their cash cattle purchases (and slaughter volumes) without putting any significant upward pressure on prices. 77. Defendants’ implementation of their conspiracy precipitated the dramatic collapse in fed cattle prices in 2015. 21 The “basis bid” is a form of most favored nation contract under which the packer agrees to pay the producer some variant of that week’s top reported cash price, with or without a premium. Defendants used such bids during the Class Period to further reduce the number of cattle they needed to purchase during the weekly cash cattle trade, thereby putting further pressure on cash cattle prices. 22 Cassandra Fish, “Cash Trade Volume Tiny; Futures Shake it Off,” The Beef (June 8, 2015), https://www.thebeefread.com/2015/06/08/cash-trade-volume-tiny-futures-shake-it-off/ (“A historically small number of negotiated fed cattle traded at the eleventh hour late Friday and Saturday at $155-$156, though the official USDA tally isn’t out yet. But at least at this writing it appears it was enough to price formulas $4 lower than last week, jerking packer margins back to a positive.”). 26 III. Defendants Coordinated Their Procurement Practices for Cash Cattle. 78. A third prong of Defendants’ conspiracy involved coordinating how each Defendant purchased cash cattle. 79. First, Defendants supported their conspiracy by collectively enforcing a queuing convention via threats of boycott. That convention works as follows: once a bid is received from Packer A, the producer may either accept the bid or pass. But the producer may not “shop” that bid to other packers. If the producer passes on the bid to seek further bids from other packers, the producer must inform them that he was bid “X” by Packer A and that he can, therefore, only accept bids of X+$1.23 If Packer B is only willing to bid X or if the producer wants to alter its reservation price, the producer is obligated to first return to Packer A, who is “on the cattle” at price X and offer it a right-of-first-refusal. Only if Packer A declines can the producer offer to sell to Packer B at X or the new reservation price. At this point, however, Packer B is under no obligation to purchase from the producer. 80. On information and belief, Defendants enforced strict adherence to this convention with threats of retaliation. Packer Defendant who were “on the cattle” would be tipped off as to the producer’s “breach” of the convention by the field buyer whom the producer contacted out of turn. 23 In certain instances, it may be acceptable to offer/accept bids in $0.50 per CWT increments. 27 81. Second, on information and belief, a Defendant would, for periods of time, sometimes extending across many months, offer the only bid (or the only credible bid) for a particular feedlot’s fed cattle (or substantially all its fed cattle) week to week, ensuring that the feedlots affected could not regularly procure credible bids from the other Defendants. Buyers for these other Defendants would even routinely fail to take or return calls from the producer until after the Friday trading window had closed. These arrangements – akin to a “home-market” market allocation scheme – indicate an agreement among Defendants to respect each other’s relationships with each Defendant’s preferred suppliers. 82. Third, Defendants periodically stopped buying cash cattle from feedlots located in a region for weeks to back-up cash cattle in those regions and break the resolve of producers to hold-out for higher prices. Having boycotted a region for weeks, Defendants would then begin purchasing cattle from that region again during the same week. When executing this scheme, Defendants would often seek to initiate their weekly cash cattle trade in the region recently boycotted. This allowed them to use the lower prices agreed to in that region to set the “market” for the remainder of the trade. In doing so, Defendants were able to influence the prices of fed cattle sales across the United States.24 24 For similar reasons, Defendants would also, at times, seek to set the market price lower by opening the weekly trade by purchasing a pen of poor quality cattle at a discount. 28 83. Fourth, Defendants suspiciously all chose to reserve most of their weekly cash trade procurement activity for Friday, typically after the CME had closed. This practice deprives producers of a price discovery mechanism and limits the ability of producers who hedge their cattle on the CME to manage their positions in response to the bids offered by the packers. While the exact time on Friday varied from week to week, Defendants would consistently conduct all, or substantially all, of their weekly cash cattle trade during the same 30- to 60-minute window on a Friday. During that window, Defendants typically adhered to the price level established by the Defendant that opened the weekly cash cattle trade, which would quickly be circulated across the market via word-of-mouth and industry reporting. If a Defendant felt it necessary to offer prices above this price level to secure the cattle it required, it would often hold such bids back until after the core trading window had closed. This reduced the chance that reports of such bids might impact negotiations conducted during the core trading window. 84. In contrast, Regional Packers continued to purchase cash cattle nearly every day of the week, thereby securing pens of high-quality cattle with limited competition. When operated alongside Defendants’ slaughter restraint and other bidding practices (outlined above), this practice reduced competition amongst Defendants for cash cattle to a race to place the first bid on each pen during the Friday cash trade. This deprived producers of a price discovery mechanism and limited the ability of producers who hedge their cattle on the CME to manage their positions in response to the bids offered by the packers. 29 85. For similar reasons, Defendants also, at times, sought to lower the market price by opening the weekly trade by purchasing a pen of poor-quality cattle at a discount. 86. Reported cash cattle trade across AMS LMR’s price reporting regions confirms both that Defendants reduced their participation in the cash cattle trade and that they conducted the bulk of their cash trading on Fridays. 87. The reported data are consistent with an agreement among Defendants to both: (1) limit their purchases of cash cattle; and (2) conduct all, or substantially all, of their cash cattle trade in a short window of time. If any single Defendant took these actions in the absence of such an agreement, that Defendant would risk failing to secure a sufficient quantity or quality of cattle to operate its plants at the most efficient capacity and/or meet customer demand, without any guarantee that its actions would have the desired impact on fed cattle or beef prices. The data are even more striking when one considers that Regional Packers continued to purchase cash cattle throughout the week and thus can be regarded as being responsible for the bulk of the transactions reported mid-week. 88. Defendants’ increased reliance on formula and forward contracts and the corresponding decrease in the number of cash cattle transactions does not explain the pattern reflected in the data. While the number of cash cattle bought annually fell continuously from 2005 to 2015, it was not until 2014/2015 that the data show a dramatic increase in the number of days without any reported cash transaction. This rise is then sustained despite a slight increase in cash cattle buying year-on-year in 2016 and 2017. 30 89. In short, even though cash cattle slaughter numbers increased slightly after 2015, the number of days per month in which there were no cash cattle transactions also increased. Consequently, Defendants’ coordinated reduction in the number of days on which they purchase cash cattle is not explained merely by the decline in the number of cash cattle purchased annually. IV. Defendants Uneconomically Imported Foreign Live Cattle to Depress Demand for U.S. Fed Cattle. 90. Defendants also engaged in coordinated imports and shipping practices that reduced demand for domestic fed cattle and suppressed the cash price transaction reports used to set the price of cattle procured under captive supply agreements. In particular, Defendants shipped cattle over uneconomically long distances to their slaughter plants, from locations both inside the United States and from Canada and Mexico, to avoid bidding up the reported price of cattle in closer AMS LMR reporting regions. 91. Given the additional freight costs incurred in procuring fed cattle from Canada or Mexico, it is only economical for a Defendant to incur the additional costs when the prevailing price differences against domestic prices exceeded the additional costs. But the data indicate that Defendants’ imports of live cattle from Canada and Mexico began to increase slightly in 2014, and continued, even after it became uneconomical for them to do so in or around mid-2015:25 25 On information and belief, Defendants are responsible for the bulk of all live cattle imports for slaughter. 31 92. Live cattle imports gradually declined until 2014 when they stabilized and began a slight upward trend. While such imports were originally economical, considering the prevailing price differences (adjusted for shipping costs and exchange rates), from mid- 2015 onwards, they were often uneconomical, and became increasingly so as the Class Period continued. This is particularly the case in relation to Canadian cattle, which comprised the majority of all live cattle imports for slaughter. 93. On information and belief, procuring Canadian and Mexican fed cattle from mid- 2015 onwards was regularly more expensive than procuring fed cattle from the adjacent U.S. feeding regions. 94. Such concerted actions are consistent with a conspiracy to depress U.S. fed cattle cash prices. A Defendant would not incur the additional cost associated with the import and purchase of foreign or extra-regional cattle in the hope of lowering its captive supply procurement costs unless it knew that its major competitors would do the same thing, and therefore, also abstaining from bidding up local cash cattle prices. V. Defendants Agreed Not to Expand Their Slaughtering Capacity. 95. To further their conspiracy to manipulate the fed cattle market, Defendants also agreed not to expand their respective slaughtering capacity, or to increase their use of existing capacity. Defendants’ plant closures stripped out millions of head of cattle from the industry’s annual slaughter capacity, thereby limiting demand for fed cattle. In relation to each closure, the relevant Defendant offered pretextual explanations such as a 32 lack of available cattle in the adjacent regions and plant inefficiencies. National Beef even rejected a significant package of incentives offered by local government, utilities and nearby feedlots when it decided to close its Brawley plant 26 96. As a result, the United States has experienced both a decline in fed cattle slaughter capacity and an underutilization of that lowered capacity. This decline in marketing outlets for fed cattle producers has been compounded in certain regions, where cattle producers now only have one, or possibly two, slaughter plants to which they are able to sell their cattle. DEFENDANTS’ CONSPIRACY CAUSED THE 2015 PRICE COLLAPSE AND SUPPRESSED PRICES THEREAFTER I. Defendants’ Conduct Precipitated the Collapse in Fed Cattle Prices in 2015. 97. Defendants’ conspiracy succeeded. Responding to the compression of their margins in late 2014, Defendants reduced their slaughter volumes, and this reduction had the desired effect. For the first half of 2015, prices fluctuated at or around $160 CWT, $10 CWT (or about $130 per head) lower than the high established in November 2014. 98. Not satisfied, Defendants embarked on an unprecedented slaughter reduction during the second and third quarters of 2015. To place further pressure on cattle prices, Defendants also drastically reduced their purchase of cash cattle, leaning heavily on their 26. “National Beef plant closing Brawley Facility,” PROGRESSIVE CATTLEMAN (March 24, 2014), https://www.progressivecattle.com/news/industry-news/national-beef-plant-closing-brawley-facility. 33 own cattle and other captive supplies to satisfy their curtailed kill numbers.27 Defendants’ strategy was immediately successful, with cash cattle – and thus formula cattle – prices falling continuously across June to about $150 CWT.28 Meanwhile, with lower slaughter volumes and lower boxed beef output, the meat margin expanded rapidly, bloating Defendants’ margins. 99. Tight fed cattle supplies do not explain Defendants’ reduced slaughter volume. The available supply of fed cattle increased on a year-on-year basis, reflecting the continuing rebuild of the cattle herd. Fed cattle inventory was higher in almost every month of 2015, compared to 2014. 100. Industry analysts noted Defendants’ determination to “break” cash cattle prices through their collective slaughter reductions and reduced cash cattle purchases. 27 Defendants’ slaughter levels of their own cattle across the second half of 2015 were steady on a year-on- year basis, as reported by AMS LMR Report “LM_CT153 – National Weekly Direct Slaughter Cattle – Prior Week Slaughter and Contract Purchases,” https://marketnews.usda.gov/mnp/ls-report-config; see also Cassandra Fish, “Cash Trade Volume Tiny; Futures Shake it Off” The Beef (June 8, 2015), https://www.thebeefread.com/2015/06/08/cash-trade-volume-tiny-futures-shake-it-off/ (“A historically small number of negotiated fed cattle traded at the eleventh hour late Friday and Saturday at $155-$156, though the official USDA tally isn’t out yet. But at least at this writing it appears it was enough to price formulas $4 lower than last week, jerking packer margins back to a positive. Only problem is, packers weren’t able to secure enough cattle cheaper, even when relying on captives, to easily fill an even curtailed kill expected this week at 540,000 head. June forward contracts are rumored being called in as a way to offset the absence of negotiated purchases.”); and Fish, “Futures Treading Water; Packers Keep Pressure On” (“The news is well known this week and the packer has the upper hand. Boxes are higher and margins are black but packers are keeping kills small. The reliance of packers on captive supply coupled with enormous kill cuts enabled the packer to buy a limited number of negotiated cattle in June and to buy them cheaper.”). 28 Cassandra Fish, “Smack Down,” The Beef (June 15, 2015), https://www.thebeefread.com/2015/06/15/smack-down/ (“Cash cattle prices broke hard Friday as packers successfully executed a strategy of slashed kills and limited negotiated purchases.”). 34 On June 12, 2015, analyst Cassandra Fish of “The Beef,” and formerly a risk manager at Tyson, pondered when a Defendant might break ranks: Rarely has this industry segment [the beef packers,] been an all-for-one and one-for-all group. All packers need to buy cattle inventory. Most have cut hours. So will someone break ranks, pay up for cattle and add hours to capture the better realization that the next boxed beef rally will bring? Will one short a customer only to find that order filled by a competitor?29 101. Ms. Fish answered her own question in the negative a few weeks later, remarking on June 25, 2015 that the “packers refuse to reach for cattle and are currently in command. After 3 weeks of sharply curtailed kills, packers are exhibiting incredible discipline and letting the kill increase gradually,” limiting the ability “of feeders to get all cattle marketed in a timely fashion.”30 102. Defendants tightened the screws during the remainder of 2015. They continued to restrain their slaughter levels and curtail their purchases of cash cattle even after it became clear that slaughter-ready cattle had been “backed up” and were reaching historically heavy weights.31 103. This was particularly evident in September 2015, when Defendants utilized the leverage they had gained over producers in the prior months to great effect, pushing 29 Cassandra Fish, “Futures Holding Gains; Waiting on Cash,” The Beef (June 11, 2015), https://www.thebeefread.com/2015/06/11/futures-holding-gains-waiting-on-cash/. 30 Cassandra Fish, “Another Round of the Blues,” The Beef (June 25, 2015), https://www.thebeefread.com/2015/06/25/another-round-of-the-blues/. 31 Cassandra Fish, “Kills Too Small For Too Long,” The Beef (Sept. 8, 2015), https://www.thebeefread.com/2015/09/08/kills-too-small-for-too-long/. 35 prices down to $120 CWT by months’ end, despite increasing their purchases of cash cattle. Defendants also demanded extended delivery periods of two to four weeks as a condition of trade throughout the month, providing them with further leverage over producers who still had cattle to sell.32 As a result, large numbers of the cash cattle sold in September were not slaughtered until October. 104. As Ms. Fish lamented on November 10, 2015, the “[p]ackers no longer compete against each other to buy fed cattle each week,” and were consequently reaping “gangbuster profits.”33 105. During the second half of 2015, after Defendants embarked on their collusive reduction in slaughter volume, producer margins were materially reduced, while Defendants’ margins remained positive. II. Defendants’ Ongoing Conduct Continues to Depress Fed Cattle Prices. 106. Following their successful 2015, Defendants continued to limit their collective slaughter numbers and cash cattle purchases in 2016. While monthly slaughter volumes for the first three quarters of 2016 were up after 2015’s record lows, they remained flat or below 2014 levels despite the available supply of fed cattle having risen again. 32 Cassandra Fish, “No bottom in sight,” The Beef (Sept. 16, 2015), https://www.thebeefread.com/2015/09/16/no-bottom-in-sight/. 33 Cassandra Fish, “Whatever Happened to a Fair Fight” The Beef (Nov. 10, 2015) https://www.thebeefread.com/2015/11/10/whatever-happened-to-a-fair-fight/. 36 107. As a result, the price of fed cattle continued to fall across 2016 to a low of roughly just below $100 per cwt in mid-October. As in 2015, Defendants responded by dramatically increasing kill volumes in the fourth quarter of 2016. 108. Defendants’ success in “backing-up” cash cattle in the summer of 2016 is confirmed by the fact that Defendants were able to raise cash cattle slaughter levels in the fourth quarter of 2016 over 2014 and 2015 levels without causing a dramatic rise in prices.34 The gradual price increase was consistent with the seasonal rise in fed cattle prices typically experienced in the fourth quarter of each year as the availability of slaughter-weight cattle declines. But for the glut in slaughter-ready cattle created by Defendants’ coordinated actions, prices would have risen significantly in response to the Defendants’ dramatic increase in year-on-year slaughter numbers. 109. In 2017 and 2018, having already reduced their slaughter volumes below historic levels and curtailed their cash cattle purchases, Defendants told the market they had insufficient capacity to slaughter the supposed “wall of cattle” due to reach 34 See Cassandra Fish, “And it All Falls Down,” The Beef (Sept. 27, 2016), https://www.thebeefread.com/2016/09/27/and-it-all-falls-down/ (“The big carryover of unsold negotiated cattle from last week has gained negative status as the hours have rolled by, with packers willing and able to sit back and lower bids to $104, $6 lower than 2 weeks ago and $3 lower than the few that traded Friday and Saturday”); and Cassandra Fish, “Despondency,” The Beef (Oct. 11, 2018), https://www.thebeefread.com/2016/10/11/despondency/ (“As if on cue, kills this week are now rumored to be cutback to 585k-595k, with a cooler cleaning and Saturday kills out. . . . A pull back in the kill with record packer margins cements the reality that easily and efficiently killing our way through the numbers, which used to be a reality, isn’t any longer. This makes it difficult for the market to return to fully current marketing status if there is any slowdown in kill.”). 37 slaughter-weight in the summer of 2018.35 Defendants thus encouraged producers to prematurely sign captive supply agreements to ensure they could “get their cattle dead” before Defendants ran out of “hook” or “shackle space.”36 At the same time, Defendants managed their respective slaughter volumes to ensure that their collective demand did not exceed the available supply.37 110. Defendants’ tactics succeeded. Prices fell in late Winter/Spring 2018 despite record strong beef demand and tight supplies of slaughter-ready cattle across March and April. Indeed, prices fell from around $129 per CWT at the beginning of March 2018 to $110 per CWT by the beginning of May 2018. Prices remained low until mid-November 2018, a significant extension of the one to two-month summer low typically experienced by the market. And of course, Defendants never reached slaughter capacity.38 35 Cassandra Fish, “Still Green!?!” The Beef (Mar. 27, 2018), https://www.thebeefread.com/2018/03/27/still- green/ (“The [packers’] mechanical [slaughter] capacity exceeds needs [across Q2 2018]. The limitation perception is linked to labor. The perception of there being a limitation has created fear and inspired some cattle feeders to “get in line” by selling [cattle] out-front [i.e., on captive supply agreements].”). 36 See Cassandra Fish, “Holding Gain,” The Beef (Apr. 18, 2018), https://www.thebeefread.com/2018/04/18/holding-gains/ (“Cattle feeders, still fearful of growing supplies in May, June and beyond continue to sell cattle for May at substantially lower prices than current values.”). 37 Cassandra Fish, “Futures Trade Both Sides; Cash Poised To Trade Lower,” The Beef (Apr. 2, 2018), available at: https://www.thebeefread.com/2018/04/02/futures-trade-both-sides-cash-poised-to-trade- lower/ (“Looking back at March’s fed slaughter rate, it underperformed expectations.... Packers appear to have responded to the tight supply of market-ready cattle in the north by keeping the kill constrained and margins profitable and stable.”). 38 Cassandra Fish, “Quiet Conclusion,” The Beef (June 1, 2018), https://www.thebeefread.com/2018/06/01/quiet-conclusion/ (“As each week goes by in June, the calendar will take the industry into the heart of one of the most well-advertised “walls” of market-ready cattle in memory. Now that it is a known fact that the industry can kill 540k head of fed cattle and that demand can absorb the largest beef production in 10-years, the panic experienced in March seems overdone.”). 38 III. Defendants Publicly Signaled Their Commitment to Supply Restraint. 111. Defendants’ joint efforts to periodically curtail slaughter levels to “balance” their demand to supply are further evidenced by public statements by senior executives about their firms’ commitment to production restraint and operating a “margin” rather than a “market share” business. Explicit and implicit in the executives’ statements was the importance of restricting slaughter levels and capacity across the industry. 112. For example, commenting on National Beef’s decision to close its Brawley, California plant on January 31, 2014, Tyson’s COO stated “it is consistent, I guess, with what we’ve been saying all along, as the calf crop declines and the noncompetitive feedlot areas or noncompetitive plants or the combination thereof, we’ll probably have to curtail production ... to some extent, we’ve always felt that - and anticipated something like that would happen.”39 113. As prices continued to rise in 2014, JBS director Wesley Mendonca Batista responded to an analyst’s question as to whether U.S. fed cattle slaughtering capacity needed to be rationalized by suggesting that JBS’s recent acquisition of XL Foods’ Omaha, Nebraska plant was probably a mistake, and that slaughtering capacity needed to come out of California and at least one other U.S. region (“If you want to be balanced you need to have capacity to be shut there.”).40 39 Tyson Foods Q1 2014 Results Earnings Call Transcript (Jan. 31, 2014), at 4. 40 JBS Q3 2014 Earnings Calls Transcript (Nov. 13, 2014), at 12. 39 114. Even after fed cattle prices had already collapsed, Tyson’s then-CEO Donald Smith still publicly stressed the need for further slaughter reductions in August 2015: “[b]ecause we run for margin and not for market share, we’re not willing to overpay for cattle and we’ve had to cut back on our hours at our plants resulting in inefficiencies and added costs. In the short-term, we are negatively impacted, but markets will equilibrate, and conditions are expected to improve for the long term.”41 115. JBS’s André Nogueira de Souza went further and publicly praised Defendants’ efforts to reduce industry-wide slaughter capacity through plant closures, noting that it had left the industry in “a very good position, [to achieve] balance in the industry in 2016, 2017, and 2018.”42 116. Defendants’ executives knew they needed to tread carefully in their public exhortations for slaughter restraint, as shown by Tyson’s then-CEO Donnie Smith’s slip during his discussion of output restraint during Tyson’s Q4 2015 Earnings Call:43 You’ve got relatively low cattle supply, you’ve got too much -- well, not to say too much, probably not the right way to say it, but you’ve got excess industry capacity. And that limits our ability to drive margins above the 1.5% to 3%, we think. 117. Such comments are typical in cartels because the comments serve to publicly affirm – in euphemistic terms – the conspirators’ private understandings. 41 Tyson Foods Q3 2015 Results Earnings Call Transcript (Aug. 3, 2015), at 4. 42 JBS Q3 2015 Results Earnings Call Transcript (Nov. 12, 2015), at 9. 43 Tyson Foods Q4 2015 Earnings Call Transcript (Nov. 24, 2015). 40 IV. Economic Analysis Supports the Existence of the Alleged Conspiracy to Depress Fed Cattle Prices. 118. Economic data and analysis corroborate the direct and circumstantial evidence of the alleged conspiracy. In particular, data and analysis confirm that: (a) the collapse in fed cattle prices in 2015 cannot be explained by common supply or demand drivers; (b) from at least January 1, 2015, fed cattle prices were artificially depressed; and (c) other explanations potentially offered for the 2015 price collapse do not withstand scrutiny. A. Supply and Demand Drivers Do Not Explain the 2015 Price Collapse or Subsequent Low Prices 119. The prices for fed cattle bought across the United States followed a discernible pattern: increasing consistently from 2009 through 2014 (accounting for seasonal fluctuations in prices), collapsing dramatically in 2015, and then stabilizing below the prior trend line. 120. Seasonal changes do not explain the dramatic depression of fed cattle prices during the Class Period. Historically fed cattle prices tend to gradually rise during the first quarter until the early part of the second quarter, peaking in March or April. Prices then tend to trend downwards to a summer low typically established in June or July, before commencing an upward trend that typically peaks in November. 44 44 “Annual and Seasonal Price Patterns for Cattle,” CORNHUSKER ECONOMICS, University of Nebraska- Lincoln (Aug. 19, 2015), https://agecon.unl.edu/cornhusker-economics/2015/annual-and-seasonal-price- patterns-for-cattle. 41 121. Fed cattle producers’ main cost – purchasing feeder cattle – also increased and decreased during this period. But the decline in feeder cattle costs did not occur until after fed cattle prices collapsed in 2015.45 122. That a decline in the fed cattle producers’ costs did not cause the 2015 decline is evident when one compares fed cattle prices to fed cattle producers’ total costs. 123. In fact, during 2015, when fed cattle prices underwent a drastic decline, the costs borne by fed cattle producers increased. Specifically, from January 2015 to January 2016, fed cattle prices in Iowa and Minnesota, for example, decreased by approximately 20.7%, whereas input costs increased by approximately 2.6%.46 124. Because of this dramatic disconnect between fed cattle prices and input costs, fed cattle producers suffered their largest losses in 30 years during 2015 and 2016. 125. While fed cattle producers enjoyed a profitable 2017, this was largely due to a significant drop in the input costs associated with fed cattle marketed during that year, and in particular, the price of feeder cattle. Defendants were able to constrain the typical seasonal rise in fed cattle prices across the first half of 2017 and continued to profit from historic margins. 45 See Iowa State University’s estimate of the break-even price (i.e., the cost) associated with feeding a 750- pound yearling to a market weight of 1,250 pounds. Ag Econ Department, Cooperative Extension Service, Iowa State University, “Estimated Livestock Returns” available at: http://www2.econ.iastate.edu/estimated-returns/. 46 See id. 42 126. Nor do changes in beef demand or consumer preferences explain the depression of fed cattle prices. While there was a 5.67% decline in retail beef prices from January 2015 to January 2016, prices rebounded in the months that followed, before going down, then up again thereafter. Importantly, the spread between retail beef prices and fed cattle prices continued its gradual increase, consistent with its upward trend during the past 20 years, suggesting beef demand remained robust. 47 Monthly Beef Demand Indices, Jan. 1988 – Oct. 201748 127. What changed in 2015 was the meat margin. The meat margins realized by Defendants in the aftermath of the 2015 price collapse – which at times exceeded $600 per head – were historically unprecedented. 47 USDA, Economic Research Service (“ERS”), “Meat Price Spreads,” (last accessed May 3, 2019), https://www.ers.usda.gov/data-products/meat-price-spreads/. 48 “Assessing Beef Demand Determinants” (Jan. 18, 2018), pp. 13-14, available at: https://www.beefboard.org/news/files/FY2018/Assessing%20Beef%20Demand%20Determinants_FullRe port.pdf. 43 B. Other Explanations for the Drop in Fed Cattle Prices Do Not Withstand Scrutiny 128. The United States Government Accountability Office’s (“GAO”) 2018 Report suggests potential explanations for the price collapse proffered by Defendants and others. These explanations, however, are not borne out by the facts. 129. For example, the GAO Report mentions that the droughts of 2011-2013 might have reduced the availability of forage to raise calves and feeder cattle, leading ranchers to reduce cattle inventory.49 Under this explanation, ranchers expanded their inventory once the drought eased, thereby oversupplying the market and causing prices to crash. Any oversupply of feeder cattle, though, should have caused a collapse in the price of feeder cattle, which did not happen until well after fed cattle prices had collapsed 130. It has also been suggested that the increase supply of corn seen in the aftermath of the 2011-2013 droughts encouraged fed cattle producers to feed their cattle for longer than they typically would. The resulting fatter cattle then received lower prices per CWT, as is customary. This premise is faulty: Most producers did not choose to overfeed their cattle but were forced to do so by Defendants’ coordinated slaughter restrictions. 131. Finally, the strengthening of the U.S. dollar in 2014 and potentially related changes in the volume of U.S. imports and exports of live cattle and beef also cannot explain the price collapse.50 These events were not even in lock-step with the collapse in 49 2018 GAO Report at 12. 50 Id. at 14. 44 fed cattle prices in the second half of 2015. In fact, during the second half of 2014, when net imports of beef and the U.S. dollar were increasing, fed cattle prices still increased to their November 2014 peak. In the first half of 2015, net imports were transiently around 8% of total U.S. production, but by November 2015 – when fed cattle prices had bottomed out – net imports of beef had turned slightly negative. THE FED CATTLE MARKET IS CONDUCIVE TO COLLUSION 132. The structure and characteristics of the market for the purchase of fed cattle make the market highly susceptible to collusion. These facts, when considered against the backdrop of Defendants’ actions that are consistent with collusion and inconsistent with the proper functioning of a competitive market, support an inference of the anticompetitive agreement alleged herein. I. The Fed Cattle Packer Industry Is Highly Consolidated and Highly Concentrated. 133. The Fed Cattle Packer industry is highly concentrated.51 Since JBS’s acquisition of Smithfield Beef Group, Inc. in 2008, Defendants’ cumulative share of annual purchases of U.S. fed cattle has approximated 81-89% each year, with each Defendant’s individual 51 The U.S. national four-firm concentration ratio (CR4) for beef packers rose from 25% in 1977 to 71% in 1992, the first year in which the national Herfindahl-Hirschmann Index (“HHI”) exceeded 1800. Since that time, the HHI index for the industry has only increased, particularly in certain regions. U.S. v. JBS Amended Complaint, ¶ 36-37; Cai, Stiegert, and Koontz, Regime Switching and Oligopsony power: the case of US beef processing, Food System Research Group, Working Paper Series, (2010 Cai, X., K. W. Stiegert, and S. R. Koontz. “Oligopsony Fed Cattle Pricing: Did Mandatory Price Reporting Increase Meatpacker Market Power?” Proceedings of the NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management. Available at http://www.farmdoc.illinois.edu/nccc134/conf_2011/pdf/confp24-11.pdf. 45 share of annual purchases remaining largely static. No Regional Packer possesses a double-digit market share, with Greater Omaha, Defendants’ nearest rival, maintaining a 2.5-3.5% market share through its Omaha, Nebraska plant. Unsurprisingly, the GAO’s 2018 Report found that lower “packer competition in any given area was associated with lower fed cattle prices in that area.”52 II. The Supply of Fed Cattle and Demand for Beef Are Relatively Insensitive to Short- Term Changes in Price. 134. Recent studies have shown that the quantity of beef U.S. consumers purchase has become less sensitive to changes in beef prices, and the impact of such price changes on beef demand is small relative to other factors.53 Beef’s own price elasticity for the period 2008-2017 was estimated at -0.479, indicating that a “10% price increase would reduce [beef] demand by 4.79%.”54 As a result, Defendants are incentivized to reduce fed cattle slaughter and beef production, as neither they, nor their immediate customers, are harmed by the resulting wholesale and retail price increases. 135. Further, as noted above, reduced slaughter volumes and/or lower fed cattle prices are unlikely to significantly alter the immediately available supply of fed cattle. Because of cattle’s comparably long life cycle, cattle producers typically require about 39 52 2018 GAO Report at 15-16. 53 Glynn Tonsor, Jason Lusk, Ted Schroeder, “Assessing Beef Demand Determinants” (Jan. 18, 2018), at 7- 9, www.beefboard.org/news/files/FY2018/Assessing%20Beef%20Demand%20Determinants_ FullReport.pdf. 46 months to alter supply levels once a decision has been made to increase production.55 As a result, fed cattle supplies are relatively insensitive to short-term price changes, particularly given the absence of a substitute market into which fed cattle producers can sell their cattle. III. Fed Cattle Producers Face Significant Market Access Risk. 136. As perishable commodities, producers face significant pressure to sell their cattle within weeks of reaching slaughter-weight.56 As noted by Grain Inspection, Packers and Stockyards Administration (now a part of the AMS), “[c]attle held beyond the optimal marketing period begin to decrease in value because of excessive fat gain and the rising cost of gain.”57 Further, continuing to hold slaughter-weight cattle increases the risk of death loss, which elevates after cattle spend more than 5-6 months in the feedlot.58 137. These facts, coupled with the absence of a substitute market to sell fed cattle, expose fed cattle producers to market access risk, namely “the availability of a timely and appropriate market outlet.”59 55 Tyson Foods Inc. “Investor Fact Book – Fiscal Year 2017” (2018), at 10, https://s22.q4cdn.com/104708849/files/doc_factbook/Tyson-Foods-FY17-Fact-Book-(rev-042518).pdf (“Tyson 2017 Fact Book”); 2018 GAO Report at 5. 56 RTI International, “GIPSA Livestock and Meat Marketing Study, Vol. 3: Fed Cattle and Beef Industries,” prepared for U.S.D.A. Grain Inspection, Packers and Stockyard Administration (2007), at 5-4, https://www.gipsa.usda.gov/psp/publication/livemarketstudy/LMMS_Vol_3.pdf (“RTI International”). 58 David Cooper, “Feed yard data reveals higher death losses,” PROGRESSIVE CATTLEMAN (Dec. 24, 2015), https://www.progressivecattle.com/topics/herd-health/feedyard-data-reveals-higher-death-losses. 59 RTI International at 5-4. 47 138. That risk and the leverage it provides to Defendants is exacerbated by the significant information asymmetry faced by producers vis-à-vis Defendants regarding the available supply of fed cattle and Defendants’ procurement needs. Producers have only limited information concerning the supply of fed cattle beyond the information conveyed by the USDA’s Cattle on Feed Reports. By contrast, Defendants can construct detailed inventories of upcoming fed cattle supplies through their regular contacts with all the fed cattle producers situated within their respective procurement territories. 139. The impact of market access risk on the parties’ relative bargaining power is meaningful. As demonstrated by Defendants’ threats regarding 2018’s supposed “wall of cattle,” the mere use of coordinated threats of increased market access risk can be sufficient to coerce producers to commit cattle to captive supply agreements or accept lower cash prices. IV. There Are Many Trade Organizations and Opportunities for Defendants to Meet and Collude. 140. Defendants’ management and employees have regular opportunities to meet and collude through their membership in various trade and industry associations, including: the National Cattlemen’s Beef Association (“NCBA”); the U.S. Meat Export Federation (“USMEF”); the Global and U.S. Roundtables for Sustainable Beef (“USRSB”) and the North American Meat Institute (“NAMI”). 48 141. For example, the NCBA holds an annual convention (known as “CattleCon”), a summer conference, a legislative conference, and regional meetings.60 The NCBA Product Council, which includes Defendants, other packers, and certain retailers and restaurants, meets quarterly for the Beef Executive Forum, an invitation-only event.61 142. Similarly, the USMEF – a trade association that develops export opportunities for U.S. protein producers and whose leadership includes current and former employees and officers of Defendants – holds both spring and fall conferences and monthly international trade shows.62 143. The NAMI – which is a national trade association that represents companies that process 95% of red meat – conducts a series of annual conference and educational workshops across the country.63 V. Defendants Benefit from High Barriers to Entry. 144. Defendants benefit from substantial barriers to entry into the market. Because of these barriers, the entry of new fed cattle slaughter businesses, or the repurposing of 60 NCBA Allied Industry Membership, NAT’L CATTLEMEN’S BEEF ASS’N (2019), www.beefusa.org/CMDocs/BeefUSA/AboutUs/2019NCBA%20Allied%20Industry%20Brochure. pdf; https://us13.campaign-archive.com/?u=3ac0220907d479b33ff07dbbc&id=1d27f4a1b7. 62 See https://www.usmef.org/usmef-events/. 63 See About NAMI, NAT’L AM. MEAT ASS’N (2019), https://www.meatinstitute.org/index.php?ht=d/sp/i/204/pid/204; Events, NAT’L AMERICAN MEAT ASS’N (2019), https://www.meatinstitute.org/index.php?ht=d/sp/i/10422/pid/10422. 49 existing cow and bull slaughter facilities, is unlikely despite any decrease in the price of fed cattle or increase in the wholesale price of beef. Construction of large-scale fed cattle packing facilities require an upfront investment of over $250 million and take years to get online due to permitting, planning, designing and building requirements.64 145. The construction of smaller plants, with capacity to slaughter 1,000-1,500 head per day, takes a similar period of time and costs at least $150 million.65 Re-purposing an existing plant, or reopening a similar sized, but previously shuttered, plant costs many millions of dollars. 146. Aside from the costs and time associated with opening a plant, new entrants face difficulties complying with a significant volume of regulations, finding and training a workforce of between 1,500 to 3,000 staff, and finding marketing outlets for the resultant 147. Given these substantial barriers, it’s unsurprising recent years have seen the failure of new or re-launched independent fed cattle Packer businesses, including Northern Beef Packers and Kane Beef.66 64 U.S. v. JBS, Amended Complaint, ¶41. 65 Amanda Ranke, “What’s the Future For Northern Beef Packers?” Beef (July 22, 2013), www.beefmagazine.com/blog/whats-future-northern-beef-packers; Press Release. 66 Amanda Radke, “What’s the Future for Northern Beef Packers?” Beef (July 22, 2013), www.beefmagazine.com/blog/whats-future-northern-beef-packers; Dirk Lammers, “Aberdeen beef plant open again and slaughtering” CAPITAL JOURNAL (Nov. 19, 2015), www.capjournal.com/news/aberdeen- beef-plant-open-again-and-slaughtering-cattle/article_b0a76552-8f0b-11e5-aab0-4747ca2759bc.html; Greg Henderson, “Kane Beef Now under Court Receivership,” DROVERS (Oct. 16, 2018), www.drovers.com/article/kane-beef-now-under-court-receivership. 50 DEFENDANTS HAVE SIMILAR COST STRUCTURES AND HAVE SIGNIFICANT OVERSIGHT OF EACH OTHER’S PRICE AND PRODUCTION DECISIONS 148. Because of their similar cost structures, Defendants have a common interest in manipulating the meat margin to extract increased profits from their existing market shares. 149. Defendants’ field buyers’ weekly trips to inspect feedlots in their territory provide an opportunity to meet and exchange commercially sensitive information. On information and belief, field buyers routinely share “market color” obtained from the field, including reports of their competitors’ activities obtained from producers, with their respective head offices and fellow field buyers through daily conference calls. 150. These realities, combined with widespread formal and informal reporting of fed cattle and beef bids, transactions and volumes, and each slaughter plant’s current and planned output, enable Defendants to monitor each other’s adherence to any anticompetitive agreement. The purchasing dynamics of the fed cattle market, with its weekly cash trade, also provide Defendants with the ability to punish any suspected non- compliance with such an agreement.67 67 Research shows that markets, such as the fed cattle market, where many sellers make repetitive sales to a small group of purchasers, facilitate the formation and maintenance of price-fixing agreements as they provide opportunities for purchasers to agree, sustain and enforce market sharing arrangements. See, e.g., “Price Fixing, Bid Rigging, and Market Allocation Schemes: What They Are and What to Look For,” U.S. DOJ, ANTITRUST DIVISION, www.justice.gov/atr/public/guidelines/211578.htm. 51 DEFENDANTS ARE RECIDIVISTS WITH A HISTORY OF COLLUSION 151. Defendants’ conduct is consistent with their previous use of production restraint to increase the price of broiler chicken and pork. JBS and Tyson have significant market shares in both the broiler chicken and pork processing markets. Cargill was the fourth largest U.S. pork processer until it sold its pork business to JBS in October 2015. 152. Broiler chicken and pork processers, including JBS and Tyson, are alleged to have engaged in a series of synchronized production cuts or restrictions designed to raise wholesale prices. The broiler chicken processors have also allegedly manipulated the “Georgia Dock” price benchmark – a self-reported benchmark commonly used by market participants to set wholesale chicken prices. 153. In both cases, like here, the participants publicly called on each other to maintain supply discipline. 154. Government investigations68 and civil litigation69 regarding the processers’ alleged conspiracies are ongoing. At least one defendant, Fieldale Farms, opted to settle with plaintiffs in the broiler class claims.70 68 The Antitrust Section of the Florida Attorney General’s office opened an investigation into the broiler chicken processors’ alleged anticompetitive practices, and the Georgia Department of Agriculture has suspended the Georgia Dock price index. 69 In re Broiler Chicken Antitrust Litig., No. 16-cv-08637 (N.D. Ill.) and In re Pork Antitrust Litig., 18-cv-1776 (D. Minn). In the former case, the court held that the broiler chicken processors’ customers had alleged sufficient facts to plausibly suggest that defendants’ conduct was the product of a conspiracy. In re Broiler Chicken Antitrust Litig., 290 F. Supp. 3d 772 (N.D. Ill. 2017) (“Defendants’ business strategies during the relevant time period are indicative of a conspiracy.”). 70 In re Broiler Chicken Antitrust Litig., No. 16-cv-08637 (N.D. Ill.), Nov. 16, 2018, Docket #1414. 52 155. In addition, Defendants have a long history of other misconduct, spanning breaches of the Packers & Stockyards Act as well as antitrust, anti-corruption, environmental, health and safety regulation, both domestic and foreign. IN ADDITION TO CONSPIRING TO DEPRESS FED CATTLE PRICES, DEFENDANTS MANIPULATED THE MARKET FOR LIVE CATTLE FUTURES AND OPTIONS 156. Live cattle futures have traded on the CME since 1964. Live cattle options have traded on the CME since 1984.71 Both contracts, which are important tools used by producers to manage the risks associated with their businesses, were impacted by Defendants’ conspiracy. I. Futures and Options Generally. 162. A commodity futures contract is a standardized bilateral agreement for the purchase and sale of a commodity – like fed cattle – at a specified time. In this context, a commodity is the underlying product on which a futures contract is based. 163. A futures contract involves an exchange (in this case, the CME) acting as a central clearinghouse that guarantees both sides of the transaction, thereby eliminating counterparty risk. The buyer of a futures contract is typically considered a “long,” whose position will increase in value as the underlying physical or cash market price increases. The seller of a futures contract is typically considered a “short” whose position will increase in value as the underlying physical or cash market price decreases. 71 Historical First Trade Dates, CME, https://www.cmegroup.com/media-room/historical-first-trade- dates.html. 53 164. Rather than take delivery, futures market participants almost always “offset” their futures contracts before actual delivery. For example, a purchaser of one live cattle futures contract may liquidate, cancel, or offset a future obligation to take delivery of the cattle by selling one live cattle futures contract. The difference between the initial purchase price and the subsequent sale price represents the realized profit or loss for the trader. 165. An options contract comes in two forms: a “call option” and a “put option.” The buyer of a call option has the right (but not the obligation) to purchase the underlying asset at a set price (the “strike price”). The seller of the call option (the “writer”) has the obligation to deliver the underlying asset at the strike price if the buyer exercises its right. The buyer of a put option has the right (but not the obligation) to sell the underlying asset at a set price (the “strike” or “exercise” price). The seller of a put option has the obligation to buy the underlying asset at the strike price if the buyer exercises its right. A. Live Cattle Contracts 166. When fed cattle have reached slaughter-weight, they are referred to as “live,” “finished,” or “fat” cattle. Fed cattle can be distinguished from “feeder cattle”, which refers to fed cattle that weigh between 700-900 pounds and have yet to enter the feedlot. Live cattle, for purposes of CME live cattle futures contracts, weigh no less than 1,050 pounds and no more than 1,550 pounds (or 1,350 pounds for heifers). 54 167. Trading in CME live cattle futures and options is subject to the rules and regulations of the CME, including Chapter 10172 (live cattle futures), Chapter 101A73 (options on live cattle futures), and Chapter 101B74 (options on live cattle futures calendar spreads) of the CME Rulebook. 168. CME live cattle futures and options are traded electronically on CME’s Globex electronic trading platform. While both live cattle futures and options were also traded in CME’s “open outcry” trading pits at the beginning of the Class Period, only live cattle options continued to be so traded after the CME’s decision to close down most of its futures trading pits in July 2015. 1. Live Cattle Futures 169. Chapter 101 of the CME Rulebook sets forth the rules for trading in CME live cattle futures–including contract size, trade dates, and tick sizes–as well as deliveries on CME live cattle futures contracts, including, for example, weight deviations, location differentials, and delivery points. 170. One live cattle futures contract calls for the delivery of 40,000 pounds of live cattle producing 65% Choice, 35% Select USDA grade of live steers or live heifers.75 72 CME Rulebook, CME, https://www.cmegroup.com/rulebook/CME/ (“CME Rulebook”), Chapter 101. 73 CME Rulebook, Chapter 101A. 74 CME Rulebook, Chapter 101B. 75 CME Rulebook, Chapter 101, Rules 10101, 10102.B. 55 171. Live cattle futures prices are quoted in cents per pound. The minimum tick size is $0.00025 per pound (or $10 per contract).76 A one penny ($0.01) change in the per pound price results in a $400 change in the contract price. 172. Live cattle futures trade for the following contract months: February, April, June, August, October, and December. Nine contract months are eligible for trading at any given time. They include the six upcoming contract months and the next three contract months in the calendar cycle.77 For example, in May 2019, the following contract months were eligible for trading: June 2019, August 2019, October 2019, December 2019, February 2020, April 2020, June 2020, August 2020, and October 2020. Trading continues until the last business day of the given contract month at 12:00 p.m.78 173. Live cattle futures are “physically” settled. This means the buyer of a live cattle future has a right to receive (and the seller of a live cattle future has the obligation to deliver) 40,000 pounds of cattle per contract.79 174. Buyers choose either live graded deliveries or carcass graded deliveries.80 76 Live Cattle Futures Contract Specs, CME, https://www.cmegroup.com/trading/agricultural/livestock/live-cattle_contract_specifications.html. 77 Live Cattle Futures Quotes, CME, https://www.cmegroup.com/trading/agricultural/livestock/live- cattle_quotes_globex.html. 79 Self-Study Guide to Hedging with Livestock Futures and Options, CME, (Version 17), at 7, https://www.cmegroup.com/trading/agricultural/files/AC-215_SelfStuy_GuideNYMEX.pdf. 80 CME Rulebook, Chapter 101, Rules 10103.B (live graded), 10103.C (carcass graded). 56 Deliveries of live cattle are made at approved delivery points at approved livestock yards in the following territories: Colorado; Iowa/Minnesota/South Dakota; Kansas; Nebraska; Texas/Oklahoma/ New Mexico.81 Buyers electing carcass graded delivery must specify an approved slaughter plant enumerated by the CME. Eligible slaughter plants include those enumerated for the livestock yards to which the cattle were tendered, and any other approved slaughter plant that is within 225 road miles of the originating feedlot. 175. A live delivery unit must consist entirely of steers or entirely of heifers.82 All cattle are required to be healthy,83 and all cattle must be born and raised exclusively in the United States.84 2. Live Cattle Options 176. Chapter 101A of the CME Rulebook outlines the specifications for live cattle options. The asset underlying a live cattle option is a live cattle futures contract. A live cattle option permits the holder to buy, in the case of the call, or to sell, in the case of the put, one live cattle futures contract. Live cattle options trade in cents per pound. The minimum price fluctuation is $0.00025 per pound.85 81 Id., Rule 10103.B. 84 Id. Rule 10101. 85 Live Cattle Options Contract Specs, CME, https://www.cmegroup.com/trading/agricultural/livestock/live-cattle_contractSpecs_options.html. 57 177. Live cattle options trade in the following contract months: February, April, June, August, October, and December. At any given time, ten contract months trade, the six months in the February bi-monthly cycle, plus the three next in that cycle in the following year, as well as one nearby “serial” month of January, March, May, July, September, or November. Trading in live cattle options ends on the first Friday of the contract month at 1:00 p.m.86 178. For monthly options that expire in the February bi-monthly cycle (i.e., February, April, June, August, October, and December), the underlying futures contract is the futures contract for the month in which the option expires. For example, the contract for an option that expires in February is the February futures contract.87 179. For monthly options that expire in months other than those in the February bi- monthly cycle (i.e., January, March, May, July, September, and November), the underlying futures contract is the next futures contract in the February bi-monthly cycle that is nearest to the expiration of the option. For example, the underlying futures contract for an option that expires in January is the February futures contract. 180. Live cattle options are “American style,” meaning that the option holders can exercise their options at any point before trading expires.88 87 CME Rulebook, Chapter 101A, Rule 101A01.D. 88 Id., Rule 101A02.A. 58 181. In addition, CME lists “live cattle calendar spread options,” where the option is to buy (a call), or to sell (a put), one live cattle futures calendar spread.89 A live cattle futures calendar spread option consists of a combination of a purchase in one futures contract month and a sale in another futures contract month.90 Unlike American style options, these options can only be exercised on the day of expiration.91 II. Relationship Between Live Cattle Futures and Cattle Spot (Cash) Prices. 182. There is a strong relationship between live cattle futures and the fed cattle cash market. As CME observes, “livestock cash prices and futures prices tend to move up and down together, which is what makes the concept of effective hedging possible.”92 183. The CME recognizesd, livestock (including live cattle and feeder cattle) contract specifications are designed to ensure “a two-way relationship between the benchmark livestock futures market and the numerous livestock cash markets. The price that is discovered in a futures market comes from the interaction between the supply (sellers’ offers) and demand (buyers’ bids).”93 89 CME Rulebook, Chapter 101B, Rule 101B01. 91 Id., Rule 101B02. 92 INTRODUCTION TO LIVESTOCK: Learn about Basis: Livestock, CME, available at https://www.cmegroup.com/education/courses/introduction-to-livestock/learn-about-basis- livestock.html. 93 Self-Study Guide to Hedging with Livestock Futures and Options, CME (Version 17), at 6, available at https://www.cmegroup.com/trading/agricultural/files/AC-215_SelfStuy_GuideNYMEX.pdf. 59 184. Many futures market “bids and offers come from cash market participants.”94 185. “In turn, the futures contract price is then used by cash market participants to transact in the spot (current) market or for cash forward type contracts.”95 The relationship between the cash market and the futures market is particularly strong with respect to live cattle futures because, as the CME has observed, “many cash market contracts are ‘based on’ or ‘referenced to’ the futures market price.”96 186. Live cattle futures contracts are designed so that their prices converge with physical cash cattle prices when they expire. For physically settled contracts such as live cattle, “[t]he possibility of delivery on the futures contract generally causes the futures price during the delivery month to align with the cash price at the futures delivery locations.”97 187. There is a strong, statistically-significant relationship between: (1) changes in the physical cash cattle prices reported in the afternoon of day 1 with live cattle futures market price changes on day 2; (2) changes in physical cash cattle prices reported on day 2 and live cattle futures market price changes on day 2; and (3) changes in live cattle futures market prices on day 2 and physical cash market prices changes reported on the morning of day 3. 97 Id. at 11. 60 III. Defendants Traded CME Live Cattle Futures and Options. 188. Defendants regularly trade on the CME live cattle markets. 189. From February 1, 2018 through January 31, 2019, for example, Defendants had the only CME-approved slaughter plants for live cattle.98 As a result, they are central participants in the CME live cattle market. 190. Cargill touts its ability to “manage risk” in live and feeder cattle futures and options contracts. “Our risk management team has more than 20 years of experience helping customers manage price risks across 70-plus commodities markets” including “Live cattle” and “Feeder cattle.”99 News reports indicate it actively trades in the cattle futures markets. For example, on January 25, 2016, Cargill stated, “We’ve seen not only a very volatile cattle futures market, but prices were coming down a lot.”100 191. Tyson uses “derivative financial instruments, primarily futures and options, to reduce our exposure to various market risks related to commodity purchases,”101 as well as “to reduce the effect of changing prices and as a mechanism to procure the underlying 98 CME Group, Chicago Mercantile Exchange Inc. 2018 Approved Slaughter Plants for Live Cattle, https://www.cmegroup.com/content/dam/cmegroup/notices/market-regulation/2018/01/2018-approved- slaughter-plants-for-live-cattle.pdf. 99 Cargill, Agriculture Risk Management, https://www.cargill.com/price-risk/crm/agriculture. 100 Gregory Meyer, Cattlemen lock horns with futures exchange over market volatility, FINANCIAL TIMES (Jan. 25, 2016), https://www.ft.com/content/6eed1268-c130-11e5-846f-79b0e3d20eaf (subscription required). 101 Tyson Foods, Inc., Quarterly Report (Form 10-Q) at 37 (Feb. 4, 2011), https://www.sec.gov/Archives/edgar/data/100493/000119312511024082/d10q.htm. 61 commodity....”102 Tyson holds “certain positions, primarily in ... livestock futures, that are not hedges for financial reporting purposes.”103 “As part of our commodity risk management activities, we use derivative financial instruments, primarily futures and options, to reduce our exposure to various market risks related to these purchases….”104 192. JBS references the CME live cattle futures contract in its procurement contracts.105 Its financial reports also indicate a high level of commodities, derivatives and futures trading.106 193. Marfrig likewise acknowledges that it trades “futures market derivative financial instruments” to “reduce commodity-related price risk.”107 194. National Beef has similarly acknowledged it uses “futures contracts in order to reduce exposure associated with entering into firm commitments to purchase live cattle at prices determined prior to the delivery of the cattle....”108 102 Tyson Foods, Inc., Annual Report (Form 10-K) at 8 (Sept. 29, 2018), https://s22.q4cdn.com/104708849/files/doc_financials/quartely/2018/q4/TSN-FY18-10-K.pdf. 103 Id. at 14. 104 Id. at 52. 105 Driftless Region Beef Conference 2013, Sample Contract, https://lib.dr.iastate.edu/cgi/viewcontent.cgi?referer=https://www.google.com/&httpsredir=1&article=103 4&context=driftlessconference. 106 JBS S.A., Condensed Financial Statements and Independent auditors’ report, at 46 (Sept. 30, 2018), https://jbss.infoinvest.com.br/enu/4812/DF%20JBS%20300918%20Ingls%20- %20Condensada%2013.11%2018h20_Parecer.pdf. 107 Marfrig Global Foods, 2017 Sustainability Report at 77, http://www.marfrig.com.br/Uploads/Arquivos/Marfrig_RA17_eng.pdf. 108 National Beef Annual Report (Form 10-K) at F-15, (Nov. 16, 2011), https://www.sec.gov/Archives/edgar/data/1273784/000144530511003450/nbp201182710k.htm. 62 195. The specifics of Defendants’ CME cattle futures and options trading activity are not public information. Trading on the CME is anonymous. IV. Defendants Directly Caused Artificial CME Live Cattle Futures and Options Prices 196. Because slaughter-weight fed cattle is the commodity underlying CME live cattle futures and options, Defendants necessarily and directly caused prices of live cattle futures and options to be artificial by suppressing the price of fed cattle. 197. Defendants had the motive to cause artificial depression of futures prices, separate and apart from their futures transactions. In particular, futures prices are used to set the price of cattle delivered under forward contracts. By depressing live cattle futures contracts Defendants lower the cost of cattle procured under forward contracts. 198. Defendants’ conduct in the cash cattle market had a direct and proximate impact on prices in the CME live cattle futures and options markets. For example, on August 14, 2015, Tyson announced it was closing its Denison, Iowa beef plant, which caused price declines in the cash and futures markets. Specifically, the spot or front- month August contract fell $0.004 per pound ($160 per live cattle future) and the October 2015 contract fell $0.01 per pound ($400 per live cattle future). According to one market participant, “[s]ome feedlots may have surrendered after seeing futures fall earlier in the session, partly on word that Tyson closed a beef plant.”109 109 Theopolis Waters, Livestock-CME live cattle futures sag with initial cash prices, REUTERS, Aug. 14, 2015, https://www.reuters.com/article/markets-livestock-cattle/livestock-cme-live-cattle-futures-sag-with- initial-cash-prices-idUSL1N10P2MG20150814. 63 CLASS ACTION ALLEGATIONS 199. Plaintiff brings this action on behalf of himself, and, under Rules 23(a) and (b) of the Federal Rules of Civil Procedure, on behalf of all members of the following two classes: Producer Class All persons or entities within the United States that directly sold to a Defendant one or more fed cattle for slaughter during the Class Period other than on a cost-plus basis. Exchange Class All persons who transacted in live cattle futures and/or options traded on the CME or another U.S. exchange during the Class Period.110 200. “Fed cattle” means steers and heifers, whether beef breeds or Holsteins, which are raised and fed specifically for beef production. “Class Period” means the period from January 1, 2015 through the present. “Cost-plus basis” means an agreement to sell fed cattle at a price determined by the producers’ costs of production without regard to prevailing cash cattle prices. 201. Excluded from both Classes are Defendants and their officers, directors, management, employees, subsidiaries, and affiliates. Also excluded is the Judge presiding over this action, his or her law clerks, spouse, and any person within the third degree of relationship living in the Judge’s household and the spouse of such a person. 110 The Exchange Class includes persons who established positions before the Class period but who closed out or stood for delivery on these positions after the Class Period commenced. As noted below, Plaintiffs reserve the right to amend the Class definitions as the litigation progresses to include, for example, all persons who transacted in CME feeder cattle futures and options during the Class Period. 64 202. Members of the Classes are so numerous and geographically dispersed that joinder is impracticable. Members of the Producer Class are readily identifiable from information and records in the possession of Defendants or third parties (including commercial feedlots and marketing cooperatives engaged by certain Class members). Members of the Exchange Class are readily identifiable from information and records in the possession of the CME, or capable of identification via third parties. 203. Plaintiffs’ claims are typical of the claims of the members of both Classes. Plaintiffs and members of both Classes were damaged by the same wrongful conduct of Defendants. 204. Plaintiffs will fairly and adequately protect and represent the interests of members of both Classes. The interests of Plaintiffs are coincidental with, and not antagonistic to, those of members of the Classes. Plaintiffs and all members of the Producer Class are similarly affected by Defendants’ wrongful conduct in that they received artificially low prices for fed cattle sold to Defendants. Plaintiffs and all members of the Exchange Class are similarly affected by Defendants’ course of conduct, which violated the Commodity Exchange Act. 205. Plaintiffs are represented by counsel with experience in the prosecution and leadership of antitrust, class action, and other complex litigation, including multiple class actions in the agricultural industry on behalf of farmers. 65 206. Questions of law and fact common to the Classes predominate over questions that may affect only individual Class members, thereby making relief with respect to members of both Classes as a whole appropriate. 207. Questions of law and fact common to members of the Producer Class include, but are not limited to: a. whether Defendants engaged in a combination and conspiracy among themselves to fix, depress, suppress, and/or stabilize the prices of fed cattle purchased in the United States; b. whether Defendants engaged in a combination and conspiracy among themselves to allocate the market for the purchase of fed cattle offered for sale in the United States; c. the identity of the participants of the alleged conspiracy; d. the duration of the alleged conspiracy and the acts carried out by Defendants in furtherance of the conspiracy; e. whether Defendants’ alleged conspiracy violated federal antitrust laws; f. whether Defendants’ alleged conspiracy and/or course of business violated the Packers and Stockyards Act; g. whether Plaintiffs and members of the Producer Class suffered injury; h. the amount of damages suffered by Plaintiffs and members of the Producer Class; and 66 i. the appropriate type and scope of injunctive and related equitable relief available to the Producer Class. 208. Questions of law and fact common to members of the Exchange Class include, but are not limited to: a. whether Defendants’ conduct violated Sections 6(c)(3), 9(a) and 22 of the Commodity Exchange Act; b. whether Defendants’ conduct violated Sections 6(c)(1) and 22 of the Commodity Exchange Act; c. whether Defendants aided and abetted Commodity Exchange Act violations; d. whether Plaintiff and members of the Exchange Class suffered injury; e. the amount of damages suffered by Plaintiff and members of the Exchange Class and f. the appropriate type and scope of injunctive and related equitable relief available to the Exchange Class. 209. A class action is superior to other methods for the fair and efficient adjudication of this controversy because joinder of all Class members is impracticable. A class action will permit many similarly-situated persons to adjudicate their common claims in a single forum simultaneously, efficiently, and without the duplication of effort and expense that numerous individual actions would engender. Class treatment will also permit the adjudication of claims by many class members who could not afford individually to 67 litigate claims such as those asserted in this Complaint. The cost to the court system of adjudication of such individualized litigation would be substantial. The prosecution of separate actions by individual members of the Classes would create a risk of inconsistent or varying adjudications, establishing incompatible standards of conduct for Defendants. 210. Plaintiffs know of no special difficulty to be encountered in the maintenance of this action that would preclude its maintenance as a class action. 211. Plaintiffs have defined members of the Classes based on currently available information and hereby reserves the right to amend the definition of members of the Classes, including, without limitation, the length of the Class Period. STATUTE OF LIMITATIONS AND TOLLING 212. The statutes of limitations governing Plaintiffs’ claims against Defendants were tolled under the doctrine of fraudulent concealment. The doctrine applies here because Defendants fraudulently concealed their misconduct through their own affirmative acts, and because Defendants’ conduct was inherently self-concealing. 213. Defendants actively concealed their violations of law from Plaintiffs and both Classes by, amongst other matters, (i) relying on non-public forms of communication; (ii) offering pre-textual justifications for their plant closures, slaughter reductions and withdrawal from the cash cattle trade; (iii) explicitly and implicitly representing that the fed cattle bids and contract terms Defendants offered Plaintiffs and the Producer Class were the product of honest competition and not a conspiracy; and (iv) affirmatively 68 misrepresenting that they complied with applicable laws and regulations, including antitrust laws. Below is a list of non-exhaustive examples of such statements that each Defendant published during the Class Period: a. Tyson’s Code of Conduct extolled Tyson’s compliance with antitrust laws throughout the Class Period. Tyson states that it “compete[s] in the market with integrity and compl[ies] with competition laws.... We comply with the letter and spirit of competition laws ... wherever we do business.”111 b. JBS’s 2014 Annual Report detailed the policies it had in place to “ensure ethical conduct and integrity in the management of its business”, including its Manual of Ethical Conduct, which “addresses issues related to violations, conflicts of interest, third-party contracts, employment practices, receiving gifts, decision making, anti-corruption practices and other sensitive topics.”112 JBS also launched an “Always Do The Right Thing” compliance program in June 2017 to “ensure that JBS implements the best global compliance program in the industry in order to restore the trust of its stakeholders.”113 111 Tyson Code of Conduct, available at https://www.tysoncodeofconduct.com/suppliers-and- customers/competition (last accessed May 6, 2019). 112 JBS 2014 Annual Report at 45 – 46, available at https://jbss.infoinvest.com.br/enu/4362/20150601_RelatorioJBS_ingles_menor.pdf (last accessed May 6, 2019). 113 Available at https://jbss.infoinvest.com.br/enu/4197/JBS%20S.A.%20-%20Material%20Fact%20- %20Executive%20Committee2.pdf (last accessed May 6, 2019). 69 c. Cargill stressed in its 2015 Corporate Responsibility report that “[w]e obey the law. Obeying the law is the foundation on which our reputation and Guiding Principles are built.... We conduct our business with integrity.... We compete vigorously, but do so fairly and ethically. We ... comply with the laws and regulations that support fair competition and integrity in the marketplace.” Cargill reiterated this message in its subsequent Corporate Responsibility reports and on its website.114 d. National Beef’s former majority shareholder, Jefferies Financial Group, Inc. noted in its 2014 Annual Report that National Beef was “subject to extensive government regulation” and was subject to the Packers and Stockyards Act. 210. Defendants’ conspiracy was inherently self-concealing because it relied on secrecy for its successful operation. Had the public learned that Defendants conspired to fix prices in the fed cattle market, their conspiracy could not have continued for as long as it did. Accordingly, Plaintiffs could not have learned of Defendants’ anticompetitive conduct until recently. 211. Because of Defendants’ fraudulent concealment, Plaintiffs and both Classes were not aware of Defendants’ misconduct and could not have discovered it through the exercise of due diligence until recently. Plaintiffs and members of both Classes have acted diligently in seeking to bring their claims promptly. 114 See “Ethics & Compliance” https://www.cargill.com/about/ethics-and-compliance (last accessed May 6, 2019). 70 212. Accordingly, Plaintiffs assert that the applicable statutes of limitation on Plaintiffs’ claims were tolled. Defendants are also equitably estopped from asserting any statute of limitations defense. 213. Additionally, Defendants’ conspiratorial conduct has caused and continues to cause continuing injuries to Plaintiffs and the Classes. To the extent any statute of limitations was previously triggered – which is expressly disputed – these continuing injuries constitute continuing violations that start any statutory period running again. CLAIMS FOR RELIEF COUNT I: MARKET ALLOCATION AND PRICE-FIXING IN VIOLATION OF THE SHERMAN ACT, 15 U.S.C. §1 (Producer Class against All Defendants) 214. Plaintiffs incorporate by reference each prior paragraph as if set forth herein. 215. During the Class Period, Defendants controlled the slaughter of fed cattle in the United States and thus the available marketing outlets for fed cattle producers. Defendants were horizontal competitors in the market for the purchase of fed cattle. 216. From at least January 1, 2015 and continuing to the present, the exact dates being unknown to Plaintiffs, Defendants engaged in a continuing agreement, understanding and conspiracy in an unreasonable and unlawful restraint of trade to allocate the market for, and artificially fix and suppress the price of fed cattle in violation of Section 1 of the Sherman Act, 15 U.S.C. §1. Defendants’ conspiracy is a per se violation of the Sherman Act and is, in any event, an unreasonable and unlawful restraint of trade. 71 217. Defendants’ conspiracy and the resulting impact on fed cattle prices received by producers occurred in and affected U.S. interstate commerce. 218. As a proximate result of Defendants’ unlawful conduct, Plaintiffs and members of the Producer Class have suffered injury to their business or property. These injuries included, but were not limited to, receiving artificial and non-competitive prices for fed cattle sold to Defendants. Plaintiffs and the Producer Class were also deprived of the benefits of free and open competition in the market for the purchase of fed cattle. Plaintiffs and members of the Producer Class are each entitled to treble damages for Defendants’ violations of the Sherman Act alleged herein. 219. Plaintiffs and the members of the Producer Class are threatened with future injury to their businesses and property unless the injunctive relief requested is granted. COUNT II: VIOLATIONS OF PACKERS AND STOCKYARDS ACT, 7 U.S.C. §§192 and 209 (Producer Class against All Defendants) 210. Plaintiffs incorporate by reference each prior paragraph as if set forth herein. 211. Title 7 U.S.C. §192 provides, in pertinent part, “[i]t shall be unlawful for any packer with respect to livestock . . . to . . . (a) [e]ngage in or use any unfair, unjustly discriminatory, or deceptive trade practice or device; or . . . (e) [e]ngage in any course of business or do any act for the purpose or with the effect of manipulating or controlling prices, or of creating a monopoly in the acquisition of, buying, selling, or dealing in, any article, or of restraining commerce; or (f) [c]onspire, combine, agree, or arrange with any other person (1) to apportion territory for carrying on business, or (2) to apportion 72 purchases or sales of any article, or (3) to manipulate or control prices; or (g) [c]onspire, combine, agree, or arrange with any other person to do, or aid or abet the doing of, any act made unlawful by subdivisions (a), (b), (c), (d), or (e).” 212. Title 7 U.S.C. §209 further provides that, “[i]f any person subject to this chapter violates any of the provisions of this chapter . . . relating to the purchase, sale, or handling of livestock, . . . he shall be liable to the person or persons injured thereby for the full amount of damages sustained in consequence of such violation.” Such liability may be enforced “by suit in any district court of the United States of competent jurisdiction[.]” 213. Deceptive trade practices under the Packers and Stockyards Act are addressed in the Code of Federal Regulations in Part 201 of Title 9. Section 201.70 states “[e]ach packer and dealer engaged in purchasing livestock, in person or through employed buyers, shall conduct his buying operations in competition with, and independently of, other packers and dealers similarly engaged.” 214. From at least January 1, 2015 and continuing to the present, the exact dates being unknown to Plaintiffs, Defendants violated 7 U.S.C. §192(a), (e), (f), and (g) by engaging in a course of business and doing acts for the purpose or with the effect of reaching and implementing a conspiracy, combination, agreement, or arrangement to allocate the market for, and artificially fix, depress, suppress, or stabilize the price of fed 73 215. The effect of these acts and this conspiracy, combination, agreement, or arrangement, was to fix, depress, suppress, stabilize, or otherwise artificially manipulate the price of fed cattle bought by Defendants. Defendants had no legitimate business justification for these acts and this conspiracy, combination, agreement, or arrangement. 216. As a proximate result of Defendants’ breaches of the Packers and Stockyards Act, Producer Plaintiffs and the members of the Producer Class have been injured and damaged in their respective businesses and property. COUNT III: UNJUST ENRICHMENT (Producer Class against All Defendants) 217. Plaintiffs incorporate by reference each prior paragraph as if set forth herein. 218. Plaintiffs and Producer Class members sold fed cattle during the Class Period directly to Defendants. These transactions should have been priced based on competitive market forces and reflect honest competition by Defendants. 219. However, rather than competing honestly and aggressively with each other, Defendants colluded to fix, depress, suppress, or stabilize the prices paid to Plaintiffs and the Producer Class for the purchase of their fed cattle. 220. Defendants’ collusion enabled them to enjoy supra-competitive profits at the expense of Plaintiffs and the Producer Class and caused Plaintiffs and the Producer Class to receive less for sales of fed cattle to Defendants than they otherwise would have received had Defendants acted honestly and fairly. 74 221. It is unjust and inequitable for Defendants to have enriched themselves in this manner at the expense of Plaintiffs and the Producer Class, and equity and good conscience require Defendants to make restitution. 222. Plaintiffs and the Producer Class therefore seek restoration of the monies of which they were unfairly and unlawfully deprived as described in this Complaint. COUNT IV: MANIPULATION IN VIOLATION OF THE COMMODITY EXCHANGE ACT 7 U.S.C. §§1, ET SEQ. AND CFTC REGULATION 180.2, 17 C.F.R. §180.2 (Exchange Class against All Defendants) 223. Plaintiff Mendenhall Farms incorporates by reference each prior paragraph as if set forth herein. 224. During the Class Period, Defendants specifically intended to manipulate the prices of fed cattle, the physical commodity underlying the CME live cattle futures and options contracts, and specifically intended to manipulate the prices of CME live cattle futures and options. 225. Defendants had the ability to cause artificial prices in fed cattle and live cattle futures and options. They did so through, among other things, their dominant position in the market for the purchase of fed cattle, their superior access to information and reporting mechanisms, their financial wherewithal, and their extensive involvement in the CME live cattle futures and options trading and delivery processes. 226. Defendants caused artificial prices in the physical fed cattle market as well as in live cattle futures and options markets. Their conduct resulted in, among other things, 75 artificially low prices in the commodity underlying CME live cattle futures and options prices and in the live cattle futures and options prices themselves. 227. Defendants therefore engaged in unlawful manipulation of CME live cattle and futures and options and their underlying physical commodity in violation of Sections 6(c)(3), 7 U.S.C §9(3), 9(a) of the CEA, 7 U.S.C. §13(a), Section 22 of the CEA, 7 U.S.C. §25(a), and CFTC Rule 180.2, 17 C.F.R. §180.2. 228. The manipulation by Defendants and their conspirators and agents deprived Plaintiff Mendenhall Farms and the Exchange Class of a lawfully operating market during the Class Period and caused them to transact at artificial prices, which directly led to injury and economic damages. 229. Plaintiff Mendenhall Farms and Exchange Class members are each entitled to actual damages and other relief from Defendants. COUNT V: MANIPULATIVE AND DECEPTIVE DEVICE IN VIOLATION OF THE COMMODITY EXCHANGE ACT, 7 U.S.C. §§1, ET SEQ. AND CFTC REGULATION 180.1(A), 17 C.F.R. §180.1(A) (Exchange Class against All Defendants) 210. Plaintiff Mendenhall Farms incorporates by reference each prior paragraph as if set forth herein. 211. Defendants intended to affect or acted recklessly with regards to affecting prices of CME live cattle futures and options contracts and engaged in overt acts in furtherance of that intent. 76 212. Defendants intentionally or recklessly used or employed a manipulative device or artifice to defraud, and engaged in acts, practices, and/or courses of business that operated as a fraud or deceit in violation of Section 6(c)(1) of the CEA, 7 U.S.C. §9, and Section 22 of the CEA (7 U.S.C. §25), and Regulation 180.1(a), 17 C.F.R. §180.1(a). 213. Defendants’ conduct proximately caused injury to Plaintiff Mendenhall Farms and other members of the Exchange Class who transacted in an artificial and manipulated market, at manipulated prices during the Class Period. 214. The manipulative and deceptive devices employed by Defendants and their conspirators and agents deprived Plaintiff Mendenhall Farms and the Exchange Class of a lawfully operating market during the Class Period and caused them to transact at artificial prices that directly led to injury and economic damages. 215. Plaintiff Mendenhall Farms and Exchange Class members are each entitled to actual damages and other relief from Defendants. COUNT VI: PRINCIPAL-AGENT LIABILITY IN VIOLATION OF THE COMMODITY EXCHANGE ACT, 7 U.S.C. §§ 1, ET SEQ. AND CFTC REGULATION 1.2, 17 C.F.R. §1.2 (Exchange Class against All Defendants) 216. Plaintiff Mendenhall Farms incorporate by reference each prior paragraph as if set forth herein. 217. Defendants’ traders, employees and/or officers, and conspirators, acted as agents for their principals, Defendants, when engaging in the manipulation and manipulative and deceptive devices and schemes described herein. 77 218. Defendants are liable under Section 2(a)(1)(B) of the CEA, 7 U.S.C. §2(a)(1)(B) and Regulation 1.2, 17 C.F.R. §1.2, for the manipulative acts of its agents, representatives, and/or other persons acting for them in the scope of their employment. 219. The principal-agent violations by Defendants and their conspirators and agents deprived Plaintiff Mendenhall Farms and the Exchange Class of a lawfully operating market during the Class Period and caused them to transact at artificial prices that directly led to injury and economic damages. 220. Plaintiff Mendenhall Farms and Exchange Class members are each entitled to actual damages and other relief from Defendants. COUNT VII: AIDING AND ABETTING IN VIOLATION OF THE COMMODITY EXCHANGE ACT, 7 U.S.C. §§1, ET SEQ. (Exchange Class against All Defendants) 221. Plaintiff Mendenhall Farms incorporates by reference each prior paragraph as if set forth herein. 222. Defendants knowingly aided, abetted, counseled, induced and/or procured the violations of the CEA alleged herein, including violations by the other Defendants. 223. Defendants did so knowing of their violations of the CEA and willfully intended to assist these manipulations, which resulted in CME live cattle futures and options prices, and their underlying physical commodity becoming artificial, during the Class Period. 78 224. Through their aiding and abetting violations, Defendants violated Section 22(a)(1) of the CEA, 7 U.S.C. §25(a)(1). 225. Plaintiff Mendenhall Farms and Exchange Class members are each entitled to actual damages and other relief from Defendants. PRAYER FOR RELIEF 226. Plaintiffs, on behalf of themselves and members of the Classes, request relief as follows: A. That the Court determine that this action may be maintained as a class action under Rule 23(a) & (b) of the Federal Rules of Civil Procedure, that both of the Plaintiffs be named as Class Representative of the Producer Class and Plaintiff Mendenhall Farms be named as Class Representative of the Exchange Class, that the undersigned be named as Lead Class Counsel of both Classes, and direct that notice of this action, as provided by Rule 23(c)(2) of the Federal Rules of Civil Procedure, be given to Class members; B. That the Court enter an order declaring that Defendants’ actions, as set forth in this Complaint, violate the federal laws set forth above; C. That the Court award Plaintiffs and members of the Classes damages, treble damages, punitive damages, and/or restitution in an amount to be determined at trial; D. That the Court issue appropriate injunctive and other equitable relief against Defendants; E. That the Court award Plaintiffs pre- and post-judgment interest; 79 F. That the Court award Plaintiffs their costs of suit, including reasonable attorneys’ fees and expenses, including costs of consulting and testifying experts; and G. That the Court award any and all such other relief as the Court may deem just and proper. JURY DEMAND Pursuant to Federal Rule of Civil Procedure 38(b), Plaintiffs demand a trial by jury on all matters so triable. Date: May 22, 2019 Respectfully submitted, Richard M. Paul III Sean Cooper (pro hac applications forthcoming) PAUL LLP 601 Walnut Street, Suite 300 Kansas City, Missouri 64106 Telephone: (816) 984-8100 [email protected] [email protected] By /s/ Matthew J. Barber William R. Sieben (#100808) Alicia N. Sieben (#389640) Matthew J. Barber (#397240) SCHWEBEL GOETZ & SIEBEN 5120 IDS Center 80 South Eighth Street Minneapolis, Minnesota 55402 Telephone: (612) 377-7777 [email protected] [email protected] [email protected] Ward A. Rouse (pro hac application forthcoming) ROUSE LAW, PC 4940 Pleasant Street West Des Moines, Iowa 50266 Telephone: (515) 223-9000 [email protected] Eric H. Gibbs Michael L. Schrag Joshua Bloomfield George Sampson (pro hac applications forthcoming) GIBBS LAW GROUP LLP 505 14th Street, Suite 1110 Telephone: (510) 350-9700 [email protected] [email protected] [email protected] [email protected] ATTORNEYS FOR PLAINTIFFS AND THE PROPOSED CLASSES 80

antitrust

9EZP_YgBF5pVm5zYwyyi

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK -----------------------------------------------------x JOSEPH WHITE, : on behalf of Plaintiff and a class, : : Plaintiff, : : vs. : : ALLTRAN FINANCIAL, LP, : : Defendant. : -----------------------------------------------------x COMPLAINT – CLASS ACTION INTRODUCTION 1. Plaintiff Joseph White brings this action to secure redress regarding unlawful collection practices engaged in by Defendant Alltran Financial, LP. Plaintiff alleges violation of the Fair Debt Collection Practices Act, 15 U.S.C. §1692 et seq. (“FDCPA”). JURISDICTION AND VENUE 2. Jurisdiction of this Court arises under 15 U.S.C. §1692k(d) and 28 U.S.C. §1331. 3. Plaintiff’s private information was wrongfully disclosed by Defendant to an unauthorized third party, causing injury to Plaintiff which can be redressed by an award of damages. 4. Personal jurisdiction and venue in this District are proper because Defendant’s collection letter was received here. PARTIES Plaintiff 5. Plaintiff Joseph White is a natural person residing in Brooklyn, New York. -1- Defendant 6. Defendant Alltran Financial, LP, is a limited partnership entity organized under the law of Texas. It has offices at (a) 5800 North Course Drive, Houston, Texas 77072, (b) 4001 E. 29th St., Suite 130, Bryan, Texas 77802, and (c) 6506 South Lewis, #260, Tulsa, Oklahoma 74136. It does business in New York. Its registered agent and office is C T Corporation System, 28 Liberty St., New York, New York 10005. 7. Defendant Alltran Financial, LP is engaged in the sole or principal business of a collection agency, collecting consumer debts and using the mails and telephone system for that 8. Upon information and belief, almost all of Defendant Alltran Financial, LP’s resources are devoted to debt collection. 9. Upon information and belief, almost all of Defendant Alltran Financial, LP’s revenue is derived from debt collection. 10. Upon information and belief, almost all of Defendant Alltran Financial, LP’s expenses are related to debt collection. 11. Defendant Alltran Financial, LP, states that it “is a leader in the Accounts Receivable Management industry. We have united industry leading organizations with over 78 years of combined experience to be a transformational force in Financial Services thought leadership and innovation.” (https://alltran.com/financial-services/) 12. Defendant Alltran Financial, LP is a debt collector as defined by the FDCPA, 15 U.S.C. §1692a(6), as a person who uses one or more instrumentalities of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts. -2- FACTUAL ALLEGATIONS 13. This action arises out of Defendant’s attempts to collect a credit card debt incurred for personal, family or household purposes. 14. On or about April 6, 2021, Defendant Alltran Financial, LP caused a letter vendor to send Plaintiff the letter in Exhibit A. 15. The letter bears markings that are characteristic of one generated by a letter vendor. In addition, public court filings indicate that Alltran Financial, LP uses a letter vendor. 16. In order to have the letter vendor send Plaintiff the letter in Exhibit A, Defendant had to furnish the letter vendor with Plaintiff’s name and address, the status of Plaintiff as a debtor, details of Plaintiff’s alleged debt, and other personal information. 17. The letter vendor then populated some or all of this information into a prewritten template, printed, and mailed the letter to Plaintiff. 18. The FDCPA defines “communication” at 15 U.S.C. § 1692a(3) as “the conveying of information regarding a debt directly or indirectly to any person through any medium.” 19. The sending of an electronic file containing information about Plaintiff’s purported debt to a letter vendor is therefore a communication. 20. Defendant’s communication to the letter vendor was in connection with the collection of a debt since it involved disclosure of the debt to a third-party with the objective being communication with and motivation of the consumer to pay the alleged debt. 21. Plaintiff never consented to having Plaintiff’s personal and confidential information, concerning the debt or otherwise, shared with anyone else. 22. In limiting disclosures to third parties, the FDCPA states, at 15 U.S.C. §1692c(b): “Except as provided in section 1692b of this title, without the prior consent of the consumer given -3- directly to the debt collector, or the express permission of a court of competent jurisdiction, or as reasonably necessary to effectuate a post judgment judicial remedy, a debt collector may not communicate, in connection with the collection of any debt, with any person other than the consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector.” 23. The letter vendor used by Defendant as part of its debt collection effort against Plaintiff does not fall within any permitted exception provided for in 15 U.S.C. §1692c(b). 24. Due to Defendant’s communication to this letter vendor, information about Plaintiff is within the possession of an unauthorized third-party. 25. If a debt collector “conveys information regarding the debt to a third party -- informs the third party that the debt exists or provides information about the details of the debt -- then the debtor may well be harmed by the spread of this information.” Brown v. Van Ru Credit Corp., 804 F.3d 740, 743 (6th Cir. 2015). 26. Defendant unlawfully communicates with the unauthorized third-party letter vendor solely for the purpose of streamlining its generation of profits without regard to the propriety and privacy of the information which it discloses to such third-party. 27. In its reckless pursuit of a business advantage, Defendant disregarded the known, negative effect that disclosing personal information to an unauthorized third-party has on consumers. COUNT I – FDCPA 28. Plaintiff incorporates paragraphs 1-27. 29. Defendant violated 15 U.S.C. §1692c(b) when it disclosed information about Plaintiff’s purported debt to the employees of an unauthorized third-party letter vendor in -4- connection with the collection of the debt. 30. Defendant violated 15 U.S.C. §1692f by using unfair means in connection with the collection of a debt – disclosing personal information about Plaintiff to third parties not expressly authorized under the FDCPA. CLASS ALLEGATIONS 31. Plaintiff brings this action on behalf of a class, pursuant to Fed.R.Civ.P. 23(a) and 32. The class consists of (a) all individuals in New York (b) with respect to whom Defendant had a letter prepared and sent by a letter vendor (c) which letter was sent at any time during a period beginning one year prior to the filing of this action and ending 30 days after the filing of this action. 33. Plaintiff may alter the class definition to conform to developments in the case and discovery. 34. On information and belief, based on the size of Defendant’s business operations and the use of form letters, there are more than 40 class members, and the class is so numerous that joinder of all members is not practicable. 35. There are questions of law and fact common to the class members, which common questions predominate over any questions relating to individual class members. The predominant common questions are whether Defendant’s practice as described above violates the 36. Plaintiff will fairly and adequately represent the class members. Plaintiff has retained counsel experienced in class actions and FDCPA litigation. Plaintiff’s claim is typical of the claims of the class members. All are based on the same factual and legal theories. -5- 37. A class action is superior for the fair and efficient adjudication of this matter, a. Individual actions are not economically feasible. b. Members of the class are likely to be unaware of their rights; c. Congress intended class actions to be the principal enforcement mechanism under the FDCPA. WHEREFORE, the Court should enter judgment in favor of Plaintiff and the class and against Defendant for: i. Statutory damages; ii. Attorney’s fees, litigation expenses and costs of suit; iii. Such other and further relief as the Court deems proper. s/Abraham Kleinman Abraham Kleinman Abraham Kleinman KLEINMAN LLC 626 RXR PLAZA Uniondale, NY 11556-0626 (516) 522-2621 (888) 522-1692 (FAX) pro hac vice to be applied for: Dulijaza (Julie) Clark EDELMAN, COMBS, LATTURNER & GOODWIN, LLC 20 S. Clark Street, Suite 1500 Chicago, Illinois 60603 (312) 739-4200 -6- (312) 419-0379 (FAX) [email protected] -7- NOTICE OF ASSIGNMENT Please be advised that all rights relating to attorney’s fees have been assigned to counsel. s/Abraham Kleinman Abraham Kleinman -8- EXHIBIT A

consumer fraud

K1Yi_4gBF5pVm5zY-mUQ

Civil Action No. __________________ IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ANGE SAMMA PSC 400, Box #4278 APO AP 96273, ABNER BOUOMO 166 Lakeview Circle #H Wahiawa, HI 96787, AHMAD ISIAKA, 15002 Rainy Morning Drive Humble, TX 77346, MICHAEL PEREZ 702 Quartermaster Road, Box #500 Joint Base Elmendorf-Richardson, AK 99505, SUMIN PARK 702 Quartermaster Road, Box #3012 Joint Base Elmendorf-Richardson, AK 99505, YU MIN LEE 95-797 Wikao St. #B201 Mililani, HI 96789, on behalf of themselves and others similarly situated, Plaintiffs, v. UNITED STATES DEPARTMENT OF DEFENSE 1000 Defense Pentagon Washington, DC 20301, MARK ESPER, in his official capacity as Secretary of Defense 1000 Defense Pentagon Washington, DC 20301, Defendants. CLASS ACTION COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF (Unlawful deprivation of honorable service certifications from non-citizen service members) INTRODUCTION 1. Plaintiffs are non-citizens serving in the United States Armed Forces who seek to naturalize as United States citizens. They, along with thousands of other non-citizen service members, are presently serving this country across the Armed Forces at myriad bases domestically and abroad. Many are long-time residents of the United States who enlisted in the military to serve and give back to their adopted country. They have a statutory right to apply to naturalize due to their honorable service during a period of armed conflict under 8 U.S.C. § 1440, but the Department of Defense (“DoD”) and Secretary of Defense Mark Esper (together, “Defendants”) have blocked them from doing so. Defendants have adopted an unlawful policy of withholding certifications of Plaintiffs’ honorable service, which they require to apply to naturalize based on their ongoing military service. As a result, Defendants are denying thousands of men and women in uniform the U.S. citizenship that Congress has long promised to non- citizens serving in our military. 2. Non-citizens have served in the U.S. military in large numbers since the founding of the Republic. For more than 200 years, Congress has recognized the vital role non-citizens play in the nation’s military through the passage of laws promising expedited citizenship to individuals that enlist and serve honorably during periods of armed conflict. From the War of 1812 to World War II, U.S. laws enacted during periods of armed conflict have permitted non- citizens to naturalize almost immediately upon entering service and prior to deployment. 3. In 1952, Congress passed the expedited military naturalization statute that is in effect today. The Immigration and Nationality Act (“INA”), 8 U.S.C. § 1440, provides that any non-citizen who has served honorably in the military during wartime may naturalize, regardless of immigration status or length of residence or physical presence in the United States. By waiving the typical requirements for naturalization, the statute allows non-citizens to apply to naturalize almost immediately upon entering service. The legislative history of the statute confirms that its purpose is to ensure that non-citizens serving during wartime may naturalize prior to their deployment. 4. 8 U.S.C. § 1440 expressly delineates a narrow, non-discretionary, and ministerial role for DoD in the expedited naturalization process. It mandates that DoD provide service members with a “duly authenticated certification . . . which shall state whether the applicant served honorably” during wartime so that they may apply for naturalization pursuant to section 5. To satisfy this requirement, U.S. Citizenship and Immigration Services (“USCIS”), a component of the Department of Homeland Security (“DHS”) responsible for processing and adjudicating naturalization applications, requires DoD to certify honorable service using USCIS Form N-426 (“N-426”). Service members must submit a completed N-426 to USCIS with their naturalization applications. USCIS will not consider a military naturalization application that does not include a completed N-426. 6. Until October 2017, DoD’s longstanding practice was to issue N-426 certifications of honorable service to non-citizens who had served honorably without regard to any additional criteria, including a minimum service duration requirement. Moreover, a broad range of military personnel with access to an individual’s service records could certify the N- 426, and would typically do so within days of receiving it. 7. In a dramatic departure from prior practice, on October 13, 2017, DoD adopted a new policy (“N-426 Policy”) requiring that the military withhold N-426 certifications of honorable service from service members until they meet several new criteria and follow a new process. The new criteria require service members to complete additional DoD background screening; pass a “military service suitability determination,” which purports to determine a service member’s security risk to the military; and serve for a minimum of 180 days for active duty service members and one year for service members in the Selected Reserve of the Ready Reserve (“Selected Reserve”), before they may obtain their N-426 certification. The new process also requires the Secretary of the applicable service, or a commissioned officer of at least a particular pay grade designated by the Secretary, to certify the N-426. The addition of new criteria and the new process in the N-426 Policy have significantly prolonged the period service members must wait before they may obtain an N-426 certification and apply for naturalization pursuant to 8 U.S.C. § 1440. 8. The N-426 Policy obstructs 8 U.S.C. § 1440 and the intent of Congress, and makes it difficult, if not impossible, for service members to benefit from expedited naturalization. 9. DoD’s subversion of the statutory scheme is so significant that it is now harder for many service members to naturalize through the expedited process than through the ordinary civilian process. Many service members who are lawful permanent residents have waited so long for their N-426 certification that they could have obtained naturalization faster through the civilian process. Similarly, veterans can still benefit from expedited naturalization under section 1440 because they do not have to abide by the new criteria or policy set forth in the N-426 Policy. 10. USCIS statistics demonstrate the impact of the N-426 Policy on military naturalizations. In fiscal year 2018, which commenced in October 2017, when Defendants implemented the N-426 Policy, USCIS reported a 72-percent drop in military naturalization applications from pre-N-426 Policy levels. 11. Through the N-426 Policy, Defendants have unlawfully obstructed the ability of thousands of service members to obtain U.S. citizenship, placing them in a state of personal and professional limbo. The N-426 Policy prevents service members from enjoying the benefits and rights that accrue with citizenship, such as the right to vote and fully participate in the civic life of their adopted homeland, to bring their immediate family members to the United States before they deploy, or to travel with a U.S. passport. Without citizenship, service members are also unable to advance their careers since many roles in the military, including the more technical and senior roles as well as those requiring a security clearance, necessitate U.S. citizenship. Many of these roles would offer better opportunities for promotion and a higher salary. 12. The N-426 Policy also places many service members in peril because of their inability to obtain U.S. citizenship. Non-citizen service members deployed overseas have no right to U.S. consular services and protections. As foreign nationals, they may have different rights and vulnerabilities compared to their U.S. citizen counterparts in the countries where they are stationed. Service members lacking lawful immigration status can be placed in removal proceedings and deported from this country, notwithstanding their ongoing military service and eligibility to naturalize. Without citizenship, these service members cannot petition to adjust the immigration status of their parents, spouses, or children left behind in this country during their deployment, nor can they travel freely outside of and return to this country. For these service members, the inability to naturalize also jeopardizes their ability to work and remain in the United States following military service, potentially cutting them off from benefits afforded to veterans, such as Veterans Administration healthcare. 13. The N-426 Policy is unlawful. It directly violates Congress’s clear command that DoD play a purely ministerial role in certifying honorable service. It concocts additional substantive criteria and procedural requirements, which service members must meet before they can obtain their certification of honorable service and apply for naturalization. By implementing the N-426 Policy, DoD violates the INA and the Administrative Procedure Act. JURISDICTION AND VENUE 14. This case arises under the Constitution and the laws of the United States and presents a federal question within this Court’s jurisdiction under 28 U.S.C. § 1331. The Court has authority to grant declaratory relief pursuant to the Declaratory Judgment Act, 28 U.S.C. §§ 2201–2202, and injunctive relief pursuant to 5 U.S.C. § 702. 15. Venue is proper in the District of Columbia under 28 U.S.C. § 1391(b)(2) and (e)(1) because a substantial part of the events giving rise to the claims occurred in this district, Defendant DoD is an agency of the United States, and Plaintiffs sue Defendant Mark Esper in his official capacity as an officer of the United States. RELATED LAWSUITS 16. In September 2017, three individuals brought a class action against DoD and the Secretary of Defense challenging their refusal to certify the N-426s of non-citizen service members in the Selected Reserve who enlisted through the Military Accessions Vital to the National Interest (“MAVNI”) program. Plaintiffs in that case later amended their complaint to include a challenge to DoD’s refusal to certify the N-426s of Selected Reserve MAVNI service members pursuant to the N-426 Policy. This Court issued a preliminary injunction enjoining the N-426 Policy as it applies to Selected Reserve MAVNI service members who have not received an N-426 certification. Kirwa v. U.S. Dep’t of Def., 285 F. Supp. 3d 21 (D.D.C. 2017). 17. In May 2017, ten individuals brought a class action against DoD, DHS, and USCIS challenging, inter alia, DoD’s revocation or threat to revoke N-426s issued to Selected Reserve MAVNI service members. Plaintiffs in that case later amended their complaint to include a challenge to DoD’s revocation or threat to revoke N-426s issued to Selected Reserve MAVNI service members pursuant to the N-426 Policy. On October 27, 2017, this Court issued a preliminary injunction enjoining the N-426 Policy as it applies to this group of non-citizen service members. Order, Nio v. U.S. Dep’t of Homeland Sec., No. 17-cv-998 (D.D.C. Oct. 27, 2017), ECF No. 74. 18. This complaint involves common issues of fact and arises out of the same core events as the Kirwa and Nio actions. This lawsuit, like Kirwa and Nio, challenges DoD’s unlawful refusal to certify the N-426s of non-citizens serving honorably during wartime. However, Kirwa and Nio were both challenges on behalf of classes of Selected Reserve MAVNI service members, whereas this lawsuit is on behalf of all other non-citizen service members, including lawful permanent resident and active duty MAVNI service members, who are similarly entitled to an N-426 certification under 8 U.S.C. § 1440 but who remain subject to the N-426 Policy. This lawsuit also involves similar issues of injury to Plaintiffs and the prospective class as those in Kirwa and Nio. In all three cases, service members are experiencing significant delays in their ability to apply for naturalization, resulting in similar harms. PARTIES 19. Plaintiff Ange Samma is a lawful permanent resident who enlisted in the U.S. Army in July 2018. Plaintiff Samma serves on active duty as a Private First Class (E-3) with the 339th Quartermaster Company at Camp Humphreys in South Korea. 20. Plaintiff Abner Bouomo is a lawful permanent resident who enlisted in the U.S. Army in December 2017. Plaintiff Bouomo serves on active duty as a Private First Class (E-3) with the 25th Infantry Division at Schofield Barracks in Hawaii. 21. Plaintiff Ahmad Isiaka is a lawful permanent resident who enlisted in the U.S. Army in January 2020. Plaintiff Isiaka serves in the Selected Reserve of the U.S. Army Reserve as a Private Second Class (E-2) with the 644th Transportation Company in Houston, Texas. 22. Plaintiff Michael Perez is a lawful permanent resident who enlisted in the U.S. Army in November 2017. Plaintiff Perez serves on active duty as a Private Second Class (E-2) with the 2nd Battalion, 377th Parachute Field Artillery Regiment at Joint Base Elmendorf- Richardson in Alaska. 23. Plaintiff Sumin Park enlisted in the U.S. Army as a lawful permanent resident in January 2017. Plaintiff Park serves on active duty as a Private Second Class (E-2) with the 2nd Battalion, 377th Parachute Field Artillery Regiment at Joint Base Elmendorf-Richardson in Alaska. 24. Plaintiff Yu Min Lee enlisted in the U.S. Army through the MAVNI program in July 2016. Plaintiff Lee serves on active duty as a Specialist (E-4) at Schofield Barracks in Hawaii. 25. Defendant DoD is an executive branch department of the U.S. federal government that is responsible for issuing and implementing the N-426 Policy. 26. Defendant Mark Esper is the Secretary of Defense and has supervisory responsibility over DoD. Plaintiffs sue Defendant Esper in his official capacity. LEGAL FRAMEWORK A. Non-Citizen Enlistment in the U.S. Military 27. U.S. citizens, lawful permanent residents, and people from the Marshall Islands, Micronesia, and Palau may enlist in the U.S. military. 10 U.S.C. § 504(b)(1)(A)–(C). 28. In addition, the Secretary of Defense and the Secretaries of the military service departments are authorized to enlist people who do not fall into the categories above if their enlistment is “vital to the national interest.” Id. § 504(b)(2)(A). In November 2008, pursuant to this provision, the Secretary of Defense authorized the MAVNI program. The MAVNI program permits certain foreign nationals, who are not lawful permanent residents or people from the Marshall Islands, Micronesia, and Palau, to enlist if they are healthcare professionals or possess foreign language skills with an associated cultural background critical to the military. B. Expedited Naturalization through Military Service 29. In 1952, Congress enacted the INA, codified at 8 U.S.C. § 1101 et seq., which sets forth the requirements for naturalization. 30. The INA provides non-citizen service members with two different expedited naturalization processes—one for military service during “peacetime,” 8 U.S.C. § 1439, and the other for military service during designated “periods of hostilities,” id. § 1440. On July 3, 2002, President George W. Bush issued Executive Order 13269, which designated the period “beginning on September 11, 2001” as a “period of hostilities” and rendered non-citizen service members eligible for expedited naturalization pursuant to section 1440 from that date onward. The Executive Order remains in effect to this day. 31. 8 U.S.C. § 1440(a) provides: Any person who, while an alien or a noncitizen national of the United States, has served honorably as a member of the Selected Reserve of the Ready Reserve or in an active-duty status in the military, air, or naval forces of the United States . . . during any . . . period which the President by Executive order shall designate as a period in which Armed Forces of the United States are or were engaged in military operations involving armed conflict with a hostile foreign force . . . may be naturalized as provided in this section . . . . (emphasis added) 32. Section 1440 instructs that “[t]he executive department under which” service members have “served shall determine” and must prove “by a duly authenticated certification . . . whether the applicant served honorably.” Id. § 1440(a), (b)(3). USCIS, the DHS component responsible for processing and adjudicating naturalization applications, has prescribed Form N- 426, Request for Certification of Military or Naval Service, as the form DoD must use to certify a service member’s honorable service. See 8 C.F.R. § 329.4; U.S. Citizenship & Immigr. Servs., USCIS Policy Manual, Vol. 12, Pt. I, Ch. 5. 33. A service member may apply for naturalization with USCIS once DoD has certified their honorable service using Form N-426. See 8 C.F.R. § 329.4. Section 1440 requires service members to comply with the general eligibility criteria for naturalization, with certain exceptions. Under the INA and its implementing regulations, a civilian who wishes to naturalize as a U.S. citizen generally must be at least 18 years old, be a lawful permanent resident of the United States, have “resided continuously within the United States” for “at least five years after having been lawfully admitted for permanent residence,” and have “been physically present in the United States” for at least half that time.1 8 C.F.R. § 316.2(a)(1)–(4); see also 8 U.S.C. §§ 1423, 1427, 1429, 1445. A civilian must also demonstrate “good moral character” for the five years preceding the date of application for naturalization and be “attached to the principles of the Constitution of the United States, and favorably disposed toward the good order and happiness of the United States.” 8 C.F.R. § 316.2(a)(1)(7); see also 8 U.S.C. §§ 1423, 1427(d). In addition, a civilian must not have “a final finding of deportability” or be in removal proceedings at the time of application. 8 U.S.C. § 1429. Finally, a civilian must pay a fee to submit the naturalization application, which is currently $725. See 8 C.F.R. § 103.7. 34. 8 U.S.C. § 1440 waives or modifies several of the requirements set forth above. First, it makes naturalization available to “[a]ny person who, while an alien or a noncitizen national of the United States,” has served honorably during a designated period of hostilities, not 1 Civilians who are spouses of U.S. citizens are only required to demonstrate continuous residence for at least three years and physical presence for at least half that time. See 8 U.S.C. § 1430(a). just to lawful permanent residents. 8 U.S.C. § 1440(a). Second, it waives the continuous residence and physical presence requirements. Id. § 1440(b)(2); see also 8 C.F.R. § 329.2. Third, it requires a service member to demonstrate “good moral character” for one year (not five) preceding the date of application for naturalization. 8 C.F.R. § 329.2(d). Fourth, it waives the age requirement and the prohibition against naturalization for persons with deportation orders or in removal proceedings. 8 U.S.C. § 1440(b)(1). Finally, it waives the naturalization application fee. Id. § 1440(b)(4). 35. Once an individual submits a naturalization application, USCIS must conduct a background investigation, see 8 U.S.C. § 1446(a); 8 C.F.R. § 335.1, which includes a full criminal background check by the Federal Bureau of Investigation, see 8 C.F.R. § 335.2(b). After completing the background investigation, USCIS must schedule a naturalization examination at which a USCIS officer interviews the applicant. See Id. § 335.2(a). 36. If the applicant has complied with all of the requirements for naturalization set forth in the INA and its implementing regulations, USCIS “shall grant the application.” Id. § 335.3. Once USCIS has granted an application, the applicant must take the oath of allegiance, following which the person “shall be deemed a citizen of the United States.” Id. §§ 337.1, 337.9. 37. Citizenship granted pursuant to 8 U.S.C. § 1440 may be revoked “if the person is separated from the Armed Forces under other than honorable conditions before the person has served honorably for a period or periods aggregating five years.” 8 U.S.C. § 1440(c). FACTUAL BACKGROUND A. Immigrants Make Valuable Contributions to the U.S. Military 38. Immigrants have made valuable contributions to the U.S. military throughout this nation’s history, serving in the Revolutionary War and in every major conflict since the founding of the Republic. During World War I, nearly a half million immigrants—about a quarter of whom were non-citizens—fought on behalf of the United States.2 More than 300,000 immigrants served during World War II, over a third of whom were non-citizens.3 39. Immigrants have continued to play a vital role in the U.S. military in the modern era, including since 2001, when the current period of armed conflict commenced. In 2009, there were nearly 115,000 immigrants serving in the U.S. military, representing almost 8 percent of the then–1.4 million military personnel on active duty.4 40. Non-citizens make up a considerable number of those fighting in today’s wars. Between 1999 and 2010, approximately 80,000 non-citizens enlisted in the military, accounting for 4 percent of the total number of persons entering service in that period.5 Between 2011 and 2015, an average of about 10,000 non-citizens served in the Army per year.6 The role non- citizens have played in recent conflicts is also reflected in the number—over 100,000—that have naturalized on the basis of their military service since 2001.7 41. DoD has reported that approximately 5,000 lawful permanent residents enlist in the military each year.8 And from 2008 to 2016, the MAVNI program recruited 10,400 foreign 2 See Lynn O’Neil & Omer S. Senturk, Thesis: Non-Citizens in the U.S. Military, Naval Postgraduate Sch. 12 (2004). 3 See id. at 15–16; Immigration & Naturalization Serv., U.S. Dep’t of Justice, Foreign-Born in the United States Army During World War II, with Special Reference to the Alien, 6 Monthly Review 43, 48 (1948). 4 See Margaret D. Stock, Essential to the Fight: Immigrants in the Military Eight Years After 9/11, Immigration Policy Ctr., Am. Immigration Council 4 (2009) (citing data provided to the author by the Defense Manpower Data Center). 5 See U.S. Dep’t of Def., Population Representation in the Military Services: Fiscal Year 2010 Summary Report 41. 6 See Che T. Arosemena, Immigrants and the US Army: A Study in Readiness and the American Dream, Sch. of Advanced Military Studies 55 (2016). 7 See U.S. Dep’t of Homeland Sec., Yearbook of Immigration Statistics 2019 tbl. 20 (2018). 8 See Dep’t of Def. Fact Sheet, Military Accessions Vital to the National Interest (MAVNI) Recruitment Pilot Program 3, available at https://dod.defense.gov/news/mavni-fact-sheet.pdf. nationals, who were not lawful permanent residents, into the military.9 42. Immigrants are critical to the readiness of the U.S. military. In every recruitment year between 2002 and 2013, with the exception of 2009, the Army would have failed its recruitment goals for its active duty force without non-citizen enlistments.10 43. Immigrant, and specifically non-citizen, recruits also tend to be of “higher quality” than their citizen counterparts. DoD reported that in 2016, the majority of non-citizen recruits were “high-quality,” with Tier 1 education credentials (i.e., at least a high school diploma as opposed to an alternative credential, such as a GED) and an Armed Forces Qualification Test (“AFQT”) score in the 50th percentile or higher. It further reported that a higher percentage of non-citizen recruits in the Army (which had over half of all non-citizen recruits) were high-quality compared to citizen recruits.11 MAVNI recruits, in particular, are of exceptional quality, averaging four more years of education and 17 points higher on the AFQT than non-MAVNI service members and with English proficiency generally on par with that of native-born speakers.12 44. Non-citizens also perform better than their citizen counterparts once they join the military. In particular, they have substantially lower attrition rates, even after controlling for other demographic and service-related characteristics.13 9 See U.S. Gov’t Accountability Off., Immigration Enforcement: Actions Needed to Better Handle, Identify, and Track Cases Involving Veterans 7 (2019). 10 See Arosemena, supra note 7, at 52 (citing Defense Manpower Data Center accessions data, FY 2002 to FY 2013). 11 See U.S. Dep’t of Def., Population Representation in the Military Services: Fiscal Year 2016 Summary Report 42. 12 See Arosemena, supra note 7, at 49. 13 Molly McIntosh & Seems Sayala, Non-Citizens in the Enlisted U.S. Military, Center for Naval Analyses 8–10 (2011); Anita U. Hattiangadi et al., Non-Citizens in Today’s Military: Final Report, Ctr. for Naval Analyses 56–59, 63–65 (2005). 45. Finally, non-citizens are likely to possess skills critical to the military, particularly linguistic diversity and cultural competencies as well as medical and information-technology expertise.14 DoD initiated the MAVNI program for this very reason, to recruit non-citizens who have skills “vital to the national interest,” including healthcare professionals and individuals with expertise in certain foreign languages and cultures. 10 U.S.C. § 504(b)(2). 46. Immigrants have repeatedly gone above and beyond the call of duty in their military service to the United States. Many immigrants have served with distinction and are among those awarded the highest honors in the military. Over 20 percent of recipients of the military’s highest honor—the Congressional Medal of Honor—have been immigrants.15 Immigrants have also won significant awards in combat and many have sacrificed their lives fighting for this country since 2011.16 B. Congress Has Historically Allowed Non-Citizens Serving During Wartime to Naturalize Almost Immediately Upon Entering Service 47. The United States has a well-established tradition of rewarding non-citizens who enlist in the military with an expedited path to citizenship. Moreover, that tradition has long recognized that non-citizens enlisting during wartime should be awarded an opportunity to apply for naturalization almost immediately upon entering service. 14 See Muzaffar Chishti et al., Noncitizens in the U.S. Military: Navigating National Security Concerns and Recruitment Needs, Migration Policy Inst. 10–11 (2019). 15 See Examining Immigrant Americans’ Contribution to the Armed Forces and National Defense: Hearing Before the S. Comm. on the Judiciary, 106th Cong. (1999) (statement of Sen. Spencer Abraham, Chairman, S. Comm. on the Judiciary); see also U.S. Citizenship & Immigr. Servs., USCIS Facilities Dedicated to the Memory of Immigrant Medal of Honor Recipients, https://www.uscis.gov/about-us/find-uscis-office/uscis-facilities-dedicated-memory-immigrant- medal-honor-recipients. 16 See Contributions of Immigrants to the United States Armed Forces: Hearing Before the S. Comm. on the Armed Services, 109th Cong. (2006) (statement of Gen. Peter Pace, USCMC, Chairman, Joint Chiefs of Staff); P’ship for a New Am. Econ., An Unheralded Contribution: Honoring America’s Fallen Foreign-Born Service Members Post 9/11 6 (2015). 48. Congress first authorized the expedited naturalization of non-citizens serving in the military during the War of 1812 by passing legislation permitting non-citizens to immediately become citizens so long as they had declared an intention to naturalize before the start of hostilities.17 49. During the Civil War, the Union passed several laws to encourage the enlistment of non-citizens by offering a path to expedited naturalization. An 1862 law permitted “any alien” who “has been or shall be hereafter honorably discharged . . . to become a citizen” upon proof of one year’s residency (reduced from the general requirement of five) within the United States.18 50. Congress provided an expedited path to citizenship for non-citizens serving during World War I. In a 1918 law, it authorized “any alien” serving in the military during the war to “file his petition for naturalization . . . without proof of the required five years’ residence within the United States.”19 In discussing this Act, senators emphasized that the nearly 125,000 non-citizen soldiers then serving in the U.S. Army should not be sent to fight in a war overseas without first obtaining their citizenship.20 51. During World War II, Congress again passed legislation providing an expedited path to citizenship for non-citizen service members. A 1942 law authorized any non-citizen 17 See An Act Supplementary to the Acts Heretofore Passed on the Subject of a Uniform Rule of Naturalization, 3 Stat. 53, 53 (1813). 18 See, e.g., An Act to Define the Pay and Emoluments of Certain Officers of the Army, and for Other Purposes, 12 Stat. 594, 597 (1862). 19 See An Act to Amend the Naturalization Laws and to Repeal Certain Sections of the Revised Statutes of the United States and Other Laws Relating to Naturalization, Pub. Law No. 65-144, 40 Stat. 542 (1918). 20 See 56 Cong. Rec. 5,009 (daily ed. April 12, 1918) (statement of Sen. Hardwick) (“It is impossible, or at least it is unfair, to send these soldiers to the battle line in Europe until they have been naturalized and made citizens of this country, so that they will not be subjected to charges of treason against the governments and princes of whom they were formerly subjects. The War Department is not willing to subject these men to that sort of danger. It is not fair to them and it is not just to the country.”). serving during the war to apply for naturalization and waived several requirements, including a period of residence within the United States.21 A subsequent 1944 law also eliminated the requirement for proof of lawful entry into the United States.22 C. The INA and Its Implementing Regulations Allow Non-Citizens Serving Honorably During Wartime to Naturalize Almost Immediately upon Entering Service 52. In 1952, Congress enacted the INA, which continues to authorize an expedited path to citizenship for non-citizens serving in the U.S. military. 53. Under 8 U.S.C. § 1440, which governs expedited military naturalization during wartime, service members must meet a single requirement to apply for naturalization—they must have “served honorably as a member of the Selected Reserve of the Ready Reserve or in an active-duty status.” Id.§ 1440(a). Active duty service members begin their service when they ship to basic training. Members of the Selected Reserve begin their service either when they ship to basic training or when they participate in their first drill, whichever comes first. 54. Section 1440 imposes no other requirement for service members to demonstrate their eligibility to apply for naturalization. 55. The plain language of section 1440—“served honorably”—makes clear that the honorable service requirement is backwards-looking. 56. Section 1440 does not condition the honorable service requirement upon any minimum length of service. 57. The legislative history of the INA makes clear that Congress deliberately chose not to require any minimum length of honorable service for non-citizens seeking to naturalize 21 See An Act to Further Expedite the Prosecution of the War, 56 Stat. 182, 186 (1942). 22 See An Act Relating to the Naturalization of Persons Not Citizens Who Serve Honorably in the Military or Naval Forces during the Present War, 58 Stat. 886, 886–87 (1944). during wartime. The 1968 Senate Committee on the Judiciary Report accompanying amendments to the INA explained that section 1440 provides that an individual “who has served honorably . . . may be naturalized without regard to the requirements concerning age, residence, physical residence, physical presence, court jurisdiction, or a waiting period.” 23 S. Rep. No. 1268-1292, at 4 (1968) (emphasis added). The Report further compares section 1440 (service during wartime) with section 1439 (service during peacetime) and emphasizes that while “[t]he peacetime serviceman must have a minimum of 3 years’ service, the wartime serviceman has no minimum required.”24 Id. at 5 (emphasis added). The Report explained the purpose for this distinction: “[A] serviceman is afforded an opportunity to acquire a citizenship before he is assigned to active combat, whereas if service in a defined combat zone is a condition to the acquisition of citizenship, the serviceman killed in action could never avail himself of the special benefits provided by his adopted country.” Id. at 13. 58. DHS, which is responsible for implementing and enforcing the naturalization laws, reads section 1440 to provide that service members establish their eligibility to apply for naturalization by demonstrating only that they have served honorably. 59. DHS has also explicitly acknowledged in past rulemaking that section 1440 imposes no minimum service duration requirement. 60. The USCIS Policy Manual, USCIS’s central repository for its immigration policies, confirms that the sole requirement to apply for naturalization under section 1440 is 23 This Report accompanied an amendment to the INA to expand eligibility for expedited naturalization under 8 U.S.C. § 1440 to those who served during the Vietnam War and in future designated periods of military hostilities. 24 In 2003, Congress amended 8 U.S.C. § 1439, reducing from three years to one year the period of honorable service required to qualify for naturalization through military service during peacetime. See National Defense Authorization Act for Fiscal Year 2004 (“NDAA 2003”), Pub. Law No. 108-136, 117 Stat. 1392 (2003). demonstration of honorable service. 61. USCIS Form N-426 further reflects that section 1440 establishes a service member’s eligibility to apply for naturalization based solely upon the demonstration of honorable service. The form instructs DoD to record the applicant’s periods of service and designate “yes” or “no” as to whether the applicant has served honorably during each period. It does not require DoD to verify whether a service member has met a minimum service duration or any other requirement. D. DoD’s Role in Certifying Honorable Service is Purely Ministerial 62. In the INA, Congress charged the Secretary of Homeland Security “with the administration and enforcement of this chapter and all other laws relating to immigration and naturalization of aliens, except insofar as . . . such laws relate to the powers, functions, and duties conferred upon,” inter alia, the Attorney General. 8 U.S.C. § 1103(a)(1). 8 U.S.C. § 1421(a) delegates to the Attorney General “[t]he sole authority to naturalize persons as citizens of the United States.” The Attorney General has, in turn, authorized USCIS “to perform such acts as are necessary and proper to implement the Attorney General’s [naturalization] authority” under 8 U.S.C. § 1421. 8 C.F.R. § 310.1. 63. Defendants have no legal authority to implement or enforce the immigration and naturalization laws of the United States. 64. In 8 U.S.C. § 1440, Congress assigned to DoD the narrow, non-discretionary, and ministerial role of “determin[ing] whether persons have served honorably” by providing “a duly authenticated certification.” Id. § 1440(a), (b)(3). 65. Defendants have admitted in the Nio litigation that “DoD serves a ministerial role in determining if an individual is serving honorably.” Defs.’ Resp. to Pls.’ Mot. for Prelim. Inj. at 36, Nio v. United States Dep’t of Homeland Sec., No. 17-cv-998 (D.D.C. July 7, 2017), ECF No. 66. USCIS Form N-426 also instructs DoD to play a ministerial role in certifying honorable service by requiring DoD to record the applicant’s periods of service and indicate whether the applicant has served honorably during each period. 67. DoD’s longstanding practice has been to fulfill its ministerial role by certifying honorable service based solely on whether a service member has served honorably at the time DoD completed the N-426. This practice consisted of “a cursory records check to determine if the enlistee (1) was in the active duty or the Selected Reserves, (2) had valid dates of service, and (3) had no immediately apparent past derogatory information in his service record.” Kirwa, 285 F. Supp. 3d at 29. 68. DoD’s longstanding practice has also been to permit a broad range of military personnel with access to an individual’s service records to certify the N-426. 69. DoD’s past certification process often took as little as a single day to complete. E. Defendants’ Unlawful N-426 Policy 70. On October 13, 2017, DoD set forth the N-426 Policy in a memorandum titled “Certification of Honorable Service for Members of the Selected Reserve of the Ready Reserve and Members of the Active Components of the Military or Naval Forces for Purposes of Naturalization.” 71. In direct contravention of 8 U.S.C. § 1440, the N-426 Policy mandates that service members who enlist on or after October 13, 2017 may not receive N-426 certifications of honorable service until they meet a series of new requirements and follow a new process. 72. The N-426 Policy specifies that no service member may receive an N-426 certification until the following criteria are met: 1. Legal and Disciplinary Matters: The Service Member is not the subject of pending disciplinary action or pending adverse administrative action or proceeding, and is not the subject of a law enforcement or command investigation; AND 2. Background Investigation and Suitability Vetting: The Service Member has completed applicable screening and suitability requirements . . . ; AND 3. Military Training and Required Service: The Service Member has served in a capacity, for a period of time, and in a manner that permits an informed determination as to whether the member served honorably, as set forth below. a. For Service Members in an Active Component: [. . .]  Completed at least 180 consecutive days of active duty service, inclusive of the successful completion of basic training . . . . b. For Service Members in the Selected Reserve of the Ready Reserve: [. . .]  Completed at least one year of satisfactory service . . . as a member of the Selected Reserve, inclusive of the member’s successful completion of basic training . . . . 73. The N-426 Policy also alters the process for service members to obtain an N-426 certification. The N-426 must now be completed by the Secretary of the applicable service, who may delegate this authority “to a commissioned officer serving in the pay grade of O-6 or higher.” The O-6 pay grade designates a full Colonel in the Army, Air Force, or Marines, and a Captain in the Navy or the Coast Guard. 74. None of the new criteria imposed by the N-426 Policy is permissible under law. By statute, DoD has a mandatory, non-discretionary, ministerial duty to certify the honorable service of all non-citizens who have served honorably during a designated period of military hostilities. The N-426 Policy imposes additional conditions upon honorable certification beyond this single requirement. DoD has no authority or discretion to mandate compliance with those additional conditions for non-citizens who have served honorably to obtain their N-426 certifications. 75. The N-426 Policy is also directly at odds with DoD’s own past interpretation and practice with respect to certifications of honorable service under section 1440. DoD previously regularly and routinely certified the honorable service of non-citizens without any of the unlawful requirements now being imposed by the N-426 Policy. It also previously permitted a broad range of military personnel with access to an individual’s service records to complete N- 426 certifications. 76. DoD did not provide public notice prior to the issuance of the N-426 Policy. 77. DoD did not solicit, receive, or consider comments from the public regarding the changes made by the N-426 Policy. 78. DoD did not provide any statement of the basis or purpose of the changes—either with respect to the new criteria or the new process for service members to obtain a certification of honorable service—in the N-426 Policy. 79. DoD has not, and cannot, provide a valid rationale for either the new criteria or new process set forth in the N-426 Policy. 80. By conditioning N-426 certification upon additional, non-statutory, substantive criteria and requiring such certification be completed by a designated officer of O-6 pay grade or higher, Defendants are unlawfully withholding or unreasonably delaying the issuance of N-426 certifications to Plaintiffs and similarly-situated service members. F. Plaintiffs’ Service Commitments 81. The commitment that each Plaintiff has undertaken as a service member in the U.S. military is serious and substantial. The standard enlistment contract—Enlistment/ Reenlistment Document Armed Forces of the United States (DD Form 4)—obligates service members to eight years of service. Moreover, in a time of war, the contract states that enlistment may be extended without consent “for the duration of the war and for six months after its end.” 82. The contract emphasizes that the agreement “is more than an employment contract” and, as such, requires service members to (1) “obey all lawful orders and perform all assigned duties,” (2) be subject to discharge “and given a certificate for less than honorable service” if their “behavior fails to meet acceptable military standards,” which may “hurt . . . future job opportunities and . . . claim[s] for veteran’s benefits,” (3) be “[s]ubject to the military justice system,” and (4) be “[r]equired upon order to serve in combat or other hazardous situations.” As confirmation of enlistment, the contract also requires service members to take the Oath of Enlistment: I . . . do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; and that I will obey the orders of the President of the United States and the orders of the officers appointed over me, according to regulations and the Uniform Code of Military Justice. 83. As members of the U.S. military, Plaintiffs may be required to compromise individual liberties that are otherwise considered fundamental in American society. The military provides recruits, prior to their enlistment, with United States Military Entrance Processing Command Form 601-23-4—“Restrictions on Personal Conduct in the Armed Forces”—which specifies that military service entails behavioral limitations not applicable to civilians in the United States. Various military regulations and directives place limits, for example, on service members’ exercise of their right to free speech and association. Recruits must indicate that they understand the military’s restrictions on personal conduct before they take the Oath of Enlistment. G. Plaintiffs’ Honorable Service and N-426 Requests 84. Plaintiffs are non-citizens eligible to apply to naturalize under 8 U.S.C. § 1440. They have signed enlistment contracts, taken the Oath of Enlistment, and are currently serving in an active duty status or in the Selected Reserve. They are serving during a designated period of military hostilities, and they are doing so honorably. 85. Plaintiff Ange Samma is a lawful permanent resident who enlisted in the U.S. Army in July 2018 and currently serves on active duty as a Private First Class (E-3). 86. Private Samma shipped to basic combat training at Fort Jackson, South Carolina in February 2019 and completed that training in April 2019. Private Samma shipped to advanced individual training at Fort Lee, Virginia in April 2019 and completed that training in July 2019. Private Samma shipped to his duty station at Camp Humphreys in South Korea on July 30, 2019, where he currently serves with the 339th Quartermaster Company. 87. Private Samma first requested his N-426 certification from his drill sergeant at basic combat training on or about March 2019. His drill sergeant told him that non-citizens used to be naturalized at basic combat training but that he would be unable to help Private Samma obtain the certification. 88. Private Samma next requested his N-426 certification from his drill sergeant at advanced individual training in April 2019. His drill sergeant informed him that because Private Samma was an active duty soldier, he would need to serve six months before he would be eligible for the N-426 certification. His drill sergeant further explained that even if he were to give Private Samma’s N-426 to an officer of O-6 pay grade to certify, because of the six-month service duration requirement, the O-6 would not certify the N-426 at that time. 89. Private Samma again requested his N-426 certification from his drill sergeant at advanced individual training on or about June or July 2019. His drill sergeant again refused to help him obtain the certification. 90. Private Samma next requested his N-426 certification from his platoon sergeant in August 2019, soon after he arrived at his duty station. Together with his platoon sergeant, Private Samma then brought the N-426 to the S-1 office, which is responsible for military personnel matters. The S-1 office informed Private Samma that he would need to obtain a memorandum and order from his company commander stating that he needed the N-426 certification before it could send the N-426 up to an officer of O-6 pay grade for certification. Private Samma obtained the memorandum and order from his company commander and submitted them to the S-1 office. 91. Private Samma received his N-426 on October 24, 2019, and sent it directly to USCIS so that USCIS could process his naturalization application. 92. On December 20, 2019, Private Samma received an email from the USCIS Field Office in Guam informing him that because his N-426 was incomplete, he would have to provide a new N-426 before his naturalization application could proceed. The office informed him that two parts of the form, Parts 5 and 6, were not completed and that the certifying official had failed to provide a date next to their signature. Part 5 requires the certifying official to indicate whether the applicant served honorably during their periods of military service. Part 6 requires the certifying official to indicate if the applicant has separated from service. 93. Private Samma submitted another N-426 for certification to the S-1 office on February 12, 2020. On April 14, 2020, Private Samma received his N-426, but the N-426 was the same as the one he previously received on October 24, 2019 with the missing information filled in. The USCIS Field Office in Guam has informed him that it will not accept this N-426 and that Private Samma must submit an entirely new N-426 certification. 94. Private Samma has still not received his N-426 certification. It has been 14 months since Private Samma began serving in an active duty status by shipping to basic combat training and he has served honorably at all times since entering service. 95. Plaintiff Abner Bouomo is a lawful permanent resident who enlisted in the U.S. Army in December 2017 and currently serves on active duty as a Private First Class (E-3). 96. Private Bouomo shipped to basic combat training at Fort Jackson, South Carolina in April 2019 and completed that training in June 2019. Private Bouomo shipped to advanced individual training at Fort Lee, Virginia in June 2019 and completed that training in October 2019. Private Bouomo shipped to his duty station at Schofield Barracks in Hawaii on October 17, 2019, where he currently serves with the 25th Infantry Division. 97. Private Bouomo first requested his N-426 certification from a civilian Army employee while undergoing in-processing at basic combat training in June 2019. The civilian Army employee refused to help him obtain the N-426 certification and gave him a memorandum stating that soldiers would have to wait until they report to their duty station to obtain the certification. The memorandum also stated that soldiers would have to have the N-426 certified by an officer of O-6 pay grade or higher in their chain of command. 98. Private Bouomo next requested his N-426 certification from his drill sergeant at advanced individual training on or about July 2019. His drill sergeant asked Private Bouomo to provide an N-426 for certification, which he did. In October 2019, as Private Bouomo was nearing his graduation, he asked his drill sergeant about his N-426 certification. His drill sergeant told Private Bouomo he had not yet obtained the certification. On the day of Private Bouomo’s graduation from advanced individual training, Private Bouomo’s drill sergeant returned his uncompleted N-426 to him and told him he would have to get it certified at his duty station. 99. Private Bouomo next requested his N-426 certification in November 2019 from the non-commissioned officer (“NCO”) above him in his chain of command. The NCO told Private Bouomo that he would send the N-426 up his chain of command for certification. In January 2020, the S-1 military personnel office informed Private Bouomo that he would have to serve one year before he would be eligible for the N-426 certification. 100. Private Bouomo has still not received his N-426 certification. It has been 12 months since Private Bouomo began serving in an active duty status by shipping to basic combat training and he has served honorably at all times since entering service. 101. Plaintiff Ahmad Isiaka is a lawful permanent resident who enlisted in the U.S. Army in January 2020 and currently serves in the Selected Reserve of the U.S. Army Reserve as a Private Second Class (E-2). 102. Private Isiaka began drilling with the 644th Transportation Company in Houston, Texas in February 2020. 103. Private Isiaka requested his N-426 certification from his Unit Administrator on or about the end of February or beginning of March 2020. His Unit Administrator refused to help him obtain the certification and told him that he had not been serving for long enough and that he would have to complete basic combat and advanced individual training before he could receive his certification. 104. Private Isiaka has still not received his N-426 certification. It has been two months since Private Isiaka began serving in the Selected Reserve by participating in Selected Reserve drills with his unit and he has served honorably at all times since entering service. 105. Plaintiff Michael Perez is a lawful permanent resident who enlisted in the U.S. Army in November 2017 and currently serves on active duty as a Private Second Class (E-2). 106. Private Perez shipped to basic combat training at Fort Jackson, South Carolina in April 2019 and completed that training in June 2019. Private Perez shipped to advanced individual training at Fort Lee, Virginia in June 2019 and completed that training in September 2019. Private Perez shipped to his duty station at Joint Base Elmendorf-Richardson in Alaska on September 26, 2019, where he currently serves with the 2nd Battalion, 377th Parachute Field Artillery Regiment. 107. Private Perez first requested his N-426 certification from his drill sergeant at basic combat training in April 2019. His drill sergeant refused to help him obtain the N-426 certification and told him that service members were no longer able to obtain the certification while at basic combat training. 108. Private Perez next requested his N-426 certification from his drill sergeant at advanced individual training in July 2019. His drill sergeant asked Private Perez to provide an N- 426 for certification, which he did. In September 2019, as Private Perez was nearing his graduation, he asked his drill sergeant about his N-426 certification. His drill sergeant informed him he would be unable to help him obtain the certification and that he should request it at his duty station. 109. Private Perez next requested his N-426 certification from his platoon sergeant at his duty station in October 2019. His platoon sergeant told Private Perez that he would have to send the N-426 up his chain of command for certification. 110. In February 2020, Private Perez’s platoon sergeant returned his uncompleted N- 426 to him and told him that his chain of command had informed him that Private Perez would have to serve one year in active duty before he would be eligible for the certification. 111. Private Perez has still not received his N-426 certification. It has been 12 months since Private Perez began serving in an active duty status by shipping to basic combat training and he has served honorably at all times since entering service. 112. Plaintiff Sumin Park enlisted in the U.S. Army in January 2017 as a lawful permanent resident and currently serves on active duty as a Private Second Class (E-2). 113. Private Park shipped to basic combat training at Fort Jackson, South Carolina in June 2019 and completed that training in August 2019. Private Park shipped to advanced individual training at Fort Lee, Virginia in August 2019 and completed that training in October 2019. Private Park shipped to her duty station at Joint Base Elmendorf-Richardson in Alaska on November 7, 2019 where she currently serves with the 2nd Battalion, 377th Parachute Field Artillery Regiment. 114. Private Park first requested her N-426 certification from her drill sergeant at advanced individual training on or about September or October 2019. Her drill sergeant refused to help her obtain the certification and told her that she should request it when she got to her duty station because seeking a signature from an officer of O-6 pay grade would take longer than nine weeks, which was the length of her advanced individual training. 115. Private Park next requested her N-426 certification from her platoon sergeant at her duty station in February 2020. Her platoon sergeant told Private Park that he would have to send the N-426 up his chain of command but that he anticipated it would take a long time for the N-426 to reach an officer of O-6 pay grade. Her platoon sergeant could not give her an estimate of how long it would take for her to receive her N-426 certification. 116. In March 2020, Private Park’s platoon sergeant returned her uncompleted N-426 to her and told her that his chain of command had informed him that she would have to serve one year in active duty before she would be eligible for the N-426 certification. 117. Private Park has still not received her N-426 certification. It has been ten months since Private Park began serving in an active duty status by shipping to basic combat training and she has served honorably at all times since entering service. 118. Plaintiff Yu Min Lee enlisted in the U.S. Army through the MAVNI program in July 2016 and currently serves on active duty as a Specialist (E-4). 119. Specialist Lee shipped to basic combat training at Fort Jackson, South Carolina in September 2019 and completed that training in November 2019. Specialist Lee shipped to advanced individual training at Fort Lee, Virginia in November 2019 and completed that training in February 2020. Specialist Lee shipped to her duty station at Schofield Barracks in Hawaii on February 24, 2020. 120. Specialist Lee first requested her N-426 certification from her drill sergeant at advanced individual training in January 2020. Her drill sergeant asked her to provide an N-426 for certification, which she did. Specialist Lee checked in with her drill sergeant about the progress of her N-426 certification several times in January and February 2020. In February 2020, her drill sergeant also asked Specialist Lee to provide a Form N-400, which is the naturalization application that goes to USCIS. Specialist Lee provided her drill sergeant with a completed N-400, at which point he informed her that because she was about to graduate, he would be unable to help her obtain the N-426 certification. While Specialist Lee was speaking with her drill sergeant, another drill sergeant came over and informed her drill sergeant that Specialist Lee would need to compete 180 days of service before she could obtain the N-426 certification. 121. Specialist Lee has still not received her N-426 certification. It has been seven months since she began serving in an active duty status by shipping to basic combat training and she has served honorably at all times since entering service. H. Defendants’ Unlawful Conduct Has Caused, and Will Continue to Cause, Substantial and Irreparable Harm to Plaintiffs 122. Plaintiffs are suffering and will continue to suffer irreparable harm due to Defendants’ actions. 123. Depriving service members of their opportunity to become naturalized citizens— an opportunity guaranteed by statute and earned through honorable military service—is an ongoing harm for which monetary damages cannot provide relief. 124. Defendants’ conduct is unlawfully depriving Plaintiffs of the opportunity to exercise the fundamental rights and benefits that accompany citizenship, including the right to vote, the right to sponsor immediate family members, and the right to travel with a U.S. passport. 125. Plaintiffs Bouomo, Isiaka, and Samma, for example, would like to exercise the right to sponsor immediate family members. Plaintiff Bouomo had hoped citizenship would offer him the opportunity to sponsor his mother, who currently resides in Cameroon. Similarly, Plaintiff Isiaka had hoped citizenship would offer him the opportunity to sponsor his mother and father, who currently reside in Nigeria. Plaintiff Samma had hoped citizenship would offer him the opportunity to sponsor his brother, who was in the United States on a non-immigrant visa until recently, for a green card through adjustment of status. His brother has since had to leave the United States because his visa was about to expire and he lacked a sponsor to obtain a green 126. Plaintiffs Bouomo, Perez, and Samma would also like to exercise the right to travel with a U.S. passport. Plaintiff Bouomo’s Cameroonian passport expired after he enlisted in the Army. In expectation of receiving his U.S. citizenship and a U.S. passport through his military service, Plaintiff Bouomo has not renewed it to date, as it would require him to travel to a Cameroonian embassy or consulate. Similarly, Plaintiff Perez’s Philippine passport expired after he enlisted in the Army. In expectation of receiving his U.S. citizenship and a U.S. passport through his military service, Plaintiff Perez has not renewed it to date, as it would require him to travel to a Philippines embassy or consulate. Plaintiff Samma is currently serving at his duty station in South Korea and when traveling there was unable to produce a U.S. passport, unlike his fellow soldiers also traveling to South Korea. Plaintiff Samma felt this difference was palpable and highlighted distinctions between himself and his fellow soldiers. 127. For some Plaintiffs, such as Plaintiffs Lee and Park, naturalization through military service would also afford protection from removal proceedings and deportation. Immigration and Customs Enforcement officials have stated in the Nio litigation that “any alien without legal immigration status in the United States is subject to removal and may be placed in removal proceedings for failing to maintain status or for any other violation of the immigration laws which would make the alien removable.” Dec. of Nathalie Asher in Supp. of Defs.’ Suppl. Mem. in Opp. to Pls’ Mot. for Prelim. Inj. ¶ 5, Nio v. U.S. Dep’t of Homeland Sec., No. 17-cv- 998 (D.D.C. Aug. 14, 2017), ECF No. 31-1. 128. Plaintiff Lee enlisted in the military through the MAVNI program as a recipient of Deferred Action for Childhood Arrivals (“DACA”). However, her DACA status and work authorization expired during her military service and she has been unable to apply for naturalization on the basis of her service because DoD has unlawfully withheld her N-426 certification. Because Plaintiff Lee lacks lawful immigration status in the United States, she lives in fear of being placed in removal proceedings and deported from this country. 129. Plaintiff Park enlisted in the military in 2017 as a conditional permanent resident. She subsequently applied to remove the conditions on her permanent resident status and obtain a Permanent Green Card. In 2019, Plaintiff Park received an interview date for her application to remove the conditions on her permanent resident status. Because the interview date was just prior to her ship-out date to basic combat training, Plaintiff Park contacted her military recruiter, who informed her that she did not have to attend the interview and that she would obtain her citizenship through the military. In reliance on her recruiter’s statement and in expectation of naturalizing through the military, Plaintiff Park did not attend the interview and, as a result, did not pursue her application. However, she is unable to apply for naturalization based on her military service because DoD has unlawfully withheld her N-426 certification, Plaintiff Park therefore lives in fear of being placed in removal proceedings and deported from this country. 130. By withholding N-426 certifications from Plaintiffs Lee and Park, DoD is not even granting these service members the modicum of protection that may accompany a pending naturalization application. 131. For service members whose lawful immigration status is in question, naturalization through military service would also allow them to petition to adjust the status of their immediate family members in the United States and to travel outside of and return to this country. Plaintiff Lee, for example, wishes to travel abroad to visit her ailing grandmother, but fears doing so would jeopardize her ability to return home to this country. Citizenship would also ensure that service members such as Plaintiffs Lee and Park can work and remain in the United States and access veterans’ benefits following their military service. 132. Service members deployed overseas, such as Plaintiff Samma, may also face risks that their U.S. citizen counterparts do not. Without U.S. citizenship, Plaintiff Samma has no right to U.S. consular services and protection. And as a foreign national, he may have different rights and vulnerabilities compared to his fellow U.S. citizen soldiers in the country where he is stationed. 133. Many service members, including Plaintiffs, dream of joining the U.S. military to put their skills to work for their adopted country and to develop skills they may use both in their military and future careers. However, the N-426 Policy has made it more difficult for Plaintiffs to advance in their careers because many roles in the military, including the more technical and senior roles as well as those requiring a security clearance, necessitate U.S. citizenship. 134. Plaintiff Lee holds a bachelor’s degree in linguistics and was eligible to join the Army as a MAVNI recruit because she speaks a language and has an associated cultural background the military deems vital to the national interest. However, her current military occupational specialty, automated logistics specialist, does not utilize the expertise for which she was recruited into the military. Plaintiff Lee would like to re-classify her military occupational specialty to an intelligence-related role and her Armed Service Vocational Aptitude Battery and General Technical test scores are high enough to qualify her for more advanced roles, including in intelligence. But many of these roles are unavailable to her because she is not a U.S. citizen. In particular, intelligence roles require a security clearance, which she cannot obtain without U.S. citizenship. The military service roles of interest to Plaintiff Lee would also come with a higher rank and pay grade. 135. Plaintiff Isiaka holds a bachelor’s degree in electrical and electronics engineering and a master’s degree in subsea engineering. He would like to apply to be an officer in the Army, for which he is eligible as a college graduate, but is unable to without U.S. citizenship. As an officer, Plaintiff Isiaka would receive a higher rank and pay grade. 136. Plaintiff Bouomo has an associate’s degree in computer science but would like to obtain a bachelor’s degree in this field and become an officer in the Army using the opportunities the military makes available to service members. To that end, he would like to apply to the Army’s Green to Gold Active Duty Option Program, which would allow him to complete his bachelor’s degree and earn a commission as an officer. However, he is unable to apply to the program without U.S. citizenship. As an officer, Plaintiff Bouomo would receive a higher rank and pay grade. 137. Plaintiff Samma was working towards his associate’s degree in electrical engineering when he enlisted in the Army. His current military occupational specialty is water treatment specialist but he would like to re-classify that role to an information technology-related one, for which he has the requisite Armed Forces Qualification Test score and which would relate to his desired career as an electrical engineer. However, the military service roles of interest to Plaintiff Samma require a security clearance, which he cannot obtain without U.S. citizenship. These roles would also come with better promotion opportunities. Plaintiff Samma was also recently selected to work at the Camp Humphreys Tax Assistance Center following a competitive process, but was told that he could not continue in the role because he lacked a security clearance. This role would have helped Plaintiff Samma attain experience that would have been useful to his future career. 138. Plaintiff Perez’s current military occupational specialty is wheeled vehicle mechanic but he would like to re-classify that role to one involving medical services, aviation, or administration. However, the military service roles of interest to Plaintiff Perez require U.S. citizenship. Some of these roles would also come with salary bonuses. 139. The deprivation of citizenship and other injuries inflicted on Plaintiffs by the N-426 Policy continue with each passing day. And every day of lost citizenship rights and benefits is a day that these Plaintiffs can never recover or be recompensed for losing. Without the ability to obtain the myriad privileges and opportunities that naturalization affords, these service members are suffering harm. CLASS ACTION ALLEGATIONS 140. The named Plaintiffs bring this action pursuant to Rule 23 of the Federal Rules of Civil Procedure on behalf of themselves and all other persons similarly situated. The named Plaintiffs seek to represent the below-described class (“Proposed Class”). 141. Proposed Class: All individuals who: (a) are non-citizens serving honorably in the U.S. military; (b) have requested but not received a certified Form N-426; and (c) are not Selected Reserve MAVNIs covered by the Kirwa lawsuit. 142. The members of the Proposed Class warrant class action treatment because they fulfill the requirements of Rule 23(a) of the Federal Rules of Civil Procedure. 143. The Proposed Class meets the numerosity requirement of Rule 23(a)(1) because the members of the class are so numerous that joinder of all members is impractical. While the exact number of class members is unknown to Plaintiffs at this time, DoD’s own statements and policy documents indicate that the proposed class would comprise several thousand service members. 144. The Proposed Class meets the commonality requirement of Rule 23(a)(2) because there are questions of law and fact common to the class, including, for example, whether DoD has a ministerial duty to complete N-426 certifications and whether the N-426 Policy, which establishes new criteria and a new procedure for N-426 certification, is contrary to law. 145. The Proposed Class meets the typicality requirement of Rule 23(a)(3) because the claims of the named Plaintiffs are typical of the claims of each of the class members. Plaintiffs and class members are similarly affected by Defendants’ wrongful conduct in violation of federal law, including 8 U.S.C. § 1440, that is described herein. 146. The named Plaintiffs will fairly and adequately protect the interests of the Proposed Class as required by Rule 23(a)(4) because their interests are identical to those of the other members of the class. Fair and adequate protection of the interests of the class will be further ensured because the named Plaintiffs are represented by competent legal counsel who are experienced in federal litigation, are undertaking representation on a pro bono basis, and have adequate resources and commitment to represent the class as a whole. Plaintiffs are committed to continuing to represent the class until their claims for declaratory and permanent injunctive relief are fully and finally adjudicated and until all eligible class members who seek to obtain N-426 certifications allowing them to apply for naturalization receive them from DoD. 147. The Proposed Class qualifies for certification under Rule 23(b)(1) because prosecuting separate actions would create a risk of inconsistent adjudications across class members. If the individual members of the class were to bring separate suits to challenge Defendants’ policies and practices, Defendants may address the claims of these individuals while ignoring the concerns of the remaining class members, thereby exacerbating Defendants’ violations of the law. Resolving this matter as a class action would also serve the Court’s interest in judicial economy by avoiding overburdening the courts with individual lawsuits brought by each of the many service members whose N-426 certifications are being withheld due to Defendants’ unlawful conduct. Alternatively, the Proposed Class qualifies for class action treatment under Rule 23(b)(2) because Plaintiffs seek declaratory and final injunctive relief. This relief is appropriate for the whole class as Defendants’ actions and/or refusals to act apply generally to the class as a whole. CLAIMS FOR RELIEF Claim I: Immigration and Nationality Act and Implementing Regulations 148. The Immigration and Nationality Act, 8 U.S.C. § 1440, provides for the expedited naturalization of non-citizens serving in the U.S. military during a designated period of military hostilities. President Bush designated a period of military hostilities beginning on September 11, 2001, which continues to this day. 149. Section 1440 and its implementing regulations impose a single requirement for non-citizens serving during wartime to apply for expedited naturalization—they must have served honorably. 150. Section 1440 and its implementing regulations mandate that DoD play a narrow, non-discretionary, and ministerial role in the naturalization process—it must certify whether a non-citizen service member has served honorably. 151. The N-426 Policy creates additional, non-statutory, substantive criteria non- citizen service members must meet before DoD will certify their honorable service under 8 U.S.C. § 1440. 152. Accordingly, the N-426 Policy violates 8 U.S.C. § 1440 and 8 C.F.R. § 329.2 as those provisions set forth the sole and exclusive applicable statutory and regulatory criteria for DoD certification of honorable service. 153. As a result of these violations, Plaintiffs and class members have suffered and will continue to suffer irreparable injury in the form of unwarranted denials and unreasonable delays of their N-426 certifications. Claim II: Administrative Procedure Act (5 U.S.C. § 706(1)) (Unlawful Withholding and Unreasonable Delay) 154. 5 U.S.C. § 706(1) authorizes a court to “compel agency action unlawfully withheld or unreasonably delayed.” 155. 8 U.S.C. § 1440 and its implementing regulations mandate that DoD play a narrow, non-discretionary, and ministerial role in the naturalization process—it must certify whether a non-citizen service member has served honorably. 156. Plaintiffs have a right to receive N-426 certifications of honorable service to apply for naturalization pursuant to section 1440 based on their current service records. 157. Through the N-426 Policy, Defendants have unlawfully withheld and/or unreasonably delayed N-426 certifications to Plaintiffs and the class contrary to the plain language of applicable law, including 8 U.S.C. § 1440. 158. As a result of these violations, Plaintiffs and class members have suffered and will continue to suffer irreparable injury in the form of unwarranted denials and unreasonable delays of their N-426 certifications. Claim III: Administrative Procedure Act (5 U.S.C. § 706(2)) (Arbitrary and Capricious; In Excess of Statutory Jurisdiction or Authority) 159. The Administrative Procedure Act, 5 U.S.C. § 706(2)(A), authorizes a court to hold unlawful and set aside final agency action found to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law, or in excess of statutory jurisdiction or authority. 160. The N-426 Policy is arbitrary and capricious because DoD did not provide any statement of the basis or purpose for the policy and it cannot provide a valid rationale for the 161. The N-426 Policy is also not in accordance with law and is in excess of statutory jurisdiction or authority because it violates the INA and its implementing regulations and exceeds DoD’s narrow, non-discretionary, and ministerial duty to certify the honorable service of non-citizens serving during wartime pursuant to 8 U.S.C. § 1440 and its implementing regulations. 162. As a result of these violations, Plaintiffs and class members have suffered and will continue to suffer irreparable injury in the form of unwarranted denials and unreasonable delays of their N-426 certifications. Count IV: Administrative Procedure Act (5 U.S.C. § 553) (Notice and Comment) 163. The Administrative Procedure Act, 5 U.S.C. § 553, requires administrative agencies to provide a notice and comment period prior to implementing a substantive rule. 164. The N-426 Policy constitutes a substantive agency rule within the meaning of 5 U.S.C. § 551(4). 165. Defendants failed to provide a notice and comment period prior to adopting and implementing the N-426 Policy. 166. Because the N-426 Policy is a substantive rule promulgated without the notice and comment period, it violates 5 U.S.C. § 553 and is therefore invalid. 167. As a result of these violations, Plaintiffs and class members have suffered and will continue to suffer irreparable injury in the form of unwarranted denials and unreasonable delays of their N-426 certifications. PRAYER FOR RELIEF Plaintiffs, on behalf of themselves and the class, respectfully request that the Court: a) Certify the case as a class action as proposed herein; b) Appoint Plaintiffs as representatives of the class and Plaintiffs’ counsel as Class Counsel; c) Declare the N-426 Policy violates the INA and the APA; d) Order Defendants to set aside the N-426 Policy; e) Enjoin Defendants from withholding certified Form N-426s from Plaintiffs and class members pursuant to the N-426 Policy; f) Enjoin Defendants from withholding certified Form N-426s from Plaintiffs and class members who have served honorably for one day or more, except where a Plaintiff or class member has not served honorably as reflected in that individual’s service record and based on sufficient grounds generally applicable to all members of the military; g) Order Defendants to use their best efforts to certify or deny Form N-426s within two business days of receipt of the Form N-426 from a service member; h) Order Defendants to authorize all military personnel authorized to certify Form N-426s prior to the N-426 Policy to certify Form N-426s; i) Enjoin Defendants from discharging or separating Plaintiffs and class members pending completion of their Form N-426s and processing of their naturalization applications, except as related to the conduct of an individual service member and based on sufficient grounds generally applicable to all members of the military; j) Award Plaintiffs and the class costs, expenses, and reasonable attorneys’ fees, including under the Equal Access to Justice Act; and k) Award such further relief as the Court deems just or appropriate. Dated: April 28, 2020 Respectfully submitted, /s/ Jonathan Hafetz Jennifer Pasquarella Michelle (Minju) Cho American Civil Liberties Union Foundation of Southern California 1313 West 8th Street Los Angeles, CA 90017 (213) 977-5236 [email protected] [email protected] Jonathan Hafetz (D.D.C. Bar No. NY0251) Scarlet Kim Noor Zafar Brett Max Kaufman (D.D.C. Bar. No. NY0224) American Civil Liberties Union Foundation 125 Broad Street, 18th Floor New York, NY 10004 (212) 549-2500 [email protected] [email protected] [email protected] [email protected] Arthur B. Spitzer (D.C. Bar No. 235960) American Civil Liberties Union Foundation of the District of Columbia 915 15th Street, NW, 2nd Floor Washington, DC 20005 (202) 601-4266 [email protected] Counsel for Plaintiffs

civil rights, immigration, family

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IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF OKUAHOMA filed m 1 9 2020 THE NOLC, INC. and other similarly situated 2307 Britten Drive Mark C. McCa^, Clerk U.S. DISTRICT COURT Dallas, Texas 75216 BRUCE CARTER and others similarly CIVIU ACTION situated 2307 Britton Drive Dallas, N' Texas 75216 ivj_L o20 CV -294GKF -JFJ Plaintiffs, JURY TRIAL DEMANDED THE UNITED STATES OF AMERICA SERVE ON: William P. Barr, Esq. Attorney General of the United States United States Department of Justice 950 Pennsylvania Ave NW Washington, DC 20530-0001 THE UNITED STATES SMALU BUSINESS ADMINISTRATION SERVE ON: Chris Pilkerton, Esq. Office of General Counsel 409 3rd Street SW Washington, DC 201416 JOVITA CARRANZA, in her Official Capacity as Administrator of the Small Business Administration SERVE ON; Office of General Counsel 409 3rd Street SW Washington, DC 201416 STEVEN MNUCHIN, in his Official Capacity as United States Secretary of the Treasury SERVE ON: United States Department of the Treasury Office of General Counsel 1500 Pennsylvania Ave NW Washington, DC 20220 Defendants. CLASS ACTTON COMPT ATNT Amid our country's handling of the novel coronavirus pandemic, the United States government enacted an extraordinary piece of legislation attempting to inject trillions of dollars into our economy. As part of this legislation, the Small Business Administration, in conjunction with the Department of Treasury, doled out nearly $350 billion to "small" businesses (those with less than 500 employees). However, our government left many small businesses in the lurch. A vast majority of minority-owned and woman-owned businesses were entirely shut out of this program by the actions taken by the government. While many larger businesses were able to rush to banks to take advantage of the opportunity to participate, most of the minority- owned and woman-owned small businesses were never even given the opportunity to submit an application for the program before the money ran out. Moreover, to the extent these minority-owned and woman-owned businesses were even able to participate, many of them would receive far less benefit from the program than other businesses. This is a direct result of the government's discriminatory actions. Plaintiffs, The NOLC, Inc. ("Plaintiff NOLC") and Bruce C. Carter ("Plaintiff Carter"), bring this lawsuit on behalf of themselves and others similarly situated against the U.S. Small Business Administration ("Defendant SBA"), Jovita Carranza ("Defendant Carranza") in her official capacity as Administrator of Defendant SBA, the United States of America (the "USA"), and Steven Mnuchin ("Defendant Mnuchin") in his official capacity as Secretary of the Treasury (collectively, the "Defendants") seeking all available relief under the equal protection of the Fifth Amendment, and state as follows: 1. TNTROniirTfON This lawsuit seeks to uphold the core of America "Life, Liberty and The Pursuit of Happiness. It is Plaintiff s belief that the US Small Business Administration (SBA) egregiously and lawlessly failed to protect Underserved and Rural community small businesses from financial hardships due to COVlD-19. The US federal government passed H.R. Bill 748 C.A.R.E.S. ACT with the intent of preserving the thirty million small businesses in America according to SBA. Despite SBA's full knowledge of America's 30 million small businesses it failed to provide guidelines that would ensure processing and disbursement of Paycheck Protection Program funds and metered EIDL grants. EIDL grants according to the bill were to provide emergency assistance up to $10,000.00 to small businesses within 3 days after application. Despite information from a coalition of small businesses and congress that guidelines as of April 10th were failing socially and economically business owners, SBA as of June 19th has not provided guidelines to protect the existence of said businesses. It was the Sense of the Senate in the C.A.R.E.S ACT that the SBA Administrator provides agents with guidelines that protect small businesses. The Sense of Senate states: "It is the sense of the Senate that the Administrator should issue guidance to lenders and agents to ensure that the processing and disbursement of eovered loans prioritizes small business concems and entities in underserved and rural markets, including veterans and members of the military community, small business concems owned and controlled by socially and economically disadvantaged individuals (as defined in section 8(d)(3)(C)), women, and businesses in operation for less than 2 years." Failure to comply with the Sense of the Senate has led to underfunding or non-funding for the most vulnerable small businesses. Without guidance, lenders have been allowed to circumvent the law and discriminate against certain groups. 1. On March 27, 2020, President Donald J. Trump signed the Coronavirus Aid, Relief, and Economic Security Act, H.R. 748 ("CARES Act") into law. This legislation created a new Paycheck Protection Program ("PPP") to permit COVID-19-impacted small businesses (under 500 employees), nonprofits, and individuals to obtain loans via the 7(a) Loan Program ("PPP Loans"). The CARES Act temporarily (from February 15,2020 through June 30,2020) increased the total 7(a) Loan Program amount to $349 billion. 2. During a time of national and global crisis. Defendants were given the unique and tremendous charge of providing relief to small business owners through administration of these small business loans pursuant to the PPP. Yet, Defendants chose to pick winners and losers - the winners being non-minority and non-woman owned small businesses. 3. Defendants failed to appropriately protect the interests of a large part of this country's economic engine - sole proprietorships, ^ self-employed individuals, or independent contractors ("Non- employer Businesses") - by giving preference to businesses who maintained W-2 employees on payroll. In fact, Defendants knowingly, intentionally, and illegally discriminated against minority-owned and woman- owned Non-employer Businesses. 4. Defendants exacted this scheme by preventing Non-employer Businesses, which are disproportionately owned by minorities and women, from submitting applications and failing to provide ' A limited liability company (or LLC) that does not make a simple S-Corp election is treated, for tax purposes, as a sole proprietor guidance to allow for the processing of loans for Non-employer Businesses. By the time, the Defendants allowed these Non-employer Businesses to submit applications, the money was gone — nearly $350 billion. IL FARTTES 5. Plaintiff NOLC, Inc. is a Non-Profit entity organized on February 27, 2020 under the laws of the state of Texas. NOLC is Social Welfare Organization It is operated by Bruce Carter who is an individual residing in Dallas, Texas. This entity is solely minority owned and operated. 6. Plaintiff Bruce C. Carter is an individual who has dedicated the last 20 years working in underserved communities all across America. He is an African American man who currently resides in Dallas, Texas. 7. Defendant Jovita Carranza is the current administrator of the United States Small Business Administration and has been in this position throughout the entirety of the relevant time period. 8. Defendant SBA is a government department organized under the laws of the United States of America whose purpose is to provide service and support to small businesses in the United States. Per its website, Defendant SBA "has worked to ignite change and spark action so small businesses can confidently start, grow, expand, or recover." 9. Defendant Mnuchin is the Secretary of the Treasury and has been in this position throughout the entirety of the relevant time period. III. JITRISDICTION AND VENUE 10. The subject matter jurisdiction of this Court is invoked pursuant to 28 U.S.C. § 1331 as this is a civil action arising under the Constitution and laws of the United States; specifically, these claims arise pursuant to 42 U.S.C. § 1983. 11. Venue lies in this District pursuant to 28 U.S.C. § 1391 (e) as this is a judicial district in which the Plaintiffs reside. IV. FACTS A. Facts Common to All 12. The CARES Act is the largest economic relief bill in United States history. As enacted, the CARES Act allocates $2.2 trillion to support individuals and businesses that are affected by the COVID- 19 pandemic wreaking havoc on the global economy. 13. The CARES Act expanded the eligibility criteria for borrowers to qualify for SBA loans through the institution of the PPP. The PPP was purportedly made available to small businesses with payroll employees, eligible non-profit organizations, veterans' organizations, and tribal businesses per the Small Business Act. 14. The PPP was also intended to be made available to self-employed individuals, sole proprietors, and independent contractors. 15. The CARES Act does not specify as to when and how the PPP funds would be distributed, nor does it provide enough guidance or criteria as to how recipients of PPP funds would be determined. This was left to the discretion of Defendants and their employees and officers. 16. Defendants were tasked with the implementation of the PPP and were also responsible for issuing guidance to assist potential borrowers in successfully completing and submitting loan applications. 17. Defendants were also in charge of deciding when the application process would open, and to whom it would be available. Pursuant to this. Defendants scheduled two separate application periods for the PPP loans. 18. The first application period began on Friday, April 3, 2020. This application period was specifically designated for businesses with up to 500 W-2 employees. 19. The second application period began one week later, Friday, April 10, 2020. This application period was designated for Non-employer Businesses. These individuals and entities were prevented from submitting PPP loan applications or otherwise accessing the allocated funds before Friday, April 10, 2020. In addition, the guidance for these loan applications was not released until late in the day on Tuesday, April 14, 2020 -- practically not allowing the Non-employer Businesses to apply until Wednesday, April 15, 2020. 20. Defendants did not provide any explanation or policy reasoning to justify the separate application periods. 21. On or about April 16, 2020, Defendant SBA announced on its website that it is "unable to accept new applications for the Paycheck Protection Program "PPP" based on available appropriations funding. Similarly, we are unable to enroll new PPP lenders at this time." The general consensus on this announcement is that the PPP funds had been exhausted, and there was no more money available to fund PPP loans for any individual or entity. 22. The first wave of applicants, businesses with payroll employees, was given a 14- day window of opportunity to apply for the PPP loans before the funds were exhausted. In contrast, the second group. Non-employer Businesses, only had a onp-day window to apply before the funds were exhausted. Defendants knew that discriminating against Non-employer Businesses would 4 disproportionately harm businesses owned by minorities and women. 24. 9.9 million firms in the United States were owned by women, with 89.5% of those being 5 Non-employer firms. https://home.treasury.gOv/system/files/l36/Interim-Final-Rv|le-AdditionaI-Eligibility-Criteria-and-Requirements- for-Certain-PIedges-of- Loans.pdf https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources (accessed as of4/16/2020) ^ https://www.sba.gov/sites/default/files/advocacy/Non-employer-Fact-Sheet.pdf; https://www.mbda.gOv/sites/mbda.gov/files/migrated/files-attachments/SBO_Facts_BOB.pdf; https://www.mbda.gov/sites/mbda.gov/files/migrated/files-attaehments/Black%20Women%20Entrepreneurs.pdf ^ https://www.census.gov/newsroom/prcss-relcases/2015/cb 15-209.html 25. Approximately 79% of all white-owned businesses and 96% of black-owned businesses are Non-employer, respectively. "Non-employer businesses. Play a larger role amongst black-owned businesses than they do amongst white-owned businesses. 26. It has been widely reported by many congressional leaders that this very discrimination has occurred in the implementation of the PPP. B. Facts Specific to Plaintiff NOLC, INC. 27. Plaintiff NOLC ("Plaintiff NOkC" or "the business") is a Non-Proflt Corporation, organized on February 27, 2020 under the laws of the state of Texas. Plaintiff NOLC is operated by Bruce Carter ("Mr. Carter") who is an individual residing in Dallas, Texas. 28. NOLC has not filed a tax return. 29. Plaintiff NOLC is a Non-Profit Organization that is a Social Welfare Organization that addresses Civil Rights by tackling systemic, economic, judicial, and political oppression. 30. Plaintiff NOLC business model is year-round. 31. All of the business activities that Plaintiff NOLC planned to host have either been cancelled or indefinitely postponed due to the COVID-19 pandemic and social distancing policies enacted by state and local and federal governments. Plaintiff NOLC's only current source of revenue is its potential donations online, which are inadequate for operations. 32. Plaintiff NOLC applied for a PPP loan through Simmons Bank on April 4, 2020. Plaintiff NOLC had and continues to have an ongoing banking relationship with Simmons Bank. Plaintiff NOLC applied for the relief funds under Simmons Bank's PPP application process. 33. At the time Plaintiff NOLC applied, the PPP application required the applicant to upload its payroll records. Plaintiff NOLC does not have any employees, and thus there were no payroll records to submit. Plaintiff NOLC completed the application without submitting any payroll records. On April 4,2020, ^ Bruce Carter, Entering Entrepreneurship: Racial Disparities in the Pathways into Business Ownership, October 2019 (https://socialequity.duke.edu/wp- content/uploads/2019/10/Entering-Entrepreneurship.pdf); citing US Census 2012 Survey of Business Owners (https://www.census.gov/library/publications/2012/econ/2012-sbo.html) Plaintiff NOLC received acknowledgement that its application had been received. 34. On April 16, 2020, Plaintiff NOLC received additional correspondence from Simmons Bank stating that the fiinds had been exhausted. 35. On April 23, 2020, Plaintiff NOLC received a telephone call from Carole Davis, Senior Vice President of Simmons Bank indicating that Simmons Bank Management had approved the processing of Ihe loan with a required letter from SBA. NOLC spoke with Derenda Fisher at SBA and she stated she could not provide a letter, however if Plaintiff had paid invoices or had contracts, that was sufficient as to conducting business. Carter emailed both Derenda Fisher and Carole Davis on April 29,2020 (See Exhibit 5, attached hereto and incorporated by reference herein for all intended piuposes.) 36. On May 12, 2020 Lori S. Baldock, President of Simmons Bank, Fort Worth, Texas Market informed the NOLC that Simmons Bank was unable to approve the Applicant's request for a PPP Loan. As of the date of the filing of this Complaint, Plaintiff NOLC has not received any funding under the C.A.R.E.S. ACT. 37. Facts Specific to Plaintiff Bruce C. Carter 38. Plaintiff Bruce C. Carter ("Plaintiff Carter") is an individual currently residing in Dallas, 39. Since 2000, Plaintiff Carter has owned and operated small businesses in the following industries. Real Estate Development, Logistics and Educational Services. Plaintiff Carter operates his business out of commercial offices in Dallas, Texas and Washington, D.C. 40. On March 31, 2020 Plaintiff Carter had filed for the EIDL Emergency Grants requesting $10,000.00 for each application. Applications were filed for the following businesses, NOLC, Inc., Bruce C. Carter and Value of A Life. On May 4, 2020 Plaintiff made another EIDL Grant application for his business. Opportunity Centers of America and all applications were denied or not funded. 41. Plaintiff Carter's businesses requires regular face-to-face meetings with both current and potential clients. Plaintiff Carter is often required to travel to clients' homes or businesses to meet with them. 9 Plaintiff Carter also regularly attends seminars, networking events, and marketing events in order to sustain and build his business, as well as to meet potential clients. 42. Since the COVID-19 pandemic has escalated the across the country, Plaintiff Carter has experienced a substantial decrease in business revenue such that he has reported no income for the First and Second Quarters of 2020. 43. This decline is directly attributable to the COVID-19 pandemic and social distancing policies enacted by state, local and federal governments. Plaintiff Carter is no longer able to meet with clients in person, and most of his business cannot be effectively conducted over the phone or via videoconferencing. Plaintiff Carter cannot bring in new clients, nor can he generate income through existing ones. Most of Plaintiff Carter's clients are not in a position to afford to pay his fees under the current economic conditions. 44. Plaintiff Carter learned of the EIDL Grant program on March 27, 2020. He made qplicadon directly to SBA March 31,2020 and on May 4,2020. 45. Plaintiff Carter factually believes SBA retaliated against him for a letter dated April 6,2020 (See Exhibit 1, attached hereto and incorporated by reference herein for all intended purposes.) written to SBA Administrator Jovita Carranza requesting guidelines that would ensure processing of loans and disbursement of funds to conununity small businesses in compliance with HR BILL 748 and or C.A.R.E.S. ACT 2020. On April 9, 2020 (See Exhibit 2, attached hereto and incorporated by reference herein for all intended purposes.) Plaintiff Carter made a Press Release challenging the SBA Administrator Jovita Carranza for not instituting guidelines that would protect African Americans. Mr. Carter's April 9, 2020 Press Release caused Congress to write the SBA Administrator Jovita Carranza on April 10, 2020 (See Exhibit 3, attached hereto and incorporated by reference herein for all intended purposes.) requesting that SBA issue final guidance on allowing applicants to determine the amount of the EIDL Grant for $1,000.00 and up to $10,000.00 of the applicant's choice. Plaintiff Carter issued a fourth and final letter to SBA Jovita Carranza on April 26, 2020 (See Exhibit 4, attached hereto and incorporated by reference herein for all 10 intended purposes.) requesting guidelines she issued to protect and prevent discriminatory practices against African Americans and Hispanic Community. Finally, Plaintiff Carter felt it necessary to lead protest against SB A in five different States to include Texas, Illinois, Michigan, Ohio, and Georgia. 46. As of the date of the filing of this Complaint, Plaintiff Carter has not received any funding for his companies or any companies where his name is attached through the EIDL Grants. V. CLASS ATJ.FGATTONS 47. Plaintiff bring this claim for violations of Plaintiffs' rights to equal protection under the Fifth Amendment to the United States Constitution pursuant to Federal Rule of Civil Procedure 23 on behalf of: All minority and woman-owned non-employer businesses. 48. Upon information and belief, there are millions of minority and woman-owned, non- employer businesses that have suffered discrimination based on the guidelines set forth by the SBA prohibiting such businesses from applying for the PPP program contemporaneously with its employer counterparts. 49. Plaintiffs are class members, and Plaintiffs' legal claims are typical of the claims of other class members. Plaintiffs have no interests that are antagonistic to, or in conflict with the interests of other class members. 50. Plaintiffs will fairly and adequately represent the class and all interests, and they have retained competent and experienced counsel who will effectively represent the interests of the entire class. 51. Questions of law and fact are common to the class, and include whether the SBA's guidelines had a disparate impact on minority and women-owned small businesses. 52. Class certification is appropriate under Federal Rule of Civil Procedure 23(b)(3) because common questions of law and fact predominate over any questions affecting only individual class members, and because a class action is superior to other available methods forthe fair and efficient adjudication of this litigation. The damages suffered by individual class members are small compared to the expense and burden of individual prosecution of this litigation. In ^4ditipn, class certification is superior because, inter alia, it 11 will obviate the need for unduly duplicative litigation, which might result in inconsistent judgments about Defendants' guidelines and actions. 53. Members of the proposed class are readily ascertainable, as the United States government and its agencies regularly collect and maintain information regarding minority-owned and woman-owned Non-employer Businesses. 54. This action satisfies the numerosity, typicality, adequacy, predominance and/or superiority requirements under applicable law. 55. 8 million firms in the United States were owned by minorities in 2012, with 88.6% of those being Non-employer Businesses. 9.9 million firms in the United States were owned by women, with 89.5% of those being Non-employer Businesses. As result, the class is so numerous that joining all members in a single action is impracticable. The disposition of these claims will provide substantial benefit to the class. 56. Commonality/Predominance. There is a well-defined community of interest and common questions of law and fact, which predominate over any questions affecting only individual members of the class. Plaintiffs' claims are about the SBA's discrimination against minority-owned and woman-owned Non-employer Businesses through its guidelines issued to govern the PPP loan program. Common legal and factual questions, which do not vary among members of the class, and which may be determined without reference to the individual circumstances of class members, include, but are not limited to: a. Whether Defendants' actions in prohibiting sole proprietors, self-employed, and independent contractors from applying with the other small businesses with less than 500 employees were discriminatory against minority-owned and woman-owned Non-employer Businesses? b. Whether Defendants' actions in prohibiting sole proprietors, self-employed, and independent contractors from including expenses such as retirement, health insurance, and other expenses in calculating the total loan amount were discripiinatory against minority-owned and woman-owned Non- employer Businesses? c. Whether Defendants' actions in reducing the forgivable portion of the loan only for sole 12 proprietors, self-employed, and independent contractors to eight weeks of net profits based on the fact that the SBA believes "many such individuals operate out of either their homes, vehicles, or sheds and thus do not incur qualifying mortgage interest, rent, or utility payments" were discriminatory against minority- owned and woman-owned Non-employer Businesses? (emphasis added). 57. Typicality. The representative Plaintiffs' claims are typical of the claims of the class. The Plaintiffs are each minority owned Non-employer Businesses. Plaintiff Infinity is also a woman-owned Non-employer Business. The only difference among class members will be the amount of damages sustained by the members of the class, which does not affect liability and does not bar certification. 58. Adequacy of Representation. Plaintiffs will fairly and adequately protect and pursue the interests of the members of the class. Plaintiffs understand the nature of the claims herein, and its role in these proceedings. They will vigorously represent the interest of the class. Plaintiffs have retained class counsel who are experienced and qualified in employment and complex eases. Neither Plaintiffs nor its attomeys have interests which are contrary to or conflict with those of the class. 59. Superiority/Manageability. A class action is superior to all other available methods for the fair and efficient adjudication of this action. There are millions of minority-owned and women-owned Non- employer Businesses subject to the Defendants' discriminatory practices and guidance. Individual litigation of the claims of class members is economically unfeasible and proeedurally impracticable. The individual damages incurred by each member of any class resulting from Defendants' common and systemic wrongful conduct likely will be too small to warrant the expense of individual suits. Further, the Court would be unduly burdened by individual litigation of eases raising the same common questions. Individualized litigation would also present the potential for varying, inconsistent, or contradictory judgments and would magnify the delay and expense to all parties and to the Court resulting fi:-om multiple trials of the same factual and legal issues. 7 https://home.treasury.gov/system/files/136/Interim-Final-Rule-Additional-Eligibility-Criteria-and-Requirements- for-Certain-Pledges-of- Loans.pdf 13 COUNT I VIOLATION OF THE FIFTH AMENDMENT TO THE U.S. CONSTITUTION EQUAL PROTECTION 60. Paragraphs 1 to 58 are incorporated as though fully set forth herein. 61. Plaintiffs and class members are individuals or entities entitled to protection under the U.S. Constitution. 62. The guidance provided by Defendants for implementation of the CARES Act violated and was contrary to the Fifth Amendment of the U.S. Constitution because it discriminated against Non- employer Businesses based on race and gender. 63. The SBA's guidance blocked minority-owned and woman-owned Non-employer Businesses from having a fair chance to apply, and in some cases out right prohibited application, for the PPP loan under the CARES Act, while it allowed larger, non-minority and non-woman. 64. As mentioned previously, 8 million firms in the United States were owned by minorities in 2012, with 88.6% of those being Non-employer Businesses. 9.9 million firms in the United States were owned by women, with 89.5% of those being Non-employer Businesses. 65. The SBA knew full well the discriminatory impact the guidance would have on those minority and woman-owned Non-employer Businesses, which was a motivating factor for setting forth the guidance. 66. As a direct and proximate result of the unconstitutional guidance, Plaintiffs have suffered and will continue to suffer irreparable injuries inclu4ing but not limited to financial ruin, business ruination, and the violation of the rights protected by the Fifth Amendment of the United States Constitution. 14 IMPACT STATEMENT The Plaintiffs are requesting $150 Billion to ensure that 2 Million U.S.A. Community Small Business doors remain open after COVID-19 is no longer a threat. These businesses are in Undeserved and Rural Markets and not funded in two rounds of funding under the C.A.R.E.S A.CT. The most neglected groups of Community Small Businesses have been barbers, hairstylist, local bars, mom and pop restaurants, restaurant servers, barbershop owners, salon owners, small churches, youth organizations, small non-profits, massage therapists, promoters, rideshare drivers and gig workers such as artists, actors, comedians, and music artists. The requested fiinds will provide up to $75,000.00 in assistance for each business. The necessary services to develop a solid economic foundation for each company will be covered in the funds allocated for each company. Some of the services would include Accounting, Bookkeeping, Payroll Protection, Insurance, Marketing, and a Business Manager/Coach. The business manager/coach's mission is to ensure once the business has is Rescued, Restored, and Recovered, it will sustain itself. 15 PRAYER FOR RET JFF WHEREFORE, Plaintiffs and the class seek the following relief: a. An order certifying the proposed class pursuant to Fed. R. Civ. P. 23; b. grant judgment against Defendants, jointly and severally, in favor of Plaintiffs and the class for all damages suffered by Plaintiffs and the class, including pre-judgment and post- judgment interest; c. litigation costs, expenses, and attorneys' fees to the fullest extent permitted under the law; d. such other and further relief as this Court deems just and proper. Dated: June 19, 2020 Respectfully submitted, /s/ Robert W. Haiees Robert W. Haiges, OB#17196 ROBERT W. HAIGES P.C. P. 0,1187 Edmqpd, Ok. 73083 405-478-1188 - Telephone 405-478-5501 - Facsimile [email protected] -Email Counsel for Plaintiffs .HJRY DEMANDED Plaintiffs demand a jury trial as to all claims so triable. 16 COHHUNmr SMAU BUSINESSES Bruce Carter Coalition Spokesperson [email protected] April 6th, 2020 The Honorable Jovita Carranza Mrs. Administrator of the US Small Business Administration 409 Third Street, SW Washington, DC 20416 Dear Administrator; Rescuing Community Small Business is a national coalition led by business professionals, 501C(3)'s and 501 C(4) founders. Our mission as it relates to COVlD-19 is to reduce any potential discriminatory practices and total disregarding of the Sense of The Senate in H.R. 748 the C.A R.E.S ACT as it relates to ensuring the processing and disbursements of loans in underserved and rural markets, and small business concerns owned and controlled by socially and economically disadvantaged individuals, women, and businesses in operation for less than 2 years. The coalition understands that the Community Small Business (CSB) must have its own rescue, recovery and restoration package in order to survive this unprecedented crisis caused by COVlD-19. The coalition classifies a Community Small Business as a business with 1 to 10 employees, annual revenues under $800,000 00 and generally serves its customers weekly. CSB's are historically located in urban underserved census tracts, rural communities and zip codes with high levels of poverty CSB's must have a different guideline to qualify for GOVID-19 Economic Injury Disaster Loans via the 2020 Coronavirus stimulus package. Based on traditional guidelines and practices CSB's will not receive funding if the guidelines are not adjusted. This non-action would be equivalent to handing down a DEATH SENTENCE to someone that hasn't committed a crime. CSB's typically employ the unemployable or jrovide income opportunities for the homeless and individuals suffering from addictions or mental illnesses Simply put, allowing one to pick up the trash, sweep the business floor, take out the trash or provide overnight security makes many communities function harmoniously. Additionally, they are the backbones to local youth organizations and community activities. In the event CSB's are left behind it will create higher crime rates, increase poverty, civil unrest within these communities and many will bypass recession and suffer the worst depression in America's history. The bottom line is once America recovers from COVID-19 these businesses will remain closed forever unless we stand up for them now!!! CSB's owners normally vyork 60 to 80 hours per week but lack marketing and management training causing the business too often survive on a weekly basis Benefiting CSB s will be required to keep their staff intact, 3465 Buffington Center' Atlanta, GA 30349 provide community services where applicable, participate in financial literacy and business development training. The CSB coalition believes these requirements will provide a solid foundation and enhance the ability to repay any loan. CSB Coalition has built a top tier level of community partners which includes; financial institutions, attorneys, accountants, and professional service providers, young adults ages 16-25, restaurant servers, barbers, hairstylists, and overcomers. In order to have a positive impact on America's underserved and rural communities during this uncertainty of economic conditions due to COVID-19, one of our CSB's wrww.iTHINKSoiutions.us has developed a methodology that will do the following on a national level: 1. 458,000 Full-Time jobs protected or created 2. 1,500,000 Part-time/ seasonal jobs protected or created 3. 100,000 Food Production Centers aka (Mom and Pop Restaurants) 4. 200,000,000 Daily Meal Production Capacity / Delivery 5. 100,000,000 Americans Served Daily Additional Benefits: 1. National Food Access Supply Chain that will serve ail 2000 plus counties in America 2. Keep Community Small Businesses Doors Open 3. Protect CSB Workforce 4. Create New Jobs 5. Infusion of cash in multiple industries such as retail, rental cars, hotels, and several others 6. Assist with Outreach, Technical Assistance, Training, Processing and Packaging of loans 7. Addressing the mental needs of 2020 High School Seniors 8. Assist in flattening the curve and starving COVID-19 9. Assist with 2020 Census Hard To Count 10. Reduce Domestic Violence and Criminal Activities There is no rural dirt road we are not prepared to travel nor an urban community we are afraid to serve. All we need are the resources to fulfill the mission and unite America. The CSB coalition respectfully requests the opportunity to expeditiously discuss our proposal with you at this unprecedented time in the lives of all Americans. Sincerely, ^AiACL. CaAikA. Bruce Carter CSB Spokesperson 202-907-1760 Direct Cell I ' ^ COHHDHITV SMAU BUSINESSES Bruce Carter Coalition Spokesperson bcarter@csbcoalition com FOR IMMEDIATE RELEASE WEDNESDAY, APRIL 09, 2020 COVlD-19 COULD HAVE SLAVERY AMD l\/IASS INCARCERATiON LIKE EFFECT ON AFRICAN AlVIERlCANS The fact that socially and economically disadvantaged African Americans are dying of COVlD-19 does not shock those that are on the ground Before data being released by government agencies on the disparities in deaths, SBA Administrator Jovita Carranza was sent a letter on April 06, 2020, requesting she ensure that community small businesses not be discriminated against as it relates to PPP loans. The discrimination of community small businesses would remove any chance of connecting with and educating younger and poor African Americans on the importance of social distancing. Community Small Businesses located in underserved urban cores and rural communities can connect directly with the people. Some Community Small Businesses such as Barber Shops. Hair Salons, Smaller Non-Profits, Mom and Pop Restaurants, are vital in flattening the curb and saving lives. Unfortunately, they must have a different set of guidelines to qualify and receive funding via H.R. 748. The current guidelines demonstrate a disconnect between the current Administration and America's Community Small Businesses. Any non-action by the SBA would be equivalent to handing down a DEATH SENTENCE to someone that hasn't committed a crime. When a barber goes to cut hair at someone's home to make money, community spread will happen, and death is imminent. httpsT/www.vi/itv coin/news/biookhaven-man-dies-of-covid-19-familv-pleads-for-social- distancino-practice/ As of 4/09/2020, not one African American Community Small Business had received an EIDL Loan Advance or Paycheck Protection Program (PPP) Loan. In cities like Philadelphia. Baltimore, Atlanta, Jackson, Mississippi, and other cities with a high African American population on the rise, the body count could be unconscionable. 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'Sia>|JBUJ ibjiij puB sbbjb paAjasjapun iBq} Buunsua uo sasnooj aouBjUB aqi (jloiigrtss of file llniferi States lHasliinrilmi, 301 2D5I5 £^hihrt 3 April 10.2020 The Honorable Jovita Carran/a Administrator Small Business .Admini.stration 400 3rc! Street. SW The Hononible Sicven Mnuchin Secretary U.S. Department of the Treasury 1500 Pcnn.sylvania Avenue, NW Washinaton. DC 20416 Washinaton. DC 20220 Dear Secretary iVlnuchin and .Administrator Carran/.a. The City ofNew York's small businesses and entrepreneurs are suflcring immensely as a result of the Coronavirus (COVID-19). Since March 22. New York has,been under a statewide stay-at- home order to slow the spread of the novel Coronavirus to help Ilatten the curve. 1 his order effectively shuttered all non-essential small businesses throughout the city, in New York, 98 percent of all businesses are small, with fewer than 100 employees, and 89 percent are very small employing fewer than 20 individuals. The impact of the pandemic on our local economy is dire and can be seen in the 810,000 unemployment claims m:\dc by New Yorkers since March 9'''.' To address the unprecedented challenges facing small businesses. Congress pas.sed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. a S2.2 trillion stimulus bill, which contains funding for a wide range of programs designed to help respond to the economic downturn caused by the COVID-19 pandemic. Specific to the SBA and our small business owners. Congre.ss created a new loan forgiveness program and grants to help keep small businesses alloat during this unprecedented crisis. The Paycheck Protection Program ( PPP) received S.149 billion in funding to inject into our nation's struiitzlinu small businesses, fhe program will provide forgivable, low-interest loans to small businesses to pay employees, keep them on the payroll, and keep the businesses viable. To that end. Consress created basic requirements, including eligibility, loan size, and forgiveness criteria, to reach small businesses as quickly as possible while tiLso providing lenders with the tools they need to deliver this vital support. The CARE.S Act also created a new. immediate disaster grant at the SBA. Using the current economic injury disaster loan (EIDL) program, these grants were designed and intended to deliver a quick infusion of capital, based simply on applicants self-certifying that they are eligible. Further, ttrant recipients arc not precluded from applying for PPP loans or continuing to pursue disaster loans. Edwards. Jesse. "N't' l.auiichinu New UiK-mpkwiiicnl Site l iiat Won't Rcijuirc Phono C all. 200!v Nh ers Still in Limbo". NBC New York, accessed on April 'J. 2620. wva)jHWu_\oi:LoiiiU2^ uneninlovmcnt-sne-iliat-does!it-reMtiire-nhonc-call-nuirc-ilian-200k.-ncu;\od^:s::NUlE^>'Ji'jc.^»2eji^ We are concerned that these programs are not being implemented as Congress intended. Beginning on Tuesday, March 31"", the SB A and the Treasury Department posted guidance on their websites to implement the PPP.^ Since then, due to the lack of formal Standard Operating Procedures, borrowers and lenders have been forced to rely on an incomplete and ever-changing list of questions and answers issued by your agencies. Unfortunately, this guidance continues to leave out vital information about eligibility of businesses and nonprofits, guidance for lenders on how to close loans, and adds new requirements that were not part of the law. Of particular concern, the SBA adopted the "first-come, first serve rule," which provides no assurances that the most vulnerable small businesses will have access to the forgivable loans. Coupled with reports that many lenders are currently only making PPP loans to their existing customers, we fear that without full guidance, traditionally underserved small businesses in urban areas hit hard by the pandemic, like New York City, will be left behind. The guidance also established a 75/25 percent rule that could conceivably limit the amount of loan forgiveness for small businesses, particularly those in New York City with steep rents. We need to ensure the program will be there and workable for New York's microbusinesses - the shops and corner stores that are woven into the fabric of our communities. Turning to the EIDL grants, which Congress intended to provide a quick infusion of cash to help small businesses pay their rent and other bills. SBA has failed to issue final guidance and award grants in a manner consistent with Congressional intent. The SBA has metered the amount of the EIDL grant to $1,000 per employee, even though Congress specifically stated that the applicant, not the agency, has the sole authority to determine how much grant money they receive up to $10,000. Moreover, the law requires SBA to issue advances within three days of receipt of applications, yet small business owners say they are still waiting weeks after applying. The SBA has also been plagued by IT system issues that have contributed to delays in making loans. We have heard numerous reports about the Etran system crashing which prevents lenders from processing loans. Constituents have also reported being kicked out of the EIDL system and having to restart the time-consuming process of applying for a disaster grant. Finally, the SBA has lacked transparency in reporting results from these programs to Congress and the American people. At a time when swift execution is required to stem this economic crisis, it is imperative that we know details on program implementation. The SBA must establish a daily tracking of key data and information such as how many loans and grants are being processed by participating lenders and the agency, how much money is being allocated to small businesses, size of businesses served, demographics of business owners, and geographic distribution of awards across the country. This reporting is central to our Congressional oversight responsibilities to ensure program performance. Furthermore, we need to know the spend rates in these programs so action can be taken to appropriate the necessary funds to ensure all eligible small businesses have access to this critical assistance. - Assistance for Small Businesses, U.S. Department of the Treasury, accessed on April 9.2020 at littDs://liome.treasurv.gov/t>olicv-issues/toD-Driorities/cares-act/as5istancc-l'or-sinall-businc5se5; Coronavirus (COVlD-19): Small Business Guidance & Loan Resources, U.S. Small Business Administration, accessed on April 9,2020 at hitDs://wvm.sba.gov/Dage/coronavinis-covid-l9-small-business-guidance-loan-resources These are just a few of the many issues that we are hearing from small business owners and lenders in our communities. In sum. we are deeply troubled by the lack of clear, coherent guidance for small businesses during this crisis, and we urge you to release formal comprehensive Standard Operating Procedures immediately to put all small businesses on an equal playing field and give lenders the clarity they need to process and disburse loans. We further request that you provide Congress with daily reporting on SBA's programs in response to the COVID-19 pandemic. Sincerely, Nydia M, Velazquez Member of Congress Charles Schumer United States Senator 11 f n ^ Kirsten Gillibrand United States Senator Jerrold Nadler Member of Congress JUw Yvette Clarke Member of Congress Hakeem Jeffries Member of Congress Thomas R. Suozzi Member of Congress Alexandria Ocasio-Cortez Member of Congress Grace Meng Member of Congress Eliot L. Engel Member of Congress JS. Kathleen M. Rice Member of Congress Carolyn B. Maloney Member of Congress Adriano Espaillat Member of Congress Gregory Meeks Member of Congress Jose E. Serrano Member of Congress Bthibi-t COMMUHITY SfilAU. BUSINESSES CSB Coalition [email protected] 4/26/2020 Jovita Carranza SBA Administrator 409 Third Street, SW, Washinuton. DC 204 16 RE; Requesting streamline guidelines for PPP LOANS in Underserved and Rural Markets for Economically and Socially disadvantages Individuals. Mrs Carranza, According to HR 748, and the SENSE of the SENATE Sec 1102, concerned businesses covered loans in underserved and rural markets were to be prioritized as it related to processing and disbursement. Micro-small businesses, also known as Community Small Businesses under the current SBA guidelines, have been overlooked for PPP loan funding Please read the law below and forward the guidelines you issued to agents and lenders to prevent further discriminatory practices. "It is the sense of the Senate that the Administrator should issue guidance to lenders and agents to ensure that the processing and disbursement of covered loans prioritizes small business concerns and entities in underserved and rural markets, including veterans and members of the military community, small business concerns owned and controlled by socially and economically disadvantaged individuals (as defined in section 8(d)(3)(C)). women, and businesses in operation for less than 2 years Additionally, the coalition is requesting the immediate issue of the following guidelines to avoid more egregious behavior that would further decimate African American and Hispanic communities 3465 Buffington Center ^ Atlanta. GA 30349 Tel. +1 800-614-8125 | Fax +1 800-614-8125 I wvdw csbcoalition corn Applicant Good Faith Certification is utilized in place of 940,941.944 payroll tax reports, or 1099's because these documents are generally not available in the demographic identified in the Sense of the Senate. The Good Faith Certification covers the following: 1. Applicants intended use of PPP covered loan. 2. Calls for a budget for the 8 weeks of covered loan funds 3. Certificstion that required documentation for expended covered loan funds is prepared by a 3"* party and provided to the lender, within the time required by H.R.748. 4. CSB applicants fully understand the liabilities of not utilizing the funds for the purpose stated. The above guidelines can accomplish the following: 1. Provide funds expeditiously to the most vulnerable businesses 2. Remove the lender's discretion and concern that SBA might not back the loan 3. Provide the government a recourse for fraudulent activity Our coalition has developed three models that address our countries current reality as a result of COVID-19. The three models focus on Relief, Restoration, and Recovering: 1. Rescuing Community Small Businesses 2. Masking The Underserved 3. Keeping Our Doors Open KODO CSB is confident these guidelines can accomplish the real intent of the current administration while following the law as outlined in HR 748. Sincerely, ^^JuxcSy OaJtkXJi. Bruce Carter CSB Spokesperson 202-907-1760 Direct Cell 3465 Buffington Center 1 Atlanta, GA 30349 Tel: +1 800-614-8125 j Fax +1 800-614-81251 www.csbcoalition.com V'J I I !i Bruce Carter <bcarter@va!ueofa!ife.us> Determination of Eligibility Bruce Carter <[email protected]> Wed. Apr 29, 2020 at 2:18 PM To derenda.fisher@sba gov, Carole Davis <[email protected]>, "Logan, Cherita" <cherita.logan@mail. house. gov> Mrs. Fisher. I spoke with you last week as it related to determining the eligibility of a company being in operations versus formation. You indicated that as long as I could demonstrate expenses due to doing business, that would be sufficient. The lender understandably requires a letter from SBA. I am sure to protect their interest. I need your assistance In this matter. I requested congressional aid last week and will be forwarding their response momentarily. I have also attached a Texas Workforce Separation Letter for one of our 18 paid independent contractors last year that was apart of our research and development team. Additional documentation includes legal work performed by a third party. Due to processing and limited funds it would be much appreciated if you could and clarity today, Bruce Carter Director 202-907-1760 vwvw.valueofalife.us "Which person is worse, the one that created the problem? or the one that knows of the problem but does nothing to fix it?" Bruce Carter Separation of Work-20200429140257.pdf 642K 5

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UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK -----------------------------------------------------------X WALTER AVELAR, JULIO CASTRO, EDWIN GUEVARA, RUBEN GUEVARA, JORGE MOJICA, JAIME REYES, NELSON RIOS, ALEXANDER ALFARO, and DANIEL MEJIA, individually and behalf of those similarly situated, Plaintiffs Case No. _____________ CLASS AND COLLECTIVE ACTION COMPLAINT vs. JOHN ARMATO, YVETTE ARMATO a/ka/ YVETTE BAHAMONDE, TUSCANY MARBLE AND GRANITE, INC., Defendants. -----------------------------------------------------------X Plaintiffs Walter Avelar, Julio Castro, Edwin Guevara, Ruben Guevara, Jorge Mojica, Nelson Rios, Jaime Reyes, Daniel Mejia (“FLSA Plaintiffs”), and Alex Alfaro (Collectively with FLSA Plaintiffs, “Plaintiffs”) through their attorneys McBrien Law P.C. and the Marlborough Law Firm, P.C. respectfully allege as follows: PRELIMINARY STATEMENT 1. Plaintiffs and other similarly situated non-exempt laborers including, but not limited to stone finishers, installers and installers’ helpers (the “Tuscany Laborers”) bring this action against Defendants, the owners and operators of CLASS AND COLLECTIVE ACTION COMPLAINT 1 Tuscany Marble and Granite (“Tuscany“ or “the Business”). Tuscany fabricates and installs granite and stone countertops and slabs. Tuscany operates locations in Deer Park and Williston Park, New York. 2. The action is brought as a prospective collective action pursuant to the Fair Labor Standards Act of 1938 (“FLSA“) for willful failure to pay overtime premium compensation to Plaintiffs and other similarly situated workers when working more than forty hours in a workweek. 3. In addition, the action asserts individual and class action claims under the New York Labor Law (“NYLL”) for willful failure to pay overtime premium pay when working more than forty hours in a workweek; failure to pay for all hours worked; failure to issue proper wage statements; and failure to issue proper notifications of pay rate pursuant to New York’s Wage Theft Prevention Act. Defendants maintained several unlawful policies and practices resulting in a failure to pay proper overtime and regular wages including their “No Overtime Pay Policy,” an unlawful “Automatic Deduction Policy,” and “Time Shaving Practices.” JURISDICTION AND VENUE 4. This Court has subject matter jurisdiction over Plaintiffs’ federal FLSA claims pursuant to 29 U.S.C. § 216(b) and 28 U.S.C. § 1331 and supplemental CLASS AND COLLECTIVE ACTION COMPLAINT 2 jurisdiction over Plaintiffs’ New York State law claims pursuant to 28 U.S.C. § 5. This Court has personal jurisdiction over Defendants because each of them are domiciled within the State of New York. 6. Venue is proper in the Eastern District of New York because Defendants conduct business in this District and the acts and/or omissions giving rise to the claims herein allegedly took place in this District. Moreover, all of the Defendants are domiciled in this District. PARTIES 7. Defendant John Armato is an individual domiciled in Centerport, New York. 8. At all relevant times, Defendant John Armato was and is an owner and operator and Chief Executive Officer of Defendant Tuscany Marble and Granite, 9. Defendant John Armato was and is in active control and management of Tuscany, regulated and regulates the employment of persons employed by Tuscany including Plaintiffs, acts directly and indirectly in the interest of Tuscany in relation to the employees, and was and is thus an employer of Plaintiffs and other CLASS AND COLLECTIVE ACTION COMPLAINT 3 similarly situated Tuscany Laborers under the Fair Labor Standards Act and New York State Labor Law. 10. Defendant Yvette Armato is an individual domiciled in Centerport, New York. 11. At all relevant times, Defendant Yvette Armato was and is an operator of Tuscany and, upon information and belief, an owner of Defendant Tuscany Marble and Granite, Inc. 12. Defendant Yvette Armato was and is in active control and management of Tuscany, regulated and regulates the employment of persons employed by Tuscany including Plaintiffs, acts directly and indirectly in the interest of Tuscany in relation to the employees, and was and is thus an employer of Plaintiffs and other similarly situated Tuscany Laborers under the Fair Labor Standards Act and New York State Labor Law. 13. Defendants John Armato and Yvette Armato are hereafter collectively referred to as “Individual Defendants.” 14. Defendant Tuscany Marble and Granite, Inc. is a New York corporation with its principal place of business in Deer Park, New York. 15. The Individual Defendants operate Tuscany through Defendant Tuscany Marble and Granite, Inc. CLASS AND COLLECTIVE ACTION COMPLAINT 4 16. At all times relevant to this action, Tuscany was an “enterprise engaged in interstate commerce“ within the meaning of the FLSA. The enterprise has an annual gross volume of sales in excess of $500,000. 17. Plaintiff Walter Avelar was employed by Defendants as an installer from prior to March 2015 through approximately April 2019. 18. Plaintiff Julio Castro was employed by Defendants as an installer’s helper from approximately September 2018 through March 2019. 19. Plaintiff Edwin Guevara was employed by Defendants as an installer from prior to March 2015 through approximately March 2020. 20. Plaintiff Ruben Guevara was employed by Defendants as an installer’s helper from approximately August 2016 through approximately January 2020. 21. Plaintiff Jorge Mojica was employed by Defendants as a stone finisher from prior to March 2015 through approximately October 2020. 22. Plaintiff Nelson Rios was employed by Defendants as an installer’s helper from approximately April 2016 through approximately April 2020. 23. Plaintiff Jaime Reyes was employed by Defendants as an installer’s helper from prior to March 2015 through approximately November 2018. 24. Plaintiff Daniel Mejia was employed by Defendants as an installer’s helper and installer from prior to March 2015 through approximately March 2019. CLASS AND COLLECTIVE ACTION COMPLAINT 5 25. Plaintiff Alfaro was employed by Defendants as an installer’s helper from approximately May 2015 through approximately July 2017. 26. On or about February 23, 2021, Plaintiffs served Defendants with a demand for inspection of shareholder records and notice to shareholders concerning Defendant Tuscany Marble and Granite, Inc. pursuant to New York Business Corporation Law § 630. 27. Defendants have not produced the shareholder information nor made the information available to Plaintiffs for inspection. 28. Plaintiffs and Defendants executed an agreement to toll the statute of limitations for Plaintiffs and potential plaintiffs’ claims from March 22, 2021. Plaintiffs terminated the tolling agreement effective June 18, 2021. PLAINTIFFS’ FACTUAL ALLEGATIONS Defendants’ Failure To Pay Overtime Premium Pay 29. At all relevant times, Defendants owned, and operated Tuscany located at 243 Skidmore Road, Deer Park, New York. 30. At all relevant times, Tuscany has had gross operating revenues in excess of $500,000.00 per year. 31. Plaintiffs and other similarly situated workers were employed as Tuscany Laborers by Defendants. CLASS AND COLLECTIVE ACTION COMPLAINT 6 32. Plaintiffs and other similarly situated Tuscany Laborers were non- exempt employees under the FLSA and the New York Labor Law. 33. Plaintiffs and other similarly situated Tuscany Laborers have not received all of the overtime compensation owed to them when working more than forty hours in a workweek. 34. Defendants maintained several common pay practices and policies with respect to Plaintiffs and other similarly situated Tuscany Laborers. 35. First, Plaintiffs and other similarly situated Tuscany Laborers were subject to Defendants’ No Overtime Pay Policy. 36. Plaintiffs and other Tuscany Laborers were not paid any premium for overtime hours worked. 37. Instead Defendants paid Plaintiffs and other Tuscany Laborers at their regular hourly rate or nothing at all for overtime hours worked. 38. Second, Plaintiffs and other similarly situated Tuscany Laborers were subject to Defendants’ Automatic Deduction Policy. 39. Defendants automatically deducted one hour per shift for lunch. 40. But Defendants did not permit Plaintiffs and other Tuscany Laborers to take lunch break of longer than thirty minutes and often required them to work with no uninterrupted meal break at all. CLASS AND COLLECTIVE ACTION COMPLAINT 7 41. Defendants’ Automatic Deduction Policy resulted in an underpayment of two and a half hours to five hours of unpaid time per week. 42. Third, Defendants regularly failed to pay Plaintiffs and other similarly situated Tuscany Laborers for all of the hours they worked, by reducing the number of hours paid (“Time Shaving Practices”). 43. Because Plaintiffs and similarly situated Tuscany Laborers regularly worked more than forty hours per week, Defendants’ Automatic Deduction Policy and Time Shaving Practices regularly resulted in Defendants’ nonpayment of wages that should have been paid at the overtime rate. 44. However, in instances where Tuscany Laborers worked less than forty hours in a workweek, Defendants’ Automatic Deduction Policy and Time Shaving Practices resulted in unpaid regular wages. Wage Statements 45. At all relevant times, Defendants issued fraudulent wage statements or no wage statement at all to Plaintiffs and the Tuscany Laborers in violation of New York Labor Law 195(3). 46. Some of the Tuscany Laborers were paid entirely in cash off the books and provided with no wage statements. CLASS AND COLLECTIVE ACTION COMPLAINT 8 47. Most of the Tuscany Laborers were paid a portion of their wages by check in the amount indicated on the Tuscany Laborers’ wage statements and paid a portion in cash off the books. 48. Until approximately 2016, Defendants issued wage statements improperly listing Tuscany Laborers, including Plaintiffs working for Defendants at the time, as salaried employees. 49. Beginning in approximately 2016, Defendants issued wage statements improperly listing Tuscany Laborers, including Plaintiffs working for Defendants at the time, as working up to only forty hours per week when in fact the Tuscany Laborers were working a substantial number of overtime hours. 50. When Defendants did issue wage statements, they included only the portion of wages paid by check on those statements and excluded the amounts paid in cash off the books. 51. When Defendants did issue wage statements, they underreported the hourly rates of Plaintiffs and other Tuscany Laborers on those statements. Notifications of Pay Rate 52. At all relevant times, Defendants issued fraudulent notifications of pay rate or no notifications of pay rate at all to Plaintiffs and the Tuscany Laborers in violation of New York Labor Law 195(1). CLASS AND COLLECTIVE ACTION COMPLAINT 9 53. In some instances Defendants failed to issue Notifications of Pay Rate at all. 54. When Defendants did issue Notifications of Pay Rate, they consistently falsely represented the Tuscany Laborer’s regular hourly rate, by underreporting their hourly rates. 55. When Defendants did issue Notifications of Pay Rate, they consistently failed to indicate the Tuscany Laborers’ overtime rate. 56. Instead Defendants either crossed out the portion of the forms concerning overtime pay or reiterated their No Overtime Pay Policy. Defendants’ Fraudulent Document Scheme 57. In approximately mid-2016, the Department of Labor conducted an investigation of Defendants’ pay and recordkeeping practices. 58. During the Department of Labor investigation, Defendants directed many of the Plaintiffs and other Tuscany Laborers, including Plaintiffs Mojica and Edwin Guevara, if questioned, to tell the investigators they work only 40 hours per week and to say nothing else. 59. Upon information and belief, several Tuscany Laborers cooperated with the investigation and were authorized to receive money from the Department of Labor. CLASS AND COLLECTIVE ACTION COMPLAINT 10 60. Upon information and belief, Defendants directed the cooperating employees to remit their awards back to Defendants. 61. Upon information and belief, those Tuscany Laborers remitted their awards back to Defendants. 62. Following the Department of Labor investigation, Defendants developed an elaborate scheme to create a false paper trail of fraudulent documents in an effort to conceal their unlawful practices from civil and criminal authorities. The Actual Time Sheets 63. Prior to early 2017, Defendants maintained only one set of time sheets which indicated the actual work hours of the Tuscany Laborers, less the thirty- minute lunch breaks Tuscany Laborers were sometimes permitted to take (the “Actual Time Sheets”). 64. Actual Time Sheets were kept for all Tuscany Laborers, including those workers paid in cash off the books. 65. The Actual Time Sheets were generally maintained on a daily basis. 66. Plaintiffs and other Tuscany Laborers were not required to sign or initial the Actual Time Sheets, but were required to contemporaneously enter the start and end times of their shift each day. CLASS AND COLLECTIVE ACTION COMPLAINT 11 67. Tuscany Laborers were required to log their start and end times each 68. The Actual Time Sheets included all days worked by Plaintiffs and other Tuscany Laborers, including work performed on Saturdays. 69. Upon information and belief, Defendants continue to maintain the Actual Time Sheets. The Phony Time Sheets 70. Beginning in early 2017, Defendants began maintaining a second set of times sheets, which contained fraudulent information concerning the Tuscany Laborers work hours (The “Phony Time Sheets”). 71. The Phony Time Sheets falsely indicated that Plaintiffs and Tuscany Laborers worked no more than forty hours each work week. 72. Defendants required most Plaintiffs and other Tuscany Laborers to complete the Phony Time Sheets at one time for the period of one or more weeks in order to receive their pay that week. 73. Defendants required most Plaintiffs and Tuscany Laborers to initial the Phony Time Sheets. 74. Defendants did not require those Tuscany Laborers who Defendants paid completely in cash off the books to complete the Phony Time Sheets. CLASS AND COLLECTIVE ACTION COMPLAINT 12 75. The Phony Time Sheets did not include any time worked on Saturdays, even though several Tuscany Laborers, including Plaintiff Mojica often worked six days per week Monday through Saturday. 76. When Defendants required the Tuscany Laborers to initial the Phony Time Sheets, they knew this information was false and fraudulent. The Payroll Receipt Forms 77. Beginning in early 2017, Defendants began requiring Plaintiffs and other Tuscany Laborers paid on the books to sign monthly “Payroll Receipt Forms.” 78. When Defendants required Plaintiffs and other Tuscany Laborers to sign the Payroll Receipt Forms, they knew this information was false and fraudulent. 79. Following the Department of Labor investigation, Defendants admitted to Tuscany Laborers working for Defendants at the time, including Plaintiffs Alfaro, Edwin Guevara, Reyes, Mojica, Rios, and Avelar that they were owed back wages dating back to 2011. 80. Defendants failed to pay any back wages to those Plaintiffs. Plaintiffs’ Experience Plaintiff Walter Avelar CLASS AND COLLECTIVE ACTION COMPLAINT 13 81. Plaintiff Walter Avelar was employed by Defendants as a non-exempt installer from prior to March 2015 through approximately April 2019. 82. Plaintiff Avelar was subject to Defendants’ Automatic Deduction Policy. 83. Plaintiff Avelar was subject to Defendants’ Time Shaving Practices. 84. Plaintiff Avelar was not paid overtime premium pay for hours worked in excess of forty hours each week and was not paid at all for many overtime hours. 85. In at least one week in June 2018, Plaintiff Avelar worked more than 55 hours, but received no overtime premium pay and was not paid at all for many of the overtime hours he worked that week. 86. Plaintiff Avelar was paid part by check and part in cash off the books. 87. During the relevant period, Plaintiff Avelar’s regular hourly rate was $25.00 per hour. 88. Plaintiff Avelar was required to sign documents indicating that his regular hourly rate was substantially less than $25.00 per hour. 89. Defendants did not issue Plaintiff Avelar proper notifications of pay rate in violation of NYLL 195(1)(a). 90. Defendants did not issue Plaintiff Avelar proper wage statements in violation of NYLL 195(3). CLASS AND COLLECTIVE ACTION COMPLAINT 14 Plaintiff Julio Castro 91. Plaintiff Julio Castro was employed by Defendants as a non-exempt installer’s helper from approximately September 2018 through March 2019. 92. Plaintiff Castro was subject to Defendants’ Automatic Deduction Policy. 93. Plaintiff Castro was subject to Defendants’ Time Shaving Practices. 94. Plaintiff Castro was not paid for hours worked in excess of forty hours in a workweek. 95. In at least one week in February 2019, Plaintiff Castro worked more than 42 hours, but received no overtime premium pay and was not paid at all for many of the overtime hours he worked that week. 96. Plaintiff Castro’s regular hourly rate was $18.00 per hour. 97. Plaintiff Castro was required to sign documents indicating that his regular hourly rate was substantially less than $18.00 per hour. 98. Plaintiff Castro was paid part by check and part in cash off the books. 99. Defendants did not issue Plaintiff Castro proper notifications of pay rate in violation of NYLL 195(1)(a). 100. Defendants did not issue Plaintiff Castro proper wage statements in violation of NYLL 195(3). CLASS AND COLLECTIVE ACTION COMPLAINT 15 Plaintiff Edwin Guevara 101. Plaintiff Edwin Guevara was employed by Defendants as a non-exempt installer from prior to March 2015 through approximately March 2020. 102. Plaintiff Edwin Guevara was subject to Defendants’ Automatic Deduction Policy. 103. Plaintiff Edwin Guevara was subject to Defendants’ Time Shaving Practices. 104. Plaintiff Edwin Guevara was not paid overtime premium pay for hours worked in excess of forty hours each week and was not paid at all for many overtime hours. 105. Plaintiff Edwin Guevara was paid part by check and part in cash off the books. 106. At all times relevant, Plaintiff Edwin Guevara’s regular hourly rate was $22.00 per hour. 107. Plaintiff Edwin Guevara was required to sign documents indicating that his regular hourly rate was substantially less than $22.00 per hour. 108. In at least one week in May 2019, Plaintiff Edwin Guevara worked more than 50 hours, but received no overtime premium pay and was not paid at all for many of the overtime hours he worked that week. CLASS AND COLLECTIVE ACTION COMPLAINT 16 109. Defendants did not issue Plaintiff Edwin Guevara proper notifications of pay rate in violation of NYLL 195(1)(a). 110. Defendants did not issue Plaintiff Edwin Guevara proper wage statements in violation of NYLL 195(3). Plaintiff Ruben Guevara 111. Plaintiff Ruben Guevara was employed by Defendants as a non-exempt installer’s helper from approximately August 2016 through approximately January 2020. 112. Plaintiff Ruben Guevara was subject to Defendants’ Automatic Deduction Policy. 113. Plaintiff Ruben Guevara was subject to Defendants’ Time Shaving Practices. 114. Plaintiff Ruben Guevara was not paid for hours worked in excess of forty hours in a workweek. 115. In at least one week in May 2019, Plaintiff Ruben Guevara worked more than 50 hours, but received no pay for overtime hours worked. 116. Plaintiff Ruben Guevara was paid part by check and part in cash off the books. 117. Plaintiff Ruben Guevara’s regular hourly rate was $16.00 per hour. CLASS AND COLLECTIVE ACTION COMPLAINT 17 118. Plaintiff Ruben Guevara was required to sign documents indicating that his regular hourly rate was substantially less than $16.00 per hour. 119. Defendants did not issue Plaintiff Ruben Guevara proper wage statements in violation of NYLL 195(3). 120. Defendants did not issue Plaintiff Ruben Guevara proper notifications or pay rate in violation of NYLL 195(1)(a). Plaintiff Jorge Mojica 121. Plaintiff Jorge Mojica was employed by Defendants as a non-exempt stone fabricator from prior to March 2015 through approximately October 2020. 122. Plaintiff Mojica was not paid for all hours worked. 123. Plaintiff Mojica was subject to Defendants’ Automatic Deduction Policy. 124. Plaintiff Mojica was subject to Defendants’ Time Shaving Practices. 125. Plaintiff Mojica was not paid overtime premium pay for hours worked in excess of forty hours each week and was not paid at all for many overtime hours that he worked. 126. For example, in at least one week in May 2019, Plaintiff Mojica worked more than 55 hours, but received no overtime premium pay and was not paid at all for many of the overtime hours he worked that week. CLASS AND COLLECTIVE ACTION COMPLAINT 18 127. Plaintiff Mojica was paid part by check and part in cash off the books. 128. At all times relevant, Plaintiff Mojica’s regular hourly rate was $21.50 per hour. 129. Plaintiff Mojica was required to sign documents indicating that his regular hourly rate was substantially less than $21.50 per hour. 130. Defendants did not issue Plaintiff Mojica proper notifications or pay rate in violation of NYLL 195(1)(a). 131. Defendants did not issue Plaintiff Mojica proper wage statements in violation of NYLL 195(3). Plaintiff Nelson Rios 132. Plaintiff Nelson Rios was employed by Defendants as a non-exempt installer’s helper from approximately April 2016 through approximately April 2020. 133. Plaintiff Rios was not paid for all hours worked. 134. Plaintiff Rios was subject to Defendants’ Automatic Deduction Policy. 135. Plaintiff Rios was subject to Defendants’ Time Shaving Practices. 136. Plaintiff Rios was not paid for hours worked in excess of forty hours in a workweek. 137. In at least one week in May 2019, Plaintiff Rios worked more than 55 hours, but received no pay for overtime hours worked. CLASS AND COLLECTIVE ACTION COMPLAINT 19 138. Plaintiff Rios was paid part by check and part in cash off the books. 139. At all times relevant, Plaintiff Rios’ regular hourly rate was $13.50 per 140. Plaintiff Rios was required to sign documents indicating that his regular hourly rate was less than $13.50 per hour. 141. Defendants did not issue Plaintiff Rios proper notifications or pay rate in violation of NYLL 195(1)(a). 142. Defendants did not issue Plaintiff Rios proper wage statements in violation of NYLL 195(3). Plaintiff Jaime Reyes 143. Plaintiff Jaime Reyes was employed by Defendants as a non-exempt installer’s helper from prior to March 2015 through approximately November 2018. 144. Plaintiff Reyes was subject to Defendants’ Automatic Deduction Policy. 145. Plaintiff Reyes was subject to Defendants’ Time Shaving Practices. 146. Plaintiff Reyes was not paid for hours worked in excess of forty hours in a workweek. 147. In at least one week in June 2018, Plaintiff Reyes worked more than 50 hours, but received no pay for overtime hours worked. CLASS AND COLLECTIVE ACTION COMPLAINT 20 148. Plaintiff Reyes was paid part by check and part in cash off the books. 149. In March 2015, Plaintiff Reyes’ regular hourly rate was $19.00 per 150. In approximately July 2015, Plaintiff Reyes’ regular hourly rate was raised to $22.00 per hour. 151. Plaintiff Reyes was required to sign documents indicating that his regular hourly rate was substantially lower than it actually was. 152. Defendants did not issue Plaintiff Reyes proper notifications or pay rate in violation of NYLL 195(1)(a). 153. Defendants did not issue Plaintiff Reyes proper wage statements in violation of NYLL 195(3). Plaintiff Daniel Mejia 154. Plaintiff Mejia was employed by Defendants from prior to March 2015 through approximately March 2019. 155. Plaintiff Mejia started as a non-exempt employer’s helper and was promoted to a non-exempt installer in approximately early 2017. 156. Plaintiff Mejia was subject to Defendants’ Automatic Deduction Policy. 157. Plaintiff Mejia was subject to Defendants’ Time Shaving Practices. CLASS AND COLLECTIVE ACTION COMPLAINT 21 158. Plaintiff Mejia was not paid overtime premium pay for hours worked in excess of forty hours in a workweek. 159. Plaintiff Mejia worked more than sixty hours in some weeks. 160. Plaintiff Mejia’s regular hourly rate was $15.50 per hour in 2015. By the time he left the job in 2019, he regular hourly rate was $19.50 per hour. 161. Defendants did not issue Plaintiff Mejia notifications of pay rate in violation of NYLL 195(1)(a). 162. Defendants did not issue Plaintiff Mejia wage statements in violation of NYLL 195(3). Plaintiff Alexander Alfaro 163. Plaintiff Alexander Alfaro was employed by Defendants as a non- exempt installer from approximately early 2015 through approximately July 2017. 164. Plaintiff Alfaro was subject to Defendants’ Automatic Deduction Policy. 165. Plaintiff Alfaro was subject to Defendants’ Time Shaving Practices. 166. Plaintiff Alfaro was not paid overtime premium pay for hours worked in excess of forty hours each week and was not paid at all for many overtime hours. CLASS AND COLLECTIVE ACTION COMPLAINT 22 167. In at least one week in December 2016, Plaintiff Alfaro worked more than 55 hours, but received no overtime premium pay and was not paid at all for many of the overtime hours he worked that week. 168. Plaintiff Alfaro was paid part by check and part in cash off the books. 169. At all times relevant, Plaintiff Alfaro’s regular hourly rate was $35.00 per hour. 170. Plaintiff Alfaro was required to sign documents indicating that his regular hourly rate was less than $35.00 per hour. 171. Defendants did not issue Plaintiff Alfaro proper notifications or pay rate in violation of NYLL 195(1)(a). 172. Defendants did not issue Plaintiff Alfaro proper wage statements in violation of NYLL 195(3). COLLECTIVE ACTION ALLEGATIONS 173. FLSA Plaintiffs bring this case as an “opt-in“ collective action on behalf of similarly situated employees of Defendants pursuant to 29 U.S.C. § 216(b). 174. FLSA Plaintiffs, on behalf of themselves and the prospective collective class, seek relief on a collective basis challenging Defendants’ failure to pay overtime. CLASS AND COLLECTIVE ACTION COMPLAINT 23 175. The Collective Class is defined as follows: “All similarly situated laborers of Tuscany Marble and Tile, Inc. from March 22, 2018, who elect to opt- in to this action.” 176. FLSA Plaintiffs are similar to other members of the Collective because: 1) members of the Collective Class worked more than forty hours in a workweek without overtime premium pay; and 2) members of the Collective Class have been subject to Defendants’ same policies and practices through which they were deprived of overtime compensation including Defendants’ No Overtime Pay Policy, Automatic Deduction Policy and Time Shaving Practices. 177. FLSA Plaintiffs and members of the Collective all perform or performed similar duties and were all deprived of overtime premium pay due to them as a result of Defendants’ No Overtime Pay Policy, Automatic Deduction Policy and Time Shaving Practices. 178. FLSA Plaintiffs’ experience is typical of the experiences of the other Collective class members. Defendants’ failure to pay overtime wages at the rates required by the FLSA result from generally applicable policies or practices and do not depend on the personal circumstances of FLSA Plaintiffs. 179. With respect to Defendants’ FLSA overtime violations, their unlawful conduct has been widespread, repeated, and consistent. CLASS AND COLLECTIVE ACTION COMPLAINT 24 CLASS ACTION ALLEGATIONS 180. Plaintiffs bring this action as a prospective class action on behalf of themselves and all other persons similarly situated. 181. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, for purposes of the state law claims, Plaintiffs seek the certification of a class of all persons who, during the relevant time period of March 22, 2015, to the date of final judgment in this matter, have been employed by Defendants as a non-exempt laborer (hereinafter referred to as the “Tuscany Laborer Class”). 182. The Tuscany Laborer Class includes more than forty similarly situated workers who have not been paid for all hours worked, not been paid overtime pay due to them and who have not received proper wage statements or notifications of pay rate. Members of the Laborer Class would benefit from the issuance of a court- supervised notice of the lawsuit and the opportunity to opt out of a certified class. 183. The class is so numerous as to make it impracticable to join all members of the class as Plaintiffs. 184. There are questions of law and fact common to all members of the class and those questions predominate over any question affecting only individual class members. Defendants have acted on grounds generally applicable to all class members, in that Defendants’ acts and omissions constitute a violation of the wage CLASS AND COLLECTIVE ACTION COMPLAINT 25 laws of the State of New York. 185. Common questions of law and fact include, but are not limited to, the following: a. Whether each of the Defendants was a joint employer of the Tuscany Laborers; b. Whether Defendants have consistently failed to pay Plaintiffs and other similarly situated class members overtime wages at one and one-half times their regular rate of pay for hours worked in excess of forty hours; c. Whether Defendants’ Automatic Deduction Policy deprived the Tuscany Laborers of wages for all hours worked; d. Whether Defendants’ Automatic Deduction Policy deprived the Tuscany Laborers of overtime; e. Whether Defendants’ Time Shaving Practices deprived the Tuscany Laborers of overtime; f. Whether Defendants’ No Overtime Pay Policy deprived the Tuscany Laborers of overtime; g. Whether Defendants required the Tuscany Laborers to initial fraudulent time sheets for the purpose of concealing the underpayment of wages; h. Whether Defendants paid Tuscany Laborers partially or wholly in cash off the CLASS AND COLLECTIVE ACTION COMPLAINT 26 books for the purpose of concealing the underpayment of wages; i. Whether Defendants can satisfy their burden of proving a good faith basis for believing that any underpayment of wages was in compliance with the law; j. Whether Defendants have failed systematically to provide proper wage payment statements as required by the New York Labor Law; and k. Whether Defendants have systematically failed to provide proper Wage Theft Prevention Act notifications of pay rate as required by the New York Labor Law. 186. Plaintiffs’ claims are typical of the claims of all class members and Defendants’ anticipated affirmative defenses thereto are typical of the Defendants’ anticipated affirmative defenses to the claims of other class members. 187. Plaintiffs will fairly and adequately protect the interests of all class members in the prosecution of this action and in the administration of all matters relating to the claims of the class. Plaintiffs are similarly situated with, and have suffered similar injuries as, the members of the class they seek to represent. 188. Plaintiffs have retained counsel capable of handling class action suits. Neither Plaintiffs nor their counsel have an interest which is in conflict with the class or which might cause them not to vigorously pursue this action. 189. Pursuant to F.R.C.P. 23(b)(1), class certification is appropriate here CLASS AND COLLECTIVE ACTION COMPLAINT 27 because the prosecution of separate actions by class members could result in either inconsistent adjudications establishing incompatible pay practices, or could as a practical matter dispose of the legal claims of class members not parties to such separate adjudications. 190. Pursuant to F.R.C.P. 23(b)(3), class certification is appropriate here because questions of law or fact common to members of the class predominate over any questions affecting only individual members and because a class action is superior to other available methods for the fair and efficient adjudication of the controversy. AS AND FOR A FIRST CAUSE OF ACTION AGAINST DEFENDANTS (Overtime Violations: FLSA) 191. Plaintiffs repeat and reallege the previous allegations as if fully set forth herein. 192. The FLSA Plaintiffs bring this claim on behalf of themselves and all similarly situated employees who opt-in to the action. 193. At all relevant times, Defendants have been, and continue to be, “employers” engaged in the interstate “commerce“ and/or in the production of “goods” for “commerce” within the meaning of the FLSA, 29 U.S.C. § 203. CLASS AND COLLECTIVE ACTION COMPLAINT 28 194. Defendants employ or employed numerous Tuscany Laborers, including the FLSA Plaintiffs and other similarly situated Tuscany Laborers as non-exempt employees. 195. At all relevant times, Tuscany has had gross operating revenues in excess of $500,000.00 per year and satisfies the threshold test for the “enterprise“ requirement under the FLSA. 196. The FLSA requires each covered employer, such as Defendants, to compensate their non-exempt employees at a rate of not less than one and one-half times the regular rate of pay for work performed in excess of forty hours in a work week. 197. Defendants failed to pay the FLSA Plaintiffs and the prospective collective class members one and one-half times their regular hourly rates for all hours worked in excess of forty in a workweek. 198. Defendants have not acted in good faith and did not have a reasonable basis for believing that they did not violate the FLSA. 199. Defendants’ violations of the FLSA were willful, as evidenced by Defendants’ fraudulent bookkeeping practices designed to deprive Plaintiffs and the Class of appropriate overtime payments. CLASS AND COLLECTIVE ACTION COMPLAINT 29 200. Similarly situated Tuscany Laborers would benefit from an opportunity to receive notice of the lawsuit and an opportunity to opt-in to the action. 201. As a result of Defendants’ violation of FLSA, the FLSA Plaintiffs and any Opt-in Plaintiffs have been injured and are entitled to damages for unpaid overtime, liquidated damages and attorneys’ fees costs, disbursements and interest thereon. AS AND FOR A SECOND CAUSE OF ACTION AGAINST DEFENDANTS (Overtime Violations: New York Labor Law) 202. Plaintiffs repeat and reallege the previous allegations as if fully set forth herein. 203. This cause of action is brought against Defendants for failure to pay overtime for work performed by Plaintiffs and prospective Class Members in excess of forty hours per week pursuant to NYLL 191, 663(1). 204. At all times relevant to this action, Defendants were Plaintiffs’ employers within the meaning of New York Labor Law §§ 2 and 651. 205. At all times relevant Plaintiffs were Defendants’ non-exempt employees within the meaning of New York Labor Law §§ 2 and 651. CLASS AND COLLECTIVE ACTION COMPLAINT 30 206. Defendants willfully required, suffered or permitted Plaintiffs to work overtime and willfully failed to pay them overtime compensation of one and one- half times the regular rate of pay for each hour in excess of forty hours in a workweek as required under New York Labor Law § 650; 12 NYCRR § 146-1.4. 207. As a result of Defendants’ New York Labor Law violations, Plaintiffs are entitled to recover from Defendants, jointly and severally, amounts proven at trial for unpaid overtime wages, liquidated damages, reasonable attorney’s fees, and the costs and disbursements of the action, pursuant to New York Labor Law § 663(1). AS AND FOR A THIRD CAUSE OF ACTION AGAINST DEFENDANTS (Failure to Pay Wages) 208. Plaintiffs repeat and reallege each and every allegation contained in the preceding paragraphs as if fully set forth herein. 209. This cause of action is brought against Defendants for failure to pay wages for work performed by Plaintiffs and prospective Class Members pursuant to NYLL §§ 191, 663(1). 210. New York Labor Law requires that wages be paid on an employer’s regular payday for all hours worked and NYLL 663(1) requires the payment of all wage owed. CLASS AND COLLECTIVE ACTION COMPLAINT 31 211. Defendants have failed to pay Plaintiffs and prospective Class Members all wages for the hours they each worked for Defendants. 212. Due to Defendants’ violations of the New York Labor Law, Plaintiffs and the members of the Class are entitled to recover from Defendants their unpaid wages, liquidated damages, reasonable attorneys’ fees, costs and pre-judgment and post-judgment interest. AS AND FOR A FOURTH CAUSE OF ACTION AGAINST DEFENDANTS (Violation of the Wage Theft Prevention Act: New York Labor Law) 213. Plaintiffs repeat and reallege the previous allegations as if fully set forth herein. 214. New York Labor Law § 195(1)(a) requires Defendants to provide Plaintiffs with notifications of pay rate at the commencement of their employment, in both English and the employees primary language, and to preserve those records for a period of six years. 215. Those statements must include: the employee’s rate or rates of pay, including overtime rate of pay; where applicable; how the employee is paid; and any allowances taken as part of the minimum wage and information identifying the employer. CLASS AND COLLECTIVE ACTION COMPLAINT 32 216. Defendants failed to furnish accurate notifications of pay rate in either English or Spanish in violation of the Wage Theft Prevention Act. 217. Due to Defendants’ violation of New York State Law, Plaintiffs are entitled to recover from Defendants an award of statutory damages pursuant to NYLL 195(1)(a); 198(1)(d) plus costs interest and reasonable attorneys’ fees. AS AND FOR A FIFTH CAUSE OF ACTION AGAINST DEFENDANTS (Violation of the Wage Theft Prevention Act: New York Labor Law) 218. Plaintiffs repeat and reallege the previous allegations as if fully set forth herein. 219. New York Labor Law § 195(3) requires Defendants to provide Plaintiffs with wage statements with every payment of wages listing the following: the dates of work covered by that payment of wages; name of employee; name of employer; address and phone number of employer; rate or rates of pay and basis thereof, whether paid by the hour, shift, day, week, salary, piece, commission, or other; gross wages; deductions; allowances, if any, claimed as part of the minimum wage; and net wages. 220. Defendants failed to furnish Plaintiffs with wage statements in compliance with the Wage Theft Prevention Act. CLASS AND COLLECTIVE ACTION COMPLAINT 33 221. Due to Defendants’ violation of New York State Law, Plaintiffs are entitled to recover from Defendants an award of statutory damages pursuant to NYLL 195(3)(a); 198(1)(d) plus costs interest and reasonable attorneys’ fees. PRAYER FOR RELIEF WHEREFORE, Plaintiffs, individually and on behalf of all others similarly situated, demand as follows: A. A ruling conditionally certifying the Collective Class an order authorizing the issuance of the notice to the members of the Collective and an opportunity to opt-in to the case; B. An Order Certifying the Tuscany Laborer Class pursuant to Rule 23 of the Federal Rules of Civil Procedure; designating Plaintiffs as class representatives; and designating of Plaintiffs’ counsel as class counsel; C. An award to Plaintiffs and any opt-in Plaintiffs under the FLSA and NYLL for unpaid overtime wages and an additional amount equal as liquidated damages pursuant to each statute; D. An award to Plaintiffs, any opt-in Plaintiffs and Class Members for statutory damages for Defendant’s violations of the pay rate notification provisions of the Wage Theft Prevention Act; CLASS AND COLLECTIVE ACTION COMPLAINT 34 E. An award to Plaintiffs, any opt-in Plaintiffs and Class Members for statutory damages for Defendant’s violations of the wage statement requirements of the Wage Theft Prevention Act; F. An award to Plaintiffs, any opt-in Plaintiffs and Class Members for prejudgment and post judgment interest; G. An award to Plaintiffs and any opt-in Plaintiffs and Class Members for the cost of this action together with reasonable attorneys’ fees; and H. Such other and further relief as this Court may deem necessary and proper. DEMAND FOR JURY TRIAL Plaintiffs demand trial by jury of all triable issues. Dated: Melville, New York June 21, 2021 THE MARLBOROUGH LAW FIRM, P.C By: Christopher Marlborough (CM6107) 445 Broad Hollow Road, Suite 400 Melville, New York 11747 (212) 991-8960 [email protected] CLASS AND COLLECTIVE ACTION COMPLAINT 35 Bruce McBrien MCBRIEN LAW PC 140 Fell Ct., Suite 305 Hauppauge, NY 11788 (631) 403-0335 [email protected] Attorneys for Plaintiffs CLASS AND COLLECTIVE ACTION COMPLAINT 36

employment & labor

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UNITED STATES DISTRICT COURT WESTERN DISTRICT OF MISSOURI JANICE DAVIDOW, individually and ) on behalf of others similarly situated, ) ) Plaintiff, ) ) v. ) Case No. ) H&R BLOCK, INC., and ) H&R BLOCK TAX SERVICES LLC, ) ) JURY TRIAL DEMANDED Defendants. ) CLASS ACTION COMPLAINT Plaintiff Janice Davidow, on behalf of herself and all persons similarly situated, for her cause of action against defendants H&R Block, Inc. and H&R Block Tax Services LLC (collectively, “H&R Block”), alleges as follows: NATURE OF THE CASE 1. This is an antitrust class action brought by and on behalf of individuals who work or have worked for H&R Block, a tax preparation services company and franchisor, for unlawfully conspiring to suppress the wages and impede job mobility of its employees through agreements with its franchisees not to compete for workers in violation of Section I of the Sherman Act. H&R Block orchestrated and enforced this conspiracy at least in part through an explicit contractual prohibition (“No-Poach Clause”) contained in standard H&R Block franchise agreements that severely limited Plaintiff’s and Class members’ job mobility and served to significantly suppress their compensation. 1 JURISDICTION AND VENUE 2. Plaintiff Janice Davidow brings this action to obtain injunctive relief and recover damages, including treble damages, costs of suit, and reasonable attorneys’ fees arising from Defendants’ violations of Section 1 of the Sherman Act, 15 U.S.C. § 1. 3. The Court has subject matter jurisdiction pursuant to Sections 4 and 16 of the Clayton Act (15 U.S.C. §§ 15 and 26), and 28 U.S.C. §§ 1331 and 1337. 4. Both H&R Block defendants have their principal place of business in Kansas City, Missouri and thus are subject to personal jurisdiction in this Court. 5. Venue is proper in this District under Section 12 of the Clayton Act, 15 U.S.C. § 22, as well as 28 U.S.C. § 1391, because a substantial part of the events or omissions giving rise to Plaintiff’s claims alleged herein occurred in this District, a substantial portion of the affected interstate trade and commerce was carried out in this District, and Defendants reside in, can be found in, and/or transacts business in this District. THE PARTIES 6. Plaintiff Janice Davidow is an individual residing in Coral Springs, Florida. Plaintiff worked as a seasonal tax preparer for H&R Block in Coral Springs, Florida for the 2012-2013 tax seasons. As a result of the conspiracy described herein, Plaintiff’s compensation was suppressed during the time she worked for H&R Block. 7. Defendant H&R Block, Inc., is a Missouri corporation with headquarters at One H&R Block Way in Kansas City, Missouri. 2 8. Defendant H&R Block Tax Services LLC is a Missouri limited liability company and a wholly-owned subsidiary of defendant H&R Block, Inc. It is also headquartered at One H&R Block Way in Kansas City, Missouri. 9. Various persons, partnerships, sole proprietors, firms, and corporations, the identities of which are presently unknown, including H&R Block franchisees as well as direct and indirect subsidiaries of defendant H&R Block, Inc. that operate company- owned stores, have participated as co-conspirators with H&R Block in the offenses alleged in this Complaint, and have performed acts and made statements in furtherance of the conspiracy, or in furtherance of the anticompetitive conduct. 10. Whenever in this Complaint reference is made to any act, deed or transaction of any corporation or limited liability entity, the allegation means that the corporation or limited liability entity engaged in the act, deed or transaction by or through its officers, directors, agents, employees or representatives while they were actively engaged in the management, direction, control, or transaction of the corporation’s or limited liability entity’s business or affairs. FACTUAL ALLEGATIONS 11. Throughout the Class Period, H&R Block and co-conspirators employed Class members throughout the United States. 12. H&R Block’s conduct substantially affected interstate commerce, and caused antitrust injury, throughout the United States. 3 13. H&R Block holds itself out as the “world’s largest consumer tax services provider” and provides tax preparation and assistance services through a variety of avenues. Individuals can make an appointment with a tax preparer at a physical office, can access the assistance of a “tax pro” remotely, and can download tax filing software via desktop and mobile applications. 14. H&R Block provides in-person tax preparation services at approximately 10,000 offices across the United States. As of 2018, approximately 3,300 of its locations are franchise-owned while the remaining approximately 6,700 of its U.S. offices are corporate-owned. 15. H&R Block boasts that it employs “70,000 highly trained tax professionals worldwide.” https://www.hrblock.com/corporate/pdfs/hrb-factsheet.pdf (last visited Nov. 16, 2018). 16. Employees in tax preparations and assistance services, like personnel in any labor market, benefit when their employers compete for their services. Competition in the labor market creates leverage for personnel, which in turn leads to higher wages and greater mobility. 17. Beginning at least by January 2009 and continuing until at least May 2018, H&R Block, along with other unnamed persons and entities acting as co-conspirators, enacted a scheme related to the recruitment of employees and potential employees, which included policies and agreements not to solicit or recruit without prior approval each 4 other’s personnel. 18. The standard H&R Block franchise license agreement entered into by H&R Block and its franchisees during the Class Period includes a “Restrictions on Competition” clause that states: “During the term of this Agreement, neither Franchisee nor any of Franchisee’s Associates will, without H&R Block’s prior written consent . . . . Solicit for employment any person who is employed by H&R Block or by any other franchisee of H&R Block.” 19. Instead of a one-way agreement by franchisees to not solicit or recruit employees from either other franchisees or from H&R Block’s company-owned stores, H&R Block itself adhered to the same agreement in the operation of its company-owned stores. 20. The purpose and effect of this scheme was to limit and suppress mobility and compensation for class members. 21. These agreements impeded or restricted the movement of employees between H&R Block and its franchisees. These agreements also prohibited and prevented competition between and among H&R Block and its franchisees for employees. The agreements unreasonably limited franchisees’ ability to solicit employees who work for H&R Block or other franchisees, reducing the pool of experienced candidates available to them and decreasing the employment options available to current employees. Basic economic principles inform that a reduction in the pool of potential employers tends to lower the bargaining power of employees and depress wages, especially if the lost 5 opportunities were superior to their current employment. Background on the H&R Block Franchise Model 22. H&R Block was founded in 1955 by two brothers, Henry and Richard Bloch, in Kansas City, Missouri and quickly expanded to New York City and then soon after the first H&R Block franchisees began. 23. The franchise program rapidly stretched the reach of H&R Block throughout the United States. Within five years of its first franchise agreements, H&R Block had opened 200 more offices. Then, during the 1970s, its business expanded to more than 8,600 offices across the United States. 24. Today, H&R Block has both corporate and franchise locations in nearly every state as well as the District of Columbia and generates over $3.1 billion in annual revenue. 25. H&R Block, Inc., the parent holding company, has partially diversified its business since the 1960s, but tax preparation services remain the company’s core business. Many of H&R Block, Inc.’s non-tax preparation affiliates provide ancillary services such as financing to franchisees or customers. 26. H&R Block’s major revenue sources include for tax preparation fees and related services performed at corporate-owned tax offices, franchise royalties, sales of desktop tax preparation software, and fees from related services and products. H&R Block’s Franchise Model 27. H&R Block receives profits from its franchises primarily through charging 6 royalties on the franchises’ gross revenue. 28. H&R Block franchises throughout the United States operate on standardized terms pursuant to a common franchise license agreement. They are competitors with H&R Block and with each other. As stated in H&R Block’s standard franchise agreement, H&R Block franchisees function in an “independent contractor” relationship with H&R Block. The franchise agreement states that such franchisees are not “a joint venturer, joint employer, partner, agent, fiduciary, or employee” of H&R Block. In fact, the franchise agreement prohibits franchisees from holding themselves out as such. 29. The franchise agreement further spells out that, as to the franchisee and H&R Block, “neither party will have any power to bind or obligate the other; and neither party will be liable to any person for any debts or liabilities incurred by the other.” 30. The H&R Block Franchise Disclosure Document (“FDD”), which summarizes and explains its standard franchise license agreement and practices, expressly states on page 1 that H&R Block, including its corporate-owned locations, and its franchisees are competitors: “[The franchisee’s] direct competition from national and local tax return tax preparation firms will include [H&R Block] affiliates.” 31. The FDD provides that franchisees operate within a defined Franchise Territory, but do “not, however, receive an exclusive Franchise Territory.” On the contrary, franchisees may “face competition from other offices that [H&R Block] franchise[s] or own[s], or that are franchised or owned by [H&R Block’s] parent or affiliates, or from 7 other channels of distribution or competitive brands [H&R Block] control[s].” 32. Additionally, the FDD provides that H&R Block or its affiliates may provide the same products and services as the franchisee in the Franchise Territory under a different mark within the Franchise Territory, “regardless of proximity to or economic impact upon [the] Franchised Business.” 33. H&R Block’s standard franchise agreement states that all decisions related to employment are to be made entirely and independently by each franchisee. Further, it states that employees of the franchisee are not employees of H&R Block: All employees hired by or working for Franchisee will be solely the employees of Franchisee and not employees of H&R Block or subject to H&R Block’s control. Specifically, Franchisee will have exclusive control over all employment related decisions, including decisions concerning hiring, firing, wages, conditions of employment, discipline, staffing, or any other day-to-day management of employees. H&R Block has no obligation or right to control any franchise employment issue. 34. Thus, as H&R Block’s standard franchise agreement and FDD make clear, H&R Block franchise locations do and are intended to compete with each other as well as with H&R Block corporate-owned locations. Each franchisee independently owns and operates its franchise location(s) as such. Among other things, such franchisees possess and exercise sole and complete decision-making authority as to all employment-related decisions, including but not limited to recruitment, hiring, firing, advancement, promotion, staffing, compensation, conditions of employment, discipline and other day- to-day management of employees. The only restriction placed on the franchisees is to not 8 compete over the labor pool. 35. But for the conspiracy, and the conduct of H&R Block and its agents and co- conspirators in furtherance thereof, each H&R Block franchisee would have competed with other H&R Block franchisees and with H&R Block itself for employees and would have engaged in competition and would have solicited and recruited employees from other H&R Block franchisees and from H&R Block corporate-owned locations. The No-Poach Agreements between and among Competing H&R Block Locations 36. Notwithstanding the franchise license agreement’s definition of the franchisor- franchisee relationship, H&R Block and its franchises have agreed not to compete with respect to recruitment and other aspects of competition with respect to the soliciting and recruiting of employees. 37. Specifically, until May 2018, H&R Block’s franchise agreement, which franchisees are required to sign, included a clause prohibiting any H&R Block franchise from hiring any employees of H&R Block, including its corporate-owned tax offices, or employees of other H&R Block franchises. This clause (the “No-Poach Clause”) provides: During the term of this Agreement, neither Franchisee nor any of Franchisee’s Associates will, without H&R Block’s written consent… [s]olicit for employment any person who is employed by H&R Block or by any other franchisee of H&R Block; 38. The anti-poaching scheme was between and among separate economic actors pursuing separate economic interests such that the agreement deprives the marketplace generally and, more importantly, the class members of the benefits of independent 9 centers of decision making as well as the benefits of free and open competition. 39. The No-Poach restriction was not intended or limited to simply protecting H&R Block’s investment in training its employees at corporate-owned offices. After all, the franchise offices’ employees were required to meet the same training requirements. 40. The restriction placed on franchisees from poaching employees from other franchisees further underscores the true purpose and value of the No-Poach Clause and surrounding policies to H&R Block: restricting competition for employees in the market and artificially suppressing wages among competing firms in a highly specialized sector. 41. While the No-Poach Clause in the standard franchise license agreement ostensibly placed an obligation only on franchisees, H&R Block operated under the same policy to effectuate and enforce the anticompetitive agreement. 42. Enforcing this agreement was a central part of the recruiting and hiring process at H&R Block. For example, the first question on H&R Block’s online application for its corporate tax offices asks, “Have you ever worked for H&R Block or a H&R Block Franchise affiliate?” If yes, applicants are prompted to input their H&R Block Employee ID. This question is separate and apart from and precedes the history of employment portion on the application. This allows the prospective H&R Block employer to easily flag applicants who are or have been employed by competing H&R Block franchisees or H&R Block corporate stores. The purpose and effect of this provision is to enforce and perpetuate the Conspiracy, in particular, by identifying and preventing violations of the 10 agreement. Employee Recruitment, Hiring, and Training 43. As one of the largest providers of tax preparation services in the United States, H&R Block has a critical need for workers trained not only in tax preparation and assistance but also in the H&R Block System. The same is true for H&R Block franchisees. 44. At the height of the 2018 tax season, H&R Block employed over 70,000 individuals, including tax professionals and other administrative staff. Franchise locations additionally employ an estimated 20,000-30,000 employees—many of whom are seasonal. 45. Due to the seasonal nature of tax preparation and related services, H&R Block and its franchisees must recruit and hire a large number of new or returning employees every year. As H&R Block highlights in its 2018 Form 10-K disclosure to the Securities and Exchange Commission, H&R Block’s “business is dependent on the availability of a seasonal workforce, including tax professionals, and [its] ability to hire, train, and supervise these employees.” 46. H&R Block’s Form 10-K further underscores the importance of recruiting and hiring large numbers of qualified tax preparers each tax season due to the “specialized and highly seasonal nature” of the tax preparation business, that “presents financial risks and operational challenges, which, if not satisfactorily addressed, could materially affect our business and our consolidated financial position, results of operations, and cash 11 flows.” 47. In particular, H&R Block states that, “[s]uccess in [the] industry depends on our ability to attract, develop, motivate, and retain key personnel in a timely manner, including . . . those in seasonal tax preparation positions or with other required specialized expertise, including technical positions. The market for such personnel is extremely competitive, and there can be no assurance that we will be successful in our efforts to attract and retain the required personnel.” 48. As H&R Block recognized in its Form 10-K filing, the regular need each tax season for qualified tax preparation workers would otherwise lead to healthy competition between H&R Block, its franchise locations, and other companies providing tax preparation services, and thus, higher wages, benefits, compensation and other terms of employment. Instead, as part of its efforts to “satisfactorily address[]” the threats to cash flow associated with the seasonal turnover of employees in an “extremely competitive” market, H&R Block conspired with its franchisees and other co-conspirators to restrict employee mobility and competition in the market, with the purpose and effect of reducing and restricting mobility and limiting and reducing wages, benefits, compensation and other terms of employment. Required Training Specific to Employment at H&R Block and Its Franchises 49. Each H&R Block tax professional must invest hundreds of dollars and dozens of hours to complete H&R Block-specific educational requirements before even being 12 considered for employment at H&R Block or its franchises, unless he or she passes a test to demonstrate equivalent knowledge. Completing those requirements provides no guarantee of employment. Further, tax preparers seeking to work in subsequent tax seasons after being hired by H&R Block and its franchises must complete at least 18 hours of additional H&R Block-specific training before being considered for re-hire. 50. To meet the need for the large number of tax professionals required to staff the company’s many corporate and franchise office locations, H&R Block established “H&R Block Income Tax Schools” as early as 1978 to provide introductory income tax courses to individuals with no background in tax return services as well as supplemental courses for more experienced tax professionals. Today, the introductory Income Tax Course provides 60 to 89 hours of instruction relating to tax forms. Classes are typically held at local H&R Block offices—both corporate-owned and franchise locations—with additional sessions provided online. Students must pay for course materials. 51. To apply for a job with H&R Block or an H&R Block franchise, a prospective employee must either take the 60-hour Income Tax Course or pass a test to demonstrate equivalent knowledge. A high school diploma is not a prerequisite for enrolling in the Income Tax Course or taking the knowledge exam. 52. The course requirement is not considered training, as H&R Block will not even consider an application until a prospective employee fulfills the course requirement or passes an equivalent knowledge test. Rather, completion of the course is a prerequisite to 13 being considered for employment. 53. Instead, H&R Block’s marketing materials advertise that the basic Income Tax Course helps individuals master their own annual returns and “can also lead to a job.” Completion of the course does not guarantee employment at H&R Block. 54. H&R Block’s marketing materials further clarify that the course “is not intended for, nor open to any persons who are either currently employed or seeking employment with any professional tax preparation company or organization other than H&R Block [or one of its franchise offices]. During the course, should H&R Block learn of any student’s employment or intended employment with a competing professional tax preparation company or service, H&R Block reserves the right to immediately cancel the student’s enrollment.” 55. Upon successful completion, H&R Block Income Tax Course students receive an H&R Block Certification. This Certification is a prerequisite for most if not all tax preparation jobs at H&R Block corporate or franchise locations. 56. In addition, seasonal tax preparation workers must complete at least 18-24 hours of H&R Block training before they can be considered for rehire in a subsequent tax season. 57. These H&R Block-specific education requirements are the primary qualifications for open tax professional positions at corporate-owned and franchise offices. 58. The principal educational qualifications of many employees at H&R Block’s corporate-owned or franchise offices are completion of highly specialized, H&R Block- 14 specific trainings and certifications. 59. With limited educational qualifications apart from hundreds of hours invested in H&R Block-specific training, many tax professionals at H&R Block’s corporate-owned and franchise locations are uniquely suited to working at H&R Block or one of its franchise locations. Based on H&R Block’s franchise-specific education requirements for all corporate-owned and franchise locations, employees should generally be highly mobile between H&R Block’s corporate-owned and franchise offices. 60. In the absence of H&R Block’s anticompetitive conduct, competition between and among Defendants and co-conspirators for H&R Block-trained workers in the highly specialized and technical tax preparation services industry, particularly within the H&R Block System, would be robust and would have increased and enhanced the workers’ compensation and mobility. The H&R Block System 61. In addition to the specialized training for tax preparers, franchisees and management-level employees must complete further specialized training on the H&R Block System. 62. H&R Block utilizes “a distinctive system” for establishing and operating tax return preparation businesses and performing related services (“System”). According to its FDD, the H&R Block System includes “proprietary processes, methods and software; standards, specifications and procedures for operations; procedures for management 15 control; training and assistance; and advertising and promotional programs.” 63. Both corporate-owned and franchise offices and their employees must operate according to the H&R Block System. 64. To ensure familiarity and compliance with the distinctive H&R Block System, franchisees and their management-level employees must attend training on the System before their first and second tax seasons. Under the standard franchise agreement, the franchisee is responsible for the travel expenses, room, board, and wages for the training. These initial and other ongoing trainings cover topics including franchisor/franchisee commitments, personnel management and training programs, and the H&R Block service model. 65. As a result of the H&R Block-specific training, education, and qualification requirements, including as to H&R Block proprietary processes, procedures, methods, and software, as in H&R Block Income Tax Courses and Schools, employment with a non- H&R Block tax preparation company or business is not a reasonable substitute for the employees of H&R Block and their franchises. The Purpose and Effect of this Scheme was to Restrict Mobility and Suppress Compensation Restricted and Reduced Mobility 66. H&R Block’s anticompetitive scheme has restricted and reduced mobility between H&R Block corporate-owned and franchise locations. 67. The H&R Block website provides information about more than 65,000 tax 16 professionals working at corporate-owned or franchise offices. Tax professionals with differing degrees of seniority and training carry different titles, including Master Tax Advisor, Senior Tax Analyst, Tax Analyst, Senior Tax Specialist, Tax Specialist and Tax Associate. 68. Nearly 70% of the 70,000 tax professionals listed on H&R Block’s website are affiliated with a single corporate-owned or franchise office. An employee being associated with only one location would comply with the No-Poach Clause and the conspiracy. Approximately 26% are listed as working at multiple corporate-owned offices, and an additional 4% are affiliated with multiple offices within one franchise group—that is, franchise locations owned by the same franchisee. These associations also would comply with the No-Poach Clause and the conspiracy. Only 0.41%, however, are affiliated with both company-owned and franchise offices. And only 0.28% of tax professionals are affiliated with offices in more than one franchise group. Thus, approximately 99.3% of current employees at H&R Block’s corporate and franchise offices appear to be in compliance with the terms of No-Poach Clause and the conspiracy, while about 0.7% of current employees appear to be noncompliant. 69. The small number of employees affiliated with both a corporate-owned office and a franchise office—particularly in comparison to the much larger number of employees at multiple corporate-owned locations or offices within the same franchise group—help demonstrate not only that the No-Poach Clause in the standard franchise agreement is 17 routinely enforced, but also that the H&R Block corporate-owned stores adhere to a parallel rule not to solicit or recruit employees from franchisee offices. These agreements and policies eliminate incentives and abilities of franchisees and corporate-owned offices to compete for employees. 70. The scheme restricted employees’ job mobility by decreasing the pool of potential employers and eliminating competition. This, in turn, has led to suppressed wages, compensation and other benefits, compounded over the long term of the conspiracy. 71. The anticompetitive agreement and its harmful effects were not limited to tax professionals but extended to managers, executives and other employees of H&R Block. Suppressed Compensation 72. H&R Block and franchisee employees have roles in tax preparation, customer service, and administrative or management positions. For each of these roles, employees at H&R Block and its franchises are paid below the national salary for similar job titles. 73. For example, H&R Block Seasonal Tax Preparers have an average base pay of approximately $10.86 per hour, while the Bureau of Labor Statistics (“BLS”) hourly mean wage for a tax preparer is $22.67 per hour. H&R Block receptionists reportedly earn approximately $9.80 per hour while the BLS hourly mean wage for receptionist is $13.65. 74. But for the conspiracy, employee compensation at H&R Block corporate-owned and franchise offices would be significantly higher. 18 Illegality and Anticompetitive Harm of Franchise No-Poach Agreements 75. On or about July 9, 2018, the Attorneys General of 10 states and of the District of Columbia announced an investigation into the anticompetitive hiring and recruiting practices and procedures used by several large franchise companies, and stated that: [W]e are concerned about the use of No Poach Agreements among franchisees and the harmful impact that such agreements may have on employees in our States and our state economies generally. By limiting potential job opportunities, these agreements may restrict employees’ ability to improve their earning potential and the economic security of their families. These provisions also deprive other franchisees of the opportunity to benefit from the skills of workers covered by a No Poach Agreement whom they would otherwise wish to hire. When taken in the aggregate and replicated across our States, the economic consequences of these restrictions may be significant. 76. Within days of the announcement of the States’ investigation, H&R Block made public that it had agreed to end its practice of including and enforcing No-Poach Agreements in franchise contracts. CO-CONSPIRATORS AND AGENTS 77. The anticompetitive and unlawful acts alleged against H&R Block were authorized, ordered or performed by H&R Block and its respective directors, officers, agents, employees, or representatives, while actively engaged in the management, direction, or control of H&R Block’s businesses or affairs. 78. Individuals and/or entities not named as defendants herein may have participated as co-conspirators in the violations alleged herein and may have performed acts and made statements in furtherance thereof. 19 79. Each Defendant acted as the principal, agent, or joint venturer of, or for other Defendants with respect to the acts, violations, and common course of conduct alleged herein. The agency relationships formed among the Defendants with respect to the acts, violations, and common course of conduct alleged herein were consensually formed between the H&R Block principals and agents. 80. Accordingly, H&R Block’s principals are liable for the acts of their agents. Likewise, the H&R Block agents are liable for the acts of their principals conducted by the agents within the scope of their explicit, implied or apparent authority. CLASS ACTION ALLEGATIONS 81. Plaintiff brings this action on behalf of herself and all others similarly situated (“the Class”), pursuant to Federal Rules of Civil Procedure 23(a), 23(b)(2), and 23(b)(3). The Class is defined as follows: All persons who worked at any H&R Block tax office in the United States, whether owned and operated by H&R Block or by its franchisee, at any time between January 1, 2009, and May 10, 2018. Excluded from the Class are senior executives and personnel in the human resources and recruiting departments of the H&R Block or co-conspirators and their wholly owned subsidiaries, as well as personnel hired outside of the United States to work outside of the United States. 82. Based on the nature of trade and commerce involved, as well as the scope and duration of the conspiracy, there are tens of thousands of Class members geographically 20 dispersed throughout the United States. Therefore, joinder of all members of the Class is not practicable. 83. The questions of law or fact common to the Class include, but are not limited to: a. whether the agreement violated the Sherman Act; b. whether the scheme and No Poach Agreement, or any one of them, constitute a per se violation of the Sherman Act; c. whether the scheme and associated agreements restrained trade, commerce, or competition for labor; d. whether Plaintiff and the Class suffered antitrust injury or were threatened with injury; and e. the type and measure of damages suffered by Plaintiff and the Class. 84. These and other questions of law and fact common to the Class predominate over any questions affecting only individual Class members. 85. Plaintiff’s claims are typical of the claims of the Class. 86. Plaintiff will fairly and adequately represent the interests of the Class and has no conflict with the interests of the Class. 87. Plaintiff has retained competent counsel experienced in antitrust litigation to represent herself and the Class. 88. H&R Block and the co-conspirators have acted on grounds generally applicable to the Class, thereby making final injunctive relief appropriate with respect to the Class. 89. A class action is superior to alternative means of adjudicating this controversy because it will eliminate repetitive litigation and because prosecuting separate actions by 21 individual Class members would create the risk of inconsistent or varying adjudications, establishing incompatible standards of conduct for H&R Block. ANTICOMPETITIVE EFFECTS 90. The anticompetitive agreement reduced competition for labor. H&R Block and the co-conspirators entered into, implemented, and policed these agreements with knowledge of the overall conspiracy, and did so with the intent and effect of fixing, retraining and stabilizing the compensation paid to its personnel at artificially low levels. 91. The harm not only reached individuals who sought to change their employment from one franchise or corporate office location to another, but also extended to those who had no intention of changing from one franchise or corporate office location to another, due to, inter alia, the companies’ efforts to maintain internal equity in their compensation structures, as well as the reduction of transparency. 92. While the scheme constitutes a per se violation of the Sherman Act, H&R Block and unnamed co-conspirators also exploited their collective market power in the relevant market, which is the labor market for tax professionals and managers at H&R Block, as defined herein, in the United States. 93. Through the conspiracy, H&R Block exercised and maintained this power, and did in fact suppress wages, benefits, job mobility, and other aspects of compensation and eliminate competition. 94. The scheme and the conduct of H&R Block and its agents and co-conspirators in 22 furtherance thereof did not have procompetitive effects and were not intended to have procompetitive effects. 95. In the alternative, H&R Block is liable under a “quick look” analysis where one with even a rudimentary understanding of economics could conclude that the arrangements and agreements alleged would have an anticompetitive effect on class members and markets. 96. In the alternative, any procompetitive effects that may have resulted from the scheme and/or the conduct of H&R Block and its agents and co-conspirators in furtherance thereof were and are outweighed by the anticompetitive harm alleged herein, including but not limited to restricting employee mobility and suppressing wages, benefits, and other aspects of compensation. EQUITABLE TOLLING AND STATUTE OF LIMITATIONS 97. While Plaintiff had knowledge of aspects of H&R Block’s and industry recruiting practices, Plaintiff had neither actual nor constructive knowledge of H&R Block’s unlawful conspiracy until, at the earliest, H&R Block’s public announcement that it had ended the practice of including and enforcing No-Poach Agreements in franchise contracts on or around July 12, 2018. Nor did Plaintiff have any reason to suspect that H&R Block was illegally acting in concert to suppress wages and the labor market. At no point did H&R Block inform Plaintiff that its compensation was not competitive but was instead suppressed by H&R Block’s anticompetitive agreements. Plaintiff therefore did 23 not know of, did not discover, and could not have discovered through reasonable diligence, the existence of the conspiracy outlined in the foregoing allegations. 98. Conspiracies, by their nature, must be concealed. To keep the scheme hidden from employees and prospective employees, H&R Block and its co-conspirators did not publicize the No-Poach Clause. H&R Block also did not inform employees of the scheme between H&R Block and its franchises at any time. 99. H&R Block concealed the conspiracy by giving false and pretextual explanations for hiring and compensation decisions, including that the decisions were based on merit, the operation of free and open competition, and other considerations. 100. As a result of H&R Block’s and its co-conspirators’ successful efforts to conceal the fact and scope of the conspiracy, the running of any applicable statute of limitations has been tolled with respect to Plaintiff’s claims concerning H&R Block’s conspiracy. COUNT I: VIOLATIONS OF SECTIONS 1 AND 3 OF THE SHERMAN ACT, 15 U.S.C. §§ 1, 3 101. Plaintiff incorporates each allegation above as if set forth herein. 102. Beginning no later than January 1, 2009, and continuing until in or around May 2018, H&R Block entered into and engaged in unlawful agreements in restraint of trade and commerce, in violation of Sections 1 and 3 of the Sherman Act, 15 U.S.C. §§ 1, 3. 103. H&R Block’s agreements have included concerted actions and undertakings among themselves and their co-conspirators with the purpose and effect of: (a) fixing, reducing and stabilizing the wages, benefits and other aspects of compensation of 24 Plaintiff and the Class at artificially low levels; and (b) eliminating, to a substantial degree, competition among H&R Block for labor. 104. As a direct and proximate result of H&R Block’s combinations and contracts to restrain trade and eliminate competition for labor, members of the Class have suffered injury and have been deprived of the benefits of free and fair competition on the merits. 105. The unlawful agreements among H&R Block and their co-conspirators have had the following effects, among others: a. competition among H&R Block for labor has been suppressed, restrained, and eliminated; and b. Plaintiff and Class members have received lower compensation and experienced decreased job mobility from H&R Block than they otherwise would have received in the absence of the anticompetitive agreement and, as a result, have been injured in their property and have suffered damages in an amount subject to proof at trial. 106. The acts done by each Defendant as part of, and in furtherance of, their contracts, combinations, and/or conspiracies were authorized, ordered, or committed by their respective officers, directors, agents, employees, or representatives while actively engaged in the management of each Defendant’s affairs. 107. H&R Block’s contracts, combinations, and/or conspiracies are per se violations of Sections 1 and 3 of the Sherman Act. 108. Accordingly, Plaintiff and Class members are entitled to three times their damages caused by H&R Block’s violations of Sections 1 and 3 of the Sherman Act, as well as the costs of bringing suit, reasonable attorneys’ fees, and a permanent injunction 25 prohibiting H&R Block from ever again entering into similar agreements in violation of the antitrust laws. DEMAND FOR JURY TRIAL Pursuant to Rule 38(b) of the Federal Rules of Civil Procedure, Plaintiff, on behalf of herself and the Class, demands a jury trial as to all issues triable by a jury. PRAYER FOR RELIEF WHEREFORE, Plaintiff requests that the Court enter judgment on her behalf and that of the Class by adjudging and decreeing that: a. This action may be maintained as a class action, with Plaintiff as the designated Class representative and her counsel as Class counsel; b. H&R Block has engaged in a trust, contract, combination, or conspiracy in violation of Sections 1 and 3 of the Sherman Act, and that Plaintiff and the Class members have been damaged and injured in their business and property as a result of this violation; c. The alleged combinations and conspiracy are per se violations of the Sherman d. H&R Block is enjoined from attempting to enter into, entering into, maintaining, or enforcing any no-poach agreement, or other illegal anticompetitive agreement or understanding, as alleged herein; e. Judgment be entered for Plaintiff and Class members, and against H&R Block, for three times the amount of damages sustained by Plaintiff and the Class, as allowed by law; f. Plaintiff and the Class recover pre-judgment and post-judgment interest as permitted by law; g. Plaintiff and the Class recover their costs of suit, including attorneys’ fees, as provided by law; and 26 h. Plaintiff and the Class are entitled to such other and further relief as is just and proper under the circumstances. Respectfully Submitted, GUSTAFSON GLUEK, PLLC Daniel E. Gustafson Amanda Williams Canadian Pacific Plaza 120 South 6th Street, Suite 2600 Minneapolis, Minnesota 55402 (612) 333-8844 [email protected] [email protected] GREG COLEMAN LAW, PC Gregory F. Coleman 800 S. Gay Street, Suite 1100 Knoxville, Tennessee 37929 (865) 247-0080 [email protected] Dated: December 31, 2018 PAUL LLP Richard M. Paul III Richard M. Paul III, Mo. Bar No. 44233 Ashlea Schwarz, Mo. Bar No. 60102 Laura Fellows, Mo. Bar No. 65896 601 Walnut Street, Suite 300 Kansas City, Missouri 64106 (816) 984-8100 [email protected] [email protected] [email protected] WHITFIELD BRYSON & MASON, LLP Daniel K. Bryson 900 W. Morgan Street Raleigh, North Carolina 27603 (919) 600-5000 [email protected] ATTORNEYS FOR PLAINTIFF 27

antitrust

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PETER R. DION-KINDEM (SBN 95267) THE DION-KINDEM LAW FIRM PETER R. DION-KINDEM, P. C. 21550 Oxnard Street, Suite 900 Woodland Hills, California 91367 Telephone: (818) 883-4900 Fax: (818) 883-4902 Email: [email protected] LONNIE C. BLANCHARD, III (SBN 93530) THE BLANCHARD LAW GROUP, APC 3311 East Pico Boulevard Los Angeles, CA 90023 Telephone: (213) 599-8255 Fax: (213) 402-3949 Email: [email protected] Case No. Class Action Complaint and Demand for Jury Trial Attorneys for Plaintiff Sarmad Syed UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA Sarmad Syed, an individual, on behalf of himself and all others similarly situated, Plaintiff, vs. M-I LLC, a Delaware Limited Liability Company, PreCheck, Inc., a Texas Corporation, and Does 1 through 10, Defendants. Plaintiff Sarmad Syed (“Plaintiff”) alleges: 1. This class action alleges that certain policies and practices followed by Defendants M-I LLC and PreCheck, Inc. in furnishing, using, procuring, and/or causing to be procured consumer reports for employment purposes violate the provisions of the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. 1681, et seq. Specifically, Defendants violate Section 1681b(b) of the FCRA by furnishing, using, procuring, and/or causing to be procured consumer reports for employment purposes by failing to make proper disclosures required thereunder. JURISDICTION/VENUE 2. The Court has jurisdiction under 15 U.S.C. Section 1681p. 3. Venue is proper in this Court under 28 U.S.C. Section 1391(b) because the Defendants regularly do business in this district. PARTIES 4. Sarmad Syed (“Plaintiff”) is a resident of California and is a “consumer” protected by the FCRA. 5. Defendant M-I LLC (“M-I”) is believed to be Delaware limited liability company. M-I was a “user” of a consumer reports for employment purposes pertaining to Plaintiff and certain class members and procured and/or caused them to be procured by Defendant PreCheck, Inc. 6. Defendant PreCheck, Inc. is believed to be a Delaware corporation. PreCheck furnished consumer reports to M-I and other persons for employment purposes and procured or caused to be procured consumer reports with respect to Plaintiff and class members for employment purposes. 7. Plaintiff does not presently know the true names and capacities of the defendants named as Does 1 through 10 and therefore sues such defendants by these fictitious names. Plaintiff believes that the Doe Defendants are persons or entities who are involved in the acts set forth below, either as independent contractors, suppliers, agents, servants or employees of the known defendants, or through entering into a conspiracy and agreement with the known Defendants to perform these acts, for financial gain and profit, in violation of Plaintiff’s and Class Members’ rights. Plaintiff will request leave of Court to amend this Complaint to set forth their true names, identities and capacities when Plaintiff ascertains them. 8. Each of the Defendants has been or is the principal, officer, director, agent, employee, representative and/or co-conspirator of each of the other defendants and in such capacity or capacities participated in the acts or conduct alleged herein and incurred liability therefor. At an unknown time, some or all of the Defendants entered into a conspiracy with other of the Defendants to commit the wrongful acts described herein. These wrongful acts were committed in furtherance of such conspiracy. Defendants aided and abetted each other in committing the wrongful acts alleged herein. Each of the Defendants acted for personal gain or in furtherance of their own financial advantage in effecting the acts alleged herein. First Claim for Relief Violation of the FCRA Section 1681b(b) 9. Plaintiff realleges all of the preceding paragraphs. 10. The FCRA defines a “person” as “. . . any individual, partnership, corporation, trust, estate, cooperative, association, government or governmental sub-division, or other entity.” 11. M-I and PreCheck are each a “person” as defined by the FCRA. 12. The FCRA defines a “consumer report” as “any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, mode of living which is used or expected to be used for. . . (B) employment purposes.” 13. M-I, as standard practice, routinely obtains “consumer reports” about its employees or prospective employees for employment purposes. 14. PreCheck, as a standard practice, furnishes, procures and/or causes to be prepared “consumer reports” about consumers to Shred-It and other persons for employment purposes. 15. Section 1681b(b) of the FCRA regulates the conduct of “persons” who furnish or use a “consumer report” for employment purposes as follows: (b) Conditions for furnishing and using consumer reports for employment purposes (1) Certification from user A consumer reporting agency may furnish a consumer report for employment purposes only if -- (A) the person who obtains such report from the agency certifies to the agency that-- (i) the person has complied with paragraph (2) with respect to the consumer report, and the person will comply with paragraph (3) with respect to the consumer report if paragraph (3) becomes applicable; and (ii) information from the consumer report will not be used in violation of any applicable Federal or State equal employment opportunity law or regulation; and (B) the consumer reporting agency provides with the report, or has previously provided, a summary of the consumer’s rights under this subchapter, as prescribed by the Bureau under section 1681g(c)(3) of this title. (2) Disclosure to consumer (A) In general Except as provided in subparagraph (B), a person may not procure a consumer report, or cause a consumer report to be procured, for employment purposes with respect to any consumer, unless-- (i) a clear and conspicuous disclosure has been made in writing to the consumer at any time before the report is procured or caused to be procured, in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes; and (ii) the consumer has authorized in writing (which authorization may be made on the document referred to in clause (i)) the procurement of the report by that person. . . . 16. At all times relevant hereto, PreCheck, Inc. was a “consumer reporting agency” governed by the FCRA. During the relevant time, PreCheck, Inc. was regularly engaged in the business of assembling, evaluating and disbursing information concerning consumers for the purpose of furnishing consumer reports, as defined in 15 U.S.C. Section 1681(d), to third parties, including M-I for employment purposes. 17. Plaintiff applied for a job with M-I on or about July 20, 2011. 18. As part of the application process, Plaintiff was presented with and executed a document entitled “Pre-employment Disclosure & Release.” (See Exhibit 1.) This form was prepared by PreCheck and provided by PreCheck to M-I and other employers. This form includes a provision waiving or releasing rights as follows: I understand the information obtained will be used as one basis for employment or denial of employment. I hereby discharge, release and indemnify prospective employer, PreCheck, Inc., their agents, servants and employees, and all parties that rely on this release and/or the information obtained with this release from any and all liability and claims arising by reason of the use of this release and dissemination of information that is false and untrue if obtained by a third party without verification. It is expressly understood that the information obtained through the use of this release will not be verified by PreCheck, Inc. 19. Defendant PreCheck violated Section 1681b(b)(1) by furnishing consumer reports for employment purposes without obtaining accurate certifications from M-I and other persons to whom they furnished consumer reports for employment purposes that they had complied with the provisions of subparagraph (2) and by knowing or recklessly failing to know that the disclosure and authorization form they provided to M-I and other persons to whom they furnished consumer reports for employment purposes did not comply with the provisions of Section 1681b(b)(2). 20. Defendant PreCheck violated Section 1681b(b)(2) by providing M-I and other persons to whom they furnished consumer reports for employment purposes with the disclosure and authorization forms used by such persons, which forms PreCheck knew or recklessly failed to know did not comply with the provisions of Section 1681b(b)(2), thereby procuring or causing to be procured a consumer report for employment purposes without the making of the required disclosure in compliance with the provisions of Section 1681b(b)(2). 21. Defendant M-I violated Section 1681b(b)(2) by procuring or causing to be procured consumer reports for employment purposes without making the required disclosure “in a document that consists solely of the disclosure” by using the disclosure and authorization form to obtain indemnity and a release of claims from consumers. 22. Defendants knew or should have known about their legal obligations under the FCRA. These obligations are well established in the plain language of the FCRA and in the promulgations of the Federal Trade Commission. Defendants obtained or had available substantial written materials which apprised them of their duties under the FCRA. Any reasonable employer or consumer reporting agency knows about or can easily discover these obligations. 23. Despite knowing of these legal obligations, Defendants acted consciously in breaching their known duties and depriving Plaintiff and other Class members their rights under the FCRA. 24. As a result of these FCRA violations, Defendants are liable for statutory damages from $100 to $1,000 for each violation pursuant to 15 U.S.C. Section 1681n(a)(1)(A), punitive damages pursuant to 15 U.S.C. Section 1681n(a)(2), and attorney’s fees and costs pursuant to Section 1681n and Section 1681o. 25. Plaintiff and Class Members are entitled to equitable relief against Defendants requiring their compliance with the FCRA in all future instances and/or re-employment of Plaintiff, and enjoining their future violations of the FCRA. 26. Plaintiff discovered Defendants’ violation(s) within the last two years when he obtained and reviewed his personnel file from Defendants and discovered that Defendants had furnished, used, procured and/or caused to be procured a “consumer report” regarding him for employment purposes. CLASS ACTION ALLEGATIONS 27. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, Plaintiff brings this action for himself and on behalf of a class initially defined as follows: PreCheck Class All persons residing in the United States (including all territories and other political subdivisions of the United States) as to whom PreCheck furnished consumer reports for employment purposes within the period prescribed by FCRA, 15 U.S.C. §1681p and as to which such class members did not receive the legally required disclosures under Section 1681b(b)(2). M-I Sub-Class All persons residing in the United States (including all territories and other political subdivisions of the United States) as to whom M-I or any of its related companies procured or caused to be procured a consumer report for employment purposes within the period prescribed by FCRA, 15 U.S.C. §1681p without providing the legally required disclosures under Section 1681b(b)(2). 28. Numerosity. Fed. R. Civ. P. 23(a)(1). The members of the Class are so numerous that joinder of all members is impractical. The names and addresses of the Class members are identifiable through documents maintained by the Defendants, and the Class members may be notified of the pendency of this action by published and/or mailed notice. 29. Existence and Predominance of Common Questions of Law and Fact. Fed. R. Civ. P. 23(a)(2). Common questions of law and fact exist as to all members of the Class. These questions predominate over the questions affecting only individual members. These common legal and factual questions include, among other things: a. Whether Defendants violated Section 1681b(b) by procuring or causing to be procured consumer reports for employment purposes without making the required disclosure “in a document that consists solely of the disclosure” as required by Section 1681b(b)(2)(A)(i). b. Whether Defendant PreCheck violated Section 1681b(b) by furnishing consumer reports for employment purposes knowing or reckless failing to know that PreCheck had not obtained accurate certifications from the persons to whom they provided such reports that such persons had complied with Section 1681b((b)(2). c. Whether Defendants’ violations were willful. 30. Typicality. Fed. R. Civ. P. 23(a)(3). Plaintiff’s class claims are typical of the claims of Class members. Plaintiff for class certification purposes seeks only statutory and punitive damages. In addition, Plaintiff is entitled to relief under the class claims as the other members of the Class. 31. Adequacy. Fed. R. Civ. P. 23(a)(4). Plaintiff is an adequate representative of the Classes because Plaintiff’s interests coincide with, and are not antagonistic to, the interests of the members of the Class Plaintiff seeks to represent. Plaintiff has retained counsel competent and experienced in class action litigation, and Plaintiff intends to prosecute this action vigorously. The interests of members of the Class will be fairly and adequately protected by Plaintiff and Plaintiff’s counsel. 32. Superiority. Fed. R. Civ. P. 23(b)(3). Questions of law and fact common to the Class members predominate over questions affecting only individual members, and a class action is superior to other available methods for fair and efficient adjudication of the controversy. The statutory and punitive damages sought by each member are such that individual prosecution would prove burdensome and expensive given the complex and extensive litigation necessitated by Defendants’ conduct. It would be virtually impossible for the members of the Class individually to redress effectively the wrongs done to them. Even if the members of the Class themselves could afford such individual litigation, it would be an unnecessary burden on the Courts. Furthermore, individualized litigation presents a potential for inconsistent or contradictory judgments and increases the delay and expense to all parties and to the court system presented by the complex legal and factual issues raised by Defendants’ conduct. By contrast, the class action device will result in substantial benefits to the litigants and the Court by allowing the Court to resolve numerous individual claims based upon a single set of proof in a case. 33. Injunctive Relief Appropriate for the Class. Fed. R. Civ. P. 23(b)(2). Class certification is appropriate because Defendants have acted on grounds generally applicable to the Classes, making appropriate equitable injunctive relief with respect to Plaintiff and the Class members. Second Claim for Relief Violation of California Civil Code Section 1786.16 34. Plaintiff realleges paragraphs 1 through 8. 35. California has enacted the Investigative Consumer Reporting Agencies Act, Civ. Code, §§ 1786 to 1786.60 (“ICRAA”). 36. Section 1786.2 defines certain terms as follows: (a) The term “person” means any individual, partnership, corporation, limited liability company, trust, estate, cooperative, association, government or governmental subdivision or agency, or other entity. The term “person” as used in this title shall not be construed to require duplicative reporting by any individual, corporation, trust, estate, cooperative, association, government, or governmental subdivision or agency, or other entity involved in the same transaction. (b) The term “consumer” means a natural individual who has made application to a person for employment purposes, for insurance for personal, family, or household purposes, or the hiring of a dwelling unit, as defined in subdivision (c) of Section 1940. (c) The term “investigative consumer report” means a consumer report in which information on a consumer’s character, general reputation, personal characteristics, or mode of living is obtained through any means. The term does not include a consumer report or other compilation of information that is limited to specific factual information relating to a consumer’s credit record or manner of obtaining credit obtained directly from a creditor of the consumer or from a consumer reporting agency when that information was obtained directly from a potential or existing creditor of the consumer or from the consumer. Notwithstanding the foregoing, for transactions between investigative consumer reporting agencies and insurance institutions, agents, or insurance-support organizations subject to Article 6.6 (commencing with Section 791) of Chapter 1 of Part 2 of Division 1 of the Insurance Code, the term “investigative consumer report” shall have the meaning set forth in Section 791.02 of the Insurance Code. (d) The term “investigative consumer reporting agency” means any person who, for monetary fees or dues, engages in whole or in part in the practice of collecting, assembling, evaluating, compiling, reporting, transmitting, transferring, or communicating information concerning consumers for the purposes of furnishing investigative consumer reports to third parties, but does not include any governmental agency whose records are maintained primarily for traffic safety, law enforcement, or licensing purposes, or any licensed insurance agent, insurance broker, or solicitor, insurer, or life insurance agent. . . . (f) The term “employment purposes,” when used in connection with an investigative consumer report, means a report used for the purpose of evaluating a consumer for employment, promotion, reassignment, or retention as an employee. . . . 37. M-I is a “person” described in Civil Code Section 1786.12(d). 38. M-I, as standard practice, routinely obtains “investigative consumer reports” about its employees or prospective employees. 39. Civil Code Section 1786.16 provides: (a) Any person described in subdivision (d) of Section 1786.12 shall not procure or cause to be prepared an investigative consumer report unless the following applicable conditions are met: . . . (2) If, at any time, an investigative consumer report is sought for employment purposes other than suspicion of wrongdoing or misconduct by the subject of the investigation, the person seeking the investigative consumer report may procure the report, or cause the report to be made, only if all of the following apply: (A) The person procuring or causing the report to be made has a permissible purpose, as defined in Section 1786.12. (B) The person procuring or causing the report to be made provides a clear and conspicuous disclosure in writing to the consumer at any time before the report is procured or caused to be made in a document that consists solely of the disclosure, (i) An investigative consumer report may be obtained. (ii) The permissible purpose of the report is identified. (iii) The disclosure may include information on the consumer’s character, general reputation, personal characteristics, and mode of living. (iv) Identifies the name, address, and telephone number of the investigative consumer reporting agency conducting the investigation. (v) Notifies the consumer in writing of the nature and scope of the investigation requested, including a summary of the provisions of Section 1786.22. . . . (C) The consumer has authorized in writing the procurement of the report. (4) The person procuring or causing the request to be made shall certify to the investigative consumer reporting agency that the person has made the applicable disclosures to the consumer required by this subdivision and that the person will comply with subdivision (b). (Emphasis added.) 40. The disclosure provided to Plaintiff is attached as Exhibit 1. 41. Defendants violated Section 1786.16 by failing to provide the requisite notice to Plaintiff before procuring a consumer investigative report concerning Plaintiff. 42. Defendant’s violation of the statute was grossly negligent or willful in that Defendants knew or should have known about their legal obligations under the ICRAA. These obligations are well established in the plain language of the ICRAA. Defendants obtained or had available substantial written materials which apprised them of their duties under the ICRAA. Any reasonable employer knows about or can easily discover these obligations. Despite knowing of these legal obligations, Defendants acted willfully or in a grossly negligent manner in breaching their known duties and depriving Plaintiff of his rights. 43. Plaintiff discovered Defendants’ violation(s) within the last two years when he obtained and reviewed his personnel file from Defendants and discovered that Defendants had procured an “investigate consumer report” regarding him without providing legally required notice. 44. As a result of Defendants’ violation of the statute, Plaintiff is entitled to recover actual damages or $10,000, whichever is greater, pursuant to Civil Code Section1786.50. 45. As a result of Defendants’ violation of the statute, Plaintiff is entitled to recover reasonable attorney’s fees pursuant to Civil Code Section1786.50. 46. As a result of Defendants’ violation of the statute, and because Defendants’ violation was willful or grossly negligent, Plaintiff is entitled to punitive damages, according to proof, pursuant to Civil Code Section 1786.50. WHEREFORE, Plaintiff demands a jury trial and requests that judgment be entered against all Defendants as follows: 1. For an order certifying the proposed FCRA class under Federal Rule 23 and appointing Plaintiff and Plaintiff’s undersigned counsel of record to represent same; 2. For statutory damages; 3. For punitive damages; 4. For injunctive relief as requested; 5. For attorney’s fees and costs; 6. For interest as provided by law; 7. For such other and further relief as the Court deems proper. Dated: May 16, 2014 THE DION-KINDEM LAW FIRM BY: ________________________________ PETER R. DION-KINDEM, P.C. PETER R. DION-KINDEM Attorney for Plaintiff Sarmad Syed Exhibit 1 :_:~:,.'::,. ·.~: ?;. ~ B -~ ~ J£ ~?~ ~~_;fl_a ~ 'l ;,~ o 3.~_1. ~ s -~.!i~, ·l:. Jt)~:~~~ ~:~L< .-.. ·( .-. • ' 0 "' • • • • 0 • ' '•" - • • • , ~ •~ J' '• o I • • ~ , , ,. , , ., :. • • • ~ • :._ • i:." • ' , (PlFJ\SF PRINT) • APPLICANT'S FULL NAME: __ pre Check inc. Any Othc1 Name You ll:ivc Wo1kc<l Unucr: _____ J;;::_m __ "'\ ___ _ Soc1<1I Sccurny No D.11c 01 Birth 1 • _ ­ rel: 713·66 I ·5959 C ·11rrcn1 Atlclrc.ss· -· • ..ttV £ 1 ·800·9!>9-9861 Fnx: I -800-207-2778 • 1i. 7-11 1.-r.., l.. tly --- ------ _____ S1:11e _u_' _:.\ ____ ~Ip. _i_J_J_,_, _ l)1wcr's License No State {. /l My Present Employer May Be Cont:icted ror :> Job Reference No en/ Pm~u.rni io ih~ r.:cimremcn1s l.l( the f'.ur t'reJ11 Reporllng Act, J arknowledgr that a u"1ht report. consumer report'an1Vor mvtshg:w~" comumrr repon'ruay he 111:ide in con11cttion with my :ipphcnllon for •·111pfl)yment w11h prospecrive o:mplo)'er (mcl111.hng conu:ict fo: ,crvicc~) I ur.lel\taml tli ~t the.c 1n~e~11gat1••e background inqu111es !Tlily n lu•1c r.1cJ11. onsurnei. crrm1n31. '11w1:tg. pr.or employment and oihc:r iepoi:s These repents may include mlorm1111on as 10 my ch.11a•:tc:, worl: h.;b11~ p~rtormaxe Jnd cxpc:ncnce, along with reasons for tcrmrn.llron ol p.isc cmploymen1 Cro:n previous employers Futlh~r. I 11nJcrnand tnat prn~pccuve employer and PrcCheck, rue. may~ tcqui:sttng mtorm.itron from v.inous 1~eilc1;1l . State, nud 01her .igenc1cs wlurh m.1m1arn m:ords conccrnrng my past acu·~1ue..~ rclaung to my dnvJnll aeclir. C"n:u.1n:il, c1v1I •nd other c."tp-nc?nces ;is well as c!a1ms mvol"1n& me m :he lilt:s of 1:uurante compar.ies 1 aurhoi j 2c, ,1jthc1ut rescrv;\11011, any party or :igency contacted by f'rcChcck. Inc. 10 furnish the above mentioned mrorm:niou 1 :iuthonze VIE to Prov.de PrcCheck. Inc or any po1enual crnploycr of thts esnployrr.ent tr.rns~cuun, !>l.-itc ci:cords of employment. mc;udmg infontUl!On tcpur:cd by t:1!h:dual e:nplo1ers to the Sl.lle. 1r.ch.:dmg Sl3te llinpl•>)'m-:nt Sccumy Agency 1ecords Th:s aJ.1Ulor:z:mon ~:or tins ernploymi:nt ti wsac11on only ~ml .:0111rnues in .:fleet tor 36:i days tro:n thr date 01 Appht3nt's cxecu11on of this con.sent unless limited t, i rate law. 111 which ti.Sr the authoniauon conunues rn effect for the rnaxrmurn ~11oJ, not le> ,exceed 1tiS days. al!owcd by law 1 !l!lde:sr~r.rJ ·hat Ill)' retusal to ronsc1\I ... hall not be the basis for the denial of cmploymcni and that my dec1s:on is •1olunt~ry .ind nu< rc:quaed by law ,\photocopy or this a111hori1:111on sh.111 have the same elfei;t :tS 1he ong111:il. 1 untlcisinnd thl' mforrn.rnon obtained will be used 11s one basis IOr employment or tlcmnl of emph>yment l h.e:eby discharge. release ,,0,j inikmnily pr·J$p~1:lr;e cmploytr PreChe1.k, Inc , their Jger.t5, c1~ants Jnr! cmploy~es. ~nd .111 paJ11es rh.11 rely on ih1s releasr ind/or 11'.e nlormauon ot-tamc:d \\llh this rck:l~e fa om any and all liab1hty ano claims a11s1ng by 1eJson Clf the: u~c ol i.'us rele~se :md J1uemma11on <lf mioi matll)n 1tn1 I\ •~lsc .inc.I un11cc rf obmrned from a thud party w11hou1 '"'lllt~:rnon :J ... ·,,,-1 l ~"Z D~TE:~------~--~':__-~ Ii~· 0 .,;-:: Jt'~.:~tl .:mpl~ymcnt. ::uher wt.olly or pil!tiy bcc<:us.e ol 1;1fo11:unon ccn:31:tt:d 1n 11 consumer re pert .1 t1:;c,csure ·>. 11! he ::l~~e to , ;i.., 1 'the n.>mc ll!)ll idd:~ss of ·::e: 1merng~;p.e .<gc:n'-1 makm~ st.th rCJlC!t Upon you: wntlcn requ::st w1:!11:1:: re3so~abl~ ;:-''100 t! :.:me, rh- n~c.rngau\e 1gcnc·, C·•mp1!1;.g :nc report .\ill !T:.?lte :i co::-.ple:e: r.d ai:c~;~·c d1stlOStJrc 01 th·! n1:0~ and i:cc~ or • ;e u;·.-e •ig;;i;o:; , 1 i:•: ,\gt DJ""""'or1.i111,1 Emplcttnt111.~.1<Ji1987 p1oh1b11; d1s111•n11 .. i11~110•11J,,b1s1s rJf 11c .. uh ''•P''' ro 111d.--.J1 : !1 ;,ho 11~ ct /n:i1 l•Jl,·.:i•s Oi "~· "'-'' ui,:~1 ~1uo•1 isl'' tonnw~a 1tpo1t pwpoJts ~ 1Jb.: /\ COtrJuir:tl ilf•Ctl ·~. y (..,,IJl.J.f CJ l1.1p/Oj'lrtttU reco1ds t•~Uit.JtJrJ 1,a• reh;iCa!l•}ll. /l(t'ff:Ht .enficattQll., t!nVl''j •~CDr.J. !'Tr•IO , :. 1!t:a1~Jf (:'z.d p:ibhc flCO d.; 1tJ1untfi.J r1•mnc1l chcu3,J

consumer fraud

uOexEYcBD5gMZwcznSG5

CIVIL ACTION CLASS ACTION COMPLAINT UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK OURIEL EZRA, on behalf of himself and all others similarly situated, Plaintiffs, AND -against- DEMAND FOR JURY TRIAL F.H. CANN & ASSOCIATES, INC. Defendant. Plaintiff OURIEL EZRA (hereinafter, “Plaintiff”), a New York resident, brings this class action complaint by and through his attorneys, Law Office of Alan J. Sasson, P.C., against Defendant F.H. CANN & ASSOCIATES, INC. (hereinafter “Defendant”), individually and on behalf of a class of all others similarly situated, pursuant to Rule 23 of the Federal Rules of Civil Procedure, based upon information and belief of Plaintiff’s counsel, except for allegations specifically pertaining to Plaintiff, which are based upon Plaintiff’s personal knowledge. INTRODUCTION/PRELIMINARY STATEMENT 1. Congress enacted the FDCPA in 1977 in response to the “abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors.” 15 U.S.C. § 1692(a). At that time, Congress was concerned that “abusive debt collection practices contribute to the number of personal bankruptcies, to material instability, to the loss of jobs, and to invasions of individual privacy.” Id. Congress concluded that “existing laws . . . [we]re inadequate to protect consumers,” and that “the effective collection of debts” does not require “misrepresentation or other abusive debt collection practices.” 15 U.S.C. §§ 1692(b) & (c). 2. Congress explained that the purpose of the Act was not only to eliminate abusive debt collection practices, but also to “insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged.” Id. § 1692(e). After determining that the existing consumer protection laws were inadequate, id. § 1692(b), Congress gave consumers a private cause of action against debt collectors who fail to comply with the Act. Id. § 1692k. JURISDICTION AND VENUE 3. The Court has jurisdiction over this class action under 28 U.S.C. § 1331, 15 U.S.C. § 1692 et seq. and 28 U.S.C. § 2201. If applicable, the Court also has pendent jurisdiction over the state law claims in this action pursuant to 28 U.S.C. § 1367(a). 4. Venue is proper in this judicial district pursuant to 28 U.S.C. § 1391(b)(2). NATURE OF THE ACTION 5. Plaintiff brings this class action on behalf of a class of New York consumers seeking redress for Defendant’s actions of using an unfair and unconscionable means to collect a debt. 6. Defendant's actions violated § 1692 et seq. of Title 15 of the United States Code, commonly referred to as the Fair Debt Collections Practices Act (“FDCPA”) which prohibits debt collectors from engaging in abusive, deceptive and unfair practices. 7. Plaintiff is seeking damages, and declaratory and injunctive relief. PARTIES 8. Plaintiff is a natural person and a resident of the State of New York, and is a “Consumer” as defined by 15 U.S.C. §1692(a)(3). 9. Defendant is a collection agency with its principal office located in North Andover, Massachusetts. 10. Upon information and belief, Defendant is a company that uses the mail, telephone, and facsimile and regularly engages in business the principal purpose of which is to attempt to collect debts alleged to be due another. 11. Defendant is a “debt collector,” as defined under the FDCPA under 15 U.S.C. § 1692a(6). CLASS ALLEGATIONS 12. Plaintiff brings claims, pursuant to the Federal Rules of Civil Procedure (hereinafter “FRCP”) Rule 23, individually and on behalf of the following consumer class (the “Class”):  All New York consumers who received a collection letter from the Defendant attempting to collect an obligation owed to or allegedly owed to Santander Bank, N.A. (“Santander”), that contain the alleged violation arising from Defendant's violation of 15 U.S.C. §§1692g and 1692e, et seq.  The Class period begins one year to the filing of this Action. 13. The Class satisfies all the requirements of Rule 23 of the FRCP for maintaining a class action:  Upon information and belief, the Class is so numerous that joinder of all members is impracticable because there are hundreds and/or thousands of persons who have received debt collection letters and/or notices from Defendant that violate specific provisions of the FDCPA. Plaintiff is complaining of a standard form letter and/or notice that is sent to hundreds of persons (See Exhibit A, except that the undersigned attorney has, in accordance with Fed. R. Civ. P. 5.2 partially redacted the financial account numbers in an effort to protect Plaintiff’s privacy);  There are questions of law and fact which are common to the Class and which predominate over questions affecting any individual Class member. These common questions of law and fact include, without limitation: a. Whether Defendant violated various provisions of the FDCPA; b. Whether Plaintiff and the Class have been injured by Defendant’s conduct; c. Whether Plaintiff and the Class have sustained damages and are entitled to restitution as a result of Defendant’s wrongdoing and if so, what is the proper measure and appropriate statutory formula to be applied in determining such damages and restitution; and d. Whether Plaintiff and the Class are entitled to declaratory and/or injunctive relief.  Plaintiff’s claims are typical of the Class, which all arise from the same operative facts and are based on the same legal theories.  Plaintiff has no interest adverse or antagonistic to the interest of the other members of the Class.  Plaintiff will fairly and adequately protect the interest of the Class and has retained experienced and competent attorneys to represent the Class.  A Class Action is superior to other methods for the fair and efficient adjudication of the claims herein asserted. Plaintiff anticipates that no unusual difficulties are likely to be encountered in the management of this class action.  A Class Action will permit large numbers of similarly situated persons to prosecute their common claims in a single forum simultaneously and without the duplication of effort and expense that numerous individual actions would engender. Class treatment will also permit the adjudication of relatively small claims by many Class members who could not otherwise afford to seek legal redress for the wrongs complained of herein. Absent a Class Action, class members will continue to suffer losses of statutory protected rights as well as monetary damages. If Defendant’s conduct is allowed to proceed without remedy they will continue to reap and retain the proceeds of their ill-gotten gains.  Defendant has acted on grounds generally applicable to the entire Class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the Class as a whole. ALLEGATIONS OF FACT PARTICULAR TO OURIEL EZRA 14. Plaintiff repeats, reiterates and incorporates the allegations contained in paragraphs numbered “1” through “13” herein with the same force and effect as if the same were set forth at length herein. 15. Defendant collects and attempts to collect debts incurred or alleged to have been incurred for personal, family or household purposes on behalf of creditors using the United States Postal Services, telephone and Internet. 16. Upon information and belief, within the last year Defendant commenced efforts to collect an alleged consumer “debt” as defined by 15 U.S.C. 1692a(5), when it mailed a Collection Letter to Plaintiff seeking to collect an unpaid balance allegedly owed to Santander. 17. On or around July 11, 2016, Defendant sent Plaintiff a collection letter. See Exhibit A. 18. The letter was sent or caused to be sent by persons employed by Defendant as a “debt collector” as defined by 15 U.S.C. §1692a(6). 19. The letter is a “communication” as defined by 15 U.S.C. §1692a(2). 20. The letter concerns a debt that was incurred on a credit card. 21. The credit card accrued interest. 22. The credit card accrued late fees. 23. Defendant failed to advise Plaintiff whether or not such fees were continuing to accrue. 24. As a result, Plaintiff and the least sophisticated consumer were left in the dark as to the amount due and owing in violation of §1692g. 25. Congress adopted the debt validation provisions of section 1692g to guarantee that consumers would receive adequate notice of their rights under the FDCPA. Wilson, 225 F.3d at 354, citing Miller v. Payco–General Am. Credits, Inc., 943 F.2d 482, 484 (4th Cir.1991). 26. The rights afforded to consumers under Section 1692g(a) are amongst the most powerful protections provided by the FDCPA. 27. Defendant’s violations of the FDCPA created the risk of real harm that Plaintiff would make payment only to be contacted again later due to other charges that may have accrued between the date of the letter and the date payment was made. 28. Defendant’s actions as described herein are part of a pattern and practice used to collect consumer debts. 29. Defendants could have taken the steps necessary to bring its actions within compliance with the FDCPA, but neglected to do so and failed to adequately review its actions to ensure compliance with the law. 30. On information and belief, Defendants sent a written communication, in the form annexed hereto as Exhibit A to at least 50 natural persons in the State of New York within one year of the date of this Complaint. First Count Violation of 15 U.S.C. § 1692g Failure to Adequately Convey the Amount of the Debt 31. Plaintiff repeats, reiterates and incorporates the allegations contained in paragraphs numbered “1” through “30” herein with the same force and effect as if the same were set forth at length herein. 32. 15 U.S.C. § 1692g provides that within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing certain enumerated information. 33. One such requirement is that the debt collector provide “the amount of the debt.” 15 U.S.C. § 1692g(a)(1). 34. A debt collector has the obligation not just to convey the amount of the debt, but also to convey such clearly. 35. Defendant’s letters to Plaintiff sets forth a “Balance” of $856.64. 36. Defendant’s letters fail to disclose whether the balance may increase due to interest and fees. 37. The least sophisticated consumer would be confused as to how she could satisfy the debt. 38. The least sophisticated consumer might believe she could pay the debt in full by remitting the sum stated in the letter at any time after he received the letter. 39. Such a belief may or may not be correct, as Defendant has failed to disclose whether the balance may increase due to interest and fees. 40. If interest continues to accrue after the date of the letter, the least sophisticated consumer would not know how to satisfy the debt because the Defendant has failed to indicate the applicable interest rate. 41. Conversely, the least sophisticated consumer might believe she may pay the debt in full by remitting the sum stated in the letter at any time after the date of the letter. 42. Defendant failed to clearly state the amount of the debt. 43. Because of this failure, the least sophisticated consumer would likely be confused as to the amount of the debt. 44. Because of this failure, the least sophisticated consumer would likely be uncertain as to the amount of the debt. 45. Defendant has violated the FDCPA because the letter fails to disclose whether the balance may increase due to interest and fees. 46. Defendant has violated § 1692g as it failed to clearly, explicitly and unambiguously convey the amount of the debt. 47. Nor has Defendant provided the safe harbor language adopted by the Second Circuit.1 48. By reason thereof, Defendant is liable to Plaintiff for judgment that Defendant's conduct violated Section 1692g et seq. of the FDCPA, actual damages, statutory damages, costs and attorneys’ fees. Second Count 15 U.S.C. §1692e et seq. False or Misleading Representations as to Status of Debt 49. Plaintiff repeats, reiterates and incorporates the allegations contained in paragraphs numbered “1” through “48” herein with the same force and effect as if the same were set forth at length herein. 50. Pursuant to 15 U.S.C. §1692e, a debt collector is prohibited from using false, deceptive, or misleading representation in connection with the collection of a debt. 51. The said letter stated in pertinent part as follows: “Interest “$0.00” 52. The said letter also stated in pertinent part: “Costs $0.00.” 53. Defendant did not have any legal basis for adding “Costs $0.00” onto Plaintiff's alleged debt. 1 Avila v. Riexinger & Assocs., LLC, Nos. 15-1584(L), 15- 1597(Con), 2016 U.S. App. LEXIS 5327, at *8 (2d Cir. Mar. 22, 2016) ("The district court also expressed a concern that requiring debt collectors to disclose this information might lead to more abusive practices, as debt collectors could use the threat of interest and fees to coerce consumers into paying their debts. This is a legitimate concern. To alleviate it, we adopt the "safe harbor" approach adopted by the Seventh Circuit in Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, & Clark, L.L.C., 214 F.3d 872 (7th Cir. 2000)...The court[in Miller] held that a debt collector who used this form would not violate the [FDCPA], "provided, of course, that the information [the debt collector] furnishes is accurate.") (emphasis added). 54. The least sophisticated consumer could be led to believe that although there is no collection fee at the time he received the said letter, he may be liable to such a fee in the future. 55. The said letter language implies a threat, and is confusing to the least sophisticated consumer so as to falsely imply that the creditor is entitled to receive a collection fee. 56. Defendant was not entitled to impose a collection fee as a permissible fee that a creditor may charge in connection with a consumer credit transaction. Tylke v. Diversified Adjustment Service, Inc., No. 14-CV-748 (E.D. Wis. Oct. 28, 2014). ([I]t is possible that, as the defendant suggests, an "unsophisticated consumer" might understand the statement to be explaining that no part of the debt is a "collection fee" even though the (creditor’s) agreement allows for one. On the other hand, it is also possible that an "unsophisticated consumer" would interpret the statement to mean that there is no "collection fee" now but that one could be assessed later on. In other words, the inclusion of a collection fee, even one showing a balance of zero, could imply the future possibility of one. Such a reading is neither bizarre nor idiosyncratic.) 57. Said language can be reasonably read to have two or more different meanings, one of which is false. Pipiles v. Credit Bureau of Lockport, Inc., 886 F.2d 22, 25 (2d Cir. 1989). (Because the collection notice was reasonably susceptible to an inaccurate reading, it was deceptive within the meaning of the Act.), Clomon v. Jackson, 988 F.2d 1314, 1319 (2d Cir. 1993). (Collection notices are deceptive if they are open to more than one reasonable interpretation, at least one of which is inaccurate.), Russell v. Equifax A.R.S., 74 F.3d 30, 34 (2d Cir. N.Y. 1996). (A collection notice is deceptive when it can be reasonably read to have two or more different meanings, one of which is inaccurate. The fact that the notice's terminology was vague or uncertain will not prevent it from being held deceptive under § 1692e(10) of the Act.) 58. Defendant, as a matter of pattern and practice, mails letters, or causes the mailing of letters, to debtors using language substantially similar or materially identical to that utilized by Defendant in mailing the above-cited letter to Plaintiff. 59. The letters Defendant mails, or causes to be mailed, are produced by Defendant's concerted efforts and integrated or shared technologies including computer programs, mailing houses, and electronic databases. 60. The said letter is a standardized form letter. 61. Defendant's July 11, 2016 letter is in violation of 15 U.S.C. §§ 1692e, 1692e(2), 1692e(5) 1692e(10), 1692f and 1692f(1) for the use of false and deceptive means; for falsely representing the character, amount, or legal status of a debt; for the false representation of compensation which may be lawfully received by a debt collector for the collection of a debt; for threatening to take any action that cannot legally be taken or that is not intended to be taken; for the use of unfair and unconscionable means to collect on a debt; and for attempting to collect an amount unless such an amount is expressly authorized by the agreement creating the debt or permitted by law. 62. By reason thereof, Defendant is liable to Plaintiff for judgment that Defendant's conduct violated Section 1692g et seq. of the FDCPA, actual damages, statutory damages, costs and attorneys’ fees. Third Count 15 U.S.C. §1692g et seq. Validation of Debts 63. Plaintiff repeats, reiterates and incorporates the allegations contained in paragraphs numbered “1” through “62” herein with the same force and effect as if the same were set forth at length herein. 64. 15 U.S.C. § 1692g provides that within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing certain enumerated information. 65. One such request is that the debt collector provide “the name of the creditor to whom the debt is owed.” 15 U.S.C. § 1692g(a)(2). 66. A debt collector has the obligation not just to convey the name of the creditor to whom the debt is owed, but also to convey such clearly. 67. A debt collector has the obligation not just to convey the name of the creditor to whom the debt is owed, but also to state such explicitly. 68. Merely naming the creditor without specifically identifying the entity as the current creditor to whom the debt is owed is not sufficient to comply with 15 U.S.C. § 1692g(a)(2). 69. Even if a debt collector conveys the required information, the debt collector nonetheless violates the FDCPA if it conveys that information in a confusing or contradictory fashion so as to cloud the required message with uncertainty. 70. When determining whether the name of the creditor to whom the debt is owed has been conveyed clearly, an objective standard, measured by how the “least sophisticated consumer” would interpret the notice, is applied. 71. Defendant's letter fails to explicitly identify the name of the creditor to whom the debt is owed. 72. Defendant’s July 11, 2016 letter to Plaintiff fails to identify any creditor to whom the debt is owed. 73. Indeed, Defendant’s letter fails to identify any entity or individual as a “creditor.” 74. Defendant’s letter merely states, “Re: Santander Bank, N.A., formerly Sovereign Bank, N.A.” 75. The letter fails to indicate whether the “Re:” refers to Plaintiff’s creditor. 76. The letter fails to indicate whether the “Re:” refers to the creditor to whom the debt is owed. 77. The letter fails to indicate whether the “Re:” refers to the original creditor or the current creditor to whom the debt is owed. 78. Defendant’s letter states, “The above referenced account has been referred to our offices for collection.” 79. The letter fails to indicate who referred the account to Defendant. 80. Defendant failed to clearly state the name of the creditor to whom the debt is owed. 81. The least sophisticated consumer would likely be confused as to the creditor to whom the debt is owed. 82. Defendant has violated § 1692g as it failed to clearly and explicitly convey the name of the creditor to whom the debt is owed. 83. Defendant could have taken the steps necessary to bring its actions within compliance with the FDCPA, but neglected to do so and failed to adequately review its actions to ensure compliance with the law. PRAYER FOR RELIEF WHEREFORE, Plaintiff demands judgment against Defendants as follows: (a) Declaring that this action is properly maintainable as a Class Action and certifying Plaintiff as Class representative and the Law Office of Alan J. Sasson, P.C., as Class Counsel; (b) Awarding Plaintiff and the Class statutory damages; (c) Awarding Plaintiff and the Class actual damages; (d) Awarding Plaintiff costs of this Action, including reasonable attorneys’ fees and expenses; (e) Awarding pre-judgment interest and post-judgment interest; and (f) Awarding Plaintiff and the Class such other and further relief as this Court may deem just and proper. Respectfully submitted, By:__/s/ Alan J. Sasson_______ Alan J. Sasson, Esq. Law Office of Alan J. Sasson, P.C. 2687 Coney Island Avenue, 2nd Floor Brooklyn, New York 11235 Phone: (718) 339-0856 Facsimile: (347) 244-7178 Attorney for Plaintiff DEMAND FOR TRIAL BY JURY Pursuant to Rule 38 of the Federal Rules of Civil Procedure, Plaintiff hereby requests a trial by jury on all issues so triable. /s/ Alan J. Sasson Alan J. Sasson, Esq. Dated: Brooklyn, New York February 1, 2017

consumer fraud

kPM9E4cBD5gMZwczT5Fi

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION § § § § Plaintiffs, § § CIVIL ACTION NO. § § § § Defendants. COMPLAINT Plaintiffs Nicole Olibas ("Olibas") and Kellie Barton ("Barton") (collectively INTRODUCTION AND SUMMARY 1. This is a lawsuit to recover unpaid overtime wages under the federal Fair Labor 2. The Plaintiffs were employed as dispatchers for Defendants. They were paid a 3. In the three years prior to the filing of this lawsuit, Defendants employed and 4. Plaintiffs and similarly situated dispatchers were line level dispatchers who 5. From approximately February 2011 forward, Plaintiffs and similarly situated 6. Defendants failed to comply with the FLSA because they misclassified Plaintiffs 7. Accordingly, Defendants did not pay Plaintiffs and the putative collective action THE PARTIES, JURISDICTION AND VENUE 8. Plaintiff Olibas is a former employee of Defendants and is a natural person who 9. Plaintiff Barton is a former employee of Defendants and is a natural person who 10. The putative collective action members are all current and former dispatchers who 11. Defendant Kreis is a natural person and is a member and manager at Native 12. Defendant Barclay is a natural person and is a member and manager at Native 13. Defendant Durham is a natural person and is a founding manager and member of 14. Defendant Native Oilfield Services is a domestic limited liability company with 15. The Court has personal jurisdiction over Defendants based on both general and 16. The Court has subject matter jurisdiction over this case based on federal question FACTUAL BACKGROUND 17. Plaintiffs and the putative collective action members worked for Defendants as 18. Plaintiffs and the putative collective action members' were line level dispatchers19. Line level dispatchers were not involved in management or the general business 20. Plaintiffs and the putative collective action members were paid a salary. 21. Plaintiffs and the putative collective action members were never paid 1.5 times 22. Defendants misclassified Plaintiffs and the putative collective action members as CONTROLLING LEGAL RULES 23. The FLSA generally requires that an employer employing an employee for a 24. Plaintiffs and the putative collective action members were not "exempt" from the 25. Failing to pay the required overtime premium for hours worked over 40 in a 26. The FLSA defines the "regular rate" as including "all remuneration for " 29 U.S.C. § 207(e). FLSA CLAIM FOR OVERTIME PAY 27. This action is authorized and instituted pursuant to the FLSA. 29 U.S.C. § 201, et 28. All conditions precedent to this suit, if any, have been fulfilled. 29. At all material times, Plaintiffs were employees under the FLSA. 29 U.S.C. § 30. At all material times, the putative collective action members were similarly 31. At all material times, Defendants were and are eligible and covered employers 32. At times, Plaintiffs and the putative collective action members worked in excess 33. At all material times, Plaintiffs and the putative collective action members were 34. The regular rate of pay must include non-discretionary bonuses for all hours 35. Defendants failed to pay Plaintiffs and putative collective action members 36. Defendants' violation of the FLSA was and remains willful within the meaning of 37. Defendants have not made a good faith effort to comply with the requirements of 38. Where, as here, "the employers" actions or policies were effectuated on a 39. Accordingly, Plaintiffs seek to represent a collective action under 29 U.S.C. § JURY DEMAND 40. Plaintiffs demand a jury trial.DAMAGES AND PRAYER 41. Plaintiffs ask that the court issue a summons for Defendants to appear and answer, a. Actual damages in the amount of unpaid overtime wages; b. Liquidated damages under the FLSA; C. Pre-judgment and post-judgment interest; d. Court costs; e. Reasonable attorney's fees; and f. All other relief to which Plaintiffs and those similarly situated to Plaintiffs are entitled. Respectfully submitted, By: s/ Allen Vaught Allen R. Vaught Baron & Budd, P.C. State Bar No. 24004966 3102 Oak Lawn Avenue, Suite 110 Dallas, Texas 75219 (214) 521-3605 - Telephone (214) 520-1181 - Facsimile [email protected] ATTORNEYS FOR PLAINTIFFS DEFENDANTS Leslie Kreis, John Barclay, David Durham and Native Oilfield Services, LLC Tarrant County of Residence of First Listed Defendant Dallas (EXCEPT IN U.S. PLAINTIFF CASES) (IN U.S. PLAINTIFF CASES ONLY) LAND INVOLVED. Attorneys (If Known) (Place an "X" in One Box Only) (For Diversity Cases Only) 3 Federal Question PTF DEF PTF (U.S. Government Not a Party) Citizen of This State 1 1 Incorporated or Principal Place 4 of Business In This State 4 Diversity Citizen of Another State 2 2 Incorporated and Principal Place 5 of Business In Another State (Indicate Citizenship of Parties in Item III) Citizen or Subject of a 3 3 Foreign Nation 6 Foreign Country (Place an "X" in One Box Only) TORTS FORFEITURE/PENALTY BANKRUPTCY PERSONAL INJURY PERSONAL INJURY 610 Agriculture 422 Appeal 28 USC 158 310 Airplane 362 Personal Injury 620 Other Food & Drug 423 Withdrawal 410 Antitrust 315 Airplane Product Med. Malpractice 625 Drug Related Seizure 28 USC 157 Liability 365 Personal Injury of Property 21 USC 881 450 Commerce 320 Assault, Libel & Product Liability 630 Liquor Laws PROPERTY RIGHTS 460 Deportation Slander 368 Asbestos Personal 640 R.R. & Truck 820 Copyrights 330 Federal Employers' Injury Product 650 Airline Regs. 830 Patent Liability Liability 660 Occupational 840 Trademark 480 Consumer Credit 340 Marine PERSONAL PROPERTY Safety/Health 490 Cable/Sat TV 345 Marine Product 370 Other Fraud 690 Other 810 Selective Service Liability 371 Truth in Lending LABOR SOCIAL SECURITY 350 Motor Vehicle 380 Other Personal 710 Fair Labor Standards 861 HIA (1395ff) Exchange 355 Motor Vehicle Property Damage Act 862 Black Lung (923) Product Liability 385 Property Damage 720 Labor/Mgmt. Relations 863 DIWC/DIWW (405(g)) 12 USC 3410 360 Other Personal Product Liability 730 Labor/Mgmt.Reporting 864 SSID Title XVI Injury & Disclosure Act 865 RSI (405(g)) 891 Agricultural Acts CIVIL RIGHTS PRISONER PETITIONS 740 Railway Labor Act FEDERAL TAX SUITS 441 Voting 510 Motions to Vacate 790 Other Labor Litigation 870 Taxes (U.S. Plaintiff 442 Employment Sentence 791 Empl. Ret. Inc. or Defendant) 443 Housing/ Habeas Corpus: Security Act 871 IRS-Third Party Accommodations 530 General 26 USC 7609 Act 444 Welfare 535 Death Penalty IMMIGRATION 445 Amer. w/Disabilities 540 Mandamus & Other 462 Naturalization Application Employment 550 Civil Rights 463 Habeas Corpus to Justice 446 Amer. w/Disabilities 555 Prison Condition Alien Detainee Other 465 Other Immigration State Statutes 440 Other Civil Rights Actions (Place an "X" in One Box Only) Transferred from 2 Removed from 3 Remanded from 4 Reinstated or 5 6 Multidistrict 7 another district State Court Appellate Court Reopened Litigation (specify) Judgment Cite the U.S. Civil Statute under which you are filing (Do not cite jurisdictional statutes unless diversity): 29 U.S.C. Section 201 et seq. Brief description of cause: Claims for unpaid overtime wages and related damages CHECK IF THIS IS A CLASS ACTION DEMAND $ UNDER F.R.C.P. 23 JURY DEMAND: Yes No (See instructions) JUDGE DOCKET NUMBER SIGNATURE OF ATTORNEY OF RECORD s/Allen Vaught AMOUNT APPLYING IFP JUDGE MAG. JUDGEINSTRUCTIONS FOR ATTORNEYS COMPLETING CIVIL COVER SHEET FORM JS 44 Authority For Civil Cover Sheet Example U.S. Civil Statute: 47 USC 553 Brief Description: Unauthorized reception of cable service

employment & labor

FEyJCIoBWgSZx1wwZGZT

Todd M. Friedman (SBN 216752) Adrian R. Bacon (SBN 280332) Thomas E. Wheeler (SBN 308789) LAW OFFICES OF TODD M. FRIEDMAN, P.C. 21550 Oxnard St., Suite 780 Woodland Hills, CA 91367 Phone: (323) 306-4234 Fax: 866-633-0228 [email protected] [email protected] [email protected] Attorneys for Plaintiff UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA ABANTE ROOTER AND PLUMBING INC, individually and on behalf of all others similarly situated, Plaintiff, vs. Case No. CLASS ACTION COMPLAINT FOR VIOLATIONS OF: 1. NEGLIGENT VIOLATIONS OF THE TELEPHONE CONSUMER PROTECTION ACT [47 U.S.C. §227 ET SEQ.] 2. WILLFUL VIOLATIONS OF THE TELEPHONE CONSUMER PROTECTION ACT [47 U.S.C. §227 ET SEQ.] PREMIUM LINES INSURANCE SERVICES, INC., and DOES 1 through 10, inclusive, and each of them Defendant(s). DEMAND FOR JURY TRIAL ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Plaintiff, ABANTE ROOTER AND PLUMBING INC (“Plaintiff”), on behalf of herself and all others similarly situated, alleges the following upon information and belief based upon personal knowledge: NATURE OF THE CASE 1. Plaintiff brings this action for herself and others similarly situated seeking damages and any other available legal or equitable remedies resulting from the illegal actions of PREMIUM LINES INSURANCE SERVICES, INC. (“Defendant”), in negligently, knowingly, and/or willfully contacting Plaintiff on Plaintiff’s cellular telephone in violation of the Telephone Consumer Protection Act, 47. U.S.C. § 227 et seq. (“TCPA”), thereby invading Plaintiff’s privacy. JURISDICTION & VENUE 2. Jurisdiction is proper under 28 U.S.C. § 1332(d)(2) because Plaintiff, a resident of California, seeks relief on behalf of a Class, which will result in at least one class member belonging to a different state than that of Defendant, a California corporation. Plaintiff also seeks up to $1,500.00 in damages for each call in violation of the TCPA, which, when aggregated among a proposed class in the thousands, exceeds the $5,000,000.00 threshold for federal court jurisdiction. Therefore, both diversity jurisdiction and the damages threshold under the Class Action Fairness Act of 2005 (“CAFA”) are present, and this Court has jurisdiction. 3. Venue is proper in the United States District Court for the Northern District of California pursuant to 28 U.S.C. § 1391(b)(2) because Defendant does business within the state of California and Plaintiff resides within the County of Alameda. PARTIES 4. Plaintiff, ABANTE ROOTER AND PLUMBING INC (“Plaintiff”), is a natural person residing in Emeryville, California and is a “person” as defined by 47 U.S.C. § 153 (39). 5. Defendant, PREMIUM LINES INSURANCE SERVICES, INC. (“Defendant”) is an insurance company, and is a “person” as defined by 47 U.S.C. § 153 (39). 6. The above named Defendant, and its subsidiaries and agents, are collectively referred to as “Defendants.” The true names and capacities of the Defendants sued herein as DOE DEFENDANTS 1 through 10, inclusive, are currently unknown to Plaintiff, who therefore sues such Defendants by fictitious names. Each of the Defendants designated herein as a DOE is legally responsible for the unlawful acts alleged herein. Plaintiff will seek leave of Court to amend the Complaint to reflect the true names and capacities of the DOE Defendants when such identities become known. 7. Plaintiff is informed and believes that at all relevant times, each and every Defendant was acting as an agent and/or employee of each of the other Defendants and was acting within the course and scope of said agency and/or employment with the full knowledge and consent of each of the other Defendants. Plaintiff is informed and believes that each of the acts and/or omissions complained of herein was made known to, and ratified by, each of the other Defendants. FACTUAL ALLEGATIONS 8. Beginning in or around May of 2020, Defendant contacted Plaintiff on Plaintiff’s cellular telephone ending in -3803, in an effort to sell or solicit its services. 9. Defendant called Plaintiff on Plaintiff’s cellular telephone multiple times from a phone number confirmed to belong to Defendant, (209) 747-2530. 10. Defendant used an “automatic telephone dialing system”, as defined by 47 U.S.C. § 227(a)(1) to place its calls to Plaintiff seeking to sell or solicit its business services. 11. Defendant’s calls constituted calls that were not for emergency purposes as defined by 47 U.S.C. § 227(b)(1)(A). 12. Defendant’s calls were placed to telephone number assigned to a cellular telephone service for which Plaintiff incurs a charge for incoming calls pursuant to 47 U.S.C. § 227(b)(1). 13. Plaintiff is not a customer of Defendant’s services and has never provided any personal information, including Plaintiff’s cellular telephone number, to Defendant for any purpose whatsoever. 14. Defendant never received Plaintiff’s “prior express consent” to receive calls using an automatic telephone dialing system or an artificial or prerecorded voice on Plaintiff’s cellular telephone pursuant to 47 U.S.C. § 227(b)(1)(A). 15. Plaintiff alleges upon information and belief, including without limitation Plaintiff’s experiences as recounted herein, especially Plaintiff’s experience of being called despite Defendant’s lack of express consent to call Plaintiff, that Defendant lacks reasonable policies and procedures to avoid the violations of the Telephone Consumer Protection act herein described. CLASS ALLEGATIONS 16. Plaintiff brings this action individually and on behalf of all others similarly situated, as a member the proposed class (hereafter, “The Class”) defined as follows: All persons within the United States who received any solicitation/telemarketing telephone calls from Defendant to said person’s cellular telephone made through the use of any automatic telephone dialing system or an artificial or prerecorded voice and such person had not previously consented to receiving such calls within the four years prior to the filing of this Complaint 17. Plaintiff represents, and is a member of, The Class, consisting of all persons within the United States who received any solicitation telephone calls from Defendant to said person’s cellular telephone made through the use of any automatic telephone dialing system or an artificial or prerecorded voice and such person had not previously not provided their cellular telephone number to Defendant within the four years prior to the filing of this Complaint. 18. Defendant, its employees and agents are excluded from The Class. Plaintiff does not know the number of members in The Class, but believes the Class members number in the thousands, if not more. Thus, this matter should be certified as a Class Action to assist in the expeditious litigation of the matter. 19. The Class is so numerous that the individual joinder of all of its members is impractical. While the exact number and identities of The Class members are unknown to Plaintiff at this time and can only be ascertained through appropriate discovery, Plaintiff is informed and believes and thereon alleges that The Class includes thousands of members. Plaintiff alleges that The Class members may be ascertained by the records maintained by Defendant. 20. Plaintiff and members of The Class were harmed by the acts of Defendant in at least the following ways: Defendant illegally contacted Plaintiff and The Class members via their cellular telephones thereby causing Plaintiff and The Class members to incur certain charges or reduced telephone time for which Plaintiff and The Class members had previously paid by having to retrieve or administer messages left by Defendant during those illegal calls, and invading the privacy of said Plaintiff and The Class members. 21. Common questions of fact and law exist as to all members of The Class which predominate over any questions affecting only individual members of The Class. These common legal and factual questions, which do not vary between Class members, and which may be determined without reference to the individual circumstances of any Class members, include, but are not limited to, the following: a. Whether, within the four years prior to the filing of this Complaint, Defendant made any telemarketing/solicitation call (other than a call made for emergency purposes or made with the prior express consent of the called party) to a Class member using any automatic telephone dialing system or any artificial or prerecorded voice to any telephone number assigned to a cellular telephone service; b. Whether Plaintiff and the Class members were damaged thereby, and the extent of damages for such violation; and c. Whether Defendant should be enjoined from engaging in such conduct in the future. 22. As a person that received numerous telemarketing/solicitation calls from Defendant using an automatic telephone dialing system or an artificial or prerecorded voice, without Plaintiff’s prior express consent, Plaintiff is asserting claims that are typical of The Class. 23. Plaintiff will fairly and adequately protect the interests of the members of The Class. Plaintiff has retained attorneys experienced in the prosecution of class actions. 24. A class action is superior to other available methods of fair and efficient adjudication of this controversy, since individual litigation of the claims of all Class members is impracticable. Even if every Class member could afford individual litigation, the court system could not. It would be unduly burdensome to the courts in which individual litigation of numerous issues would proceed. Individualized litigation would also present the potential for varying, inconsistent, or contradictory judgments and would magnify the delay and expense to all parties and to the court system resulting from multiple trials of the same complex factual issues. By contrast, the conduct of this action as a class action presents fewer management difficulties, conserves the resources of the parties and of the court system, and protects the rights of each Class member. 25. The prosecution of separate actions by individual Class members would create a risk of adjudications with respect to them that would, as a practical matter, be dispositive of the interests of the other Class members not parties to such adjudications or that would substantially impair or impede the ability of such non- party Class members to protect their interests. 26. Defendant has acted or refused to act in respects generally applicable to The Class, thereby making appropriate final and injunctive relief with regard to the members of the Class as a whole. FIRST CAUSE OF ACTION Negligent Violations of the Telephone Consumer Protection Act 47 U.S.C. §227 et seq. 27. Plaintiff repeats and incorporates by reference into this cause of action the allegations set forth above at Paragraphs 1-26. 28. The foregoing acts and omissions of Defendant constitute numerous and multiple negligent violations of the TCPA, including but not limited to each and every one of the above cited provisions of 47 U.S.C. § 227 et seq. 29. As a result of Defendant’s negligent violations of 47 U.S.C. § 227 et seq., Plaintiff and the Class Members are entitled an award of $500.00 in statutory damages, for each and every violation, pursuant to 47 U.S.C. § 227(b)(3)(B). 30. Plaintiff and the Class members are also entitled to and seek injunctive relief prohibiting such conduct in the future. SECOND CAUSE OF ACTION Knowing and/or Willful Violations of the Telephone Consumer Protection Act 47 U.S.C. §227 et seq. 31. Plaintiff repeats and incorporates by reference into this cause of action the allegations set forth above at Paragraphs 1-26. 32. The foregoing acts and omissions of Defendant constitute numerous and multiple knowing and/or willful violations of the TCPA, including but not limited to each and every one of the above cited provisions of 47 U.S.C. § 227 et 33. As a result of Defendant’s knowing and/or willful violations of 47 U.S.C. § 227 et seq., Plaintiff and the Class members are entitled an award of $1,500.00 in statutory damages, for each and every violation, pursuant to 47 U.S.C. § 227(b)(3)(B) and 47 U.S.C. § 227(b)(3)(C). 34. Plaintiff and the Class members are also entitled to and seek injunctive relief prohibiting such conduct in the future. PRAYER FOR RELIEF WHEREFORE, Plaintiff requests judgment against Defendant for the following: FIRST CAUSE OF ACTION Negligent Violations of the Telephone Consumer Protection Act 47 U.S.C. §227 et seq. • As a result of Defendant’s negligent violations of 47 U.S.C. §227(b)(1), Plaintiff and the Class members are entitled to and request $500 in statutory damages, for each and every violation, pursuant to 47 U.S.C. 227(b)(3)(B); and • Any and all other relief that the Court deems just and proper. SECOND CAUSE OF ACTION Knowing and/or Willful Violations of the Telephone Consumer Protection Act 47 U.S.C. §227 et seq. • As a result of Defendant’s willful and/or knowing violations of 47 U.S.C. §227(b)(1), Plaintiff and the Class members are entitled to and request treble damages, as provided by statute, up to $1,500, for each and every violation, pursuant to 47 U.S.C. §227(b)(3)(B) and 47 U.S.C. §227(b)(3)(C); and • Any and all other relief that the Court deems just and proper. JURY DEMAND 35. Pursuant to Plaintiff’s rights under the Seventh Amendment to the United States Constitution, Plaintiff demands a jury on all issues so triable. Respectfully Submitted this 10th day of June, 2021. LAW OFFICES OF TODD M. FRIEDMAN, P.C. By: /s/ Todd M. Friedman Todd M. Friedman Law Offices of Todd M. Friedman Attorney for Plaintiff

privacy

6wjMFYcBD5gMZwczSyGz

Case No. 18-cv-5192 SHAKED LAW GROUP, P.C. Dan Shaked (DS-3331) 44 Court Street, Suite 1217 Brooklyn, NY 11201 Tel. (917) 373-9128 Email: [email protected] Attorneys for Plaintiff and the Class UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK -----------------------------------------------------------X MARION KILER, Individually and as the representative of a class of similarly situated persons, Plaintiff, - against - KATE SOMERVILLE SKINCARE, LLC, Defendants. -----------------------------------------------------------X COMPLAINT – CLASS ACTION INTRODUCTION 1. Plaintiff, Marion Kiler (“Plaintiff” or “Kiler”), brings this action on behalf of herself and all other persons similarly situated against Kate Somerville Skincare, LLC (hereinafter “Kate Somerville” or “Defendant”), and states as follows: 2. Plaintiff is a visually-impaired and legally blind person who requires screen- reading software to read website content using his computer. Plaintiff uses the terms “blind” or “visually-impaired” to refer to all people with visual impairments who meet the legal definition of blindness in that they have a visual acuity with correction of less than or equal to 20 x 200. Some blind people who meet this definition have limited vision; others have no vision. 3. Based on a 2010 U.S. Census Bureau report, approximately 8.1 million people in the United States are visually impaired, including 2.0 million who are blind, and according to 1 the American Foundation for the Blind’s 2015 report, approximately 400,000 visually impaired persons live in the State of New York. 4. Plaintiff brings this civil rights action against Kate Somerville for their failure to design, construct, maintain, and operate their website to be fully accessible to and independently usable by Plaintiff and other blind or visually-impaired persons. Defendant is denying blind and visually-impaired persons throughout the United States with equal access to the goods and services Kate Somerville provides to their non-disabled customers through http//:www.Katesomerville.com (hereinafter “Katesomerville.com” or “the website”). Defendants’ denial of full and equal access to its website, and therefore denial of its products and services offered, and in conjunction with its physical locations, is a violation of Plaintiff’s rights under the Americans with Disabilities Act (the “ADA”). 5. Katesomerville.com provides to the public a wide array of the goods, services, price specials, employment opportunities and other programs offered by Kate Somerville. Yet, Katesomerville.com contains thousands of access barriers that make it difficult if not impossible for blind and visually-impaired customers to use the website. In fact, the access barriers make it impossible for blind and visually-impaired users to even complete a transaction on the website. Thus, Kate Somerville excludes the blind and visually-impaired from the full and equal participation in the growing Internet economy that is increasingly a fundamental part of the common marketplace and daily living. In the wave of technological advances in recent years, assistive computer technology is becoming an increasingly prominent part of everyday life, allowing blind and visually-impaired persons to fully and independently access a variety of services. 6. The blind have an even greater need than the sighted to shop and conduct transactions online due to the challenges faced in mobility. The lack of an accessible website 2 means that blind people are excluded from experiencing transacting with defendant’s website and from purchasing goods or services from defendant’s website. 7. Despite readily available accessible technology, such as the technology in use at other heavily trafficked retail websites, which makes use of alternative text, accessible forms, descriptive links, resizable text and limits the usage of tables and JavaScript, Defendant has chosen to rely on an exclusively visual interface. Kate Somerville’s sighted customers can independently browse, select, and buy online without the assistance of others. However, blind persons must rely on sighted companions to assist them in accessing and purchasing on Katesomerville.com. 8. By failing to make the website accessible to blind persons, Defendant is violating basic equal access requirements under both state and federal law. 9. Congress provided a clear and national mandate for the elimination of discrimination against individuals with disabilities when it enacted the ADA. Such discrimination includes barriers to full integration, independent living, and equal opportunity for persons with disabilities, including those barriers created by websites and other public accommodations that are inaccessible to blind and visually impaired persons. Similarly, New York state law requires places of public accommodation to ensure access to goods, services, and facilities by making reasonable accommodations for persons with disabilities. 10. Plaintiff browsed and intended to make an online purchase of Anti-Aging Cream on Katesomerville.com. However, unless Defendant remedies the numerous access barriers on its website, Plaintiff and Class members will continue to be unable to independently navigate, browse, use, and complete a transaction on Katesomerville.com. 11. Because Defendant’s website, Katesomerville.com, is not equally accessible to blind and visually-impaired consumers, it violates the ADA. Plaintiff seeks a permanent injunction to cause a change in Kate Somerville’s policies, practices, and procedures so that Defendant’s 3 website will become and remain accessible to blind and visually-impaired consumers. This complaint also seeks compensatory damages to compensate Class members for having been subjected to unlawful discrimination. JURISDICTION AND VENUE 12. This Court has subject matter jurisdiction over this action under 28 U.S.C. § 1331 and 42 U.S.C. § 12181, as Plaintiff’s claims arise under Title III of the ADA, 42 U.S.C. § 12181 et seq., and 28 U.S.C. § 1332, because this is a class action, as defined by 28 U.S.C. § 1332(d)(1)(B), in which a member of the putative class is a citizen of a different state than Defendant, and the amount in controversy exceeds the sum or value of $5,000,000, excluding interest and costs. See 28 U.S.C. § 133(d)(2). 13. This Court also has supplemental jurisdiction over pursuant to 28 U.S.C. § 1367, over Plaintiff’s pendent claims under the New York State Human Rights Law, N.Y. Exec. Law, Article 15 (Executive Law § 290 et seq.) and the New York City Human Rights Law, N.Y.C. Administrative Code § 8-101 et seq. (“City Law”). 14. Venue is proper in this District of New York pursuant to 28 U.S.C. §§ 1391(b)- (c) and 144(a) because Plaintiff resides in this District, Defendant conducts and continues to conduct a substantial and significant amount of business in this District, and a substantial portion of the conduct complained of herein occurred in this District. 15. Defendant is registered to do business in New York State and has been conducting business in New York State, including in this District. Defendant purposefully targets and otherwise solicits business from New York State residents through its website and sells its products through many retailers in this District and through home-shopping television. Because of this targeting, it is not unusual for Kate Somerville to conduct business with New York State residents. Defendant also has been and is committing the acts alleged herein in this District and 4 has been and is violating the rights of consumers in this District and has been and is causing injury to consumers in this District. A substantial part of the act and omissions giving rise to Plaintiff’s claims have occurred in this District. Most courts support the placement of venue in the district in which Plaintiff tried and failed to access the Website. In Access Now, Inc. v. Otter Products, LLC 280 F.Supp.3d 287 (D. Mass. 2017), Judge Patti B. Saris ruled that “although the website may have been created and operated outside of the district, the attempts to access the website in Massachusetts are part of the sequence of events underlying the claim. Therefore, venue is proper in [the District of Massachusetts].” Otter Prods., 280 F.Supp.3d at 294. This satisfies Due Process because the harm – the barred access to the website – occurred here.” Otter Prods., 280 F.Supp.3d at 293. Additionally, in Access Now, Inc. v. Sportswear, Inc., No. 17-cv-11211-NMG, 2018 Dist. LEXIS 47318 (D. Mass. Mar. 22, 2018), Judge Nathaniel M. Gorton stated that the defendant “availed itself of the forum state’s economic activities by targeting the residents of the Commonwealth . . . . Such targeting evinces a voluntary attempt to appeal to the customer base in the forum.” Sportswear, No. 1:17-cv-11211-NMG, 2018 U.S. Dist. LEXIS 47318 at *11. Thus, establishing a customer base in a particular district is sufficient cause for venue placement. Specifically, Plaintiff attempted to purchase Anti-Aging Cream on Defendant’s website, Katesomerville.com. PARTIES 16. Plaintiff, is and has been at all relevant times a resident of Kings County, State of New York. 17. Plaintiff is legally blind and a member of a protected class under the ADA, 42 U.S.C. § 12102(l)-(2), the regulations implementing the ADA set forth at 28 CFR §§ 36.101 et seq., the New York State Human Rights Law and the New York City Human Rights Law. Plaintiff, Marion Kiler, cannot use a computer without the assistance of screen reader software. 5 Plaintiff, Marion Kiler, has been denied the full enjoyment of the facilities, goods and services of Katesomerville.com as a result of accessibility barriers on Katesomerville.com. 18. Defendant, Kate Somerville Skincare, LLC, is a California Foreign Limited Liability Company doing business in New York with its principal place of business located at 144 South Beverly Drive, Beverly Hills, CA 90212. 19. Kate Somerville provides to the public a website known as Katesomerville.com which provides consumers with access to an array of goods and services, including, the ability to view the various lines of skincare, anti-aging, and acne treatment products, make purchases, and find a retailer, among other features. Consumers across the United States and the world use Defendant’s website to purchase skincare, anti-aging, and acne treatment products and related products. Defendant’s website is a place of public accommodation within the definition of Title III of the ADA, 42 U.S.C. § 12181(7). See Victor Andrews v. Blick Art Materials, LLC, No. 17-cv-767, 2017 WL 3278898 (E.D.N.Y. August 1, 2017). The inaccessibility of Katesomerville.com has deterred Plaintiff from buying Anti-Aging NATURE OF THE CASE 20. The Internet has become a significant source of information, a portal, and a tool for conducting business, doing everyday activities such as shopping, learning, banking, researching, as well as many other activities for sighted, blind and visually-impaired persons alike. 21. The blind access websites by using keyboards in conjunction with screen- reading software which vocalizes visual information on a computer screen. Except for a blind person whose residual vision is still sufficient to use magnification, screen access software provides the only method by which a blind person can independently access the Internet. Unless 6 websites are designed to allow for use in this manner, blind persons are unable to fully access Internet websites and the information, products and services contained therein. 22. For screen-reading software to function, the information on a website must be capable of being rendered into text. If the website content is not capable of being rendered into text, the blind user is unable to access the same content available to sighted users. 23. Blind users of Windows operating system-enabled computers and devises have several screen-reading software programs available to them. Job Access With Speech, otherwise known as “JAWS” is currently the most popular, separately purchase and downloaded screen- reading software program available for blind computer users. 24. The international website standards organization, the World Wide Web Consortium, known throughout the world as W3C, has published version 2.1 of the Web Content Accessibility Guidelines (“WCAG 2.1”). WCAG 2.1 are well-established guidelines for making websites accessible to blind and visually-impaired persons. These guidelines are universally followed by most large business entities and government agencies to ensure their websites are accessible. Many Courts have also established WCAG 2.1 as the standard guideline for accessibility. The federal government has also promulgated website accessibility standards under Section 508 of the Rehabilitation Act. These guidelines are readily available via the Internet, so that a business designing a website can easily access them. These guidelines recommend several basic components for making websites accessible, including but not limited to: adding invisible alt-text to graphics, ensuring that all functions can be performed using a keyboard and not just a mouse, ensuring that image maps are accessible, and adding headings so that blind persons can easily navigate the site. Without these very basic components, a website will be inaccessible to a blind person using a screen reader. Websites need to be accessible to the “least sophisticated” user 7 of screen-reading software and need to be able to work with all browsers. Websites need to be continually updated and maintained to ensure that they remain fully accessible. FACTUAL ALLEGATIONS 25. Defendant, Kate Somerville Skincare, LLC, controls and operates Katesomerville.com. in New York State and throughout the United States and the world. 26. Katesomerville.com is a commercial website that offers products and services for online sale. The online store allows the user to browse skincare, anti-aging, and acne treatment products, make purchases, and perform a variety of other functions. 27. Among the features offered by Katesomerville.com are the following: (a) Consumers may use the website to connect with Kate Somerville on social media, using such sites as Facebook, Twitter, Instagram, and Pinterest; (b) an online store, allowing customers to purchase the various lines of skincare, anti-aging, and acne treatment products; and (c) learning about shipping and return policies, promotions, where to find a retailer, and about the company. 28. This case arises out of Kate Somerville’s policy and practice of denying the blind access to the goods and services offered by Katesomerville.com. Due to Kate Somerville’s failure and refusal to remove access barriers to Katesomerville.com, blind individuals have been and are being denied equal access to Kate Somerville, as well as to the numerous goods, services and benefits offered to the public through Katesomerville.com. 29. Kate Somerville denies the blind access to goods, services and information made available through Katesomerville.com by preventing them from freely navigating Katesomerville.com. 8 30. Katesomerville.com contains access barriers that prevent free and full use by Plaintiff and blind persons using keyboards and screen-reading software. These barriers are pervasive and include, but are not limited to: lack of alt-text on graphics, inaccessible drop-down menus, the lack of navigation links, the lack of adequate prompting and labeling, the denial of keyboard access, empty links that contain no text, redundant links where adjacent links go to the same URL address, and the requirement that transactions be performed solely with a mouse. 31. Alternative text (“Alt-text”) is invisible code embedded beneath a graphical image on a website. Web accessibility requires that alt-text be coded with each picture so that a screen-reader can speak the alternative text while sighted users see the picture. Alt-text does not change the visual presentation except that it appears as a text pop-up when the mouse moves over the picture. There are many important pictures on Katesomerville.com that lack a text equivalent. The lack of alt-text on these graphics prevents screen readers from accurately vocalizing a description of the graphics (screen-readers detect and vocalize alt-text to provide a description of the image to a blind computer user). As a result, Plaintiff and blind Katesomerville.com customers are unable to determine what is on the website, browse the website or investigate and/or make purchases. 32. Katesomerville.com also lacks prompting information and accommodations necessary to allow blind shoppers who use screen-readers to locate and accurately fill-out online forms. On a shopping site such as Katesomerville.com, these forms include search fields to locate skincare, anti-aging, and acne treatment products and fields used to fill-out personal information, including address and credit card information. Due to lack of adequate labeling, Plaintiff and blind customers cannot make purchases or inquiries as to Defendant’s merchandise, nor can they enter their personal identification and financial information with confidence and security. In fact, Plaintiff could not determine the price of a specific product and when Plaintiff 9 attempted to click on “add to bag,” her screen-reader could not recognize the button. Consequently, she was unable to proceed to checkout and unable to complete a transaction. 33. Similarly, Katesomerville.com lacks accessible drop-down menus. Drop- down menus allow customers to locate and choose products as well as specify the quantity of certain items. On Katesomerville.com, blind customers are not aware if the desired products, such as skincare, anti-aging, and acne treatment, have been added to the shopping bag because the screen-reader does not indicate the type of product. Moreover, blind customers are unable to select the quantity of the product they desire. Therefore, blind customers are essentially prevented from purchasing any items on Katesomerville.com. 34. Furthermore, Katesomerville.com lacks accessible image maps. An image map is a function that combines multiple words and links into one single image. Visual details on this single image highlight different “hot spots” which, when clicked on, allow the user to jump to many different destinations within the website. For an image map to be accessible, it must contain alt-text for the various “hot spots.” The image maps on Katesomerville.com’s menu page do not contain adequate alt-text and are therefore inaccessible to Plaintiff and the other blind individuals attempting to make a purchase. When Plaintiff tried to access the menu link in order to make a purchase, she was unable to access it completely. 35. Katesomerville.com also lacks accessible forms. Quantity boxes allow customers to specify the quantity of certain items. On Katesomerville.com, blind customers are unable to select specific quantity because the screen-reader does not indicate the function of the box. As a result, blind customers are denied access to the quantity box. Furthermore, Plaintiff is unable to locate the shopping bag because the shopping bag form does not specify the purpose of the shopping bag. As a result, blind customers are denied access to the shopping bag. 10 Consequently, blind customers are unsuccessful in adding products into their shopping bags and are essentially prevented from purchasing items on Katesomerville.com. 36. Moreover, the lack of navigation links on Defendant’s website makes attempting to navigate through Katesomerville.com even more time consuming and confusing for Plaintiff and blind consumers. 37. Katesomerville.com requires the use of a mouse to complete a transaction. Yet, it is a fundamental tenet of web accessibility that for a web page to be accessible to Plaintiff and blind people, it must be possible for the user to interact with the page using only the keyboard. Indeed, Plaintiff and blind users cannot use a mouse because manipulating the mouse is a visual activity of moving the mouse pointer from one visual spot on the page to another. Thus, Katesomerville.com’s inaccessible design, which requires the use of a mouse to complete a transaction, denies Plaintiff and blind customers the ability to independently navigate and/or make purchases on Katesomerville.com. 38. Due to Katesomerville.com’s inaccessibility, Plaintiff and blind customers must in turn spend time, energy, and/or money to make their purchases at traditional brick-and- mortar retailers. Some blind customers may require a driver to get to the stores or require assistance in navigating the stores. By contrast, if Katesomerville.com was accessible, a blind person could independently investigate products and make purchases via the Internet as sighted individuals can and do. According to WCAG 2.1 Guideline 2.4.1, a mechanism is necessary to bypass blocks of content that are repeated on multiple webpages because requiring users to extensively tab before reaching the main content is an unacceptable barrier to accessing the website. Plaintiff must tab through every navigation bar option and footer on Defendant’s website in an attempt to reach the desired service. Thus, Katesomerville.com’s inaccessible 11 design, which requires the use of a mouse to complete a transaction, denies Plaintiff and blind customers the ability to independently make purchases on Katesomerville.com. 39. Katesomerville.com thus contains access barriers which deny the full and equal access to Plaintiff, who would otherwise use Katesomerville.com and who would otherwise be able to fully and equally enjoy the benefits and services of Katesomerville.com in New York State and throughout the United States. 40. Plaintiff, Marion Kiler, has made numerous attempts to complete a purchase on Katesomerville.com, most recently in August 2018, but was unable to do so independently because of the many access barriers on Defendant’s website. These access barriers have caused Katesomerville.com to be inaccessible to, and not independently usable by, blind and visually- impaired persons. Amongst other access barriers experienced, Plaintiff was unable to purchase Anti-Aging Cream. 41. As described above, Plaintiff has actual knowledge of the fact that Defendant’s website, Katesomerville.com, contains access barriers causing the website to be inaccessible, and not independently usable by, blind and visually-impaired persons. 42. These barriers to access have denied Plaintiff full and equal access to, and enjoyment of, the goods, benefits and services of Katesomerville.com. 43. Defendant engaged in acts of intentional discrimination, including but not limited to the following policies or practices: (a) constructed and maintained a website that is inaccessible to blind class members with knowledge of the discrimination; and/or (b) constructed and maintained a website that is sufficiently intuitive and/or obvious that is inaccessible to blind class members; and/or 12 (c) failed to take actions to correct these access barriers in the face of substantial harm and discrimination to blind class members. 44. Defendant utilizes standards, criteria or methods of administration that have the effect of discriminating or perpetuating the discrimination of others. 45. Because of Defendant’s denial of full and equal access to, and enjoyment of, the goods, benefits and services of Katesomerville.com, Plaintiff and the class have suffered an injury-in-fact which is concrete and particularized and actual and is a direct result of defendant’s conduct. CLASS ACTION ALLEGATIONS 46. Plaintiff, on behalf of herself and all others similarly situated, seeks certification of the following nationwide class pursuant to Rule 23(a) and 23(b)(2) of the Federal Rules of Civil Procedure: “all legally blind individuals in the United States who have attempted to access Katesomerville.com and as a result have been denied access to the enjoyment of goods and services offered by Katesomerville.com, during the relevant statutory period.” 47. Plaintiff seeks certification of the following New York subclass pursuant to Fed.R.Civ.P. 23(a), 23(b)(2), and, alternatively, 23(b)(3): “all legally blind individuals in New York State who have attempted to access Katesomerville.com and as a result have been denied access to the enjoyment of goods and services offered by Katesomerville.com, during the relevant statutory period.” 48. There are hundreds of thousands of visually-impaired persons in New York State. There are approximately 8.1 million people in the United States who are visually- impaired. Id. Thus, the persons in the class are so numerous that joinder of all such persons is impractical and the disposition of their claims in a class action is a benefit to the parties and to the Court. 13 49. This case arises out of Defendant’s policy and practice of maintaining an inaccessible website denying blind persons access to the goods and services of Katesomerville.com. Due to Defendant’s policy and practice of failing to remove access barriers, blind persons have been and are being denied full and equal access to independently browse, select and shop on Katesomerville.com. 50. There are common questions of law and fact common to the class, including without limitation, the following: (a) Whether Katesomerville.com is a “public accommodation” under the ADA; (b) Whether Katesomerville.com is a “place or provider of public accommodation” under the laws of New York; (c) Whether Defendant, through its website, Katesomerville.com, denies the full and equal enjoyment of its goods, services, facilities, privileges, advantages, or accommodations to people with visual disabilities in violation of the ADA; and (d) Whether Defendant, through its website, Katesomerville.com, denies the full and equal enjoyment of its goods, services, facilities, privileges, advantages, or accommodations to people with visual disabilities in violation of the law of New York. 51. The claims of the named Plaintiff are typical of those of the class. The class, similar to the Plaintiff, is severely visually-impaired or otherwise blind, and claims Kate Somerville has violated the ADA, and/or the laws of New York by failing to update or remove access barriers on their website, Katesomerville.com, so it can be independently accessible to the class of people who are legally blind. 52. Plaintiff will fairly and adequately represent and protect the interests of the members of the Class because Plaintiff has retained and is represented by counsel competent and experienced in complex class action litigation, and because Plaintiff has no interests antagonistic 14 to the members of the class. Class certification of the claims is appropriate pursuant to Fed. R. Civ. P. 23(b)(2) because Defendant has acted or refused to act on grounds generally applicable to the Class, making appropriate both declaratory and injunctive relief with respect to Plaintiff and the Class as a whole. 53. Alternatively, class certification is appropriate under Fed. R. Civ. P. 23(b)(3) because questions of law and fact common to Class members clearly predominate over questions affecting only individual class members, and because a class action is superior to other available methods for the fair and efficient adjudication of this litigation. 54. Judicial economy will be served by maintenance of this lawsuit as a class action in that it is likely to avoid the burden that would be otherwise placed upon the judicial system by the filing of numerous similar suits by people with visual disabilities throughout the United States. 55. References to Plaintiff shall be deemed to include the named Plaintiff and each member of the class, unless otherwise indicated. FIRST CAUSE OF ACTION (Violation of 42 U.S.C. §§ 12181 et seq. – Title III of the Americans with Disabilities Act) 56. Plaintiff repeats, realleges and incorporates by reference the allegations contained in paragraphs 1 through 55 of this Complaint as though set forth at length herein. 57. Title III of the American with Disabilities Act of 1990, 42 U.S.C. § 12182(a) provides that “No individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation.” Title III also prohibits an entity from “[u]tilizing standards or 15 criteria or methods of administration that have the effect of discriminating on the basis of disability.” 42 U.S.C. § 12181(b)(2)(D)(I). 58. Katesomerville.com is a sales establishment and public accommodation within the definition of 42 U.S.C. §§ 12181(7). 59. Defendant is subject to Title III of the ADA because it owns and operates Katesomerville.com. 60. Under Title III of the ADA, 42 U.S.C. § 12182(b)(1)(A)(I), it is unlawful discrimination to deny individuals with disabilities or a class of individuals with disabilities the opportunity to participate in or benefit from the goods, services, facilities, privileges, advantages, or accommodations of an entity. 61. Under Title III of the ADA, 42 U.S.C. § 12182(b)(1)(A)(II), it is unlawful discrimination to deny individuals with disabilities or a class of individuals with disabilities an opportunity to participate in or benefit from the goods, services, facilities, privileges, advantages, or accommodation, which is equal to the opportunities afforded to other individuals. 62. Specifically, under Title III of the ADA, 42 U.S.C. § 12182(b)(2)(A)(II), unlawful discrimination includes, among other things, “a failure to make reasonable modifications in policies, practices, or procedures, when such modifications are necessary to afford such goods, services, facilities, privileges, advantages, or accommodations to individuals with disabilities, unless the entity can demonstrate that making such modifications would fundamentally alter the nature of such goods, services, facilities, privileges, advantages or accommodations.” 63. In addition, under Title III of the ADA, 42 U.S.C. § 12182(b)(2)(A)(III), unlawful discrimination also includes, among other things, “a failure to take such steps as may be necessary to ensure that no individual with disability is excluded, denied services, segregated 16 or otherwise treated differently than other individuals because of the absence of auxiliary aids and services, unless the entity can demonstrate that taking such steps would fundamentally alter the nature of the good, service, facility, privilege, advantage, or accommodation being offered or would result in an undue burden.” 64. There are readily available, well-established guidelines on the Internet for making websites accessible to the blind and visually-impaired. These guidelines have been followed by other business entities in making their websites accessible, including but not limited to ensuring adequate prompting and accessible alt-text. Incorporating the basic components to make their website accessible would neither fundamentally alter the nature of Defendant’s business nor result in an undue burden to Defendant. 65. The acts alleged herein constitute violations of Title III of the ADA, 42 U.S.C. § 12101 et seq., and the regulations promulgated thereunder. Patrons of Kate Somerville who are blind have been denied full and equal access to Katesomerville.com, have not been provided services that are provided to other patrons who are not disabled, and/or have been provided services that are inferior to the services provided to non-disabled patrons. 66. Defendant has failed to take any prompt and equitable steps to remedy its discriminatory conduct. These violations are ongoing. 67. As such, Defendant discriminates, and will continue in the future to discriminate against Plaintiff and members of the proposed class and subclass on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, accommodations and/or opportunities of Katesomerville.com in violation of Title III of the Americans with Disabilities Act, 42 U.S.C. §§ 12181 et seq. and/or its implementing regulations. 17 68. Unless the Court enjoins Defendant from continuing to engage in these unlawful practices, Plaintiff and members of the proposed class and subclass will continue to suffer irreparable harm. 69. The actions of Defendant were and are in violation of the ADA, and therefore Plaintiff invokes his statutory right to injunctive relief to remedy the discrimination. 70. Plaintiff is also entitled to reasonable attorneys’ fees and costs. 71. Pursuant to 42 U.S.C. § 12188 and the remedies, procedures, and rights set forth and incorporated therein, Plaintiff prays for judgment as set forth below. SECOND CAUSE OF ACTION (Violation of New York State Human Rights Law, N.Y. Exec. Law Article 15 (Executive Law § 292 et seq.)) 72. Plaintiff repeats, realleges and incorporates by reference the allegations contained in paragraphs 1 through 71 of this Complaint as though set forth at length herein. 73. N.Y. Exec. Law § 296(2)(a) provides that it is “an unlawful discriminatory practice for any person, being the owner, lessee, proprietor, manager, superintendent, agent, or employee of any place of public accommodation . . . because of the . . . disability of any person, directly or indirectly, to refuse, withhold from or deny to such person any of the accommodations, advantages, facilities or privileges thereof.”. 74. Katesomerville.com is a sales establishment and public accommodation within the definition of N.Y. Exec. Law § 292(9). 75. Defendant is subject to the New York Human Rights Law because it owns and operates Katesomerville.com. Defendant is a person within the meaning of N.Y. Exec. Law. § 76. Defendant is violating N.Y. Exec. Law § 296(2)(a) in refusing to update or remove access barriers to Katesomerville.com, causing Katesomerville.com to be completely 18 inaccessible to the blind. This inaccessibility denies blind patrons the full and equal access to the facilities, goods and services that Defendant makes available to the non-disabled public. 77. Specifically, under N.Y. Exec. Law § unlawful discriminatory practice includes, among other things, “a refusal to make reasonable modifications in policies, practices, or procedures, when such modifications are necessary to afford facilities, privileges, advantages or accommodations to individuals with disabilities, unless such person can demonstrate that making such modifications would fundamentally alter the nature of such facilities, privileges, advantages or accommodations.” 78. In addition, under N.Y. Exec. Law § 296(2)(c)(II), unlawful discriminatory practice also includes, “a refusal to take such steps as may be necessary to ensure that no individual with a disability is excluded or denied services because of the absence of auxiliary aids and services, unless such person can demonstrate that taking such steps would fundamentally alter the nature of the facility, privilege, advantage or accommodation being offered or would result in an undue burden.” 79. There are readily available, well-established guidelines on the Internet for making websites accessible to the blind and visually-impaired. These guidelines have been followed by other business entities in making their website accessible, including but not limited to: adding alt-text to graphics and ensuring that all functions can be performed by using a keyboard. Incorporating the basic components to make their website accessible would neither fundamentally alter the nature of Defendant’s business nor result in an undue burden to Defendant. 80. Defendant’s actions constitute willful intentional discrimination against the class on the basis of a disability in violation of the New York State Human Rights Law, N.Y. Exec. Law § 296(2) in that Defendant has: 19 (a) constructed and maintained a website that is inaccessible to blind class members with knowledge of the discrimination; and/or (b) constructed and maintained a website that is sufficiently intuitive and/or obvious that is inaccessible to blind class members; and/or (c) failed to take actions to correct these access barriers in the face of substantial harm and discrimination to blind class members. 81. Defendant has failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 82. As such, Defendant discriminates, and will continue in the future to discriminate against Plaintiff and members of the proposed class and subclass on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, accommodations and/or opportunities of Katesomerville.com under N.Y. Exec. Law § 296(2) et seq. and/or its implementing regulations. Unless the Court enjoins Defendant from continuing to engage in these unlawful practices, Plaintiff and members of the class will continue to suffer irreparable harm. 83. The actions of Defendant were and are in violation of the New York State Human Rights Law and therefore Plaintiff invokes his right to injunctive relief to remedy the discrimination. 84. Plaintiff is also entitled to compensatory damages, as well as civil penalties and fines pursuant to N.Y. Exec. Law § 297(4)(c) et seq. for each and every offense. 85. Plaintiff is also entitled to reasonable attorneys’ fees and costs. 86. Pursuant to N.Y. Exec. Law § 297 and the remedies, procedures, and rights set forth and incorporated therein, Plaintiff prays for judgment as set forth below. THIRD CAUSE OF ACTION 20 (Violation of New York State Civil Rights Law, NY CLS Civ R, Article 4 (CLS Civ R § 40 et seq.)) 87. Plaintiff repeats, realleges and incorporates by reference the allegations contained in paragraphs 1 through 86 of this Complaint as though set forth at length herein. 88. Plaintiff served notice thereof upon the attorney general as required by N.Y. Civil Rights Law § 41. 89. N.Y. Civil Rights Law § 40 provides that “all persons within the jurisdiction of this state shall be entitled to the full and equal accommodations, advantages, facilities, and privileges of any places of public accommodations, resort or amusement, subject only to the conditions and limitations established by law and applicable alike to all persons. No persons, being the owner, lessee, proprietor, manager, superintendent, agent, or employee of any such place shall directly or indirectly refuse, withhold from, or deny to any person any of the accommodations, advantages, facilities and privileges thereof . . .” 90. N.Y. Civil Rights Law § 40-c(2) provides that “no person because of . . . disability, as such term is defined in section two hundred ninety-two of executive law, be subjected to any discrimination in his or her civil rights, or to any harassment, as defined in section 240.25 of the penal law, in the exercise thereof, by any other person or by any firm, corporation or institution, or by the state or any agency or subdivision.” 91. Katesomerville.com is a sales establishment and public accommodation within the definition of N.Y. Civil Rights Law § 40-c(2). 92. Defendant is subject to New York Civil Rights Law because it owns and operates Katesomerville.com. Defendant is a person within the meaning of N.Y. Civil Law § 40- 21 93. Defendant is violating N.Y. Civil Rights Law § 40-c(2) in refusing to update or remove access barriers to Katesomerville.com, causing Katesomerville.com to be completely inaccessible to the blind. This inaccessibility denies blind patrons full and equal access to the facilities, goods and services that Defendant makes available to the non-disabled public. 94. There are readily available, well-established guidelines on the Internet for making websites accessible to the blind and visually-impaired. These guidelines have been followed by other business entities in making their website accessible, including but not limited to: adding alt-text to graphics and ensuring that all functions can be performed by using a keyboard. Incorporating the basic components to make their website accessible would neither fundamentally alter the nature of Defendant’s business nor result in an undue burden to Defendant. 95. In addition, N.Y. Civil Rights Law § 41 states that “any corporation which shall violate any of the provisions of sections forty, forty-a, forty-b or forty two . . . shall for each and every violation thereof be liable to a penalty of not less than one hundred dollars nor more than five hundred dollars, to be recovered by the person aggrieved thereby . . .” 96. Specifically, under N.Y. Civil Rights Law § 40-d, “any person who shall violate any of the provisions of the foregoing section, or subdivision three of section 240.30 or section 240.31 of the penal law, or who shall aid or incite the violation of any of said provisions shall for each and every violation thereof be liable to a penalty of not less than one hundred dollars nor more than five hundred dollars, to be recovered by the person aggrieved thereby in any court of competent jurisdiction in the county in which the defendant shall reside . . .” 97. Defendant has failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 22 98. As such, Defendant discriminates, and will continue in the future to discriminate against Plaintiff and members of the proposed class on the basis of disability are being directly indirectly refused, withheld from, or denied the accommodations, advantages, facilities and privileges thereof in § 40 et seq. and/or its implementing regulations. 99. Plaintiff is entitled to compensatory damages of five hundred dollars per instance, as well as civil penalties and fines pursuant to N.Y. Civil Rights Law § 40 et seq. for each and every offense. FOURTH CAUSE OF ACTION (Violation of New York City Human Rights Law, N.Y.C. Administrative Code § 8-102, et seq.) 100. Plaintiff repeats, realleges and incorporates by reference the allegations contained in paragraphs 1 through 99 of this Complaint as though set forth at length herein. 101. N.Y.C. Administrative Code § 8-107(4)(a) provides that “it shall be an unlawful discriminatory practice for any person, being the owner, lessee, proprietor, manager, superintendent, agent or employee of any place or provider of public accommodation, because of . . . disability . . . directly or indirectly, to refuse, withhold from or deny to such person, any of the accommodations, advantages, facilities or privileges thereof.” 102. Katesomerville.com is a sales establishment and public accommodation within the definition of N.Y.C. Administrative Code § 8-102(9). 103. Defendant is subject to City Law because it owns and operates Katesomerville.com. Defendant is a person within the meaning of N.Y.C. Administrative Code § 8-102(1). 104. Defendant is violating N.Y.C. Administrative Code § 8-107(4)(a) in refusing to update or remove access barriers to Katesomerville.com, causing Katesomerville.com to be completely inaccessible to the blind. This inaccessibility denies blind patrons full and equal 23 access to the facilities, goods, and services that Defendant makes available to the non-disabled public. Specifically, Defendant is required to “make reasonable accommodation to the needs of persons with disabilities . . . any person prohibited by the provisions of [§ 8-107 et seq.] from discriminating on the basis of disability shall make reasonable accommodation to enable a person with a disability to . . . enjoy the right or rights in question provided that the disability is known or should have been known by the covered entity.” N.Y.C. Administrative Code § 8- 107(15)(a). 105. Defendant’s actions constitute willful intentional discrimination against the class on the basis of a disability in violation of the N.Y.C. Administrative Code § 8-107(4)(a) and § 8-107(15)(a) in that Defendant has: (a) constructed and maintained a website that is inaccessible to blind class members with knowledge of the discrimination; and/or (b) constructed and maintained a website that is sufficiently intuitive and/or obvious that is inaccessible to blind class members; and/or (c) failed to take actions to correct these access barriers in the face of substantial harm and discrimination to blind class members. 106. Defendant has failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 107. As such, Defendant discriminates, and will continue in the future to discriminate against Plaintiff and members of the proposed class and subclass on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, accommodations and/or opportunities of Katesomerville.com under N.Y.C. Administrative Code § 8-107(4)(a) and/or its implementing regulations. Unless the Court enjoins Defendant from 24 continuing to engage in these unlawful practices, Plaintiff and members of the class will continue to suffer irreparable harm. 108. The actions of Defendant were and are in violation of City law and therefore Plaintiff invokes his right to injunctive relief to remedy the discrimination. 109. Plaintiff is also entitled to compensatory damages, as well as civil penalties and fines under N.Y.C. Administrative Code § 8-120(8) and § 8-126(a) for each offense. 110. Plaintiff is also entitled to reasonable attorneys’ fees and costs. 111. Pursuant to N.Y.C. Administrative Code § 8-120(8) and § 8-126(a) and the remedies, procedures, and rights set forth and incorporated therein, Plaintiff prays for judgment as set forth below. FIFTH CAUSE OF ACTION (Declaratory Relief) 112. Plaintiff repeats, realleges and incorporates by reference the allegations contained in paragraphs 1 through 111 of this Complaint as though set forth at length herein. 113. An actual controversy has arisen and now exists between the parties in that Plaintiff contends, and is informed and believes that Defendant denies, that Katesomerville.com contains access barriers denying blind customers the full and equal access to the goods, services and facilities of Katesomerville.com, which Kate Somerville owns, operates and/or controls, fails to comply with applicable laws including, but not limited to, Title III of the American with Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et seq., and N.Y.C. Administrative Code § 8-107, et seq. prohibiting discrimination against the blind. 114. A judicial declaration is necessary and appropriate at this time in order that each of the parties may know their respective rights and duties and act accordingly. 25 PRAYER FOR RELIEF WHEREFORE, Plaintiff respectfully demands judgment in favor of Plaintiff and the class and against the Defendants as follows: a) A preliminary and permanent injunction to prohibit Defendant from violating the Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et seq., and N.Y.C. Administrative Code § 8-107, et seq., and the laws of New York; b) A preliminary and permanent injunction requiring Defendant to take all the steps necessary to make its website, Katesomerville.com, into full compliance with the requirements set forth in the ADA, and its implementing regulations, so that Katesomerville.com is readily accessible to and usable by blind individuals; c) A declaration that Defendant owns, maintains and/or operates its website, Katesomerville.com, in a manner which discriminates against the blind and which fails to provide access for persons with disabilities as required by Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et seq., and N.Y.C. Administrative Code § 8-107, et seq., and the laws of New York; d) An order certifying this case as a class action under Fed. R. Civ. P. 23(a) & (b)(2) and/or (b)(3), appointing Plaintiff as Class Representative, and his attorneys as Class Counsel; e) An order directing Defendants to continually update and maintain its website to ensure that it remains fully accessible to and usable by the visually-impaired; f) Compensatory damages in an amount to be determined by proof, including all applicable statutory damages and fines, to Plaintiff and the proposed class for violations of their civil rights under New York State Human Rights Law and City Law; g) Plaintiff’s reasonable attorneys’ fees, expenses, and costs of suit as provided by state and federal law; 26 h) For pre- and post-judgment interest to the extent permitted by law; and i) For such other and further relief which this court deems just and proper. Dated: Brooklyn, New York September 5, 2018 SHAKED LAW GROUP, P.C. Attorneys for Plaintiff By:/s/Dan Shaked_________ Dan Shaked (DS-3331) 44 Court St., Suite 1217 Brooklyn, NY 11201 Tel. (917) 373-9128 e-mail: [email protected] 27

civil rights, immigration, family

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UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS CASE NO.: CLASS ACTION ALEYDA TORRES, on behalf of herself and all others similarly situated, Plaintiff v. BAYSTATE HEALTH, INC., Defendant COMPLAINT FOR DAMAGES, EQUITABLE, DECLARATORYAND INJUNCTIVE RELIEF DEMAND FOR JURY TRIAL Plaintiff Aleyda Torres (“Plaintiff”), individually by and through her undersigned counsel, brings this class action lawsuit against Baystate Health, Inc. (“BHI”), on behalf of herself and all other similarly situated, and alleges, based upon information and belief and the investigation of her counsel, as follows: INTRODUCTION 1. This is a punitive class action lawsuit brought by current and former patients of BHI against BHI for its failure to properly secure and safeguard their personally identifiable information (“PII”) and protected health information (“PHI”), and for their failure to provide timely, accurate and adequate notice that such PII had been compromised. 2. On April 8, 2019, BHI announced that hacker gained access to a number of employee email accounts through a phishing attack which subsequently exposed the personal data of more than 12,000 BHI patients. The exposed personal information included patients’ names, dates of birth, addresses, health information (such as, diagnoses, treatment information, 1 and medications), health insurance information, Medicare numbers and Social Security numbers. (“Data Breach” or “Breach”). 3. According to the Notice to Our Patients of an Email Incident (“Notice”) issued by BHI, an unauthorized third party illegally accessed a number of BHI employee email accounts.1 This led to the exposure of personally identifiable information belonging to more than 12,000 BHI patients. 4. While the Breach was discovered by BHI on February 7, 2019, patients were not notified until nearly two months later. 5. Phishing attacks – the kind that led to the Data Breach – are well-known phenomenon for which there are a number of protective measures. This Data Breach occurred, however, only because BHI failed to implement adequate and reasonable cyber-security procedures and protocols. Among other things, Defendant failed to exercise reasonable care, and to implement adequate cyber-security training, including, but not limited to, how to spot phishing emails from unauthorized senders. 6. The deficiencies in Defendant’s data security protocols were so significant that the Breach likely remained undetected for months. 7. Intruders, therefore, had months to access, view and steal patient data unabated. During this time, BHI failed to recognize its systems had been breached and that intruders were stealing data on hundreds of thousands of current and former patients. Timely action by BHI would likely have significantly reduced the consequences of the Breach. 8. BHI disregarded the rights of Plaintiff and Class members by intentionally, willfully, recklessly, or negligently failing to take adequate and reasonable measures to ensure its 1 https://www.baystatehealth.org/phishing (last visited on April 10, 2019) 2 data systems were protected, failing to disclose to its patients the material fact that it did not have adequate computer systems and security practices to safeguard their PII, failing to take available steps to prevent the Data Breach, failing to monitor and timely detect the Data Breach, and failing to provide Plaintiff and Class members prompt and accurate notice of the Data Breach. 9. Plaintiff and Class Members seek to remedy the harms suffered as a result of the Data Breach and have a significant interest in ensuring that their PII, which remain in BHI’s possession, is protected from further breaches. 10. No one can know what else the cyber criminals will do with the compromised PII/PHI. However, what is known is that BHI patients will be for the rest of their lives at a heightened risk of further identity theft and fraud. 11. Defendant’s conduct gives rise to claims for breach of contract and negligence. Plaintiff, individually, and on behalf of those similarly situated, seeks to recover damages, equitable relief, injunctive relief designed to prevent a reoccurrence of the Data Breach and resulting injuries, restitution, disgorgement, reasonable costs and attorney fees, and all other remedies this Court deems proper. PARTIES 12. Plaintiff Aleyda Torres is a resident of Springfield, Hampden County, Massachusetts and a patient of BHI. On or about April 5, 2019, Ms. Torres received notice from BHI that her PII/PHI, along with approximately 12,000 patients, had been improperly exposed to unauthorized third parties. 13. Shorty after receiving notice from BHI Health, Ms. Torres purchased credit monitoring in an attempt to protect her credit, and safe guard her identity. 3 14. In addition to the monitoring her accounts for fraudulent activity affecting Ms. Torres as a result of the Breach, she will continue to be at heightened risk for financial fraud, medical fraud and identity theft and her attendant damages for years to come. 15. Defendant BHI is a not-for -profit, integrated health care system serving over 800,000 people throughout western New England. BHI’s principal office is located at 759 Chestnut Street, Springfield, Hampden County, Massachusetts. JURISTICTION AND VENUE 16. This Court has subject matter jurisdiction over this action under the Class Action Fairness Act, 28 U.S.C. § 1332(d)(2). The amount in controversy exceeds $5 million, exclusive of interest and costs. There are more than 100 putative class members, and at least some members of proposed Class have a different citizenship from BHI. 17. This Court has jurisdiction over Defendant as it operates in this District, and their computer systems implicated in this Breach are based in this District. 18. Plaintiff was a patient of BHI Health and engaged in underlying health services within this District where her PII was also maintained, and where the breach occurred which led to her sustaining damage. Through its business operations in this District, BHI intentionally avails itself of the markets within this District to render the exercise of jurisdiction by this Court just and proper. 19. Venue is proper in this Court pursuant to 28 U.S.C. § 1391 (a)(1) because a substantial part of the events and omissions giving rise to this action occurred in this District, BHI is based in this District, maintains patient PII in the District and has caused harm to Plaintiff and Class members residing in this District. 4 STATEMENTS OF FACTS Background 20. Cyber-attacks come in may forms. Phishing attacks are among the oldest and well known. In simple terms, phishing is a method of obtaining personal information using deceptive emails and websites. The goal is to trick an e-mail recipient into believing that the message is something they want or need for a legitimate or trustworthy source and to subsequently click on link or download an attachment. The fake link will typically mimic a familiar website and require the input of credentials. Once input, the credentials are then used to gain unauthorized access into a system. “It’s one of the oldest types of cyberattacks, dating back to the 1990’s and one that every organization with an internet presence is aware.”2 21. Phishing attacks are well known and understood by cyber-protection community and there are many well-known proactive measures that can be undertaken to prevent phishing attacks such as “sandboxing” inbound e-mail3, inspecting and analyzing web traffic, pen-testing an organization to find weak spots, and employee education, among many others.4 22. Data breaches, including those perpetrated by phishing attacks, have become widespread. In 2016, the number of U.S. data breaches surpassed 1,000, a record high and a forty percent increase in the number of data breaches from the previous year.5 In 2017, a new record high of 1,579 breaches were reported representing a 44.7 percent increase over 2016.6 2 https://www.csoonline.com/article/2117843/phishing/what-is-phishing-how-this-cyber-attack-works-and-how-to- prevent-it.html. (Last visited April 10, 2019) 3 An automated process whereby emails with attachments and links are segregated to an isolated test environment, a “sandbox,” wherein a suspicious file or URL may be executed safely. 4 https://www.csoonline.com/article/2117843/phishing/what-is-phishing-how-this-cyber-attack-works-and-how-to- prevent-it.html. (last visited April 10, 2019) 5 Identify Theft Resource Center, Data Breaches Increase 40 Percent in 2016, Finds New Report From Identity Theft Resource Center and CyberScout (January 19, 2017), available at https://www.idtheftcenter.og/surveys-studys/ (last visited April 10, 2019). 6 Identity Theft Resource Center, 2017 Annual Data Breach Year-End Review, available at https://www.idtheftcenter.org/2017-data-breaches/ (last visited April 10, 2019). 5 The BHI Data Breach 23. On February 7, 2019, Defendant discovered than an unauthorized third party gained access to BHI’s patient information through the use of phishing emails sent to BHI employees. Due to BHI’s inadequate protocols and procedures to prevent such attacks, unauthorized parties gained unfettered access to the PII/PHI of approximately 12,000 current and former patients.7 24. But not until or about April 8, 2019, did BHI publicly announced that its system had been compromised by unauthorized third parties. The announcement came two months after they first noticed their system had been compromised. BHI made no statement as to when the breach first occurred, or how long the privacy of patient PII had been compromised. A similar notice to the Plaintiff stated: BHI Health is committed to protecting the security and confidentiality of our patients’ information. Regrettably, we are writing to inform you that an incident that involves some of your information. We are writing to explain the incident, measures we have taken, and some steps you can take in response. Between February 7 and March 7, 2019, BHI learned of unauthorized access to a limited number of employee email accounts during that same time frame due to a phishing incident. We immediately secured each account, began an investigation, and hired a leading computer forensic firm to assist. The investigation determined that one of the email accounts contained some information about you. The information may have included your name, address, date of birth, health insurance plan and policy information, and some limited health information, such as diagnosis, treatment, and/or procedure descriptions. The emails did not contain your Social Security number. Your electronic medical record was not accessed or involved. While we have no indication that your information was actually acquired or viewed by the unauthorized person, or that it has been misused, we wanted to notify you regarding this incident and assure you that we take it very seriously. As a precaution, we recommend that you review the statements you receive from your healthcare provider or your health insurer. If you see services that you did not receive, please contact the insurer or provider immediately. 7 Baystate Health: Confidential Patient Info Accessed in Email Phishing Attach. April 8, 2019. https://www.nbcboston.com/news/local/Baystate-Health-Confidential-Patient-Info-Accessed-in-Phishing-Attack- 508271191.html (last visited April 10, 2019). 6 We deeply regret any inconvenience or concern that incident may cause you. To help prevent something like this from happening in the future, we required a password change for all affected employees, increased the level of email logging and are reviewing those logs regularly, and have blocked access to email accounts outside of our network unless the access is approved by BHI. We are also reinforcing employee training on how to detect and avoid phishing emails. If you have any questions, please call 1-833-231-3361, Monday through Friday, between 9 a.m. and 6:30 p.m. Eastern Time. 25. BHI has not advised as to why it waited months to advise patients that their information had been compromised as a result of the breach. BHI’s Inadequate Cyber-Security Practices 26. Prior to the Data Breach, BHI advised in the Notice of Privacy Practices posted on its website that it “WE ARE COMMITTED TO THE PRIVACY OF YOUR MEDICAL INFORMATION.”8 27. BHI further acknowledged that it is “required by law to maintain the privacy and security of your protected health information (“PHI”) and “Let you know promptly if a breach occurs that may have compromised the privacy or security of your information.”9 28. BHI represented that it would abide by these obligations, but failed to live up to its own promises, as well as its duties and obligations required by law and industry standards. 29. Contrary to its promises, BHI’s conduct has instead been a direct cause of the impermissible release, disclosure, compromise, and publication of Class Members’ PII/PHI, as well as the ongoing harm to Plaintiff and other Class Members. 8 Notice of Privacy Practices, available at https://www.baystatehealth.org/notice-of-privacy-practices content/uploads/2017/11/summary_notice_privacy_practices.pdf (last visited April 10, 2019). 9 Notice of Privacy Practices, available at https://www.baystatehealth.org/notice-of-privacy-practices content/uploads/2017/11/summary_notice_privacy_practices.pdf (last visited April 10, 2019). 7 30. BHI could have prevented this Data Breach which was based on a long and well- known hacking technique known as phishing, for which there are numerous and effective countermeasures. 31. Generally, organizations can mount two primary defenses to phishing scams: employee education and technical security barriers. 32. Employee education is the process of adequately making employees aware of common phishing scams and implementing company-wide policies requiring unknown links, attachments or requests to be sequestered and checked for authenticity. Employee education and established protocols for use of log-in credentials is the easiest method to assist employees in properly identifying fraudulent emails and prevent unauthorized access to personal information. 33. Organizations like BHI can also greatly reduce the flow of phishing emails by implementing certain security measures governing email transmissions. For example, organizations can use a simple email validation system that allows domain owners to publish a list of IP addresses that are authorized to send email on their behalf to reduce the amount of spam and fraud by making it harder for malicious senders to disguise their identities. Organizations can also use email authentication protocols that block email streams which have not been properly authenticated. 34. Unfortunately, BHI failed to employ any of these defenses to the detriment of Plaintiff and thousands of Class Members. As evidenced by the success of the phishing hack, it is clear that BHI failed to ensure that its employees were adequately trained on even the most basic of cybersecurity protocols, including: 8 a. How to detect phishing emails and other scams including providing employees examples of these scams and guidance on how to verify if emails are legitimate; b. Effective password management and encryption protocols for internal and external emails; c. Avoid responding to emails that are suspicious or from unknown sources; d. Locking, encrypting and limiting access to computers and files containing sensitive information; and e. Implementing guidelines for maintaining sensitive data. 37 BHI’s failures handed criminals patient PII/PHI and put Plaintiff and Class members of Class at serious, immediate and ongoing risk for identity theft and fraud. 38. The Data Breach was caused by BHI’s failure to abide by best practices and industry standards concerning the security of its computer systems. BHI did not comply with security standards and allowed its patients’ PII/PHI to be compromised by failing to implement security measures that could have prevented or mitigated the Data Breach. 39. BHI failed to ensure that all its personnel with access to patient records were made aware of this well-known and well-publicized type of scam. 40. In addition, upon information and belief, BHI failed to take reasonable steps to clearly, conspicuously, and timely inform Plaintiff and the other Class Members of the nature and extent of the Data Breach. By failing to provide adequate and timely notice, BHI prevented Plaintiff and Class Members from protecting themselves from the consequences of the Data Breach. 9 41. This is not BHI’s first Data Breach, BHI has previously suffered a similar Data Breach in 2016 affecting 13,000 patients. Value of Personally Identifiable Information 42. BHI was well-aware, or reasonably should have been aware, that the PII/PHI it collects is highly sensitive and of significant value to those who would use it for wrongful purposes. 43. The FTC defines identify theft as “a fraud committed or attempted using the identifying information or another person without authority.”10 The FTC describes “identifying information” as “any name or number that may be used, alone or in conjunction with any other information, to identify a specific person.”11 44. Personal identifying information is a valuable commodity to identify thieves once the information has been compromised. As the FTC recognizes, once identity thieves have personal information, “they can drain your bank account, run up your credit cards, open new utility accounts, or get medical treatment on your health insurance.”12 45. Identity thieves can use personal information, such as that of Plaintiff and Class members, which BHI failed to keep secure, to perpetrate a variety of crimes that harm victims. For instance, identity thieves may commit various type of government fraud such as: immigration fraud; obtaining a driver’s license or identification care in the victim’s name but with another’s picture; using the victim’s information to obtain government benefits; or filing a fraudulent tax return using the victim’s information to obtain a fraudulent refund. 10 17 C.F.R. §248.201 (2013). 11 Id. 12 Federal Trade Commission. Warning Signs of Identity Theft. Available at: https://www.consumer.ftc.gov/articles/0271-warnings-signs-identity-theft- (last visited April 10, 2019). 10 46. A “cyber black market” exists in which criminals openly post stolen social security numbers and other personal information on multiple underground Internet websites. Such data is valuable to identity thieve because they can use victims’ personal data to pen new financial accounts, take out loans in another person’s name and/or incur charges on existing accounts. 47. Professionals tasked with trying to stop fraud and other misuse know that PII/PHI has real monetary value in part because criminals continue their efforts to obtain this data.13 In other words, if any additional breach of sensitive data did not have incremental value to criminals, one would expect to see a reduction in criminal efforts to obtain such additional data over time. However, just the opposite has occurred. According to the Identity Theft Resource Center, 2017 saw 1,579 data breaches, representing a 44.7 percent increase over the record high figures reported a year earlier.14 48. At all relevant times, BHI knew, or reasonably should have known, of the importance of safeguarding PII/PHI and of the foreseeable consequences that would occur if its data security system was breached, including, the significant costs that would be imposed on its patients as a result of a breach. The Effects of Unauthorized Disclosure of PII/PHI 49. The ramifications of the BHI’s failure to keep its patients’ PII/PHI secure are long lasting and severe. Once PII/PHI is stolen, fraudulent use of that information and damage to victims may continue for years. 13 Data Breaches Rise as Cybercriminals Continue to Outwit IT, CIO Magazine, https://www.cio.com/article/2686167/data-breach/data-breaches-rise-as-cybercriminals-continue-to-outwit-it.html. (last visited April 10, 2019). 14 2017 Annual data Breach Year-End Review, https://www.idtheftcenter.org/2017-data-breaches, (last visited April 10, 2019). 11 50. Social Security numbers, for example, are among the worst kind of personal information to have stolen because they may be put to a variety of fraudulent uses and are difficult for an individual to change. The Social Security Administration has warned that identity thieves can use an individual’s Social Security number to apply for additional credit lines. Such fraud may go undetected until debt collection calls commence months, or even years, later. 51. Stolen Social Security numbers also make is possible for thieves to file fraudulent tax returns, file for unemployment benefits, or apply for a job using a false identity. Each of these fraudulent activities is difficult to detect. An individual may not know that his or her Social Security number was used to file for unemployment benefits until law enforcement notifies the individual’s employer of the suspected fraud. Fraudulent tax returns are typically discovered only when an individual’s authentic tax return is rejected. 52. Moreover, it is no easy task to change or cancel a stolen Social Security number. An individual cannot obtain a new Social Security number without significant paperwork and evidence of actual misuse. Even then, a new Social Security number may not be effective, as “[t]he credit bureaus and banks are able to link the new number very quickly to the old number, so all of that old bad information is quickly inherited into the new Social Security number.”15 53. Additionally, the information compromised in the Data Breach is significantly more valuable than the mere loss of credit card information typical of recent large retailer data breaches. The PII/PHI compromised in the BHI’s Data Breach is difficult, if not impossible, to change (i.e. Social Security numbers, names, addresses, dates of birth and medical records). 15 Victims of Social Security Number Theft Find It’s Hard to Bounce Back. NPR, Brain Naylor, Feb. 9, 2015, available at http://www.npr.org/2015/02/09/384875839/data-stolen-by-anthem-s-hackers-has-millions-worrying- about-indentiy-theft (last visited April 10, 2019). 12 54. This data, as one would expect, demands a much higher price on the black market. Martin Walter, senior director of cybersecurity firm RedSeal, explained, “Compared to credit card information, personally identifiable information and Social Security numbers are worth more than 10x on the black market.”16 55. It is well known and the subject of many media reports that PII/PHI is highly coveted and a frequent target of hackers. This information is targeted not only for identity theft purposes, but also for committing healthcare fraud including obtaining medical services under another’s insurance. A study by Experian found that the “average total cost” of medical identity theft is “about $20,000” per incident, and that a majority of victims of medial identity theft were forced to pay out-of-pocket costs for healthcare they did not receive in order to restore coverage.17 Despite well publicized litigation and frequent public announcements of data breaches by medical and technology companies, Defendant opted to maintain an insufficient and inadequate system to protect the PHI and PII of Plaintiff and Class members. 56. Unfortunately, and as is alleged below, despite all of this publicly available knowledge or the continued compromises of PII and PHI in the hands of third parties, such as health companies, Defendant’ approach at maintaining the privacy of the Plaintiff’s and the Class Members’ PII and PHI was lackadaisical, cavalier, reckless, or at the very least negligent. Plaintiff and Class Members Suffered Damages 57. The PII/PHI belonging to Plaintiff and Class members is private and sensitive in nature and was left inadequately protected by BHI, BHI did not obtain Plaintiff’s or Class 16 Anthem Hack: Personal Data Stolen Sells for 10x Price of Stolen Credit Card Numbers, IT World, Tim Greene, February 6, 2015, available at http://www.itworld.com/article/2880960/anthem-hack-personal-data-stoeln-sells-for- 10x-price-of-stolen-credit-card-numbers.html (last visited April 10, 2019). 17 Elinor Mills, Study: Medical identity theft is costly for victims, available at https://www.cnet.com/news/study- medical-identity-theft-is-costly-for-victims/ (last visited April 10, 2019. 13 members’ consent to disclose their PII to any other person as required by applicable law and industry standard. 58. The Data Breach was a direct and proximate result of BHI’s failure to: properly safeguard and protect Plaintiff’s and Class members’ PII/PHI from unauthorized access, use, and disclosure, as required by various state and federal regulations, industry practices, and the common law; BHI’s failure to establish and implement appropriate administrative, technical, and physical safeguards to ensure the security and confidentiality of Plaintiff’s and Class members’ PII; and protect against reasonable foreseeable threats to the security or integrity of such information. 59. BHI had the resources necessary to prevent a breach, but neglected to adequately invest in data security, despite the growing number of well-publicized data breaches. 60. Had BHI remedied the deficiencies in its data security systems, adopted security measurers recommended by experts in the field, BHI would have prevented intrusion into its systems and, ultimately, the theft of PII/PHI belonging to its patients. 61. As a direct and proximate result of BHI’s wrongful actions and inaction and the resulting Data Breach, Plaintiff and Class members have been placed at an imminent, immediate, and continuing increased risk of harm from identity theft and identity fraud, requiring them to take the time which they otherwise would have dedicated to other life demands such as work and family in an effort to mitigate the actual and potential impact of the Data Breach on their lives including, inter alia, by placing “freezes” and “alerts” with credit reporting agencies, contacting their financial institutions, closing or modifying financial accounts, closely reviewing and monitoring their credit reports and accounts for unauthorized activity, and filing police reports. T his time has been lost forever and cannot be recaptured. 14 62. The ramifications of Defendant’ failure to keep Plaintiff’s and Class Members’ data secure and severe. As explained by the Federal Trade Commission: Medical identity theft happens w hen someone steals your personal information and uses it to commit health care fraud. Medical ID thieves may use your identity to get treatment—even surgery—or to bilk insurers by making fake claims. Repairing damage to your good name and credit record can be difficult enough, but medical ID theft can have other serious consequences. If a scammer gets treatment in your name, that person’s health problems could become a part of your medical record. It could affect your ability to get medical care and insurance benefits, and could event affect decisions made by doctors treating you later on. The scammer’s unpaid medical debts also could end up on your credit report.18 63. PII/PHI—like the type disclosed in the breach—is particularly valuable for cybercriminals. According to SecureWorks (a division of Dell Inc.), “[i]t’s a well known truism within much of the healthcare data security community that an individual healthcare record is worth more on the black market ($50, on average) than a U.S.-based credit card and personal identity with social security number combined.”19 The reason is that thieves “[c]an use a healthcare record to submit false medical claims (and thus obtain free medical care), purchase prescription medication, or resell the record on the black market.”20 64. Similarly, the FBI Cyber Division, in an April 8, 2014 Private Industry Notification, advised: Cyber criminals are selling [medical] information on the black market at a rate of $50 for each partial EHR, compared to $1 for a stolen social security number or credit card number. HER can then be sued to file fraudulent insurance claims, obtain prescription medication, and advance identity theft. HER theft is also more difficult to detect, taking almost twice as long as normal identity theft.21 18 Federal Trade Commission, Medical ID Theft: Health Information for Older People, available at https://www.consumer.ftc.gov/articles/0326-medical-id-theft-health-information-older-people (last visited March 16, 2019). 19 What’s the Market Value of a Healthcare Record, Dell SecureWorks (December 13, 2012), https://www.secureworks.com/blog/general-market-value-of-a-healthcare-record (last visited April 10, 2019). 20 Id. 21 Federal Bureau of Investigation, FBI Cyber Division Private Industry Notification (April 8, 2014), https://info.publicintelligence.net/FBI-HealthCareCyberInstrusions,pdf (last visited April 10, 2019). 15 65. Once use of compromised non-financial PII/PHI is detected, the personal an economic consequence to the data breach victims can be overwhelming. As reported by CreditCards.com: The Ponemon Institute found that 36 percent of medical ID theft victims pay to resolve the issue, and their out-of-pocket costs average nearly $19,000. Event if you don’t end up paying out of pocket, such usage can wreak havoc on both medical and credit records, and clearing that up is a time-consuming headache. That’s because medical records are scattered. Unlike personal financial information, which is consolidated and protected by credit bureaus, bits of your medical records end up in every doctor’s office and hospital you check into, every pharmacy that fills a prescription and every facility that processes payments for those transactions.22 66. Research by Ponemon confirms that medical identity theft is costly and complex to resolve, and therefore it is critical for healthcare providers to take additional steps to assist victims resolve the consequences of the theft and prevent future fraud. In a 2014 study, Ponemon found that sixty-five percent (65%) of victims of medical identity theft in the study had to pay an average of $13,500 to resolve the resultant crimes23, and only ten percent (10%) of those in the study reported having achieved complete satisfaction in concluding the incident. 67. The average time spent by those respondents who successfully resolved their situation was more than 200 hours, working with their insurer or healthcare provider to make sure their personal medical credentials were secure and verifying the accuracy of their personal health information, medical invoices and claims, and electronic health records. Indeed, fifty-nine percent (59%) of the respondents reported that their information was used to obtain healthcare services or treatments, and fifty-six percent (56%) reported that their information was used to 22 Cathleen McCarthy, CreditCards, How to Spot and Prevent Medical Identity Theft (August 19, 2014), http://www.creditcards.com/credit-card-news/spot-prevent-medical-identity-theft-1282.php (last visited April 10, 2019). 23 Jaclyn Fitzgerald, Ponemon Institute Study reveals 21.7% Rise in medical Identity Theft, HC Pro (March 2, 2015), http://www.hcpro.com/HIM-313785-865/Ponemon-Institute-study-reveals-217-rise-in-medicalidentity- theft.html (last visited April 10, 2019). 16 obtain prescription pharmaceuticals or medical equipment. Forty-five percent (45%) of respondents said that the medical theft incident had a negative impact on their reputation, primarily because of embarrassment due to the disclosure of sensitive health conditions (89% of the respondents), thirty-five percent (35%) said the person committing the fraud depleted their insurance benefits resulting in denial of valid insurance complains, and third-one percent (31%) said they lost their health insurance entirely as a result of the medical identity theft. Twenty-nine percent (29%) of the respondents reported that they had to make out-of-pocket payments to their health plan or insurer to restore coverage. Additionally, the study found that almost one-half of medical identity theft victims lose their healthcare coverage as a result of the identity theft, almost one-third have their insurance premiums rise, and forty percent (40%) were never able to resolve their identity theft. 68. Notwithstanding the seriousness of the Data Breach, BHI has not offered to provide the Plaintiff with any assistance or meaningful compensation for the costs and burdens— current and future—associated with the exposure of her PII/PHI. BHI has offer some Class members Credit Monitoring. 69. Moreover, it is incorrect to assume that reimbursing an individual for financial loss due to fraud makes that individual whole again. On the contrary, after conducting a study, the U.S. Department of Justice’s Bureau of Justice Statistics found that “among victims who had personal information used for fraudulent purposes, 29% spent a month or more resolving problems” and that “resolving the problems caused by identity theft [could] take more than a year for some victims.” 17 70. To date, the BHI has offered patients nothing more than what any citizen is already entitled to under the law and is woefully inadequate in light of the nature of the Breach.24 We recommend that affected patients review the statements they receive from their healthcare providers and healthcare insurer. If they see services they did not receive, please contact the insurer or provider immediately. For those patients whose Social Security numbers were included in the email accounts, we are offering a complimentary one year membership of credit monitoring and identity protection services.25 71. A free credit report and the ability to freeze their accounts is not only a right that every citizen enjoys, it is grossly inadequate to protect the Plaintiffs and Class members from the threats they fact resulting from the PII/PHI that was exposed. Moreover, although credit monitoring can help detect fraud after it has already occurred, it has very little value as a preventive measure and does nothing to prevent fraudulent tax filings. As noted by security expert Brian Krebs, “although [credit monitoring] services may alert you when someone opens or attempts to pen a new line of credit in your name, most will do little—if anything—to block that activity. My take: If you’re being offered free monitoring, it probably can’t hurt to sign up, but you shouldn’t expect the service to stop identity thieves from ruining your credit.”26 72. As a result of the BHI’s failures to prevent the Data Breach, Plaintiffs and Class members have suffered and will continue to suffer damages. They have suffered or are at increased risk of suffering: a. The compromise, publication, theft and/or unauthorized use of PHII/PHI; 24 See, https://www.usa.gov/credit-reports (“You are entitled to a free credit report from each of the three credit reporting agencies (Equifax, Experian, and TransUnion) once every 12 months”) (Last visited April 10, 2019). 25 https://www.baystatehealth.org/phishing 26 Brian Krebs, Are Credit Monitoring Services Worth It?, KREBS ON SECRUITY, (March 19, 2014), http://krebsonsecurity.com/2014/03/are-credit-monitoring-services-worth-it/ (last visited April 10, 2019). 18 b. Out-of-pocket costs associated with the prevention, detection, recovery and remediation from identity theft or fraud; c. Lost opportunity costs and lost wages associated with efforts expended and the loss of productivity from addressing and attempting to mitigate the actual and future consequences of the Data Breach, including but not limited to efforts spent researching how to prevent, detect, contest and recover from identity theft and fraud; d. The continued risk to their PII/PHI, which remains in the possession of BHI and is subject to further breaches so long as BHI fails to undertake appropriate measures to protect the PII/PHI in their possession; and e. Current and future costs in terms of time, effort and money that will be expended to prevent, detect, contest, remediate and repair the impact of the Data Breach for the remainder of the lives of Plaintiff and Class members. 73. BHI continues to hold the PII/PHI of its patients, including Plaintiff and Class members. Particularly because BHI has demonstrated an inability to prevent a breach or stop it from continuing event after being detected, Plaintiff and Class members have an undeniable interest in ensuring that their PII/PHI is secure, remains secure, and is not subject to further theft. CLASS ACTION ALLEGATIONS 74. Plaintiff seeks relief on behalf of herself and as representatives of all others who are similarly situated. Pursuant to Fed. R. Civ. P. Rule 23(a), (b)(2), (b)(3) and (c)(4), Plaintiff seeks certification of a Nationwide class defined as follows: 19 All persons whose personally identifiable information and protected health information was compromised as a result of the Data Breach announced by BHI in February 2019 (the “Class”). 75. Excluded from the Class are BHI and any of its affiliates, parents or subsidiaries; all persons who make a timely election to be excluded form the Class; government entities; and the judges to whom this case is assigned, their immediate families, and court staff. 76. Plaintiff hereby serves the right to amend or modify the class definitions with greater specificity or division after having had an opportunity to conduct discovery. 77. The proposed Class meets the criteria for certification under Rule 23(a), (b)(2), (b)(3) and (c)(4). 78. Numerosity. Fed. R. Civ. P. 23(a)(1). Consistent with Rule 23(a)(1), the members of the Class are so numerous and geographically dispersed that the joinder of all members is impractical. The Data Breach implicates at lease 12,000 current and former BHI patients. BHI has physical and email addresses for Class members who therefore may be notified of the pendency of this action by recognized, Court-approved notice dissemination methods, which may include U.S. mail, electronic mail, internet postings, and/or published notice. 79. Commonality. Fed. R. Ci. P. 23(a)(2) and (b)(3). Consistent with Rule 23(a)(2) and with 23(b)(3)’s predominance requirement, this action involves common questions of law and fact that predominate over any questions affecting individual Class members. The common questions include: a. Whether BHI had a duty to protect patient PII/PHI; b. Whether BHI knew or should have known of the susceptibility of its systems to a data breach; 20 c. Whether BHI’s security measures to protect their systems were reasonable in light of HIPAA requirements, FTC data security recommendations, and best practices recommended by data security experts; d. Whether BHI was negligent in failing to implement reasonably and adequate security procedures and practices; e. Whether BHI’s failure to implement adequate data security measurers allowed the breach of its data systems to occur; f. Whether BHI’s conduct, including its failure to act, resulted in or was the proximate cause of the breach of its systems, resulting in the unlawful exposure of the Plaintiff’s and Class members’ PII/PHI; g. Whether Plaintiff and Class members were injured and suffered damages or other losses because of BHI’s failure to reasonably protect its systems and data network; and, h. Whether Plaintiff and Class members are entitled to relief. 80. Typicality. Fed. R. Civ. P. 23(a)(3). Consistent with Rule 23(a)(3), Plaintiff’s claims are typical of those of other Class members. Plaintiff is a BHI patient whose PII/PHI was exposed in the Data Breach. Plaintiff’s damages and injuries are akin to other Class members, and Plaintiff seeks relief consistent with the relief sought by the Class. 81. Adequacy. Fed. R. Civ. P. 23(a)(4). Consistent with Rule 23(a)(4), Plaintiff is an adequate representative of the Class because Plaintiff is a member of the Class she seeks to represent; is committed to pursuing this matter against BHI to obtain relief for the Class; and has no conflicts of interest with the Class. Moreover, Plaintiff’s Counsel are competent and 21 experienced in litigating class actions, including privacy litigation of this kind. Plaintiff intends to vigorously prosecute this case and will fairly and adequately protect the Class’s interests. 82. Superiority. Fed. R. Civ. P. 23(b)(3). Consistent with Rule 23(b)(3), a class action is superior to any other available means for the fair and efficient adjudication of this controversy, and no usual difficulties are likely to be encountered in the management of this class action. The quintessential purpose of the class action mechanism is to permit litigation against wrongdoers event when damages to an individual plaintiff may not be sufficient to justify individual litigation. Here, the damages suffered by Plaintiff and the Class are relatively small compared to the burden and expense required to individually litigate their claims against BHI, and thus, individual litigation to redress BHI’s wrongful conduct would be impracticable. Individual litigation by each Class member would also strain the court system. Individual litigation creates the potential for inconsistent or contradictory judgments and increases the delay and expense to all parties and the court system. By contrast, the class action device presents far fewer management difficulties and provides the benefits of a single adjudication, economies of scale, and comprehensive supervision by a single court. 83. Injunctive and Declaratory Relief. Class certification is also appropriate under Rule 23(b)(2) and (c). Defendant, through their uniform conduct, acted or refused to act on grounds generally applicable to the Class as a whole, making injunctive and declaratory relief appropriate to the Class as a whole. 84. Rule 23(c)(4). Particular issues under Rule 23(c)(4) are appropriate for certification because such claims present only particular, common issues, the resolution of which would advance the disposition of this matter and the parties’ interests therein. Such particular issues include, but are not limited to: 22 a. Whether BHI owed a legal duty to Plaintiff and the Class to exercise due care in collecting, storing and safeguarding their PII/PHI; b. Whether BHI breached a legal duty to Plaintiff and the Class to exercise due care in collecting, storing, using, transmitting, and safeguarding their PII; c. Whether BHI failed to comply with their own policies and applicable laws, regulations, and industry standards relating to data security; d. Whether BHI timely, adequately, and accurately informed Class members that their PII/PHI had been disclosed without authorization; and e. Whether BHI failed to implement and maintain reasonable security procedures and practices appropriate to the nature and scope of the information disclosed and compromised in the Data Breach. 85. Finally, all members of the proposed Classes are readily ascertainable. BHI has access to patient names and addresses affected by the Data Breach. Using this information, Class members can be identified and ascertained for the purposes of providing notices. COUNT I NEGLIGENCE 86. Plaintiffs restate and realleges paragraphs 1 through 85 above as if fully set forth 87. BHI’s Notice of Privacy Practices acknowledges BHI’s duty to protect the PHII/PHI of its patents, which include Plaintiff and Class Members. 88. Plaintiff and the Class Members entrusted their PII/PHI to BHI with the understanding that the BHI would safeguard their information. 23 89. Defendant had full knowledge of the sensitivity of the PII/PHI and the types of harm that Plaintiff and Class Members could and would suffer if the PII were wrongfully disclosed. 90. Defendant had a duty to exercise reasonable care in safeguarding, securing and protecting such information from being compromised, lost, stolen, misused, and/or disclosed to unauthorized parties. This duty includes, among other things, designing, maintaining and testing the Defendant’s security protocols to ensure that Plaintiff’s and Class Members’ information in its possession was adequately secured and protected and that employees tasked with maintaining such information were adequately training on cyber security measures regarding the security of student, parent guardian and employee personal information. 91. Plaintiff and the Class Members were the foreseeable and probable victims of any inadequate security practices and procedures. Defendant know of or should have known of the inherent risks in collecting and storing the PII/PHI of Plaintiffs and the Class, the critical importance of providing adequate security of that PII/PHI, the current cyber scams being perpetrated on employers, and that it had inadequate employee training and education and IT security protocols in place to secure the PII/PHI of Plaintiff and the Class. 92. Defendant’s own conduct created a foreseeable risk of harm to Plaintiff and Class members. Defendant’ misconduct included, but was not limited to, its failure to take the steps and opportunities to prevent the Data Breach as set forth herein. Defendant’ misconduct also included its decision not to comply with industry standards for the safekeeping and encrypted authorized disclosure of the PII/PHI of Plaintiff and Class Members. 93. Plaintiff and Class Members had no ability to protect their PII/PHI that was in BHI’s possession. 24 94. Defendant was in a position to protect against the harm suffered by Plaintiff and Class Members as result of the Data Breach. 95. Defendant has a duty to have proper procedures in place to prevent the unauthorized dissemination Plaintiff and Class members’ PII/PHI. 96. Defendant have admitted that Plaintiff’s and Class Members’ PII/Phi was wrongfully disclosed to unauthorized third persons as a result of the Data Breach. 97. Defendant, through their actions and/or omissions, unlawfully breached their duty to Plaintiff and Class members by failing to exercise reasonable care in protecting and safeguarding the Plaintiff’s and Class members’ PII/PHI while it was within the BHI’s possession or control. 98. Defendant improperly and inadequately safeguarded Plaintiff’s and Class members’ PII in deviation of standard industry rules, regulations and practices at the time of the Data Breach. 99. Defendant, through their actions and/or omissions, unlawfully breached its duty to Plaintiff and Class members by failing to have appropriate procedures in place to detect and prevent dissemination of its patients’ PII/PHI. 100. Defendant, through their actions and/or omissions, unlawfully breached its duty to adequately disclose to Plaintiff and Class members the existence, and scope of the Data Breach. 101. But for the Defendant’ wrongful and negligent breach of duties owed to Plaintiff and Class members, Plaintiff’s and Class members’ PII/PHI would not have been compromised. 102. There is a temporal and close causal connection between Defendant’s failure to implement security measures to protect the PII/PHI of current and former patients and the harm suffered or risk of imminent harm suffered by Plaintiff and the Class. 25 103. As a result of Defendant’ negligence, Plaintiff and the Class members have suffered and will continue to suffer damages and injury including, but not limited to: out-of- pocket expenses associated with procuring robust identity protection and restoration services; increased risk of future identity theft and fraud, the costs associated therewith; time spent monitoring, addressing and correcting the current and future consequences of the Data Breach; and the necessity to engage legal counsel and incur attorneys’ fees, costs and expenses. COUNT II BREACH OF CONTRACT 104. Plaintiffs restate and realleges paragraphs 1 through 103 above as if fully set forth 105. As set forth above, Plaintiff and Class members received healthcare services from 106. As set forth above, the contract between Plaintiff and Class members and BHI was supported by consideration in many forms including the payment of monies for healthcare services. 107. Plaintiff and Class members performed pursuant to these contracts, and satisfied all conditions, obligations, and promises of the agreements. 108. Under the contracts, BHI were obligated, as outlined in the Privacy Practices, to maintain the confidentiality of Plaintiff and Class member’s PHI and PII. 109. As a result of BHI’s breach of contract, by failing to adequately secure Plaintiff and Class member’s PHI and PII, Plaintiff and Class members did not receive the full benefit of the bargain, and instead received services that were less valuable than described in the contracts. Plaintiff and Class members, therefore, were damages in an amount at least equal to the difference in value between what was promised and what BHI ultimately provided. 26 110. Also, as a result of BHI’s breach of contract, Plaintiff and Class members have suffered actual damages resulting from the theft of their PHI and PII, and remain at imminent risk of suffering additional breaches in the future. COUNT III BREACH OF IMPLIED CONTRACT 111. Plaintiff restates and reallege paragraphs 1 through 110 above as if fully set forth 112. Plaintiff and Class members were required to provide their personal information, to BHI as a condition of becoming a patient at BHI. 113. Implicit in the enrollment documents between BHI and its patients was the obligation that the information provided to it would be maintained confidentially and securely. 114. Defendant has an implied duty of good faith to ensure that the PII/PHI of Plaintiff and Class members in its possession were only used for purposes relevant to their interactions as patients of BHI. 115. Defendant had an implied duty to reasonably safeguard and protect the PII/PHI of Plaintiff and Class members from unauthorized disclosure or uses. 116. Additionally, Defendant implicitly promised to retain this PII/PHI only under conditions that kept such information secure and confidential. 117. Plaintiff and Class members fully performed their obligations under the implied contracts with Defendant. Defendant did not. 118. Plaintiff and Class members would not have provided their confidential PII/PHI to the Defendant in the absence of their implied contracts with Defendant. 27 119. Defendant breached the implied contracts with Plaintiff and Class members by failing to reasonably safeguard and protect Plaintiff’s and Class members’ PII/PHI, which was compromised as a result of the Data Breach. 120. Defendant breached their implied contracts with Plaintiff and Class members by failing to reasonably safeguard and protect Plaintiff’s and Class members’ PII/PHI, which was compromised as a result of the Data Breach. 121. As a direct and proximate result of Defendant’ breach of its implied contracts with Plaintiff and Class members, Plaintiff and Class members have suffered and will suffer injury, including but not limited to: (i) the loss of the opportunity how their PII/PHI is used; (ii) the compromise, publication, and/or theft of their PII/PHI; (iii) out-of-pocket expenses associated with the prevention, detection, and recovery from identity theft, tax fraud, and/or unauthorized use of their PII/PHI; (iv) lost opportunity costs associated with effort expended and the loss of productivity addressing and attempting to mitigate the actual and future consequences of the Data Breach; (vi) the continued risk to their PII/PHI, which remain in BHI’s possession and is subject to further unauthorized disclosures so long as the BHI fails to undertake appropriate and adequate measures to protect the PII/PHI of Plaintiff and Class members in its continued possession; (vii) future costs in terms of time, effort and money that will be expended to prevent, detect, contest, and repair the impact of the PII/PHI compromised as a result of the Data Breach for the remainder of the lives of the Plaintiff and Class members; and (viii) the necessity to engage legal counsel and incur attorneys’ fees, cost and expenses. COUNT IV NEGLIGENCE PER SE 28 122. Plaintiff restates and reallege paragraphs 1 through 85 above as if fully set forth 123. Pursuant to HIPPA and the laws of numerous states, BHI had a duty to implement reasonable safeguards to protect Plaintiffs’ and Class Members’ medical information. 124. BHI breached its duties to Plaintiffs and Class Members’ under the aforementioned laws by allowing confidential medical information to be accessed and compromised by an unauthorized third party. 125. BHI’s failure to comply with applicable laws and regulations constitutes negligence per se. 126. But for BHI’s negligent breach of their duties, Plaintiff and Class Members would not have been injured. 127. The injury and harm suffered by the Plaintiff and Class Members was the reasonably foreseeable result of BHI’s breach of its duties. BHI knew or should have known that it was failing to meet its duties, and that BHI’s breach would cause Plaintiff and Class Members to experience the foreseeable harms associated with the exposure of their confidential medical information. 128. As a direct and proximate result of BHI’s negligent conduct and/or negligent supervision, Plaintiff and Class members have been injured and are entitles to damages. COUNT V INVASION OF PRIVACY 129. Plaintiff restates and reallege paragraphs 1 though 85 above as if fully set forth herein. Plaintiff and Class members had a legitimate expectation of privacy to their PII and PHI and were entitled to the protection of this information against disclosure to unauthorized third 29 130. The unauthorized release to, custody of and examination by third parties of personal medical information and other personally identifiable information would be offensive to a reasonable person of ordinary sensibilities. 131. BHI owed a duty to its patients, including Plaintiff and Class Members, to keep their PII and PHI confidential. 132. The Data Breach at the hands of BHI constitutes an intentional interference with Plaintiff’s and Class Members’ interest in solitude or seclusion, either as to their persons or as to their private affairs or concerns, of a kind that would be highly offensive to a reasonable person. 133. As a proximate result of the above acts and omissions of BHI, the PII and PHI of the Plaintiff and Class Members was disclosed to and used by third parties without authorization, causing Plaintiff and Class Members to suffer damages. COUNT VI DECLARATORY JUDGMENT 134. Plaintiff restates and realleges paragraphs 1 through 85 above as if fully set forth 135. As previously alleged, BHI owes duties of care to Plaintiff and Class Members that require it to adequately secure such PII/PHI. 136. BHI still possesses Plaintiff’s and Class members’ PII/PHI. 137. In conjunction with alerting the public to the Data Breach, BHI represented that it: (a) secured the impacted accounts to prevent further unauthorized access; (b) confirmed the security of its email system; (3) notified law enforcement; and (4) retained a forensic security firm to investigate. The announcement lacked any specificity and, moreover, was wholly insufficient to ensure the PII/PHI still in BHI’s possession is protected from further exposure. 30 138. Accordingly, BHI has not satisfied its contractual obligations and legal duties to Plaintiff and Class members. In fact, now that BHI’s lax approach towards data security has become public, the PII in its possession is more vulnerable than before. 139. Actual harm has risen in the wake of the Data Breach regarding BHI’s contractual obligations and duties of care to provide data security measures to Plaintiff and Class Members. 140. Plaintiff, therefore, seeks a declaration that (a) BHI’s existing data security measures do not comply with its contractual obligations and duties of care, and (b) in order to comply with its contractual obligations and duties of care, BHI must implement and maintain reasonable security measures, including, but not limited to: a. engaging third-party security auditors/penetration testers as well as internal security personnel to conduct testing, including simulated attacks, penetration tests, and audits on BHI’s system on a periodic basis, and ordering BHI to promptly correct any problems or issues detected by such third-party security auditors; b. engaging third-party security auditors and internal personnel to run automated security monitoring; c. auditing, testing, and training its security personnel regarding any new or modified procedures; d. segmenting customer data by, among other things, creating firewalls and access controls so that if one area of BHI is compromised, hackers cannot gain access to other portions of BHI systems; e. purging, deleting, and destroying patient data not necessary for its provisions of services in a reasonably secure manner; 31 f. conducting regular database scans and security checks; g. routinely and continually conducting internal training and education to inform internal security personnel how to identify and contain a breach when it occurs and what to do in response to a breach; and h. educating its patients about threats they face as a result of the loss of their personal information to third parties, as well as the steps BHI customers should take to protect themselves. WHEREFORE, Plaintiff, on behalf of herself and all others similarly situated, respectfully requests the following relief: i. An Order certifying this case as a class action; j. An Order appointing Plaintiff as the class representative; k. An Order appointing undersigned counsel as class counsel; l. A mandatory injunction directing the Defendant to hereinafter adequately safeguard the PII/PHI of the Class by implementing improved security procedures and measures; m. An award of damages; n. An award of costs and expenses; o. An award of attorneys’ fees; and p. Such other and further relief as this court may deem just and proper. DEMAND FOR JURY TRIAL Plaintiffs demand a jury trial as to all issues triable by a jury. 32 Dated: April 11, 2019 Respectfully submitted, The Plaintiff, By her attorney, __________________________________ Kevin Chrisanthopoulos, Esq. KC Law 30 Court Street, Suite 1 Westfield, MA 01085 Tel. (413) 251-1010 Fax. (413) 372-1610 [email protected] BBO #643734 33

consumer fraud

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IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA MICHAEL ESTRADA, individually and on behalf of others similarly situated, PLAINTIFF, CIVIL ACTION NO._________ v. JURY TRIAL DEMANDED MAGUIRE INSURANCE AGENCY, INC., DEFENDANT. COMPLAINT AND JURY DEMAND Plaintiff, Michael Estrada, individually and on behalf of all others similarly situated (hereinafter “Plaintiff Class” or “Class”), by and through his attorneys of record, hereby files the following Complaint and Jury Demand (“Complaint”) and alleges as follows: PRELIMINARY STATEMENT 1. Plaintiff seeks unpaid overtime wages under the Fair Labor Standards Act (“FLSA”). It is well-established law that low level claims examiners like Plaintiff and similarly situated employees, who do not engage in negotiations, are nonexempt employees under the FLSA. 2. Plaintiff, and similarly situated employees work for Defendant as Claims Examiners in the fast track auto department (“Claims Examiners”)1. 1 All references to “Claims Examiners” are limited to the description in paragraph 2 of Plaintiff’s petition. Plaintiff does not include or refer to any other types of claims 3. Claims Examiners handle automobile property damage claims that are processed in a routine manner. Claims Examiners are closely managed by their supervisors, do not handle personal injury claims, perform no negotiations, and have no specialized training. Claims Examiners do not have independent settlement authority over $10,000. Generally, Claims Examiners receive a claim, refer the claim damage to an independent appraiser, and then cut checks to the insured in the amount of the independent appraisal. 4. Claims Examiners routinely work in excess of forty hours per week without receiving overtime compensation. Claims Examiners are categorically nonexempt. However, Defendant failed to pay Claims Examiners overtime when they worked over forty hours. For these reasons, Plaintiff seeks, on behalf of himself and those similarly situated, unpaid overtime wages, liquidated damages, attorney fees, and all other relief permitted. JURISDICTION AND VENUE 5. This Court has original jurisdiction to hear this complaint and to adjudicate the claims stated herein under 28 U.S.C. § 1331, this action being brought under the FLSA, 29 U.S.C. § 201 et seq. Venue is proper because the parties have diversity jurisdiction and the Defendant is subject to personal jurisdiction in Pennsylvania. examiners, including but not limited to claims examiners who handle personal injury claims and/or work outside of the fast track auto department. PARTIES 6. Defendant, Maguire Insurance Agency, Inc. (“Maguire”) is an insurance underwriting company incorporated in the State of Pennsylvania. Maguire is headquartered in and has its principal place of business in Bala Cywyd, Pennsylvania. 7. At all relevant times herein, Defendant was: a. Licensed to do business and is doing business in the City, Counties, and State of Pennsylvania; b. The “employer” within the meaning of FLSA, 29 U.S.C. § 203(d); c. “Engaged” in commerce” within the meaning of FLSA, 29 U.S.C. § 203(s)(1); and d. Responsible for misclassifying Claims Examiners as “exempt” employees and erroneously denying them overtime compensation. 8. Plaintiff, Michael Estrada (“Estrada”), has at all relevant times been a resident of the State of Texas and an employee of Defendant. Between June 9, 2008 and current, Mr. Estrada was employed by Defendant as a Claims Examiner in Defendant’s Addison, Texas office. Mr. Estrada worked hours in excess of forty per week, without receiving overtime compensation as required by federal law. 9. Estrada sues on his own behalf and on behalf of other Claims Examiners pursuant to 29 U.S.C. § 216(b). Plaintiff and similarly situated employees are individuals who (1) were, or are, Claims Examiners in the fast track auto department for Defendant within three years of this suit, (2) worked hours in excess of forty hours per week, and (3) were not paid overtime compensation as required by federal law. NATURE OF THE ACTION 10. This action is brought to recover unpaid wages to Plaintiff and all other similarly situated current and former Claims Examiners of Defendant. 11. Defendant’s practices violate the FLSA, 29 U.S.C. §§201 et seq. Plaintiffs seek injunctive and declaratory relief, compensation and credit for all uncompensated work required, suffered, or permitted by Defendant, liquidated and/or other damages, penalties and interest as permitted by applicable law, and attorneys’ fees and costs. COLLECTIVE ACTION ALLEGATIONS 12. Plaintiff brings this claim for relief for violations of the FLSA as a nationwide collective action pursuant to Section 16(b) of the FLSA, 29 U.S.C. §216(b), on behalf of all persons who were, are, or will be employed by Defendant as Claims Examiners throughout the United States, at any time during the applicable statute of limitations period, who have not been compensated at one and one-half times the regular rate of pay for all work performed in excess of forty hours per work week. These FLSA claims do not include any claims for unpaid overtime arising out of any periods of employment in any position other than as Claims Examiner. 13. Issues of law and fact common to the Plaintiff Class as a whole include, but are not limited to, the following: a. Defendant unlawfully failed and continues to fail to pay overtime compensation in violation of the FLSA, 29 U.S.C. §201 et seq.; b. Plaintiff and members of the Class are non-exempt from the entitlement to overtime compensation for overtime hours worked under the overtime pay requirements of the FLSA: c. Defendant’s policies and practices of classifying Plaintiff and members of the Class as exempt from overtime entitlement under the FLSA and failing to pay overtime to Claims Examiners violate applicable provisions of the FLSA; d. Defendant’s failure to pay overtime to Plaintiff and members of the Class was willful within the meaning of the FLSA; e. Defendant failed and continues to fail to maintain accurate records of actual time worked by Plaintiff and members of the Class; f. Defendant failed and continues to fail to record or report all actual time worked by Plaintiff and members of the Class; and g. Defendant failed and continues to fail to provide accurate wage statements itemizing all actual time worked and wages earned by Plaintiff and members of the Class. 14. This claim for relief for violations of the FLSA may be brought and maintained as an “opt-in” collective action pursuant to §16(b) of the FLSA, 29 U.S.C. § 216(b), for all claims asserted by the Plaintiff on behalf of members of the Class, because the claims of the Plaintiff are similar to the claims of the members of the prospective nationwide Plaintiff Class. 15. Plaintiff, and members of the Class, are similarly situated, have substantially similar job requirements, pay provisions, and are subject to Defendant’s common practice, policy, or plan of refusing to pay overtime in violation of the FLSA and unlawfully characterizing Plaintiff and members of the Class as exempt employees. 16. The named Plaintiff’s claims are typical of the members of the Class. Plaintiff, like other members of the Class of Claims Examiners working for Defendant, were subject to Defendant’s policy and practice of refusing to pay overtime wages in violation of Federal law. Plaintiff’s job duties and claims were and are typical of those of other class members who worked for Defendant as Claims Examiners in the fast track auto department and are as follows: a. Claims Examiners process the intake of automobile claims involving minor collisions, parking lot accidents, vandalism, and comprehensive automobile damage from bad weather. b. Claims Examiners do not handle any personal injury claims and handle only minor, quickly resolvable, automobile damage claims. c. Claims Examiners handle both “first party claims” which involve only the insured and “third party claims” which involve minor collisions with another vehicle and driver or the property of another individual. d. Claims Examiners use a computer program called “Image Right” that reduces claims examining to clerical data entry. e. Claims Examiners also use another computer program called “Apps” that simplifies the coverage review process for any damaged vehicle. f. Claims Examiners determine liability by using the “Apps” program. Claims Examiners contact the insured driver or other driver, if any, to determine liability. Usually, the wrongdoer admits to liability right away. However, if there are conflicting statements and no police reports or independent witnesses, then Claims Examiners must contact their supervisors who make the final determination of liability. g. Claims Examiners assign an independent appraiser. The independent appraiser reviews the vehicle damage and performs an evaluation and final estimate for the repairs. Claims Examiners simply input the appraiser’s estimate and have the authority to approve any estimate that is within $10,000. h. If the appraiser’s estimate is more than $10,000, Claims Examiners must receive approval and authority from a supervisor who will review the claim and specifically instruct the Claims Examiner on how to close the file. i. Once Claims Examiners issue payment, the file is automatically closed. j. Claims Examiners do not perform any negotiations or damage appraisals. If a matter becomes complex and falls outside of routine procedure then Claims Examiner must consult their supervisor for further commentary, direction, and instruction. 17. Plaintiff will fairly and adequately represent and protect the interest of the members of the Class. Plaintiff has retained counsel competent and experienced in complex class actions, FLSA, and state labor, wage and hour and employment law litigation. FIRST COUNT (Fair Labor Standards Act, 29 U.S.C. §§ 201 et seq.) 18. Plaintiff repeats and incorporates by reference the allegations of all previous paragraphs as fully as though the same were set forth at length herein. 19. Defendant has been, and continues to be, an “employer” engaged in interstate “commerce” and/or in the production of “goods” for “commerce,” within the meaning of the FLSA, 29 U.S.C. § 203. At all relevant times, Defendant has employed, and continues to employ, “employee[s],” including Plaintiff and each of the members of the class. At all relevant times, Defendant has had gross operating revenues in excess of $500,000. 20. Plaintiff has signed a consent to sue in this action pursuant to § 16(b) of the FLSA, 29 U.S.C. § 216(b). Plaintiff’s consent is attached as an exhibit to this complaint. Additional class members will join this action as plaintiffs in the future. 21. Defendant is required to compensate all non-exempt employees at a rate of not less than one and one-half the regular rate of pay for work performed in excess of forty hours in a workweek. 22. Plaintiff and members of the Class are not exempt from the right to receive overtime pay under the FLSA and are not exempt from the requirement that their employer pay them overtime compensation under the FLSA. Plaintiff and members of the Class are entitled to be paid overtime compensation for all overtime hours worked. 23. Defendant, at all relevant times, had a policy and practice of failing and refusing to pay overtime pay to its Claims Examiners for their hours worked in excess of forty hours per week. 24. As a result of Defendant’s failure to compensate its Claims Examiners, including the Plaintiff and members of the Class, at a rate of less than one and one- half times the regular rate of pay for work performed in excess of forty hours in a workweek, Defendant has violated, and continues to violate, the FLSA, 29 U.S.C. §§ 201 et seq., including 29 U.S.C. §207(a)(1), and § 215(a). 25. The foregoing conduct, as alleged, constitutes a willful violation of the FLSA within the meaning of 29 U.S.C. § 255(a). 26. Plaintiff, on behalf of himself and members of the class, seeks damages in the amount of their respective unpaid overtime compensation, plus liquidated damages, as provided by the FLSA, 29 U.S.C. § 216(b), and such other legal and equitable relief as the Court deems just and proper. 27. Plaintiff, on behalf of himself and members of the Class, seeks recovery of their attorney’s fees and costs of action to be paid by Defendant, as provided by the FLSA, 29 U.S.C. § 216(b). PRAYER FOR RELIEF 28. Plaintiff repeats and incorporates by reference the allegations of all previous paragraphs as fully as though the same were set forth at length herein. WHEREFORE, Plaintiff on behalf of himself and all employees similarly situated who join in this action pray for relief: a. Issuance of notice as soon as possible to all Claims Examiners who were employed by Defendant during any portion of the three years immediately preceding the filing of this action. Generally, this notice should inform them that this action has been filed, describe the nature of the action, and explain their right to opt into this lawsuit if they were not paid minimum wage for hours worked as agents during any portion of the statutory period or if they worked hours in excess of forty (40) in any week during the statutory period, but were not paid overtime compensation; b. Judgment against Defendant for an amount equal to Plaintiffs’ unpaid back wages at the applicable overtime rate; c. Judgment against Defendant for an amount equal to Plaintiffs’ minimum wages at the applicable minimum wage; d. Judgment against Defendant that their violations of the FLSA were willful; e. An equal amount to the overtime damages as liquidated damages; f. To the extent that liquidated damages are not awarded, an award of prejudgment interest; g. All costs and attorney’s fees incurred prosecuting these claims; h. Leave to add additional Plaintiffs by motion, the filing of written consent forms, or any other method approved by the Court; and i. For such further relief as the Court deems just and equitable. JURY DEMAND Plaintiff Michael Estrada, on behalf of himself and all employees similarly situated who join in this action, hereby demands trial by jury as to all issues so triable. Respectfully submitted, DATED: February 3, 2012 /s/ James A. Bell, IV James A. Bell IV, Esquire PA Attorney I.D.# 81724 Bell & Bell LLP 1617 JFK Blvd. – Suite 1020 Philadelphia, PA 19103 Telephone: (215) 569-2500 Facsimile: (215) 569-2220 [email protected] Robert J. Wiley, Esquire Texas Bar No. 24013750 Board Certified in Labor and Employment Law Texas Board of Legal Specialization (awaiting admission pro hac vice) Caitlin Connors, Esquire Texas Bar No. 24064124 (awaiting admission pro hac vice) Stacey Cho, Esquire Texas Bar No. 24063953 (awaiting admission pro hac vice) ROB WILEY, P.C. 1825 Market Center Blvd., Ste. 385 Dallas, Texas 75207 Telephone: (214) 528-6500 Facsimile: (214) 528-6511 [email protected] [email protected] [email protected] Attorneys for Plaintiffs

employment & labor

1r2ADIcBD5gMZwczVknw

SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION CASE NO. 4:17-CV-2679 FLSA COLLECTIVE ACTION CHRISTOPHER CANTRELL, Individually and for Others Similarly Situated, v. LUTECH RESOURCES, INC. ORIGINAL COMPLAINT SUMMARY 1. Lutech Resources, Inc. (Lutech) did not pay Christopher Cantrell (Cantrell) overtime as required by federal law. 2. Instead, Lutech paid Cantrell, and other workers like him, at the same hourly rate for all hours worked, including those in excess of 40 in a workweek. 3. Cantrell brings this collective action to recover unpaid overtime and other damages. JURISDICTION AND VENUE 4. Because this case raises a federal question under 29 U.S.C. § 216(b), this Court has original subject matter jurisdiction pursuant to 28 U.S.C. § 1331. 5. Venue is proper in this Court pursuant to 28 U.S.C. § 1391 a significant portion of the facts giving rise to this lawsuit occurred in this District. 6. For example, Lutech is hired Cantrell from its office in Houston, Texas, which is in this District and Division. 7. Lutech also paid Cantrell from its office in this District and Division. 8. Further, Lutech is headquartered in this District and Division. 1 9. Cantrell was an hourly employee of Lutech. 10. His written consent is attached. 11. Cantrell brings this collective action on behalf of all hourly employees of Lutech who were paid “straight time for overtime” during the past 3 years. 12. Lutech is a company formed in Delaware, but headquartered in Houston, Texas. 13. Lutech may be served with process by serving its registered agent. THE FACTS 14. Lutech “has over 25 years’ experience providing tailor made recruitment and integrated resource management to leading Engineering, Resources, Energy and Manufacturing sector companies worldwide.”1 15. In each of the past 3 years, Lutech’s gross volume of sales done has exceeded $500,000. 16. Lutech operates in states across the country. 17. Indeed, Lutech’s “operations experience spans the globe.”2 18. Lutech performs substantial work in the Southern District of Texas. 19. This business includes hiring and paying Cantrell for the work he performed. 20. Cantrell started working for Lutech in early 2015. 21. Cantrell stopped working for Lutech in early 2016. 22. Lutech employed Cantrell as a “QC Inspector.” 23. Lutech paid Cantrell by the hour. 24. Cantrell’s starting “Straight-Time Hourly Rate” was $50. 25. Cantrell’s “Overtime Hourly Rate” was also $50. 1 http://www.lutechresources.com/ 2 http://www.lutechresources.com/services 2 27. If Cantrell worked fewer than 40 hours in a week, Lutech only paid him for the hours he worked (plus any accrued PTO). 28. But Cantrell normally worked more than 40 hours in a week. 29. Cantrell regularly worked 55 hours a week or more. 30. Because he was paid by the hour, Cantrell reported his work hours to Lutech. 31. Lutech has accurate records of the hours Cantrell worked. 32. Thus, the hours Cantrell worked are plainly reflected in Lutech’s records, including its payroll records. 33. Lutech paid Cantrell at the same hourly rate for all hours worked, including those in excess of 40 in a workweek. 34. Thus, rather than receiving time and half as required by the FLSA, Cantrell only received “straight time” pay for overtime hours worked. 35. This “straight time for overtime” payment scheme violates the FLSA. 36. Lutech was well aware of the overtime requirements of the FLSA. 37. The Department of Labor poster, which Lutech is required by law to display, makes it clear that overtime must be paid at “1½ times the regular rate of pay” rather than at the same hourly rate as non-overtime 38. In addition, on information and belief, Lutech pays overtime to certain “in-house” hourly staff (such as secretaries and receptionists). 3 giving it additional notice of the FLSA’s overtime requirements.3 40. Despite knowing what the FLSA required, Lutech failed to pay certain hourly employees, such as Cantrell, overtime. 41. Lutech’s failure to pay overtime to Cantrell, and the other workers like him, was, and is, a willful violation of the FLSA. COLLECTIVE ACTION ALLEGATIONS 42. Lutech’s illegal “straight time for overtime” policy extends well beyond Cantrell. 43. Lutech’s “straight time for overtime” payment plan is the “policy that is alleged to violate the FLSA” in this FLSA collective action. Bursell v. Tommy's Seafood Steakhouse, No. CIV.A. H-06- 0386, 2006 WL 3227334, at *3 (S.D. Tex. Nov. 3, 2006). 44. Lutech’s paid dozens of workers according to the same unlawful scheme. 45. Lutech has accurate records of the hours worked by its hourly workers. 46. Lutech has accurate records of the wages paid to its hourly workers. 47. Therefore, 48. Any differences in job duties do not detract from the fact that these hourly workers were entitled to overtime pay. 49. The workers impacted by Lutech’s “straight time for overtime” scheme should be notified of this action and given the chance to join pursuant to 29 U.S.C. § 216(b). 50. Therefore, the class is properly defined as: All hourly employees of Lutech who were paid “straight time for overtime” at any point in the past 3 years.4 3 Lutech’s parent, CB&I, is facing its own FLSA collective action in a related case. See Terry, et al. v. Chicago Bridge & Iron Company, et al., Case No. 4:17-cv-367 (S.D. Texas). 4 The class is further limited to workers covered by the FLSA. See 29 U.S.C. § 213(f). 4 CAUSE OF ACTION 51. By failing to pay Cantrell and those similarly situated to him overtime at one-and-one- half times their regular rates, Lutech violated the FLSA’s overtime provisions. 52. Lutech owes Cantrell and those similarly situated to him the difference between the rate actually paid and the proper overtime rate. 53. Because Lutech knew, or showed reckless disregard for whether, its pay practices violated the FLSA, Lutech owes these wages for at least the past three years. 54. Lutech is liable to Cantrell and those similarly situated to him for an amount equal to all unpaid overtime wages as liquidated damages. 55. Cantrell and those similarly situated to him are entitled to recover all reasonable attorneys’ fees and costs incurred in this action. PRAYER Cantrell prays for relief as follows: 1. An order allowing this action to proceed as a collective action under the FLSA and directing notice to all hourly employees who received straight time for overtime; 2. Judgment awarding Cantrell and those similarly situated to him all unpaid overtime compensation, liquidated damages, attorneys’ fees and costs under the FLSA; 3. An award of pre- and post-judgment interest on all amounts awarded at the highest rate allowable by law; and 4. All such other and further relief to which Cantrell and those similarly situated to him may show themselves to be justly entitled. 5 BRUCKNER BURCH PLLC /s/ Rex Burch By: _________________________ Richard J. (Rex) Burch Texas Bar No. 24001807 David I. Moulton Texas Bar No. 24051093 8 Greenway Plaza, Suite 1500 Houston, Texas 77046 (713) 877-8788 – Telephone (713) 877-8065 – Facsimile [email protected] Michael A. Josephson Texas Bar No. 24014780 Andrew W. Dunlap Texas Bar No. 24078444 JOSEPHSON DUNLAP 11 Greenway Plaza, Suite 3050 Houston, Texas 77046 Tel: (713) 352-1100 Fax: (713) 352-3300 [email protected] [email protected] 6 7

employment & labor

Aq6zCocBD5gMZwczH8dQ

Case No. UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK BARBARA STROUGO, Individually and On Behalf of All Others Similarly Situated, Plaintiff, vs. MALLINCKRODT PUBLIC LIMITED COMPANY, MARK C. TRUDEAU, BRYAN M. REASONS, GEORGE A. KEGLER, and MATTHEW K. HARBAUGH, Defendants. Plaintiff Barbara Strougo (“Plaintiff”), individually and on behalf of all other persons similarly situated, by Plaintiff’s undersigned attorneys, for Plaintiff’s complaint against Defendants, alleges the following based upon personal knowledge as to Plaintiff and Plaintiff’s own acts, and information and belief as to all other matters, based upon, inter alia, the investigation conducted by and through Plaintiff’s attorneys, which included, among other things, a review of the Defendants’ public documents, conference calls and announcements made by Defendants, United States Securities and Exchange Commission (“SEC”) filings, wire and press releases published by and regarding Mallinckrodt public limited company (“Mallinckrodt” or the “Company”), analysts’ reports and advisories about the Company, and information readily obtainable on the Internet. Plaintiff believes that substantial evidentiary support will exist for the allegations set forth herein after a reasonable opportunity for discovery. NATURE OF THE ACTION 1. This is a federal securities class action on behalf of a class consisting of all persons other than Defendants who purchased or otherwise acquired Mallinckrodt securities between February 28, 2018 and July 16, 2019, both dates inclusive (the “Class Period”), seeking to recover damages caused by Defendants’ violations of the federal securities laws and to pursue remedies under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, against the Company and certain of its top officials. 2. Mallinckrodt was founded in 1867 and is based in the United Kingdom. The Company, together with its subsidiaries, develops, manufactures, markets, and distributes specialty pharmaceutical products and therapies in the United States, Europe, the Middle East, Africa, and internationally. It operates in two segments, Specialty Brands, and Specialty Generics and Amitiza. The Company markets its branded products to physicians, pharmacists, pharmacy buyers, hospital procurement departments, ambulatory surgical centers, and specialty pharmacies. 3. Among other products, Mallinckrodt’s portfolio includes H.P. Acthar Gel (“Acthar”), an injectable drug for various indications, such as rheumatoid arthritis, multiple sclerosis, infantile spasms, systemic lupus erythematosus, polymyositis, and others. During the Class Period, Acthar was in a Phase 2B study designed to assess its efficacy and safety as an investigational treatment for amyotrophic lateral sclerosis (“ALS”). 4. Throughout the Class Period, Defendants made materially false and misleading statements regarding the Company’s business, operational and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) Acthar posed significant safety concerns that rendered it a non-viable treatment for ALS; (ii) accordingly, Mallinckrodt overstated the viability of Acthar as an ALS treatment; and (iii) as a result, the Company’s public statements were materially false and misleading at all relevant 5. On July 16, 2019, post-market, Mallinckrodt announced that the Company was permanently discontinuing the PENNANT Trial assessing Acthar’s safety and efficacy as an ALS treatment.1 Mallinckrodt stated that it decided “to halt the trial after careful consideration of a recent recommendation by the study’s independent Data and Safety Monitoring Board” (“DSMB”), which “was based on the specific concern for pneumonia, which occurred at a higher rate in the ALS patients receiving Acthar Gel compared to those on placebo” and that “the board also mentioned other adverse events specific to this patient population.” 6. On this news, Mallinckrodt’s stock price fell $0.64 per share, or 7.8%, to close at $7.56 per share on July 17, 2019. 7. As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s securities, Plaintiff and other Class members have suffered significant losses and damages. JURISDICTION AND VENUE 8. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of the Exchange Act (15 U.S.C. §§ 78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder by the SEC (17 C.F.R. § 240.10b-5). 1 The official title of the PENNANT Trial is “A Multicenter, Double Blind, Placebo-Controlled Study to Assess the Efficacy and Safety of Acthar Gel in the Treatment of Subjects with Amyotrophic Lateral Sclerosis.” 9. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. § 1331 and Section 27 of the Exchange Act. 10. Venue is proper in this Judicial District pursuant to Section 27 of the Exchange Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1391(b). Mallinckrodt securities are traded on the New York Stock Exchange (“NYSE”) located within this Judicial District. 11. In connection with the acts alleged in this complaint, Defendants, directly or indirectly, used the means and instrumentalities of interstate commerce, including, but not limited to, the mails, interstate telephone communications, and the facilities of the national securities markets. PARTIES 12. Plaintiff, as set forth in the attached Certification, acquired Mallinckrodt securities at artificially inflated prices during the Class Period and was damaged upon the revelation of the alleged corrective disclosures. 13. Defendant Mallinckrodt is incorporated under the jurisdiction of Ireland with its principal executive offices located at 3 Lotus Park, The Causeway, Staines-Upon-Thames, Surrey TW18 3AG, United Kingdom. Mallinckrodt’s securities trade in an efficient market on the NYSE under the symbol “MNK.” 14. Defendant Mark C. Trudeau (“Trudeau”) has served as Mallinckrodt’s President and Chief Executive Officer and Director at all relevant times. 15. Defendant Bryan M. Reasons (“Reasons”) has served as Mallinckrodt’s Executive Vice President (“EVP”) and Chief Financial Officer (“CFO”) since March 18, 2019. 16. Defendant George A. Kegler (“Kegler”) served as Mallinckrodt’s EVP and Interim CFO since December 6, 2018 until March 18, 2019. 17. Defendant Matthew K. Harbaugh (“Harbaugh”) served as Mallinckrodt’s EVP and CFO since before the start of the Class Period until December 6, 2018. Defendant Harbaugh currently serves as the President of Specialty Generics at Mallinckrodt. 18. Defendants Trudeau, Reasons, Kegler, and Harbaugh are sometimes referred to herein collectively as the “Individual Defendants.” 19. The Individual Defendants possessed the power and authority to control the contents of Mallinckrodt’s SEC filings, press releases, and other market communications. The Individual Defendants were provided with copies of Mallinckrodt’s SEC filings and press releases alleged herein to be misleading prior to or shortly after their issuance and had the ability and opportunity to prevent their issuance or to cause them to be corrected. Because of their positions with Mallinckrodt, and their access to material information available to them but not to the public, the Individual Defendants knew that the adverse facts specified herein had not been disclosed to and were being concealed from the public, and that the positive representations being made were then materially false and misleading. The Individual Defendants are liable for the false statements and omissions pleaded herein. SUBSTANTIVE ALLEGATIONS Background 20. Among other products, Mallinckrodt’s portfolio includes Acthar, an injectable drug for various indications, such as rheumatoid arthritis, multiple sclerosis, infantile spasms, systemic lupus erythematosus, polymyositis, and others. 21. On November 21, 2016, Mallinckrodt announced that it would initiate a company-sponsored clinical trial evaluating Acthar’s use in the treatment of patients suffering from ALS. 22. On June 14, 2017, Mallinckrodt announced that it had enrolled its first patient in what it colloquially called the “PENNANT Trial” (MNK14042068), a double-blind, placebo- controlled Phase 2b study evaluating the efficacy and safety of Acthar in the treatment of ALS. Materially False and Misleading Statements Issued During the Class Period 23. The Class Period begins on February 28, 2018. On February 27, 2018, during after-market hours, Mallinckrodt filed its Annual Report on Form 10-K with the SEC, reporting the Company’s financial and operating results for the fiscal year ended December 29, 2017 (the “2017 10-K”). The 2017 10-K touted Acthar as a highly-accomplished wonder drug with various uses and treatment indications, stating, in relevant part: H.P. Acthar® Gel (“H.P. Acthar Gel”) is an injectable drug approved by the U.S. Federal Drug Administration (“FDA”) for use in 19 indications. The product currently generates substantially all of its net sales from ten of the on-label indications, including the treatment of proteinuria in nephrotic syndrome of the idiopathic type (“NS”); the treatment of acute exacerbations of multiple sclerosis (“MS”) in adults; the treatment of infantile spasms (“IS”) in infants and children under two years of age; the treatment of the pulmonology indication of sarcoidosis; the treatment of ophthalmic conditions related to severe acute and chronic allergic and inflammatory processes; and the treatment of certain rheumatology-related conditions, including the treatment of the rare and closely related neuromuscular disorders, dermatomyositis and polymyositis. We may initiate commercial efforts for other approved indications where there is high unmet medical need. 24. Additionally, the 2017 10-K touted Mallinckrodt’s “critical” and “controlled” Phase 2 study into Acthar for uses in patients with ALS, stating, in relevant part: Since acquiring H.P. Acthar Gel, we have initiated critical controlled trials in an effort to expand the product’s evidence base and strengthen its clinical profile. For example, we are currently enrolling patients in a Phase 2 study to evaluate H.P. Acthar Gel for patients with Amyotrophic Lateral Sclerosis (“ALS”) a progressive and fatal neurodegenerative disorder. 25. The 2017 10-K also contained merely generic, boilerplate representations concerning the risk that Mallinckrodt’s clinical trials for Acthar could potentially show no basis to pursue use of Acthar for a particular indication, without specifying which, if any clinical trials, were currently in danger of failing to show such a basis. For example, the 2017 10-K non- specifically noted that “a clinical trial to evaluate the use of H.P. Acthar Gel to treat indications not on the current H.P. Acthar Gel label [such as ALS] may not provide a basis to pursue adding such indications to the current H.P. Acthar Gel label.” 26. Appended as an exhibit to the 2017 10-K were signed certifications pursuant to the Sarbanes-Oxley Act of 2002 (“SOX”) wherein Defendants Trudeau and Harbaugh “certif[ied] to their knowledge that the Company’s [2017 10-K] . . . fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the [2017 10-K] fairly presents, in all material respects, the financial condition and results of operations of the Company.” 27. On February 26, 2019, Mallinckrodt filed its Annual Report on Form 10-K with the SEC, reporting the Company’s financial and operating results for the fiscal year ended December 28, 2018 (the “2018 10-K”). As with the 2017 10-K, the 2018 10-K touted Acthar as a highly-accomplished wonder drug with various uses and treatment indications. The 2018 10-K also discussed the progress of Mallinckrodt’s “critical” trial towards developing Acthar for use in treating patients with ALS. Specifically, the 2018 10-K stated, in relevant part: H.P. Acthar® Gel (repository corticotropin injection) (“H.P. Acthar Gel”) is an injectable drug approved by the U.S. Federal Drug Administration (“FDA”) for use in 19 indications. The product currently generates substantially all of its net sales from ten of the on-label indications, including adjunctive therapy for short- term administration for an acute episode or exacerbation in rheumatoid arthritis (“RA”), including juvenile RA; monotherapy for the treatment of infantile spasms in infants and children under 2 years of age; treatment during an exacerbation or as maintenance therapy in selected cases of systemic lupus erythematosus; treatment of acute exacerbations of multiple sclerosis (“MS”) in adults; including a diuresis or a remission of proteinuria in nephrotic syndrome (“NS”) without uremia of the idiopathic type or that due to lupus; treatment during an exacerbation or as maintenance therapy in selected cases of systemic dermatomyositis (polymyositis); treatment of symptomatic sarcoidosis; and treatment of severe acute and chronic allergic and inflammatory processes involving the eye and its adnexa including uveitis. We may initiate commercial efforts for other approved indications where there is high unmet medical need. Since acquiring H.P. Acthar Gel, we have initiated critical placebo-controlled trials in an effort to expand the product’s evidence base and strengthen its clinical profile. There are currently eight ongoing Company-sponsored studies for which the areas of focus include . . . amyotrophic lateral sclerosis (“ALS”), which is not a currently approved indication . . . . Enrollment for the Phase 2 study to evaluate H.P. Acthar Gel for patients with ALS, a progressive and fatal neurodegenerative disorder, continues to progress and has surpassed the 25% enrollment target. 28. The 2018 10-K also contained merely generic, boilerplate representations, substantively similar to those quoted in ¶ 24 above, concerning the risk that Mallinckrodt’s clinical trials for Acthar could potentially show no basis to pursue use of Acthar for a particular indication, without specifying which, if any clinical trials, were currently in danger of failing to show such a basis. With respect to evaluating Acthar’s use in treating ALS, the 2018 10-K merely noted that the Company “initiated a Phase 2 clinical trial for a potential new indication in 29. Appended as an exhibit to the 2018 10-K were signed SOX certifications wherein Defendants Trudeau and Kegler “certif[ied] to their knowledge that the Company’s [2018 10-K] . . . fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the [2018 10-K] fairly presents, in all material respects, the financial condition and results of operations of the Company.” 30. On June 19, 2019, Mallinckrodt presented at the Raymond James Life Sciences and Medtech Conference. As part of the conference, in response to a question regarding the Company’s expected pipeline, Defendant Reasons discussed Acthar’s development for ALS, indicated that data from ALS patients who had completed 36 weeks of treatment for that use was promising, and that the trial for that use was progressing: Unidentified Analyst Okay. Thanks. And then maybe we can talk about a couple of the other expected pipeline events over the next [indiscernible]? Bryan Reasons * * * We’re . . . likely to complete enrolment near the end of the year, early into next year, in both sarcoidosis and even our ALS trial with Acthar. So, a lot of progression of our activities both in the pipeline, as well as in support of Acthar. * * * Unidentified Analyst Okay. And, what type of data has been generated to date with Acthar in ALS? Investigator initiated study; I would imagine… Bryan Reasons Yes. It was a small pilot study that the previous sponsor had done. Really looking at the safety of a number of different dosage regimens, but they had the opportunity to follow those patients after 36 weeks. We did some very interesting analyses of those patients who went out the 36 weeks, compared them to a dataset that’s curated in Boston at Mass General. Has all the data, our controlled trials that we’ve done in ALS, and we did some post talk analysis looking at the anticipated effect of these patients due to these trajectory versus on drug and we saw some very compelling suggestion that the product might be effective in attenuating the progression. So, we utilized that data actually to have conversations with the agency and informed the design of a very large 200 plus patient study, which is essentially proof-of-concept, but if positive could very well be a potential registration trial. So, we’re very excited about that. 31. On June 24, 2019, Mallinckrodt issued a press release entitled “Mallinckrodt Achieves 50 Percent Enrollment for Phase 2B Trial Investigating the Use of Acthar® Gel (Repository Corticotropin Injection) in Amyotrophic Lateral Sclerosis (ALS)” (the “June 2019 Press Release”). The June 2019 Press Release touted the PENNANT Trial’s progress in achieving 50% enrollment and included a statement by Mallinckrodt’s EVP and Chief Scientific Officer (“CSO”), Steven Romano (“Romano”), M.D., who acclaimed the PENNANT Trial’s 50% enrollment as a “milestone,” stating, in relevant part: We are very pleased to reach this milestone in our important study of Acthar Gel in ALS patients . . . . We embarked on this multi-center, double blind, placebo- controlled trial to evaluate the effects of the therapy on established measures of disease symptoms and progression, and look forward to assessing the potential clinical value Acthar Gel may bring to patients with this devastating disease. 32. With respect to adverse reactions to Acthar, the June 2019 Press Release noted that “[c]ommon adverse reactions for Acthar are similar to those of corticosteroids” and included, inter alia, “fluid retention” (emphasis added). Notably, those suffering from pneumonia may experience fluid build-up in their lungs.2 However, the June 2019 Press Release failed to disclose whether any such adverse reactions were observed in patients with ALS in the PENNANT Trial. 33. The statements referenced in ¶¶ 22-31 were materially false and misleading because Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operational and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) Acthar posed significant safety concerns that rendered it a non-viable treatment for ALS; (ii) accordingly, Mallinckrodt overstated the viability of Acthar as an ALS treatment; and (iii) as a 2 See Pneumonia, Mayo Clinic, https://www.mayoclinic.org/diseases- conditions/pneumonia/symptoms-causes/syc-20354204 (last visited July 26, 2019) (“Pneumonia is an infection that inflames the air sacs in one or both lungs. The air sacs may fill with fluid or pus (purulent material), causing cough with phlegm or pus, fever, chills, and difficulty breathing.”). result, the Company’s public statements were materially false and misleading at all relevant The Truth Begins to Emerge 34. On July 16, 2019, post-market, and less than a month after issuing the June 2019 Press Release, Mallinckrodt issued another press release entitled “Mallinckrodt Halts Phase 2B Trial Investigating the Use of Acthar® Gel (Repository Corticotropin Injection) in Amyotrophic Lateral Sclerosis (ALS)” (the “July 2019 Press Release”). According to the July 2019 Press Release, Mallinckrodt was permanently discontinuing the PENNANT Trial on the recommendation of the study’s independent DSMB, which “was based on the specific concern for pneumonia, which occurred at a higher rate in the ALS patients receiving Acthar Gel compared to those on placebo” and that “the board also mentioned other adverse events specific to this patient population.” Specifically, the July 2019 Press Release stated, in relevant part: Mallinckrodt made the decision to halt the trial after careful consideration of a recent recommendation by the study’s independent Data and Safety Monitoring Board (DSMB). The DSMB was created by the company following industry best practice to ensure the safety of patients participating in a clinical study. This oversight is accomplished through ongoing review of semi-blinded information as the study is being conducted, and is typically done when there is limited information available in the patient population being studied. The recommendation was based on the specific concern for pneumonia, which occurred at a higher rate in the ALS patients receiving Acthar Gel compared to those on placebo; the board also mentioned other adverse events specific to this patient population. The DSMB noted the proportion of patients who have completed Week 36 – the primary endpoint target – precludes a definitive determination of a treatment effect. The lack of a clear efficacy signal for this ALS patient population combined with the potential risk of pneumonia led to the board’s recommendation. After careful analysis, Mallinckrodt agreed that the study should be permanently halted in the interest of patient safety for this fragile population, one for which pneumonia is a particularly serious condition. Enrollment in the study will cease immediately, and those patients already enrolled will be tapered off the drug before discontinuing use. 35. The July 2019 Press Release also contained a statement by Romano, M.D., Mallinckrodt’s EVP and CSO, who stated, in relevant part: Mallinckrodt’s primary focus is on the safety of patients and, while ALS patients are among those most in need of new therapies and treatment options, we believe this is the right decision . . . . Though the probability of success for the ALS population was acknowledged as being low, this study was initiated based on compelling analyses carried out following the completion of a small pilot study and we were hopeful it would have translated into a benefit for this group of patients in great need of effective therapies. 36. On this news, Mallinckrodt’s stock price fell $0.64 per share, or 7.8%, to close at $7.56 per share on July 17, 2019. 37. As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s securities, Plaintiff and other Class members have suffered significant losses and damages. PLAINTIFF’S CLASS ACTION ALLEGATIONS 38. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all those who purchased or otherwise acquired Mallinckrodt securities during the Class Period (the “Class”); and were damaged upon the revelation of the alleged corrective disclosures. Excluded from the Class are Defendants herein, the officers and directors of the Company, at all relevant times, members of their immediate families and their legal representatives, heirs, successors or assigns and any entity in which Defendants have or had a controlling interest. 39. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, Mallinckrodt securities were actively traded on the NYSE. While the exact number of Class members is unknown to Plaintiff at this time and can be ascertained only through appropriate discovery, Plaintiff believes that there are hundreds or thousands of members in the proposed Class. Record owners and other members of the Class may be identified from records maintained by Mallinckrodt or its transfer agent and may be notified of the pendency of this action by mail, using the form of notice similar to that customarily used in securities class actions. 40. Plaintiff’s claims are typical of the claims of the members of the Class as all members of the Class are similarly affected by Defendants’ wrongful conduct in violation of federal law that is complained of herein. 41. Plaintiff will fairly and adequately protect the interests of the members of the Class and has retained counsel competent and experienced in class and securities litigation. Plaintiff has no interests antagonistic to or in conflict with those of the Class. 42. Common questions of law and fact exist as to all members of the Class and predominate over any questions solely affecting individual members of the Class. Among the questions of law and fact common to the Class are:  whether the federal securities laws were violated by Defendants’ acts as alleged herein;  whether statements made by Defendants to the investing public during the Class Period misrepresented material facts about the business, operations and management of Mallinckrodt;  whether the Individual Defendants caused Mallinckrodt to issue false and misleading financial statements during the Class Period;  whether Defendants acted knowingly or recklessly in issuing false and misleading financial statements;  whether the prices of Mallinckrodt securities during the Class Period were artificially inflated because of the Defendants’ conduct complained of herein; and  whether the members of the Class have sustained damages and, if so, what is the proper measure of damages. 43. A class action is superior to all other available methods for the fair and efficient adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the damages suffered by individual Class members may be relatively small, the expense and burden of individual litigation make it impossible for members of the Class to individually redress the wrongs done to them. There will be no difficulty in the management of this action as a class action. 44. Plaintiff will rely, in part, upon the presumption of reliance established by the fraud-on-the-market doctrine in that:  Defendants made public misrepresentations or failed to disclose material facts during the Class Period;  the omissions and misrepresentations were material;  Mallinckrodt securities are traded in an efficient market;  the Company’s shares were liquid and traded with moderate to heavy volume during the Class Period;  the Company traded on the NYSE and was covered by multiple analysts;  the misrepresentations and omissions alleged would tend to induce a reasonable investor to misjudge the value of the Company’s securities; and  Plaintiff and members of the Class purchased, acquired and/or sold Mallinckrodt securities between the time the Defendants failed to disclose or misrepresented material facts and the time the true facts were disclosed, without knowledge of the omitted or misrepresented facts. 45. Based upon the foregoing, Plaintiff and the members of the Class are entitled to a presumption of reliance upon the integrity of the market. 46. Alternatively, Plaintiff and the members of the Class are entitled to the presumption of reliance established by the Supreme Court in Affiliated Ute Citizens of the State of Utah v. United States, 406 U.S. 128, 92 S. Ct. 2430 (1972), as Defendants omitted material information in their Class Period statements in violation of a duty to disclose such information, as detailed above. COUNT I (Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Promulgated Thereunder Against All Defendants) 47. Plaintiff repeats and re-alleges each and every allegation contained above as if fully set forth herein. 48. This Count is asserted against Defendants and is based upon Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder by the SEC. 49. During the Class Period, Defendants engaged in a plan, scheme, conspiracy and course of conduct, pursuant to which they knowingly or recklessly engaged in acts, transactions, practices and courses of business which operated as a fraud and deceit upon Plaintiff and the other members of the Class; made various untrue statements of material facts and omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and employed devices, schemes and artifices to defraud in connection with the purchase and sale of securities. Such scheme was intended to, and, throughout the Class Period, did: (i) deceive the investing public, including Plaintiff and other Class members, as alleged herein; (ii) artificially inflate and maintain the market price of Mallinckrodt securities; and (iii) cause Plaintiff and other members of the Class to purchase or otherwise acquire Mallinckrodt securities and options at artificially inflated prices. In furtherance of this unlawful scheme, plan and course of conduct, Defendants, and each of them, took the actions set forth herein. 50. Pursuant to the above plan, scheme, conspiracy and course of conduct, each of the Defendants participated directly or indirectly in the preparation and/or issuance of the quarterly and annual reports, SEC filings, press releases and other statements and documents described above, including statements made to securities analysts and the media that were designed to influence the market for Mallinckrodt securities. Such reports, filings, releases and statements were materially false and misleading in that they failed to disclose material adverse information and misrepresented the truth about Mallinckrodt’s finances and business prospects. 51. By virtue of their positions at Mallinckrodt, Defendants had actual knowledge of the materially false and misleading statements and material omissions alleged herein and intended thereby to deceive Plaintiff and the other members of the Class, or, in the alternative, Defendants acted with reckless disregard for the truth in that they failed or refused to ascertain and disclose such facts as would reveal the materially false and misleading nature of the statements made, although such facts were readily available to Defendants. Said acts and omissions of Defendants were committed willfully or with reckless disregard for the truth. In addition, each Defendant knew or recklessly disregarded that material facts were being misrepresented or omitted as described above. 52. Information showing that Defendants acted knowingly or with reckless disregard for the truth is peculiarly within Defendants’ knowledge and control. As the senior managers and/or directors of Mallinckrodt, the Individual Defendants had knowledge of the details of Mallinckrodt’s internal affairs. 53. The Individual Defendants are liable both directly and indirectly for the wrongs complained of herein. Because of their positions of control and authority, the Individual Defendants were able to and did, directly or indirectly, control the content of the statements of Mallinckrodt. As officers and/or directors of a publicly-held company, the Individual Defendants had a duty to disseminate timely, accurate, and truthful information with respect to Mallinckrodt’s businesses, operations, future financial condition and future prospects. As a result of the dissemination of the aforementioned false and misleading reports, releases and public statements, the market price of Mallinckrodt securities was artificially inflated throughout the Class Period. In ignorance of the adverse facts concerning Mallinckrodt’s business and financial condition which were concealed by Defendants, Plaintiff and the other members of the Class purchased or otherwise acquired Mallinckrodt securities at artificially inflated prices and relied upon the price of the securities, the integrity of the market for the securities and/or upon statements disseminated by Defendants, and were damaged thereby. 54. During the Class Period, Mallinckrodt securities were traded on an active and efficient market. Plaintiff and the other members of the Class, relying on the materially false and misleading statements described herein, which the Defendants made, issued or caused to be disseminated, or relying upon the integrity of the market, purchased or otherwise acquired shares of Mallinckrodt securities at prices artificially inflated by Defendants’ wrongful conduct. Had Plaintiff and the other members of the Class known the truth, they would not have purchased or otherwise acquired said securities, or would not have purchased or otherwise acquired them at the inflated prices that were paid. At the time of the purchases and/or acquisitions by Plaintiff and the Class, the true value of Mallinckrodt securities was substantially lower than the prices paid by Plaintiff and the other members of the Class. The market price of Mallinckrodt securities declined sharply upon public disclosure of the facts alleged herein to the injury of Plaintiff and Class members. 55. By reason of the conduct alleged herein, Defendants knowingly or recklessly, directly or indirectly, have violated Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder. 56. As a direct and proximate result of Defendants’ wrongful conduct, Plaintiff and the other members of the Class suffered damages in connection with their respective purchases, acquisitions and sales of the Company’s securities during the Class Period, upon the disclosure that the Company had been disseminating misrepresented financial statements to the investing COUNT II (Violations of Section 20(a) of the Exchange Act Against The Individual Defendants) 57. Plaintiff repeats and re-alleges each and every allegation contained in the foregoing paragraphs as if fully set forth herein. 58. During the Class Period, the Individual Defendants participated in the operation and management of Mallinckrodt, and conducted and participated, directly and indirectly, in the conduct of Mallinckrodt’s business affairs. Because of their senior positions, they knew the adverse non-public information about Mallinckrodt’s misstatement of income and expenses and false financial statements. 59. As officers and/or directors of a publicly owned company, the Individual Defendants had a duty to disseminate accurate and truthful information with respect to Mallinckrodt’s financial condition and results of operations, and to correct promptly any public statements issued by Mallinckrodt which had become materially false or misleading. 60. Because of their positions of control and authority as senior officers, the Individual Defendants were able to, and did, control the contents of the various reports, press releases and public filings which Mallinckrodt disseminated in the marketplace during the Class Period concerning Mallinckrodt’s results of operations. Throughout the Class Period, the Individual Defendants exercised their power and authority to cause Mallinckrodt to engage in the wrongful acts complained of herein. The Individual Defendants therefore, were “controlling persons” of Mallinckrodt within the meaning of Section 20(a) of the Exchange Act. In this capacity, they participated in the unlawful conduct alleged which artificially inflated the market price of Mallinckrodt securities. 61. Each of the Individual Defendants, therefore, acted as a controlling person of Mallinckrodt. By reason of their senior management positions and/or being directors of Mallinckrodt, each of the Individual Defendants had the power to direct the actions of, and exercised the same to cause, Mallinckrodt to engage in the unlawful acts and conduct complained of herein. Each of the Individual Defendants exercised control over the general operations of Mallinckrodt and possessed the power to control the specific activities which comprise the primary violations about which Plaintiff and the other members of the Class complain. 62. By reason of the above conduct, the Individual Defendants are liable pursuant to Section 20(a) of the Exchange Act for the violations committed by Mallinckrodt. PRAYER FOR RELIEF WHEREFORE, Plaintiff demands judgment against Defendants as follows: A. Determining that the instant action may be maintained as a class action under Rule 23 of the Federal Rules of Civil Procedure, and certifying Plaintiff as the Class representative; B. Requiring Defendants to pay damages sustained by Plaintiff and the Class by reason of the acts and transactions alleged herein; C. Awarding Plaintiff and the other members of the Class prejudgment and post- judgment interest, as well as their reasonable attorneys’ fees, expert fees and other costs; and D. Awarding such other and further relief as this Court may deem just and proper. DEMAND FOR TRIAL BY JURY Plaintiff hereby demands a trial by jury. Dated: July 26, 2019 Respectfully submitted, POMERANTZ LLP /s/ Jeremy A. Lieberman Jeremy A. Lieberman Gustavo F. Bruckner J. Alexander Hood II 600 Third Avenue, 20th Floor New York, New York 10016 Telephone: (212) 661-1100 Facsimile: (212) 661-8665 Email: [email protected] Email: [email protected] Email: [email protected] POMERANTZ LLP Patrick V. Dahlstrom 10 South La Salle Street, Suite 3505 Chicago, Illinois 60603 Telephone: (312) 377-1181 Facsimile: (312) 377-1184 Email: [email protected] Attorneys for Plaintiff

securities

tv-0FIcBD5gMZwczIFUd

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF NORTH CAROLINA CHARLOTTE DIVISION Case No. COMPLAINT CLASS ACTION JURY TRIAL DEMANDED RAYMOND BENITEZ, individually and on behalf of all others similarly situated, Plaintiff, v. THE CHARLOTTE-MECKLENBURG HOSPITAL AUTHORITY, d/b/a CAROLINAS HEALTHCARE SYSTEM, ATRIUM HEALTH, Defendant. Plaintiff Raymond Benitez, individually, and on behalf of all others similarly situated, for his complaint against Defendant Charlotte-Mecklenburg Hospital Authority, d/b/a Carolinas Healthcare System, Atrium Health (“CHS”), states as follows: NATURE OF THE ACTION 1. This is an action for restraint of trade seeking classwide damages and injunctive relief under Section One of the Sherman Act and Sections 4 and 16 of the Clayton Act. 2. This matter arises from CHS’s abuse of its market dominance through the imposition of unlawful contract restrictions that prohibit commercial health insurers from offering inpatients financial benefits to use less-expensive health care services offered by CHS’s competitors. This unlawful restraint of trade is the subject of a separate injunctive action by the United States of America and the State of North Carolina. This related action seeks a remedy for consumers who, as a result of CHS’s unlawful conduct, have been forced to pay CHS above- competitive prices for inpatient services through co-insurance payments and other direct payments. THE PARTIES 3. Plaintiff Raymond Benitez resides in Charlotte, North Carolina in Mecklenburg County. Between July 4, 2016 and July 10, 2016 he utilized CHS general acute care inpatient hospital services for seven overnight stays. He was insured by Blue Cross Blue Shield of North Carolina and under his policy made a co-insurance payment directly to CHS of $3,440.36. 4. CHS is a North Carolina not-for-profit corporation providing healthcare services with its principal place of business in Charlotte. Its flagship facility is Carolinas Medical Center, a large general acute-care hospital located in downtown Charlotte. It also operates nine other general acute-care hospitals in the Charlotte area. It has done business until recently as Carolinas HealthCare System and now does business as Atrium Health. JURISDICTION, VENUE, AND INTERSTATE COMMERCE 5. The Court has subject-matter jurisdiction over this action under Section 4 of the Clayton Act, 15 U.S.C. § 15; and Section 16 of the Clayton Act, 15 U.S.C. § 26; and 28 U.S.C. §§ 1331, 1337(a), and 1345. 6. The Court has personal jurisdiction over CHS under Section 12 of the Clayton Act, 15 U.S.C. § 22. CHS maintains its principal place of business and transacts business in this District. 7. Venue is proper under 28 U.S.C. § 1391 and Section 1 of the Clayton Act, 15 U.S.C. § 22. CHS transacts business and resides in this District, and the events giving rise to the claims occurred in this District. 8. CHS engages in interstate commerce and in activities substantially affecting interstate commerce. CHS provides healthcare services for which employers, insurers, and individual patients remit payments across state lines. CHS also purchases supplies and equipment that are shipped across state lines, and it otherwise participates in interstate commerce. FACTUAL ALLEGATIONS Background 9. CHS is the second largest public health system in the United States. It has what CHS calls 12 million patient “encounters” each year, or “one every three seconds” in the Charlotte area. Many of these involve hospital admissions. More than 50% of all Charlotte inpatient revenues are paid to CHS. Its largest competitor has less than half of CHS’s revenues. 10. As this Court has pointed out, the complex world of healthcare is perplexing for consumers and “… [these complexities] present difficulties, frequently to consumers who become limited by who can provide their healthcare and how much it will cost.” The free market is the greatest force for efficient, cost-based pricing, and innovation in human history. Just as democracy can thrive only in a free political system unhindered by outside forces, market efficiency and capitalism can survive only if market power is kept in check. Thus, it is imperative to ensure full and fair competition in healthcare markets. Only this keeps the healthcare pricing facing insurance and inpatient consumers at competitive levels and preserves competitive choice. This is the goal of both public and private enforcement of the antitrust laws. 11. CHS’s market power has enabled it to negotiate high prices (in the form of high “reimbursement rates”) for treating insured patients. CHS has long had a reputation for being a high-priced healthcare provider. In a 2013 presentation, CHS’s internal strategy group recognized that CHS “has enjoyed years of annual reimbursement rate increases that are premium to the market, with those increases being applied to rates that are also premium to the market.” 12. Steering is a method by which insurers offer consumers of healthcare services options to reduce some of their healthcare expenses. Steering typically occurs when an insurer offers consumers a financial incentive to use a lower-cost provider or lower-cost provider network, in order to lower their healthcare expenses. 13. Steering – and the competition from lower-priced healthcare providers that steering animates – threatens CHS’s high prices and revenues. In 2013, CHS’s internal strategy group surveyed a dozen of CHS’s senior leaders, asking them to list the “biggest risks to CHS revenue streams.” Nine of the twelve leaders polled identified the steering of patients away from CHS as one of the biggest risks to CHS’s revenues. 14. To protect itself against steering that would induce price competition and potentially require CHS to lower its high prices, CHS has imposed steering restrictions in its contracts with insurers. These restrictions impede insurers from providing financial incentives to patients to encourage them to consider utilizing lower-cost but comparable or higher quality alternative healthcare providers. 15. The United States of America and the State of North Carolina seek to enjoin CHS from using unlawful contract steering restrictions that prohibit commercial health insurers in the Charlotte area from offering inpatients financial benefits to use less-expensive healthcare services offered by CHS’s competitors. These steering restrictions reduce competition resulting in pricing injury to Charlotte area consumers. This related action seeks remedy for the overcharge damages of inpatients paying CHS directly for inpatient services through co- insurance payments or otherwise. 16. Section 5 of the Clayton Act, 15 U.S.C. § 16(a), accords preclusive or prima facie effect in a private damage action to civil and criminal judgments obtained by the United States Department of Justice. This encourages private damage actions relying, in part, on government prosecutions. Thus, public enforcement by the United States Department of Justice, which typically pursues only the most flagrant violations of the antitrust laws, is supplemented by private enforcement enlarging penalties for such violations and deterring future misconduct. 17. Plaintiff relies, in part, on the United States’ and the State of North Carolina’s thorough assessments of the CHS restraint of trade and their conclusions as to what constitutes the public interest. Plaintiff does not seek consolidation with the government action. However, Plaintiff is prepared to proceed with coordination of discovery should the Court deem that appropriate. Relevant Market 18. The sale of general acute care inpatient hospital services to insurers (“acute inpatient hospital services”) is a relevant product market. The market includes sales of such services to insurers’ individual, group, fully-insured, and self-funded health plans, as well as to inpatients directly compensating CHS through coinsurance or otherwise. 19. The relevant market does not include sales of acute inpatient hospital services to government payers, e.g., Medicare (covering the elderly and disabled), Medicaid (covering low- income persons), and TRICARE (covering military personnel and families) because a healthcare provider’s negotiations with an insurer are separate from the process used to determine the rates paid by government payers. 20. Acute inpatient hospital services consist of a broad group of medical and surgical diagnostic and treatment services that include a patient’s overnight stay in the hospital. Although individual acute inpatient hospital services are not substitutes for each other (e.g., obstetrics is not a substitute for cardiac services), insurers typically contract for the various individual acute inpatient hospital services as a bundle, and CHS’s steering restrictions have an adverse impact on the sale of all acute inpatient hospital services. Therefore, acute inpatient hospital services can be aggregated for analytical convenience. 21. There are no reasonable substitutes or alternatives to acute inpatient hospital services. Consequently, a hypothetical monopolist of acute inpatient hospital services would likely profitably impose a small but significant price increase for those services over a sustained period of time. 22. The relevant geographic market is no larger than the Charlotte area. In this Complaint, the Charlotte area means the Charlotte Combined Statistical Area, as defined by the U.S. Office of Management and Budget, which consists of Cabarrus, Cleveland, Gaston, Iredell, Lincoln, Mecklenburg, Rowan, Stanly, and Union counties in North Carolina, and Chester, Lancaster, and York counties in South Carolina. The Charlotte area has a population of about 2.6 million people. 23. Insurers contract to purchase acute inpatient hospital services from hospitals within the geographic area where their enrollees are likely to seek medical care. Such hospitals are typically close to their enrollees’ homes or workplaces. Insurers who seek to sell insurance plans to individuals and employers in the Charlotte area must include Charlotte area hospitals in their provider networks because people who live and work in the Charlotte area strongly prefer to obtain acute inpatient hospital services in the Charlotte area. Charlotte area consumers have little or no willingness to enroll in an insurance plan that provides no network access to hospitals located in the Charlotte area. 24. For these reasons, it is not a viable alternative for insurers that sell health insurance plans to consumers in the Charlotte area to purchase acute inpatient hospital services from providers outside the Charlotte area. Consequently, competition from providers of acute inpatient hospital services located outside the Charlotte area would not likely be sufficient to prevent a hypothetical monopolist provider of acute inpatient hospital services located in the Charlotte area from profitably imposing small but significant price increases for those services over a sustained period of time. Market Power 25. CHS – with more than 50% of all Charlotte inpatient revenues – exerts market power in its dealings with commercial health insurers (“insurers”). CHS’s market power results from its large size, the comprehensive range of healthcare services that it offers, its high market share, and insurers’ need to include access to CHS’s hospitals – as well as its other facilities and providers – in at least some of their provider networks in insurance plans that cover people in the Charlotte area. CHS’s market power is further evidenced by its ability to profitably charge prices to insurers and inpatients that are higher than competitive levels across a range of services, and to impose on insurers restrictions that reduce competition. 26. CHS’s maintenance and enforcement of its steering restrictions lessen competition between CHS and the other providers of acute inpatient hospital services in the Charlotte area that would, in the absence of the restrictions, likely reduce the prices paid for such services by insurers and their inpatient enrollees. Thus, the restrictions help to insulate CHS from competition, by limiting the ability of CHS’s competitors to win more commercially-insured business by offering lower prices. 27. Insurers want to steer inpatient enrollees towards lower-cost providers and to offer innovative insurance plans that steer. For years, insurers have tried to negotiate the removal of steering restrictions from their contracts with CHS, but cannot because of CHS’s market power. In the absence of the steering restrictions, insurers would likely steer consumers to lower- cost providers more than their current contracts with CHS presently permit. Anti-Steering Conduct Restraining Trade 28. CHS restricts steering to help insulate itself from price competition, which enables CHS to maintain high prices to insurers and inpatients and preserve its dominant position, and not for any procompetitive purpose. Indeed, when asked under oath whether CHS should limit the ability of insurers to offer tiered networks or narrow networks that exclude CHS, Carol Lovin, CHS’s Chief Strategy Officer, said that CHS should not. And when asked her view about the possibility of eliminating CHS’s steering restrictions, she testified, “Would I personally be okay with getting rid of them? Yes, I would.” CHS’s steering restrictions do not have any procompetitive effects. CHS can seek to avoid losses of revenues and market share from lower cost competitors by competing to offer lower prices and better value than its competitors, rather than imposing rules on insurers that reduce the benefit to its rivals from competing on price. 29. Tiered networks are a popular type of steering that insurers use in healthcare markets. Typically, insurers using tiered networks place healthcare providers that offer better value healthcare services (lower cost, higher quality) in top tiers. Patients who use top-tier providers pay lower out-of-pocket costs. For example, for a procedure costing $10,000, a patient might be responsible for paying $3,600 in co-insurance at a lower-tier hospital, but only $1,800 co-insurance to have the same procedure performed at a top-tier hospital. 30. Narrow-network insurance plans are another popular steering tool. Typically, narrow networks consist of a subset of all the healthcare providers that participate in an insurer’s conventional network. A consumer who chooses a narrow-network insurance plan typically pays lower premiums and lower out-of-pocket expenses than a conventional broad-network insurance plan as long as the consumer is willing to choose from the smaller network of providers for his or her healthcare needs. 31. Providers are motivated to have insurers steer towards them, including through an insurer’s narrow or tiered network, because of the increased patient volume that accompanies steering. Thus, the ability of insurers to steer gives providers a powerful incentive to be as efficient as possible, maintain low prices, and offer high quality and innovative services. By doing so, providers induce insurers to steer patient volume to them. Individuals and employers that provide health insurance to their employees benefit tremendously from this because they can lower their healthcare expenses. 32. CHS has gained patient volume from insurers steering towards CHS, and has obtained higher revenues as a result. CHS encourages insurers to steer patients toward itself by offering health insurers modest concessions on its market-power driven, premium prices. 33. However, CHS forbids insurers from allowing CHS’s competitors to do the same. CHS prevents insurers from offering tiered networks that feature hospitals that compete with CHS in the top tiers, and prevents insurers from offering narrow networks that include only CHS’s competitors. By restricting its competitors from competing for – and benefitting from – steered arrangements, CHS uses its market power to impede insurers from negotiating lower prices with its competitors and offering lower-premium plans. 34. CHS also imposes restrictions in its contracts with insurers that impede insurers from providing truthful information to consumers about the value (cost and quality) of CHS’s healthcare services compared to CHS’s competitors. CHS’s restrictions on insurers’ price and quality transparency are an indirect restriction on steering because they prevent inpatients from accessing information that would allow them to make healthcare choices based on available price and quality information. 35. Because CHS’s steering restrictions prevent its competitors from attracting more inpatients through lower prices, CHS’s competitors have less incentive to remain lower priced and to continue to become more efficient. As a result, CHS’s restrictions reduce the competition that CHS faces in the marketplace. In the instances in which insurers have steered in other markets and in the few instances in which insurers have steered in the Charlotte area despite CHS’s restrictions, insurers have reduced health insurance costs for consumers. 36. Four insurers provide coverage to more than 85 percent of the commercially- insured residents of the Charlotte area. They are: Aetna Health of the Carolinas, Inc., Blue Cross Blue Shield of North Carolina, Cigna Healthcare of North Carolina, Inc., and United Healthcare of North Carolina, Inc. 37. CHS maintains and enforces steering restrictions in its contracts with all four of these insurers. In some instances, the contract language prohibits steering outright. For example, CHS secured a contractual obligation from one insurer that it “shall not directly or indirectly steer business away from” CHS. In other instances, the contract language gives CHS the right to terminate its agreement with the insurer if the insurer engages in steering, providing CHS the ability to deny the insurer and its enrollees access to its dominant hospital system unless the steering ends. Although the contractual language that CHS has imposed varies with each insurer, it consistently creates disincentives that deter insurers from providing to their enrollees truthful information about their healthcare options and the benefits of price and quality competition among healthcare providers that the insurers could offer if they had full freedom to steer. Antitrust Injury 38. As a result of this reduced competition due to CHS’s steering restrictions, inpatients and employers in the Charlotte area pay higher prices for health insurance coverage, have fewer insurance plans from which to choose, and are denied access to consumer comparison shopping and other cost-saving innovative and more efficient health plans that would be possible if insurers could steer freely. 39. Insurance companies are not the sole source of non-government reimbursement inpatient revenues to CHS. CHS also receives payments directly from Charlotte area inpatient consumers in the form of “co-insurance” payments and other direct payments for expenses not covered by insurance. A co-insurance payment is the percentage of the bill for inpatient medical services paid directly by the insured inpatient consumer, with the rest paid by the insurance company. 40. As a direct result of CHS’s anti-competitive conduct, inpatient consumers are forced to pay above-competitive prices for co-insurance and other direct payments to CHS. CLASS ALLEGATIONS A. Fed. R. Civ. P. 23(a) Prerequisites 41. Plaintiff (“Class Representative”) is a representative of persons residing in the Charlotte Combined Statistical Area making direct payments for general acute care inpatient procedures to the Charlotte-Mecklenburg Hospital Authority d/b/a Carolinas Healthcare System and Atrium Health (“CHS”) on or after February 28, 2014. Such persons include inpatients making direct co-insurance payments to CHS as a result of their health plan deductibles or otherwise; or, if no health insurance covers a procedure, direct payments to CHS for all or part of the procedure’s costs. Excluded from the class are (a) direct inpatient payments to CHS which are set at a fixed amounts by insurance plan or otherwise regardless of the cost of the CHS procedure; and (b) the Presiding Judge, employees of this Court, and any appellate judges exercising jurisdiction over these claims as well as employees of that appellate court. 42. Prosecution of the claims of the Class as a class action is appropriate because the prerequisites of Rule 23(a) of the Federal Rules of Civil Procedure are met: (a) The number of persons in the Class is in the thousands, and the members of the Class are therefore so numerous that joinder of all members of the Class is impracticable. Joinder also is impracticable because of the geographic diversity of the members of the Class, the need to expedite judicial relief, and the Class Representative’s lack of knowledge of the identity and addresses of all members of the Class. (b) There are numerous questions of law and fact arising from the pattern of conspirators’ restraint of trade which are common to the members of the Class. These include, but are not limited to, common issues as to (1) whether the Defendant has engaged in restraint of trade; and (2) whether this conduct, taken as a whole, has materially caused antitrust price injury to be inflicted on members of the Class. In addition, there are common issues as to the nature and extent of the injunctive and monetary relief available to the members of the Class. 43. The claims of the Class Representative are typical of the claims of the members of the Class and fairly encompass the claims of the members of the Class. The Class Representative and the members of the Class are similarly or identically harmed by the same systematic and pervasive concerted action. 44. The Class Representative and the Representative’s counsel will fairly and adequately protect the interests of the members of the Class. There are no material conflicts between the claims of each Class Representative and the members of the Class that would make class certification inappropriate. Counsel for the Class will vigorously assert the claims of the Class Representative and the other members of the Class. B. Federal Rule of Civil Procedure 23(b)(3) Prerequisites 45. In addition, the prosecution of the claims of the Class as a class action pursuant to Rule 23(b)(3) is appropriate because: (a) Questions of law or fact common to the members of the Class predominate over any questions affecting only its individual members; and (b) A class action is superior to other methods for the fair and efficient resolution of the controversy. C. Federal Rule of Civil Procedure 23(b)(2) Prerequisites 46. The prosecution of the claims of the Class as a class action pursuant to Rule 23(b)(2) is appropriate because the conspirators have acted, or refused to act, on grounds generally applicable to the Class, thereby making appropriate final injunctive relief, or corresponding declaratory relief, for the Class as a whole. CHS’S VIOLATION OF SECTION 1 OF THE SHERMAN ACT 47. Plaintiffs incorporate paragraphs 1 through 46 of this Complaint. 48. CHS has market power in the sale of general acute care inpatient hospital services in the Charlotte area. 49. CHS has and likely will continue to negotiate and enforce contracts containing steering restrictions with insurers in the Charlotte area. The contracts containing the steering restrictions are contracts, combinations, and conspiracies within the meaning of Section 1 of the Sherman Act, 15 U.S.C. § 1. 50. These steering restriction have had, and will likely to continue to have, the following substantial anticompetitive effects in the relevant product and geographic market, among others: (a) Depriving insurers and their enrolled inpatients of the benefits of a competitive market and competitive pricing for their purchase of acute inpatient hospital services; (b) Protecting CHS’s market power and enabling CHS to maintain at supracompetitive levels the prices for acute inpatient hospital services; (c) Substantially lessening competition among providers in their sale of acute inpatient hospital services; (d) Restricting the introduction of innovative insurance products that are designed to achieve lower prices and improved quality for acute inpatient hospital services; and (e) Reducing consumers’ incentives to seek acute inpatient hospital services from more cost-effective providers. 51. Entry or expansion by other hospitals in the Charlotte area has not counteracted the actual and likely competitive harms resulting from CHS’s steering restrictions. And in the future, such entry or expansion is unlikely to be rapid enough and sufficient in scope and scale to counteract these harms to competition. Building a hospital with a strong reputation that is capable of attracting physicians and inpatients is difficult, time-consuming, and expensive. Additionally, new facilities and programs, and typically the expansion of existing facilities and programs, are subject to lengthy licensing requirements, and in North Carolina, to certificate-of- need laws. 52. CHS did not devise its strategy of using steering restrictions for any procompetitive purpose. Nor do the steering restrictions have any procompetitive effects. Any arguable benefits of CHS’s steering restrictions are outweighed by their actual and likely anticompetitive effects. 53. Inpatient consumers and their insurers have paid above-competitive pricing directly to CHS materially caused by the restraint of trade. 54. The challenged steering restrictions unreasonably restrain trade in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. PRAYER FOR RELIEF WHEREFORE, Plaintiff individually and as a member of the proposed Class alleged prays that: A. This Court declare that CHS’s conduct constitutes a violation of the Sherman Act, 15 U.S.C. § 1, allowing treble damage relief to the proposed Class under Section 4 of the Clayton Act, 15 U.S.C. § 15; B. This Court permanently enjoin Defendant from continuing the conspiracy and unlawful actions described herein under Section 16 of the Clayton Act, 15 U.S.C. § 26; C. Plaintiff recover reasonable attorneys’ fees and costs as allowed by law; D. Plaintiff recover pre-judgment and post-judgment interest at the highest rate allowed by law; and E. Plaintiff be granted such other and further relief as the Court deems just and equitable. JURY DEMAND Plaintiff demands a trial by jury. February 28, 2018 Respectfully submitted, J. Gentry Caudill /s/ Adam S. Hocutt N.C. Bar No. 758 Adam S. Hocutt N.C. Bar No. 39760 DOZIER MILLER LAW GROUP 301 S. McDowell St., #700 Charlotte, NC 28204 Telephone: (704) 372-6373 Facsimile: (704) 347-0674 [email protected] [email protected] R. Stephen Berry BERRY LAW PLLC (Pro Hac Vice Petition Forthcoming) 1717 Pennsylvania Avenue, N.W. Suite 850 Washington, D.C. 20006 Telephone: (202) 296-3020 Facsimile: (202) 296-3038 [email protected] Steven F. Molo (Pro Hac Vice Petition Forthcoming) Justin M. Ellis (Pro Hac Vice Petition Forthcoming) Thomas J. Wiegand (Pro Hac Vice Petition Forthcoming) MOLOLAMKEN LLP 430 Park Avenue New York, NY 10022 Telephone: (212) 607-8160 Facsimile: (212) 607-8161 [email protected] [email protected] [email protected] Attorneys for Plaintiffs and Proposed Class Co-Counsel

antitrust

RrfSC4cBD5gMZwczRs-Y

Case No. 1:19-cv-1039 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION SHEILA OBIEFUNA 7003 Falcon drive Schererville, IN 46375 Plaintiff, v. HYPOTEC, INC., formally known as U.V.S. INC. 11900 Biscayne Blvd., Suite 106 Miami, FL 33181 Serve on: Corporation Service Company 25 Little Falls Drive Wilmington DE 19808 and FREDERIC ABITBOL 9719 Palma Vista Way Boca Raton, FL 33428 Defendants. CLASS ACTION COMPLAINT AND DEMAND FOR JURY TRIAL Plaintiff Sheila Obiefuna, on behalf of herself and on behalf of the entire class of persons similarly situated, by and through her attorneys, Michael Paul Smith, Melissa L. English and Sarah A. Zadrozny of Smith, Gildea & Schmidt, LLC, Timothy F. Maloney, Veronica B. Nannis and Megan Benevento of Joseph, Greenwald and Laake, P.A., and Gregory Utter and Steven Coffaro of Keating, Muething & Klekamp PLL1, files this Class Action Complaint, sues the Defendants for cause, claims damages, and states as follows: 1 Motions for pro hac vice admission for Attorneys Smith, English, Zadrozny, Maloney, Nannis, Benevento and Utter, pursuant to Local Rule 83-6, are in process. INTRODUCTION 1. Plaintiff Sheila Obiefuna (“Plaintiff Obiefuna”) and alleged Class Members are borrowers who currently have or had a residential mortgage loan originated and/or brokered by Defendant Hypotec, Inc. (“Hypotec”) formerly known as U.V.S., Inc. (“UVS”), or Allegro Funding Corporation (“Allegro”) which was or is secured by Plaintiff’s and Class Members’ residential real property. 2. Plaintiff and alleged Class Members are victims of an illegal kickback and price fixing scheme between UVS/Hypotec, and the entity’s President Frederic Abitbol (“Abitbol”) (collectively, UVS/Hypotec) and All Star Title, Inc. (“All Star”), a Maryland-based title and settlement services company. 3. Under the scheme, UVS/Hypotec loan officers, agents, and/or other employees, including Abitbol, received and accepted illegal kickbacks in exchange for the assignment and referral of residential mortgage loans, refinances and reverse mortgages to All Star for title and settlement services in violation of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. §§ 2601, et seq. UVS/Hypotec and All Star laundered the kickbacks through third party marketing companies to conceal the illegal kickbacks and the kickback agreement. 4. As an essential component of the scheme, All Star conspired to and formed a cartel with various residential mortgage lenders (“All Star Lender Cartel”). UVS/Hypotec participated in the All Star Lender Cartel and, in violation of Section 1 of the Sherman Act, 15 U.S.C. §§ 1, et seq., entered into naked price fixing, minimum pricing and refusal to deal agreements (collectively, the “Cartel Agreements”) with All Star related to the residential mortgage loans generated by All Star’s illegal kickback payments to the UVS/Hypotec. 5. UVS/Hypotec benefitted from the Cartel Agreements, because the supracompetitive prices for title and settlement services charged to borrowers on loans brokered or originated by UVS Hypotec under the Cartel Agreements were financed into the borrowers’ loans, and which UVS/Hypotec charges and earns interest from these supracompetitive prices. 6. UVS/Hypotec and All Star continuously and regularly used the U.S. Mail, interstate and international wires in furtherance of the kickback and price fixing scheme, and to identify and defraud borrowers into the All Star Scheme, willfully and intentionally engaging in a pattern of racketeering activity over a period of at least five years, in violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961, et seq. 7. The Kickback and Cartel Agreements, and the resulting supracompetitive prices, were fraudulently concealed by UVS/Hypotec and All Star from Plaintiff and alleged Class Members by: laundering kickbacks through third party marketing companies, creating sham invoice and payment records, fraudulent representations in marketing materials, false allocation of title and settlement fees and manipulation of the APR associated with the UVS/Hypotec loans, and false and fraudulent representations and omissions in borrowers’ loan documents, and prevented borrowers, regulators and auditors from discovering the scheme or kickback and Cartel Agreements and the injuries to’ borrowers therefrom, thereby allowing the kickbacks and supracompetitive fees to continue. PARTIES 8. Plaintiff brings this action pursuant to Federal Rule of Civil Procedure 23 as a class action on her own behalf and on behalf of the entire class of people similarly situated. 9. Plaintiff Sheila Obiefuna is a resident of Lake County, Indiana. 10. Defendant Hypotec, Inc., formerly known and registered as U.V.S., Inc., is a Delaware corporation with its headquarters and principal place of business located in Florida, During the time period alleged herein, Hypotec was registered, qualified and doing business in Indiana under the name of U.V.S., Inc. and, after March 21, 2012, the assumed name Hypotec. It is engaged in the business of consumer mortgage brokering, origination and/or lending, and otherwise transacted business in Indiana. 11. Defendant Frederic Abitbol is a citizen and resident of Palm Beach County, Florida. Abitbol is, and at all relevant times was, the President of Hypotec (and UVS) and engaged in the brokering of residential mortgage loans in Indiana. JURISDICTION AND VENUE 12. This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. §§ 1331 and 1337(a), Section 4 of the Sherman Act, 15 U.S.C. § 4, and 18 U.S.C. § 1964(c). 13. This Court has personal jurisdiction over the parties. Personal jurisdiction over Defendants is appropriate because during the time period alleged herein UVS/Hypotec, including Abitbol, continuously transacted business within this District and engaged in an illegal price fixing agreement to fix the prices charged by All Star for settlement services that was directed at, and had the intended effect of causing injury to, persons residing in or located in this District. 14. Venue is proper in this Court pursuant to 28 U.S.C. § 1391(b)(3), 28 U.S.C. § 1391(d) and 18 U.S.C. § 1965(a). FACTUAL ALLEGATIONS FOR INDIVIDUAL AND CLASS RELIEF 15. At all relevant times, All Star is a Maryland corporation and a title and settlement service provider licensed in Maryland and more than 30 other states, and provides title and settlement services on residential mortgage loans, refinances and reverse mortgages secured by real property in 47 states. I. The All Star Scheme A. All Star and Participating Lenders Pay and Receive Kickbacks in Exchange for the Assignment and Referral of Residential Mortgage Loans to All Star and Employ Several Methods to Conceal the Kickbacks. 16. Beginning by at least 2008 and continuing, upon information and belief, through at least 2017, All Star designs and executes a scheme (“All Star Scheme”) to pay kickbacks to various mortgage lenders and their brokers, loan officers and other employees (collectively, “Participating Lender”) pursuant to an agreement and in exchange for the Participating Lender’s assignment and referral of residential mortgage loans, refinances and reverse mortgages to All Star for title and settlement services (“Kickback Agreement”). 17. All Star bases the amount of the kickback All Star paid on the number of loans the Participating Lender assigns and refers to All Star under the Kickback Agreement and the amount of profit All Star realizes on those loans. 18. All Star pays, and Participating Lenders receive and accept, kickbacks in furtherance of the All Star Scheme in different forms and laundered by and through different channels. 19. In some instances, All Star pays kickbacks by purchasing and delivering to a Participating Lender marketing materials for the Participating Lender to use in soliciting borrowers, most commonly postage to be used by a Participating Lender to send direct mail solicitations. 20. In other instances, All Star pays cash kickbacks by checks written directly to a Participating Lender and/or their branch managers, mortgage brokers, loan officers, or other employees. Often, a Participating Lender or its employee receives and accepts a kickback check laundered by and through a sham entity set up for the express purpose of receiving and accepting kickbacks and concealing the same. 21. In most instances, to conceal and launder the kickbacks paid and received under the All Star Scheme, the Participating Lenders and All Star agree to have All Star not issue a check directly to the Participating Lender and/or their branch managers, mortgage brokers, loan officers, or other employees, but instead launders the kickback payment through a third party marketing company. 22. Participating Lenders and/or their branch managers, mortgage brokers, loan officers, or other employees frequently use third party marketing companies (such as a direct mail, data and/or leads lists, telemarketing or live transfer leads provider) to provide marketing services aimed at soliciting borrowers to obtain residential mortgage loans, refinances and reverse mortgages, which increase the volume of loans the Participating Lender brokers or originates thereby increasing its net profit and commissions earned. 23. All Star and Participating Lenders use a variety of third party marketing companies to launder the kickbacks. Some of these marketing companies specialize in direct mail, while others specialize in producing data and leads lists of potential borrowers for direct mail or telemarketing solicitations. Still other third party marketing companies provide Participating Lenders “live transfer” leads in which a borrower who contacts a centralized telemarketing company is transferred “live” to the Participating Lender. 24. Under the Kickback Agreement, the Participating Lender receiving and accepting the kickback from All Star identifies a third party marketing company that the Participating Lender uses for marketing services. All Star then makes the kickback payment to the third party marketing company, and the Participating Lender receives and accepts the kickback payment when the third party marketing company applies the payment to the invoice for marketing services for the benefit of the Participating Lender. 25. To even further conceal the kickbacks and the Kickback Agreement, All Star and the Participating Lenders request and cause the third party marketing companies to issue sham invoices that falsely identify All Star as the company purchasing and receiving the marketing services. These sham invoices create the false impression that All Star purchases and receives marketing services when in fact the payment is a kickback received and accepted by the Participating Lender in exchange for the assignment and referral of loans to All Star under the Kickback Agreement. 26. The sham invoices conceal the fact that any thing of value is exchanged between All Star and the Participating Lender related to the loans that are assigned and referred to All Star under the Kickback Agreement. 27. In some instances, All Star and the Participating Lender direct the third party marketing company to issue sham “split” invoices to both All Star and the Participating Lender for a portion of the amount due to the third party marketing company. 28. All Star and the Participating Lenders’ choice to use the split invoices create the false impression that All Star purchased and received marketing services when in fact the payment is a kickback received and accepted by the Participating Lender in exchange for the assignment and referral of loans to All Star under the Kickback Agreement. The sham split invoices also hide All Star and the Participating Lender’s coordinated business relationship because there is no Participating Lender listed on the sham split invoice received and paid by All Star. 29. In other instances, All Star and the Participating Lenders choose to conceal the kickback payment entirely by creating sham payment records. To do this, a Participating Lender directs All Star to launder a kickback through the third party marketing company without the use or issuance of any invoice. Other times, the Participating Lender forwards to All Star an invoice addressed to the Participating Lender and All Star launder a kickback through a third party marketing company by simply referencing the Participating Lender’s invoice number. 30. All Star and Participating Lenders choose to use sham invoice and payment records to conceal the fact that any kickback payment is made by All Star as well as the fact that All Star and the Participating Lender exchanged a thing of value related to the loans assigned and referred to All Star under the Kickback Agreement. B. All Star and Participating Lenders Form a Cartel and Conspire and Agree to Fix and Charge Borrowers Higher Prices for Title and Settlement Services and Refuse to Deal with Competitors. 31. One of the purposes of the All Star Scheme is to allow All Star to charge borrowers higher prices for title and settlement service than is possible in a competitive market and to exclude other title and settlement services from the market for title and settlement services on residential mortgage loans, refinances and reverse mortgages. 32. To achieve these purposes, All Star and Participating Lenders conspire to and form a cartel (“All Star Lender Cartel”), enter agreements and act in restraint of trade. 33. To enforce the All Star Lender Cartel, All Star and Participating Lenders conspire and agree to fix the prices All Star charges the Participating Lender’s borrowers for title and settlement services on loans that are assigned and referred to All Star under the Kickback Agreement (“Price Fixing Agreement”). 34. In addition, All Star and the Participating Lenders conspire and agree to minimum prices to charge borrowers for title and settlement services on loans that are assigned and referred to All Star under the Kickback Agreement (“Minimum Fee Agreements”). 35. The Price Fixing and Minimum Fee Agreements are enforced by an agreement that the Participating Lender refuse to deal with any other title and settlement services company on those loans generated by the kickbacks (“Refusal to Deal Agreement”) (collectively, with the Price Fixing and Minimum Fee Agreements, the “Cartel Agreements”), such that all loans generated by the Kickback Agreement are referred to All Star and are subject to the Price Fixing and Minimum Fee Agreements. 36. The prices All Star and the Participating Lenders fix under the Price Fixing and Minimum Fee Agreements are supracompetitive and higher than the prices that borrowers would otherwise be charged for title and settlement services in a competitive market and without the Cartel Agreements. 37. An additional purpose of the All Star Lender Cartel formed by All Star and Participating Lenders under the Kickback and Cartel Agreements is to exclude All Star’s competitors from the market for title and settlement services on residential mortgage loans, refinances and reverse mortgages, and to deprive borrowers of their choice of title and settlement service provider on loans generated by the All Star-funded kickbacks. 38. Participating Lenders benefit from the Cartel Agreements and the All Star Scheme because: (i) the supracompetitive pricing funds the illegal kickbacks used by Participating Lenders to solicit borrowers, generate residential mortgage loans, and earn substantial interest and commissions, and (ii) the costs for title and settlement service fees are financed into the loan and paid for by borrowers from loan proceeds such that the Participating Lender earned interest and other fees from the supracompetitive pricing. C. All Star and the Participating Lenders Use the U. S. Mail and Interstate Wires to Identify and Lure Borrowers into the All Star Scheme. 39. All Star and Participating Lenders engage in the All Star Scheme to defraud borrowers into paying supracompetitive prices for title and settlement services, thereby funding and continuing the kickbacks All Star is paying Participating Lenders. 40. In addition, All Star and Participating Lenders intend the All Star Scheme to deprive borrowers of the intangible right of the Participating Lenders’ honest services by using the kickbacks to solicit borrowers, generate residential mortgage loans, and earn substantial interest and commissions. 41. In service of these intentions, Participating Lenders and All Star use the kickback payments to lure borrowers into the All Star Scheme by using interstate mail and wires to identify, solicit and lure borrowers into the All Star Scheme. 42. Potential borrowers are identified by the third party marketing companies through which All Star and Participating Lenders are laundering the kickbacks. Many of these third party marketing companies specialize in identifying and soliciting potential borrowers, and compiling and selling borrower sales and marketing “leads lists.” 43. Participating Lenders use these lists to solicit borrowers often through printed direct mail pieces such as postcards, letters, “SNAP packs” (mailers with perforated edges the recipient rips or “snaps” open), and other printed material that encourage borrowers to contact the Participating Lender and apply for a residential mortgage loan, refinance or reverse mortgage. 44. All Star requires, and Participating Lenders agree, to include false representations in the Participating Lender’s direct mail borrower solicitations, stating that a potential borrower would save “30-40% on title fees” by using All Star. The purpose of these false representations is to: (i) prevent a borrower from trying to use a different title and settlement services company for the loan, (ii) conceal the fixed, supracompetitive pricing resulting from the All Star Scheme, and (iii) create the false representation that the prices charged the borrower for title and settlement services would be lower than the prices charged by All Star competitors. 45. Participating Lenders and All Star, by and through third party marketing companies, cause borrower data and leads list to be merged onto these direct mail solicitations, and Participating Lenders, by and through the third party marketing companies, cause these fraudulent solicitations to be sent through the interstate U.S. mail. 46. All Star and Participating Lenders also obtain from third party marketing companies borrower data and leads list to solicit borrowers over the telephone, and Participating Lenders use interstate wires to make these telemarketing calls to potential borrowers. Plaintiff believes, and therefore avers, that All Star requires, and Participating Lenders agree, to make false representations to borrowers in these telephone solicitations similar to the false representations that All Star and Participating Lenders agree to include in direct mail solicitations. 47. Participating Lenders also receive “live transfer” leads wherein a borrower calls a centralized call center, and then is transferred by the call center “live” to the Participating Lender. The third marketing company delivering the live transfer leads transmits the “live transfer” over interstate wires, and the Participating Lender receives the live transfer calls over interstate wires. 48. All Star’s records document that these borrower solicitation techniques lured thousands of borrowers into the All Star Scheme. 49. The activities of the All Star Scheme affect interstate commerce across more than 30 states. II. UVS/Hypotec Participation in the All Star Scheme Begins by April 2010 50. Abitbol incorporates Hypotec in Delaware in February, 2004 under the name “U.V.S. Inc.” UVS registers and is authorized to conduct business in Indiana by October, 2010. Abitbol is identified as President of UVS in both its original incorporation papers and its Indiana registration application. 51. Although incorporated as UVS, the entity and its employees and/or agents, including Abitbol, conducts business under the assumed name of Hypotec Lending beginning by at least 2010. In September, 2012, Indiana grants UVS’ application permitting it to conduct business under the assumed name of Hypotec. In January 2015, UVS files an amendment to its corporate entity filing, formally changing its name to “Hypotec Inc.” In all of these applications, Abitbol is identified as President of UVS/Hypotec. A. UVS/Hypotec and Abitbol Begin Participating in the All Star Scheme by Assigning and Referring Allegro loans to All Star in Exchange for Tens of Thousands in Kickbacks. 52. By April 2010, Abitbol, in the course and scope of his employment and/or agency with UVS, is brokering loans under UVS’ assumed name of Hypotec. The loans UVS/Hypotec is brokering by and through Abitbol are funded by Allegro Funding Corporation. Abitbol identifies Allegro’s business office as located at 6381 Hollywood Boulevard, Suite 601- B, Los Angeles, CA 90028, the same address Abitbol reports as UVS’s principal place of business. 53. In April 2010, All Star begins paying kickbacks to UVS/Hypotec and Abitbol in exchange for the assignment and referral of Allegro loans, refinances and reverse mortgages to All Star for title and settlement services. UVS/Hypotec, Abitbol and All Star choose to launder the kickback payments through Titan List and Mailing Services (“Titan”), a Florida based marketing services company. 54. By December 2010, All Star and UVS/Hypotec, by and through Abitbol, have formalized their Kickback Agreement with All Star splitting and kicking back to UVS/Hypotec $350 for each loan UVS/Hypotec and/or Abitbol assigns and refers to All Star under the Kickback Agreement. Exhibit 1, Dec. 12 - 16, 2010 email correspondence. To help conceal the illegal Kickback Agreement from borrowers, regulators and auditors, UVS/Hypotec, Abitbol, and All Star choose and agree to launder the kickback payments through marketing companies to conceal the kickbacks and create the false impression the kickbacks are payments for legitimate services. 55. Between April, 2010, and March, 2011, All Star pays $77,996.23 in kickbacks to UVS/Hypotec and Abitbol laundered through Titan. At a minimum, All Star pays UVS/Hypotec and Abitbol kickbacks on a monthly basis, and, more often than not, makes multiple kickback payments in a single month that are received and accepted by UVS/Hypotec and/or Abitbol. The sham split invoices and payment records associated with these kickbacks are collectively attached as Exhibit 2. 56. The sham invoices associated with these twenty three kickback payments state that Titan produces, prints and mails borrower solicitations on behalf of Fred Abitbol at “[email protected]”. See, e.g., Exhibit 2(a). Plaintiff believes and therefore avers that Fred Abitbol receives and accepts the kickback payments in the course and scope of his employment and/or agency on behalf of UVS/Hypotec. 57. The sham invoices associated with these kickback payments state that UVS/Hypotec and Abitbol use the kickback payments to cause solicitations to be produced and mailed interstate an attempt to lure tens of thousands of borrowers into the All Star Scheme and for the purpose of continuing to receive kickbacks from All Star. 58. Based on the postage charges appearing on the sham invoices, Plaintiff believes, and therefore avers, that UVS/Hypotec causes these borrower solicitations to be placed in the U.S. Mail with most, if not all, delivered interstate; that is, the borrower solicitations are placed in the mail in one state and delivered to potential borrowers in other states. 59. Each of the twenty three kickback payments in Exhibit 2 is made by transmission over and using interstate wires. In some instances, All Star electronically transmits a credit card authorization form from its office in Maryland and UVS/Hypotec and/or Abitbol receives the kickback payment by and through Titan in Florida. In other instances, All Star sends the kickback payment by wire with the payment originating at All Star’s bank in Maryland, and being received by UVS/Hypotec and Abitbol through Titan in Florida. 60. During this first year of participation in the All Star Scheme, UVS/Hypotec, by and through Abitbol and other loan offices, employees and /or agents, assigns and refers more than 230 Allegro loans to All Star for title and settlement services in performance of the Kickback and Cartel Agreements and involving loan transactions secured by real property in more than 15 states, including Indiana. B. UVS/Hypotec and Abitbol Continue Participation in the All Star Scheme Receiving More Than a Half of a Million Dollars in Kickbacks Over the Next Two Years. 61. On or about May 2011, UVS/Hypotec and Abitbol discontinue brokering Allegro-funded loans but UVS/Hypotec and Abitbol continue to perform the Kickback and Cartel Agreements substituting UVS originated loans brokered through UVS/Hypotec by Abitbol and other UVS/Hypotec employees and/or agents. See May 16, 2011 email correspondence, attached as Exhibit 3. 62. All Star continues to perform the Kickback Agreement and continues to pay UVS/Hypotec kickbacks laundered through Titan. 63. At the beginning of this phase of participation in the All Star Scheme, All Star and UVS/Hypotec agree to drastically increase the kickback All Star pays UVS/Hypotec. All Star agrees to split and kick back $1,800 to UVS on each loan assigned and referred to All Star by UVS/Hypotec. See April 8-11, 2011 email correspondence, collectively attached as Exhibit 4. 64. For the two years spanning May, 2011, through April, 2013, All Star pays $529,250.29 in kickbacks to UVS/Hypotec laundered through Titan. The sham and split invoices and payment records associated with these kickbacks are collectively attached as Exhibit 5. 65. The sham invoices associated with these kickback payments state that UVS/Hypotec and Abitbol use the kickback payments to cause solicitations to be produced and mailed in an attempt to lure tens of thousands of additional borrowers into the All Star Scheme. 66. Based on the postage charges on the sham invoices, Plaintiff believes, and therefore avers, that UVS/Hypotec causes these borrower solicitations to be placed in the U.S. Mail with most, if not all, delivered interstate; that is, the borrower solicitations are placed in the mail in one state and delivered to the potential borrowers in other states. 67. Again, all of the kickback payments described above were paid by All Star, and received and accepted by UVS/Hypotec and/or Abitbol, using and over interstate wires. In those instances when All Star paid the kickback by wire transfer, the payment was transmitted over interstate wires originating at All Star’s bank in Maryland with UVS/Hypotec and/or Abitbol receiving and accepting the kickback by and through Titan in Florida. See, e.g., Exhibit 5 (k). In those instances when All Star paid the kickback by credit card, All Star transmitted the credit card authorization over the interstate wires from its offices in Maryland with the authorization and kickback received and accepted by UVS/Hypotec and/or Abitbol by and through Titan in Florida. See, e.g., Exhibit 5 (a) 68. Also during this time period, All Star pays kickbacks to UVS/Hypotec laundered through Aziza Marketing, Inc (“Aziza”), a Florida-based internet marketing company. See July 5, 2011 e-mail from UVS to All Star forwarding invoice for payment, attached as Exhibit 6. 69. All Star pays $29,911.22 in kickbacks to UVS laundered through Aziza. The sham invoices and payment records are collectively attached as Exhibit 7. 70. All of the kickback payments laundered through Aziza were paid by All Star, and received and accepted by UVS/Hypotec and/or Abitbol, using and over interstate wires via wire transfer, originating at All Star’s bank in Maryland and UVS/Hypotec and/or Abitbol receiving and accepting the kickback by and through Aziza in Florida. See, e.g., Exhibit 7 (c). 71. In addition to Titan and Aziza, beginning on or about May 13, 2013, All Star begins paying kickback to UVS laundered through GuateCall, a Guatemala City-based call center (“GuateCall”). From May, 2013, through October, 2014, All Star pays $228,290 in kickbacks to UVS/Hypotec laundered through GuateCall. The sham invoices and payment records are collectively attached as Exhibit 8. 72. According to invoices and payment records collected in Exhibit 8, UVS is receiving “live transfer” calls from GuateCall, where potential borrowers contact a centralized call center and then are transferred by GuateCall to UVS/Hypotec brokers and other employees. See also, call activity spreadsheet for 10/28/13-11/3/13, attached as Exhibit 9. The call center GuateCall uses to receive and transmit these calls is not in the United States, and the calls are transmitted over and using interstate and international wires, with the call originating in one state, transferred internationally to Guatemala, and then transferred again to UVS’s loan officers in a second state. 73. All of the kickback payments laundered through GuateCall are made using and by transmission over interstate wires, with All Star transmitting the kickback payment from its bank in Maryland and received and accepted by UVS/Hypotec by and through GuateCall’s U.S. parent company, Saika, S.A., in New York. See, e.g., Exhibit 8 (b). 74. From May, 2011, through August, 2013, UVS/Hypotec assigns and refers more than 700 UVS loans to All Star for title and settlement services in performance of the Kickback and Cartel Agreements and involving loan transactions secured by real property in more than 10 states, including Indiana. C. UVS/Hypotec and Abitbol Continue Participation in the All Star Scheme Receiving Tens of Thousands of Dollars More in Kickbacks for the Assignment and Referral of Hypotec Brokered Loans. 75. By October 2014, UVS/Hypotec and Abitbol begin to operate and hold themselves out to the public as Hypotec and less frequently as UVS. See Oct. 27, 2014 e-mail from Danny Perez, attached as Exhibit 10. Hypotec maintains branch locations at 11900 Biscayne Blvd., Suite 106, Miami FL and at 6380 Wilshire Blvd., Suite 1602, Los Angeles, CA. 76. UVS/Hypotec and Abitbol continue to perform the Kickback and Cartel Agreements receiving and accepting kickbacks in exchange for referring and assigning Hypotec loans to All Star for title and settlement services. 77. All Star continues paying kickbacks to UVS/Hypotec. In December, 2014, All Star and UVS/Hypotec agree that All Star will split and kickback to UVS/Hypotec $700 for every loan referred and assigned to All Star by UVS/Hypotec. Exhibit 11, December, 5, 2014 email correspondence. 78. Between November, 2014, and May, 2015, All Star pays $46,246.00 in kickbacks to UVS/Hypotec laundered through GuateCall. The sham invoices and payment records associated with these kickbacks are attached as Exhibit 12. 79. UVS/Hypotec is receiving “live transfer” calls from GuateCall, and the calls are being directed to UV/Hypotec and its loan officers and other employees and/or agents. See, e.g., Exhibit 9. The call center GuateCall uses to receive calls from potential borrowers and transmit the calls to UVS/Hypotec is not in the United States, and the calls are transmitted over interstate and international wires, with the call originating in one state, transferred internationally to Guatemala, and then transferred again to UVS/Hypotec’s loan officers in a second state. 80. All of the kickback payments attached as Exhibit 12 are made by transmission over interstate wires, with All Star transmitting the kickback payment by wire transfer originating at All Star’s bank in Maryland and received and accepted by UVS/Hypotec, by and through GuateCall’s U.S. parent company, Saika, S.A., in New York. See, e.g., Exhibit 12 (a). 81. UVS/Hypotec and All Star agree to and perform the Kickback Agreement through at least September 2015, with UVS/Hypotec, Abitbol and All Star continuing to launder kickbacks through Titan and other third party marketing companies. See Aug. 31–Sept. 8, 2015 e-mail communications between Abitbol and Titan regarding All Star payment of invoice and scheduling of mail drop, attached as Exhibit 13. Based on the continuing pattern of practice between UVS/Hypotec, Abitbol and All Star, Plaintiffs believe and therefore aver UVS/Hypotec, Abitbol and All Star continue to perform the Kickback and Cartel Agreements through at least December, 2015, and, on information and belief, longer. 82. UVS/Hypotec, by and through Abitbol and others, assigned and referred more than 150 Hypotec loans to All Star for title and settlement services in performance of the Kickback and Cartel Agreements and involving loan transactions secured by real property in more than 5 states, including Indiana. 83. Based on the continuing pattern of practice between All Star, UVS/Hypotec and Abitbol, Plaintiff believes, and therefore avers, that All Star pays, and UVS/Hypotec receives and accepts, kickbacks in exchange for the assignment and referral of Allegro, UVS and/or Hypotec loans from additional known and unknown UVS/Hypotec loan officers, brokers and/or other employees and/or agents in furtherance and performance of the Kickback Agreement, including, but not limited to Pejman Gabayan, Lawrence Abitbol, Justin McKenzie, Patric Keating, Greg Thompson, Marcus Decarie, Phil Pion, Brandon Smith, Sebastian Prosper, Valerie Hapner, and Richard Khalifa. See Exhibit 9, listing UVS/Hypotec loan officers, employees and/or agents receiving live transfer calls from GuateCall. 84. Based on the continuing pattern of practice between All Star, UVS/Hypotec and Abitbol, Plaintiff believes, and therefore avers, that All Star pays kickbacks to UVS/Hypotec and Abitbol by and through other third party marketing companies in addition to those identified herein. 85. Based on the continuing pattern of practice between All Star, UVS/Hypotec and Abitbol, Plaintiff believes, and therefore avers, that All Star, UVS/Hypotec and Abitbol use and cause to be used U.S. mail and/or interstate wires to identify and solicit borrowers that are the currency of the Kickback and Cartel Agreements between All Star, UVS/Hypotec, and Abitbol. 86. No title services are provided by UVS/Hypotec, or by their employees and/or agents, including Abitbol, associated with the receipt and acceptance of the kickbacks. The payment by All Star and the receipt and acceptance by UVS/Hypotec and Abitbol of the kickbacks is made solely for the assignment and referral of the UVS/Hypotec borrowers to All Star. 87. At all relevant times, Abitbol and all other UVS/Hypotec loan officers, employees and/or agents who receive and accept kickbacks are licensed mortgage brokers and/or authorized loan officers, and at all relevant times are acting within scope of the business relationship and duties of their employment on behalf of UVS/Hypotec, specifically seeking borrowers and originating and securing loans for residential mortgages through UVS/Hypotec and/or brokering such loans through UVS/Hypotec to other lenders whom UVS/Hypotec authorizes, referring the borrowers to title companies, and working with title companies to close these loans. All activities, including interactions with All Star, are for the benefit of UVS/ Hypotec and/or Abitbol. D. UVS/Hypotec and Abitbol Perform the Cartel Agreements Fixing Supracompetitive Prices for Title and Settlement Services and Refusing to Deal with Competing Title Companies. 88. Beginning in July 2010, All Star and UVS/Hypotec, by and through Abitbol, conspire and agree to fix prices for title and settlement services associated with Allegro loans assigned and referred by Abitbol and UVS/Hypotec to All Star under the Kickback Agreement. Initially, UVS/Hypotec, by and through Abitbol, and All Star agree to fix prices at $600 plus title in licensed states, and $1,300 (including title) for loans closed in Florida. All Star and UVS/Hypotec further agree to charge $200 more in unlicensed states; that is, those states in which All Star is not a licensed title and settlement services company and must work with a cooperating title company. See July 7, 2010 Title Fees Spreadsheet, attached as Exhibit 14. This $200 Unlicensed State Surcharge is the minimum amount of actual damages sustained by borrowers from unlicensed states assigned and referred to All Star by UVS/Hypotec in performance of the Cartel Agreements during this time period. 89. The next month, in August, 2010, All Star and Abitbol discuss the Kickback and Refusal to Deal Agreements, wherein Abitbol demands All Star to continue paying kickbacks to Abitbol and UVS/Hypotec based on Abitbol’ s performance of the Cartel Agreements: “You already did not contribute the whole month of July and now you are not contributing for 3 out of 4 weeks in august. I cannot continue to send all my business unless I know you will start again on our original deal.” See Aug. 16, 2010 e-mail, attached as Exhibit 15 90. Two months later, in October, 2010, after several months and thousands of dollars of kickback payments, All Star and UVS/Hypotec, by and through Abitbol, expand their pricing fixing agreement. While continuing to apply a fixed $600 plus title for loans closed in licensed states and $800 plus title for loans closed in unlicensed states, All Star and UVS/Hypotec, by and through Abitbol agree and fix prices for FHA Streamline loans to $600 plus title in licensed states and $800 plus title in unlicensed states. See Oct. 25, 2010 Fee Spreadsheet, attached as Exhibit 16. These prices are approximately $100 higher than the prices All Star is charging other Participating Lenders (UVS/Hypotec Overcharge”), which amount represents the minimum amount of actual damages incurred by borrowers assigned and referred to All Star by UVS/Hypotec, through Abitbol and other employees and/or agents, pursuant to the Cartel Agreements. 91. Just two months later, in December, 2010, UVS/Hypotec, by and through Abitbol, and All Star conspire and agree to fix prices even higher, increasing the amount charged in licensed and non-licensed states to $800 plus title insurance, and in Florida to $1,500 including title. This agreement is memorialized in the 12/16/10 Title Fee Spreadsheet, attached as Exhibit 17. These prices are approximately $100-$300 higher than the prices All Star is charging other Participating Lenders and this UVS/Hypotec Overcharge, along with any applicable Unlicensed State Surcharge, represents the minimum amount of actual damages incurred by borrowers assigned and referred to All Star by UVS/Hypotec pursuant to the Cartel Agreements. 92. The December, 2010, agreement also memorializes that $350 of the $800 charged is the amount All Star splits and kicks back to UVS/Hypotec and is not associated with any legitimate title or settlement service. See Exhibit 1. . In addition and in the alternative to the UVS/Hypotec Overcharge and any applicable Unlicensed State Surcharge, this $350 Kickback Surcharge represents the minimum amount of actual damages incurred by borrowers assigned and referred to All Star by UVS/Hypotec pursuant to the Cartel Agreements during this time period. 93. Four months later, in April, 2011, All Star and UVS/Hypotec, by and through Abitbol, conspire and agree to triple the fixed prices for title and settlements services on those loans assigned and referred to All Star by UVS/Hypotec to $2,350 plus title insurance. These prices are approximately $300-$1,650 higher than the prices All Star is charging other Participating Lenders, which amount of UVS/Hypotec Overcharge represents the minimum amount of actual damages incurred by borrowers assigned and referred to All Star by UVS/Hypotec pursuant to the Cartel Agreements. 94. Under these new fixed prices, All Star and UVS raise the Kickback Surcharge six fold with All Star splitting and kicking back to UVS/Hypotec $1,800 of the fixed price for each loan assigned and referred to All Star under the Kickback and Cartel Agreements. In addition to and in the alternative to the UVS/Hypotec Overcharge, this $1,800 Kickback Surcharge constitutes the minimum amount of actual damages incurred by borrowers assigned and referred to All Star by UVS/Hypotec pursuant to the Cartel Agreements. See Exhibit 4. 95. To replace revenue that it is splitting and kicking back to UVS./Hypotec, All Star instructs its employees to charge UVS/Hypotec borrowers for unnecessary endorsements and enhanced title policies on loans assigned and referred by UVS/Hypotec to All Star under the Kickback and Cartel Agreements. The amounts associated with these unnecessary endorsements and enhanced title policies constitutes an Enhanced Title Surcharge, which amount along with the other amounts pled herein, constitute the minimum amount of actual damages suffered by UVS borrowers assigned and referred to All Star by UVS pursuant to the Cartel Agreements. See Aug. 12 to Aug. 26, 2011 e- mail correspondence regarding use of “enhanced policies”, attached as Exhibit 18. 96. A few weeks after instituting the policy of charging unnecessary endorsement and enhanced title policies, Alex Godobrodko, a sales representative employed by All Star, circulates a spreadsheet memorializing the price fixing and minimum fee agreements with certain Participating Lenders in the All Star Scheme. Based on the facts pled herein, Plaintiff believes and therefore avers that the agreements attributed to “Allegro Funding” are the price fixing and minimum fee agreements between All Star and UVS/Hypotec and are applied to all loans referred to All Star by UVS/Hypotec and/or its employees and/or agents, including Abitbol. See 9/16/11 Fee Spreadsheet, attached as Exhibit 19. 97. Under these price fixing and minimum fee agreements, UVS/Hypotec’ borrowers are charged $2,350 plus title for loans closed in licensed states. These prices are approximately $300-$1,650 higher than the prices All Star is charging other Participating Lenders, which UVS/Hypotec Overcharge represents the minimum amount of actual damages incurred by borrowers assigned and referred to All Star by UVS/Hypotec pursuant to the Cartel Agreements during this time period. 98. Under these price fixing and minimum fee agreements, UVS borrowers from unlicensed states are charged $1,000 plus title, representing a $200 increase in the Unlicensed State Surcharge. In addition and in the alternative to the UVS/Hypotec Overcharge and/or Kickback Surcharge, this Unlicensed State Surcharge is the minimum amount of damages incurred by borrowers in “unlicensed states” assigned and referred to All Star by UVS/Hypotec under the Kickback and Cartel Agreements during this time period. 99. Four months later, on January 12, 2012, All Star and UVS/Hypotec agree to modify its price fixing agreement to charge $2,350 plus title insurance on loans assigned and referred by UVS/Hypotec to All Star from “All States except NM”, and to charge $1,000 plus title insurance on loans assigned and referred to All Star located in New Mexico. See 1/12/12 Fee Spreadsheet, attached as Exhibit 20. These prices are approximately $800-1,550 higher than the prices All Star is charging other Participating Lenders, a UVS/Hypotec Overcharge which represents the minimum amount of actual damages incurred by borrowers assigned and referred to All Star by UVS/Hypotec pursuant to the Kickback and Cartel Agreements during this time period. 100. In December 2014, All Star and UVS/Hypotec conspire and agree to fix prices for title and settlement service associated with Hypotec loans assigned and referred from UVS/Hypotec to $1,150 plus title insurance. Of this amount, $700 represents the amount All Star splits and kickbacks to UVS/Hypotec for assigning and referring the loan to All Star for title and settlement services. In addition and in the alternative to the UVS/Hypotec Overcharge, this Kickback Surcharge is the minimum amount of damages incurred by borrowers referred and assigned to All Star by UVS/Hypotec under the Kickback and Cartel Agreements during this time period. See Exhibit 11. 101. Approximately four months later, in April, 2015, All Star and Hypotec conspire and agree to fix prices for title and settlement service associated with loans assigned and referred from UVS/Hypotec to $750 plus title insurance in licensed states, and $1,000 plus title insurance for loans assigned and referred to All Star in commitment states, that is, states requiring borrowers obtain a letter certifying that their loan has been through the underwriting process and has been approved. See April 29, 2015 e-mail, attached as Exhibit 21. These prices are approximately $55-$255 higher than the prices All Star is charging other Participating Lenders, a UVS/Hypotec Overcharge which represents the minimum amount of actual damages incurred by borrowers assigned and referred to All Star by UVS/Hypotec pursuant to the Cartel Agreements during this time period. 102. All Star and UVS/Hypotec perform the Cartel Agreements, including these fixed and minimum price agreements, for loans assigned and referred to All Star by UVS/Hypotec through at least November, 2015, and, based on All Star and UVS/Hypotec’s continuing pattern of practice, longer. See June 29, 2015 e-mail, attached as Exhibit 22; Jason’s Client Fee Structure Effective 11/30/15, attached as Exhibit 23. 103. Based on the continuing pattern of practice between All Star and UVS/Hypotec, Plaintiff believes, and therefore avers, that All Star and UVS/Hypotec conspire to and fix prices for title and settlement services associated with loans assigned and referred to All Star by additional known and unknown UVS/Hypotec loan officers, employees and/or agents in furtherance and performance of the All Star Lender Cartel and the Cartel Agreements. 104. UVS/Hypotec and Abitbol exercise a managerial role in the All Star Scheme by receiving and accepting the kickback payments, requiring performance of Kickback and Cartel Agreements, and agreeing and requiring that All Star charge supracompetitive prices for title and settlement services to execute and allow the All Star Scheme to continue. 105. As a result of the Kickback and Cartel Agreements, and UVS/Hypotec’s and Abitbol’s participation in the All Star Lender Cartel and wider All Star Scheme, the borrowers on loans assigned and referred to All Star by UVS/Hypotec, including Plaintiff and alleged Class Members, are harmed because they are defrauded into being charged and paying higher and supracompetitive prices for title and settlement services than they would have been charged and paid without the Kickback and Cartel Agreements, are denied kickback free title and settlement services, are denied their choice of title and settlement service provider and other consumer benefits of a competitive marketplace, and are deprived of the intangible right to honest services by their mortgage broker. FACTUAL ALLEGATIONS RELATED TO THE INDIVIDUAL CLASS REPRESENTATIVE 106. Plaintiff’s transaction and the course of events thereafter exemplify the working of the Kickback and Cartel Agreements and are typical of all alleged Class Members’ transactions. 107. In or about October 2015, Plaintiff Sheila Obiefuna obtains a residential mortgage loan from UVS/Hypotec through Abitbol, the President of Hypotec, in relation to the refinance of her residential real property located at 7003 Falcon Drive, Shererville, IN 46375. Plaintiff Obiefuna’s UVS/Hypotec loan closes on or about October 16, 2015. 108. Plaintiff Obiefuna believes, and therefore avers, that Abitbol assigned and referred Plaintiff Obiefuna’s loan to All Star in performance of the Refusal to Deal Agreement and as quid pro quo for the kickback All Star paid to Hypotec in accordance with ¶ 81, thereby performing the Kickback and Cartel Agreements, depriving Plaintiff Obiefuna of her choice of title and settlement service provider, and denying Plaintiff Obiefuna kickback-free title and settlement services. 109. All Star charges Plaintiff Obiefuna for title and settlement service fees, thereby performing the Price Fixing and Minimum Fee Agreements. When All Star initially sends Obiefuna’s HUD-1 to UVS/Hypotec for approval, see Exhibit 30, UVS/Hypotec directs All Star to raise the fees it is charging Obiefuna to match the Price Fixing Agreement. Exhibit 31, Oct. 15, 2015 email directing All Star to increase fees. All Star does so. Exhibit 32, Obiefuna HUD-1. 110. Plaintiff Obiefuna believes, and therefore avers, the price for title and settlement service fees All Star charges to Plaintiff Obiefuna are supracompetitive and higher than the same charges would have been without the Kickback and Cartel Agreements. 111. The title and settlement service fees UVS/Hypotec and All Star charges Obiefuna, and Obiefuna pays, include the approximately $55-255 UVS/Hypotec Overcharge described in ¶101, which is the minimum amount of Plaintiff Obiefuna’s actual damages resulting from the All Star Scheme and Cartel Agreements. 112. Plaintiff Obiefuna believes, and therefore avers, that All Star disburses proceeds from Plaintiff Obiefuna’s UVS/Hypotec loan in payment of these title and settlement service charges. 113. As a direct and proximate result of the Kickback and Cartel Agreements, and UVS/Hypotec’s performance of these agreements, Plaintiff Obiefuna is harmed because she was: (i) charged and paid more for settlement services than she would have paid without the illegal Kickback and Cartel Agreements; (ii) was defrauded into being charged and paying supracompetitive prices for title and settlements service fees; (iii) stripped of her choice of title and settlement service provider and her mortgage broker’s impartial evaluation of All Star’s service and quality; (iv) deprived of kickback-free title and settlement services and the consumer benefits of fair competition among independent title and settlement service providers; and (v) deprived of her right to honest services of her mortgage broker. 114. As a direct and proximate result of the Kickback and Cartel Agreements, Plaintiff Obiefuna was charged and paid more for the title and settlement services than she would have paid without the Kickback and Cartel Agreements, and suffered actual damages in the amount of at least approximately $55-255 and, on information and belief, additional amounts. FACTUAL ALLEGATIONS RELATED TO LIMITATIONS 115. Essential to the All Star Scheme, UVS/Hypotec and Abitbol, as well as other members of the All Star Lender Cartel, and All Star undertake affirmative acts that fraudulently conceal the Kickback and Cartel Agreements, the resulting kickbacks and fixed prices, and the actual injury and damages to borrowers, including Plaintiff and alleged Class Members. I. All Star and UVS/Hypotec Launder Kickbacks through Third Party Marketing Companies and Use Sham Invoice and Payment Records. 116. As described in ¶ 21 above, UVS/Hypotec, Abitbol and All Star chose to conceal the fact and payment of kickbacks by laundering kickbacks through third party marketing companies. 117. As described in ¶¶ 24-29, UVS/Hypotec and All Star further chose to conceal the illegal kickbacks and Kickback Agreement through the creation of sham invoices and sham payment records. 118. These sham invoices and payment records create an ongoing false record that conceals and prevents discovery of the fact that any thing of value is exchanged between UVS/Hypotec and All Star related to the assignment and referral of UVS/Hypotec loans, including Plaintiff’s loan, the actual payment and receipt and acceptance of illegal kickbacks, and UVS/Hypotec’s coordinated business relationship with All Star. II. Abitbol, UVS/Hypotec and All Star’s Fraudulent Marketing Representations 119. To further conceal the Price Fixing, Minimum Fee Agreements, the Kickback Agreement, and the resulting supracompetitive prices charged to borrowers for title and settlement services, Abitbol, UVS/Hypotec and All Star make false representations to borrowers in marketing materials. 120. In direct mail solicitations of borrowers, UVS/Hypotec represents that a borrower can receive “30-40% off when using All Star Title!” and that All Star is UVS/Hypotec’s “Preferred Title Company” See, e.g., April 14, 2010 Allegro mailer, attached as Exhibit 24, and Sept. 21, 2011 and June 28, 2013 UVS mailers, collectively attached as Exhibit 25. 121. These representations are false because: (i) neither UVS/Hypotec nor its loan funding affiliates recognize the designation of a “preferred” title company; (ii) a borrower cannot save any percentage of title fees with All Star, but instead is charged higher and supracompetitive fees under the Price Fixing and Minimum Fee Agreements; (iii) the reason the UVS/Hypotec broker wants a borrower to use All Star is for UVS/Hypotec to obtain kickbacks and to perform its obligations under the Cartel Agreements, not because the borrower will receive lower fees; and (iv) any borrower responding to the direct mail solicitation does not “choose” All Star, but will be assigned and referred by UVS/Hypotec to All Star. 122. Plaintiff believes, and therefore avers, that UVS/Hypotec makes similar false representations by other means, e.g. as in telemarketing and “live transfer” phone calls with borrowers. III. UVS/Hypotec’s and All Star’s False Allocation of Fees and APR Manipulation 123. The Truth in Lending Act (“TILA”) mandates that lenders report to borrowers the Annual Percentage Rate, or “APR”, associated with a loan, refinance, or reverse mortgage. While the interest rate of a loan is the cost to borrow the principal loan amount, the APR includes both the interest rate of the loan plus certain other lender fees, such as origination fees, discount points and some closing costs, including some title and settlement service fees. The APR is intended as a tool for borrowers to compare, among other things, closing and settlement costs across loans with similar interest rates and to easily identify when one loan has substantially higher fees than another loan at the same interest rate. Lenders are required to report to borrowers a calculation of the APR on various loan documents, including the TILA disclosure. 124. The title and settlement service fees that are excluded in the APR calculation are defined by TILA. 12 C.F.R. § 1026.4(c). Because some fees are excluded from the APR (and others are not), title and settlement service companies and lenders can manipulate – and falsely minimize – the APR by choosing to falsely allocate amounts charged for title and settlement services to those categories of fees that are excluded from the APR calculation. 125. As a regular and continuing business practice, Abitbol, UVS/Hypotec and All Star choose to allocate the charges for title and settlement services associated with a borrower’s loan only to those categories of title services not included in the APR, thereby falsely minimizing the APR reported on borrowers’ loan documents and required federal disclosures and to conceal the Kickback and Cartel Agreements, and the resulting supracompetitive prices charged to borrowers for title and settlement services. 126. For example, fees for “title examination”, “abstract of title” and “title insurance” are excluded from the APR calculation – see, 12 C.F.R. § 1026.4(c)(7)(i) – while a settlement or closing fee, or an application signing fee, is a settlement service cost required to be included in the APR calculation. See 12 C.F.R. § 1026.4(a)(1)(i). By allocating the charges associated with conducting a settlement or closing with a borrower to the category of “title exam” or “abstract” the result would be a false, and falsely minimized, APR. 127. All Star chooses to employ the false allocation of fees and manipulation of the APR as a regular business practice as early as 2011 and at least through October, 2015, allocating all charges for title and settlement service to “Title Exam” or “Abstract” because those fees are excluded from, and do not raise, the APR, and thereby assists in fraudulently concealing the Kickback and Cartel Agreements and the resulting supracompetitive prices charged borrowers for title and settlement services. See, e.g., June 6, 2011 e-mail, attached as Exhibit 26; September 24, 2015 e-mail, attached as Exhibit 27; October 6, 2015 e-mail, attached as Exhibit 28. 128. UVS/Hypotec participates in and ratifies this false allocation of fees. See Exhibit 29, Oct. 26, 2011 e-mail between UVS and All Star allocating charges for settlement service to title insurance because they do not affect the APR. Based on this continuing pattern of practice, Plaintiff believes, and therefore avers, that All Star and UVS/Hypotec engage in the false allocation and manipulation of the APR throughout the time period UVS/Hypotec is participating in the All Star Scheme as one of the ways to conceal the Kickback and Cartel Agreements and the resulting supracompetitive prices charged to borrowers for title and settlement services. 129. For example, despite conducting a settlement or closing with each borrower, All Star and UVS/Hypotec choose to not allocate any amount of All Star’s charges associated with a borrower’s loan to “settlement or closing fee” because that charge is included in the APR. Instead, All Star and UVS/Hypotec allocate all charges, including that portion attributable to conducting a settlement or closing, to “Title Exam”, “Abstract” or “Title Insurance”, which are excluded from the APR. See Exhibit 29. 130. UVS/Hypotec’s and All Star’s choice to falsely allocate fees resulted in the fraudulent reporting of false APRs and the false, and falsely minimized, representation of the cost of the UVS/Hypotec loan to borrowers. 131. The UVS/Hypotec’s and All Star’s choice to falsely allocate fees and fraudulently report these false allocations in borrowers’ loan documents concealed from borrowers the supracompetitive pricing of title and settlement services resulting from the Kickback and Cartel Agreements and prevented borrowers from discovering the supracompetitive nature of the pricing through comparison to UVS/Hypotec’s and All Star’s competitors. 132. As a regular business practice, All Star used various software programs, including “Titlehound”, to produce borrower loan documents, including documents reporting the APRs associated with a loan. All Star caused this software, including Titlehound, to be programmed to make these false allocations of title and settlement service fees and the resulting false APR calculations, and to produce UVS/Hypotec’s loan documents to present to borrowers and on which UVS/Hypotec and All Star intended borrowers to rely. 133. UVS/Hypotec’s and All Star’s choice to falsely allocate fees and manipulate and falsely report APRs fraudulently concealed from borrowers the coordinated business relationship between UVS/Hypotec and All Star under the Kickback and Cartel Agreements, the supracompetitive and higher prices for title and settlement services resulting from the Kickback and Cartel Agreements, and affirmatively prevented borrowers from discovering their injuries resulting therefrom. IV. False Representations in Borrowers’ Loan Documents 134. In addition to false representations in marketing communications to borrowers and the choice to misrepresent the actual APRs through the intentionally classifying some of All Star’s charges as non-APR related charges, UVS/Hypotec and All Star choose to make false representations on borrowers’ loan documents. 135. At all relevant times, federal law requires UVS/Hypotec, as lender or broker, to provide a “Good Faith” Estimate to the borrower within three days of taking a loan application. 12 C.F.R. § 1024.7(a)-(b). 136. Federal law requires Block 4 of the “Good Faith” Estimate to only state the charges for “title services and lender’s title insurance”. 137. As a regular pattern of practice, UVS/Hypotec chooses to falsely include in Block 4 charges that are not title services and lender’s title insurance including the UVS/Hypotec Overcharge (see ¶¶ 90 – 93, 97, 99, 101), Kickback Surcharge (¶¶ 92, 94, 100), Enhanced Title Surcharge (¶ 95), Unlicensed State Surcharge ((¶¶ 88, 98), and other flat fee overcharges associated with the Price Fixing and Minimum Fee Agreements. 138. UVS/Hypotec’s choice to falsely include these charges in Block 4 of the “Good Faith” Estimate, contrary to federal law, conceals from borrowers: (i) the charges and amounts associated with the surcharges and flat fixed fees, (ii) the fixed and supracompetitive nature of the charges, (iii) the illegal kickbacks, and (iv) the coordinated business relationship between Abitbol, UVS/Hypotec and All Star under the Kickback and Cartel Agreements. 139. In addition to the GFE, federal law, at all relevant times, requires each borrower to be provided with a HUD-1 Settlement Statement at the closing or settlement of a loan. The settlement agent is required to produce the HUD-1, but federal regulations require the lender or broker to provide to the settlement agent all information appearing in the HUD- 1 statement. 140. Section 1100 of the HUD-1 reports to the borrower the title and settlement services provided on the loan, along with the associated charges to the borrowers for those services. 141. As a continuing pattern and regular business practice, UVS/Hypotec and All Star choose and cause the false allocation of fees described in ¶¶ 123 - 133 (the “APR and GFE Misrepresentations”) to repeat and appear on UVS/Hypotec borrowers’ HUD-1 statements in Section 1100. 142. As a continuing pattern and regular business practice, UVS/Hypotec chooses to omit and chooses not to describe anywhere on a borrower’s HUD-1 statement the amount of the kickback received by UVS/Hypotec related to the borrower’s loan or the fact that All Star has paid a kickback to UVS/Hypotec for the assignment and referral of the borrower’s loan. UVS/Hypotec is required to report the kickback on Line 801 or Line 808 of the HUD-1. 143. As a continuing pattern of practice, UVS/Hypotec chooses to omit and chooses to not describe anywhere on a borrower’s HUD-1 statement that the borrower is being charged or the amount of any UVS/Hypotec Overcharge, Kickback Overcharge, Enhanced Title Surcharge, Unlicensed State Surcharge, or other flat fees associated with the fixed prices under the Cartel Agreements. UVS/Hypotec is required to report these amounts in Section 1100 or Section 1300 of the HUD-1. 144. As a continuing pattern of practice, UVS/Hypotec, and its loan officers, employees and/or agents including Abitbol, chooses to omit and chooses not to describe anywhere on a borrower’s HUD-1 statement that UVS/Hypotec ultimately receives a portion of the charges listed in Section 1100 of the HUD-1, falsely stating instead that All Star retains all amounts paid by the borrower. This representation is false because All Star in fact splits a portion of the Section 1100 charges to kick back to UVS/Hypotec under the Kickback and Cartel Agreements. 145. The choices to make these false representations and to omit this information on federally required forms presented to the UVS/Hypotec borrowers by All Star as UVS/Hypotec’s agent at closing, fraudulently conceals: (i) the charges and amounts associated with the surcharges, overcharges, and flat fixed fees, (ii) the fixed and supracompetitive nature of the charges, (iii) the illegal kickbacks, and (iv) the coordinated business relationship between UVS/Hypotec and All Star under the Kickback and Cartel Agreements. 146. Individually and collectively, UVS/Hypotec’s and All Star’s affirmative acts of concealment – the laundering of kickbacks through third party marketing companies, the related creation of sham invoice and payment records, false marketing statements, false allocation of fees and manipulation of the reported APR, and misrepresentations and omissions on borrowers “Good Faith” Estimates, HUD-1s, and other loan documents – are outside the control of UVS/Hypotec’s borrowers, including Plaintiff and Class Members, and are in the sole control of, and the result of choices by, UVS/Hypotec, including Abitbol, and All Star. V. Plaintiff’s Reasonable Diligence 147. As a result of the fraudulent concealments by UVS/Hypotec and All Star, Plaintiff Obiefuna (and, upon information and belief, all alleged Class Members) had no actual notice before, at or after the closing of her loan of the illegal kickbacks, the exchange of any thing of value between UVS/Hypotec and All Star, the Price Fixing and Minimum Fee Agreements or the resulting supracompetitive nature of the prices charged for title and settlement services, or the coordinated business relationship between UVS/Hypotec, Abitbol, and All Star under the Kickback and Cartel Agreements. 148. Plaintiff exercised reasonable diligence before, during and after the closing of her loan. 149. Plaintiff Obiefuna receives loan documents prepared by UVS/Hypotec in advance of her closing and reviews those loan documents. 150. Plaintiff Obiefuna believes, and therefore avers, that her pre-closing loan documents include a “Good Faith” Estimate prepared by UVS/Hypotec. Plaintiff Obiefuna is not in possession of the “Good Faith” Estimate issued regarding her refinance and believes that document is in the sole possession of UVS/Hypotec. 151. Plaintiff Obiefuna believes, and therefore avers, that UVS/Hypotec and All Star choose to omit from her “Good Faith” Estimate any description or statement of the coordinated business relationship between UVS/Hypotec and All Star and to include the fraudulent representations and omissions described in ¶¶ 135 – 38 (the “GFE Misrepresentations”). Plaintiff Obiefuna believes and therefore avers that her “Good Faith” Estimate does not identify All Star as the provider of any title settlement service related to her refinance. 152. Plaintiff Obiefuna believes, and therefore aver, that UVS/Hypotec and All Star include in her pre-closing documents UVS/Hypotec and All Star’s false allocation of fees and a false APR as described in ¶¶ 123 – 133 (the “APR Misrepresentations”). 153. Abitbol’s, UVS/Hypotec’s and All Star’s choices to make the false statements and omissions in Plaintiff Obiefuna’s pre-closing loan documents were done for the purposes of concealing, and did so conceal from Plaintiff Obiefuna, the coordinated business relationship between UVS/Hypotec, Abitbol and All Star, the Kickback and Cartel Agreements, the fact, nature and amount of the illegal kickbacks related to Plaintiff Obiefuna’s loan, and the fixed and supracompetitive nature of prices charged Plaintiff Obiefuna for title and settlement services. 154. As is reasonable under the circumstances, Plaintiff Obiefuna believes these pre-closing documents and the representations made therein. A reasonable borrower would have no reason to believe, and Plaintiff Obiefuna did not believe, that: (i) a coordinated business relationship exists between UVS/Hypotec, Abitbol and All Star; (ii) there has been any payment or exchange of a thing of value between UVS/Hypotec, Abitbol and All Star related to the assignment and referral of Plaintiff Obiefuna’s loan for title and settlement services, or (iii) the prices she will be charged for title and settlement services are fixed and supracompetitive or the result of Kickback and Cartel Agreements between UVS/Hypotec, Abitbol and All Star. 155. Plaintiff Obiefuna acts diligently during the closing or settlement of her loan. As a condition of funding her loan, UVS/Hypotec requires Plaintiff Obiefuna to participate in a closing, and she attends and fully participates in the required closing. 156. At the closing of their loan, Plaintiff Obiefuna receives from All Star, or its agent, several documents, including a HUD-1 Settlement Statement. 157. UVS/Hypotec, Abitbol and All Star choose to omit from the documents Plaintiff Obiefuna receives at closing, including Plaintiff Obiefuna’s HUD-1, any description or statement of the coordinated business relationship between UVS/Hypotec, Abitbol and All Star under any of the Kickback or Cartel Agreements. 158. UVS/Hypotec, Abitbol and All Star choose to omit from the documents Plaintiff Obiefuna receives at closing, including her HUD-1, any description or statement of any payment, amount or thing of value that was paid by All Star to UVS/Hypotec and/or Abitbol related to Plaintiff Obiefuna’s loan. 159. UVS/Hypotec, Abitbol, and All Star choose to include in Section 1100 of Plaintiff Obiefuna’s HUD-1 the fraudulent representations described in ¶ 144. 160. Plaintiff Obiefuna believes, and therefore avers, that UVS/Hypotec and All Star choose to include in the documents Plaintiff Obiefuna receives at closing, including her HUD-1, the false allocation of fees as described in ¶¶ 123 – 133, the APR misrepresentations, and the resulting fraudulent representations and omissions as described in ¶¶ 139 – 144, the GFE Misrepresentations. 161. UVS/Hypotec and All Star choose to make the fraudulent omissions and representations and false certifications in Plaintiff Obiefuna’s loan closing documents for the purposes of concealing, and did so conceal from Plaintiff Obiefuna, the coordinated business relationship between UVS/Hypotec and All Star, the Kickback and Cartel Agreements, the fact, nature, and amount of the illegal kickback related to Plaintiff Obiefuna’s loan, the fixed and supracompetitive nature of the prices charged for title and settlement services, and Plaintiff Obiefuna’s injuries and actual damages therefrom. 162. As is reasonable under the circumstances, Plaintiff Obiefuna believes these closing documents and the representations made therein. A reasonable borrower would have no reason to believe, and Plaintiff Obiefuna does not believe, that: (i) a coordinated business relationship exists between UVS/Hypotec and All Star; (ii) there has been any payment or exchange of a thing of value between UVS/Hypotec and All Star related to the assignment and referral of Plaintiff Obiefuna’s loan for title and settlement services; (iii) the prices charged for title and settlement services are fixed and supracompetitive and the result of Kickback and Cartel Agreements between UVS/Hypotec and All Star. 163. Plaintiff Obiefuna acts diligently after her closing. On or about December 28, 2018, Plaintiff Obiefuna receives a letter from undersigned counsel describing an investigation of All Star and UVS, which is the former name of Hypotec. This is Plaintiff Obiefuna’s first indication of any potential wrongful, illegal, and/or actionable conduct by anyone. 164. Within days, Plaintiff Obiefuna contacts and retains counsel. Plaintiff Obiefuna files this Complaint within months of becoming aware of facts giving rise to her causes of action. VI. Accrual and Tolling of Limitations 165. Plaintiff Obiefuna’s claims pursuant to pursuant to 15 U.S.C. § 1 and 18 U.S.C. § 1964 accrued at the earliest, for the purpose of the limitations period provided in 15 U.SC. § 15(b), on the date of her injury, that is on or about October 21, 2015, the date her loan proceeds were disbursed and Plaintiff Obiefuna incurred and paid the fixed and supracompetitive prices resulting from the Kickback and Cartel Agreements. Plaintiff Obiefuna’s claims are brought within four years of that date, and are not subject to any limitations defense. 166. In addition, and in the alternative, the limitations period provided in 15 U.S.C. § 15(b), applicable to claims pursuant to 15 U.S.C. § 1 and 18 U.S.C. § 1964, is subject to the discovery of injury rule. McCool v. Strata Oil Co., 972 F.2d 1452, 1464 (7th Cir. 1992). Abitbol and UVS/Hypotec’s affirmative acts precluded borrowers, including Plaintiff and Class Members, from discovering the fixed and supracompetitive nature of the prices charged for title and settlement services, and affirmatively prevented borrowers, including Plaintiff and Class Members, from discovering the fact of their injuries and harm resulting therefrom. 167. As a result, Plaintiff’s, and Class Members’, claims pursuant to 15 U.S.C. § 1 and 18 U.S.C. § 1964 did not accrue, for the purpose of the limitations period provided in 15 U.SC. § 15(b), until such time as Plaintiff, and Class Members, knew, or should have known, of their injury: for Plaintiff Obiefuna, on or about December 28, 2018. 168. In addition and in the alternative, as a result of the fraudulent concealments by Abitbol, UVS/Hypotec and All Star and Plaintiff’s reasonable diligence before, during and after the closing of Plaintiff’s loan, the statute of limitations as to all causes of action pled herein are and should be tolled beginning on the date of Plaintiff’s loan closing and continuing until the learning of facts giving rise to the causes of action pled herein: for Plaintiff Obiefuna, on or about December 28, 2018. 169. Plaintiff believes, and therefore avers, that the fraudulent concealments described herein were an integral component of the Kickback and Cartel Agreements and the All Star Scheme, and typical of all alleged Class Members’ transactions such that all Class Members are entitled to the equitable tolling of applicable limitations period. COUNT I Violation of the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2607(a) and (b) 170. Plaintiff incorporates the above stated paragraphs as if restated herein. 171. All transactions at issue in the instant complaint are incident to or part of real estate settlement services involving federally related mortgage loans and thereby are subject to the provisions of RESPA, 12 U.S.C. § 2601, et seq. 172. UVS/Hypotec, by and through its mortgage brokers, loan officers, employees and/or agents including Abitbol, received and accepted things of value paid by All Star in exchange for the assignment and referral of business to All Star in violation of RESPA, 12 U.S.C. § 2607(a). 173. UVS/Hypotec by and through its mortgage brokers, loan officers, employees and/or agents, including Abitbol, received and accepted illegal fee splits from All Star, wherein All Star split a portion of the fees charged borrowers and paid such portion or split to UVS/Hypotec and/or Abitbol, in violation of RESPA 12 U.S.C. § 2607(b); 174. All loans assigned and referred to All Star under the Kickback Scheme were secured by first or subordinate liens on residential real property and were funded in whole or in part by UVS/Hypotec and/or their affiliates whose deposits or accounts are insured by the Federal Government and/or who are regulated by an agency of the Federal Government. 175. The payment and/or arranging of payment of kickbacks to UVS/Hypotec and/or Abitbol by All Star and UVS/Hypotec’s and/or Abitbol’s receipt thereof constitute a violation of § 8(a) of RESPA, which prohibits the payment of referral fees or kickbacks pursuant to an agreement in connection with the origination or brokering of federally related mortgage loans. 176. Plaintiff alleges claims for violations of 12 U.S.C. §2607(a) and (b) on her own behalf and pursuant to Fed. R. Civ. P. 23 with the class defined as follows: All individuals in the United States who were borrowers on a federally related mortgage loan (as defined under the Real Estate Settlement Procedures Act, 12 U.S.C. § 2602) originated or brokered by Allegro Funding Corporation, U.V.S., Inc. or Hypotec, Inc., for which All Star Title, Inc. provided a settlement service, as identified in Section 1100 on the borrower’s HUD-1, between January 1, 2010 and December 31, 2016. Exempted from this class is any person who, during the period of January 1, 2010 through December 31, 2016, was an employee, officer, member and/or agent of Allegro Funding Corporation, U.V.S., Inc., Hypotec, Inc., or All Star Title, Inc. (the “RESPA Class”). 177. There are questions of law and fact common to the claims of each and all members of the RESPA Class. These common questions include, but are not limited to: a. Whether there existed a referral agreement between UVS/Hypotec and All Star whereby UVS/Hypotec agreed to assign and refer loans, refinances and reverse mortgages brokered or originated by UVS/Hypotec to All Star in return for kickbacks; b. Whether UVS/Hypotec and their employees and/or agents received illegal kickbacks from All Star for the assignment and referral of business to All Star; c. Whether the illegal kickbacks to UVS/Hypotec and their employees and/or agents violated RESPA; d. Whether UVS/Hypotec and All Star used third party marketing companies to launder kickbacks related to UVS/Hypotec loans; e. Whether Plaintiff and RESPA Class Members were forced to pay more for said settlement services; f. Whether UVS/Hypotec used sham and/or split invoices and sham payment records to actively and fraudulently conceal the payment, receipt and acceptance of illegal kickbacks; g. Whether UVS/Hypotec disclosed or described to any borrower their coordinated business relationships with All Star or the fact that a thing of value had been exchanged between UVS/Hypotec and All Star related to any borrower’s loan; h. Whether UVS/Hypotec disclosed or described on any borrower’s “Good Faith” Estimate, HUD-1 or other loan document UVS/Hypotec’s coordinated business relationships with All Star or the fact that a thing of value had been exchanged between UVS/Hypotec and All Star related to any borrower’s loan; i. Whether despite exercising reasonable due diligence, Plaintiff and RESPA Class Members did not and could not have learned of the illegal kickbacks until contacted by counsel; j. Whether Plaintiff and RESPA Class Members are entitled to treble damages under RESPA; and k. Whether Plaintiff and RESPA Class Members are entitled to attorneys’ fees and expenses under RESPA. 178. These common issues of law and fact predominate over any question affecting only individual RESPA Class Members. 179. Plaintiff’s transaction and claim is typical of the claims or defenses of the respective RESPA Class Members, and are subject to the same statutory measure of damages set forth in 12 U.S.C. § 2607(d)(2). 180. Plaintiff will fairly and adequately protect the interests of the RESPA Class. The interests of Plaintiff and all other members of the RESPA Class are identical. 181. Plaintiff’s counsel has substantial experience in complex litigation and class action proceedings, have been approved as class and settlement class counsel in multiple U.S. District Courts in similar litigation, and will adequately represent the RESPA Class’s interests. 182. The RESPA Class consists of borrowers on more than 1,200 loans, and thus are so numerous that joinder of all members is impracticable. 183. Separate actions by individual members of the class would create a risk of inconsistent or varying adjudications with respect to individual members of the class that would establish incompatible standards of conduct for UVS/Hypotec. 184. This action entails questions of law and fact common to RESPA Class Members that predominate over any questions affecting only individual plaintiffs; therefore, a class action is superior to other available methods of fair and efficient adjudication of this litigation. 185. Most members of the RESPA Class are unaware of their rights to prosecute a claim against UVS/Hypotec and/or Abitbol. 186. No member of the RESPA Class has a substantial interest in individually controlling the prosecution of a separate action, but if he or she does, he or she may exclude himself or herself from the class upon the receipt of notice under Fed. R. Civ. P. 23(c). COUNT II Violation of the Sherman Act, 15 U.S.C. § 1 187. Plaintiff incorporates the above stated paragraphs as if restated herein. 188. All Star, UVS/Hypotec and Abitbol conspired to and executed an agreement to fix the price of title and settlement services charged to borrowers on refinances, reverse mortgages, and other mortgage loans, in violation of the Sherman Act, 15 U.S.C. § 1. 189. As a direct and proximate result of the Cartel Agreements between UVS/Hypotec, Abitbol and All Star, Plaintiff and Class Members were charged and paid supracompetitive prices for title and settlement services and were charged and paid more for title and settlement services than they otherwise would have without the Cartel Agreements. 190. As a direct and proximate result of the Cartel Agreements between UVS/Hypotec, Abitbol and All Star, Plaintiff and Class Members were injured and suffered actual damages in the amount of between approximately $55-1,650, which is the minimum UVS/Hypotec Overcharge resulting from the Price Fixing and Minimum Fee Agreements between UVS/Hypotec, Abitbol and All Star. 191. In addition, and in the alternative, as a direct and proximate result of the Cartel Agreements between UVS/Hypotec and All Star, Plaintiff and Class Members were injured and suffered actual damages in the amount of applicable Kickback, Unlicensed State, and/or Enhanced Policy Surcharge resulting from the Price Fixing and Minimum Fee Agreements between UVS/Hypotec and All Star. 192. Plaintiff alleges claims pursuant to Fed. R. Civ. P. 23 for violations of 15 U.S.C. § 1 (“Antitrust Class”), with the alleged Antitrust Class defined as: All individuals in the United States who were borrowers on a loan originated or brokered by Allegro Funding Corporation, U.V.S., Inc. or Hypotec, Inc., for which All Star Title, Inc. provided a settlement service, as identified in Section 1100 on the borrower’s HUD-1, between January 1, 2010 and December 31, 2017. Exempted from this class is any person who, during the period of January 1, 2010 through December 31, 2017, was an employee, officer, member and/or agent of Allegro Funding Corporation, U.V.S., Inc., Hypotec, Inc. or All Star Title, Inc. 193. The Antitrust Class consists of borrowers on more than 1,200 loans, and thus are so numerous that joinder of all members is impracticable. 194. There are questions of law and fact common to the claims of each and all members of the Antitrust Class. These common questions include, but are not limited to: a. Whether UVS/Hypotec and their employees and/or agents violated the Sherman Act by conspiring to and fixing the title and settlement services fees charged to and paid by Plaintiff and Antitrust Class Members; b. Whether UVS/Hypotec and their employees and/or agents, including Abitbol, violated the Sherman Act by conspiring to and agreeing to supporting the Price Fixing and Minimum Fee Agreements through a concerted refusal to deal with non-cartel title and settlement service companies on all loans generated by UVS/Hypotec by the Kickback Agreement; c. Whether the prices charged borrowers on loans brokered or originated by UVS/Hypotec pursuant to the Cartel Agreements were supracompetitive, and higher than prices that would have been charged without the Cartel Agreements; d. Whether UVS/Hypotec made false representations to borrowers to actively conceal the Cartel Agreements and supracompetitive prices resulting therefrom; e. Whether All Star falsely allocated fees to actively conceal the Cartel Agreements and the supracompetitive prices charged borrowers on loans brokered or originated by UVS/Hypotec in performance of those agreements; f. Whether UVS/Hypotec made false representations on borrowers’ Good Faith Estimates, HUD-1s and other loan documents to actively conceal the Cartel Agreements and the supracompetitive prices charged borrowers on loans brokered or originated by UVS/Hypotec in performance of those agreements; g. Whether despite exercising reasonable due diligence, Plaintiff and Class Members did not and could not have learned of the Cartel Agreements, the supracompetitive prices charged for title and settlement services, and their injuries and actual damages therefrom, until contacted by counsel; h. Whether Plaintiff and the Antitrust Class are entitled to treble damages under the Sherman Act; and i. Whether Plaintiff and the Antitrust Class are entitled to attorneys’ fees and expenses under the Sherman Act. 195. These common issues of law and fact predominate over any question affecting only individual Antitrust Class Members. 196. Plaintiff’s transaction and claim is typical of the claims or defenses of the respective Antitrust Class Members, and are subject to the same statutory measure of damages set forth in 15 U.S.C. § 15(a). 197. Plaintiff will fairly and adequately protect the interests of the Antitrust Class. The interests of the named Plaintiff and all other members of the Antitrust Class are identical. 198. Plaintiff’s counsel has substantial experience in complex litigation and class action proceedings, have been approved as class counsel in related litigation, and will adequately represent the Antitrust Class’s interests. 199. Separate actions by individual members of the class would create a risk of inconsistent or varying adjudications with respect to individual members of the class that would establish incompatible standards of conduct for UVS/Hypotec. 200. This action entails questions of law and fact common to Antitrust Class Members that predominate over any questions affecting only individual plaintiffs; therefore, a class action is superior to other available methods of fair and efficient adjudication of this litigation. 201. Most members of the Antitrust Class are unaware of their rights to prosecute a claim against UVS/Hypotec or Abitbol. 202. No member of the Antitrust Class has a substantial interest in individually controlling the prosecution of a separate action, but if he or she does, he or she may exclude himself or herself from the class upon the receipt of notice under Fed. R. Civ. P. 23(c). COUNT III Violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962 203. Plaintiff incorporates the above stated paragraphs as if restated herein. 204. UVS/Hypotec and Abitbol, are each a “person” as defined under 18 U.S.C. § 1961(3). 205. The All Star Scheme constitutes an enterprise for the purposes of 18 U.S.C. § 1962(c) (“All Star Scheme Enterprise”). The activities of the All Star Scheme Enterprise affect interstate commerce across more than 30 states. 206. UVS/Hypotec and Abitbol are employed by or associated with the All Star Scheme Enterprise. 207. UVS/Hypotec agreed to and did conduct and participate in conducting the affairs of the All Star Scheme Enterprise through a pattern of racketeering activity and for the unlawful purpose of defrauding borrowers into paying fixed and supracompetitive prices for title and settlement services related residential mortgage, refinance and reverse mortgages brokered or originated by UVS/Hypotec, and to thereby deprive borrowers of their money and/or property and/or the intangible right to honest services. 208. The repeated use of the U.S. Mail and interstate wires by UVS/Hypotec, Abitbol and All Star over a period of more than five years and involving over 1,200 borrowers in furtherance of the All Star Scheme and All Star Scheme Enterprise as pled herein, constitutes a pattern of racketeering activity pursuant to 18 U.S.C. § 1961(5). 209. UVS/Hypotec and Abitbol have directly and indirectly conducted and participated in the conduct of the All Star Scheme Enterprise’s affairs, which affected interstate commerce in more than 30 states, through the pattern of racketeering activity pled herein, in violation of 18 U.S.C. § 1962(c). 210. As a direct and proximate result of UVS/Hypotec’ participation in the All Star Scheme and All Star Scheme Enterprise through the pattern of racketeering activity pled herein, Plaintiff and Class Members were injured and suffered actual damages in the amount of between approximately $55-1,650, which is the minimum amount of the UVS/Hypotec Overcharge resulting under the Price Fixing and Minimum Fee Agreements with UVS/Hypotec. 211. In addition, as a direct and proximate result of UVS/Hypotec’ participation in the All Star Scheme Enterprise through the pattern of racketeering activity pled herein, Plaintiff and Class Members were deprived of the intangible right of honest services by UVS/Hypotec and its employees and agents. 212. Plaintiff alleges claims pursuant to Fed. R. Civ. P. 23 for violations of 18 U.S.C. § 1962(c) (“RICO Class”), with the alleged RICO Class defined as: All individuals in the United States who were borrowers on a loan originated or brokered by the Allegro Funding Corporation, U.V.S., Inc. or Hypotec, Inc. for which All Star Title, Inc. provided a settlement service, as identified in Section 1100 on the borrower’s HUD-1, between January 1, 2010 and December 31, 2017. Exempted from this class is any person who, during the period of January 1, 2010 through December 31, 2017, was an employee, officer, member and/or agent of the Allegro Funding Corporation, U.V.S., Inc., Hypotec, Inc., or All Star Title, Inc. 213. The RICO Class consists of borrowers on more than 1,200 loans, and thus are so numerous that joinder of all members is impracticable. 214. There are questions of law and fact common to the claims of each and all members of the RICO Class. These common questions include, but are not limited to: a. Whether UVS/Hypotec and its employees and/or agents violated RICO by defrauding borrowers, including Plaintiff and RICO Class Members, into paying supracompetitive prices for title and settlement services and fund the kickbacks All Star is paying UVS/Hypotec; b. Whether UVS/Hypotec and All Star formed an enterprise; c. Whether the activities of the All Star Scheme Enterprise affected interstate commerce; d. Whether one purpose of the All Star Scheme Enterprise was to deprive borrowers of money or property; e. Whether one purpose of the All Star Scheme Enterprise was to deprive borrowers of the intangible right of honest services; f. Whether UVS/Hypotec and All Star used the interstate U.S. Mail in furtherance of the All Star Scheme and All Star Scheme Enterprise; g. Whether UVS/Hypotec and All Star used interstate wires in furtherance of the All Star Scheme and the All Star Scheme Enterprise; h. Whether the use of interstate U.S. mail and wires constitutes a pattern of racketeering activity; i. Whether UVS/Hypotec conducted or participated in the All Star Scheme Enterprise through a pattern of racketeering activity; j. Whether UVS/Hypotec actively concealed the All Star Scheme, the supracompetitive prices, and the All Star Scheme Enterprise; k. Whether Plaintiff’s and RICO Class members knew or should have known of their injuries resulting from UVS/Hypotec’ violation of 18 U.S.C. § 1962(c); l. Whether UVS/Hypotec and All Star’s fraudulent concealments prevented Plaintiff and RICO Class members from discovering their injuries proximately caused by UVS/Hypotec’ participation in the All Star Scheme Enterprise through a pattern of racketeering activity; m. Whether Plaintiff and the RICO Class are entitled to treble damages pursuant to 18 U.S.C. § 1964(c); and n. Whether Plaintiff and the RICO Class are entitled to attorneys’ fees and expenses pursuant to 18 U.S.C. § 1964(c). 215. These common issues of law and fact predominate over any question affecting only individual RICO Class Members. 216. Plaintiff’s transaction and claim is typical of the claims or defenses of the respective RICO Class Members, and are subject to the same statutory measure of damages set forth in 18 U.S.C. § 1964(c). 217. Plaintiff will fairly and adequately protect the interests of the RICO Class. The interests of the named Plaintiff and all other members of the RICO Class are identical. 218. Plaintiff’s counsel has substantial experience in complex litigation and class action proceedings, have been approved as class counsel in related litigation, and will adequately represent the RICO Class’s interests. 219. Separate actions by individual members of the class would create a risk of inconsistent or varying adjudications with respect to individual members of the class that would establish incompatible standards of conduct for UVS/Hypotec. 220. This action entails questions of law and fact common to RICO Class members that predominate over any questions affecting only individual plaintiffs; therefore, a class action is superior to other available methods of fair and efficient adjudication of this litigation. 221. Most members of the RICO Class are unaware of their rights to prosecute a claim against UVS/Hypotec. 222. No member of the RICO Class has a substantial interest in individually controlling the prosecution of a separate action, but if he or she does, he or she may exclude himself or herself from the class upon the receipt of notice under Fed. R. Civ. P. 23(c). WHEREFORE, Plaintiff respectfully demands: a. This Court to certify the RESPA, Antitrust, and RICO Classes pursuant to Federal Rule of Civil Procedure 23 and set this matter for trial; b. Judgment for Plaintiff and RESPA Members against Defendants Hypotec, Inc. and Abitbol, jointly and severally, and award Plaintiff and RESPA Class Members treble damages for title and settlement services charged by All Star, including, but not limited to, title insurance premiums, in an amount equal to three times the amount of any charge paid for such settlement services, pursuant to 12 U.S.C. § 2607(d)(2); c. Judgment for Plaintiff and Antitrust Class Members against Defendants Hypotec, Inc., and Abitbol, jointly and severally, and award Plaintiff and Antitrust Class Members damages in the amount equal to three times the actual damages caused by the Cartel Agreements pursuant to 15 U.S.C. § 15(a); d. Judgment for Plaintiff and RICO Class Members against Defendants Hypotec, Inc., and Abitbol, jointly and severally, and award Plaintiff and RICO Class Members damages in the amount equal to three times the actual damages caused by the All Star Scheme pursuant to 18 U.S.C. § 1964(c); e. Reasonable attorneys’ fees, interest and costs pursuant to 12 U.S.C. § 2607(d)(5), 15 U.S.C. § 15(a), and 18 U.S.C. § 1964(c); and f. For such other and further relief as this Court deems proper. Respectfully submitted, /s/ Steven C. Coffaro Michael Paul Smith, Esq., pro hac pending Melissa L. English, Esq., pro hac pending Sarah A. Zadrozny, Esq., pro hac pending Smith, Gildea & Schmidt, LLC 600 Washington Avenue, Suite 200 Towson, Maryland 21204 (410) 821-0070 / (410) 821-0071 (fax) Email: [email protected] [email protected] [email protected] Counsel for Plaintiff and Class Members Steven C. Coffaro, Esq. (19767-15) Gregory M. Utter, Esq., pro hac pending Keating Muething & Klekamp PLL One East Fourth Street, Suite 1400 Cincinnati, OH 45202 (513) 579-6489 / (513) 579-6457 (fax) Email: [email protected] [email protected] Co-Counsel for Plaintiff and Class Members Timothy F. Maloney, Esq., pro hac pending Veronica B. Nannis, Esq., pro hac pending Megan A. Benevento, Esq., pro hac pending Joseph, Greenwald & Laake, P.A. 6404 Ivy Lane, Suite 400 Greenbelt, Maryland 20770 (301) 220-2200 / (301) 220-1214 (fax) Email: [email protected] [email protected] [email protected] Co-Counsel for Plaintiff and Class Members JURY DEMAND Plaintiff and Class Members hereby demand a trial by jury on all claims so triable in the foregoing Class Action Complaint.

antitrust

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UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA GAYLE HYDE, Individually and On Behalf of All Others Similarly Situated, Plaintiff, v. QUICKEN LOANS INC., Case No.: CLASS ACTION COMPLAINT FOR DAMAGES AND INJUNCTIVE RELIEF PURSUANT TO THE TELEPHONE CONSUMER PROTECTION ACT, 47 U.S.C. § 227, ET SEQ. JURY TRIAL DEMANDED Defendant. INTRODUCTION 1. The plaintiff GAYLE HYDE (“Ms. Hyde” or “Plaintiff”) brings this Class Action Complaint for damages, injunctive relief, and any other available legal or equitable remedies, resulting from the illegal actions of defendant QUICKEN LOANS INC. (“Quicken Loans” or “Defendant”) in negligently and/or intentionally contacting Plaintiff on her cellular telephone, in violation of the Telephone Consumer Protection Act, 47 U.S.C. § 227, et seq., (“TCPA”), thereby invading Plaintiff’s privacy. Plaintiff alleges as follows upon personal knowledge as to herself and her own acts and experiences, and, as to all other matters, upon information and belief, including investigation conducted by her attorneys. JURISDICTION AND VENUE 2. This Court has federal question jurisdiction because this case arises out of violation of federal law. 47 U.S.C. § 227(b). 3. Venue is proper in the United States District Court for the District of Minnesota pursuant to 28 U.S.C. § 1391 because Quicken Loans: (a) is authorized to conduct business in this district and has intentionally availed itself of the laws by conducting business in this district; (b) does substantial business within this district; (c) is subject to personal jurisdiction in this district; and (d) Plaintiff was harmed by Defendant’s conduct within this judicial district. PARTIES 4. Ms. Hyde is, and at all times relevant was, a citizen and resident of the State of Minnesota, County of Wright, City of Buffalo, and is, and at all times mentioned herein was, a “person” as defined by 47 U.S.C. § 153(39). 5. Plaintiff is informed and believes, and thereon alleges, that Quicken Loans is, and at all times mentioned herein was, a privately held Michigan corporation with its principal place of business in Detroit, Michigan, is a “person” as defined by 47 U.S.C. § 153(39). 6. Upon information and belief, Quicken Loans is an active, registered corporation with the State of Minnesota’s Secretary of State, and has a registered office in St. Paul, Minnesota. 7. Plaintiff alleges that at all times relevant herein, Defendant conducted business in the State of Minnesota and in the County of Wright, and within this judicial district. FACTUAL ALLEGATIONS 8. According to Quicken Loan’s website, an individual can sign up for Quicken Loans Text Alerts by texting AMAZE to the short code 262-93. 9. Sometime prior to November 2018, Ms. Hyde went onto QuickenLoans.com to compare rates using Quick Loans’ Mortgage Calculator, a free service. At no time did Ms. Hyde text AMAZE to the short code 262-93, or consent to receive text messages in any other way. 10. On or about November 26, 2018, at approximately 4:34 p.m., Quicken Loans sent Ms. Hyde a marketing text message to her cellular telephone ending in “3058”, from the short code 262-93. The November 26, 2018, text message read: Quicken Loans: Time’s running out on our Biggest Deal of the Year! Lock your rate now. http://m.qloans.co/N2CRyGuU Reply HELP for help, STOP to end text 11. Ms. Hyde had received several marketing text messages identical to the one above for the past two months. Each time that Plaintiff received this text in the past, she responded with “Stop.” 12. However, such requests went unheeded, as Ms. Hyde received another text message on November 26, 2018. 13. Having no other option, on November 26, 2018, Ms. Hyde yet again responded to the text message with “Stop”. 14. Similar to her other attempts, Quicken Loans responded with: QLTextAlerts: You are unsubscribed & will no longer receive messages from us. Reply HELP for help. Msg&Data Rates May Apply. 1-800-863-4332 15. Despite this clear revocation of consent (if consent had existed in the first instance) and Quicken Loans acknowledgment of the revocation, on December 4, 2018, at approximately 12:34 p.m., Quicken Loans sent Ms. Hyde another text message from its SMS short code soliciting their business. 16. The December 4, 2018, text message read as follows: Quicken Loans Rate Alert: Rates have dropped! See Today’s Rates: http://m.qloans.co/GsaryGBE Reply HELP for help, STOP to end text 17. As Ms. Hyde had done many times before, Ms. Hyde replied in a text message with the word “STOP”. 18. Upon information and belief, Quicken Loans sent or transmitted, or had sent or transmitted on its behalf, the same or substantially similar unsolicited text messages en masse to thousands of customers’ cellular telephones nationwide. 19. Upon information and belief, Quicken Loans constructed the content of these text messages, and decided the timing of the sending of the message campaign. 20. Quicken Loans sent each of the aforementioned text messages to Plaintiff’s cellular telephone using short message script (“SMS”) messaging technology, specifically SMS “262-93”. 21. Upon information and belief, this SMS short code is registered as belonging to Quicken Loans. 22. The telephone number “1-800-863-4332” is listed on Quicken Loans’ website as being its Client Relations’ contact number. 23. The text messages sent to Plaintiff were impersonal in nature. 24. Upon information and belief, the text messages were based on a template. 25. Upon information and belief, the automated text messaging system used by Quicken Loans to send the text messages has the capacity to store or produce telephone numbers to be called, using a random or sequential number generator. 26. Upon information and belief, the automated text messaging system used by Quicken Loans to send the text messages also has the capacity to, and does, dial telephone numbers stored as a list or in a database without human intervention. 27. Defendant’s telephonic communications were not made for emergency purposes, as defined by 47 U.S.C. § 227(b)(1)(A)(iii). 28. Defendant’s telephonic communications were made to a telephone number assigned to a cellular telephone service for which Plaintiff incurs a charge, as prohibited by 47 U.S.C. § 227(b)(1). 29. Defendant did not have prior express written consent, nor prior express consent, to send the text messages to Plaintiff’s cell phone, especially after Plaintiff had clearly and expressly requested on multiple occasions that Quicken Loans cease sending text messages. 30. Through Defendant’s aforementioned conduct, Plaintiff suffered an invasion of a legally protected interest in privacy, which is specifically addressed and protected by the TCPA. 31. Plaintiff was personally affected by Defendant’s aforementioned conduct because Plaintiff was frustrated and distressed that Defendant annoyed Plaintiff with several unwanted marketing text messages, even after telling Defendant to stop sending text messages repeatedly. This invaded Plaintiff’s right to privacy. 32. Defendant’s telephonic communications forced Plaintiff and other similarly situated class members to live without the utility of their cellular phones because they were occupied text messages, causing annoyance and lost time. 33. Plaintiff is informed and believes and here upon alleges, that the text messages were sent by Quicken Loans and/or Quicken Loans’ agent(s), with Quicken Loans’ permission, knowledge and/or control. 34. The text messages from Quicken Loans, or its agent(s), violated 47 U.S.C. § 227(b)(1)(A)(iii). CLASS ACTION ALLEGATIONS 35. Plaintiff brings this action on behalf of herself and on behalf of all others similarly situated. 36. Plaintiff represents, and is a member of the class (the “Class”), consisting of: All persons within the United States who were sent any text message by Defendant or its agent/s and/or employee/s using short code 262-93 to said person’s cellular telephone made through the use of any automatic telephone dialing system, within the four years prior to the filing of the Complaint. 37. Plaintiff also represents, and is a member of the subclass (the “Subclass”), consisting of: All persons within the United States who were sent any text message by Defendant or its agent/s and/or employee/s using short code 262-93 to said person’s cellular telephone made through the use of any automatic telephone dialing system, following a written request to cease contacting their cellular telephone phone (e.g., through a “STOP” text message), within the four years prior to the filing of the Complaint. 38. Defendant and its employees or agents are excluded from the Class and Subclass. Plaintiff does not know the number of members in the Class or Subclass, but believes the members of the Class and Subclass number in the several thousands, if not more. Thus, this matter should be certified as a Class action to assist in the expeditious litigation of this matter. 39. Plaintiff and members of the Class and Subclass were harmed by the acts of Defendant in at least the following ways: Defendant, either directly or through its agent(s), illegally contacted Plaintiff and the members of the Class and Subclass via their cellular telephones by using an ATDS, thereby causing Plaintiff and the Class and Subclass members to incur certain cellular telephone charges or reduce cellular telephone time for which Plaintiff and the members of the Class and Subclass previously paid, and invading the privacy of said Plaintiff and the members of the Class and Subclass. Plaintiff and the members of the Class and Subclass were damaged thereby. 40. This suit seeks only damages and injunctive relief for recovery of economic injury on behalf of the Class and Subclass, and it expressly is not intended to request any recovery for personal injury and claims related thereto. Plaintiff reserves the right to expand the Class and Subclass definitions to seek recovery on behalf of additional persons as warranted as facts are learned in further investigation and discovery. 41. The joinder of the members of the Class and Subclass is impractical and the disposition of their claims in the Class action will provide substantial benefits both to the parties and to the court. The Class and Subclass can be identified through records of Defendant and/or its agents and records of wireless telephone carriers. 42. There is a well-defined community of interest in the questions of law and fact involved affecting the parties to be represented. The questions of law and fact common to the Class and Subclass predominate over questions which may affect individual members of the Class and Subclass, including the following: (a) Whether, within the four years prior to the filing of this Complaint, Defendant or its agent(s) sent any text messages without the prior express written express consent of the called party to members of the Class and Subclass using an automatic dialing system; (b) Whether the text messages from Defendant were for marketing purposes; (c) Whether Defendant sent text messages to members of the Subclass after Defendant was instructed to stop sending text messages; (d) Whether Defendant can meet its burden of showing Defendant obtained prior express consent; (e) Whether Defendant’s conduct was knowing and/or willful; (f) Whether Plaintiff and the members of the Class and Subclass were damaged thereby, and the extent of damages for such violation; and (g) Whether Defendant and its agent(s) should be enjoined from engaging in such conduct in the future. 43. As a person who received at least one text message from Quicken Loans using an ATDS without Plaintiff’s prior express consent, including after multiple requests for the text messages to cease, Plaintiff is asserting claims that are typical of the Class and the Subclass. 44. Plaintiff will fairly and adequately represent and protect the interests of the Class and Subclass in that Plaintiff has no interest antagonistic to any member of the Class or Subclass. 45. Plaintiff and the members of the Class and Subclass have all suffered irreparable harm as a result of Defendant’s unlawful and wrongful conduct. Absent a class action, the Class and Subclass will continue to face the potential for irreparable harm. In addition, these violations of law will be allowed to proceed without remedy and Defendant will likely continue such illegal conduct. Because of the size of each individual Class member’s claims, few, if any, members of the Class and Subclass could afford to seek legal redress for the wrongs complained of herein. 46. Plaintiff has retained counsel experienced in handling class action claims and claims involving violations of the Telephone Consumer Protection Act. 47. A class action is a superior method for the fair and efficient adjudication of this controversy. Class-wide damages are essential to induce Defendant to comply with federal law. The interest of members of the Class and Subclass in individually controlling the prosecution of separate claims against Defendant is small because the maximum statutory damages in an individual action for violation of privacy are minimal. Management of these claims is likely to present significantly fewer difficulties than those presented in many class claims. 48. Notice may be provided to the Class and Subclass members by direct mail and/or email notice, publication notice and by other reasonable means. 49. Defendant has acted on grounds generally applicable to the Class and Subclass, thereby making appropriate final injunctive relief and corresponding declaratory relief with respect to the Class and Subclass as a whole. FIRST CAUSE OF ACTION NEGLIGENT VIOLATIONS OF THE TCPA 47 U.S.C. § 227 ET SEQ. 50. Plaintiff incorporates by reference all of the above paragraphs of this Complaint as though fully stated herein. 51. The foregoing acts and omissions of Defendant constitute numerous and multiple negligent violations of the TCPA, including but not limited to each and every one of the above-cited provisions of 47 U.S.C. § 227, et seq. 52. As a result of Defendant’s negligent violations of 47 U.S.C. § 227, et seq., Plaintiff and the Class and Subclass are entitled to an award of $500.00 in statutory damages, for each and every violation, pursuant to 47 U.S.C. § 227(b)(3)(B). 53. Plaintiff and the Class and Subclass are also entitled to and seek injunctive relief prohibiting such conduct in the future. SECOND CAUSE OF ACTION KNOWING AND/OR WILLFUL VIOLATIONS OF THE TCPA 47 U.S.C. § 227 ET SEQ. 54. Plaintiff incorporates by reference all of the above paragraphs of this Complaint as though fully stated herein. 55. The foregoing acts and omissions of Defendant constitute numerous and multiple knowing and/or willful violations of the TCPA, including but not limited to each and every one of the above-cited provisions of 47 U.S.C. § 227, et 56. As a result of Defendant’s knowing and/or willful violations of 47 U.S.C. § 227, et seq., Plaintiff and the Class and Subclass are entitled to an award of $1,500.00 in statutory damages, for each and every violation, pursuant to 47 U.S.C. § 227(b)(3)(B) and 47 U.S.C. § 227(b)(3)(C). 57. Plaintiff and the Class and Subclass are also entitled to and seek injunctive relief prohibiting such conduct in the future. PRAYER FOR RELIEF WHEREFORE, Plaintiff and the Class and Subclass members pray for judgment against Defendant and the following relief: • An order certifying the Class and Subclass as requested herein; • An order appointing Plaintiff to serve as the representative of the Class and Subclass in this matter and appointing Plaintiff’s Counsel as Class and Subclass Counsel in this matter; • An award of $500.00 in statutory damages to Plaintiff and each Class and Subclass member for each and every negligent violation of 47 U.S.C. § 227(b)(1) by Defendant, pursuant to 47 U.S.C. § 227(b)(3)(B); • An award of $1,500.00 in statutory damages to Plaintiff and each Class and Subclass member for each and every knowing and/or willful violation of 47 U.S.C. § 227(b)(1) by Defendant, pursuant to 47 U.S.C. § 227(b)(3)(B); • Pre-judgment and post-judgment interest; • An order providing injunctive relief prohibiting such conduct in the future, pursuant to 47 U.S.C. § 227(b)(3)(A); • An award of reasonable costs of suit; • An award of reasonable attorneys’ fees; • Any other relief the Court may deem just and proper. TRIAL BY JURY 58. Pursuant to the eleventh amendment to the Constitution of the United States of America, Plaintiff is entitled to, and demands, a trial by jury. Dated: January 28, 2019 Respectfully submitted, TARSHISH CODY, PLC By: s/ ADAM R. STRAUSS ____ ADAM R. STRAUSS (#0390942) [email protected] 6337 PENN AVENUE SOUTH MINNEAPOLIS, MN 55423 TELEPHONE: (952) 361-5556 FACSIMILE: (952) 361-5559 ATTORNEY FOR PLAINTIFF KAZEROUNI LAW GROUP, APC Abbas Kazerounian, Esq. (CA SBN: 249203) [email protected] Pro Hac Vice To Be Filed 245 Fischer Avenue, Suite D1 Costs Mesa, California 92626 Telephone: (800) 400-6808 Facsimile: (800) 520-5523 Attorney for Plaintiff

privacy

1QjKFYcBD5gMZwczzhb1

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO ANGELA COLLINS, ) on behalf of herself, individually, ) and on behalf of all others similarly ) situated, ) Civil Action No. ) Plaintiff, ) v. ) ) DKL VENTURES, LLC, a Colorado ) FLSA collective and corporation d/b/a ) state law class action SELECT HOME CARE; and ) ) ERIC DAVID LEWIS, ) in his individual and corporate ) capacities, ) ) Defendants. ) COLLECTIVE AND CLASS ACTION COMPLAINT (JURY TRIAL DEMANDED) Plaintiff ANGELA COLLINS (“Plaintiff” or “Ms. Collins”), on behalf of herself, individually, and on behalf of all of those similarly situated, through undersigned counsel at the Sawaya & Miller Law firm, makes the following allegations in support of this Collective and Class Action Complaint, brought pursuant to the federal Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201, et seq.; and the Colorado Wage Act, Colo. Rev. Stat. § 8-4-101, et seq., and applicable Colorado Minimum Wage Orders, 7 CCR § 1103-1 (collectively, “Colorado Wage and Hour Law”); and accompanying federal and state regulations. 1 PARTIES 1. Individual and representative Plaintiff Angela Collins is a former employee of Defendant DKL VENTURES, LLC, a Colorado corporation d/b/a SELECT HOME CARE (“Select Home Care” or “the Company”), as defined by 29 U.S.C. § 203(e) and Colorado state laws. Plaintiff was employed as a personal care worker who cared for elderly and disabled individuals on behalf of Select Home Care. She brings this action on behalf of herself and all other current and former hourly non-exempt employees at Select Home Care’s Colorado franchise who provide in-home care and services, including but not limited to personal care workers, nurses, and certified nursing assistants. 2. Individual and representative Plaintiff Angela Collins is a resident of the state of Colorado over the age of eighteen years. She worked as an hourly, non-exempt employee of Select Home Care from approximately 2011 until September 2015. 3. Defendant DKL Ventures, LLC, d/b/a Select Home Care, is a Colorado corporation with a principal office address of 6143 South Willow Drive, Suite 401, Greenwood Village, Colorado 80111. 4. Defendant Select Home Care does business within the state of Colorado. 5. Defendant Select Home Care provides in-home care to seniors and disabled individuals. Plaintiff provided care to seniors, ill, and disabled individuals within the state of Colorado while employed by the company. 6. Defendant Eric David Lewis (“Lewis”) is the owner and operator of Select Home Care. He worked at the Company’s offices at 6143 South Willow Drive and/or 2 1777 South Bellaire Street, Suite 430, Denver, Colorado 80222. Mr. Lewis personally decided and implemented the wrongful compensation policies and practices of Defendants that Plaintiffs allege herein, and having engaged in such behavior, Defendant Lewis has made himself jointly and severally liable for all damages under the FLSA requested by Plaintiffs, both individually and with respect to their Collective Action claims set forth in this Complaint. He is being sued in his individual as well as his corporate capacity. 7. Under 28 U.S.C. § 1331, this Court has original jurisdiction to hear this Complaint and to adjudicate the stated claims. This action is being brought under the FLSA, as well as under Colorado state Wage and Hour law. The representative Plaintiff has signed a consent form to join this lawsuit, a copy of which will be filed with the 8. This Court has supplemental jurisdiction over the Colorado state law class action claims in this Complaint under 28 U.S.C. § 1367. Those state claims derive from the same common core of operative facts as the federal claims. 9. The Court has personal jurisdiction over Select Home Care because it is qualified to do business in Colorado with the Colorado Secretary of State, and it does business within the state of Colorado. 10. The Court has personal jurisdiction over the individually and corporately named Defendant Lewis because he resides and works within the State of Colorado at Select Home Care. 3 11. Venue is proper in this district pursuant to 28 U.S.C. § 1391 because Defendants operate out of facilities in Denver and Greenwood Village, Colorado, and all of the events giving rise to Plaintiffs’ claims have occurred and are presently occurring in this district. 12. Plaintiff brings this action on behalf of herself and all other similarly situated care workers for Select Home Care to obtain declaratory and injunctive relief and recover unpaid wages and overtime, liquidated damages, penalties, attorney’s fees and costs, pre- and post-judgment interest, and any other remedies to which they may be entitled based on Select Home Care’s violation of the FLSA and Colorado Wage and Hour Law. BACKGROUND AND FACTUAL ALLEGATIONS FOR ALL CLAIMS 13. Select Home Care is a Denver-based franchise of a national company, also called Select Home Care (“the parent company”), with offices in at least six states. 14. Select Home Care in Denver provides home-based care for elderly, ill, and disabled clients. 15. Plaintiff and similarly situated employees worked in clients’ homes caring for clients. Job duties included but were not limited to changing clients’ undergarments and clothes; helping clients to bathe and use the bathroom; hooking up clients to oxygen, continuous positive airway pressures (“CPAP”) machines, and nebulizers; draining catheters; bandaging clients; and rolling clients who were bedbound. 4 16. Plaintiff and similarly situated employees were paid by Select Home Care as W-2 employees and were employed by Defendants as a third-party employer under federal and state law. 17. Plaintiff and similarly situated employees wore Select Home Care name badges; had to dress and groom themselves according to standards dictated by Select Home Care; and called in sick to Select Home Care rather than directly to the homecare client. 18. Colorado Wage and Hour Law requires that such third-party employers pay overtime to home care workers. 7 C.C.R. § 1103-1:5. Under this law, Plaintiff and similarly situated employees were covered employees under Colorado state Wage and Hour law. 19. Since January 1, 2015, the FLSA also has required that such third-party employers pay overtime to home care workers. 29 C.F.R. § 552.109(a). 20. Plaintiff and similarly situated care employees were paid an hourly rate that varied based on the clients’ needs and location. 21. Plaintiff and similarly situated employees frequently worked more than twelve hours a day and/or more than forty hours a week but were not paid at one and a half times their hourly rate for overtime hours as required by the FLSA and Colorado Wage and Hour Law. 22. Upon information and belief, Defendants gave the care workers a letter in approximately summer of 2014 stating that a change in the law meant that Select Home Care would have to start paying care workers overtime rates if they worked more than 5 forty hours a week and that, therefore, the Company would no longer be assigning care workers more than forty hours a week of work. 23. Upon information and belief, rather than assigning fewer hours or paying overtime, as required by law, Defendants instead willfully misrepresented the law to the employees, telling them that the law requiring overtime had not passed. 24. Upon information and belief, employees complained to Defendants about their failure to pay overtime rates, and Defendants willfully and wrongly told the employees that they were exempt from overtime laws. 25. The Select Home Care parent company spoke to the New York Times twice in 2014 about how changed FLSA regulations requiring that third party employers pay overtime to nonmedical care workers, such as those employed by Select Home Care in Denver and other locations, would affect the company. 26. Dylan Hull, one of the parent company’s owners, told the New York Times in June 2014 that Select Home Care would continue to directly employ care workers but increase the cost of home care for clients to comply with regulatory changes. 27. Despite Hull’s statements to the New York Times, Select Home Care in Colorado willfully continued not to pay overtime. 28. Plaintiff and similarly situated employees were also denied rest breaks and meal breaks, as required by Colorado Wage and Hour Law, approximately 40 percent of the time. 6 29. Plaintiff complained to two of her supervisors about not being able to take rest and meal breaks, or even having a minute to use the bathroom. Plaintiff’s supervisors told her that she could not take breaks when she was with clients who needed constant care. 30. Upon information and belief, Select Home Care’s annual gross volume of sales made or business done is not less than $500,000, and the overtime protections of the FLSA apply to Plaintiff and similarly situated employees as of January 1, 2015. FLSA COLLECTIVE ACTION CLAIMS First Claim for Relief Failure to Pay Overtime Rates in Violation of the FLSA 31. Plaintiff and similarly situated employees repeat and incorporate by this reference the allegations contained above. 32. Defendants Select Home Care and Eric David Lewis are employers and Plaintiff and similarly situated care workers are employees under the FLSA. 29 U.S.C. § 203(d) and (e). 33. Under regulations for third party employment for companionship and domestic service that went into effect January 1, 2015, Plaintiff and similarly situated care workers are entitled to time and a half their regular rate of pay for all hours worked in excess of 40 hours per week under the FLSA. 29 U.S.C. § 207(a)(1); 29 C.F.R. §552.109. 34. Plaintiff and similarly situated care workers have not been paid one and a half times their regular rate of pay for all hours worked in excess of 40 hours per week. 7 35. By their actions alleged above, Defendants willfully, knowingly, and/or recklessly engaged in a widespread policy, pattern, and practice of violating the overtime provisions of the FLSA and corresponding controlling federal regulations. 36. As a result of Defendants’ violation of the FLSA, Plaintiff and similarly situated employees have suffered damages by failing to receive all wages to which they were entitled under the FLSA. 37. As a result of Defendants’ unlawful acts, Plaintiff and similarly situated employees have been deprived of their wages for all hours worked in an amount to be determined at trial and are entitled to the recovery of such amounts, liquidated damages, pre- and post-judgment interest, attorney’s fees, costs, and other compensation and legal remedies, and additionally, such declaratory and injunctive or other equitable relief, as the law allows. Second Claim for Relief Individual Liability of Defendant Lewis under the FLSA 38. Plaintiff and similarly situated employees repeat and incorporate by this reference the allegations contained above. 39. Individually named Defendant Lewis has not made a good faith effort to comply with the FLSA’s compensation requirements. 40. By his actions alleged above, individually named Defendant Lewis intentionally, willfully, knowingly, and/or recklessly violated the controlling provisions of the FLSA and corresponding federal regulations. 8 41. Defendant Lewis willfully and intentionally engaged in a widespread pattern and practice of violating the controlling provisions of the FLSA and corresponding federal regulations, as set out above, by failing to properly pay care workers an overtime rate for hours in excess of 40 hours per week. 42. As a result of Defendant Lewis’ violations of the FLSA and corresponding regulations, Plaintiff and similarly situated employees have suffered damages by failing to receive overtime pay for hours worked in excess of forty hours a week. 43. As a result of Defendant Lewis’ unlawful acts, Plaintiff and similarly situated employees have been deprived of overtime pay in an amount to be determined at trial, and are entitled to the recovery of such amounts, liquidated damages, pre- and post-judgment interest, attorney’s fees, costs, and other compensation and legal remedies, and also including such declaratory and injunctive or other equitable relief, as the law allows. COLORADO STATE CLAIMS Third Claim for Relief Failure to Pay Overtime Rates and Provide Rest and Meal Breaks in Violation of Colorado Wage and Hour Law 44. Plaintiff and similarly situated employees repeat and incorporate by this reference the allegations contained above. 45. Plaintiff and similarly situated care workers are employees under the Colorado Wage Act, all relevant Colorado Minimum Wage Orders, and accompanying 9 state regulations, as alleged above. C.R.S. § 8-4-101(5); 7 C.C.R. § 1103-1:2, and other applicable state laws. 46. Plaintiff and similarly situated employees are covered by all relevant Colorado Minimum Wage Orders under the retail and service and/or health and medical industries. 7 C.C.R. § 1103-1:2(A) and (D). 47. Select Home Care is covered by the retail and service industry as defined by all relevant Colorado Minimum Wage Orders because it is a business or enterprise that sells or offers for sale a service or commodity to the consuming public and generates 50 percent or more of its annual dollar volume of business from such sales. 7 C.C.R. § 1103-1:2(A). 48. Select Home Care is covered by the health and medical industry as defined by all relevant Colorado Minimum Wage Orders because it is a business or enterprise engaged in providing health services including home health care. Employees of businesses or enterprises that provide such services are covered even if the employees’ work is not itself health or medical in nature. 7 C.C.R. § 1103-1:2(D). 49. Plaintiff and similarly situated employees are entitled to time and a half their regular rate of pay for any work in excess of 40 hours a week or twelve hours a day. 7 C.C.R. § 1103-1:4. 50. The Colorado Minimum Wage Orders provide an exemption from the wage order for “companions” and “domestic employees” who are “employed by households or family members.” However, the Colorado Minimum Wage Orders 10 provide no such exemption for companions or domestic employees employed by a third party employer such as Select Home Care. 7 C.C.R. § 1103-1:5. 51. Defendants willfully, knowingly, and/or recklessly ignored their requirement to pay overtime under Colorado law, as alleged above. 52. Plaintiff and similarly situated employees were entitled to an uninterrupted and duty free meal period of at least thirty minutes for every work shift exceeding five consecutive hours of work. 7 C.C.R. § 1103-1:7. 53. Plaintiff and similarly situated employees were entitled to a compensated 10 minute rest period for each four hour work period. 7 C.C.R. § 1103-1:8. 54. Plaintiff and similarly situated employees did not receive their meal or rest breaks an estimated 40 percent of the time. 55. Plaintiff complained to her supervisors that she frequently could not take a break, eat, or even use the bathroom. 56. Plaintiff’s supervisors told her, in willful violation of Colorado Wage and Hour Law, that she was not to take her legally required breaks in many client situations. 57. Because Defendants’ violations of Colorado Wage and Hour Law regarding overtime, meal, and rest breaks were willful, Plaintiff’s claims for relief are subject to a three-year statute of limitations. C.R.S. § 8-4-122. 58. Plaintiff demanded overtime payments on behalf of herself and all similarly situated employees in a letter sent November 13, 2015, as required by Colorado law. C.R.S. § 8-4-110(1). 11 59. Defendants declined Plaintiff’s demand in a response dated December 4, 60. As a result of Defendants’ violation of Colorado Wage and Hour Law, Plaintiff and similarly situated employees suffered damages by failing to receive appropriate wages and rest and meal breaks. They are entitled to recovery of such damages in an amount to be determined at trial, liquidated damages, pre- and post- judgment interest, attorney’s fees, costs, and other compensation and legal remedies, and also including such declaratory and injunctive or other equitable relief, as the law allows. FOURTH CLAIM FOR RELIEF Fed. R. Civ. P. Rule 23 Class Action Claim 61. Plaintiff and similarly situated employees repeat and incorporate by this reference the allegations contained above. 62. Plaintiff brings her claims under Colorado state law as a class action pursuant to Fed. R. Civ. P. Rule 23(a) and (b). The class is defined as all current and former hourly, non-exempt employees at Select Home Care’s Colorado franchise during the applicable statutory period who provide in-home care and services, including but not limited to personal care workers, nurses, and certified nursing assistants. 63. This action is properly maintainable as a class action under Rule 23 because the class is so numerous—on information and belief, consisting of hundreds of similarly situated members within the state of Colorado—that joinder of all members is impracticable; there are questions of law or fact common to the class; the claims or 12 defenses of the representative Plaintiff is typical of the claims or defenses of the class; and the representative Plaintiff will fairly and adequately protect the interests of the 64. This action is also properly maintainable as a class action under Rule 23 because questions of law or facts common to the members of the class predominate over any questions affecting only individual members and because a class action is superior to other available methods for the fair and efficient adjudication of the controversy. 65. The class satisfies the numerosity standard because it involves scores of former and current employees, many of whom may have left Colorado, making joinder of all members impracticable. 66. The class meets the commonality requirement because questions of law or fact that are common to the class predominate over any questions affecting individual members. The questions of law and fact common to the class include but are not limited a. Whether Defendants failed to pay class members at the overtime rate for all hours worked in excess of 40 hours per week. b. Whether Defendants failed to pay class members at the overtime rate for all hours worked in excess of 12 hours per day. c. Whether Defendants failed to provide meal breaks. d. Whether Defendants failed to provide rest breaks. e. Whether Defendants violations of Colorado Wage and Hour Law were willful. 13 f. Whether Defendants failed to act in good faith or with reasonable grounds to believe that their acts or omissions were not a violation of Colorado Wage and Hour Law. 67. Defendants are expected to raise common defenses to this class action, including denial that their actions violated the law. 68. The named representative Plaintiff will fairly and adequately protect the interests of the class, and she has retained counsel experienced and competent in the litigation of complex class actions. 69. The claims of the named representative Plaintiff are typical of the claims of the class. The named representative Plaintiff has the same interest and suffers from the same injury as the class members. The named representative Plaintiff and the class she seeks to represent were deprived of overtime rates and of rest and meal breaks. 70. Upon information and belief, no other member of the class has an interest in individually controlling the prosecution of his or her claims, especially in light of the relatively small value of each claim and the difficulties in bringing individual litigation against one’s employer. However, if any such class member should become known, he or she can opt out of this action upon receipt of the class action notice pursuant to the Fed. R. Civ. P. Rule 23(c)(2). 71. The Court has the resources and abilities to effectively manage this class action. 14 72. The named representative Plaintiff intends to send notice to all members of the class to the extent required by Rule 23. The names and addresses of the class are available from Defendant Select Home Care. 73. By their actions alleged above, Defendants willfully, knowingly, and/or recklessly violated Colorado Wage and Hour Law provisions and corresponding controlling Colorado regulations. 74. Defendants willfully and intentionally engaged in a widespread pattern and practice of violating the controlling provisions of Colorado Wage and Hour Law and controlling Colorado regulations, as set out above, by failing to pay overtime rates and failing to provide meal and rest breaks. 75. As a result of Defendants’ violation of Colorado Wage and Hour Law, Plaintiff and similarly situated employees have suffered the same kind of damages by failing to receive wages in accordance with the law. 76. Defendants have not made a good faith effort to comply with Colorado Wage and Hour Law with respect to compensation of Plaintiffs and similarly situated employees. 77. As a result of Defendants’ unlawful acts, Plaintiff and similarly situated employees have been deprived of their wages in an amount to be determined at trial and are entitled to recovery of such amounts, liquidated damages, pre- and post-judgment interest, attorney’s fees, costs, and other compensation and legal remedies, and also including such declaratory and injunctive or other equitable relief, as the law allows. REQUESTED RELIEF 15 WHEREFORE, the representative Plaintiff and the Plaintiffs who will opt into this action pursuant to § 216(b) of the FLSA, and/or the Plaintiffs who are described within the Rule 23 definition of any class certified by the Court, pray for the following A. Certification of a collective and class action, and any necessary subclasses, pursuant to § 216(b) of the FLSA and Rule 23, to be described as all current and former hourly, non-exempt employees at Select Home Care’s Colorado franchise during the applicable statutory period who provide in-home care and services, including but not limited to personal care workers, nurses, and certified nursing assistants; B. That, at the earliest possible time, Plaintiffs be allowed to give Notice of this action, or that the Court issue such Notice, to all persons who have at any time during the three years preceding the filing of this action, up through and including the date of this Court’s issuance of Court-supervised Notice, been employed, as immediately described above, by Select Home Care. Such Notice shall inform such workers or former workers that this civil action has been filed and of the nature of the action, and of their right to opt into this lawsuit if they were deprived of wages by Defendants at any time during the preceding three years; C. That all Plaintiffs be awarded damages for the up to three years preceding the filing of this Complaint in the amount of their unpaid wages, plus liquidated and penalty damages; 16 D. That the Court issue such injunctive and/or declaratory or other equitable relief to which the Plaintiffs may be entitled, so that the unlawful behavior of the Defendants may be stopped; E. That the representative Plaintiff(s) be granted an incentive award, as deemed reasonable by the Court; F. That the Plaintiffs be awarded their reasonable attorney’s fees; G. That the Plaintiffs be awarded the costs and expenses of this action; and H. That the Plaintiffs be awarded such other legal and/or equitable relief as is permitted by law. 17 JURY DEMAND All Plaintiffs demand that this matter be tried to a jury. Dated this 12th day of January, 2016. s/ David H. Miller David H. Miller s/ Rachel Graves Rachel Graves SAWAYA & MILLER LAW FIRM 1600 Ogden Street Denver, CO 80218 Telephone: 303-839-1650 FAX: 720-235-4377 Email: [email protected] [email protected] Attorney for Plaintiffs Plaintiff’s address: 6085 W. First Ave., Apt. 7 Lakewood, CO 80226 18

employment & labor

dRHvFocBD5gMZwczvkzr

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA RUSSEL “JOEY” JENNINGS, by : and through his parents/guardians, : Richard and Susan Jennings, : : RINALDO SCRUCI, by and : through his guardian, Luciana : Dudich, : : ROBERT B. CARSON, by and : through his guardian, Marilyn : Hollis, : : LAUREN LOTZI, by and through : her sibling/guardian, Linda Lotzi, : and her sibling, Patty Degen, : : BETH LAMBO, by and through : her parents/guardians, Joseph and : Carina Lambo, : : MARIA KASHATUS, by and : through her parents/guardians, : Thomas and Margaret Kashatus, : : DAVID NAULTY, by and through : CIV. NO.: his parent/guardian, Nielene : Bogansky, : : COMPLAINT MAUREEN JORDA, by and : through her sibling/guardian, : Georgine Jorda, : : JANINE WINSOCK, by and : through her sibling/guardian, Ann : Meszczynski, : : CYNTHIA MARTIN, by and : through her guardian, Thomas : Kashatus, : : TERRY D. HETRICK, by and : through his sibling/substitute : decision maker, Pamela Dougherty, : 1 SHARON MCCABE, by and : through her sibling/guardian, : Irene McCabe, and : : VIOLA “VIANNE” CAYE, by : and through her sibling/substitute : decision maker, Linda Murphy, : : : Plaintiffs, : : v. : : : TOM WOLF, as Governor of the : Commonwealth of Pennsylvania, : : TERESA D. MILLER, as the : Secretary of the Pennsylvania : Department of Human Services, : : KRISTIN AHRENS, as Deputy : Secretary of the Pennsylvania : Office of Developmental Programs, : : SUE RODGERS, as the Facility : Director at Polk Center, : : MARK J. GEORGETTI, as the : Facility Director at White Haven : Center, : : PENNSYLVANIA DEPARTMENT : OF HUMAN SERVICES, : : PENNSYLVANIA OFFICE OF : DEVELOPMENTAL PROGRAMS, : : POLK CENTER, and : : WHITE HAVEN CENTER : : : Defendants. : January 24, 2020 2 COMPLAINT AND NOW, COME the Plaintiffs, RUSSEL “JOEY” JENNINGS, by and through his parents/guardians, Richard and Susan Jennings; RINALDO SCRUCI, by and through his guardian, Luciana Dudich; ROBERT B. CARSON, by and through his guardian, Marilyn Hollis; LAUREN LOTZI, by and through her sibling/guardian, Linda Lotzi, and her sibling, Patty Degen; BETH LAMBO, by and through her parents/guardians, Joseph and Carina Lambo; MARIA KASHATUS, by and through her parents/guardians, Thomas and Margaret Kashatus; DAVID NAULTY, by and through his parent/guardian, Nielene Bogansky; MAUREEN JORDA, by and through her sibling/guardian, Georgine Jorda; JANINE WINSOCK, by and through her sibling/guardian, Ann Meszczynski; CYNTHIA MARTIN, by and through her guardian, Thomas Kashatus; TERRY D. HETRICK, by and through his sibling/substitute decision maker, Pamela Dougherty; SHARON MCCABE, by and through her sibling/guardian, Irene McCabe; and VIOLA “VIANNE” CAYE, by and through her sibling/substitute decision maker, Linda Murphy; by their attorney, and seek the enforcement of their federal rights to prevent their severe injury, including extreme mental distress, gross physical harm, and even possibly death, and aver the following: JURISDICTION 1. This action is for declaratory and injunctive relief under the Americans with Disabilities Act (“ADA”), 42 U.S.C. § 12132, the Rehabilitation Act of 1973, 29 U.S.C. § 794(a) (“Section 504”), the Medical Assistance Program authorized by 42 U.S.C. 1396, et seq., and the United States Constitution. 2. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. §§ 1331, 1342, and 1343. Plaintiffs’ claims for declaratory and injunctive relief are authorized under 28 U.S.C. §§ 2201-02 and 42 U.S.C. § 1983 and the waiver of state sovereign immunity enacted in 42 U.S.C. § 2000d-7(a)(I) and various Medicaid federal statutes and regulations incorporated into Pennsylvania law. At all times relevant to this action, Defendants have acted under color of state law. 3 VENUE 3. Venue lies in the Middle District of Pennsylvania pursuant to 28 U.S.C. § 1391(b), because White Haven Center, where many in the proposed plaintiff class reside, is located in Luzerne County which is within the area covered by the Middle District, and the family and guardians of the residents of White Haven Center and Polk Center reside throughout the Commonwealth of Pennsylvania. NAMED PLAINTIFFS 4. The Plaintiff, RUSSEL “JOEY” JENNINGS, by and through his parents/guardians, Richard and Susan Jennings, believes that White Haven is the least restrictive and most appropriate environment available to meet his needs. Joey is a 27-year-old individual with autism, intellectual disability, and co-morbid psychiatric disorders. After several failed placements in the “community,” where he was isolated and lonely, and where he suffered severe injuries, Joey has thrived at White Haven. 5. RINALDO SCRUCI, by and through his guardian, Luciana Dudich, believes that Polk is the least restrictive and most appropriate environment available to meet his needs. Rinaldo had a seizure shortly after birth which left him severely cerebral palsied. He is non- ambulatory and his feet and hands are curled. He is completely non-verbal and expresses his needs with grunts and pointing gestures, which requires that the person working with him know him well to decipher what he wants or needs. He requires complete care including bathing, dressing, eating, toileting, being placed in bed, and anything else that he wants or needs during the course of the day. After a failure at a group home where he received inadequate activities and services, he has fared extremely well at Polk. 6. ROBERT B. CARSON, by and through his guardian, Marilyn Hollis, believes that Polk is the least restrictive and most appropriate environment available to meet his needs. Robert has intellectual disability, autistic spectrum disorder, and impulse control disorder. He is non-verbal. After a group home did not work out, Robert has done exceptionally well at Polk where he is more integrated than when he was in the group home. 4 7. LAUREN LOTZI, by and through her sibling/guardian, Linda Lotzi, and her sibling, Patty Degen, believes that White Haven is the least restrictive and most appropriate environment available to meet her needs. Lauren has severe/profound intellectual and physical disabilities, neurodevelopmental disorder, spastic quadriplegia, cerebral palsy, and epilepsy. She is non-communicative and non-ambulatory. Lauren also has degenerative osteoarthritis of the spine, fibrocystic breast disease, and an eating disorder that requires that she be specially fed to prevent aspiration. Lauren receives breathing treatment several times per day in addition to a vibrating vest which breaks up the mucous in her lungs. Lauren can feel pain, but cannot tell others that she is in pain. She needs a mechanical lift to move her from bed to wheelchair and she needs specialized equipment for bathing. She also needs familiar staff who can understand her non-verbal communication. Her parents were unable to care for her in the “community” where they valiantly made the effort at their home, but she has done very well at White Haven. 8. BETH LAMBO, by and through her parents/guardians, Joseph and Carina Lambo, believes that Polk is the least restrictive and most appropriate environment available to meet her needs. Beth is severely autistic and likely profoundly intellectually disabled. She is bipolar and suffers from epilepsy seizure disorder, sinus arrhythmia, mitral valve prolapse, hyperprolactinemia, dysmenorrhea, and gastritis with peptic ulcer. She has a feeding tube. Beth has severe self-injurious behavior which includes punching herself, biting, pulling out her hair, and throwing herself on the floor. She has done very well at Polk where she receives 2-to-1 staff monitoring. Beth does not do well with change and she requires the familiar surroundings and staff at Polk. 9. MARIA KASHATUS, by and through her parents/guardians, Thomas and Margaret Kashatus, believes that White Haven is the least restrictive and most appropriate environment available to meet her needs. Maria has profound intellectual and developmental disabilities. She requires 24-hour nursing care and extensive medical care. She cannot feed herself, cannot talk or express pain, and is unable to walk or stand by herself. After a number of failed attempts at placement in a group home, Maria receives a much higher quality of life at White Haven. 10. DAVID NAULTY, by and through his parent/guardian, Nielene Bogansky believes that White Haven is the least restrictive and most appropriate environment available to meet his needs. David is severely/profoundly intellectually disabled. Attempts to place David in 5 group homes were unsuccessful because they could not manage his aggressive behavior. While in the “community,” David suffered a placement in a state hospital where he was housed for six years with forensic cases including rapists and murderers. White Haven has been able to handle his aggressive behavior. David has lived very well at White Haven. 11. MAUREEN JORDA, by and through her sibling/guardian, Georgine Jorda, believes that White Haven is the least restrictive and most appropriate environment available to meet her needs. Maureen suffered severe brain damage at birth. She cannot walk or talk. She has cerebral palsy and a seizure disorder. Maureen’s legs were also severely damaged by medical malpractice. She has a feeding tube. The experienced and competent staff at White Haven are able to provide for her every need. At White Haven she enjoys road trips with staff and other activities. She needs the full-time care that is provided by the aides and nursing staff at White Haven. The direct care staff at White Haven know when she is in pain and know when she needs something. If Maureen was to be surrounded by unfamiliar and less competent staff in the “community,” she would go into deep depression and would deteriorate rapidly. 12. JANINE WINSOCK, by and through her sibling/guardian, Ann Meszczynski, believes that White Haven is the least restrictive and most appropriate environment available to meet her needs. Janine has never developed beyond an intellectual capacity of 18 months of age. Janine has intellectual disability, bipolar one disorder, severe autism, severe paranoia, severe edema, blindness, and other medical conditions. Janine was a threat to herself and to other children in the household. Janine has received excellent care at White Haven, and she has fared very well there. 13. CYNTHIA MARTIN, by and through her guardian, Thomas Kashatus, believes that White Haven is the least restrictive and most appropriate environment available to meet her needs. Cynthia suffered from several serious illnesses as a child including spinal meningitis and tuberculosis. Her intellectual disability caused her to be placed in the Cerebral Palsy Daycare Center. At 11-years-old, she was placed in a nursing home. Cynthia was destructive and exhibited self-injurious behavior, including pulling out her hair and tearing her clothing. At age 14, Cynthia was admitted to White Haven Center where she began the process of improving her developmental skills. Cynthia has thrived at White Haven. She enjoys numerous opportunities to attend activities outside a residential unit both on and off the WHC campus. 6 14. TERRY D. HETRICK, by and through his sibling/substitute decision maker, Pamela Dougherty, believes that Polk is the least restrictive and most appropriate environment available to meet his needs. Terry has lived at Polk for nearly sixty (60) years. Terry has a mental age of one (1) year five (5) months with an IQ of less than 15. His diagnosis is profound intellectual disability, impulse control disorder, PDD-NOS, osteopenia, cleft palate, GERD, hypertension, hypothyroidism, and chronic gastritis. Terry is incontinent and wears disposable briefs which need to be changed every two (2) hours. Terry has little safety awareness which requires a very structured environment with a 24-hour awake staff. Since he is non-verbal, the staff needs to be very familiar with him to be able to sense the changes in his behavior that may be signs of discomfort or illness. Terry has no teeth and all his food must be pureed. He requires trained and familiar staff to set up his meals and to assist with his eating. Terry exhibits uncontrollable tantrums and requires assistance of 3 to 4 staff members just to calm him down and to keep them safe. Terry is very comfortable with and enjoys the companionship of his cottage mates and his familiar staff. He has great freedom of movement in his large living area. He enjoys a variety of recreational activities on campus. Terry would not be happy or safe in a “community” setting. 15. SHARON MCCABE, by and through her sibling/guardian, Irene McCabe, believes that Polk is the least restrictive and most appropriate environment available to meet her needs. Sharon was probably injured in birth during a forceps delivery. Sharon had a tendency to slap other children, was moody, and would break windows with her fist. She would bite, kick, scratch, tear clothing, and throw chairs. Sharon has had a very good life at Polk which includes a simulated community where she works at a restaurant and she attends live entertainment, dances, and movies. She was unable to adjust to the decreased structure of the Community Readiness Cottage, just as she would be unable to adjust to a much less structured “community” placement. 16. VIOLA “VIANNE” CAYE, by and through her sibling/substitute decision maker, Linda Murphy, believes that Polk is the least restrictive and most appropriate environment available to meet her needs. Vianne suffered a fall at 18-months-old which probably resulted in a cerebral hemorrhage. She was diagnosed as being profoundly intellectually disabled with a mental age of two (2). She is non-verbal, legally blind, and needs total assistance in ambulating. She has no teeth and her food must be carefully chopped up, and she requires eating assistance. She would destroy books, toys, and other things at home as she did not have an 7 understanding of the value of items. When she is upset, she kicks objects, stumps her feet, and points to and taps her head. Her parents attempted to raise her at home, but she was too dangerous to other children in the house. Her only communication is using guttural noises that can only be understood by those most familiar with her. She caused a younger brother to fall down the cellar stairs and she also cut him in the face with a razor blade. Vianne has overall done very well at Polk, but she has demonstrated increased behavioral issues and aggression every time that they have changed her environment by moving her to a different cottage. She needs to be very comfortable and adjusted to her living area, her routine, her friends, and her staff. She participates in many on-grounds and off-grounds activities at Polk, but this requires careful supervision. She needs continuous skilled care which can only be adequately received at a home like Polk. Her physical, emotional, mental, and medical needs cannot be sufficiently met in a group home environment. DEFENDANTS 17. The Defendant, TOM WOLF (Thomas Westerman Wolf), is the Governor of the Commonwealth of Pennsylvania. Governor Wolf is sued in his official capacity only. 18. The Defendant, PENNSYLVANIA DEPARTMENT OF HUMAN SERVICES (“DHS”), is a public entity covered by Title II of the Americans with Disabilities Act 42 U.S.C. § 12131(1). It receives federal funds under § 504 of the Rehabilitation Act, 29 U.S.C. § 794. DHS administers services for millions of Pennsylvania’s citizens, including individuals and families with low incomes; people with mental illnesses, developmental disabilities, or late-onset disabilities; people who are blind, visually impaired, deaf, hard of hearing, or deaf-blind; parents needing childcare services, child support and healthcare for children; and families with catastrophic medical expenses for their children. DHS is the largest agency in Pennsylvania. DHS operates the Office of Developmental Programs. 19. The Defendant, TERESA D. MILLER, is the Secretary of the Pennsylvania Department of Human Services (“DHS”). Ms. Miller is sued in her official capacity. Defendant Miller is ultimately responsible for ensuring that Pennsylvania operates its delivery of services to individuals with disabilities in conformity with the United States Constitution, the ADA, the ADA implementing regulations, section 504 of the Rehabilitation Act of 1973 as 8 amended, 29 U.S.C. § 794(a), and section 504’s implementing regulations. 20. The Defendant, PENNSYLVANIA DEPARTMENT OF HUMAN SERVICES OFFICE OF DEVELOPMENTAL PROGRAMS (“ODP”), is a public entity covered by Title II of the Americans with Disabilities Act 42 U.S.C. § 12131(1). It receives federal funds under § 504 of the Rehabilitation Act, 29 U.S.C. § 794. ODP funds services and supports for eligible Pennsylvania residents with developmental disabilities. The ODP was created “to support Pennsylvanians with developmental disabilities to achieve greater independence, choice and opportunity in their lives” and “to continuously improve an effective system of accessible services and supports.” 21. The Defendant, KRISTIN AHRENS, is Deputy Secretary of the ODP. Ms. Ahrens is sued in her official capacity. Defendant Ahrens operates Pennsylvania’s system of services to individuals with developmental disabilities and is ultimately responsible for ensuring that eligible Pennsylvania residents with developmental disabilities receive services and supports effectively and in accordance with the United States Constitution, the ADA, the ADA implementing regulations, section 504 of the Rehabilitation Act of 1973 as amended, 29 U.S.C. § 794(a), and section 504’s implementing regulations. 22. The Defendant, POLK CENTER (“Polk” or “PC”), is a residential facility in Northwestern Pennsylvania that provides, among other things, habilitation, behavioral, and medical services and supports for individuals with developmental and intellectual disabilities. Polk opened in 1897. With its 2,000-acre campus setting, it includes living areas, sheltered workshops, vocational building, school building, chapel, healthcare center, auditorium, and recreational facilities. It is located in Polk, Venango County, Pennsylvania. “An interdisciplinary team of staff provides a wide array of quality services to the adults who make Polk Center their home.” Polk is a public entity covered by Title II of the Americans with Disabilities Act 42 U.S.C. § 12131(1). It receives federal funds under § 504 of the Rehabilitation Act, 29 U.S.C. § 794. 23. The Defendant, SUE RODGERS, is the Facility Director at Polk. As Facility Director, Ms. Pickens is responsible for ensuring the health and safety of all the residents of Polk. In particular, Ms. Rodgers supervises the 24-hour supported living, medical care, and developmental activities of all residents at Polk. 9 24. The Defendant, WHITE HAVEN CENTER (“White Haven” or “WHC”), is a residential facility that provides, among other things, habilitation, behavioral, and medical services and supports for individuals with developmental and intellectual disabilities. White Haven was established in 1956. With its campus-like setting on 192 acres, it includes residential cottages, therapy rooms, healthcare services center, multi-purpose rooms, swimming pool, and recreational and entertainment facilities. It is located in White Haven, Luzerne County, Pennsylvania. WHC is a public entity covered by Title II of the Americans with Disabilities Act 42 U.S.C. § 12131(1). It receives federal funds under § 504 of the Rehabilitation Act, 29 U.S.C. 25. The Defendant, MARK R. GEORGETTI, is the Facility Director at White Haven. As Facility Director, Mr. Georgetti is responsible for ensuring the health and safety of all the residents of WHC. In particular, Mr. Georgetti supervises the 24-hour supported living, medical care, and developmental activities of all residents at WHC. CLASS ACTION ALLEGATIONS 26. Pursuant to Fed. R. Civ. P. 23(a) and (b)(2), the named Plaintiffs bring this action on behalf of themselves and all other persons similarly situated. 27. The named Plaintiffs bring this action pursuant to the Civil Rights Act, 42 U.S.C. § 1983; the Americans with Disabilities Act, 42 USC § 12132; § 504 of the Rehabilitation Act, 29 U.S.C. § 794 (“Section 504”), and the waiver of state sovereign immunity enacted in 42 U.S.C. § 2000d7(a)( 1), various Medicaid federal statutes, and regulations incorporated into Pennsylvania law and the United States Constitution, on behalf of a Class consisting of themselves and all other persons who are residents of Polk Center and White Haven Center as of January 1, 2020. 28. The proposed class consists of all residents who reside or resided at the Polk Center or White Haven Center, at any time since January 1, 2020, or at any time during this litigation. 29. Joinder of the entire Class is impracticable because the Class Members are 10 numerous, including hundreds of residents, and are persons with severe or profound developmental disabilities. Virtually all, if not all, Class Members are unable to give their consent except through guardians or family members. 30. The named Plaintiffs’ claims are typical of the claims asserted on behalf of the 31. The named Plaintiffs do not have any interests that are adverse or antagonistic to any claims or potential claims of the Class. 32. The named Plaintiffs will fairly and adequately protect the interests of the members of the Class. 33. The named Plaintiffs are committed to the vigorous prosecution of this action and have retained counsel competent and experienced in this type of litigation. 34. The named Plaintiffs do not seek monetary damages. Hence, the burden and expense of prosecuting this litigation makes it unlikely that members of the Class would or could prosecute individual actions. If individual actions were pursued by Class Members, prosecution of those individual claims would be impracticable and inefficient. 35. This Court is the most appropriate forum for adjudicating the claims at issue, which principally arise under federal law. 36. The Plaintiffs do not anticipate any difficulty in the management of this action as a class action. 37. There are many questions of law and fact common to the Class, which predominate over any questions which may affect individual members. The predominant common questions of law and fact include, among others: (a) Whether Defendants are liable for violation of the Civil Rights Act, 42 U.S.C. § (b) Whether Defendants are liable for violation of the Americans with Disabilities Act, 42 U.S.C. § 12132; (c) Whether Defendants are liable for violation of § 504 of the Rehabilitation Act, 29 U.S.C. § 794 (“Section 504”); 11 (d) Whether Defendants are liable for violation of various Medicaid federal statutes and regulations incorporated into Pennsylvania law; (e) Whether Defendants are liable for violations of the United States Constitution; and (f) Whether named Plaintiffs and Class Members are entitled to equitable and injunctive 38. A class action is superior to all other available methods for the fair and efficient adjudication of this controversy. 39. Plaintiffs seek declaratory and injunctive relief, attorneys’ fees and expenses as permitted by law, on behalf of themselves and the Class. COMMON FACTUAL ALLEGATIONS 40. All of the Plaintiffs reside at Polk Center (“PC”) or White Haven Center (“WHC”), or resided there as of January 1, 2020. 41. Almost all of the Plaintiffs have lived in their homes at PC and WHC for many years, with most of those residents having lived there for more than 20 years. Many of these individuals have resided at these Centers for over 40 years. 42. Polk is an Intermediate Care Facility for Individuals with Intellectual Disabilities (“ICF/IDD”) that is operated by the Commonwealth of Pennsylvania, and currently serves approximately 194 residents. 43. White Haven is an Intermediate Care Facility for Individuals with Intellectual Disabilities (“ICF/IDD”) that is operated by the Commonwealth of Pennsylvania, and currently serves approximately 112 residents. 44. Polk Center and White Haven Center focus on providing an everyday life for the people residing there based upon the Pennsylvania Office of Developmental Programs' "Everyday Lives" principles, and these Centers strive to make each person's living arrangements home-like, cozy and individually decorated. Some residents of these Centers work at jobs of their choosing, while others participate in the Senior Center or life skills education. 12 45. Each year, everyone who lives at the Centers participates in a person-centered planning meeting that focuses on their dreams, aspirations, abilities, needs, and desires. Participants at this meeting include anyone who is involved in a person's life such as family members, special friends, residential support staff, physicians, nurses, and clergy. From this, an "Individualized Support Plan" (ISP) is developed to provide tailored medical, spiritual, social, vocational, educational and rehabilitative services, as well as considerations for community inclusion. 46. At the Centers, many new milestones have been reached that contribute to a safe, healthy, free, and integrated environment. For example, at White Haven, there has been the establishment and continuance of a restraint-free environment. White Haven Center's "People on the Go Program", the "Pasta Program" for people with Autism, and "Workplace Harmony" are just a few more examples of the supportive individualized integrated home that exists at the Centers. 47. An Intermediate Care Facility for Individuals with Intellectual Disabilities(“ICF/IID”) (formerly referred to as an Intermediate Care Facility for the Mentally Retarded or “ICF/MR”) is regulated by the Centers for Medicare and Medicaid Services (“CMS”) in conjunction with the State’s licensing agency. Part of that regulatory process includes routine surveys by CMS and the Commonwealth’s licensing agency to ensure quality treatment and services are provided by ICF/IID-certified facilities, like Polk or White Haven Centers. 48. Eligibility for residence in a Pennsylvania developmental center requires a developmental disability that is a severe, chronic disability of an individual, which is attributable to a mental impairment, physical impairment, or combination of both; is likely to continue indefinitely; results in a combination of functional limitations in major life activities; reflects the need for a combination of special interdisciplinary care or treatment of lifelong or extended duration; and includes, but is not limited to, developmental disabilities, autism, cerebral palsy, epilepsy, spina bifida, and other neurological impairments. 49. All of the Plaintiffs are diagnosed as in need of state-run ICF/IID institutional 13 care and have been appropriately designated as eligible for state-operated ICF/IID-level of care. 50. Many, if not all, of the individuals residing at the Polk have been diagnosed with profound or severe intellectual disabilities. Almost all individuals residing at Polk have been diagnosed with additional disabilities, including seizure disorders, autism, cerebral palsy, vision difficulties, and hearing impairments. 51. Most, if not all, of the individuals residing at the White Haven have been diagnosed with profound or severe intellectual disabilities. Almost all individuals residing at WHC have been diagnosed with additional disabilities, including seizure disorders, autism, cerebral palsy, vision difficulties, and hearing impairments. 52. The primary service needs of individuals at Polk and White Haven Centers require a variety of services and supports. Some broad areas of service are described below: (a) Extensive Personal Care - This need refers to people who require total assistance and care provided by direct service staff who are specially trained on individualized programs developed by residents’ treating professionals, including physicians, nurses, physical therapists, occupational therapists, speech language pathologists, and many other licensed clinicians who treat residents at the Centers. (b) Significant Health Care Services - Treating professionals at Polk and White Haven have determined that significant nursing intervention and monitoring are required to effectively treat residents who have significant health care needs. This service includes the need for 24-hour monitoring and immediate availability of treating professionals for intermittent pressure breathing, inhalation assistive devices, tracheotomy care, or treatment for recurrent pneumonias or apnea. (c) Ambulation – Many residents at PC and WHC are non-ambulatory or require assistance with ambulation. (d) Significant Behavioral Support – Many residents at PC and WHC require significant behavioral support. This need addresses individuals who have behaviors that require intervention for the safety of themselves or others, as developed by psychologists and medical personnel and implemented in conjunction with direct service staff. 14 53. On or about August 14, 2019, defendant Miller announced the closure of Polk Center and White Haven Center, which was projected to take about three (3) years. 54. Prior to 2019, all PC and WHC residents were consistently evaluated by their treating professionals and determined to be in need of ICF/IID services, and the best setting for Plaintiffs to receive those services was at PC or WHC as determined by the professional judgment of these professionals. Subsequent to Defendants’ announcement of their intent to close the PC and WHC, outside biased professionals with far less familiarity with the Plaintiffs have or will routinely and inappropriately state that Plaintiffs would best be served in alternative settings, including settings that do not provide ICF/IID-level of care. Most, if not all, of these statements by outside professionals supporting placement in the “community” are not, or will not be, based upon sound and unbiased professional judgments consistent with accepted professional standards. 55. The Defendants incorrectly and unfairly assume that a community-based facility should be automatically considered the most integrated type of living arrangement under ADA standards. In reality, the “institutional” care at Polk and White Haven, at least for the Plaintiff Class, presents a more integrated approach to living based upon individual circumstances and 56. While many residents’ interdisciplinary teams have agreed that the residents’ needs are better served at their current ICF/IID, social workers have more recently been sending or will be sending letters or making other communications that schedule interdisciplinary meetings promoting community placements. Such communications are or will be based upon a political agenda to close all Centers rather than upon sound and unbiased accepted professional judgments. 57. Community placements are being sought for residents regardless of their needs. “Community” placement is inappropriate for most, if not all, residents of Polk and White Haven, yet, nonetheless the Defendants are pursuing an alternative “community” residence for all the Plaintiffs. 58. Plaintiffs have the right to receive ICF/IID-level of services from the Commonwealth of Pennsylvania. 15 59. All Plaintiffs have had, or imminently will have, their rights to receive ICF/IID level services at Polk or White Haven Centers denied. The policies and practices of the Commonwealth have or will deceive, frighten, and coerce residents of PC and WHC into inappropriately surrendering their rights to receive this superior level of care. 60. Many Polk and White Haven residents have lived in the community at some time. Such placements have proven to be unsuccessful. For example: (a) The Plaintiff, Russel “Joey” Jennings was in and out of six (6) different group homes where they failed to manage his challenging behaviors, which included property destruction, self-abuse, hitting, biting, scratching, and elopement into traffic. He was very isolated and lonely, and seemed like a prisoner in solitary confinement “in the community.” His care was so deficient that he was admitted to five (5) different psychiatric wards, and he languished in one of those psychiatric wards for five (5) months when no other home was willing to take him. He suffered many mysterious bruises, a broken eye socket, and lacerations. He went unbathed for weeks at a time and was forced sleep on a bare mattress in his street clothes. As a result of his “community” experience, Joey was toxically overmedicated as a chemical restraint and suffered permanent Parkinsonian like tremors, the disfigurement of female-like breasts, psychotic breaks with reality, serotonin syndrome, and intractable insomnia. Joey was rescued when he was admitted to White Haven. He is more integrated at White Haven then in the “community” because he now has multiple opportunities to socialize at parties, dances, barbecues, movies, amusement parks, and restaurants. (b) The Plaintiff, Rinaldo Scruci, did not receive adequate activities and services when he was in a group home. At Polk, in contrast to the group home, Rinaldo has been included in many activities and is much more integrated than he was in the “community.” He now likes to make throw rugs in which he takes great pride. He loves the people at Polk and is very happy with his surroundings. He is able to move around scooting in his wheelchair, which would not be an option in a much more confined setting as usually exist in the “community.” Moving Rinaldo to the “community” would cause him immeasurable harm especially because his new staff would not know what all of his gestures and expressions mean. Rinaldo needs to remain in the home that he has known for the past 54 years. 16 (c) The Plaintiff, Robert Carson, experienced inadequate care in the “community” because the staff there did not know how to handle his outrage when he hit, head-butted, pinched, and screamed. Also, the group home constantly had different staff workers which resulted in inconsistent care for Robert. In the group home, he still repeatedly soiled himself and he was very unhappy all the time. At Polk, Robert is very happy and he has many more activities, and he is much more integrated than in the group home. He engages in weekly activities that include going to the canteen to purchase snacks with his own spending money, evening bingo in the recreation room, evening social with other residents, wagon rides Friday nights in the summer, dances in the evening with snacks, church services, dining out, picnics, going out to observe holiday decorations, yearly formal dance, camping, shopping, and many off-grounds outings. Also, Robert has superior healthcare at Polk where there are nurses on staff 24-hours-a-day along with a few doctors being present every day. The direct care staff of Polk make Robert feel loved and provide him the unique individualized care that can only come from those persons who know him well. Disrupting his life and routine at Polk will result in a return of his abusive and self-injurious behaviors. (d) The Plaintiff, Lauren Lotzi, could not receive adequate care in the “community” with her parents, as she regressed and became increasingly harder to handle while experiencing falls, tantrums, seizures, weight gain, difficulty bathing and dressing, wandering in the day and night, difficulty regulating medications, difficulty with eating, and difficulty with toilet hygiene. She would elope from her home which was very dangerous because she was incapable of telling anyone her name or address, or in recognizing the danger of traffic. After moving to White Haven, she is comfortable and well-adjusted. 61. There has been, and there is a continuing further risk of, a loss of professionals and other staff at Polk and White Haven Centers due to a perceived lack of job security. Such losses have and will result in larger caseloads for existing staff, and thus less time and care for each resident. The actions of the Defendants in announcing closure will result in the deterioration of services at Polk and White Haven, including the loss of irreplaceable valuable staff. The Defendants will then use this fact to try to justify the closure of Polk and White Haven. 62. There has been, and there continues to be a further risk of, a loss of some services 17 at Polk or White Haven due to downsizing and eventual closure. This has and will result in inferior care in violation of Plaintiffs’ rights and will ultimately inappropriately force residents to leave Polk and White Haven Centers. 63. As some cottages close, in some building units, inexperienced and over-worked staff have replaced or will replace experienced staff, resulting in confusion with respect to resident care. 64. As cottages close, resident housing is being merged or will be merged, creating a dangerous and chaotic environment. Residents will be physically harmed by other residents as there will be more resident-to-resident and resident-to-staff assaults due to the revised living arrangements. 65. The Defendants have acted, or failed to properly act, under the color of state law, pursuant to the protections of the Fourteenth Amendment to the Constitution of the United 66. The Defendants have determined that the residents of Polk and White Haven have developmental disabilities and require treatment, services, supports, and care. 67. The Defendants have failed, or will fail, as a result of the decision to close the developmental centers, to provide the Polk and White Haven residents with reasonably safe conditions in their delivery of treatment, service, supports, and care. 68. The Defendants’ treatment, services, supports, and care, since the decision to close the developmental centers, have substantially departed or will substantially depart from generally accepted professional standards of care. 69. The Defendants’ provision of psychological and behavioral services, since the decision to close the developmental centers, have substantially departed or will substantially depart from generally accepted professional standards. 70. The Defendants’ provision of medical, neurological, and nursing services, since the decision to close the developmental centers, have substantially departed or will substantially depart from generally accepted professional standards. 71. The Defendants’ provision of psychiatric services, since the decision to close the 18 developmental centers, have substantially departed or will substantially depart from generally accepted professional standards. 72. The Defendants’ provision of habilitation and therapy services, including physical and nutritional management, since the decision to close the developmental centers, has substantially departed or will substantially depart from generally accepted professional standards. 73. The Defendants’ provision of protection from harm mechanisms, since the decision to close the developmental centers, has substantially departed or will substantially depart from generally accepted professional standards. 74. Due to some instances of lack of appropriate treatment, services, supports, and care, since the decision to close the developmental centers, the residents are or will be at significant risk of harm, or have or will have suffered actual harm. 75. The Defendants have failed or will fail to provide the PC and WHC residents, since the decision to close the developmental centers, with the appropriate level of habilitation training and behavioral training required to protect the residents’ liberty interests to protect them from harm and the freedom of undue restraints. 76. The Defendants seek to compel Plaintiffs’ discharge from PC and WHC to other settings, including predominately non-ICF/IID certified settings. 77. The Defendants’ policies and procedures have interfered with or usurped the ability of Plaintiffs’ treating professionals to make independent and sound professional judgments. The treating professionals are now often following a political or administrative agenda rather than accepted professional standards. 78. The Defendants’ policies and procedures have unduly influenced or compelled Plaintiffs’ treating professionals to recommend transfer or discharge of Plaintiffs to settings that are not the most appropriate for Plaintiffs’ needs, solely for the purpose of conforming to Defendants’ political policy decisions. 79. In some cases, staff has exaggerated, or will exaggerate, the residents’ personal care abilities in order to deceptively document the appropriateness of a community placement. 19 80. All Plaintiffs are medically and developmentally most appropriately served at the Polk or White Haven Centers instead of any alternative setting. 81. All Plaintiffs are physically, mentally, and emotionally fragile and are most appropriately served at the Polk or White Haven Centers instead of any alternative setting. 82. All Plaintiffs are in need of continuous care by multidisciplinary teams of professionals as are currently serving them at the Polk or White Haven Centers. 83. The services provided to Plaintiffs cannot be reasonably replicated in alternative residential settings. 84. Non-ICF/IID-certified settings are not able to reasonably provide the same level of care as an ICF/IID-certified facility. 85. Services provided to residents at the Polk and White Haven Centers are uniquely tailored to the needs of the residents of those Centers. 86. None of the Plaintiffs have given informed consent for their discharge from PC and WHC because, among other things, Defendants have precluded treating professionals at those Centers from fully and fairly considering whether those Centers best meet the needs of the Plaintiffs, and have prevented those treating professionals from acknowledging the rights of Plaintiffs to receive treatment and services at Polk or White Haven Centers, or in another ICF/IID. 87. Alternative ICF’s/IID are not and will not be available. The two remaining Centers for the developmentally disabled, if Polk and White Haven are closed, do not have the current planned capacity to take any significant number of the Plaintiff Class. Also, The Defendants have not offered placement in other ICF’s/IID. 88. Alternative ICFs/IID, even if available, are many miles away, and deny guardians, parents, and family members the opportunity to visit on a regular basis. Many guardians, parents, and family members are elderly and cannot make a long-distance trip to visit a distant ICF/IID. Such lack of family bonding may cause further harm to the well-being of those being moved and disrupts the family ties. Family members and guardians contribute positively to the care, treatment, habilitation, and psychological well-being of residents, and residents will suffer great harm if their loved ones cannot participate. 20 89. Furthermore, all ICF’s/IID are not equal and cannot be easily substituted for each other. The movement to another ICF/IID would still rip the residents of PC and WHC from their long-time homes with great potential harm. 90. Plaintiffs also have not had the benefit of their respective treating professionals’ independent judgments about whether they should continue to reside at Polk and White Haven Centers or at another state operated ICF/IID. 91. Defendants have, or will, unduly influence or compel Plaintiffs to receive services in non-ICF/IID facilities. Those services are inferior to the services provided at Polk and White Haven Centers because, among many other reasons, they will not be provided by an individualized, multidisciplinary team of professionals. 92. Some Plaintiffs will be unable to even receive services in the community. Some have already been rejected or will be rejected for admissions to group homes due to their challenging behaviors or due to their extreme care needs. 93. Persons residing in the type of settings to which Defendants intend to discharge Plaintiffs, are at approximately seventy-five (75) percent greater risk of death, abuse, and neglect as compared to similar persons receiving services at a facility like Polk or White Haven Centers. 94. Defendants know or should know of the increased danger of death, abuse, and neglect to which Plaintiffs will be subjected if they are discharged from Polk or White Haven Centers, as sought by Defendants’ political plan to downsize or close all the Developmental Centers. 95. Persons residing in the type of “community” settings to which Defendants intend to discharge Plaintiffs are likely to be more secluded from the community immediately surrounding them and be more restricted in their interactions with non-disabled peers as compared to similar persons receiving services at a facility like PC or WHC. 96. Defendants have announced their plan to “depopulate” and close PC and WHC and discharge residents to non-ICF/IID-certified alternative settings. The plan is to move the residents to “community” settings such as small group homes, nursing homes, and other settings with smaller populations where they would allegedly have more interactions with the non- 21 disabled population. In reality, these residents actually often be more isolated in a small home or apartment than they were at PC and WHC, as both Centers are open to community events and have opportunities for community involvement. 97. Among the reasons identified by Defendants for their “depopulation” plan was the ostensibly high cost of providing the necessary services for the disabled residents of the Commonwealth’s developmental centers. In reality, the costs for caring for these residents in “community” settings would be equal to or higher than care in these Centers. 98. Contrary to Defendants’ public statements about the alleged general desire for “community” placements, Plaintiffs have not requested discharge or transition from Polk or White Haven Centers. 99. Defendants have instructed or inappropriately encouraged Plaintiffs’ treating professionals to include language in Plaintiffs’ Individualized Support Plans indicating that Plaintiffs are capable of being served in settings other than Polk and White Haven Centers regardless of whether Plaintiffs are actually capable of being served in alternative settings. 100. Defendants have instructed or inappropriately encouraged Plaintiffs’ treating professionals to include language in Plaintiffs’ Individualized Support Plans indicating that Plaintiffs have requested discharge to settings other than Polk and White Haven Centers regardless of whether Plaintiffs actually communicated such a request. 101. The treating professionals are likely intimidated and fearful of retaliation, including the possible loss of their jobs, and likely will only be forthcoming with information to support the position of Plaintiffs if protected by or compelled by appropriate discovery in this 102. Because Plaintiffs’ treating professionals have not been able to provide independent judgments about the Plaintiffs’ ability to be comparatively served in alternative settings, the judgments they have made or will make in that regard are largely unreliable and inaccurate. 103. Many of the Plaintiffs have not been provided sufficient information to allow them to provide informed consent to any proposed discharge. 22 104. Plaintiffs’ guardians and family members have been given unclear and conflicting information as to the availability of specific alternative placements. In some cases, since information has not been forthcoming by the State, parents are left to believe speculation of options from other parents. Information being provided or to be provided to guardians and family members by the Commonwealth has been or will be one-sided, promoting only the alleged benefits of community placement. The State has not made any real effort to address the potential risks of community placement and has not sufficiently attempted to lessen guardians’/family members’ fears and concerns. 105. Defendants made the decision to downsize or depopulate Polk and White Haven Centers without regard to the needs of the individual Plaintiffs, their individual support plans (which are developed in conjunction with their treating professionals), or their rights to receive services in the least restrictive setting appropriate to their needs. 106. Defendants have prevented or will prevent the meaningful evaluation and consideration of treatment team professionals regarding most integrated residential settings and alternative settings which can serve the needs of such residents. 107. The decision to close PC and WHC was predetermined before conducting any investigations or making any findings about the individual needs or desires of the Plaintiffs. 108. The Defendants have ignored information regarding the large percentages of those at Polk and White Haven who are opposed to community placement; the high level of impairment of the PC and WHC residents (compared to those who can be served in the “community”); and the unavailability of appropriate and adequate alternative placements to match the current level of services provided to PC and WHC residents. 109. The Defendants rendered opinions and recommendations based on faulty data, including inaccurate cost data, and despite the lack of feasibility of a workable plan to meet the needs of all affected individuals within a three (3)-year time frame. 110. When appropriate settings in the “community” prove to be unavailable, and the Defendants continue on their course to meet their arbitrary three (3)-year deadline, some Plaintiffs will be forced into unacceptable and harmful nursing homes and psychiatric wards. 111. Residents of the State’s developmental centers, those recommended for closure 23 and those not recommended for closure, have the right to receive unbiased and objective recommendations from their respective treating professionals regarding the most appropriate setting to meet the needs of such residents. 112. The Defendants’ mandate to close two (2) developmental centers without meaningful evaluation of the residents’ needs further evidences that the residents of the developmental centers have not received or will not receive treating professionals’ recommendations without unreasonable interference or influence from the State’s policies, procedures and agendas. 113. Plaintiffs currently residing at PC and WHC have been and will be denied access to their current high level of treatment and services if the Defendants continue with their current plan to discharge residents. COMMON ALLEGATIONS OF RIGHTS AND DUTIES 114. As described more fully herein, each Plaintiff has a constitutional right, a life and liberty interest in, and a statutory entitlement to receive treatment and services from the Commonwealth of Pennsylvania in the most appropriate setting for his or her needs. 115. Interpreting the ADA and the Department of Justice’s regulations issued under it, the Supreme Court decision in Olmstead emphasized that there is no “federal requirement that community-based treatment be imposed on patients who do not desire it.” Olmstead v. Zimring, et al., 527 U.S. 581, 602 (1999). The Olmstead Court further stressed that “nothing in the ADA or its implementing regulations condones termination of institutional settings for persons unable to handle or benefit from community settings.” Id. at 601-02. “[T]he ADA is not reasonably read to impel States to phase out institutions, placing patients in need of close care at risk.” Id. at 605. 116. In fact, the Olmstead decision recognized that “for [some] individuals, no placement outside the institution may ever be appropriate.” Id. (citing and quoting Brief for American Psychiatric Association et al. as Amici Curiae at 22-23 (“Some individuals, whether mentally retarded or mentally ill, are not prepared at particular times—perhaps in the short run, perhaps in the long run—for the risks and exposure of the less protective environment of 24 community settings”); Brief for Voice of the Retarded et al. as Amici Curiae at 11 (“Each disabled person is entitled to treatment in the most integrated setting possible for that person— recognizing that, on a case-by-case basis, that setting may be in an institution”); Youngberg v. Romeo, 457 U.S. 307, 327 (1982) (Blackmun, J., concurring) (“For many mentally retarded people, the difference between the capacity to do things for themselves within an institution and total dependence on the institution for all of their needs is as much liberty as they ever will know”). 117. By virtue of the ADA and the Olmstead decision, Plaintiffs have a federally protected right to receive sound recommendations from treating professionals as to whether community placement is the most appropriate to meet their needs and to fair consideration of their opposition to that transfer, even if the proposed transfer is from institutional care to an allegedly less restrictive setting. The only proper mechanism for second-guessing an individual or guardian’s decision to oppose a treating professional’s recommended transfer to a less restrictive setting is through State law and State Court Rules as to guardianship. 118. The paradigm created by the Olmstead decision dictates that residents of the Polk and White Haven Centers and their guardians have the benefit of treating professionals’ judgments regarding the most appropriate place to receive services. Only after they have the benefit of that information are residents and guardians required to oppose or consent to continued residence at the facility or discharge to an alternative setting. 119. The Defendants have ignored and will continue to ignore Plaintiffs’ right to have treating professionals render full and fair judgments as to where Plaintiffs’ should receive services most appropriate to their needs. 120. Likewise, Defendants have ignored and will continue to ignore Plaintiffs’ rights, as recognized by Olmstead, to oppose discharge from PC and WHC. 121. Pursuant to 42 U.S.C. § 12134, Defendants are under a constitutional and statutory duty to: (a) effectuate the placement of Plaintiffs in the “most integrated setting appropriate to the needs of qualified individuals with disabilities,” a setting that “enables individuals with 25 disabilities to interact with nondisabled persons to the fullest extent possible” (28 C.F.R. pt. 35 app. A.); (b) not place Plaintiffs in more restrictive or dangerous placements than they currently (c) effectuate appropriate institutional placement for each Plaintiff; (d) propose an ICF/IID-certified institutional discharge appropriate for the Plaintiffs only where medically and therapeutically appropriate upon an impartial multidisciplinary evaluation; (e) ensure that Plaintiffs, Plaintiffs’ guardians and/or Plaintiffs’ families understand their right to receive treatment and care at an ICF/IID-certified facility prior to seeking consent to discharge a Plaintiff from the Center; (f) obtain the input and informed consent of Plaintiffs, Plaintiffs’ guardians and/or Plaintiffs’ families for such transfers. FIRST CAUSE OF ACTION AMERICANS WITH DISABILITIES ACT VIOLATIONS 122. Plaintiffs’ incorporate paragraphs one (1) through one hundred twenty-one (121) herein by reference as though fully set forth. 123. Defendants are obligated to provide treatment, sports, and services to individuals residing in the Centers consistent with the Americans with Disabilities Act and implementing regulations. 42 U.S.C. §§ 12101-12213; 28 C.F.R. pt. 35 (2006). 124. Because discharges or transfers are being forced on Plaintiffs without their consent, or the consent of their guardians or families, and without appropriate recommendations from treating professionals, such discharges or transfers violate the Americans with Disabilities Act, 42 U.S.C. §§ 12131 – 12134. 125. The Plaintiffs are entitled to injunctive and declaratory relief that the Defendants shall not discharge or transfer them from their current residences without meeting the requirements that: 26 (a) such discharge or transfer will not result in Plaintiffs receiving treatment and services in a setting more restrictive of their rights than their current residence; (b) such discharge or transfer will not be recommended by treating professionals unless the treating professionals independently conclude that such a placement is in the best interests of each Plaintiff and is the most appropriate setting to meet their needs; and (c) the Plaintiffs by their guardians or families wish to consent to such discharge or transfer. 142. Defendants have failed or will fail to provide reasonably safe conditions for the Plaintiffs if they force them into a “community” setting. 126. The Defendants have failed or will fail to provide a level of habilitation and training, including behavioral and related training programs, necessary to protect the residents’ liberty interest and to ensure their safety and freedom from undue or unreasonable restraint, if they force them into a “community” setting. 127. Forcing the residents of Polk and White Haven into “community” settings will result in treatment, supports, and services that substantially depart from generally accepted professional standards of care, thereby exposing these individuals to significant risk and, in some cases, serious harm and death. 128. Plaintiffs are entitled to the following additional declaratory and injunctive relief: (a) directing Defendants to abide by treatment plans independently prepared by Plaintiffs’ respective treating professionals, without regard for the Defendants’ political plan to downsize or close any developmental centers, and documented in their respective multidisciplinary evaluations (known as Individualized Support Plans (ISP’s), at PC and WHC). (b) Permitting each Plaintiff to choose: (i) to accept or reject the recommendation of the multidisciplinary evaluation; (ii) to receive treatment in accordance with the independent recommendations of the multidisciplinary evaluation, either at his/her current residence, another state operated ICF/IID facility, or non-ICF/IID certified setting, as each Plaintiff deems appropriate. 27 SECOND CAUSE OF ACTION REHABILITATION ACT VIOLATIONS 129. Plaintiffs’ incorporate paragraphs one (1) through one hundred twenty-eight (128) herein by reference as though fully set forth. 130. Section 504 of the Rehabilitation Act states that “[n]o otherwise qualified person with disabilities shall, solely by reason of his or her disability, be excluded from participation in, be denied benefits of, or be subjected to discrimination under any program or activity receiving federal financial assistance.” 29 U.S.C. § 794(a). 131. Each named Plaintiff and class member is a “qualified person with disabilities” within the meaning of Section 504, because they (1) have physical and/or mental impairments that substantially limit one or more major life activities; and (2) meet the essential eligibility requirements for long term care under Pennsylvania’s Medicaid program and are thus “qualified.” 132. Regulations implementing Section 504 require that a public entity administer its services, programs and activities in “the most integrated setting appropriate” to the needs of qualified individuals with disabilities. 28 CFR § 41.51(d). 133. Section 504’s regulations prohibit recipients of federal financial assistance from utilizing criteria or methods of administration: (a) that have the effect of subjecting qualified handicapped persons to discrimination on the basis of handicap [or] (b) that have the purpose or effect of defeating or substantially impairing accomplishment of the objectives of the recipient’s program with respect to handicapped persons. 134. Defendants have required that Plaintiffs be discharged or transferred from Polk and White Haven Centers to other settings in violation of Section 504's integration mandate. 135. Further, Defendants have utilized criteria and methods of administration that subject Plaintiffs and class members to discrimination on the basis of disability, by (1) failing to 28 assess properly the services and supports that would enable Plaintiffs to receive services and treatment in the most appropriate settings for their needs, (2) failing to develop proper individualized transition plans, (3) failing to allow guardians to be a meaningful part of the planning process, (4) failing to inform Plaintiffs of all of their options for receiving services, and (5) allocating resources for non-ICF/IID care contrary to the desires and needs of people with disabilities. 136. The Plaintiffs are entitled to injunctive and declaratory relief that the Defendants shall not discharge or transfer them from their current residences without meeting the requirements that: (a) such discharge or transfer will not result in Plaintiffs receiving treatment and services in a setting more restrictive of their rights than their current placement; (b) such discharge or transfer will not be recommended by treating professionals unless the treating professionals conclude that such a placement is in the best interests of the individual Plaintiffs and is most appropriate to meet their needs; and (c) the Plaintiffs by their guardians or families wish to consent to such discharge or transfer. 137. Plaintiffs are entitled to the following additional declaratory and injunctive relief: (a) directing Defendants to abide by treatment plans independently prepared by Plaintiffs’ respective treating professionals, without regard for the Defendants’ political plan to downsize or close any Centers, and documented in their respective multidisciplinary evaluations (known as ISP’s at PC and WHC). (b) permitting each Plaintiff to choose: (i) to accept or reject the recommendation of the multidisciplinary evaluation; (ii) to receive treatment in accordance with the independent recommendations of the multidisciplinary evaluation, either at his/her current residence, another state operated ICF/IID facility, or non-ICF/IID certified setting, as the Plaintiff deems appropriate. 29 THIRD CAUSE OF ACTION MEDICAID ACT AND REGULATORY VIOLATIONS 138. Plaintiffs’ incorporate paragraphs one (1) through one hundred thirty-seven (137) herein by reference as though fully set forth. 139. The Commonwealth of Pennsylvania has voluntarily assumed certain obligations under federal law in return for federal funding under the Medical Assistance Program authorized by 42 U.S.C. § 1396, et seq. 140. Those obligations include: (a) choice of an ICF/IID institutional placement, subject to a hearing, under 42 U.S.C. § 1396n and 42 CFR § 441.302(d); (b) provision of ICF/IID services under 42 U.S.C. §§ 1396a(a)(10) and 1396d(a)(l5); (c) competent evaluation for placement in an institutional ICF/IID facility under 42 CFR § 483.440(b)(3); (d) a continuous active treatment program as defined in 42 CFR § 483.440(a)(1). 141. All Plaintiffs receive assistance under the Medical Assistance Program and are owed the duties stated in the preceding paragraph. 142. Defendants have an obligation to ensure that Plaintiffs’ needs and preferences are being met in their multidisciplinary plan. 143. Defendants have failed, or will fail, to ensure that Plaintiffs’ needs and preferences are being met in their multidisciplinary plan. 144. Defendants are violating their duties to Plaintiffs under the Medical Assistance Program by their acts and omissions alleged above. 145. Plaintiffs are entitled to declaratory and injunctive relief as to the following: (a) such discharge or transfer will not result in Plaintiffs receiving treatment and services in a setting more restrictive of their rights than their current placement; (b) such discharge or transfer will not be recommended by treating professionals 30 unless the treating professionals independently and objectively conclude that such a placement is in the best interests of the individual Plaintiffs and most appropriate to meet their needs; (c) the Plaintiffs by their guardians or families wish to consent to such discharge or transfer; and (d) the State must comply at the developmental centers with all the regulatory standards contained in Title 42 of the Code of Federal Regulations. (e) the services and care provided by the State at the developmental centers must meet or exceed accepted professional standards, and must be maintained at a level at least equal to the care and services that preceded the decision to close the developmental centers; and (f) the State must maintain staffing levels for direct care staff and treating professionals at a level that meets or exceeds accepted professional standards, and at a level at least equal to the staffing that preceded the decision to close the developmental Centers; (g) the State cannot move residents to other ICF’s/IID where their needs cannot be adequately met, including, but not limited to, the State cannot move residents to an ICF/IID that is so significantly distant from their families and guardians that any individual resident will be harmed in his care, treatment, habilitation, or psychological well-being. (h) the services and care provided by the Commonwealth at the developmental centers must meet or exceed accepted professional standards, and must be maintained at a level at least equal to the care and services that preceded the decision to close the developmental centers; and 146. Plaintiffs are entitled to the following additional declaratory and injunctive relief: (a) directing Defendants to abide by treatment plans independently and objectively prepared by Plaintiffs’ respective treating professionals, without regard for the Defendants’ mandate to downsize or close any developmental centers, and documented in their respective multidisciplinary evaluations (known as ISP’s at the PC and WHC). (b) permitting each Plaintiff to choose: (i) to accept or reject the recommendation of the multidisciplinary evaluation; (ii) to receive treatment in accordance with the independent recommendations 31 of the multidisciplinary evaluation, either at his/her current residence, another state operated ICF/IID, or non-ICF/IID certified setting, as the Plaintiff deems appropriate. FOURTH CAUSE OF ACTION CONSTITUTIONAL DUE PROCESS VIOLATIONS 147. Plaintiffs’ incorporate paragraphs one (1) through one hundred forty-six (146) herein by reference as though fully set forth. 148. At all relevant times, Defendants were “persons” under 42 U.S.C. § 1983. 149. At all relevant times, Defendants were acting “under color of state law” under 42 U.S.C. § 1983. 150. At all relevant times, a “special relationship” existed between each of the Plaintiffs and the State and state actors that were responsible for their safety. 151. The Defendants have demonstrated a pattern or practice of egregious and flagrant acts or omissions which violate federal rights of the WHC and PC residents, rights which are protected by the Fourteenth Amendment to the Constitution of the United States. 152. The Plaintiff residents will suffer irreparable harm if they are deprived the rights, privileges and immunities provided by the Fourteenth Amendment and federal law. 153. Defendants, while acting under color of state law, unlawfully, intentionally, unreasonably, maliciously and with deliberate and/or reckless indifference to the Plaintiffs’ substantive due process rights secured to Plaintiffs under the Fourth and/or Fourteenth Amendments to the United States Constitution, in violation of 42 U.S.C. § 1983 et. seq. and similar provisions of federal, state and/or local law, violated Plaintiffs’ rights as alleged above and as follows. 154. The Plaintiffs have significant mental, intellectual, physical and behavioral health issues. They are unable to verbally articulate their medical and personal needs. Most of them have very limited mobility, and some have none. They are unable to care for themselves in even the most basic ways. They are at the mercy of the persons who provide them with care. Without 32 the regulatory guarantees provided by an ICF/IID facility, they are defenseless against many forms of abuse and neglect which can lead to their injury or death. 155. Before becoming residents at PC or WHC, some Plaintiffs were abused and neglected in the same types of “community” settings Defendants intend to force Plaintiffs into 156. Defendants know or should know that placing the Plaintiffs in other settings, including non-ICF/IID settings, will substantially increase their likelihood of injury and death from abuse, neglect, error, lack of appropriate services, and other causes. 157. Defendants’ failure to provide adequate safeguards to prevent such harm is a violation of Plaintiffs’ constitutional right not to be deprived of life or liberty without due process of law. 158. Defendants’ discharge process and procedure, instituted in the efforts to close PC and WHC, has and will result in harm to the residents. Loss of services, loss of staff, and reconfiguration of living units has and will result in harm to the residents. Defendants have failed and will continue to fail to protect residents from harm. 159. The actions of the Defendants herein have and will significantly contribute to an increase in the vulnerability of the Plaintiffs and create risks that would not have otherwise existed if Defendants complied with their legal duties. 160. Defendants’ actions and inactions constitute a violation of Plaintiffs’ federal rights, as protected by the Fourteenth Amendment to the Constitution of the United States and other federal laws. Unless restrained by this Court, Defendants will continue to engage in their misbehavior, which deprives the Plaintiffs of rights, privileges and immunities secured by the Constitution of the United States and federal law, and will cause irreparable harm to these residents. 161. The harm ultimately caused or to be caused to the Plaintiffs was and is foreseeable and sufficiently direct. 162. The acts and omissions of the Defendants in forcing the transfer of residents to the “community” will deny the Plaintiffs and members of the Plaintiff class their constitutional 33 rights secured by the Due Process Clause of the 14th Amendment to the United States Constitution as follows: (a) denying an individually controlled and designed habilitation plan and program to help class members maintain self-care skills; (b) denying a humane and decent existence; (c) denying habilitation necessary to ensure that residents are safe and free from unnecessary physical, mechanical and chemical restraint; (d) denying adequate shelter, clothing, nutrition and medical care; (e) denying a placement that is in the most integrated setting appropriate to their needs, which is in actuality Polk or White Haven where they already reside; and (f) denying the right to have all placement decisions be made on an individualized basis and implemented in accordance with the recommendations of planning teams composed of friends and family and professionals who know the person with a disability best, and denying proper weight for the choices and decisions of the Plaintiffs and their guardians. 163. Plaintiffs are entitled to declaratory and injunctive relief directing that: (a) such discharge or transfer cannot result in Plaintiffs receiving treatment and services in a setting more restrictive of their rights than their current placement; (b) such discharge or transfer will not be recommended by treating professionals unless the treating professionals independently and objectively conclude that such a placement is in the best interests of the individual Plaintiffs; (c) such discharge or transfer will not occur unless the Plaintiffs, by their guardians or families, wish to choose or consent to such discharge or transfer; (d) the services and care provided by the Commonwealth at the developmental centers must meet or exceed accepted professional standards, and must be maintained at a level at least equal to the care and services that preceded the decision to close the developmental centers; and (e) the State must maintain staffing levels for direct care staff and treating professionals at a level that meets or exceeds accepted professional standards, and at a level at least equal to the staffing that preceded the decision to close the developmental centers; 34 (f) the State cannot move residents to other ICF’s/IID where their needs cannot be adequately met, including, but not limited to, the State cannot move residents to an ICF/IID that is so significantly distant from their families and guardians that any individual resident will be harmed in his care, treatment, habilitation, or psychological well-being. 164. Plaintiffs are entitled to the following additional declaratory and injunctive relief: (a) directing Defendants to abide by treatment plans independently and fairly prepared by Plaintiffs’ respective treating professionals, without regard for the Defendants’ political plan to downsize or close any developmental centers, and documented in their respective multidisciplinary evaluations (known as ISPs at PC and WHC). (b) permitting each Plaintiff to choose: (i) to accept or reject the recommendation of the multidisciplinary evaluation; (ii) to receive treatment in accordance with the independent recommendations of the multidisciplinary evaluation, either at his/her current residence, another state operated ICF/IID facility, or non-ICF/IID certified setting, as the Plaintiff deems appropriate. CONCLUSION WHEREFORE Plaintiffs seek: (a) Declaratory and injunctive relief as set forth herein. (b) An award to Plaintiffs’ of reasonable attorneys’ fees, litigation expenses, and costs; and (c) Any other relief this Court deems just and proper. Respectfully submitted, Thomas B. York PA Attorney I.D. No. 32522 [email protected] 35 251 Woodland Drive Kitty Hawk, NC 27949 70 North Yale Street York, PA 17403 Attorney for Plaintiffs Date: January 24, 2020 36

civil rights, immigration, family

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SUSAN MARTIN (AZ#014226) JENNIFER KROLL (AZ#019859) MARTIN & BONNETT, PLLC 1850 N. Central Ave. Suite 2010 Phoenix, Arizona 85004 Telephone: (602) 240-6900 [email protected] [email protected] POMERANTZ GROSSMAN HUFFORD DAHLSTROM & GROSS LLP Patrick V. Dahlstrom (pro hac vice app. to be filed) Ten South La Salle Street, Suite 3505 Chicago, Illinois 60603 Telephone: (312) 377-1181 Facsimile: (312) 377-1184 [email protected] POMERANTZ GROSSMAN HUFFORD DAHLSTROM & GROSS LLP Jeremy A. Lieberman (pro hac vice app. to be filed) Francis P. McConville (pro hac vice app. to be filed) 600 Third Avenue, 20th Floor New York, New York 10016 Telephone: (212) 661-1100 Facsimile: (212) 661-8665 [email protected] [email protected] Attorneys for Plaintiff UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA DERICK LARSON, Individually and On Behalf of All Others Similarly Situated, Plaintiff, v. No. CLASS ACTION COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS DEMAND FOR JURY TRIAL INSYS THERAPEUTICS, INC., MICHAEL BABICH, and DARRYL S. BAKER, Defendants. : : : : : : : : : : : : : : : : : : Plaintiff Derick Larson (“Plaintiff”), individually and on behalf of all other persons similarly situated, by his undersigned attorneys, for his complaint against defendants, alleges the following based upon personal knowledge as to himself and his own acts, and information and belief as to all other matters, based upon, inter alia, the investigation conducted by and through his attorneys, which included, among other things, a review of the defendants’ public documents, conference calls and announcements made by defendants, United States Securities and Exchange Commission (“SEC”) filings, wire and press releases published by and regarding Insys Therapeutics, Inc. (“Insys” or the “Company”), analysts’ reports and advisories about the Company, and information readily obtainable on the Internet. NATURE OF THE ACTION 1. This is a federal securities class action on behalf of a class consisting of all persons other than defendants who purchased or otherwise acquired Insys securities between May 1, 2013 and May 8, 2014, both dates inclusive (the “Class Period”), seeking to recover damages caused by defendants’ violations of the federal securities laws and to pursue remedies under §§ 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder against the Company and certain of its top officials. 2. Insys is a commercial-stage specialty pharmaceutical company that develops and commercializes innovative supportive care products, primarily intended to assist cancer patients cope with the symptoms of their disease and treatment or therapy. 3. The Company has two marketed products, Subsys and Dronabinol SG Capsule, which utilize Insys’ sublingual spray drug delivery technology and dronabinol formulation and manufacturing capabilities. 4. In March 2012, Insys launched Subsys, the proprietary sublingual fentanyl spray for breakthrough cancer pain, or BTCP, in opioid-tolerant patients, through a purported “cost-efficient commercial organization of approximately 50 sales professionals.” 5. In a Prospectus, filed with the SEC on May 2, 2013, the Company touted to investors that “Subsys was the second most prescribed branded transmucosal immediate-release fentanyl, or TIRF, product with 16.1% market share on a prescription basis according to Source Healthcare Analytics.” 6. Throughout the Class Period, Defendants made materially false and misleading statements regarding the Company’s business and operations. Specifically, Defendants made false and/or misleading statements concerning, and/or failed to disclose, among other things that: (i) the Company engaged in illegal and/or unethical off label marketing of Subsys; (ii) the Company was exposed to potential fines and other disciplinary actions as a result of its Subsys marketing practices; and, (iii) as a result, the Company’s financial statements were materially false and misleading at all relevant times. 7. On December 12, 2013, after market close, the company announced that, “it has received a subpoena from the Office of Inspector General of the Department of Health and Human Services (“HHS”) in connection with an investigation of potential violations involving HHS programs. The subpoena requests documents regarding Subsys®, including Insys’ sales and marketing practices relating to this product.” 8. On this news, the company’s shares fell $7.73 per share, to close at $37.55 per share, a one day drop of over 17%, on high volume. 9. On May 8, 2014, a local Michigan news source published an article detailing the charges against a Michigan doctor who allegedly accounted for 20% of total nationwide Subsys prescriptions. The doctor was charged by federal prosecutors with defrauding Medicare and private insurers, and prescribing unnecessary medications to patients. 10. On this news, the Company’s shares fell $6.64 per share, or over 16%, to close on May 9, 2014 at $32.67 per share, on extremely high volume. 11. Then on May 11, 2014, analyst firm, Bronte Capital, published a report further highlighting the claims against the Michigan doctor, and the problems attendant to Insys’ marketing of Subsys, including allegedly illegal off- label marketing. 12. On this news, Insys shares fell a further $5.04 per share, or 15%, to close on May 12, 2014 at $27.63 per share. 13. As a result of defendants’ wrongful acts and omissions, and the sharp decline in the market value of the Company’s stock, Plaintiff and other Class members have suffered significant losses and damages. JURISDICTION AND VENUE 14. The claims asserted herein arise under and pursuant to §§ 10(b) and 20(a) of the Exchange Act (15 U.S.C. § 78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder (17 C.F.R. § 240.10b-5). 15. This Court has jurisdiction over the subject matter of this action pursuant to § 27 of the Exchange Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1331. 16. Venue is proper in this District pursuant to §27 of the Exchange Act, 15 U.S.C. §78aa and 28 U.S.C. §1391(b), as Insys’s principal place of business is located within this District and a substantial part of the conduct complained of herein occurred in this District. 17. In connection with the acts, conduct and other wrongs alleged in this Complaint, defendants, directly or indirectly, used the means and instrumentalities of interstate commerce, including but not limited to, the United States mail, interstate telephone communications and the facilities of the national securities exchange. PARTIES 18. Plaintiff, as set forth in the attached Certification, acquired Insys securities at artificially inflated prices during the Class Period and has been damaged upon the announcement of the alleged corrective disclosure. 19. Defendant Insys is a Delaware corporation with its principal executive offices located at 444 South Ellis Street, Chandler, Arizona 85224. Insys’s common stock trades on the NASDAQ under the ticker symbol “INSY.” 20. Defendant Michael Babich (“Babich”) has been the Company’s President, Chief Executive Officer, and a member of the Company’s board of directors (“Board”) at all relevant times. 21. Defendant Darryl S. Baker (“Baker”) has been the Company’s Chief Financial Officer at all relevant times. 22. The defendants named in ¶¶ 16 - 17 above are sometimes referred to herein as the “Officer Defendants.” MATERIALLY FALSE AND MISLEADING STATEMENTS 23. Insys is a commercial-stage specialty pharmaceutical company that develops and commercializes innovative supportive care products, primarily intended to assist cancer patients in coping with the symptoms of their disease and treatment or therapy. 24. The Company has two marketed products, Subsys and Dronabinol SG Capsule, which utilize Insys’ sublingual spray drug delivery technology and dronabinol formulation and manufacturing capabilities. 25. On or about May 2, 2013, Insys filed with the SEC a Form S-1/A Registration Statement (the “Registration Statement”), which would later be utilized for the IPO, and which incorporated a prospectus to be used in connection with the offer and sale of Insys shares. 26. On or about May 2, 2013, Insys filed its Prospectus for the IPO, which forms part of the Registration Statement that became effective on May 3, 2013. The Registration Statement and Prospectus (collectively, the “Offering Documents”) indicated that the Company’s Subsys product had obtained a substantial portion of the market for supportive care products and was in the position to capture even larger market share and greater revenues. The Company stated in relevant part: In February 2013, Subsys was the second most prescribed branded transmucosal immediate-release fentanyl, or TIRF, product with 16.1% market share on a prescription basis according to Source Healthcare Analytics. *** In the fourth quarter of 2012, our aggregate sales and marketing expenditures were $3.1 million, and we generated $4.8 million in Subsys net revenue. We focus our development efforts on product candidates that utilize innovative formulations to address the clinical shortcomings of existing commercial pharmaceutical products. We intend to utilize our sublingual spray drug delivery technology and dronabinol formulation capabilities to develop novel formulations of approved medications where we believe improved efficacy, onset of action or patient convenience are needed. *** We believe there is a large and underserved market for supportive care products. The National Cancer Institute estimates that, as of January 1, 2009, there were approximately 12.5 million people in the United States who had been diagnosed or were living with cancer. Cancer and the radiation or chemotherapy treatment regimens intended to eradicate or inhibit the progression of the disease often cause debilitating side effects and symptoms such as pain, nausea and vomiting in cancer patients 27. On or about June 3, 2013, the Company issued a press release reporting first quarter 2013 results. For the quarter the Company announced total revenues of $11.1 million, $9.7 million in net revenue from sales of Subsys, and net income of $0.1 million or $0.01 per diluted share. The Company further stated that, “total net revenue increased by 446% to $11.1 million for the first quarter of 2013.” 28. On or about June 5, 2013, the Company filed with the SEC on Form 10-Q its quarterly report for the period ending March 31, 2013, in which the Company reiterated its previously announced financial performance for the quarter. 29. On or about August 13, 2013, the Company issued a press release reporting second quarter 2013 results. For the quarter, the Company announced total revenues of $18.8 million, $18.5 million in net revenue from sales of Subsys, up 90.8% since the first quarter 2013, and net income of $4.5 million or $0.26 per diluted share. Defendant Babich further stated that, “[o]ur strong second quarter results were driven by continued uptake of Subsys. We are excited to have achieved our second quarter of profitability and look forward to building value for shareholders as we continue to execute on our marketing plan. The continued growth we have achieved allows us to accelerate reinvestment in both our research and development and sales and marketing efforts.” 30. On or about August 13, 2013, the Company filed with the SEC on Form 10-Q its quarterly report for the period ending June 30, 2013, in which the Company reiterated its previously announced financial statements for the quarter. 31. On or about November 11, 2013, the Company issued a press release reporting third quarter 2013 results. For the quarter, the Company announced total revenues of $29.2 million versus $4.8 million for the third quarter of 2012, $28.4 million in net revenue from sales of Subsys, up “1,002% over third quarter 2012,” and net income of $11.6 million or $0.51 per diluted share. Defendant Babich further stated that, “[o]ur strong results this quarter were driven by continued prescription growth of the Subsys franchise to alleviate breakthrough pain for cancer patients. The product, with its simple, one-step administration system, has captured over 30% share of the transmucosal immediate-release fentanyl (TIRF) market, and we aim to drive further growth through execution of our marketing strategy.” 32. On or about November 12, 2013, the Company filed with the SEC on Form 10-Q its quarterly report for the period ending September 30, 2013, in which the Company reiterated its previously announced financial statements for the quarter. 33. On March 4, 2014, the Company issued a press release reporting fourth quarter and annual 2013 results. For the fourth quarter, the Company announced total revenues of $40.2 million versus $5.2 million for the fourth quarter 2012. The press release also announced that: Revenues from Subsys® (fentanyl sublingual spray) were $39.2 million, up 719% over fourth quarter of 2012 levels and up 38% as compared with $28.4 million in the third quarter of 2013; Net income of $24.1 million, or $1.01 per diluted share, compared to a net loss of $7.1 million, or ($0.76) per basic and diluted share, for the fourth quarter of 2012. Non-GAAP adjusted net income, which excludes the $9.7 million income tax benefit, was $17.1 million, or $0.71 per diluted share; and, *** "Our solid results for the quarter and year were driven by strong growth in Subsys prescriptions to alleviate breakthrough pain for cancer patients," said Michael L. Babich, President and Chief Executive Officer. "In Dece mber 2013, Subsys was the most prescribed branded tran smucosal immediate-release fentanyl (TIRF) product. We believe that its simple, one-step administration system and rapid onset will enable further growth of our market share for and net revenue from this unique product." 34. On or about March 5, 2014, the Company filed with the SEC on Form 10-K its annual report for the period ending December 31, 2013, in which the Company reiterated its previously announced financial statements for the quarter. The Company also touted the success of Subsys, including the strong network of marketing employees endorsing the product to doctors, stating in relevant part: We launched Subsys as a commercial product in March 2012. Subsys is the fourth new branded product in the TIRF market over the last four years. Within the first four weeks of product launch, Subsys realized greater market share than the previous three branded products combined at their respective peak market penetration levels to date according to Source Healthcare Analytics. In December 2013, Subsys was the most prescribed branded TIRF product with 28.3% market share on a prescription basis according to Source Healthcare Analytics. Through our ongoing commercial initiatives, we believe we can continue to grow our market share and net revenue for Subsys. According to Source Healthcare Analytics, in 2013, TIRF products generated $421.2 million in annual U.S. product sales. The physician prescriber base for TIRF products is concentrated with approximately 1,850 physicians writing 90% of all TIRF product prescriptions in 2013, according to Source Healthcare Analytics. As a result, our commercial organization is able to promote Subsys using a highly targeted approach designed to maximize impact with physicians. Subsys utilizes our proprietary sublingual spray technology consisting of a small, single-unit device that delivers our proprietary formulation of drug particles via a fine mist disbursed across a broad surface area of the highly permeable membrane underneath the tongue. This delivery platform is suitable for other molecules for which there may be a benefit to a greater rate and extent of absorption, which could lead to a more rapid onset of action and enhanced bioavailability versus other oral preparations and routes of administration. We are developing our proprietary sublingual spray technology in other product applications in order to expand our portfolio of product candidates. *** Grow Subsys market share and revenues. We launched Subsys as a commercial product in March 2012. By December 2013, we had a 28.3% share of the overall TIRF market, according to Source Healthcare Analytics. We believe that we can continue to increase Subsys net product revenue through further market penetration and educating the medical community to ensure that patients are titrated to an effective dose of Subsys and have access to Subsys. In addition, we may conduct post- marketing clinical trials to seek to establish incremental uses for Subsys in the supportive care market or other advantages that Subsys may have over existing fentanyl products. Continue to leverage our cost-efficient commercial organization to market Subsys and, if approved, Dronabinol Oral Solution and other complementary products . We commercialize Subsys through a cost- efficient commercial organization utilizing an incentive- based sales model similar to that employed by Sciele Pharma and other companies previously led by members of our board of directors, including our founder and Executive Chairman. We intend to market Dronabinol Oral Solution and other proprietary supportive care products, if approved, using the same approach and our commercial organization. We target our product detailing efforts primarily towards oncologists, pain specialists and centers that focus on supportive care. We may also pursue opportunities to acquire commercial products or product candidates that could further leverage our supportive care commercial organization. We believe Subsys’ proprietary formulation and sublingual delivery mechanism offer several advantages over other FDA-approved TIRF products, and these advantages may lead to improved patient compliance and expanded medical use of fentanyl for BTCP. Such advantages include:  Statistically significant pain relief in five minutes: Subsys is the only product to show statistically significant pain relief when measuring the sum of pain intensity difference, SPID, at five minutes in a Phase 3 BTCP clinical trial using fentanyl. We believe that Subsys is able to achieve this rapid delivery of fentanyl through sublingual delivery because there is a high density of blood vessels beneath the tongue and the thin layer in the mucosa enables higher absorption. The product sprays in a manner that is designed to maximize the area covered by the product.  One-step administration: Subsys is administered in one step using a small handheld delivery system that sprays fentanyl beneath the patient’s tongue. This delivery mechanism allows for administration in less than one minute, rather than the 14 to 30 minutes required for Actiq and Fentora. Further, Subsys can be administered without moistening the tongue or cheek, allowing for administration in cancer patients suffering from dry mouth and oral mucositis.  Superior pharmacokinetic profile. As compared to Actiq’s PK profile, Subsys’ PK profile is characterized by higher peak blood concentrations, which are achieved at a more rapid rate. This profile is, in part, due to greater than 85% absorption occurring transmucosally, resulting in higher bioavailability. Because a small volume of liquid is sprayed on to the sublingual mucosa, we believe this method of administration reduces the amount of liquid swallowed and subsequently absorbed via the digestive system. As a result, we believe that less fentanyl is exposed to first-pass metabolism in the liver.  Broad spectrum of dosage strengths allows for proper titration and better pain relief. Subsys is available in the most complete range of dosage strengths in the TIRF market, at 100, 200, 400, 600, 800, 1,200 and 1,600 mcg. We believe it is important to offer a product in all dose ranges for the treatment of BTCP, as all branded products without generic equivalents, and, to our knowledge, all product candidates currently in development, are not, or will not be, available in the 1,200 and 1,600 mcg dosage strengths. Subsys Market Experience to Date Prescription Trends: Monthly prescription data through February 2014 shows that approximately 39,000 prescriptions of Subsys have been dispensed since launch in March 2012. Subsys’ total prescription share of the TIRF market has increased each quarter since launch. In December 2013, Subsys was the most prescribed branded TIRF product with 28.3% market share. Physician Prescriber Base: Approximately 1,850 physicians were responsible for 90% of all TIRF prescriptions dispensed in 2013, according to Source Healthcare Analytics. We have targeted our initial commercialization efforts towards the majority of these high prescribers. As of December 2013, there were approximately 1,140 unique physician prescribers of Subsys, according to the TIRF risk evaluation mitigation strategy, or REMS, database. As of December 2013, approximately 81% of the top 118 TIRF prescribers had prescribed Subsys. These physicians accounted for 30% of TIRF prescriptions, according to Source Healthcare Analytics. Patient Use: Patient data generated by the TIRF REMS database demonstrates that the number of Subsys- experienced patients has increased steadily since launch with over 7,100 unique patients as of December 2013. Importantly, the proportion of Subsys prescriptions written for repeat Subsys patients has continued to increase since July 2012 from 50% of prescriptions to over 80% of prescriptions as of December 2013. Generally, repeat Subsys patients receive higher doses of Subsys on average than first-time patients, as patients are titrated from a starter dose of Subsys to their effective dose in accordance with the REMS protocol. [Emphasis added.] 35. The above statements were materially false and misleading regarding the Company’s business and operations. Specifically, Defendants made false and/or misleading statements concerning, and/or failed to disclose, among other things that: (i) the Company engaged in illegal and/or unethical marketing of Subsys, including off-label marketing; (ii) the Company was exposed to potential fines and other disciplinary actions as a result of its Subsys marketing practices; and, (iii) as a result, the Company’s financial statements were materially false and misleading at all relevant times. THE TRUTH EMERGES 36. On December 12, 2013, after the market close, the Company announced that, “it has received a subpoena from the Office of Inspector General of the Department of Health and Human Services (“HHS”) in connection with an investigation of potential violations involving HHS programs. The subpoena requests documents regarding Subsys®, including Insys’ sales and marketing practices relating to this product.” 37. On this news, the Company’s shares fell $7.73 per share, to close at $37.55 per share, a one day drop of over 17%, on unusually high trading volume. 38. On May 8, 2014, a local Michigan news source published an article detailing the charges against a Michigan doctor who allegedly accounted for 20% of total nationwide Subsys prescriptions. The doctor was charged by federal prosecutors with defrauding Medicare and private insurers, and prescribing unnecessary medications to patients. 39. On this news, the Company’s shares fell $6.64 per share, or over 16%, to close on May 9, 2014 at $32.67 per share, on extremely high volume. 40. Then, on May 11, 2014, analyst firm, Bronte Capital published a report further highlighting the claims against the Michigan doctor, and the problems attendant to Insys’ marketing of Subsys, including allegedly illegal off- label marketing. The report stated in relevant part: Insys Therapeutics (INSY: NASDAQ) is a seller of marijuana based anti-nausea drugs and super-strong opiates (Fentanyl) and nothing much else. Nothing has anything that resembles strong patent protection and their version of sublingual Fentanyl is a relatively new comer to the opiate scene - having only been on the market since early 2013. *** Subsys - by far their important product - is a me-too product. It is - as the form 10K stated - the fourth Transmucosal Immediate Release Fentanyl (TIRF) product released in recent years. However very rapidly gained sales - indeed far more rapidly than any Fentanyl ever. Again to quote the 10K. *** Now given that there is not a huge difference between TIRF products it is remarkable that Subsys immediately became the dominant TIRF product with a greater share than the three previous leaders combined. It is not entirely obvious how they did that. But the key was quoted above - and I underlined it just to make sure you noticed. Insys markets Subsys through "an incentive-based sales model". Its a little hard to work out what that actually means - but it is the key risk in this business. The 10-K only says this: We market Subsys through our U.S.-based, field sales force focused on supportive care physicians. We utilize an incentive-based sales model that employs a pay structure where a significant component of the compensation paid to sales representatives is in the form of potential bonuses based on sales performance. This is not well-described in the form 10-K. They state several times that the sales approach is similar to one used at Sciele Pharma - a company that management were previously associated with. Again to quote: We commercialize Subsys through a cost-efficient commercial organization utilizing an incentive- based sales model similar to that employed by Sciele Pharma and other companies previously led by members of our board of directors, including our founder and Executive Chairman. We intend to market Dronabinol Oral Solution and other proprietary supportive care products, if approved, using the same approach and our commercial organization. Beyond that - and a description of the size of the marketing force - the marketing scheme is not well described. Here is the description of the size and extent of the marketing force. 41. On this news, Insys shares fell a further $5.04 per share, or 15%, to close on May 12, 2014 at $27.63 per share. PLAINTIFF’S CLASS ACTION ALLEGATIONS 42. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all those who purchased or otherwise acquired Insys securities during the Class Period (the “Class”); and were damaged upon the revelation of the alleged corrective disclosures. Excluded from the Class are defendants herein, the officers and directors of the Company, at all relevant times, members of their immediate families and their legal representatives, heirs, successors or assigns and any entity in which defendants have or had a controlling interest. 43. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, Insys securities were actively traded on the NASDAQ. While the exact number of Class members is unknown to Plaintiff at this time and can be ascertained only through appropriate discovery, Plaintiff believes that there are hundreds or thousands of members in the proposed Class. Record owners and other members of the Class may be identified from records maintained by Insys or its transfer agent and may be notified of the pendency of this action by mail, using the form of notice similar to that customarily used in securities class actions. 44. Plaintiff’s claims are typical of the claims of the members of the Class as all members of the Class are similarly affected by defendants’ wrongful conduct in violation of federal law that is complained of herein. 45. Plaintiff will fairly and adequately protect the interests of the members of the Class and has retained counsel competent and experienced in class and securities litigation. Plaintiff has no interests antagonistic to or in conflict with those of the Class. 46. Common questions of law and fact exist as to all members of the Class and predominate over any questions solely affecting individual members of the Class. Among the questions of law and fact common to the Class are:  whether the federal securities laws were violated by defendants’ acts as alleged herein;  whether statements made by the Individual Defendants to the investing public during the Class Period misrepresented and/or omitted material facts about the business, prospects, and operations of Insys  whether defendants acted knowingly or recklessly (i.e., with scienter) in issuing false and misleading financial statements;  whether the prices of Insys securities during the Class Period were artificially inflated because of the defendants’ conduct complained of herein; and  whether the members of the Class have sustained damages and, if so, what is the proper measure of damages. 47. A class action is superior to all other available methods for the fair and efficient adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the damages suffered by individual Class members may be relatively small, the expense and burden of individual litigation make it impossible for members of the Class to individually redress the wrongs done to them. There will be no difficulty in the management of this action as a class action. 48. Alternatively, Plaintiffs and the members of the Class are entitled to the presumption of reliance established by the Supreme Court in Affiliated Ute Citizens of the State of Utah v. United States, 406 U.S. 128, 92 S. Ct. 2430 (1972), as Defendants omitted material information in their Class Period statements in violation of a duty to disclose such information, as detailed above. APPLICABILITY OF PRESUMPTION OF RELIANCE: FRAUD-ON-THE-MARKET DOCTRINE 49. Plaintiff will rely, in part, upon the presumption of reliance established by the fraud-on-the-market doctrine in that:  defendants made public misrepresentations or failed to disclose material facts during the Class Period;  the omissions and misrepresentations were material;  the Company’s stock met the requirements for listing, and was listed and actively traded on the NASDAQ, a highly efficient and automated markets;  the Company’s shares were liquid and traded with moderate to heavy volume during the Class Period (ranging from hundreds of thousands to millions of shares per week);  as a regulated issuer, the Company filed with the SEC periodic reports during the Class Period;  the Company regularly communicated with public investors via established market communication mechanisms, including regular disseminations of press releases on the national circuits of major newswire services and other wide- ranging public disclosures, such as communications with the financial press and other similar reporting services;  the Company was followed by multiple securities analysts employed by major brokerage firms who wrote reports that were distributed to the sales force and certain customers of their respective brokerage firms during the Class Period; these reports was publicly available and entered the public marketplace;  numerous FINRA member firms were active market- makers in the Company’s stock at all times during the Class Period; and  unexpected material news about the Company was rapidly reflected in and incorporated into the Company’s stock price during the Class Period. 50. Based upon the foregoing, Plaintiff and the members of the Class are entitled to a presumption of reliance upon the integrity of the market. COUNT I Violation of § 10(b) of the Exchange Act, and Rule 10b-5 Promulgated Thereunder, Against Insys, and the Individual Defendants 51. Plaintiff repeats and realleges the allegations contained above as if fully set forth herein. 52. During the Class Period, Insys and the Officer Defendants disseminated or approved the materially false and misleading statements specified above, which they knew or deliberately disregarded were misleading in that they contained misrepresentations and failed to disclose material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. 53. The Officer Defendants: (a) employed devices, schemes, and artifices to defraud; (b) made untrue statements of material fact and/or omitted to state material facts necessary to make the statements made not misleading; and (c) engaged in acts, practices, and a course of business which operated as a fraud and deceit upon the purchasers of the Companies’ units and shares during the Class Period. 54. Plaintiff and the Class have suffered damages in that, in reliance on the integrity of the market, they paid artificially inflated prices for Insys shares. Plaintiff and the Class would not have purchased Insys shares at the prices they paid, or at all, if they had been aware that the market prices had been artificially and falsely inflated by the Officer Defendants’ misleading statements. 55. As a direct and proximate result of the Officer Defendants’ wrongful conduct, Plaintiff and the other members of the Class suffered damages in connection with their purchases of Insys shares during the Class Period. COUNT II Violation of § 20(a) of the Exchange Act Against the Individual Defendants 56. Plaintiff repeats and realleges the allegations contained above as if fully set forth herein. 57. During the Class Period, the Individual Defendants, as senior executive officers and/or directors of Insys, were privy to confidential and proprietary information concerning Insys, its operations, finances, financial condition and present and future business prospects. The Individual Defendants also had access to material adverse non-public information concerning Insys, as detailed in this Complaint. Because of their positions within Insys, the Individual Defendants had access to non-public information about the business, finances, products, markets and present and future business prospects of Insys via internal corporate documents, conversations and connections with other corporate officers and employees, attendance at management and/or board of directors meetings and committees thereof and via reports and other information provided to them in connection therewith. Because of their possession of such information, the Individual Defendants knew or recklessly disregarded that the adverse facts specified herein had not been disclosed to, and were being concealed from, the investing public. 58. The Individual Defendants are liable as direct participants in the wrongs complained of herein. In addition, the Individual Defendants, by reason of their status as senior executive officers and/or directors, were “controlling persons” within the meaning of §20(a) of the Exchange Act and had the power and influence to cause Insys to engage in the unlawful conduct complained of herein. Because of their positions of control, the Individual Defendants were able to and did, directly or indirectly, control the conduct of the business of Insys. 59. The Individual Defendants, because of their positions with Insys, controlled and/or possessed the authority to control the contents of Insys’s reports, press releases and presentations to securities analysts and through them, to the investing public. The Individual Defendants were provided with copies of Insys’s reports and press releases alleged herein to be misleading, prior to or shortly after their issuance and had the ability and opportunity to prevent their issuance or cause them to be corrected. Thus, the Individual Defendants had the opportunity to commit the fraudulent acts alleged herein. 60. The Individual Defendants, as senior executive officers and/or directors and as controlling persons of a publicly traded company whose shares were, and is, governed by the federal securities laws and is registered with the NASDAQ Global Select Market, had a duty to promptly disseminate accurate and truthful information with respect to Insys’s financial condition, cash flow, performance, growth, operations, financial statements, business, products, markets, management, earnings and present and future business prospects, and to correct any previously issued statements that had become materially misleading or untrue, so that the market price of Insys shares would be based upon truthful and accurate information. The Individual Defendants’ misrepresentations and omissions during the Class Period violated these specific requirements and obligations. 61. The Individual Defendants acted as controlling persons Insys within the meaning of Section 20(a) of the Exchange Act as alleged herein. By reason of their positions as officers and/or directors of Insys, and their ownership of Insys shares, the Individual Defendants had the power and authority to cause Insys to engage in the wrongful conduct complained of herein. By reason of such conduct, the Individual Defendants are liable pursuant to Section 20(a) of the Exchange Act. PRAYER FOR RELIEF WHEREFORE, Plaintiff demands judgment as follows: A. Determining that the instant action may be maintained as a class action under Rule 23 of the Federal Rules of Civil Procedure, and certifying Plaintiff as the Class representative; B. Awarding compensatory damages in favor of Plaintiff and the other Class members against all defendants, jointly and severally, for all damages sustained as a result of defendants’ wrongful acts and misconduct as alleged herein, in an amount to be proven at trial; C. Awarding Plaintiff and the other members of the Class prejudgment and post-judgment interest, as well as their reasonable attorneys’ fees, expert fees and other costs; and D. Awarding such other and further relief as this Court may deem just and proper. DEMAND FOR TRIAL BY JURY Plaintiff hereby demands a trial by jury. Dated this 15th day of May, 2014. MARTIN & BONNETT, P.L.L.C. By: s/Susan Martin Susan Martin Jennifer L. Kroll 1850 N. Central Ave. Suite 2010 Phoenix, AZ 85004 (602) 240-6900 [email protected] [email protected] POMERANTZ GROSSMAN HUFFORD DAHLSTROM & GROSS LLP Jeremy A. Lieberman (pro hac vice app. to be filed) Francis P. McConville (pro hac vice app. to be filed) 600 Third Avenue, 20th Floor New York, New York 10016 Telephone: (212) 661-1100 Facsimile: (212) 661-8665 [email protected] [email protected] POMERANTZ GROSSMAN HUFFORD DAHLSTROM & GROSS LLP Patrick V. Dahlstrom (pro hac vice app. to be filed) Ten South LaSalle Street, Suite 3505 Chicago, Illinois 60603 Telephone: (312) 377-1181 Facsimile: (312) 377-1184 [email protected] THE ROSEN LAW FIRM, P.A. Phillip Kim (pro hac vice app. to be filed) 275 Madison Avenue, 34th Floor New York, N.Y. 10016 Chicago, Illinois 60603 Telephone: (212) 686-1060 Facsimile: (212) 202-3827 [email protected] Attorneys for Plaintiff CERTIFICATION PURSUANT TO FEDERAL SECURITIES LAWS 1. I, _ _ \).=._.Q.._(_;_c_.._L _ _ _ ~ _ _ r_S_0_Yl ___ _ __. make this declaration pursuant to Section 27(a)(2) of the Securities Act of 1933 ("Securities Act'') and/or Section 21 D(a)(2) of the Securities Exchange Act of 1934 ("Exchange Act") as amended by the Private Securities Litigation Reform Act of 1995. 2. I have reviewed a Complaint against lNSYS Therapeutics, Inc. ("INSYS Therapeutics" or the "Company"), and authorize the filing of a comparable complaint on my behalf. 3. I did not purchase or acquire INSYS Therapeutics securities at the direction of plaintiffs counsel or in order to participate in any private action arising under the Securities Act or Exchange Act 4. I am willing to serve as a representative party on behalf of a Class of investors who purchased or acquired lNSYS Therapeutics securities during the class period, including providing testimony at deposition and trial, if necessary. I understand that the Court has the authority to select the most adequate lead plaintiff in this action. 5. To the best of my current knowledge, the attached sheet lists all of my transactions in INSYS Therapeutics securities during the Class Period as speci·fied in the Complaint. 6. During the three-year period preceding the date on which this Certification is signed, I have not sought to serve as a representative party on behalf of a class under the federal securities laws. 7. I agree not to accept any payment for serving as a representative party on behalfofthe class as set forth in the Complaint, beyond my pro rata share of any recovery, except such re-asonable costs and expenses directly relating to the representation of the class as ordered or approved by the Court. 8. T declare under penalty of perjury that the foregoing is true and correct. Executed __,5"'-+--' /J'---tj-'--1. /f-I[_L..f- ( ___ _ (Da1e)f D~zZ.~ . (Sign ature) (Type or Print Name) . . SUMMARY OF PURCHASES AND SALES DATE PURCHASE OR NUMBER OF PRICE PER SHARE SALE SHARES y /~I fC( YJ-rc...~~~ 7_.06 1 37· bb L./J ~I /J l1 Pv r c.-\t~'-') t ?_cy ~37-~h 'II I

securities

LgahFYcBD5gMZwcza8kM

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x JAMES MURPHY, ON BEHALF OF HIMSELF AND ALL OTHER PERSONS SIMILARLY SITUATED, Plaintiffs, v. ECF CASE No.: CLASS ACTION COMPLAINT JURY TRIAL DEMANDED FRIENDS OF THE VANDERBILT MUSEUM INC. Defendant. : : : : : : : : : : : : - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x INTRODUCTION 1. Plaintiff, JAMES MURPHY, on behalf of himself and all other persons similarly situated, asserts the following claims against Defendant, FRIENDS OF THE VANDERBILT MUSEUM INC., as follows. 2. Plaintiff is a visually-impaired and legally blind person who requires screen-reading software to read website content using his computer. Plaintiff uses the terms “blind” or “visually-impaired” to refer to all people with visual impairments who meet the legal definition of blindness in that they have a visual acuity with correction of less than or equal to 20 x 200. Some blind people who meet this definition have limited vision. Others have no vision. 3. Based on a 2010 U.S. Census Bureau report, approximately 8.1 million people in the United States are visually impaired, including 2.0 million who are blind, and according to the American Foundation for the Blind’s 2015 report, approximately 400,000 visually impaired persons live in the State of New York. 4. Plaintiff brings this civil rights action against FRIENDS OF THE VANDERBILT MUSEUM INC., (“Defendant” or “Vanderbilt Museum”) for its failure to design, construct, maintain, and operate its website to be fully accessible to and independently usable by Plaintiff and other blind or visually-impaired people. Defendant’s denial of full and equal access to its website, and therefore denial of its products and services offered thereby and in conjunction with its physical location, is a violation of Plaintiff’s rights under the Americans with Disabilities Act (“ADA”). 5. Because Defendant’s website, https://www.vanderbiltmuseum.org/ (the “Website” or “Defendant’s website”), is not equally accessible to blind and visually- impaired consumers, it violates the ADA. Plaintiff seeks a permanent injunction to cause a change in Defendant’s corporate policies, practices, and procedures so that Defendant’s website will become and remain accessible to blind and visually-impaired consumers. JURISDICTION AND VENUE 6. This Court has subject-matter jurisdiction over this action under 28 U.S.C. § 1331 and 42 U.S.C. § 12181, as Plaintiff’s claims arise under Title III of the ADA, 42 U.S.C. § 1281, et seq., and 28 U.S.C. § 1332. 7. This Court has supplemental jurisdiction under 28 U.S.C. § 1367 over Plaintiff’s New York State Human Rights Law, N.Y. Exec. Law Article 15, (“NYSHRL”) and New York City Human Rights Law, N.Y.C. Admin. Code § 8-101 et seq., (“NYCHRL”) claims. 8. Venue is proper in this district under 28 U.S.C. §1391(b)(2) because Defendant conducts and continues to conduct a substantial and significant amount of business in this District, Defendant is subject to personal jurisdiction in this District, and a substantial portion of the conduct complained of herein occurred in this District. 9. Defendant is subject to personal jurisdiction in this District. Defendant has been and is committing the acts or omissions alleged herein in the Eastern District of New York that caused injury, and violated rights the ADA prescribes to Plaintiff and to other blind and other visually impaired-consumers. A substantial part of the acts and omissions giving rise to Plaintiff’s claims occurred in this District: on separate occasions, Plaintiff has been denied the full use and enjoyment of the facilities, goods, and services of Defendant’s Website. These access barriers that Plaintiff encountered have caused a denial of Plaintiff’s full and equal access multiple times in the past, and now deter Plaintiff on a regular basis from visiting Defendant’s brick-and mortar location. This includes, Plaintiff attempting to obtain information about Defendant’s museum and event space (location and hours). 10. This Court is empowered to issue a declaratory judgment under 28 U.S.C. §§ 2201 and 2202. THE PARTIES 11. Plaintiff, JAMES MURPHY, at all relevant times, is a resident of New York, New York. Plaintiff is a blind, visually-impaired handicapped person and a member of member of a protected class of individuals under the ADA, under 42 U.S.C. § 12102(1)- (2), and the regulations implementing the ADA set forth at 28 CFR §§ 36.101 et seq., the NYSHRL and NYCHRL. 12. Defendant, FRIENDS OF THE VANDERBILT MUSEUM INC. is and was, at all relevant times herein, a domestic not-for-profit corporation registered to do business in the State of New York with its principal executive office in New York. Defendant operates Vanderbilt Museum and event space as well as Vanderbilt Museum’s website and advertises, markets, distributes, and/or operates in the State of New York. Defendant is, upon information and belief, licensed to do business and is doing business in the State of New York. 13. Defendant operates Vanderbilt Museum and event space located at 180 Little Neck Road, Centerport, NY. This museum and event space constitutes a place of public accommodation. Defendant’s museum and event space provides to the public important goods and services. Defendant’s Website provides consumers with access to an array of goods and services including museum and event space location and hours, information about exhibits and event booking and other goods and services. 14. Defendant’s museum and event space is a place of public accommodation within the definition of Title III of the ADA, 42 U.S.C. § 12181(7). Defendant’s Website is a service, privilege, or advantage of Defendant’s museum and event space. NATURE OF ACTION 15. The Internet has become a significant source of information, a portal, and a tool for conducting business, doing everyday activities such as shopping, learning, banking, researching, as well as many other activities for sighted, blind and visually-impaired persons alike. 16. In today’s tech-savvy world, blind and visually-impaired people have the ability to access websites using keyboards in conjunction with screen access software that vocalizes the visual information found on a computer screen or displays the content on a refreshable Braille display. This technology is known as screen-reading software. Screen- reading software is currently the only method a blind or visually-impaired person may independently access the internet. Unless websites are designed to be read by screen- reading software, blind and visually-impaired persons are unable to fully access websites, and the information, products, and services contained thereon. 17. Blind and visually-impaired users of Windows operating system-enabled computers and devices have several screen reading software programs available to them. Some of these programs are available for purchase and other programs are available without the user having to purchase the program separately. Job Access With Speech, otherwise known as “JAWS” is currently the most popular, separately purchased and downloaded screen-reading software program available for a Windows computer. 18. For screen-reading software to function, the information on a website must be capable of being rendered into text. If the website content is not capable of being rendered into text, the blind or visually-impaired user is unable to access the same content available to sighted users. 19. The international website standards organization, the World Wide Web Consortium, known throughout the world as W3C, has published version 2.0 of the Web Content Accessibility Guidelines (“WCAG 2.0”). WCAG 2.0 are well-established guidelines for making websites accessible to blind and visually-impaired people. These guidelines are universally followed by most large business entities and government agencies to ensure their websites are accessible. 20. Non-compliant websites pose common access barriers to blind and visually- impaired persons. Common barriers encountered by blind and visually impaired persons include, but are not limited to, the following: a. A text equivalent for every non-text element is not provided; b. Title frames with text are not provided for identification and navigation; c. Equivalent text is not provided when using scripts; d. Forms with the same information and functionality as for sighted persons are not provided; e. Information about the meaning and structure of content is not conveyed by more than the visual presentation of content; f. Text cannot be resized without assistive technology up to 200% without losing content or functionality; g. If the content enforces a time limit, the user is not able to extend, adjust or disable it; h. Web pages do not have titles that describe the topic or purpose; i. The purpose of each link cannot be determined from the link text alone or from the link text and its programmatically determined link context; j. One or more keyboard operable user interface lacks a mode of operation where the keyboard focus indicator is discernible; k. The default human language of each web page cannot be programmatically determined; l. When a component receives focus, it may initiate a change in context; m. Changing the setting of a user interface component may automatically cause a change of context where the user has not been advised before using the component; n. Labels or instructions are not provided when content requires user input, which include captcha prompts that require the user to verify that he or she is not a robot; o. In content which is implemented by using markup languages, elements do not have complete start and end tags, elements are not nested according to their specifications, elements may contain duplicate attributes and/or any IDs are not unique; p. Inaccessible Portable Document Format (PDFs); and, q. The name and role of all User Interface elements cannot be programmatically determined; items that can be set by the user cannot be programmatically set; and/or notification of changes to these items is not available to user agents, including assistive technology. STATEMENT OF FACTS Defendant’s Barriers on Its Website 21. Defendant offers the commercial website, https://www.vanderbiltmuseum.org/, to the public. The website offers features which should allow all consumers to access the goods and services which Defendant offers in connection with their physical location. The goods and services offered by Defendant include, but are not limited to the following, which allow consumers to: find information about museum and event space location and hours of operation, information about exhibits and event booking, and access to various other goods and services. 22. It is, upon information and belief, Defendant’s policy and practice to deny Plaintiff, along with other blind or visually-impaired users, access to Defendant’s website, and to therefore specifically deny the goods and services that are offered and integrated with Defendant’s museum and event space. Due to Defendant’s failure and refusal to remove access barriers to its website, Plaintiff and visually-impaired persons have been and are still being denied equal access to Defendant’s museum and event space and the numerous goods, services, and benefits offered to the public through the Website. 23. Plaintiff is a visually-impaired and legally blind person, who cannot use a computer without the assistance of screen-reading software. Plaintiff is, however, a proficient JAWS screen-reader user and uses it to access the Internet. Plaintiff has visited the Website on separate occasions using the JAWS screen-reader. 24. During Plaintiff’s visits to the Website, the last occurring in September, 2019, Plaintiff encountered multiple access barriers that denied Plaintiff full and equal access to the facilities, goods and services offered to the public and made available to the public; and that denied Plaintiff the full enjoyment of the facilities, goods, and services of the Website, as well as to the facilities, goods, and services of Defendant’s physical location by being unable to learn more information on the museum and event space location and hours and other goods and services. 25. While attempting to navigate the Website, Plaintiff encountered multiple accessibility barriers for blind or visually-impaired people that include, but are not limited to, the following: a. Lack of Alternative Text (“alt-text”), or a text equivalent. Alt-text is an invisible code embedded beneath a graphical image on a website. Web accessibility requires that alt-text be coded with each picture so that screen-reading software can speak the alt-text where a sighted user sees pictures, which includes captcha prompts. Alt-text does not change the visual presentation, but instead a text box shows when the mouse moves over the picture. The lack of alt-text on these graphics prevents screen readers from accurately vocalizing a description of the graphics. As a result, visually-impaired Vanderbilt Museum customers are unable to determine what is on the website, browse, look for museum and event space location and hours of operation, check out Defendants' programs, or make any purchases; b. Empty Links That Contain No Text causing the function or purpose of the link to not be presented to the user. This can introduce confusion for keyboard and screen-reader users; c. Redundant Links where adjacent links go to the same URL address which results in additional navigation and repetition for keyboard and screen-reader users; and d. Linked Images Missing Alt-text, which causes problems if an image within a link contains no text and that image does not provide alt-text. A screen reader then has no content to present the user as to the function of the link, including information contained in PDFs. Defendant Must Remove Barriers To Its Website 26. Due to the inaccessibility of Defendant’s Website, blind and visually- impaired customers such as Plaintiff, who need screen-readers, cannot fully and equally use or enjoy the facilities, goods, and services Defendants offers to the public on its Website. The access barriers Plaintiff encountered have caused a denial of Plaintiff’s full and equal access in the past, and now deter Plaintiff on a regular basis from accessing the Website. 27. These access barriers on Defendant’s Website have deterred Plaintiff from visiting Defendant’s physical museum and event space location, and enjoying it equal to sighted individuals because: Plaintiff was unable to find the location and hours of operation of Defendant’s physical museum and event space on its Website, preventing Plaintiff from visiting the location to purchase items, and to view the items. 28. If the Website was equally accessible to all, Plaintiff could independently navigate the Website and complete a desired transaction as sighted individuals do. 29. Through his attempts to use the Website, Plaintiff has actual knowledge of the access barriers that make these services inaccessible and independently unusable by blind and visually-impaired people. 30. Because simple compliance with the WCAG 2.0 Guidelines would provide Plaintiff and other visually-impaired consumers with equal access to the Website, Plaintiff alleges that Defendant has engaged in acts of intentional discrimination, including but not limited to the following policies or practices: a. Constructing and maintaining a website that is inaccessible to visually-impaired individuals, including Plaintiff; b. Failure to construct and maintain a website that is sufficiently intuitive so as to be equally accessible to visually-impaired individuals, including Plaintiff; and, c. Failing to take actions to correct these access barriers in the face of substantial harm and discrimination to blind and visually-impaired consumers, such as Plaintiff, as a member of a protected class. 31. Defendant therefore uses standards, criteria or methods of administration that have the effect of discriminating or perpetuating the discrimination of others, as alleged herein. 32. The ADA expressly contemplates the injunctive relief that Plaintiff seeks in this action. In relevant part, the ADA requires: In the case of violations of . . . this title, injunctive relief shall include an order to alter facilities to make such facilities readily accessible to and usable by individuals with disabilities . . . Where appropriate, injunctive relief shall also include requiring the . . . modification of a policy . . . 42 U.S.C. § 12188(a)(2). 33. Because Defendant’s Website has never been equally accessible, and because Defendant lacks a corporate policy that is reasonably calculated to cause its Website to become and remain accessible, Plaintiff invokes 42 U.S.C. § 12188(a)(2) and seeks a permanent injunction requiring Defendant to retain a qualified consultant acceptable to Plaintiff (“Agreed Upon Consultant”) to assist Defendant to comply with WCAG 2.0 guidelines for Defendant’s Website. Plaintiff seeks that this permanent injunction requiring Defendant to cooperate with the Agreed Upon Consultant to: a. Train Defendant’s employees and agents who develop the Website on accessibility compliance under the WCAG 2.0 guidelines; b. Regularly check the accessibility of the Website under the WCAG 2.0 guidelines; c. Regularly test user accessibility by blind or vision-impaired persons to ensure that Defendant’s Website complies under the WCAG 2.0 guidelines; and, d. Develop an accessibility policy that is clearly disclosed on Defendant’s Websites, with contact information for users to report accessibility-related problems. 34. If the Website was accessible, Plaintiff and similarly situated blind and visually-impaired people could independently view service items, locate Defendant’s museum and event space location and hours of operation, research related products and services available via the Website. 35. Although Defendant may currently have centralized policies regarding maintaining and operating its Website, Defendant lacks a plan and policy reasonably calculated to make them fully and equally accessible to, and independently usable by, blind and other visually-impaired consumers. 36. Defendant has, upon information and belief, invested substantial sums in developing and maintaining the Website and has generated significant revenue from the Website. These amounts are far greater than the associated cost of making its website equally accessible to visually impaired customers. 37. Without injunctive relief, Plaintiff and other visually-impaired consumers will continue to be unable to independently use the Website, violating their rights. CLASS ACTION ALLEGATIONS 38. Plaintiff, on behalf of himself and all others similarly situated, seeks to certify a nationwide class under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind individuals in the United States who have attempted to access Defendants' Website and as a result have been denied access to the equal enjoyment of goods and services offered in Defendant’s' physical location, during the relevant statutory period. 39. Plaintiff, on behalf of himself and all others similarly situated, seeks certify a New York subclass under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind individuals in the State of New York who have attempted to access Defendant’s Website and as a result have been denied access to the equal enjoyment of goods and services offered in Defendant’s physical location, during the relevant statutory period. 40. Common questions of law and fact exist amongst Class, including: a. Whether Defendant’s Website is a “public accommodation” under the ADA; b. Whether Defendant’s Website is a “place or provider of public accommodation” under the NYSHRL or NYCHRL; c. Whether Defendant’s Website denies the full and equal enjoyment of its goods, services, facilities, privileges, advantages, or accommodations to people with visual disabilities, violating the ADA; and d. Whether Defendant’s Website denies the full and equal enjoyment of its goods, services, facilities, privileges, advantages, or accommodations to people with visual disabilities, violating the NYSHRL or NYCHRL. 41. Plaintiff’s claims are typical of the Class. The Class, similarly to the Plaintiff, are severely visually impaired or otherwise blind, and claim that Defendant has violated the ADA, NYSHRL or NYCHRL by failing to update or remove access barriers on its Website so either can be independently accessible to the Class. 42. Plaintiff will fairly and adequately represent and protect the interests of the Class Members because Plaintiff has retained and is represented by counsel competent and experienced in complex class action litigation, and because Plaintiff has no interests antagonistic to the Class Members. Class certification of the claims is appropriate under Fed. R. Civ. P. 23(b)(2) because Defendant has acted or refused to act on grounds generally applicable to the Class, making appropriate both declaratory and injunctive relief with respect to Plaintiff and the Class as a whole. 43. Alternatively, class certification is appropriate under Fed. R. Civ. P. 23(b)(3) because fact and legal questions common to Class Members predominate over questions affecting only individual Class Members, and because a class action is superior to other available methods for the fair and efficient adjudication of this litigation. 44. Judicial economy will be served by maintaining this lawsuit as a class action in that it is likely to avoid the burden that would be otherwise placed upon the judicial system by the filing of numerous similar suits by people with visual disabilities throughout the United States. FIRST CAUSE OF ACTION VIOLATIONS OF THE ADA, 42 U.S.C. § 12181 et seq. 45. Plaintiff, on behalf of himself and the Class Members, repeats and realleges every allegation of the preceding paragraphs as if fully set forth herein. 46. Section 302(a) of Title III of the ADA, 42 U.S.C. § 12101 et seq., provides: No individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation. 42 U.S.C. § 12182(a). 47. Defendant’s museum and event space is a place of public accommodation within the definition of Title III of the ADA, 42 U.S.C. § 12181(7). Defendant’s Website is a service, privilege, or advantage of Defendant’s museum and event space. The Website is a service that is integrated with this location. 48. Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to deny individuals with disabilities the opportunity to participate in or benefit from the goods, services, facilities, privileges, advantages, or accommodations of an entity. 42 U.S.C. § 12182(b)(1)(A)(i). 49. Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to deny individuals with disabilities an opportunity to participate in or benefit from the goods, services, facilities, privileges, advantages, or accommodation, which is equal to the opportunities afforded to other individuals. 42 U.S.C. § 12182(b)(1)(A)(ii). 50. Under Section 302(b)(2) of Title III of the ADA, unlawful discrimination also includes, among other things: [A] failure to make reasonable modifications in policies, practices, or procedures, when such modifications are necessary to afford such goods, services, facilities, privileges, advantages, or accommodations to individuals with disabilities, unless the entity can demonstrate that making such modifications would fundamentally alter the nature of such goods, services, facilities, privileges, advantages or accommodations; and a failure to take such steps as may be necessary to ensure that no individual with a disability is excluded, denied services, segregated or otherwise treated differently than other individuals because of the absence of auxiliary aids and services, unless the entity can demonstrate that taking such steps would fundamentally alter the nature of the good, service, facility, privilege, advantage, or accommodation being offered or would result in an undue burden. 42 U.S.C. § 12182(b)(2)(A)(ii)-(iii). 51. The acts alleged herein constitute violations of Title III of the ADA, and the regulations promulgated thereunder. Plaintiff, who is a member of a protected class of persons under the ADA, has a physical disability that substantially limits the major life activity of sight within the meaning of 42 U.S.C. §§ 12102(1)(A)-(2)(A). Furthermore, Plaintiff has been denied full and equal access to the Website, has not been provided services that are provided to other patrons who are not disabled, and has been provided services that are inferior to the services provided to non-disabled persons. Defendant has failed to take any prompt and equitable steps to remedy its discriminatory conduct. These violations are ongoing. 52. Under 42 U.S.C. § 12188 and the remedies, procedures, and rights set forth and incorporated therein, Plaintiff, requests relief as set forth below. SECOND CAUSE OF ACTION VIOLATIONS OF THE NYSHRL 53. Plaintiff, on behalf of himself and the New York Sub-Class Members, repeats and realleges every allegation of the preceding paragraphs as if fully set forth herein. 54. N.Y. Exec. Law § 296(2)(a) provides that it is “an unlawful discriminatory practice for any person, being the owner, lessee, proprietor, manager, superintendent, agent or employee of any place of public accommodation . . . because of the . . . disability of any person, directly or indirectly, to refuse, withhold from or deny to such person any of the accommodations, advantages, facilities or privileges thereof.” 55. Defendant’s physical location is located in State of New York and throughout the United States and constitutes a museum and event space and a place of public accommodation within the definition of N.Y. Exec. Law § 292(9). Defendant’s Website is a service, privilege or advantage of Defendant. Defendant’s Website is a service that is by and integrated with this physical location. 56. Defendant is subject to New York Human Rights Law because they own and operate its physical location and Website. Defendants are a person within the meaning of N.Y. Exec. Law § 292(1). 57. Defendants are violating N.Y. Exec. Law § 296(2)(a) in refusing to update or remove access barriers to its Website, causing its Website and the services integrated with Defendant’s physical location to be completely inaccessible to the blind. This inaccessibility denies blind patrons full and equal access to the facilities, goods and services that Defendant makes available to the non-disabled public. 58. Under N.Y. Exec. Law § 296(2)(c)(i), unlawful discriminatory practice includes, among other things, “a refusal to make reasonable modifications in policies, practices, or procedures, when such modifications are necessary to afford facilities, privileges, advantages or accommodations to individuals with disabilities, unless such person can demonstrate that making such modifications would fundamentally alter the nature of such facilities, privileges, advantages or accommodations being offered or would result in an undue burden". 59. Under N.Y. Exec. Law § 296(2)(c)(ii), unlawful discriminatory practice also includes, “a refusal to take such steps as may be necessary to ensure that no individual with a disability is excluded or denied services because of the absence of auxiliary aids and services, unless such person can demonstrate that taking such steps would fundamentally alter the nature of the facility, privilege, advantage or accommodation being offered or would result in an undue burden.” 60. Readily available, well-established guidelines exist on the Internet for making websites accessible to the blind and visually impaired. These guidelines have been followed by other large business entities and government agencies in making their website accessible, including but not limited to: adding alt-text to graphics and ensuring that all functions can be performed using a keyboard. Incorporating the basic components to make its Website accessible would neither fundamentally alter the nature of Defendant’s business nor result in an undue burden to Defendant. 61. Defendant’s actions constitute willful intentional discrimination against the class on the basis of a disability in violation of the NYSHRL, N.Y. Exec. Law § 296(2) in that Defendant has: a. constructed and maintained a website that is inaccessible to blind class members with knowledge of the discrimination; and/or b. constructed and maintained a website that is sufficiently intuitive and/or obvious that is inaccessible to blind class members; and/or c. failed to take actions to correct these access barriers in the face of substantial harm and discrimination to blind class members. 62. Defendant has failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 63. Defendant discriminates and will continue in the future to discriminate against Plaintiff and New York Sub-Class Members on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, accommodations and/or opportunities of Defendant’s Website and its physical location under § 296(2) et seq. and/or its implementing regulations. Unless the Court enjoins Defendant from continuing to engage in these unlawful practices, Plaintiff and the Sub- Class Members will continue to suffer irreparable harm. 64. Defendant’s actions were and are in violation of New York State Human Rights Law and therefore Plaintiff invokes his right to injunctive relief to remedy the discrimination. 65. Plaintiff is also entitled to compensatory damages, as well as civil penalties and fines under N.Y. Exec. Law § 297(4)(c) et seq. for each and every offense. 66. Plaintiff is also entitled to reasonable attorneys’ fees and costs. 67. Under N.Y. Exec. Law § 297 and the remedies, procedures, and rights set forth and incorporated therein Plaintiff prays for judgment as set forth below. THIRD CAUSE OF ACTION VIOLATIONS OF THE NYCHRL 68. Plaintiff, on behalf of himself and the New York Sub-Class Members, repeats and realleges every allegation of the preceding paragraphs as if fully set forth herein. 69. N.Y.C. Administrative Code § 8-107(4)(a) provides that “It shall be an unlawful discriminatory practice for any person, being the owner, lessee, proprietor, manager, superintendent, agent or employee of any place or provider of public accommodation, because of . . . disability . . . directly or indirectly, to refuse, withhold from or deny to such person, any of the accommodations, advantages, facilities or privileges thereof.” 70. Defendant’s location is a museum and event space and a place of public accommodation within the definition of N.Y.C. Admin. Code § 8-102(9), and its Website is a service that is integrated with its establishment. 71. Defendant is subject to NYCHRL because it owns and operates its physical location in the City of New York and its Website, making it a person within the meaning of N.Y.C. Admin. Code § 8-102(1). 72. Defendant is violating N.Y.C. Administrative Code § 8-107(4)(a) in refusing to update or remove access barriers to Website, causing its Website and the services integrated with its physical location to be completely inaccessible to the blind. This inaccessibility denies blind patrons full and equal access to the facilities, goods, and services that Defendant makes available to the non-disabled public. 73. Defendant is required to “make reasonable accommodation to the needs of persons with disabilities . . . any person prohibited by the provisions of [§ 8-107 et seq.] from discriminating on the basis of disability shall make reasonable accommodation to enable a person with a disability to . . . enjoy the right or rights in question provided that the disability is known or should have been known by the covered entity.” N.Y.C. Admin. Code § 8-107(15)(a). 74. Defendant’s actions constitute willful intentional discrimination against the Sub-Class on the basis of a disability in violation of the N.Y.C. Administrative Code § 8- 107(4)(a) and § 8-107(15)(a) in that Defendant has: a. constructed and maintained a website that is inaccessible to blind class members with knowledge of the discrimination; and/or b. constructed and maintained a website that is sufficiently intuitive and/or obvious that is inaccessible to blind class members; and/or c. failed to take actions to correct these access barriers in the face of substantial harm and discrimination to blind class members. 75. Defendant has failed to take any prompt and equitable steps to remedy its discriminatory conduct. These violations are ongoing. 76. As such, Defendant discriminates, and will continue in the future to discriminate against Plaintiff and members of the proposed class and subclass on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, accommodations and/or opportunities of its Website and its establishments under § 8-107(4)(a) and/or its implementing regulations. Unless the Court enjoins Defendant from continuing to engage in these unlawful practices, Plaintiff and members of the class will continue to suffer irreparable harm. 77. Defendant’s actions were and are in violation of the NYCHRL and therefore Plaintiff invokes his right to injunctive relief to remedy the discrimination. 78. Plaintiff is also entitled to compensatory damages, as well as civil penalties and fines under N.Y.C. Administrative Code § 8-120(8) and § 8-126(a) for each offense. 79. Plaintiff is also entitled to reasonable attorneys’ fees and costs. 80. Under N.Y.C. Administrative Code § 8-120 and § 8-126 and the remedies, procedures, and rights set forth and incorporated therein Plaintiff prays for judgment as set forth below. FOURTH CAUSE OF ACTION DECLARATORY RELIEF 81. Plaintiff, on behalf of himself and the Class and New York Sub-Class Members, repeats and realleges every allegation of the preceding paragraphs as if fully set forth herein. 82. An actual controversy has arisen and now exists between the parties in that Plaintiff contends, and is informed and believes that Defendant denies, that its Website contains access barriers denying blind customers the full and equal access to the goods, services and facilities of its Website and by extension its physical location, which Defendant owns, operates and controls, fails to comply with applicable laws including, but not limited to, Title III of the Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et seq., and N.Y.C. Admin. Code § 8-107, et seq. prohibiting discrimination against the blind. 83. A judicial declaration is necessary and appropriate at this time in order that each of the parties may know their respective rights and duties and act accordingly. PRAYER FOR RELIEF WHEREFORE, Plaintiff respectfully requests this Court grant the following relief: a. A preliminary and permanent injunction to prohibit Defendant from violating the Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et seq., N.Y.C. Administrative Code § 8-107, et seq., and the laws of New York; b. A preliminary and permanent injunction requiring Defendant to take all the steps necessary to make its Website into full compliance with the requirements set forth in the ADA, and its implementing regulations, so that the Website is readily accessible to and usable by blind individuals; c. A declaration that Defendant owns, maintains and/or operates its Website in a manner that discriminates against the blind and which fails to provide access for persons with disabilities as required by Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et seq., N.Y.C. Administrative Code § 8-107, et seq., and the laws of New York d. An order certifying the Class and Sub-Class under Fed. R. Civ. P. 23(a) & (b)(2) and/or (b)(3), appointing Plaintiff as Class Representative, and his attorneys as Class Counsel; e. Compensatory damages in an amount to be determined by proof, including all applicable statutory damages and fines, to Plaintiff and the proposed class for violations of their civil rights under New York State Human Rights Law and City Law; f. Pre- and post-judgment interest; g. An award of costs and expenses of this action together with reasonable attorneys’ and expert fees; and h. Such other and further relief as this Court deems just and proper. DEMAND FOR TRIAL BY JURY Pursuant to Fed. R. Civ. P. 38(b), Plaintiff demands a trial by jury on all questions of fact the Complaint raises. Dated: Garden City, New York October 1, 2019 THE LAW OFFICE OF DARRYN SOLOTOFF PLLC s/Darryn G. Solotoff Darryn G. Solotoff (DS-8117) 100 Quentin Roosevelt Blvd, #208 Garden City, New York 11530 Phone: 516.695.0052 Fax: 516.706.4692 [email protected] GOTTLIEB & ASSOCIATES s/Jeffrey M. Gottlieb Jeffrey M. Gottlieb (JG-7905) Dana L. Gottlieb (DG-6151) GOTTLIEB & ASSOCIATES 150 East 18th Street, Suite PHR New York, New York 10003 Tel: 212.228.9795 Fax: 212.982.6284 [email protected] [email protected]

civil rights, immigration, family

BeNBEYcBD5gMZwcz55-f

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x Index No.: 1:19-cv-11845 JOSEPH GUGLIELMO, on behalf of himself and all others similarly situated, CLASS ACTION COMPLAINT AND Plaintiffs, v. DEMAND FOR JURY TRIAL CRAFT SPORTSWEAR NA, LLC, Defendant. : : : : : : : : : : : : - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x INTRODUCTION 1. Plaintiff JOSEPH GUGLIELMO, on behalf of himself and others similarly situated, asserts the following claims against Defendant CRAFT SPORTSWEAR NA, LLC as follows. 2. Plaintiff is a visually-impaired and legally blind person who requires screen- reading software to read website content using his computer. Plaintiff uses the terms “blind” or “visually-impaired” to refer to all people with visual impairments who meet the legal definition of blindness in that they have a visual acuity with correction of less than or equal to 20 x 200. Some blind people who meet this definition have limited vision. Others have no vision. 3. Based on a 2010 U.S. Census Bureau report, approximately 8.1 million people in the United States are visually impaired, including 2.0 million who are blind, and according to the American Foundation for the Blind’s 2015 report, approximately 400,000 visually impaired persons live in the State of New York. 4. Plaintiff brings this civil rights action against Defendant for its failure to design, construct, maintain, and operate its website to be fully accessible to and independently usable by Plaintiff and other blind or visually-impaired people. Defendant’s denial of full and equal access to its website, and therefore denial of its goods and services offered thereby, is a violation of Plaintiff’s rights under the Americans with Disabilities Act (“ADA”). 5. Because Defendant’s website, www.craftsports.us (the “Website”), is not equally accessible to blind and visually impaired consumers, it violates the ADA. Plaintiff seeks a permanent injunction to cause a change in Defendant’s corporate policies, practices, and procedures so that Defendant’s website will become and remain accessible to blind and visually-impaired consumers. JURISDICTION AND VENUE 6. This Court has subject-matter jurisdiction over this action under 28 U.S.C. § 1331 and 42 U.S.C. § 12181, as Plaintiff’s claims arise under Title III of the ADA, 42 U.S.C. § 12181, et seq., and 28 U.S.C. § 1332. 7. This Court has supplemental jurisdiction under 28 U.S.C. § 1367 over Plaintiff’s New York City Human Rights Law, N.Y.C. Admin. Code § 8-101 et seq., (“NYCHRL”) claims. 8. Venue is proper in this district under 28 U.S.C. §1391(b)(1) and (2) because Defendant conducts and continues to conduct a substantial and significant amount of business in this District, and a substantial portion of the conduct complained of herein occurred in this District because Plaintiff attempted to utilize, on a number of occasions, the subject Website within this Judicial District. 9. Defendant is subject to personal jurisdiction in this District. Defendant has been and is committing the acts or omissions alleged herein in the Southern District of New York that caused injury and violated rights the ADA prescribes to Plaintiff and to other blind and other visually impaired-consumers. A substantial part of the acts and omissions giving rise to Plaintiff’s claims occurred in this District: on several separate occasions, Plaintiff has been denied the full use and enjoyment of the facilities, goods and services offered to the general public, on Defendant’s Website in New York County. These access barriers that Plaintiff encountered have caused a denial of Plaintiff’s full and equal access multiple times in the past, and now deter Plaintiff on a regular basis from accessing the Defendant’s Website in the future. 10. This Court is empowered to issue a declaratory judgment under 28 U.S.C. §§ 2201 and 2202. THE PARTIES 11. Plaintiff JOSEPH GUGLIELMO, at all relevant times, is and was a resident of Suffolk County, New York. 12. Plaintiff is a blind, visually-impaired handicapped person and a member of a protected class of individuals under the ADA, under 42 U.S.C. § 12102(1)-(2), and the regulations implementing the ADA set forth at 28 CFR §§ 36.101 et seq., and NYCHRL. 13. Defendant is and was at all relevant times a Washington Company doing business in New York. 14. Defendant’s Website, and its goods, and services offered thereupon, is a public accommodation within the definition of Title III of the ADA, 42 U.S.C. § 12181(7). NATURE OF ACTION 15. The Internet has become a significant source of information, a portal, and a tool for conducting business, doing everyday activities such as shopping, learning, banking, researching, as well as many other activities for sighted, blind and visually-impaired persons alike. 16. In today’s tech-savvy world, blind and visually impaired people have the ability to access websites using keyboards in conjunction with screen access software that vocalizes the visual information found on a computer screen or displays the content on a refreshable Braille display. This technology is known as screen- reading software. Screen-reading software is currently the only method a blind or visually-impaired person may use to independently access the internet. Unless websites are designed to be read by screen-reading software, blind and visually- impaired persons are unable to fully access websites, and the information, products, goods and contained thereon. 17. Blind and visually-impaired users of Windows operating system-enabled computers and devices have several screen reading software programs available to them. Some of these programs are available for purchase and other programs are available without the user having to purchase the program separately. Job Access With Speech, otherwise known as “JAWS” is currently the most popular, separately purchased and downloaded screen-reading software program available for a Windows computer. Another popular screen-reading software program available for a Windows computer is NonVisual Desktop Access “NVDA”. 18. For screen-reading software to function, the information on a website must be capable of being rendered into text. If the website content is not capable of being rendered into text, the blind or visually-impaired user is unable to access the same content available to sighted users. 19. The international website standards organization, the World Wide Web Consortium, known throughout the world as W3C, has published version 2.1 of the Web Content Accessibility Guidelines (“WCAG 2.1”). WCAG 2.1 are well- established guidelines for making websites accessible to blind and visually- impaired people. These guidelines are universally followed by most large business entities and government agencies to ensure their websites are accessible. 20. Non-compliant websites pose common access barriers to blind and visually- impaired persons. Common barriers encountered by blind and visually impaired persons include, but are not limited to, the following: a. A text equivalent for every non-text element is not provided; b. Title frames with text are not provided for identification and navigation; c. Equivalent text is not provided when using scripts; d. Forms with the same information and functionality as for sighted persons are not provided; e. Information about the meaning and structure of content is not conveyed by more than the visual presentation of content; f. Text cannot be resized without assistive technology up to 200% without losing content or functionality; g. If the content enforces a time limit, the user is not able to extend, adjust or disable it; h. Web pages do not have titles that describe the topic or purpose; i. The purpose of each link cannot be determined from the link text alone or from the link text and its programmatically determined link context; j. One or more keyboard operable user interface lacks a mode of operation where the keyboard focus indicator is discernible; k. The default human language of each web page cannot be programmatically determined; l. When a component receives focus, it may initiate a change in context; m. Changing the setting of a user interface component may automatically cause a change of context where the user has not been advised before using the component; n. Labels or instructions are not provided when content requires user input, which include captcha prompts that require the user to verify that he or she is not a robot; o. In content which is implemented by using markup languages, elements do not have complete start and end tags, elements are not nested according to their specifications, elements may contain duplicate attributes, and/or any IDs are not unique; p. Inaccessible Portable Document Format (PDFs); and, q. The name and role of all User Interface elements cannot be programmatically determined; items that can be set by the user cannot be programmatically set; and/or notification of changes to these items is not available to user agents, including assistive technology. STATEMENT OF FACTS 21. Defendant is a sports apparel company that owns and operates www.craftsports.us (its “Website”), offering features which should allow all consumers to access the goods and services and which Defendant ensures the delivery of such goods throughout the United States, including New York State. 22. Defendant’s Website offers products and services for online sale and general delivery to the public. The Website offers features which ought to allow users to browse for items, access navigation bar descriptions and prices, and avail consumers of the ability to peruse the numerous items offered for sale. 23. Plaintiff is a visually-impaired and legally blind person, who cannot use a computer without the assistance of screen-reading software. Plaintiff is, however, a proficient NVDA screen-reader user and uses it to access the Internet. Plaintiff has visited the Website on separate occasions using a screen-reader. 24. On multiple occasions, the last occurring in December of 2019, Plaintiff visited Defendant’s website, www.craftsports.us, to make a purchase. Despite his efforts, however, Plaintiff was denied a shopping experience similar to that of a sighted individual due to the website’s lack of a variety of features and accommodations, which effectively barred Plaintiff from being able to determine what specific products were offered for sale. 25. Many features on the Website lacks alt. text, which is the invisible code embedded beneath a graphical image. As a result, Plaintiff was unable to differentiate what products were on the screen due to the failure of the Website to adequately describe its content. Such issues were predominant in the section where Plaintiff was attempting, but was unsuccessful, in making a purchase. 26. Many features on the Website also fail to add a label element or title attribute for each field. This is a problem for the visually impaired because the screen reader fails to communicate the purpose of the page element. It also leads to the user not being able to understand what he or she is expected to insert into the subject field. As a result, Plaintiff and similarly situated visually impaired users of Defendant’s Website are unable to enjoy the privileges and benefits of the Website equally to sighted users. 27. Many pages on the Website also contain the same title elements. This is a problem for the visually impaired because the screen reader fails to distinguish one page from another. In order to fix this problem, Defendant must change the title elements for each page. 28. The Website also contained a host of broken links, which is a hyperlink to a non- existent or empty webpage. For the visually impaired this is especially paralyzing due to the inability to navigate or otherwise determine where one is on the website once a broken link is encountered. For example, upon coming across a link of interest, Plaintiff was redirected to an error page. However, the screen-reader failed to communicate that the link was broken. As a result, Plaintiff could not get back to his original search. 29. These access barriers effectively denied Plaintiff the ability to use and enjoy Defendant’s website the same way sighted individuals do. 30. It is, upon information and belief, Defendant’s policy and practice to deny Plaintiff, along with other blind or visually-impaired users, access to Defendant’s website, and to therefore specifically deny the goods and services that are offered to the general public. Due to Defendant’s failure and refusal to remove access barriers to its website, Plaintiff and visually-impaired persons have been and are still being denied equal access to Defendant’s Website, and the numerous goods and services and benefits offered to the public through the Website. 31. Due to the inaccessibility of Defendant’s Website, blind and visually-impaired customers such as Plaintiff, who need screen-readers, cannot fully and equally use or enjoy the facilities, products, and services Defendant offers to the public on its Website. The access barriers Plaintiff encountered have caused a denial of Plaintiff’s full and equal access in the past, and now deter Plaintiff on a regular basis from equal access to the Website. 32. If the Website were equally accessible to all, Plaintiff could independently navigate the Website and complete a desired transaction as sighted individuals do. 33. Through his attempts to use the Website, Plaintiff has actual knowledge of the access barriers that make these services inaccessible and independently unusable by blind and visually-impaired people. 34. Because simple compliance with the WCAG 2.1 Guidelines would provide Plaintiff and other visually-impaired consumers with equal access to the Website, Plaintiff alleges that Defendant has engaged in acts of intentional discrimination, including but not limited to the following policies or practices: a. Constructing and maintaining a website that is inaccessible to visually-impaired individuals, including Plaintiff; b. Failure to construct and maintain a website that is sufficiently intuitive so as to be equally accessible to visually impaired individuals, including Plaintiff; and, c. Failing to take actions to correct these access barriers in the face of substantial harm and discrimination to blind and visually-impaired consumers, such as Plaintiff, as a member of a protected class. 35. Defendant therefore uses standards, criteria or methods of administration that have the effect of discriminating or perpetuating the discrimination of others, as alleged herein. 36. The ADA expressly contemplates the injunctive relief that Plaintiff seeks in this action. In relevant part, the ADA requires: In the case of violations of . . . this title, injunctive relief shall include an order to alter facilities to make such facilities readily accessible to and usable by individuals with disabilities . . . Where appropriate, injunctive relief shall also include requiring the . . . modification of a policy . . . 42 U.S.C. § 12188(a)(2). 37. Because Defendant’s Website has never been equally accessible, and because Defendant lacks a corporate policy that is reasonably calculated to cause its Website to become and remain accessible, Plaintiff invokes 42 U.S.C. § 12188(a)(2) and seeks a permanent injunction requiring Defendant to retain a qualified consultant acceptable to Plaintiff (“Agreed Upon Consultant”) to assist Defendant to comply with WCAG 2.1 guidelines for Defendant’s Website. Plaintiff seeks that this permanent injunction requires Defendant to cooperate with the Agreed Upon Consultant to: a. Train Defendant’s employees and agents who develop the Website on accessibility compliance under the WCAG 2.1 guidelines; b. Regularly check the accessibility of the Website under the WCAG 2.1 guidelines; c. Regularly test user accessibility by blind or vision-impaired persons to ensure that Defendant’s Website complies under the WCAG 2.1 guidelines; and, d. Develop an accessibility policy that is clearly disclosed on Defendant’s Websites, with contact information for users to report accessibility-related problems. 38. Although Defendant may currently have centralized policies regarding maintaining and operating its Website, Defendant lacks a plan and policy reasonably calculated to make them fully and equally accessible to, and independently usable by, blind and other visually-impaired consumers. 39. Defendant has, upon information and belief, invested substantial sums in developing and maintaining their Website and has generated significant revenue from the Website. These amounts are far greater than the associated cost of making their Website equally accessible to visually impaired customers. 40. Without injunctive relief, Plaintiff and other visually-impaired consumers will continue to be unable to independently use the Website, violating their rights. CLASS ACTION ALLEGATIONS 41. Plaintiff, on behalf of himself and all others similarly situated, seeks to certify a nationwide class under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind individuals in the United States who have attempted to access Defendant’s Website and as a result have been denied access to the equal enjoyment of goods and services, during the relevant statutory period. 42. Plaintiff, on behalf of himself and all others similarly situated, seeks to certify a New York City subclass under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind individuals in the City of New York who have attempted to access Defendant’s Website and as a result have been denied access to the equal enjoyment of goods and services offered, during the relevant statutory period. 43. Common questions of law and fact exist amongst the Class, including: a. Whether Defendant’s Website is a “public accommodation” under the ADA; b. Whether Defendant’s Website is a “place or provider of public accommodation” under the NYCHRL; c. Whether Defendant’s Website denies the full and equal enjoyment of its products, services, facilities, privileges, advantages, or accommodations to people with visual disabilities, violating the ADA; and d. Whether Defendant’s Website denies the full and equal enjoyment of its products, services, facilities, privileges, advantages, or accommodations to people with visual disabilities, violating the NYCHRL. 44. Plaintiff’s claims are typical of the Class. The Class, similarly to the Plaintiff, are severely visually impaired or otherwise blind, and claim that Defendant has violated the ADA or NYCHRL by failing to update or remove access barriers on its Website so either can be independently accessible to the Class. 45. Plaintiff will fairly and adequately represent and protect the interests of the Class Members because Plaintiff has retained and is represented by counsel competent and experienced in complex class action litigation, and because Plaintiff has no interests antagonistic to the Class Members. Class certification of the claims is appropriate under Fed. R. Civ. P. 23(b)(2) because Defendant has acted or refused to act on grounds generally applicable to the Class, making appropriate both declaratory and injunctive relief with respect to Plaintiff and the Class as a whole. 46. Alternatively, class certification is appropriate under Fed. R. Civ. P. 23(b)(3) because fact and legal questions common to Class Members predominate over questions affecting only individual Class Members, and because a class action is superior to other available methods for the fair and efficient adjudication of this litigation. 47. Judicial economy will be served by maintaining this lawsuit as a class action in that it is likely to avoid the burden that would be otherwise placed upon the judicial system by the filing of numerous similar suits by people with visual disabilities throughout the United States. FIRST CAUSE OF ACTION VIOLATIONS OF THE ADA, 42 U.S.C. § 12181 et seq. 48. Plaintiff, on behalf of himself and the Class Members, repeats and realleges every allegation of the preceding paragraphs as if fully set forth herein. 49. Section 302(a) of Title III of the ADA, 42 U.S.C. § 12101 et seq., provides: No individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation. 42 U.S.C. § 12182(a). 50. Defendant’s Website is a public accommodations within the definition of Title III of the ADA, 42 U.S.C. § 12181(7). The Website is a service that is offered to the general public, and as such, must be equally accessible to all potential consumers. 51. Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to deny individuals with disabilities the opportunity to participate in or benefit from the products, services, facilities, privileges, advantages, or accommodations of an entity. 42 U.S.C. § 12182(b)(1)(A)(i). 52. Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to deny individuals with disabilities an opportunity to participate in or benefit from the products, services, facilities, privileges, advantages, or accommodation, which is equal to the opportunities afforded to other individuals. 42 U.S.C. § 12182(b)(1)(A)(ii). 53. Under Section 302(b)(2) of Title III of the ADA, unlawful discrimination also includes, among other things: [A] failure to make reasonable modifications in policies, practices, or procedures, when such modifications are necessary to afford such goods, services, facilities, privileges, advantages, or accommodations to individuals with disabilities, unless the entity can demonstrate that making such modifications would fundamentally alter the nature of such goods, services, facilities, privileges, advantages or accommodations; and a failure to take such steps as may be necessary to ensure that no individual with a disability is excluded, denied services, segregated or otherwise treated differently than other individuals because of the absence of auxiliary aids and services, unless the entity can demonstrate that taking such steps would fundamentally alter the nature of the good, service, facility, privilege, advantage, or accommodation being offered or would result in an undue burden. 42 U.S.C. § 12182(b)(2)(A)(ii)-(iii). 54. The acts alleged herein constitute violations of Title III of the ADA, and the regulations promulgated thereunder. Plaintiff, who is a member of a protected class of persons under the ADA, has a physical disability that substantially limits the major life activity of sight within the meaning of 42 U.S.C. §§ 12102(1)(A)- (2)(A). Furthermore, Plaintiff has been denied full and equal access to the Website, has not been provided services that are provided to other patrons who are not disabled, and has been provided services that are inferior to the services provided to non-disabled persons. Defendant has failed to take any prompt and equitable steps to remedy its discriminatory conduct. These violations are ongoing. 55. Under 42 U.S.C. § 12188 and the remedies, procedures, and rights set forth and incorporated therein, Plaintiff, requests relief as set forth below. SECOND CAUSE OF ACTION VIOLATIONS OF THE NYCHRL 56. Plaintiff, on behalf of himself and the New York City Sub-Class Members, repeats and realleges every allegation of the preceding paragraphs as if fully set forth herein. 57. N.Y.C. Administrative Code § 8-107(4)(a) provides that “It shall be an unlawful discriminatory practice for any person, being the owner, lessee, proprietor, manager, superintendent, agent or employee of any place or provider of public accommodation, because of . . . disability . . . directly or indirectly, to refuse, withhold from or deny to such person, any of the accommodations, advantages, facilities or privileges thereof.” 58. Defendant’s Website is a sales establishment and public accommodations within the definition of N.Y.C. Admin. Code § 8-102(9). 59. Defendant is subject to NYCHRL because it owns and operates its Website, making it a person within the meaning of N.Y.C. Admin. Code § 8-102(1). 60. Defendant is violating N.Y.C. Administrative Code § 8-107(4)(a) in refusing to update or remove access barriers to Website, causing its Website and the services integrated with such Website to be completely inaccessible to the blind. This inaccessibility denies blind patrons full and equal access to the facilities, products, and services that Defendant makes available to the non-disabled public. 61. Defendant is required to “make reasonable accommodation to the needs of persons with disabilities . . . any person prohibited by the provisions of [§ 8-107 et seq.] from discriminating on the basis of disability shall make reasonable accommodation to enable a person with a disability to . . . enjoy the right or rights in question provided that the disability is known or should have been known by the covered entity.” N.Y.C. Admin. Code § 8-107(15)(a). 62. Defendant’s actions constitute willful intentional discrimination against the Sub- Class on the basis of a disability in violation of the N.Y.C. Administrative Code § 8-107(4)(a) and § 8-107(15)(a) in that Defendant has: a. constructed and maintained a website that is inaccessible to blind class members with knowledge of the discrimination; and/or b. constructed and maintained a website that is sufficiently intuitive and/or obvious that is inaccessible to blind class members; and/or c. failed to take actions to correct these access barriers in the face of substantial harm and discrimination to blind class members. 63. Defendant has failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 64. As such, Defendant discriminates, and will continue in the future to discriminate against Plaintiff and members of the proposed class and subclass on the basis of disability in the full and equal enjoyment of the products, services, facilities, privileges, advantages, accommodations and/or opportunities of its Website under § 8-107(4)(a) and/or its implementing regulations. Unless the Court enjoins Defendant from continuing to engage in these unlawful practices, Plaintiff and members of the class will continue to suffer irreparable harm. 65. Defendant’s actions were and are in violation of the NYCHRL and therefore Plaintiff invokes his right to injunctive relief to remedy the discrimination. 66. Plaintiff is also entitled to compensatory damages, as well as civil penalties and fines under N.Y.C. Administrative Code § 8-120(8) and § 8-126(a) for each offense as well as punitive damages pursuant to § 8-502. 67. Plaintiff is also entitled to reasonable attorneys’ fees and costs. 68. Under N.Y.C. Administrative Code § 8-120 and § 8-126 and the remedies, procedures, and rights set forth and incorporated therein Plaintiff prays for judgment as set forth below. THIRD CAUSE OF ACTION DECLARATORY RELIEF 69. Plaintiff, on behalf of himself and the Class and New York City Sub-Classes Members, repeats and realleges every allegation of the preceding paragraphs as if fully set forth herein. 70. An actual controversy has arisen and now exists between the parties in that Plaintiff contends, and is informed and believes that Defendant denies, that its Website contains access barriers denying blind customers the full and equal access to the products, services and facilities of its Website, which Defendant owns, operates and controls, fails to comply with applicable laws including, but not limited to, Title III of the Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq., and N.Y.C. Admin. Code § 8-107, et seq. prohibiting discrimination against the blind. 71. A judicial declaration is necessary and appropriate at this time in order that each of the parties may know their respective rights and duties and act accordingly. PRAYER FOR RELIEF WHEREFORE, Plaintiff respectfully requests this Court grant the following relief: a. A preliminary and permanent injunction to prohibit Defendant from violating the Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y.C. Administrative Code § 8-107, et seq., and the laws of New York; b. A preliminary and permanent injunction requiring Defendant to take all the steps necessary to make its Website into full compliance with the requirements set forth in the ADA, and its implementing regulations, so that the Website is readily accessible to and usable by blind individuals; c. A declaration that Defendant owns, maintains and/or operates its Website in a manner that discriminates against the blind and which fails to provide access for persons with disabilities as required by Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y.C. Administrative Code § 8-107, et seq., and the laws of New York d. An order certifying the Class and Sub-Classes under Fed. R. Civ. P. 23(a) & (b)(2) and/or (b)(3), appointing Plaintiff as Class Representative, and his attorneys as Class Counsel; e. Compensatory damages in an amount to be determined by proof, including all applicable statutory and punitive damages and fines, to Plaintiff and the proposed class and subclasses for violations of their civil rights under New York City Human Rights Law and City Law; f. Pre- and post-judgment interest; g. An award of costs and expenses of this action together with reasonable attorneys’ and expert fees; and h. Such other and further relief as this Court deems just and proper. DEMAND FOR TRIAL BY JURY Pursuant to Fed. R. Civ. P. 38(b), Plaintiff demands a trial by jury on all questions of fact the Complaint raises. Dated: Hackensack, New Jersey December 27, 2019 STEIN SAKS, PLLC By: /s/ David P. Force David P. Force, Esq. [email protected] 285 Passaic Street Hackensack, NJ 07601 Tel: (201) 282-6500 Fax: (201) 282-6501 ATTORNEYS FOR PLAINTIFF

civil rights, immigration, family

cdWJD4cBD5gMZwcz_clT

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TENNESSEE ) JONATHAN MANLOVE, ) Individually, and on behalf of others ) similarly situated ) ) Plaintiff, ) CLASS ACTION COMPLAINT ) v. ) JURY TRIAL DEMANDED ) VOLKSWAGEN AKTIENGESELLSCHAFT, ) No. _______________ VOLKSWAGEN GROUP OF AMERICA, INC., ) and VOLKSWAGEN CHATTANOOGA ) OPERATIONS, LLC ) Defendants. ) __________________________________________) COLLECTIVE COMPLAINT FOR INJUNCTIVE RELIEF Plaintiff Jonathan Manlove ( “Plaintiff” or “Mr. Manlove”) brings this action in his individual capacity and on behalf of a class of employees 50 years of age and above defined below (the “Class”) that work for Volkswagen Aktiengesellschaft (“Volkswagen AG”), including its wholly-owned subsidiaries Volkswagen Group of America, Inc. (“Volkswagen Group of America”) and Volkswagen Group of America Chattanooga Operations, LLC (“Volkswagen Chattanooga”) (collectively “Volkswagen” or “the Company”) in the United States to seek injunctive relief against Volkswagen’s company-wide policy of age discrimination. INTRODUCTION 1. This is an action under the Age Discrimination in Employment Act and Tennessee Human Rights Act to correct unlawful employment practices on the basis of age, and provide appropriate relief to Plaintiff and a class of current employees who have been adversely affected by these unlawful employment practices. 2. Volkswagen AG announced to the world that it was implementing a new personnel policy to force older workers out of the Company through coercive early retirement or “natural fluctuations.” A few months later, Volkswagen AG transferred their Senior Director of Human Resources to the Chattanooga, Tennessee manufacturing facility to begin the process of purging older workers through “natural fluctuation.” One month later, Plaintiff’s boss, a man in his 60s, left the Company without warning, and was replaced by a new Manager in her 30s. 3. Three months after Volkswagen AG’s Human Resources officer came to Chattanooga, Plaintiff Jonathan Manlove received news from Human Resources that he was being demoted. He was transferred to a new position in Volkswagen, with corresponding cuts in compensation and benefits to take effect if he did not find a new position in the Company within 4. The one-year mark on Plaintiff’s demotion and transfer expires imminently, at which time the Company will take further adverse action against him. Volkswagen’s actions— publicly directed by German parent company Volkswagen AG—indisputably violate the Age Discrimination in Employment Act and Tennessee Human Rights Act. Volkswagen must be enjoined from continuing to discriminate against Plaintiff, and other vulnerable workers, while employees adjudicate additional relief in their respective appropriate forum. JURISDICTION AND VENUE 5. This Court has jurisdiction over the claims asserted in this action pursuant to 28 U.S.C. § 1331 because the action arises under the Age Discrimination in Employment Act (“ADEA”), 29 U.S.C. §§ 621, et seq., which incorporates by reference Sections 16 of the Fair Labor Standards Act of 1938 (the “FLSA”), as amended, 29 U.S.C. § 216. This Court has supplemental jurisdiction over the state law claims pursuant to 28 U.S.C. § 1367. 6. The employment practices alleged to be unlawful were committed within the jurisdiction of the United States District Court for the Eastern District of Tennessee, Southern Division. 7. This Court has jurisdiction over Defendant Volkswagen of Chattanooga because it is a limited liability company formed in the State of Tennessee. 8. This Court has jurisdiction over Defendants Volkswagen AG and Volkswagen Group of America under T. C. A. § 20-2-223 because Defendants transact a significant amount of business in the State. Defendants took adverse action, and directed its agents to take adverse action, against Plaintiff in the State of Tennessee. Defendants have purposefully availed themselves of the law in this State through hundreds-of-millions of dollars in federal, state, and local tax incentives. Defendant Volkswagen AG operates Volkswagen Group of America and Volkswagen Group of America Chattanooga, its wholly-owned subsidiaries, with a unity of interest and ownership such that they are a mere instrumentality of its parent, including through the following actions: a. All Defendants engage in the same business enterprise; b. Volkswagen AG maintains the Volkswagen North American Region, which operates under the Volkswagen AG board structure and is responsible for aligning all regional activities of Volkswagen AG throughout Canada, Mexico, and the United States, including, among others, human resources, communication, IT, sales, marking, and product development; c. Volkswagen AG and Volkswagen Group of America share common board members, including Hinrich J. Woebcken, CEO of Volkswagen AG North America Region and President and CEO of Volkswagen Group of America, and Pietro Zollino, Chief Communications Officer for Volkswagen AG North American Region and Executive Vice President of Communications for Volkswagen Group of America; d. Volkswagen AG shares common employees with Volkswagen of Chattanooga, including through the former Chairman and CEO of Volkswagen of Chattanooga, Frank Fischer, who, based on public research, has been employed by Volkswagen AG since approximately 1991, served as a production manager in AG’s German plant for years, served as AG’s Head of Construction and Management for a holding company of Volkswagen Group of America, served as the Chairman and CEO of the Chattanooga facility until 2014 at which time he became the Plant Manager of Volkswagen AG’s Emden Plant; e. Volkswagen AG maintains a common internal human resources management system known as SAP across Volkswagen AG, Volkswagen Group of America, and Volkswagen Chattanooga; Defendants maintain a unified set of human resource, performance evaluation, and compensation policies; f. Volkswagen AG exerts control over the daily affairs of Volkswagen of Chattanooga, including the labor activities and personnel decisions of its subsidiary employees, through: daily production plans directing Chattanooga worker activities and labor productivity set by and sent by German management; requiring weekly reports sent from Chattanooga to Germany so that AG employees can set worker activity and labor production; regular meetings held by Volkswagen AG employees in Chattanooga to set directly personnel work actives and production; directing operating hours of the Chattanooga facility, including plant shut-downs; maintaining a common international standards organization implemented in Chattanooga through regular audits conducted by AG employees; directing the method of promotions for workers in Chattanooga, including through the elimination of the management assessment centers; maintaining a common internal employee platform through which open positions and job transfers are conducted; g. Volkswagen AG directly implemented a common scheme of personnel policy, including in Chattanooga, as exemplified by the installation of Volkswagen AG Senior Director of Human Resources as Volkswagen of Chattanooga’s Senior Vice President of Human Resources; h. Volkswagen AG considers its subsidiaries, including Volkswagen Group of America and Volkswagen of Chattanooga, to fall under the umbrella of the “Volkswagen Group,” including through: maintaining a set of financial records for the entire “Volkswagen Group” that includes production, sales, revenues, earnings, and employees from Volkswagen AG, Volkswagen Group of America, and Volkswagen Chattanooga; maintaining a common set of “Personnel Indicators” for the entire Volkswagen Group that includes a reported 58,491 employees in The Americas; i. Volkswagen Group of America dictates the salary and bonus of all Chattanooga workers, including Plaintiff; dictates the terms of Chattanooga employee contracts, including with Plaintiff at the start of his employment with Volkswagen; and operates as an employer of Chattanooga employees, including through common personnel and policy communications from Executive Vice President of Human Resources Mike Beamish. 9. Venue is proper in this Court pursuant to 28 U.S.C. § 1391(b) and 29 U.S.C. § 626 because Defendants transact a substantial portion of their business in this District, maintain an office and manufacturing facility in this District, and operate as direct employers of more than 3,000 employees in this District. 10. Additionally, a substantial part of the events or omissions giving rise to the claims in this action occurred in the Eastern District of Virginia. PARTIES 11. Plaintiff Jonathan Manlove is a resident of Ooltewah, Hamilton County, Tennessee. At the time the events complained herein commenced, he was fifty-three (53) years old. At all relevant times, Manlove has been an “employee” of Volkswagen as defined by the relevant state and federal statutes. Plaintiff Manlove timely filed administrative charges seeking individual and class relief with the EEOC on April 25, 2018. 12. Defendant Volkswagen Aktiengesellschaft (“Volkswagen AG”) is a German corporation with its principle place of business at Berliner Ring 2, 38440 Wolfsburg, Germany. Volkswagen AG is one of the world's leading manufacturers of automobiles and commercial vehicles and the largest carmaker in Europe. Volkswagen operates 122 production plants throughout the world, including its wholly-owned production plant in Chattanooga, Tennessee. At all relevant times, Volkswagen AG acted as Plaintiff’s employer as defined by the ADEA and THRA. 13. Defendant, Volkswagen Group of America, Inc. (“Volkswagen Group of America”), incorporated in New Jersey, with its principal place of business located at 2200 Ferdinand Porsche Drive, Herndon, Virginia 20171, is a wholly owned subsidiary of Volkswagen AG. Volkswagen Group of America’s Herndon office is the operational headquarters for Volkswagen’s presence in North America. At all relevant times, Volkswagen Group of America acted as Plaintiff’s employer as defined by the ADEA and THRA. 14. Defendant, Volkswagen Group of America Chattanooga Operations, LLC (“Volkswagen Chattanooga”), is a limited liability company formed in Tennessee, with its principal place of business located at 2200 Ferdinand Porsche Drive, Herndon, Virginia 20171, according to business records filed in the State of Tennessee. Defendant is a wholly owned subsidiary of Volkswagen Group of America and operates the Volkswagen Chattanooga Assembly Plant in Chattanooga, Tennessee. At all relevant times, Volkswagen Chattanooga acted as Plaintiff’s employer as defined by the ADEA and THRA. FACTUAL ALLEGATIONS 15. As part of a rebranding effort following Volkswagen’s global emissions scandal, Volkswagen AG Brand Chief, Dr. Herbert Diess, announced a new re-branding effort designed to shed Volkswagen’s old diesel image and replace it with the image of a modern, young company focused on productivity, efficiency, and technology. As part of this, Volkswagen implemented a global policy consisting in part of eliminating older workers from the Company’s ranks. Plaintiff was a direct victim of this discriminatory policy. A. Volkswagen’s Global Emissions Fraud and Company Restructuring 16. “In my German words: we have totally screwed up.” The announcement of Michael Horn, former CEO and President of Volkswagen Group of America on September 21, 2015 perfectly captured the dramatic set of events leading to Volkswagen’s emissions scandal.1 17. September 2015 launched a shocking investigation into Volkswagen AG’s global fraud as the world learned over the coming year how high-ranking executives approved diesel 1 CNBC, “Volkswagen’s US boss: ‘We screwed up’” (September 21, 2015), available at https://www.cnbc.com/ 2015/09/21/volkswagen-us-ceo-screwed-up-on-eca-emissions-diesel-test-rigging.html engine “defeat devices” to cheat on U.S. emissions tests. Despite clear warnings from its Audi- brand engineers that defeat devices should “absolutely not be used”2 in the United States, Volkswagen AG willfully flouted American law and commenced its scheme. 18. This pattern and practice of fraudulent behavior continued for years. As Volkswagen AG engineered new defeat devices, Volkswagen employees raised concerns with legality in America, which Volkswagen AG management ignored, over time developing more precise methods to cheat emissions tests covertly. The Company continued to make false representations to U.S. regulators and customers about the legality of their vehicles, devising seemingly benign pretextual excuses to explain discrepancies in the data. 19. Volkswagen AG’s fraudulent misconduct and cover-up was indisputably directed from the top of the organization, despite earlier denials. Four days after the Environmental Protection Agency’s public notice of violation, former Volkswagen CEO Martin Winterkorn issued a statement asserting “it would be false, if because of the terrible mistakes of a few, the hard and honest work of [Volkswagen] is put under a general mistrust.” Yet, as investigation into the scheme commenced, Volkswagen AG in-house counsel orchestrated the destruction of documents and files related to the U.S. emissions issues, and a general mistrust turned into admissions of guilt and a $15 billion settlement. B. Volkswagen Strategically Rebrands as “Out with the Old” 20. Reeling from an explosive global scandal now known as “Dieselgate,” Volkswagen faced a pivotal moment, one of “the biggest in Volkswagen’s history.”3 Following the U.S. 2 United States of America v. Volkswagen AG, No. 16-CR-20394, Rule 11 Plea Agreement, Ex. 2 (E.D. Mich. Jan. 11, 2017) available at https://www.justice.gov/usao-edmi/page/file/930026/download 3 Volkswagen AG Press Release, “Volkswagen reaches settlements with U.S. government,” (Jan. 11, 2017), available at https://www.volkswagen-media-services.com/en/detailpage/-/detail/Volkswagen-reaches-settlements- with-US-government/view/4455919/7a5bbec13158edd433c6630f5ac445da?p_p_auth=06FBhdcv government’s investigation into Volkswagen’s world-wide, multi-billion-dollar fraud, shares had plummeted over 33% and the Company had lost over $26 billion in value. 21. In November 2016, eager to distract from the “diesel crisis,” a story still making headlines in the U.S., Brand Chief of the Volkswagen AG, Dr. Herbert Diess, announced a strategic rebranding campaign for Volkswagen, aptly named TRANSFORM 2025+. Diess’ plan focused on swapping out the old diesel-centric image of Volkswagen for a sleek new one. The new Volkswagen brand would focus on electric vehicles, e-mobility and connectivity, and “significant improvements in efficiency and productivity.” Volkswagen’s goal to “change radically” meant “[v]ery few things will stay as they are.”4 22. Included in all of this was “a big come-back story” for the Company in America, one that would “require[] stamina.” Thus, Volkswagen’s TRANSFORM 2025+ was accompanied by a corresponding organizational reform known as the “Pact for the Future”—a global policy of eliminating older workers and replacing them with much younger ones. 23. Volkswagen’s Pact for the Future is a labor campaign designed to eliminate 30,000 jobs world-wide, with approximately 7,000 coming from North and South America, primarily comprised of workers “born between 1955 and 1960.” This scheme entails, among other things, an alleged commitment to avoid layoffs. Rather than fire older workers, Volkswagen made a pact to “eliminate” them from the Company through “natural fluctuations.” As part of this announcement, Dr. Karlheinz Blessing, Volkswagen AG’s Human Resources Board Member, announced a commitment to “make Volkswagen slimmer, faster, and stronger.”5 4 Volkswagen US Media Site Press Release, “Transform 2025+ Volkswagen Presents its Strategy for the Next Decade,” (Nov. 22, 2016). 5 Volkswagen Akitengesellschaft, “News: Volkswagen concludes pact for greater economic viability and a more secure future” (November 18, 2016), available at https://www.volkswagenag.com/en/news/2016/11/VW_Zukunftspakt.html 24. Since their November 2016 introduction, the Company has implemented the twin- policies, TRANSFORM 2025+ and Pact for the Future, world-wide. And in the process, once again, Volkswagen’s German leadership has implemented a policy that flouts American law. Volkswagen’s policy of purging older workers from the management ranks is impermissible age discrimination. 25. To ensure the effective implementation of its Pact for the Future, Volkswagen held a human resources conference in March of 2017, noting that the Company’s “human resources transformation is crucial for the success of the pact for the future.”6 One of the key topics of this conference was the “fair and rapid implementation of the transformation taking into consideration efficiency and economics” and the “development of the workforce of the brand and its locations.” That same month, Volkswagen AG transferred its Senior Director of Human Resources from Germany to Chattanooga, Tennessee to act as the Senior Vice President of Human Resources for Volkswagen Group of America, Inc. 26. On June 6, 2017, Volkswagen issued a press release presenting strategy for the “next few months.” The key topic of this meeting was implementing Volkswagen’s Pact for the Future through a “fundamental personnel transformation.” Human Resources Board Member, Dr. Karlheinz Blessing announced a goal of eliminating 9,300 jobs by July 31, 2017 as part of the “early retirement scheme for people born between 1955 and 1960.” Dr. Blessing cautioned that older “employees who would rather continue to work are saying that they will make an active 6 Volkswagen Brand Press Release, “Human resources professionals are committed to transparency and cooperation for the implementation of the pact for the future,” Wolfsburg, Germany (Mar. 15, 2017), available at https://www.volkswagen-media-services.com/en/detailpage/-/detail/Human-resources-professionals-are-committed- to-transparency-and-cooperation-for-the-implementation-of-the-pact-for-the-future/view/4728352/ 6e1e015af7bda8f2a4b42b43d2dcc9b5?p_auth=OaU9yKxJ contribution, will qualify for new tasks and will be prepared to transfer to another business area or location.”7 27. One week later, Volkswagen announced a new head of the Chattanooga facility, one who would report directly to Hinrich J. Woebcken, President and CEO of Volkswagen Group of America and CEO of Volkswagen AG’s North American Region. Mr. Woebcken was brought on to serve in this dual role—working as an executive for Volkswagen AG and serving as President and CEO of Volkswagen Group of America—approximately seven months before the Pact for the Future was announced Mr. Woebcken previously worked at BMW along with Herbert Diess. C. Volkswagen Implements Their New Strategy in America 28. Prior to the summer of 2017, Plaintiff was unaware of the Company’s Pact for the Future or any Company-wide scheme targeting older employees in management levels for job elimination. However, the effects of the Pact for the Future began in Chattanooga months earlier. 29. In March of 2017, around the time the new Senior Vice President of Human Resources arrived from Volkswagen AG, Mr. Manlove’s Manager, in his early-sixties at the time, quickly and quietly departed the Company. 30. Despite years of experience in Logistics, and specifically in Volkswagen’s In- House Logistics group, Plaintiff was not allowed to apply for a promotion to the newly available Manager position. 31. Instead, an employee in her early-thirties was promoted from the Information Technology (“IT”) Department, where she managed approximately twelve employees, to Manager 7 Volkswagen Akitengesellschaft, “News: Works meeting in Wolsfburg: Volkswagen to implement pact for the future consistently” (June 6, 2017), available at https://www.volkswagenag.com/en/news/2017/06/VW_Betriebsversammlung_WOB.html of In-House Logistics, where she managed approximately 280 employees and approximately 300 third-party contractors. She began this position in April 2017. 32. On June 26, 2017, Volkswagen AG issued a press release touting its success in implementing the Pact for the Future. The press release headline noted “Volkswagen Brand Continues to Boost Productivity – Also in Management,” a nod to the stereotype and misconception that older workers are less productive than younger workers. Volkswagen AG announced: The Volkswagen brand is consistently implementing the pact for the future in all areas of the company. The achievement of the 2017 productivity targets is proceeding to schedule; this also applies to personal reduction and the optimization of the human resources structure. The partial early retirement scheme for employees born between 1955 and 1960 will have a significant effect. It also concerns management. “We are expecting our management levels to become younger and slimmer,” said CEO of the Volkswagen brand, Dr. Herbert Diess.8 33. Diess went on to reiterate: “We are becoming slimmer, leaner and younger. This will make Volkswagen faster and more efficient at the same time as providing new motivation for junior managers.”9 34. Two days later, Mike Beamish, Executive Vice President of Human Resources for Volkswagen Group of America, sent an email to all employees of Volkswagen Group of America, including Plaintiff, that acknowledged the “presumed demographic impact” of the Company’s plan to reduce the age of its workforce. Mr. Beamish stated that the press release may be “misinterpreted as a preference for employees based on a particular age,” but claimed that the policy was only 8 Volkswagen Media Services, “Volkswagen brand continues to boost productivity – also in management” (June 26, 2017) (emphasis added), available at https://www.volkswagen-media-services.com/en/detailpage/- /detail/Volkswagen-brand-continues-to-boost-productivity--also-in- management/view/5226049/7a5bbec13158edd433c6630f5ac445da?p_p_auth=6Mb7mZdc 9 Id. applicable to German employees. The email encouraged employees to reach out if they were victims of age discrimination or had any knowledge of discrimination. 35. The next day, Human Resources informed Plaintiff Manlove that he would be demoted from Assistant Manager (grade-9) to Supervisor (grade-6), the position into which he was first hired by Volkswagen, and transferred out of Volkswagen Chattanooga’s In-House Logistics Department, effective when the Chattanooga facility returned from its shut down on or around July 10, 2017. D. Volkswagen Discriminates Against Plaintiff Manlove 36. Mr. Manlove has extensive experience in both the automotive industry and the field of logistics. Mr. Manlove worked at Ford Motor Company for eight years, and has nine-years’ experience in the field of logistics at United Parcel Service and Boise Cascade Office Products. 37. In April 2011, Mr. Manlove began working for Volkswagen as a grade-6 Supervisor in the Production Department of the Chattanooga facility. After seven years with the Company, he had risen in rank to a grade-9 Assistant Manager of In-House Logistics. 38. At all times during Mr. Manlove’s employment, he received positive performance reviews, annual raises in salary, and annual bonus payments in recognition for his hard work. 39. At all time prior to the Volkswagen’s overt discrimination, as described below, Mr. Manlove enjoyed a professional and collegial work environment. 40. In March 2017, the Manager of In-House Logistics, in his sixties, abruptly left Volkswagen. On information and belief, Mr. Williamson was forced out of the Company due to his age. 41. Mr. Williamson’s departure created an open Manager position in Logistics. Like many open positions at Volkswagen, this opening was not posted on the Company’s internal job posting site. Instead, Volkswagen relied on the “tap on the shoulder” promotion method to fill the position. 42. Mr. Manlove was never provided an opportunity to apply for the promotion to the open position of Manager. On information and belief, none of the Assistant Managers in the In- House Logistics group over the age of fifty were given the opportunity to apply for the position. 43. Instead, an employee in her early-thirties was promoted from the Information Technology (“IT”) Department, where she managed approximately twelve employees, to Manager of In-House Logistics, where she would manage approximately 280 employees and over 300 third- party contractors. 1. Volkswagen Demotes Mr. Manlove 44. Less than three months after Volkswagen promoted the new, younger Manager of In-House Logistics, Mr. Manlove was again subjected to adverse employment actions. 45. On June 29, 2017, days after Volkswagen AG issued their press release that management ranks would become younger, and Volkswagen Group of America acknowledged the presumed demographics effects of this policy, Mr. Manlove was informed by Human Resources that he was being demoted from a grade-9 Assistant Manager to a grade-6 Supervisor and would be “on loan” to the Assembly Department. 46. A Human Resources representative told Mr. Manlove that he had one year to find a new Assistant Manager position within Volkswagen or else his salary would be reduced, and his demotion and “on loan” status would become permanent which could result in the loss of his company car. 47. The Human Resources representative assured Mr. Manlove that the demotion and transfer were in no way related to his performance. In fact, she said that Mr. Manlove’s performance had been great, and thanked him for his excellent work transitioning from Assistant Manager of Logistics Control to Assistant Manager of In-House Logistics. She stated that the Company was eliminating his position for “economic reasons,” and assured Mr. Manlove that Human Resources would assist him in quickly finding another Assistant Manager position within the Company. 48. Contrary to the “economic reasons” cited by Human Resources, approximately six months preceding Mr. Manlove’s demotion, three Specialist-level employees—all around or under the age of 40—were promoted to the position of Assistant Manager in the Logistics Department. A mere two months before Mr. Manlove’s position was eliminated, a Specialist-level employee in his twenties was promoted to an Assistant Manager position in the Logistics Department. On information and belief, Volkswagen did not post these positions, and instead personally chose which (younger) employees would fill these positions. 49. Only after those positions were filled was Mr. Manlove’s Assistant Manager position eliminated. The only two positions eliminated in Logistics were occupied by Mr. Manlove and another employee over the age of fifty. The only other employee over the age of fifty in the In-House Logistics group was given a newly created role of “Support Functions” Assistant Manager that was effectively a demotion, in part because he now oversaw twelve employees rather than ninety. 50. Volkswagen’s personnel shuffle in Logistics substituted three younger employees in place of two older ones, consistent with Volkswagen’s goal of management levels “becoming leaner and younger.” Since Volkswagen AG announced the Pact for the Future, and subsequently transferred their Human Resources Senior Director to serve as Senior Vice President of Human Resources in Chattanooga, there have been six individuals in their thirties promoted to the position of Assistant Manager in the Logistics department, and two different employees in their thirties promoted to the position of Manager of In-House Logistics. In contrast, only two individuals over the age of fifty remain in a management position in Logistics. The chart below demonstrates the effect of Volkswagen’s policy. Volkswagen Chattanooga After Pact for Logistics Department Before Pact for the Future the Future Difference Employees over 5010 7 3 -4 Employees under 50 7 11 +4 51. On July 10, 2017, Mr. Manlove’s demotion became effective. At that time, he was forced to explain personally to his new Manager and Assistant Manager in Assembly that his position had been eliminated in Logistics due to economic reasons, not performance issues, and that he was only “on loan” to Assembly until he found a new Assistant Manager position in the Company. His managers had been told only that certain Assistant Managers were being reassigned in the Company and asked if there was room for an additional Supervisor. 52. Two months after Mr. Manlove was initially demoted and transferred, he received a formal letter from Volkswagen memorializing his demotion from an Assistant Manager of In- House Logistics to a Supervisor in Assembly. The letter stated that Mr. Manlove was demoted and transferred in recognition of his hard work. The explanation stated: “Occasionally, job rotations are necessary due to organizational need. As a result of the hard work and professionalism you have demonstrated in your current position, you have been selected for a new assignment which matches your background and qualifications.” The letter further stated that Mr. Manlove “will remain a salary grade 9 for 12 months,” after which the “salary grade will then change to the base grade of the new position, grade 6.” 10 Employees at or above grade-8 in rank 53. This demotion essentially negates all of Mr. Manlove’s hard work over the last seven years. Base grade-6 Supervisor is the position into which he was hired when he came to Volkswagen in 2011. 54. Mr. Manlove’s new managers recognize the disparity between his experience and current title of Supervisor, with one commenting that Mr. Manlove’s talents were being “wasted” as a Supervisor. 2. Volkswagen Restricts Mr. Manlove From Obtaining an Equivalent Position 55. After Mr. Manlove’s demotion, he began watching for posted job openings at Volkswagen that matched his skills and experience. However, Volkswagen largely employs a word-of-mouth method of promotion, meaning many open positions are never posted. For example, of the four Assistant Manager positions in Logistics that have been filled since Mr. Manlove’s demotion and transfer, he was unaware that these positions were open or available. They were not posted to the internal system, and Human Resources never informed him of the openings, despite their assurance that they would help him find a new position. 56. In late January 2018, Mr. Manlove submitted his application for an open Product Specialist position within the Engineering and Planning Department. When Mr. Manlove submitted the application, the Human Resources representative overseeing the open position told him that he was an excellent candidate, had all of the requisite skills, and should expect an interview very soon. Two months later, he reached out an update and was told again that he was a great candidate, and that Human Resources was only waiting on the Manager of the Department to set up interviews. 57. Two weeks later, in sharp contrast to the enthusiastic response he had initially received, Mr. Manlove was told that management had decided to go in a “different direction.” He was never even brought in for an interview. On information and belief, Mr. Manlove was not allowed to interview for this position because of his age. 58. During the time that Mr. Manlove believed he was being considered for the open Product Specialist position, he was offered a competitive position with another automobile manufacturer. In reliance on the representation that he was a great candidate for the open position and would be interviewed very soon, and reliance on the false representation that Human Resources would assist him in finding another grade 9 position within the Company, Mr. Manlove ultimately declined this offer, to his detriment. 3. Volkswagen Restricts Mr. Manlove From Obtaining Any Other Position in the Company 59. As part of Volkswagen’s performance evaluation, or MBO, process, Managers go over goals, performance, and recommendations with their direct reports before submitting the filled-out performance evaluation to Human Resources. One item on the MBO asks Managers to identify the employee’s potential for promotion. Managers are asked to designate the employee as “vertical,” meaning able for advancement in position, “horizontal,” meaning able for lateral transfer to other departments, or “remain in position,” meaning employee is not eligible to move or apply for any other position in the Company for one year. Human Resources reviews each employee’s MBO as-submitted by the employee’s Manager, then enters a “finalized” MBO into the Company’s personnel system. This is the standard procedure for all salaried employees. 60. In March of 2018, Mr. Manlove met with his Manager to discuss his MBO. Both agreed that Mr. Manlove had met or exceeded all of his 2017 goals. Considering his years of experience as an Assistant Manager and positive 2017 review, his Manager designated Mr. Manlove “vertical” advancement status. Human Resources management entered Mr. Manlove’s MBO information into the Human Resources system, and changed his designation to “remain in position.” Mr. Manlove’s Manager reached out to Human Resources and pushed back against this change in his advancement status. Human Resources simply responded that the change in his status would stay, and Mr. Manlove would be designated “remain in position,” and unable to apply for any other positions in the Company, for the next year. 61. In April 2018, Mr. Manlove received his finalized MBO from Human Resources. All aspects of the finalized MBO matched the one he had discussed with his Manager, except for his advancement status, which was changed from “vertical” to “remain in position.” 62. Shortly after he received his MBO, Mr. Manlove informed Volkswagen that he had retained counsel for claims of age discrimination. Two weeks later, a Human Resources representative emailed Mr. Manlove to explain that his advancement status had been entered in error. However, this explanation is inconsistent with his Manager’s previous conversation with Human Resources regarding Mr. Manlove’s advancement status. If Mr. Manlove’s advancement status had been made in error, his status would have been changed after Human Resources was informed of the inconsistency. Further, Human Resources claimed to change his one-year advancement status to vertical, but assigned him a three-year advancement status of “remain in position,” meaning Mr. Manlove is still ineligible for a vertical promotion. And, even if Mr. Manlove’s advancement status changes in the Volkswagen system, this means nothing if Mr. Manlove is prevented from interviewing for any open positions. 63. Although Volkswagen initially promised to assist Mr. Manlove in finding a new Assistant Manager position, the Company is purposefully setting barriers to prevent him from doing so. Despite being told he was demoted and transferred in recognition of his excellent work, and was only “on loan” as a Supervisor in Assembly, Volkswagen has guaranteed that his demotion, and impending cut in pay and benefits, is permanent. 64. The culmination of adverse actions by Volkswagen AG against Mr. Manlove, and the dramatic shift in demographics following Volkswagen’s announced Pact for the Future, suggests that Volkswagen has implemented a targeted policy of discrimination against employees aged fifty and over, one that presents a continuing threat of adverse action and corresponding harm to Volkswagen’s U.S. employees. COLLECTIVE ALLEGATIONS 65. Plaintiff incorporates by reference all preceding paragraphs of the Complaint. 66. Plaintiff brings collective claims under the ADEA pursuant to Section 16(b) of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 216(b), on behalf of all Volkswagen employees in the United States age fifty (50) and over who have been subjected to adverse employment action as a result of Volkswagen’s Company-wide policy of age-discrimination, who opt into this ADEA action by filing a Consent to Join with the Court (“ADEA Collective”). 67. Plaintiff brings collective claims under the Tennessee Human Rights Act (“THRA”) T.C.A § 4-21-101, et seq, on behalf of all Volkswagen employees in Tennessee age fifty (50) and over who have been subjected to adverse employment action as a result of Volkswagen’s Company-wide policy of age-discrimination. (“THRA Collective”) 68. Plaintiff and members of the collective action are similarly situated with respect to their claims that Volkswagen transferred, demoted, or otherwise pressured them into leaving their employment with Volkswagen. 69. There is a common nexus of fact and law suggesting that Plaintiff and members of the collective action were discriminated against in the same manner. Questions at issue in the case include: (a) Whether Volkswagen unlawfully demoted and/or transferred older employees, thus reducing or threatening to reduce their compensation and other employment benefits; (b) Whether Volkswagen unlawfully denied older employees opportunities for promotion, thus affecting their compensation and other employment benefits; (c) Whether Volkswagen unlawfully coerced or attempted to coerce older employees into leaving the company, (d) Whether Volkswagen’s resulting disparate treatment of older employees when compared to similarly situated younger employees was willful within the meaning of the ADEA. 70. Counts for violations of the ADEA may be brought and maintained as an “opt-in” collective action pursuant to 29 U.S.C. § 216(b), for all claims asserted by the ADEA Collective Action Plaintiffs who opt-in to this action because the claims of the Plaintiff are similar to the claims of the EPA Collective Action Class. 71. Mr. Manlove, and the ADEA Collective Action Plaintiffs (a) are similarly situated and (b) are subject to Defendant’s common policy and practice of age discrimination in coercing older employees to leave their positions and denying them fair opportunity for work, compensation, and promotion when compared to similarly situated younger employees. ARBITRATION AGREEMENT 72. On May 25, 2018, shortly after Mr. Manlove retained legal counsel for his claims of age discrimination, Volkswagen in-house counsel represented that Mr. Manlove had an arbitration agreement with the Company. 73. Section 5 of the arbitration agreement states: Injunctive Relief. Nothing in this Agreement shall be interpreted to prevent or restrict either party from seeking provisional injunctive relief, where appropriate, in a court of competent jurisdiction. Injunctive relief includes, but is not limited to, temporary and/or permanent injunctions or retraining orders. 74. Plaintiff seeks only injunctive relief from the Court, including temporary and permanent injunctions, on behalf of himself and other similarly situated in this action. CAUSES OF ACTION COUNT ONE Age Discrimination in Violation of the ADEA, 29 U.S.C.S. §§ 621, et seq. (On Behalf of Plaintiff Jonathan Manlove and the ADEA Collective) 75. Plaintiff realleges and incorporates by reference the allegations in all preceding paragraphs. 76. It is unlawful for any employer to “discriminate against an individual with respect to his compensation, terms, conditions, or privileges of employment because of such individual’s age.” ADEA, 29 USC §§ 623(a)(1). 77. It is also unlawful for an employer to “limit, segregate or classify his employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect the status of an employee, because of such individual’s age.” ADEA, 29 USC §§ 623(a)(2). 78. Plaintiff is a member of a protected class as an employee older than forty years of age, and at all relevant times was, and is, an employee of Volkswagen. 79. The adverse employment actions alleged include, inter alia, Plaintiff’s job elimination, demotion, department transfer, and inability to apply for new positions, constitute discriminatory practices by the Company against Mr. Manlove based on his age. 80. Volkswagen discriminated against Plaintiff with respect to the compensation, terms, conditions, and privileges of his employment. Further, these adverse employment actions were designed to limit, segregate, or classify Plaintiff in such a way that he was deprived of individual employment opportunities and his status as an employee was adversely affected. 81. Volkswagen’s adverse employment actions against Plaintiff, and adverse employment actions against members of the ADEA Collective, were undertaken in direct violation of the ADEA, 29 U.S.C.S. §§ 621, et seq. 82. Age is not a bona fide occupational qualification reasonably necessary to the normal operation of Volkswagen. 83. As a result of Volkswagen’s Company-wide policy of discrimination, and individual discriminatory practices, Plaintiff has suffered, and will continue to suffer, irreparable injury, including, but not limited to: a demotion in title that irreparably harms his ability to gain employment commensurate with his experience, skills, and training; an impending reduction in salary that will irreparably injure his ability to gain employment elsewhere commensurate with his experience, skills, and training; the prevention of Plaintiff’s ability to apply for or receive any promotion in title at Volkswagen for the next three years; mental distress; humiliation and embarrassment; emotional pain and suffering; inconvenience; mental anguish; loss of enjoyment of life, and other nonpecuniary losses which monetary damages at a later time cannot adequately compensate. On information and belief, members of the ADEA Collective have or will suffer similar irreparable injury as a result of Volkswagen’s common policy of discrimination. 84. Plaintiff is entitled to injunctive relief maintaining the status quo of the terms of his employment through enjoining Volkswagen from any further act of discrimination against him, injunctive relief returning him to the original terms and conditions of his employment prior to Defendants’ unlawful discrimination; and injunctive collective relief preventing and correcting discrimination by Defendants against other similarly situated employees; and any other such relief as the Court should deem proper. COUNT TWO Age Discrimination in Violation of the THRA, T.C.A. §§ 4-21-101, et seq. (On Behalf of Jonathan Manlove and the THRA Collective) 85. Plaintiff realleges and incorporates by reference the allegations in the preceding paragraphs. 86. It is unlawful for any employer to “discriminate against an individual with respect to compensation, terms, conditions or privileges of employment because of such individual’s . . . age.” TCA § 4-21-401(a)(1). 87. It is also unlawful for an employer to “[l]imit, segregate or classify an employee . . . in any way that would deprive or tend to deprive an individual of employment opportunities or otherwise adversely affect the status of an employee, because of . . . age.” TCA § 4-21-401(a)(2). 88. Plaintiff is a member of a protected class as an employee older than forty years of age, and at all relevant times was, and is, an employee of Volkswagen. 89. The adverse employment actions alleged include, inter alia, Plaintiff’s job elimination, demotion, department transfer, inability to apply for new positions, constitute discriminatory practices by the Company against Mr. Manlove based on his age. 90. Volkswagen discriminated against Plaintiff with respect to the compensation, terms, conditions, and privileges of his employment. Further, these adverse employment actions were designed to limit, segregate, or classify Plaintiff in such a way that he was deprived of individual employment opportunities and his status as an employee was adversely affected. 91. Volkswagen’s adverse employment actions against Plaintiff were undertaken in direct violation of the THRA, T.C.A. § 4-21-401. 92. Age is not a bona fide occupational qualification reasonably necessary to the normal operation of Volkswagen. 93. As a result of Volkswagen’s Company-wide policy of discrimination, and individual discriminatory practices, Plaintiff has suffered, and will continue to suffer, irreparable injury, including, but not limited to: a demotion in title that irreparably harms his ability to gain employment commensurate with his experience, skills, and training; an impending reduction in salary that will irreparably injure his ability to gain employment elsewhere commensurate with his experience, skills, and training; the prevention of Plaintiff’s ability to apply for or receive any promotion in title at Volkswagen for the next three years; mental distress; humiliation and embarrassment; emotional pain and suffering; inconvenience; mental anguish; loss of enjoyment of life, and other nonpecuniary losses which monetary damages at a later time cannot adequately compensate. On information and belief, members of the THRA Collective have or will suffer similar irreparable injury as a result of Volkswagen’s common policy of discrimination. 94. Plaintiff is entitled to injunctive relief maintaining the status quo of the terms of his employment through enjoining Volkswagen from any further act of discrimination against him, injunctive relief returning him to the original terms and conditions of his employment prior to Defendants’ unlawful discrimination; and injunctive collective relief preventing and correcting discrimination by Defendants against other similarly situated employees; and any other such relief as the Court should deem proper. PRAYER FOR RELIEF WHEREFORE, Plaintiff respectfully requests the following relief: A. Preliminary and permanent injunction against Volkswagen and its officers, agents, and managers from continued unlawful discrimination against Plaintiff Manlove and similarly situated employees in violation of the ADEA and THRA; B. Preliminary and permanent injunction ordering the reinstatement of Mr. Manlove to a grade-9 Assistant Manager position within the Company; C. Preliminary and permanent injunction restoring Mr. Manlove’s advancement status to “vertical” in all categories; D. Preliminary and permanent injunction against any further unlawful demotion or transfer of Volkswagen’s United States employees age fifty (50) and over; E. Conditional certification of an opt-in collective for all United States employees of Volkswagen age fifty (50) and older who have suffered adverse employment action from Volkswagen’s common policy of age discrimination; and F. Such other and further relief as the Court may deem just and proper. JURY TRIAL DEMAND Pursuant to Rule 38(b) of the Federal Rules of Civil Procedure, Plaintiff demands a trial by jury on all triable questions of fact raised in this Amended Complaint. Dated: June 29, 2018 Respectfully submitted, Kevin Sharp (TNBPR #: 016287) Leigh Anne St. Charles (pro hac vice forthcoming) SANFORD HEISLER SHARP, LLP 611 Commerce Street, Suite 3100 Nashville, TN 37203 T: (615) 434-7000 F: (615) 434-7020 [email protected] [email protected] David Sanford (pro hac vice forthcoming) Andrew Melzer (pro hac vice forthcoming) SANFORD HEISLER SHARP, LLP 1350 Avenue of the Americas, 31st Floor New York, New York 10019 (646) 402-5655 [email protected] [email protected] Attorneys for Plaintiff

discrimination

ROokEocBD5gMZwczib5f

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS KEVIN BALTIMORE, on behalf of themselves and others similarly situated, Plaintiff, v. JCJB MARKETING INC. Defendant. CIVIL ACTION FILE NO. COMPLAINT – CLASS ACTION JURY TRIAL DEMANDED : : : : : : : : : : : / Plaintiff Kevin Baltimore (hereinafter referred to as “Plaintiff”), individually and on behalf of all others similarly situated, alleges on personal knowledge, investigation of his counsel, and on information and belief, as follows: NATURE OF ACTION 1. As the Supreme Court recently explained, “Americans passionately disagree about many things. But they are largely united in their disdain for robocalls. The Federal Government receives a staggering number of complaints about robocalls—3.7 million complaints in 2019 alone. The States likewise field a constant barrage of complaints. For nearly 30 years, the people’s representatives in Congress have been fighting back. As relevant here, the Telephone Consumer Protection Act of 1991, known as the TCPA, generally prohibits robocalls to cell phones and home phones.” Barr v. Am. Ass'n of Political Consultants, No. 19-631, 2020 U.S. LEXIS 3544, at *5 (July 6, 2020). 2. This case involves a campaign by JCJB Marketing Inc (“JCJB Marketing”) to market vehicle warranty services through the use of pre-recorded telemarketing calls in violation of the TCPA. 3. Because these calls were transmitted using technology capable of generating thousands of similar calls per day, he sues on behalf of a proposed nationwide class of other persons who received similar calls. 4. A class action is the best means of obtaining redress for the Defendant’s illegal telemarketing and is consistent both with the private right of action afforded by the TCPA and the fairness and efficiency goals of Rule 23 of the Federal Rules of Civil Procedure. PARTIES 5. Plaintiff Kevin Baltimore is an individual. 6. Defendant JCJB Marketing Inc. is a California corporation with its principal place of business at 14210 Spectrum Cir., Irvine, CA 92618. JURISDICTION AND VENUE 7. This Court also has federal question jurisdiction pursuant to 28 U.S.C. § 1331 and 47 U.S.C. § 227 et seq. 8. This Court has personal specific jurisdiction over JCJB Marketing because it made telemarketing calls to the Plaintiff by directing their conduct into this District. 9. Venue is proper pursuant to 28 U.S.C. § 1391(b)(2) because as calls were made into this District and the Plaintiff received them while in this District. TCPA BACKGROUND Calls Made Using a Pre-Recorded Message 10. The TCPA regulates, among other things, the use of a pre-recorded message to make calls or send pre-recorded calls. See 47 U.S.C. § 227, et seq.; In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, Report and Order, 18 FCC Rcd. 14014, 14115 ¶ 165 (2003). 11. Specifically, the TCPA prohibits the use of a pre-recorded message to a wireless number in the absence of an emergency or the prior express written consent of the called party. See 47 U.S.C. § 227(b)(1)(A)(iii); 47 C.F.R. § 64.1200(a)(2); In the Matter of Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 27 F.C.C. Rcd. 1830, 1831 (F.C.C. 2012). 12. “[T]elemarketing means the initiation of a telephone call or message for the purpose of encouraging the purchase or rental of, or investment in, property, goods, or services, which is transmitted to any person.” 47 C.F.R. § 64.1200(f)(12). 13. “[P]rior express written consent means an agreement, in writing, bearing the signature of the person called that clearly authorizes the seller to deliver or cause to be delivered to the person called advertisements or telemarketing messages using an automatic telephone dialing system or an artificial or prerecorded voice, and the telephone number to which the signatory authorizes such advertisements or telemarketing messages to be delivered.” 47 C.F.R. § 64.1200(f)(8). FACTUAL ALLEGATIONS 14. Defendant JCJB Marketing is a “person” as the term is defined by 47 U.S.C. § 153(39). 15. At no point has the Plaintiff sought out or solicited information regarding Defendant’s services prior to receiving the pre-recorded calls at issue. Calls to Plaintiff Baltimore 16. Plaintiff Baltimore’s telephone number, 617-XXX-9290, is registered to a cellular telephone service. 17. Plaintiff Baltimore received a telephone call from (617) 545-7134 on November 16, 2020. 18. The Caller ID did not identify the company. 19. When Mr. Baltimore picked up the phone no one was on the other side of the conversation. 20. Instead, a pre-recorded message was played regarding warranty services. 21. The pre-recorded message did not identify the caller. 22. The Plaintiff engaged the telemarketer to learn their identity. 23. While the caller did not identify their company, they did promote CarGuard auto warranty services. 24. After contacting the parties identified in the call, they named the Defendant as sending the Plaintiff the call. 25. The call promoted CarGuard’s services. 26. The calls received by Plaintiff were sent for the purpose of encouraging the purchase or rental of, or investment in, property, goods, or services as it seeks to have him sign up for CarGuard’s services. This message therefore qualified as telemarketing. 47 C.F.R. § 64.1200(f)(12). CLASS ACTION ALLEGATIONS 27. Plaintiff incorporates by reference all other paragraphs of this Complaint as if fully stated herein. 28. Plaintiff brings this action on behalf of himself and the following Class (the “Class”) pursuant to Federal Rule of Civil Procedure 23: All persons in the United States who, (1) within four years prior to the commencement of this litigation until the class is certified, (2) received one or more calls on their cellular telephone (3) from or on behalf of the JCJB Marketing, (4) sent using the same, or substantially similar, pre-recorded message used to contact the Plaintiff. 29. The Plaintiff is a member of and will fairly and adequately represent and protect the interests of these Class as they do not have interests that conflict with any of the class members. 30. Excluded from the Class are counsel, the Defendant, and any entities in which the Defendant has a controlling interest, the Defendant’s agents and employees, any judge to whom this action is assigned, and any member of such judge’s staff and immediate family. 31. Plaintiff and all members of the Class have been harmed by the acts of the Defendant, including, but not limited to, the invasion of their privacy, annoyance, waste of time, and the intrusion on their cellular telephone that occupied it from receiving legitimate communications. 32. The Class as defined above are identifiable through dialer records, other phone records, and phone number databases. 33. Plaintiff does not know the exact number of members in the Class, but Plaintiff reasonably believes Class members number, at minimum, in the hundreds in each class based on the en masse nature of telemarketing. 34. The joinder of all Class members is impracticable due to the size and relatively modest value of each individual claim. 35. Additionally, the disposition of the claims in a class action will provide substantial benefit to the parties and the Court in avoiding a multiplicity of identical suits. 36. There are well defined, nearly identical, questions of law and fact affecting all parties. The questions of law and fact, referred to above, involving the class claims predominate over questions which may affect individual Class members. 37. There are numerous questions of law and fact common to Plaintiff and to the proposed Class, including but not limited to the following: (a) whether a pre-recorded message was used to send calls; (b) whether the telemarketing calls at issue were made to Plaintiff and members of the Class without first obtaining prior express written consent to make the calls; (c) whether Defendant’s conduct constitutes a violation of the TCPA; and (d) whether members of the Class are entitled to treble damages based on the willfulness of Defendant’s conduct. 38. Plaintiff has retained counsel with substantial experience in prosecuting complex litigation and class actions, and especially TCPA class actions. Plaintiff and their counsel are committed to vigorously prosecuting this action on behalf of the other members of the Class and have the financial resources to do so. 39. Common questions of law and fact predominate over questions affecting only individual class members, and a class action is the superior method for fair and efficient adjudication of the controversy. The only individual question concerns identification of class members, which will be ascertainable from records maintained by Defendant and/or their agents. 40. The likelihood that individual members of the Class will prosecute separate actions is remote due to the time and expense necessary to prosecute an individual case. FIRST CAUSE OF ACTION Statutory Violations of the Telephone Consumer Protection Act (47 U.S.C. 227, et seq.) on behalf of the Robocall Classes 41. Plaintiff incorporates by reference the foregoing allegations as if fully set forth 42. The Defendant violated the TCPA by sending, or causing to be sent via an agent, pre-recorded calls to the cellular telephones of Plaintiff and members of the Class without their prior express written consent. 43. As a result of Defendant’s violations of 47 U.S.C. § 227 et seq., Plaintiff and Class members are entitled to an award of $500 in statutory damages for each and every violation of the statute, pursuant to 47 U.S.C. § 227(b)(3)(B). 44. The Plaintiff and Robocall Class Members are entitled to an award of treble damages if their actions are found to have been knowing or willful. 45. Plaintiff and Robocall Class members are also entitled to and do seek injunctive relief prohibiting the Defendant from using a pre-recorded voice in the future, except for emergency purposes. PRAYER FOR RELIEF WHEREFORE, Plaintiff, individually and on behalf of the Classes, prays for the following relief: A. Injunctive relief prohibiting Defendant from calling any cellular telephone numbers using a prerecorded voice in the future; B. As a result of Defendant’s violations of 47 U.S.C. § 227(b)(1), Plaintiff seeks for himself and each Class member up to treble damages, as provided by statute, of $1,500 for each and every violation of the TCPA; C. An order certifying this action to be a proper class action pursuant to Federal Rule of Civil Procedure 23, establishing an appropriate Classes the Court deems appropriate, finding that Plaintiff is a proper representative of the Class, and appointing the lawyers and law firms representing Plaintiff as counsel for the Class; D. Such other relief as the Court deems just and proper. JURY DEMAND Plaintiff requests a jury trial as to all claims of the complaint so triable. PLAINTIFF, By his attorneys /s/ Anthony I. Paronich Anthony I. Paronich Paronich Law, P.C. 350 Lincoln Street, Suite 2400 Hingham, MA 02043 (508) 221-1510 [email protected] Alex M. Washkowitz Jeremy Cohen CW Law Group, P.C. 188 Oaks Road Framingham, MA 01701 [email protected]

privacy

mAaMFYcBD5gMZwczzyOT

Civil Case Number: 14-4916 Plaintiffs, CIVIL ACTION CLASS ACTION COMPLAINT -against- AND DEMAND FOR JURY TRIAL Defendants. Plaintiff MORRIS BEYDA (hereinafter, "Plaintiff"), a New York resident, brings this JURISDICTION AND VENUE 1. The Court has jurisdiction over this class action under 28 U.S.C. § 1331, 15 U.S.C. § 1692 et seq. and 28 U.S.C. § 2201. If applicable, the Court also has pendent jurisdiction over the state law claims in this action pursuant to 28 U.S.C. § 1367(a). 2. Venue is proper in this judicial district pursuant to 28 U.S.C. § 1391(b)(2). NATURE OF THE ACTION 3. Plaintiff brings this class action on behalf of a class of New York consumers seeking redress for Defendant's actions of using an unfair and unconscionable means to collect a debt. 4. Defendant's actions violated § 1692 et seq. of Title 15 of the United States Code, commonly referred to as the Fair Debt Collections Practices Act ("FDCPA") which prohibits debt collectors from engaging in abusive, deceptive and unfair practices. PARTIES as defined by 15 U.S.C. 1692(a)(3). Turnpike, Suite 200, Ramsey, New Jersey 07746. facsimile and regularly engages in business the principal purpose of which is to attempt to collect debts alleged to be due another. 10. Defendant is a "debt collector," as defined under the FDCPA under 15 U.S.C. § 1692a(6). 11. John Does 1-25, are fictitious names of individuals and businesses alleged for the purpose of substituting names of Defendants whose identities will be disclosed in discovery and should be made parties to this action. CLASS ALLEGATIONS 12. Plaintiff brings claims, pursuant to the Federal Rules of Civil Procedure (hereinafter (the "Class"): American Express (US), that contain at least one of the alleged violations arising from Defendant's violation of 15 U.S.C. $1692 et seq.. The Class period begins one year to the filing of this Action. action: Upon information and belief, the Class is SO numerous that joinder of all members is impracticable because there are hundreds and/or thousands of persons who have received debt collection letters and/or notices from the Defendant that violate specific provisions of the FDCPA. Plaintiff is complaining of a standard form letter and/or notice that is sent to hundreds of persons (See Exhibit A, except that the undersigned attorney has, in accordance with Fed. R. Civ. P. 5.2 partially redacted the financial account numbers in an effort to protect Plaintiff's privacy); There are questions of law and fact which are common to the Class and which predominate over questions affecting any individual Class member. These common questions of law and fact include, without limitation: a. Whether Defendant violated various provisions of the FDCPA; b. Whether Plaintiff and the Class have been injured by Defendant's conduct; C. Whether Plaintiff and the Class have sustained damages and are be applied in determining such damages and restitution; and d. Whether Plaintiff and the Class are entitled to declaratory and/or injunctive relief. Plaintiff's claims are typical of the Class, which all arise from the same operative facts and are based on the same legal theories. Plaintiff has no interest adverse or antagonistic to the interest of the other members of the Class. Plaintiff will fairly and adequately protect the interest of the Class and has retained experienced and competent attorneys to represent the Class. A Class Action is superior to other methods for the fair and efficient adjudication of the claims herein asserted. Plaintiff anticipates that no unusual difficulties are likely to be encountered in the management of this class action. A Class Action will permit large numbers of similarly situated persons to prosecute their common claims in a single forum simultaneously and without the duplication of effort and expense that numerous individual actions would engender. Class treatment will also permit the adjudication of relatively small claims by many Class members who could not otherwise afford to seek legal redress for the wrongs complained of herein. Absent a Class Action, class members will continue to suffer losses of statutory protected rights as well as monetary damages. If Defendant's conduct is allowed proceed to without remedy they will continue to reap and retain the proceeds of their ill-gotten gains.Defendant has acted on grounds generally applicable to the entire Class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the Class as a whole. ALLEGATIONS OF FACT numbered "1" through "13" herein with the same force and effect as if the same were set forth at length herein. Express (US). 16. The American Express (US) obligation arose out of a transaction in which money, property, insurance or services, which are the subject of the transaction, are primarily for personal, family or household purposes. 17. The alleged American Express (US) obligation is a "debt" as defined by 15 U.S.C.§ 1692a(5). 18. American Express (US) is a "creditor" as defined by 15 U.S.C.§ 1692a(4). 19. Defendant contends that the American Express (US) debt is past due. 20. Defendant collects and attempts to collect debts incurred or alleged to have been incurred for personal, family or household purposes on behalf of creditors using the United States Postal Services, telephone and Internet. 21. American Express (US) directly or through an intermediary contracted Defendant to collect the American Express (US) debt. collection letter in an attempt to collect the alleged American Express (US) debt. See Exhibit A. as a "debt collector" as defined by 15 U.S.C. $1692a(6). "Your account balance may be periodically increased due to the addition of accrued interest or other charges as provided in your agreement with the original creditor or as otherwise provided by state law." 26. Upon information and belief, no interest or other charges will be added to the balance already shown on the balance due. 27. Defendant's actions as described herein are part of a pattern and practice used to collect consumer debts. 28. Defendant could have taken the steps necessary to bring its actions within compliance with the FDCPA, but neglected to do SO and failed to adequately review its actions to ensure compliance with the law. year of the date of this Complaint. CONSTRUCTION OF APPLICABLE LAW 103 F.3d 1232 (5th Cir. 1997). "Because the Act imposes strict liability, a consumer need not show intentional conduct by the debt collector to be entitled to damages." Russell V. Equifax A.R... 74 F. 3D 30 (2d Cir. 1996). the debtor. Clark V. Capital Credit & Collection Services, Inc.. 460 F. 3d 1162 (9th Cir. 2006). standard. Jeter V. Credit Bureau, Inc.. 760 F.2d 1168 (11 Cir. 1985). The purpose of the least sophisticated consumer standard is to ensure that the FDCPA protects all consumers, the gullible as well as the shrewd. COUNT I VIOLATIONS OF THE FAIR DEBT COLLECTION PRACTICES ACT 15 U.S.C. $1692e et seq. 33. Plaintiff repeats, reiterates and incorporates the allegations contained in paragraphs numbered "1" through "34" herein with the same force and effect as if the same were set forth at length herein. violated various provisions of the FDCPA, including but not limited to 15 U.S.C. § 1692e. 35. Pursuant to 15 U.S.C. $1692e, a debt collector is prohibited from using false, deceptive, or misleading representation in connection with the collection of a debt. 36. The Defendant violated 1692e by falsely suggesting that immediate payment of their balance would benefit them financially by stating that the amount may change due to interest or other charges that may be added after the date of the letter. As the amount Defendant seeks to collect never varies from the date of issuance, and Defendant never makes an adjustment after it receives payment in the amount of the initial letter, the statement in its letter is false, deceptive and misleading. violated Section 1692e et seq. of the FDCPA, actual damages, statutory damages, costs and attorneys' fees. COUNT II VIOLATIONS OF THE FAIR DEBT COLLECTION PRACTICES ACT 15 U.S.C. $1692g et seq. numbered "1" through "38" herein with the same force and effect as if the same were set forth at length herein. (a) Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing - (1) The amount of the debt; (2) The name of the creditor to whom the debt is owed; the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt-collector; (4) A statement that the consumer notifies the debt collector in writing within thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and (5) A statement that, upon the consumer's written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor. debt by stating that the outstanding balance may increase. Therefore, leaving the least sophisticated consumer to reasonably conclude that he must pay the balance stated in the letter immediately or possibly owe a larger amount, causing the consumer to be uncertain of his rights. violated Section 1692g et seq. of the FDCPA, actual damages, statutory damages, costs and attorneys' fees. PRAYER FOR RELIEF WHEREFORE, Plaintiff demands judgment against Defendants as follows: (a) Declaring that this action is properly maintainable as a Class Action and (b) Awarding Plaintiff and the Class statutory damages; (c) Awarding Plaintiff and the Class actual damages; (d) Awarding Plaintiff costs of this Action, including reasonable attorneys' (e) Awarding pre-judgment interest and post-judgment interest; and (f) Awarding Plaintiff and the Class such other and further relief as this Court /s/ Ari Marcus Ari Marcus, Esq. MARCUS LAW, LLC 1500 Allaire Avenue, Suite 101 Ocean, New Jersey 07712 (732) 660-8169 telephone (732) 298-6256 facsimile Attorneys for Plaintiff DEMAND FOR TRIAL BY JURY Pursuant to Rule 38 of the Federal Rules of Civil Procedure, Plaintiff hereby requests a /s/ Ari Marcus Ari Marcus, Esq. CERTIFICATION PURSUANT TO LOCAL RULE 11.2 I, Ari H. Marcus, the undersigned attorney of record for Plaintiff, do hereby certify to my Dated: August 18, 2014 /s/ Ari Marcus Ari Marcus, Esq.

consumer fraud

5rocDIcBD5gMZwczNSO5

Plaintiffs, -against- GREGORY W. GRAY, JR.; GREGORY P. EDWARDS; ARCHIPEL CAPITAL LLC; BIM MANAGEMENT LP; CLASS ACTION BENNINGTON INVESTMENT MANAGEMENT, COMPLAINT INC.; NIXON PEABODY, LLP; JOHN KOEPPEL ESQ.; and against all in a representative and fiduciary Civil Case capacity for as acting GENERAL PARTNERS; and No.: 5:15-CV-538 CONTROL MEMBERS of BENNINGTON - (DNH/TWD) EVERLOOP LP,; ARCHIPEL CAPITAL-AGRIVIDA JURY TRIAL DEMANDED ARCHIPEL CAPITAL - LATE STAGE FUND LP; ARCHIPEL CAPITAL - LINEAGEN LP; ARCHIPEL CAPITAL - SOCIAL MEDIA FUND LP, (1, 2, 3 & 4) and against each said funds Individually as Limited each/any/or all of the above entities; and Jane Does and Defendants. SUMMARY OF ALLEGATIONS 1 2 3 JURISDICTION AND VENUE 45 DEFENDANTS 6 78 9 10 11Offering Purported Investment Dates Funds Amount Amount Raised Number of Were Raised Offered Investors Everloop, Inc. 4/2011 to $5.5 million, up $2,913,131.19 68 10/2012 to $10 million Agrivida. 7/2011 $7.5 million $385,000.00 13 ro Bloom Energy 3/2012 $5 million $3,160,566.25 32 to Twitter Inc. and "portfolio 6/2012 to $5.5 million $5,240,092.49 51 companies in the social 11/2013 media industry" Lineagen, Inc. 4/2012 to $7 million $1,888,876.91 28 J0/2012: 3/2014 to present Uber Technologies, Inc. and 6/2014 to $15 million $6,020,640.00 9 "a portfolio of companies, present with the majority of them being venture capital backed, late stage companies" 12 13 1415 16 1718 19 2021 22 23 2425 26 2728 29 1) DECESARE was in advanced stage meetings with officials at Major League Baseball and the National Football League, while also speaking to the owners and/or executives of several major teams in both leagues. 2) Prospective investors were told that deals with these organizations were imminent and would result in millions of new users as well as millions of dollars in revenue for EVERLOOP. 3) These resulting users and revenues were described as a catalyst for major companies like Facebook, Google, Yahoo, etc. who wish to acquire EVERLOOP for tens of millions of dollars, in order to 30 expand their user base into the pre-teen market while complying with strict federal privacy laws related to personal information of children on the Internet. 4) Prospective investors were told about the millions of dollars DECESARE had personally invested in EVERLOOP and were told to watch an upcoming episode of NBC's The Secret Millionaire, which featured DECESARE talking about her wealth and showed her doing good works in a California community. 3132 33 34THE FRAUDULENT EVERLOOP SETTLEMENT 35 36 3739 4041 SOCIAL MEDIA FUND, LP's PRE-IPO TWITTER SHARES FALL SHORT 42 4344 45 4647 48 49CLASS REPRESENTATIVE CLAIMS 50 51 52CLASS ACTION ALLEGATIONS a. All persons and entities who purchased securities sold by or through any of b. Excluded from the Class are: (1) all persons or entities whose claims against 53 c. Also excluded from the Class are Defendants, members of the immediate d. The Class satisfies the requirements of Rule 23(a) and Rule 23(b)(3) of the e. Numerosity. During the Class period, numerous different securities were f. Typicality. The losses to the Plaintiffs were caused by the same events and g. Common Questions. Among the questions of law and fact common to this 54 h. Adequate Representation. The represent Plaintiff will fairly and adequately i. Superiority. A Class action is superior to all other available methods for the FIRST CLAIM FOR RELIEF (RICO 18 U.S.C. § 1962) 5556 57 SECOND CLAIM FOR RELIEF (VIOLATIONS OF 18 U.S.C. § 1962(a) AND 1962(d) 58THIRD CLAIM FOR RELIEF (Violations of § 10(b) of the Exchange Act and of Rule 10(b)-5) 59 60 FOURTH CLAIM FOR RELIEF (Violations of § 12 of the Securities Act) 61 FIFTH CLAIM FOR RELIEF (Fraud) 6263 SIXTH CLAIM FOR RELIEF (Negligent Misrepresentation) 64 SEVENTH CLAIM FOR RELIEF (Breach of Fiduciary Duty) a. The duty to act with reasonable care to ascertain that the information set forth in the written materials, including the PPMs and other presentations communicated to and relied upon by the Plaintiffs and the Class in deciding to purchase the investments were accurate and did not contain misleading statements or omissions of material facts. b. The duty to allow individual representatives selling the investments to act with reasonable care to ascertain that the investment opportunity presented to the plaintiffs and the Class was suitable and in accordance with their investments goals and intentions by providing such representatives truthful information concerning such investments. C. The duty to deal fairly and honestly with the plaintiffs and the Class. d. The duty to avoid placing itself, himself or themselves in situations involving a conflict of interest with Plaintiffs and members of the Class. 65e. The duty to manage the accounts of the Plaintiffs and the members of the Class and to manage and operate the investments and investment interest exclusively for the best interest of the Plaintiffs and the members of the Class. f. The duty to make recommendations and execute transactions in accordance with the goals, investment objectives, permissible degree of risk, and instructions to the Plaintiffs and members of the Class, and in the manner and method upon which the Defendants indicated that they would make such executions of transactions. a. Failing to act with reasonable care to ensure that the information set forth in the written materials and other presentations communicated to and relied upon by the Plaintiffs and other members of the Class in deciding to purchase the investments was accurate and did not contain misleading statements or omissions of material facts. b. Failing to act with reasonable care to provide truthful sales information to representative agents to ensure that the investment opportunity presented to plaintiffs and the Class was suitable and in accordance with their investment goals and intentions. c. Engaging in transactions which resulted in a conflict of interest between the Defendants and the Plaintiffs and the Class whose financial interest in the 66 Defendants, the Defendants had undertaken to advance, supervise, manage and protect. d. Failing to adequately and fully disclose to the plaintiffs and the Class the full context and nature of the conflicts of interest in which the Defendants and their affiliates would be engaging. e. Profiting and allowing Defendants and their affiliates to profit at the expense of the plaintiffs and the Class. f. Engaging in transactions that were designed to and did result in profit to the Defendants and their affiliates at the expense of Plaintiffs and the Class. 67 EIGHTH CLAIM FOR RELIEF (Violations of General Business Law § 349) NINTH CLAIM FOR RELIEF (Violations of General Business Law § 350) 68 TENTH CLAIM FOR RELIEF (Conversation) 69ELEVENTH CLAIM FOR RELIEF (Unjust Enrichment) TWELFTH CLAIM FOR RELIEF (New York Debtor and Creditor Law § 273) 70 THIRTEENTH CLAIM FOR RELIEF (New York State Debtor and Creditor Law § 274) FOURTEENTH CLAIM FOR RELIEF (New York State Debtor and Creditor Law § 275) FIFTEENTH CLAIM FOR RELIEF (New York State Debtor and Creditor Law § 276) 71 WHEREFORE, Plaintiffs, on behalf of themselves and all others similarly situated, 1. An order certifying the proposed class of investors, together with any 2. Compensatory damages in amount estimated to exceed the sum of 3. Consequential damages in an amount to be determined at trial; 4. Treble damages for the Defendants civil RICO violations of 18 U.S.C. 5. General damages for all injuries resulting from the negligence, fraud, 6. Disgorgement and restitution of all earnings, profits, compensation, and 7. Costs and disbursements of this action; 72 8. Reasonable attorney's fees incurred in the prosecution of this action and 9. Punitive damages for the willful, wanton, and reckless disregard of the rights 10. Such other and further relief as to the court may seem just and proper. DATED: April 29, 2015. Syracuse, New York CHERUNDOLO LAW FIRM, PLL By: John C. Cherundolo, Esq. Bar Roll No.: 101339 Attorneys for the Plaintiff Office and P.O. Address AXA Tower I, 17th Floor 100 Madison Street Syracuse, New York 13202 (315) 449-9500 73

securities

LPokFIcBD5gMZwczgdRd

No. _______________ JURY TRIAL DEMANDED IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS BEAUMONT DIVISION LARRY JAMES JACKSON, Individually and On Behalf of All Others Similarly Situated, Plaintiff, v. EVERGREEN ENVIRONMENTAL SERVICES, L.L.C. d/b/a EVERGREEN INDUSTRIAL CLEANING SERVICES d/b/a EVERGREEN INDUSTRIAL SERVICES, Defendant. § § § § § § § § § § § § § § §  PLAINTIFF’S ORIGINAL COMPLAINT TO THE HONORABLE JUDGE OF SAID COURT: COMES NOW Plaintiff Larry James Jackson (referred to as “Plaintiff” or “Jackson”) bringing this collective action and lawsuit on behalf of himself and all other similarly situated employees to recover unpaid regular and overtime wages from Defendant Evergreen Environmental Services, L.L.C. d/b/a Evergreen Industrial Cleaning Services d/b/a Evergreen Industrial Services (referred to as “Defendant” or “Evergreen”). In support thereof, he would respectfully show the Court as follows: I. Nature of Suit 1. Jackson’s claims arise under the Fair Labor Standards Act of 1938, 29 U.S.C. §§ 201-219 (“FLSA”). 2. The FLSA was enacted to eliminate “labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency and general well-being of workers … .” 29 U.S.C. § 202(a). To achieve its humanitarian goals, the FLSA defines appropriate pay deductions and sets overtime pay, minimum wage, and record keeping requirements for covered employers. 29 U.S.C. §§ 206(a), 207(a), 211(c). 3. Evergreen violated the FLSA by employing Jackson and other similarly situated nonexempt employees but refusing to pay them for all hours worked at the minimum wage. 29 U.S.C. § 206(a)(1). 4. Evergreen violated the FLSA by employing Jackson and other similarly situated nonexempt employees “for a workweek longer than forty hours [but refusing to compensate them] for [their] employment in excess of [forty] hours … at a rate not less than one and one-half times the regular rate at which [they are or were] employed.” 29 U.S.C. § 207(a)(1). 5. Evergreen violated the FLSA by failing to maintain accurate time and pay records for Jackson and other similarly situated nonexempt employees as required by 29 U.S.C. § 211(c) and 29 C.F.R. pt. 516. 6. Jackson brings this collective action under 29 U.S.C. § 216(b) on behalf of himself and all other similarly situated employees to recover unpaid regular and overtime wages. II. Jurisdiction & Venue 7. The Court has jurisdiction of this action pursuant to 28 U.S.C. § 1331 and 29 U.S.C. § 216(b) because it arises under the FLSA, a federal statute. 8. Venue is proper in this district and division pursuant to 28 U.S.C. § 1391(b)(1), (2) because Defendant resides in the Beaumont Division of the Eastern District of Texas and/or a substantial part of the events or omissions giving rise to Plaintiff’s claim occurred in the Beaumont Division of the Eastern District of Texas. III. Parties 9. Jackson is an individual who resides in Jefferson County, Texas and who was employed by Evergreen during the last three years. 10. Evergreen Environmental Services, L.L.C. is a Texas limited liability company that may be served with process by serving its registered agent, Christopher Gregg, at 702 Old Underwood Road, Building B, La Porte, Texas 77571. Alternatively, if the registered agent of Evergreen Environmental Services, L.L.C. cannot with reasonable diligence be found at the company’s registered office, Evergreen Environmental Services, L.L.C. may be served with process by serving the Texas Secretary of State pursuant to TEX. BUS. ORG. CODE § 5.251 and TEX. CIV. PRAC. & REM. CODE § 17.026. 11. Whenever it is alleged that Evergreen committed any act or omission, it is meant that the Evergreen’s officers, directors, vice-principals, agents, servants or employees committed such act or omission and that at the time such act or omission was committed, it was done with the full authorization, ratification or approval of Evergreen or was done in the routine and normal course and scope of employment of Evergreen’s officers, directors, vice-principals, agents, servants or employees. IV. Facts 12. Evergreen is an industrial cleaning services company that does business in the territorial jurisdiction of this Court and in other states, including Louisiana. 13. Evergreen employed Jackson as an operator and/or technician from approximately February 2011 until approximately April 2012. 14. During Jackson’s employment with Evergreen, he was engaged in commerce or in the production of goods for commerce. 15. During Jackson’s employment with Evergreen, the company was an enterprise engaged in commerce because it (1) had employees engaged in commerce or in the production of goods for commerce or had employees handling, selling or otherwise working on goods or materials that had been moved in or produced for commerce by others and (2) had an annual gross volume of sales made or business done of at least $500,000. 16. Evergreen paid Jackson on an hourly basis. 17. Evergreen required Jackson to report at a predetermined location each workday. 18. After reporting to the pre-determined location but prior to reporting to the jobsite, Jackson engaged in a variety of compensable activities, including (1) receiving instruction; (2) gathering personal protective equipment; (3) donning personal protective equipment; (4) conducting pre-trip vehicle inspections; (5) loading equipment, tools and supplies; (6) waiting for coworkers and/or supervisors; (7) attending meetings; (8) cleaning; and (9) performing other work as directed. 19. After leaving the jobsite but prior to being released by Evergreen, Jackson engaged in a variety of compensable activities, including (1) receiving instruction; (2) doffing personal protective equipment; (3) stowing personal protective equipment; (4) conducting post-trip vehicle inspections; (5) unloading equipment, tools and supplies; (6) attending meetings; (7) cleaning; (8) completing required paperwork; and (9) performing other work as directed. 20. Evergreen did not pay Jackson for the work he performed prior to arriving at the jobsite or after departing the jobsite, even though the work was compensable in violation of 29 U.S.C. § 206(a)(1). 21. During Jackson’s employment with Evergreen, he regularly worked in excess of forty hours per week. 22. Evergreen knew or reasonably should have known that Jackson worked in excess of forty hours per week. 23. Evergreen did not count the time that Jackson spent working prior to arriving at the jobsite or after departing the jobsite toward its obligation to pay Jackson overtime. 24. Consequently, Evergreen did not pay Jackson overtime as required by 29 U.S.C. § 207(a)(1) for the hours he worked in excess of forty per week. 25. Evergreen knew or reasonably should have known that Jackson was not exempt from the overtime provisions of the FLSA. 26. Evergreen failed to maintain accurate time and pay records for Jackson and other similarly situated nonexempt employees as required by 29 U.S.C. § 211(c) and 29 C.F.R. pt. 516. 27. Evergreen knew or showed a reckless disregard for whether its pay practices violated the FLSA. 28. Evergreen is liable to Jackson for his unpaid regular and overtime wages, liquidated damages and attorneys’ fees and costs pursuant to 29 U.S.C. § 216(b). 29. All technicians and operators employed by Evergreen are similarly situated to Jackson because they (1) have similar job duties; (2) are not paid for all hours worked at the minimum wage in violation of 29 U.S.C. § 206(a)(1); (3) regularly work in excess of forty hours per week; (4) are not paid overtime for the hours they worked in excess of forty per week as required by 29 U.S.C. § 207(a)(1) and (5) are entitled to recover their unpaid regular and overtime wages, liquidated damages and attorneys’ fees and costs from Evergreen pursuant to 29 U.S.C. § 216(b). V. Count One—Failure To Pay The Minimum Wage for All Hours Worked in Violation of 29 U.S.C. § 206(a) 30. Plaintiff adopts by reference all of the facts set forth above. See, FED. R. CIV. P. 10(c). 31. During Jackson’s employment with Evergreen, he was a nonexempt employee. 32. As a non-exempt employee, Evergreen was legally obligated to pay Jackson for all hours worked at the minimum wage. 29 U.S.C. § 206(a)(1). 33. Evergreen did not pay Jackson for the work he performed prior to arriving at the jobsite or after departing the jobsite, even though the work was compensable. 29 U.S.C. § 206(a)(1). 34. If Evergreen classified Jackson as exempt from the minimum wage requirements of the FLSA, he was misclassified because no exemption excuses the company’s noncompliance with the minimum wage requirements of the FLSA. 35. Evergreen knew or showed a reckless disregard for whether its pay practices violated the minimum wage requirements of the FLSA. In other words, Evergreen willfully violated the minimum wage requirements of the FLSA. V. Count Two—Failure To Pay Overtime in Violation of 29 U.S.C. § 207(a) 36. Plaintiff adopts by reference all of the facts set forth above. See, FED. R. CIV. P. 10(c). 37. During Jackson’s employment with Evergreen, he was a nonexempt employee. 38. As a nonexempt employee, Evergreen was legally obligated to pay Jackson “at a rate not less than one and one-half times the regular rate at which he [was] employed[]” for the hours that he worked over forty in a workweek. 29 U.S.C. § 207(a)(1). 39. Evergreen did not count the time that Jackson spent working prior to arriving at the jobsite or after departing the jobsite toward its obligation to pay Jackson overtime. 40. Consequently, Evergreen did not pay Jackson overtime as required by 29 U.S.C. § 207(a)(1) for the hours he worked in excess of forty per week at one and one- half times his regular rate. 41. If Evergreen classified Jackson as exempt from the overtime requirements of the FLSA, he was misclassified because no exemption excuses the company’s noncompliance with the overtime requirements of the FLSA. 42. Evergreen knew or showed a reckless disregard for whether its pay practices violated the overtime requirements of the FLSA. In other words, Evergreen willfully violated the overtime requirements of the FLSA. VI. Count Three—Failure To Maintain Accurate Records in Violation of 29 U.S.C. § 211(c) 43. Plaintiff adopts by reference all of the facts set forth above. See, FED. R. CIV. P. 10(c). 44. The FLSA requires employers to keep accurate records of hours worked by nonexempt employees. 29 U.S.C. § 211(c); 29 C.F.R. pt. 516. 45. In addition to the pay violations of the FLSA described above, Evergreen also failed to keep proper time records as required by the FLSA. VI. Count Four—Collective Action Allegations 46. Plaintiff adopts by reference all of the facts set forth above. See, FED. R. CIV. P. 10(c). 47. On information and belief, other employees have been victimized by Evergreen’s violations of the FLSA identified above. 48. These employees are similarly situated to Jackson because, during the relevant time period, they held similar positions, were compensated in a similar manner and were denied regular wages at the minimum wage for all hours worked and overtime wages at one and one-half times their regular rates for hours worked over forty in a workweek. 49. Evergreen’s policy or practice of failing to pay the minimum wage and overtime compensation is a generally applicable policy or practice and does not depend on the personal circumstances of the putative class members. 50. Since, on information and belief, Jackson’s experiences are typical of the experiences of the putative class members, collective action treatment is appropriate. 51. All employees of Evergreen, regardless of their rates of pay, who were not paid at the minimum wage for all hours worked or at a rate not less than one and one-half times the regular rates at which they were employed for the hours that they worked over forty in a workweek are similarly situated. Although the issue of damages may be individual in character, there is no detraction from the common nucleus of liability facts. The Class is therefore properly defined as: All operators and technicians employed by Evergreen during the last three years. 52. Evergreen is liable to Jackson and other operators and technicians for the difference between what it actually paid them and what it was legally obligated to pay 53. Because Evergreen knew and/or showed a reckless disregard for whether its pay practices violated the FLSA, the company owes Jackson and the other operators and technicians their unpaid regular and overtime wages for at least the last three years. 54. Evergreen is liable to Jackson and the other operators and technicians in an amount equal to their unpaid regular and overtime wages as liquidated damages. 55. Evergreen is liable to Jackson and the other operators and technicians for their reasonable attorneys’ fees and costs. 56. Jackson has retained counsel who is well versed in FLSA collective action litigation and who is prepared to litigate this matter vigorously on behalf of him and all other putative class members. VI. Jury Demand 57. Jackson demands a trial by jury. VI. Prayer 58. Jackson prays for the following relief: a. An order allowing this action to proceed as a collective action under 29 U.S.C § 216(b); b. Judgment awarding Jackson and other operators and technicians all unpaid regular and overtime compensation, liquidated damages, attorneys’ fees and costs; c. Prejudgment interest at the applicable rate; d. Postjudgment interest at the applicable rate; e. All such other and further relief to which Jackson and the other operators and technicians may show themselves to be justly entitled. Respectfully Submitted, MOORE & ASSOCIATES By: s/ Melissa Moore Melissa Moore State Bar No. 24013189 Curt Hesse State Bar No. 24065414 Lyric Center 440 Louisiana Street, Suite 675 Houston, Texas 77002 Telephone: (713) 222-6775 Facsimile: (713) 222-6739 ATTORNEYS FOR PLAINTIFF

employment & labor

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Case No. 18-cv-5363 SHAKED LAW GROUP, P.C. Dan Shaked (DS-3331) 44 Court Street, Suite 1217 Brooklyn, NY 11201 Tel. (917) 373-9128 E-mail: [email protected] Attorneys for Plaintiff and the Class UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK -----------------------------------------------------------X MARION KILER, Individually and as the representative of a class of similarly situated persons, Plaintiff, - against - BISSELL, INC. and BISSELL HOMECARE, INC., Defendants. -----------------------------------------------------------X COMPLAINT – CLASS ACTION INTRODUCTION 1. Plaintiff, Marion Kiler (“Plaintiff” or “Kiler”), brings this action on behalf of herself and all other persons similarly situated against Bissell, Inc. and Bissell Homecare, Inc. (hereinafter “Bissell” or “Defendant”), and states as follows: 2. Plaintiff is a visually-impaired and legally blind person who requires screen- reading software to read website content using his computer. Plaintiff uses the terms “blind” or “visually-impaired” to refer to all people with visual impairments who meet the legal definition of blindness in that they have a visual acuity with correction of less than or equal to 20 x 200. Some blind people who meet this definition have limited vision; others have no vision. 3. Based on a 2010 U.S. Census Bureau report, approximately 8.1 million people in the United States are visually impaired, including 2.0 million who are blind, and according to 1 the American Foundation for the Blind’s 2015 report, approximately 400,000 visually impaired persons live in the State of New York. 4. Plaintiff brings this civil rights action against Bissell for their failure to design, construct, maintain, and operate their website to be fully accessible to and independently usable by Plaintiff and other blind or visually-impaired persons. Defendant is denying blind and visually- impaired persons throughout the United States with equal access to the goods and services Bissell provides to their non-disabled customers through http//:www.Bissell.com (hereinafter “Bissell.com” or “the website”). Defendants’ denial of full and equal access to its website, and therefore denial of its products and services offered, and in conjunction with its physical locations, is a violation of Plaintiff’s rights under the Americans with Disabilities Act (the “ADA”). 5. Bissell.com provides to the public a wide array of the goods, services, price specials, employment opportunities and other programs offered by Bissell. Yet, Bissell.com contains thousands of access barriers that make it difficult if not impossible for blind and visually- impaired customers to use the website. In fact, the access barriers make it impossible for blind and visually-impaired users to even complete a transaction on the website. Thus, Bissell excludes the blind and visually-impaired from the full and equal participation in the growing Internet economy that is increasingly a fundamental part of the common marketplace and daily living. In the wave of technological advances in recent years, assistive computer technology is becoming an increasingly prominent part of everyday life, allowing blind and visually-impaired persons to fully and independently access a variety of services. 6. The blind have an even greater need than the sighted to shop and conduct transactions online due to the challenges faced in mobility. The lack of an accessible website means that blind people are excluded from experiencing transacting with defendant’s website and from purchasing goods or services from defendant’s website. 2 7. Despite readily available accessible technology, such as the technology in use at other heavily trafficked retail websites, which makes use of alternative text, accessible forms, descriptive links, resizable text and limits the usage of tables and JavaScript, Defendant has chosen to rely on an exclusively visual interface. Bissell’s sighted customers can independently browse, select, and buy online without the assistance of others. However, blind persons must rely on sighted companions to assist them in accessing and purchasing on Bissell.com. 8. By failing to make the website accessible to blind persons, Defendant is violating basic equal access requirements under both state and federal law. 9. Congress provided a clear and national mandate for the elimination of discrimination against individuals with disabilities when it enacted the ADA. Such discrimination includes barriers to full integration, independent living, and equal opportunity for persons with disabilities, including those barriers created by websites and other public accommodations that are inaccessible to blind and visually impaired persons. Similarly, New York state law requires places of public accommodation to ensure access to goods, services, and facilities by making reasonable accommodations for persons with disabilities. 10. Plaintiff browsed and intended to make an online purchase of a Pet Wet Dry Vacuum on Bissell.com. However, unless Defendant remedies the numerous access barriers on its website, Plaintiff and Class members will continue to be unable to independently navigate, browse, use, and complete a transaction on Bissell.com. 11. Because Defendant’s website, Bissell.com, is not equally accessible to blind and visually-impaired consumers, it violates the ADA. Plaintiff seeks a permanent injunction to cause a change in Bissell’s policies, practices, and procedures to that Defendant’s website will become and remain accessible to blind and visually-impaired consumers. This complaint also 3 seeks compensatory damages to compensate Class members for having been subjected to unlawful discrimination. JURISDICTION AND VENUE 12. This Court has subject matter jurisdiction over this action under 28 U.S.C. § 1331 and 42 U.S.C. § 12181, as Plaintiff’s claims arise under Title III of the ADA, 42 U.S.C. § 12181 et seq., and 28 U.S.C. § 1332, because this is a class action, as defined by 28 U.S.C. § 1332(d)(1)(B), in which a member of the putative class is a citizen of a different state than Defendant, and the amount in controversy exceeds the sum or value of $5,000,000, excluding interest and costs. See 28 U.S.C. § 133(d)(2). 13. This Court also has supplemental jurisdiction over pursuant to 28 U.S.C. § 1367, over Plaintiff’s pendent claims under the New York State Human Rights Law, N.Y. Exec. Law, Article 15 (Executive Law § 290 et seq.) and the New York City Human Rights Law, N.Y.C. Administrative Code § 8-101 et seq. (“City Law”). 14. Venue is proper in this District of New York pursuant to 28 U.S.C. §§ 1391(b)- (c) and 144(a) because Plaintiff resides in this District, Defendant conducts and continues to conduct a substantial and significant amount of business in this District, and a substantial portion of the conduct complained of herein occurred in this District. 15. Defendant is registered to do business in New York State and has been conducting business in New York State, including in this District. Defendant purposefully targets and otherwise solicits business from New York State residents through its website and sells its products through many retailers in this District. Because of this targeting, it is not unusual for Bissell to conduct business with New York State residents. Defendant also has been and is committing the acts alleged herein in this District and has been and is violating the rights of consumers in this District and has been and is causing injury to consumers in this District. A 4 substantial part of the act and omissions giving rise to Plaintiff’s claims have occurred in this District. Most courts support the placement of venue in the district in which Plaintiff tried and failed to access the Website. In Access Now, Inc. v. Otter Products, LLC 280 F.Supp.3d 287 (D. Mass. 2017), Judge Patti B. Saris ruled that “although the website may have been created and operated outside of the district, the attempts to access the website in Massachusetts are part of the sequence of events underlying the claim. Therefore, venue is proper in [the District of Massachusetts].” Otter Prods., 280 F.Supp.3d at 294. This satisfies Due Process because the harm – the barred access to the website – occurred here.” Otter Prods., 280 F.Supp.3d at 293. Additionally, in Access Now, Inc. v. Sportswear, Inc., No. 17-cv-11211-NMG, 2018 Dist. LEXIS 47318 (D. Mass. Mar. 22, 2018), Judge Nathaniel M. Gorton stated that the defendant “availed itself of the forum state’s economic activities by targeting the residents of the Commonwealth . . . . Such targeting evinces a voluntary attempt to appeal to the customer base in the forum.” Sportswear, No. 1:17-cv-11211-NMG, 2018 U.S. Dist. LEXIS 47318 at *11. Thus, establishing a customer base in a particular district is sufficient cause for venue placement. Specifically, Plaintiff attempted to purchase a Pet Wet Dry Vacuum on Defendant’s website, Bissell.com. PARTIES 16. Plaintiff, is and has been at all relevant times a resident of Kings County, State of New York. Plaintiff is the owner of a seeing eye dog named “socs.” 17. Plaintiff is legally blind and a member of a protected class under the ADA, 42 U.S.C. § 12102(l)-(2), the regulations implementing the ADA set forth at 28 CFR §§ 36.101 et seq., the New York State Human Rights Law and the New York City Human Rights Law. Plaintiff, Marion Kiler, cannot use a computer without the assistance of screen reader software. Plaintiff, Marion Kiler, has been denied the full enjoyment of the facilities, goods and services of Bissell.com as a result of accessibility barriers on Bissell.com. 5 18. Defendant, Bissell, Inc., is a Michigan Foreign Business Corporation doing business in this district with its principal place of business located at 2345 Walker Avenue NW, Grand Rapids, MI 49544. Defendant, Bissell Homecare, Inc., is a Michigan Foreign Business Corporation doing business in this district with its principal place of business located at 2345 Walker Avenue NW, Grand Rapids, MI 49544. 19. Bissell provides to the public a website known as Bissell.com which provides consumers with access to an array of goods and services, including, the ability to view the various lines of carpet cleaners, vacuum, sweepers, and other related products and accessories, make purchases, and learn about cleaning, among other features. Consumers across the United States and the world use Defendant’s website to purchase carpet cleaners, vacuum, sweepers, and other related products and accessories. Defendant’s website is a place of public accommodation within the definition of Title III of the ADA, 42 U.S.C. § 12181(7). See Victor Andrews v. Blick Art Materials, LLC, No. 17-cv-767, 2017 WL 3278898 (E.D.N.Y. August 1, 2017). The inaccessibility of Bissell.com has deterred Plaintiff from buying a Pet Wet Dry Vacuum. NATURE OF THE CASE 20. The Internet has become a significant source of information, a portal, and a tool for conducting business, doing everyday activities such as shopping, learning, banking, researching, as well as many other activities for sighted, blind and visually-impaired persons alike. 21. The blind access websites by using keyboards in conjunction with screen- reading software which vocalizes visual information on a computer screen. Except for a blind person whose residual vision is still sufficient to use magnification, screen access software provides the only method by which a blind person can independently access the Internet. Unless websites are designed to allow for use in this manner, blind persons are unable to fully access Internet websites and the information, products and services contained therein. 6 22. For screen-reading software to function, the information on a website must be capable of being rendered into text. If the website content is not capable of being rendered into text, the blind user is unable to access the same content available to sighted users. 23. Blind users of Windows operating system-enabled computers and devises have several screen-reading software programs available to them. Job Access With Speech, otherwise known as “JAWS” is currently the most popular, separately purchase and downloaded screen- reading software program available for blind computer users. 24. The international website standards organization, the World Wide Web Consortium, known throughout the world as W3C, has published version 2.1 of the Web Content Accessibility Guidelines (“WCAG 2.1”). WCAG 2.1 are well-established guidelines for making websites accessible to blind and visually-impaired persons. These guidelines are universally followed by most large business entities and government agencies to ensure their websites are accessible. Many Courts have also established WCAG 2.1 as the standard guideline for accessibility. The federal government has also promulgated website accessibility standards under Section 508 of the Rehabilitation Act. These guidelines are readily available via the Internet, so that a business designing a website can easily access them. These guidelines recommend several basic components for making websites accessible, including but not limited to: adding invisible alt-text to graphics, ensuring that all functions can be performed using a keyboard and not just a mouse, ensuring that image maps are accessible, and adding headings so that blind persons can easily navigate the site. Without these very basic components, a website will be inaccessible to a blind person using a screen reader. Websites need to be accessible to the “least sophisticated” user of screen-reading software and need to be able to work with all browsers. Websites need to be continually updated and maintained to ensure that they remain fully accessible. FACTUAL ALLEGATIONS 7 25. Defendants control and operate Bissell.com. in New York State and throughout the United States and the world. 26. Bissell.com is a commercial website that offers products and services for online sale. The online store allows the user to browse carpet cleaners, vacuum, sweepers, and other related products and accessories, make purchases, and perform a variety of other functions. 27. Among the features offered by Bissell.com are the following: (a) Consumers may use the website to connect with Bissell on social media, using such sites as Facebook, Twitter, Instagram, and Pinterest; (b) an online store, allowing customers to purchase carpet cleaners, vacuum, sweepers, and other related products and accessories; and (c) learning about career opportunities, promotions, community involvement, cleaning instructions, and about the company. 28. This case arises out of Bissell’s policy and practice of denying the blind access to the goods and services offered by Bissell.com. Due to Bissell’s failure and refusal to remove access barriers to Bissell.com, blind individuals have been and are being denied equal access to Bissell, as well as to the numerous goods, services and benefits offered to the public through Bissell.com. 29. Bissell denies the blind access to goods, services and information made available through Bissell.com by preventing them from freely navigating Bissell.com. 30. Bissell.com contains access barriers that prevent free and full use by Plaintiff and blind persons using keyboards and screen-reading software. These barriers are pervasive and include, but are not limited to: lack of alt-text on graphics, inaccessible drop-down menus, the lack of navigation links, the lack of adequate prompting and labeling, the denial of keyboard access, 8 empty links that contain no text, redundant links where adjacent links go to the same URL address, and the requirement that transactions be performed solely with a mouse. 31. Alternative text (“Alt-text”) is invisible code embedded beneath a graphical image on a website. Web accessibility requires that alt-text be coded with each picture so that a screen-reader can speak the alternative text while sighted users see the picture. Alt-text does not change the visual presentation except that it appears as a text pop-up when the mouse moves over the picture. There are many important pictures on Bissell.com that lack a text equivalent. The lack of alt-text on these graphics prevents screen readers from accurately vocalizing a description of the graphics (screen-readers detect and vocalize alt-text to provide a description of the image to a blind computer user). As a result, Plaintiff and blind Bissell.com customers are unable to determine what is on the website, browse the website or investigate and/or make purchases. 32. Bissell.com also lacks prompting information and accommodations necessary to allow blind shoppers who use screen-readers to locate and accurately fill-out online forms. On a shopping site such as Bissell.com, these forms include search fields to locate vacuums, fields that specify the shipping cost and return policy, and fields used to fill-out personal information, including address and credit card information. Due to lack of adequate labeling, Plaintiff and blind customers cannot make purchases or inquiries as to Defendant’s merchandise, nor can they enter their personal identification and financial information with confidence and security. In fact, when Plaintiff attempted to click on “add to cart,” her screen-reader could not recognize the 33. Similarly, Bissell.com lacks accessible drop-down menus. Drop-down menus allow customers to locate and choose products as well as specify the quantity of certain items. On Bissell.com, blind customers are not aware if the desired products, such as vacuums, have been added to the shopping cart because the screen-reader does not indicate the type of product. 9 Moreover, blind customers are unable to select the shipping information or return policy of the product they desire. Therefore, blind customers are essentially prevented from purchasing any items on Bissell.com. 34. Furthermore, Bissell.com lacks accessible image maps. An image map is a function that combines multiple words and links into one single image. Visual details on this single image highlight different “hot spots” which, when clicked on, allow the user to jump to many different destinations within the website. For an image map to be accessible, it must contain alt-text for the various “hot spots.” The image maps on Bissell.com’s menu page do not contain adequate alt-text and are therefore inaccessible to Plaintiff and the other blind individuals attempting to make a purchase. When Plaintiff tried to access the menu link in order to make a purchase, she was unable to access it completely. 35. Bissell.com also lacks accessible forms. Plaintiff is unable to locate the shopping cart because the shopping cart form does not specify the purpose of the shopping cart. As a result, blind customers are denied access to the shopping cart. Consequently, blind customers are unsuccessful in adding products into their shopping carts and are essentially prevented from purchasing items on Bissell.com. 36. Moreover, the lack of navigation links on Defendant’s website makes attempting to navigate through Bissell.com even more time consuming and confusing for Plaintiff and blind consumers. 37. Bissell.com requires the use of a mouse to complete a transaction. Yet, it is a fundamental tenet of web accessibility that for a web page to be accessible to Plaintiff and blind people, it must be possible for the user to interact with the page using only the keyboard. Indeed, Plaintiff and blind users cannot use a mouse because manipulating the mouse is a visual activity of moving the mouse pointer from one visual spot on the page to another. Thus, Bissell.com’s 10 inaccessible design, which requires the use of a mouse to complete a transaction, denies Plaintiff and blind customers the ability to independently navigate and/or make purchases on Bissell.com. 38. Due to Bissell.com’s inaccessibility, Plaintiff and blind customers must in turn spend time, energy, and/or money to make their purchases at traditional brick-and-mortar retailers. Some blind customers may require a driver to get to the stores or require assistance in navigating the stores. By contrast, if Bissell.com was accessible, a blind person could independently investigate products and make purchases via the Internet as sighted individuals can and do. According to WCAG 2.1 Guideline 2.4.1, a mechanism is necessary to bypass blocks of content that are repeated on multiple webpages because requiring users to extensively tab before reaching the main content is an unacceptable barrier to accessing the website. Plaintiff must tab through every navigation bar option and footer on Defendant’s website in an attempt to reach the desired service. Thus, Bissell.com’s inaccessible design, which requires the use of a mouse to complete a transaction, denies Plaintiff and blind customers the ability to independently make purchases on Bissell.com. 39. Bissell.com thus contains access barriers which deny the full and equal access to Plaintiff, who would otherwise use Bissell.com and who would otherwise be able to fully and equally enjoy the benefits and services of Bissell.com in New York State and throughout the United States. 40. Plaintiff, Marion Kiler, has made numerous attempts to complete a purchase on Bissell.com, most recently in September 2018, but was unable to do so independently because of the many access barriers on Defendant’s website. These access barriers have caused Bissell.com to be inaccessible to, and not independently usable by, blind and visually-impaired persons. Amongst other access barriers experienced, Plaintiff was unable to purchase a Pet Wet Dry Vacuum. 11 41. As described above, Plaintiff has actual knowledge of the fact that Defendant’s website, Bissell.com, contains access barriers causing the website to be inaccessible, and not independently usable by, blind and visually-impaired persons. 42. These barriers to access have denied Plaintiff full and equal access to, and enjoyment of, the goods, benefits and services of Bissell.com. 43. Defendant engaged in acts of intentional discrimination, including but not limited to the following policies or practices: (a) constructed and maintained a website that is inaccessible to blind class members with knowledge of the discrimination; and/or (b) constructed and maintained a website that is sufficiently intuitive and/or obvious that is inaccessible to blind class members; and/or (c) failed to take actions to correct these access barriers in the face of substantial harm and discrimination to blind class members. 44. Defendant utilizes standards, criteria or methods of administration that have the effect of discriminating or perpetuating the discrimination of others. 45. Because of Defendant’s denial of full and equal access to, and enjoyment of, the goods, benefits and services of Bissell.com, Plaintiff and the class have suffered an injury-in- fact which is concrete and particularized and actual and is a direct result of defendant’s conduct. CLASS ACTION ALLEGATIONS 46. Plaintiff, on behalf of herself and all others similarly situated, seeks certification of the following nationwide class pursuant to Rule 23(a) and 23(b)(2) of the Federal Rules of Civil Procedure: “all legally blind individuals in the United States who have attempted to access Bissell.com and as a result have been denied access to the enjoyment of goods and services offered by Bissell.com, during the relevant statutory period.” 12 47. Plaintiff seeks certification of the following New York subclass pursuant to Fed.R.Civ.P. 23(a), 23(b)(2), and, alternatively, 23(b)(3): “all legally blind individuals in New York State who have attempted to access Bissell.com and as a result have been denied access to the enjoyment of goods and services offered by Bissell.com, during the relevant statutory period.” 48. There are hundreds of thousands of visually-impaired persons in New York State. There are approximately 8.1 million people in the United States who are visually- impaired. Id. Thus, the persons in the class are so numerous that joinder of all such persons is impractical and the disposition of their claims in a class action is a benefit to the parties and to the Court. 49. This case arises out of Defendant’s policy and practice of maintaining an inaccessible website denying blind persons access to the goods and services of Bissell.com. Due to Defendant’s policy and practice of failing to remove access barriers, blind persons have been and are being denied full and equal access to independently browse, select and shop on Bissell.com. 50. There are common questions of law and fact common to the class, including without limitation, the following: (a) Whether Bissell.com is a “public accommodation” under the ADA; (b) Whether Bissell.com is a “place or provider of public accommodation” under the laws of New York; (c) Whether Defendant, through its website, Bissell.com, denies the full and equal enjoyment of its goods, services, facilities, privileges, advantages, or accommodations to people with visual disabilities in violation of the ADA; and 13 (d) Whether Defendant, through its website, Bissell.com, denies the full and equal enjoyment of its goods, services, facilities, privileges, advantages, or accommodations to people with visual disabilities in violation of the law of New York. 51. The claims of the named Plaintiff are typical of those of the class. The class, similar to the Plaintiff, is severely visually-impaired or otherwise blind, and claims Bissell has violated the ADA, and/or the laws of New York by failing to update or remove access barriers on their website, Bissell.com, so it can be independently accessible to the class of people who are legally blind. 52. Plaintiff will fairly and adequately represent and protect the interests of the members of the Class because Plaintiff has retained and is represented by counsel competent and experienced in complex class action litigation, and because Plaintiff has no interests antagonistic to the members of the class. Class certification of the claims is appropriate pursuant to Fed. R. Civ. P. 23(b)(2) because Defendant has acted or refused to act on grounds generally applicable to the Class, making appropriate both declaratory and injunctive relief with respect to Plaintiff and the Class as a whole. 53. Alternatively, class certification is appropriate under Fed. R. Civ. P. 23(b)(3) because questions of law and fact common to Class members clearly predominate over questions affecting only individual class members, and because a class action is superior to other available methods for the fair and efficient adjudication of this litigation. 54. Judicial economy will be served by maintenance of this lawsuit as a class action in that it is likely to avoid the burden that would be otherwise placed upon the judicial system by the filing of numerous similar suits by people with visual disabilities throughout the United States. 14 55. References to Plaintiff shall be deemed to include the named Plaintiff and each member of the class, unless otherwise indicated. FIRST CAUSE OF ACTION (Violation of 42 U.S.C. §§ 12181 et seq. – Title III of the Americans with Disabilities Act) 56. Plaintiff repeats, realleges and incorporates by reference the allegations contained in paragraphs 1 through 55 of this Complaint as though set forth at length herein. 57. Title III of the American with Disabilities Act of 1990, 42 U.S.C. § 12182(a) provides that “No individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation.” Title III also prohibits an entity from “[u]tilizing standards or criteria or methods of administration that have the effect of discriminating on the basis of disability.” 42 U.S.C. § 12181(b)(2)(D)(I). 58. Bissell.com is a sales establishment and public accommodation within the definition of 42 U.S.C. §§ 12181(7). 59. Defendant is subject to Title III of the ADA because it owns and operates Bissell.com. 60. Under Title III of the ADA, 42 U.S.C. § 12182(b)(1)(A)(I), it is unlawful discrimination to deny individuals with disabilities or a class of individuals with disabilities the opportunity to participate in or benefit from the goods, services, facilities, privileges, advantages, or accommodations of an entity. 61. Under Title III of the ADA, 42 U.S.C. § 12182(b)(1)(A)(II), it is unlawful 15 discrimination to deny individuals with disabilities or a class of individuals with disabilities an opportunity to participate in or benefit from the goods, services, facilities, privileges, advantages, or accommodation, which is equal to the opportunities afforded to other individuals. 62. Specifically, under Title III of the ADA, 42 U.S.C. § 12182(b)(2)(A)(II), unlawful discrimination includes, among other things, “a failure to make reasonable modifications in policies, practices, or procedures, when such modifications are necessary to afford such goods, services, facilities, privileges, advantages, or accommodations to individuals with disabilities, unless the entity can demonstrate that making such modifications would fundamentally alter the nature of such goods, services, facilities, privileges, advantages or accommodations.” 63. In addition, under Title III of the ADA, 42 U.S.C. § 12182(b)(2)(A)(III), unlawful discrimination also includes, among other things, “a failure to take such steps as may be necessary to ensure that no individual with disability is excluded, denied services, segregated or otherwise treated differently than other individuals because of the absence of auxiliary aids and services, unless the entity can demonstrate that taking such steps would fundamentally alter the nature of the good, service, facility, privilege, advantage, or accommodation being offered or would result in an undue burden.” 64. There are readily available, well-established guidelines on the Internet for making websites accessible to the blind and visually-impaired. These guidelines have been followed by other business entities in making their websites accessible, including but not limited to ensuring adequate prompting and accessible alt-text. Incorporating the basic components to make their website accessible would neither fundamentally alter the nature of Defendant’s business nor result in an undue burden to Defendant. 16 65. The acts alleged herein constitute violations of Title III of the ADA, 42 U.S.C. § 12101 et seq., and the regulations promulgated thereunder. Patrons of Bissell who are blind have been denied full and equal access to Bissell.com, have not been provided services that are provided to other patrons who are not disabled, and/or have been provided services that are inferior to the services provided to non-disabled patrons. 66. Defendant has failed to take any prompt and equitable steps to remedy its discriminatory conduct. These violations are ongoing. 67. As such, Defendant discriminates, and will continue in the future to discriminate against Plaintiff and members of the proposed class and subclass on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, accommodations and/or opportunities of Bissell.com in violation of Title III of the Americans with Disabilities Act, 42 U.S.C. §§ 12181 et seq. and/or its implementing regulations. 68. Unless the Court enjoins Defendant from continuing to engage in these unlawful practices, Plaintiff and members of the proposed class and subclass will continue to suffer irreparable harm. 69. The actions of Defendant were and are in violation of the ADA, and therefore Plaintiff invokes his statutory right to injunctive relief to remedy the discrimination. 70. Plaintiff is also entitled to reasonable attorneys’ fees and costs. 71. Pursuant to 42 U.S.C. § 12188 and the remedies, procedures, and rights set forth and incorporated therein, Plaintiff prays for judgment as set forth below. SECOND CAUSE OF ACTION (Violation of New York State Human Rights Law, N.Y. Exec. Law Article 15 (Executive Law § 292 et seq.)) 72. Plaintiff repeats, realleges and incorporates by reference the allegations contained in paragraphs 1 through 71 of this Complaint as though set forth at length herein. 17 73. N.Y. Exec. Law § 296(2)(a) provides that it is “an unlawful discriminatory practice for any person, being the owner, lessee, proprietor, manager, superintendent, agent, or employee of any place of public accommodation . . . because of the . . . disability of any person, directly or indirectly, to refuse, withhold from or deny to such person any of the accommodations, advantages, facilities or privileges thereof.”. 74. Bissell.com is a sales establishment and public accommodation within the definition of N.Y. Exec. Law § 292(9). 75. Defendant is subject to the New York Human Rights Law because it owns and operates Bissell.com. Defendant is a person within the meaning of N.Y. Exec. Law. § 292(1). 76. Defendant is violating N.Y. Exec. Law § 296(2)(a) in refusing to update or remove access barriers to Bissell.com, causing Bissell.com to be completely inaccessible to the blind. This inaccessibility denies blind patrons the full and equal access to the facilities, goods and services that Defendant makes available to the non-disabled public. 77. Specifically, under N.Y. Exec. Law § unlawful discriminatory practice includes, among other things, “a refusal to make reasonable modifications in policies, practices, or procedures, when such modifications are necessary to afford facilities, privileges, advantages or accommodations to individuals with disabilities, unless such person can demonstrate that making such modifications would fundamentally alter the nature of such facilities, privileges, advantages or accommodations.” 78. In addition, under N.Y. Exec. Law § 296(2)(c)(II), unlawful discriminatory practice also includes, “a refusal to take such steps as may be necessary to ensure that no individual with a disability is excluded or denied services because of the absence of auxiliary aids and services, unless such person can demonstrate that taking such steps would 18 fundamentally alter the nature of the facility, privilege, advantage or accommodation being offered or would result in an undue burden.” 79. There are readily available, well-established guidelines on the Internet for making websites accessible to the blind and visually-impaired. These guidelines have been followed by other business entities in making their website accessible, including but not limited to: adding alt-text to graphics and ensuring that all functions can be performed by using a keyboard. Incorporating the basic components to make their website accessible would neither fundamentally alter the nature of Defendant’s business nor result in an undue burden to Defendant. 80. Defendant’s actions constitute willful intentional discrimination against the class on the basis of a disability in violation of the New York State Human Rights Law, N.Y. Exec. Law § 296(2) in that Defendant has: (a) constructed and maintained a website that is inaccessible to blind class members with knowledge of the discrimination; and/or (b) constructed and maintained a website that is sufficiently intuitive and/or obvious that is inaccessible to blind class members; and/or (c) failed to take actions to correct these access barriers in the face of substantial harm and discrimination to blind class members. 81. Defendant has failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 82. As such, Defendant discriminates, and will continue in the future to discriminate against Plaintiff and members of the proposed class and subclass on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, accommodations and/or opportunities of Bissell.com under N.Y. Exec. Law § 296(2) et seq. 19 and/or its implementing regulations. Unless the Court enjoins Defendant from continuing to engage in these unlawful practices, Plaintiff and members of the class will continue to suffer irreparable harm. 83. The actions of Defendant were and are in violation of the New York State Human Rights Law and therefore Plaintiff invokes his right to injunctive relief to remedy the discrimination. 84. Plaintiff is also entitled to compensatory damages, as well as civil penalties and fines pursuant to N.Y. Exec. Law § 297(4)(c) et seq. for each and every offense. 85. Plaintiff is also entitled to reasonable attorneys’ fees and costs. 86. Pursuant to N.Y. Exec. Law § 297 and the remedies, procedures, and rights set forth and incorporated therein, Plaintiff prays for judgment as set forth below. THIRD CAUSE OF ACTION (Violation of New York State Civil Rights Law, NY CLS Civ R, Article 4 (CLS Civ R § 40 et seq.)) 87. Plaintiff repeats, realleges and incorporates by reference the allegations contained in paragraphs 1 through 86 of this Complaint as though set forth at length herein. 88. Plaintiff served notice thereof upon the attorney general as required by N.Y. Civil Rights Law § 41. 89. N.Y. Civil Rights Law § 40 provides that “all persons within the jurisdiction of this state shall be entitled to the full and equal accommodations, advantages, facilities, and privileges of any places of public accommodations, resort or amusement, subject only to the conditions and limitations established by law and applicable alike to all persons. No persons, being the owner, lessee, proprietor, manager, superintendent, agent, or employee of any such place shall directly or indirectly refuse, withhold from, or deny to any person any of the accommodations, advantages, facilities and privileges thereof . . .” 20 90. N.Y. Civil Rights Law § 40-c(2) provides that “no person because of . . . disability, as such term is defined in section two hundred ninety-two of executive law, be subjected to any discrimination in his or her civil rights, or to any harassment, as defined in section 240.25 of the penal law, in the exercise thereof, by any other person or by any firm, corporation or institution, or by the state or any agency or subdivision.” 91. Bissell.com is a sales establishment and public accommodation within the definition of N.Y. Civil Rights Law § 40-c(2). 92. Defendant is subject to New York Civil Rights Law because it owns and operates Bissell.com. Defendant is a person within the meaning of N.Y. Civil Law § 40-c(2). 93. Defendant is violating N.Y. Civil Rights Law § 40-c(2) in refusing to update or remove access barriers to Bissell.com, causing Bissell.com to be completely inaccessible to the blind. This inaccessibility denies blind patrons full and equal access to the facilities, goods and services that Defendant makes available to the non-disabled public. 94. There are readily available, well-established guidelines on the Internet for making websites accessible to the blind and visually-impaired. These guidelines have been followed by other business entities in making their website accessible, including but not limited to: adding alt-text to graphics and ensuring that all functions can be performed by using a keyboard. Incorporating the basic components to make their website accessible would neither fundamentally alter the nature of Defendant’s business nor result in an undue burden to Defendant. 95. In addition, N.Y. Civil Rights Law § 41 states that “any corporation which shall violate any of the provisions of sections forty, forty-a, forty-b or forty two . . . shall for each and every violation thereof be liable to a penalty of not less than one hundred dollars nor more than five hundred dollars, to be recovered by the person aggrieved thereby . . .” 21 96. Specifically, under N.Y. Civil Rights Law § 40-d, “any person who shall violate any of the provisions of the foregoing section, or subdivision three of section 240.30 or section 240.31 of the penal law, or who shall aid or incite the violation of any of said provisions shall for each and every violation thereof be liable to a penalty of not less than one hundred dollars nor more than five hundred dollars, to be recovered by the person aggrieved thereby in any court of competent jurisdiction in the county in which the defendant shall reside . . .” 97. Defendant has failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 98. As such, Defendant discriminates, and will continue in the future to discriminate against Plaintiff and members of the proposed class on the basis of disability are being directly indirectly refused, withheld from, or denied the accommodations, advantages, facilities and privileges thereof in § 40 et seq. and/or its implementing regulations. 99. Plaintiff is entitled to compensatory damages of five hundred dollars per instance, as well as civil penalties and fines pursuant to N.Y. Civil Rights Law § 40 et seq. for each and every offense. FOURTH CAUSE OF ACTION (Violation of New York City Human Rights Law, N.Y.C. Administrative Code § 8-102, et seq.) 100. Plaintiff repeats, realleges and incorporates by reference the allegations contained in paragraphs 1 through 99 of this Complaint as though set forth at length herein. 101. N.Y.C. Administrative Code § 8-107(4)(a) provides that “it shall be an unlawful discriminatory practice for any person, being the owner, lessee, proprietor, manager, superintendent, agent or employee of any place or provider of public accommodation, because of . . . disability . . . directly or indirectly, to refuse, withhold from or deny to such person, any of the accommodations, advantages, facilities or privileges thereof.” 22 102. Bissell.com is a sales establishment and public accommodation within the definition of N.Y.C. Administrative Code § 8-102(9). 103. Defendant is subject to City Law because it owns and operates Bissell.com. Defendant is a person within the meaning of N.Y.C. Administrative Code § 8-102(1). 104. Defendant is violating N.Y.C. Administrative Code § 8-107(4)(a) in refusing to update or remove access barriers to Bissell.com, causing Bissell.com to be completely inaccessible to the blind. This inaccessibility denies blind patrons full and equal access to the facilities, goods, and services that Defendant makes available to the non-disabled public. Specifically, Defendant is required to “make reasonable accommodation to the needs of persons with disabilities . . . any person prohibited by the provisions of [§ 8-107 et seq.] from discriminating on the basis of disability shall make reasonable accommodation to enable a person with a disability to . . . enjoy the right or rights in question provided that the disability is known or should have been known by the covered entity.” N.Y.C. Administrative Code § 8- 107(15)(a). 105. Defendant’s actions constitute willful intentional discrimination against the class on the basis of a disability in violation of the N.Y.C. Administrative Code § 8-107(4)(a) and § 8-107(15)(a) in that Defendant has: (a) constructed and maintained a website that is inaccessible to blind class members with knowledge of the discrimination; and/or (b) constructed and maintained a website that is sufficiently intuitive and/or obvious that is inaccessible to blind class members; and/or (c) failed to take actions to correct these access barriers in the face of substantial harm and discrimination to blind class members. 23 106. Defendant has failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 107. As such, Defendant discriminates, and will continue in the future to discriminate against Plaintiff and members of the proposed class and subclass on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, accommodations and/or opportunities of Bissell.com under N.Y.C. Administrative Code § 8- 107(4)(a) and/or its implementing regulations. Unless the Court enjoins Defendant from continuing to engage in these unlawful practices, Plaintiff and members of the class will continue to suffer irreparable harm. 108. The actions of Defendant were and are in violation of City law and therefore Plaintiff invokes his right to injunctive relief to remedy the discrimination. 109. Plaintiff is also entitled to compensatory damages, as well as civil penalties and fines under N.Y.C. Administrative Code § 8-120(8) and § 8-126(a) for each offense. 110. Plaintiff is also entitled to reasonable attorneys’ fees and costs. 111. Pursuant to N.Y.C. Administrative Code § 8-120(8) and § 8-126(a) and the remedies, procedures, and rights set forth and incorporated therein, Plaintiff prays for judgment as set forth below. FIFTH CAUSE OF ACTION (Declaratory Relief) 112. Plaintiff repeats, realleges and incorporates by reference the allegations contained in paragraphs 1 through 111 of this Complaint as though set forth at length herein. 113. An actual controversy has arisen and now exists between the parties in that Plaintiff contends, and is informed and believes that Defendant denies, that Bissell.com contains access barriers denying blind customers the full and equal access to the goods, services and 24 facilities of Bissell.com, which Bissell owns, operates and/or controls, fails to comply with applicable laws including, but not limited to, Title III of the American with Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et seq., and N.Y.C. Administrative Code § 8- 107, et seq. prohibiting discrimination against the blind. 114. A judicial declaration is necessary and appropriate at this time in order that each of the parties may know their respective rights and duties and act accordingly. PRAYER FOR RELIEF WHEREFORE, Plaintiff respectfully demands judgment in favor of Plaintiff and the class and against the Defendants as follows: a) A preliminary and permanent injunction to prohibit Defendant from violating the Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et seq., and N.Y.C. Administrative Code § 8-107, et seq., and the laws of New York; b) A preliminary and permanent injunction requiring Defendant to take all the steps necessary to make its website, Bissell.com, into full compliance with the requirements set forth in the ADA, and its implementing regulations, so that Bissell.com is readily accessible to and usable by blind individuals; c) A declaration that Defendant owns, maintains and/or operates its website, Bissell.com, in a manner which discriminates against the blind and which fails to provide access for persons with disabilities as required by Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et seq., and N.Y.C. Administrative Code § 8-107, et seq., and the laws of New York; d) An order certifying this case as a class action under Fed. R. Civ. P. 23(a) & (b)(2) and/or (b)(3), appointing Plaintiff as Class Representative, and his attorneys as Class Counsel; 25 e) An order directing Defendants to continually update and maintain its website to ensure that it remains fully accessible to and usable by the visually-impaired; f) Compensatory damages in an amount to be determined by proof, including all applicable statutory damages and fines, to Plaintiff and the proposed class for violations of their civil rights under New York State Human Rights Law and City Law; g) Plaintiff’s reasonable attorneys’ fees, expenses, and costs of suit as provided by state and federal law; h) For pre- and post-judgment interest to the extent permitted by law; and i) For such other and further relief which this court deems just and proper. Dated: Brooklyn, New York September 20, 2018 SHAKED LAW GROUP, P.C. Attorneys for Plaintiff By:/s/Dan Shaked_________ Dan Shaked (DS-3331) 44 Court St., Suite 1217 Brooklyn, NY 11201 Tel. (917) 373-9128 e-mail: [email protected] 26

civil rights, immigration, family

C96fEIcBD5gMZwczI35x

Michael Grinblat (4159752) Law Offices of Michael Grinblat 817 Broadway, Fourth Floor New York, NY 10003 Tel: (347) 796-0712 Fax: (212) 202-5130 [email protected] Attorney for the Plaintiff IN THE UNITED STATES DISTRICT COURT IN AND FOR THE EASTERN DISTRICT OF NEW YORK COMPLAINT SEMYON GRINBLAT, individually and on behalf of all others similarly situated, Plaintiff, -against- CASE NO.: 20-cv-1640 JURY DEMANDED CONSUMER FOOD SERVICES, L.L.C., CRAWFORD GROUP LLC, JOHN DOE 1-X, persons yet unknown, Limited Liability Companies, Partnerships, Corporations 1- X, entities yet unknown, Defendants. CIVIL COMPLAINT SEMYON GRINBLAT (“Plaintiff”), as and for his complaint against CONSUMER FOOD SERVICES, L.L.C., CRAWFORD GROUP LLC, JOHN DOE 1-X, persons yet unknown, Limited Liability Companies, Partnerships, Corporations 1-X, entities yet unknown (“Defendants”), respectfully brings before the Court the below allegations. STATEMENT OF THE PLAINTIFF’S CLAIMS 1. This is an action under Title III of the Americans with Disabilities Act of 1990 (the “ADA”) to enjoin unlawful discrimination based on disability. The Plaintiff was discriminated against on the basis of disability and was denied full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of the place of public accommodation owned, leased, controlled, managed, or operated, by the Defendants. 2. The Plaintiff files this action for himself, and those similarly situated, complaining of the violations of Title III of the ADA. This action is brought under ADA 42 U.S.C. §12182, §12183 and §12188(a) – incorporating by reference the remedies and procedures found in 42 U.S.C. §2000a-3, §204 of the Civil Rights Act of 1964 – the ADA’s Accessibility Guidelines, 28 C.F.R. Part 36, subpart D, the 2004 ADA Accessibility Guidelines (“ADAAG”) at 36 C.F.R. Part 1191, appendices B and D, the 2010 ADA Standards for Accessible Design (“2010 Standards”), the Building Code of the State of New York, as well as New York State Civil Rights Law §40-c and §40-d, New York State Human Rights Law §296 and New York City Human Rights Law [Administrative Code] §8-107. JURISDICTION AND VENUE 3. This Court has jurisdiction over this action pursuant to 28 U.S.C. §451, §1331, §1337, §1343, §2201, §2202 and 42 U.S.C.A. §12181, et seq., as it involves federal questions regarding the deprivation of the Plaintiff’s rights under the ADA. 4. This Court has personal jurisdiction over CRAWFORD GROUP LLC pursuant to N.Y. C.P.L.R. §302(a)(1) and §302(a)(4), because it transacts business within the State of New York, and owns, uses or possesses real property situated within the State of New York. 5. This Court has supplemental jurisdiction over the Plaintiff’s allegations arising from the Defendants’ state law violations pursuant to 28 U.S.C. §1367(a). 6. Venue is proper in this district pursuant to 28 U.S.C. §1391(b), because all events, or omissions, giving rise to this action, and alleged herein, occurred in this district. Venue is also proper in this district, because the Defendants’ property, a public accommodation, which is the subject of this action, is located in, and does business within, this judicial district. PARTIES 7. The Plaintiff is, and at all times material to this litigation has been, a resident of Monmouth County, New Jersey. 8. The Plaintiff is a qualified individual with a disability within the meaning of 42 U.S.C. §12131, who is expressly authorized to bring this action under §308 of the ADA, 42 U.S.C. §12188(a) – incorporating by reference the remedies and procedures found in 42 U.S.C. §2000a-3, §204 of the Civil Rights Act of 1964. 9. The Defendants own, and/or lease (or lease to), and/or have control over, and/or manage, and/or maintain, and/or designed, and/or built, and/or constructed, and/or altered, and/or operate, and at all relevant times operated, the restaurant, “BURGER KING #878” (“BURGER KING”) and the parking lot adjacent to it, which is provided for the use of the restaurant’s customers. 10. The aforementioned restaurant, BURGER KING, and the adjacent parking lot (collectively, the “Subject Facility”) are the subjects of this lawsuit. 11. The Subject Facility is located at 3901 Richmond Avenue, Staten Island, NY 10312. 12. Upon information and belief, CONSUMER FOOD SERVICES, L.L.C. leases, and/or manages, and/or maintains, and/or has control over, and/or designed, and/or built, and/or constructed, and/or altered, and/or marked, and/or placed signs on, and/or operates, and at all relevant times operated, the restaurant under the name of BURGER KING. 13. Upon information and belief, CONSUMER FOOD SERVICES, L.L.C. leases, and/or manages, and/or maintains, and/or has control over, and/or designed, and/or built, and/or constructed, and/or altered, and/or operates, and/or marked, and/or placed signs on, and at all relevant times operated, the parking lot adjacent to the restaurant BURGER KING, which is provided for the use of its customers. 14. CONSUMER FOOD SERVICES, L.L.C. is an American for-profit corporation organized under the laws of the State of New Jersey. 15. CONSUMER FOOD SERVICES, L.L.C. is licensed to conduct business in New York State by the New York State Department of State (“NYS DOS”). 16. NYS DOS maintains entity information for CONSUMER FOOD SERVICES, L.L.C. in its Corporation and Business Entity Database. 17. The corporate record shows that CONSUMER FOOD SERVICES, L.L.C. has the following registered agent: Walter Rumsey, 114 McClean Avenue, Staten Island, NY 10305. 18. The corporate record also shows that CONSUMER FOOD SERVICES, L.L.C. can accept service of process at 114 McClean Avenue, Staten Island, NY 10305, when accepted by the Secretary of State on behalf of the corporation. 19. The Office of the Richmond County Clerk maintains a deed record showing that the commercial lot, on which the Subject Facility is located, is owned by CRAWFORD GROUP LLC. 20. CRAWFORD GROUP LLC is an American for-profit corporation organized under the laws of the State of New Jersey. 21. CRAWFORD GROUP LLC’s address is 1 Wieczorkowski Avenue, Parlin, NJ 08859. 22. Upon information and belief, CRAWFORD GROUP LLC owns the Subject Facility. 23. Upon information and belief, CRAWFORD GROUP LLC owns, and/or manages, and/or maintains, and/or has control over, and/or designed, and/or built, and/or constructed, and/or altered, and/or marked, and/or placed signs on, the parking lot adjacent to the restaurant BURGER KING. 24. Upon information and belief, CRAWFORD GROUP LLC leases the Subject Facility to CONSUMER FOOD SERVICES, L.L.C. 25. The Subject Facility is a public accommodation within the meaning of Title III of the ADA, 42 U.S.C. §12181(7)(B) and 28 C.F.R. §36.104 Place of public accommodation (2), the New York State Human Rights Law §292(9) and the New York City Human Rights Law, Admin. Code of the City of New York, §8-107(4). 26. Defendants JOHN DOE 1-X and Limited Liability Companies, Partnerships and Corporations 1-X are persons or entities yet unknown, but who or which might share liability as owners or tenants of the Subject Facility. At all relevant times they might have been, and currently might be, either owners, lessors, or operators of the commercial real estate lot in Richmond County, on which the Subject Facility is located, and of the building in which it operates. Either one or several of them might be a landlord and lease its/their building and land, on which the parking lot of the Subject Facility is located, to CONSUMER FOOD SERVICES, L.L.C. 27. The Plaintiff reserves the right to amend this Complaint to add such persons or entities as Defendants when discovered during the course of this action. 28. Either one, or all, of the Defendants, jointly, or severally, simultaneously, or at different times, at all relevant times, was an owner, and/or landlord, and/or lessor, and/or lessee, and/or tenant, of the commercial lot in Richmond County, on which the Subject Facility is located, who jointly, or severally, owned, and/or leased, and/or managed, and/or had control over, and/or designed, and/or constructed, and/or built, and/or altered, and/or modified, and/or painted, and/or marked, and/or placed signs on, and/or operated, and/or maintained, the parking lot adjacent to the restaurant, BURGER KING, which is provided for the purpose of enabling customers of the restaurant to park at and visit the Subject Facility. 29. Either one of the Defendants, or all of them, jointly or severally, simultaneously, or at different times, at all relevant times, was/were an owner, and/or landlord, and/or lessor, and/or lessee, and/or tenant, and/or managed, and/or had control over, and/or operated, and/or designed, and/or constructed, and/or built, and/or painted, and/or marked, and/or placed signs on, and/or maintained, and/or altered the building, and/or the restaurant, BURGER KING, which is part of the Subject Facility. 30. The Defendants are jointly and severally liable for the design, construction, maintenance, management, control, alteration and/or operation of the parking lot, which is part of the Subject Facility. 31. The Defendants are jointly and severally liable for the design, construction, maintenance, management, control, alteration and/or operation of the restaurant, BURGER KING, which is part of the Subject Facility. CLASS ACTION 32. The Plaintiff brings this suit for declaratory and injunctive relief, and as a class action, on behalf of all those similarly situated, who, as persons who must use a wheelchair by reason of various disabilities, and who use or desire to use the services and accommodations offered to the public by the Defendants, are protected by, and are beneficiaries of, the ADA, the New York State Civil Rights Laws, and the New York State and City Human Rights Laws. 33. The Plaintiff, complaining for himself, and all other similarly situated disabled individuals in the City and State of New York, hereby alleges the following: a. The class is so numerous that joinder of all members, whether otherwise required or permitted, is impracticable; b. There are questions of law or fact common to the class, which predominate over any questions affecting only individual members; c. The claims or defenses of the representative party are typical of the claims or defenses of the class; d. The representative party will fairly and adequately protect the interests of the class; and e. A class action is superior to other available methods for the fair and efficient adjudication of the controversy. 34. The claims of the Plaintiff are typical of those of the class. The class, similarly to the Plaintiff, was also not able to have access to the Subject Facility because of the architectural barriers. 35. The Plaintiff will fairly and adequately represent and protect the interests of the members of the class, because, in accordance with Fed. R. Civ. P. 23(g), he has retained, and is represented by, an experienced counsel, who has done the work in identifying and investigating potential claims in the action, who knows the applicable law, who may commit resources to representing the class, who would represent the Plaintiff in complex class action litigation, and because the Plaintiff has no interests antagonistic to the members of the class. 36. A class action may be maintained under Fed. R. Civ. P. 23(a), which is satisfied, as prosecuting separate actions by, or against, individual class members would create a risk of adjudications with respect to them that, as a practical matter, would be dispositive of the interests of the other members, not parties to the individual adjudications, or would substantially impair, or impede, their ability to protect their interests. That risk includes, but is not limited to, the Defendants removing the architectural barriers without either compensating members of the class, or paying them compensatory, and/or statutory, and/or punitive damages, for discrimination, discomfort, personal injuries, pain of body and mind, emotional distress, inconvenience and humiliation, which the class members have suffered as a result of the Defendants’ actions, which violated the ADA, the New York State Civil Rights laws, the New York State Human Rights laws, and the New York City Human Rights laws. 37. Class certification of the claims is appropriate pursuant to Fed. R. Civ. P. 23(b)(2), because the Defendants had acted, or refused to act, on grounds that apply generally to the class, so that final injunctive relief, or corresponding declaratory relief, is appropriate respecting the class as a whole. 38. Alternatively, class certification is appropriate under Fed. R. Civ. P. 23(b)(3), because questions of law, or fact, common to class members, clearly predominate over any questions affecting only individual class members, and because a class action is superior to other available methods for the fair and efficient adjudication of this litigation. 39. Judicial economy would be served by allowing the matter to proceed as a class action in that it would likely avoid the burden that would be otherwise placed upon the judicial system by the filing numerous similar suits by people who use a wheelchair in the Eastern District of New York. 40. Clarity, consistency and uniformity in law would also be preserved, as maintenance of this lawsuit as a class action would likely eliminate the possibility of inconsistent verdicts, which may be issued, if plaintiffs were to initiate individual lawsuits against the Defendants. 41. References to the Plaintiff shall be deemed to include the named Plaintiff and each member of the class, unless otherwise indicated. STATUTORY SCHEME 42. On July 26, 1990, the United States Congress enacted the ADA, establishing important civil rights for individuals with disabilities, including the right to full and equal enjoyment of goods, services, facilities, privileges and access to places of public accommodation. 43. Congress made the following findings: a. Some 43,000,000 Americans have one or more physical or mental disabilities, and this number is increasing as the population as a whole is growing older; b. Historically, society has tended to isolate and segregate individuals with disabilities, and, despite some improvements, such forms of discrimination against individuals with disabilities continue to be a serious and pervasive social problem; c. Discrimination against individuals with disabilities persists in such critical areas as employment, housing, public accommodation, education, transportation, communication, recreation, institutionalization, health services, voting and access to public services; d. Individuals with disabilities continually encounter various forms of discrimination, including outright intentional exclusion, the discriminatory effects of architectural, transportation, and communication barriers, overprotective rules and policies, failure to make modifications to existing facilities and practices, exclusionary qualification standards and criteria, segregation, and regulation to lesser services, programs, activities, benefits, jobs or other opportunities; and e. The continuing existence of unfair and unnecessary discrimination and prejudice denies people with disabilities the opportunity to compete on an equal basis and to pursue those opportunities for which our free society is justifiably famous, and costs the United States billions of dollars in unnecessary expenses resulting from dependency and non-productivity. 42 U.S.C. §12101(a)(1)-(3), (5) and (8) 44. Furthermore, Congress also explicitly stated that the ADA had to: a. Provide a clear and comprehensive national mandate for the elimination of discrimination against individuals with disabilities; b. Provide clear, strong, consistent, enforceable standards addressing discrimination against individuals with disabilities; and c. Invoke the sweep of congressional authority, including the power to enforce the fourteenth amendment and to regulate commerce, in order to address the major areas of discrimination faced day-to-day by people with disabilities. 42 U.S.C. §12101(b)(1)(2) and (4) 45. Furthermore, pursuant to 42 U.S.C. §12182 and 28 C.F.R. §36.201(a), the congressional intent was to ensure that no place of public accommodation may discriminate against an individual on the basis of such individual’s disability, with regard to the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations at that place of public accommodation. 46. Congress provided commercial businesses at least 18 months from enactment to make their facilities compliant with the regulations in the ADA. The effective date of Title III of the ADA was January 26, 1992, or January 26, 1993, if a defendant has ten (10), or fewer, employees and gross receipts of $500,000, or less. 42 U.S.C. §12183; 28 C.F.R. §36.508(a). 47. The 2000 United States census indicates that in the civilian non-institutionalized population more than 49.7 million people in the United States have a disability. The census also indicates that more than 1.39 million New Yorkers have a mobility disability. 48. ADA 42 U.S.C. §12182(a), the New York State Civil Rights laws, the New York State Human Rights laws, and the New York City Human Rights laws recognize individuals with disabilities as a protected class. 49. It is unlawful for a private entity, which owns, leases, leases to, or operates a place of public accommodation, to discriminate against an individual with a disability. 42 U.S.C. §12182(b)(1)(A), 28 C.F.R. §36.201(a) and (b). 50. Pursuant to the mandates of 42 U.S.C. §12134(a), on July 26, 1991, the Department of Justice, Office of the Attorney General, promulgated Federal Regulations to implement the requirements of the ADA, known as the ADAAG, 28 C.F.R. §36, under which it may obtain civil penalties of up to $110,000 for the first violation and $150,000 for any subsequent violation. 51. The landlord, who owns the building that houses a place of public accommodation and the tenant, who owns, or operates the place of public accommodation, have a non-delegable duty to comply with the ADA, 28 C.F.R. §36.201(a) and (b), the New York State Civil Rights laws, and the New York State and City Human Rights laws. 52. The Subject Facility affects interstate commerce within the meaning of the ADA, 42 U.S.C. §12181(7)(B), and 28 C.F.R. §36.104 Place of public accommodation (2). 53. Regardless of any contractual provisions stating otherwise, the landlord and owner of the property, which houses the public accommodation, cannot escape liability for the tenant’s failure to comply with the ADA, 28 C.F.R. §36.201, the New York State Civil Rights laws, and the New York State and City Human Rights laws. 54. Discriminatory intent is not required to establish liability under the ADA, the New York State Civil Rights Laws, and the New York State and City Human Rights laws. 55. One type of disability discrimination is the failure of an owner, or an operator, of a public accommodation to remove those architectural barriers, removal of which is readily achievable. A public accommodation shall remove architectural barriers in existing facilities, including communication barriers that are structural in nature, where such removal is readily achievable, i.e., easily accomplishable and able to be carried out without much difficulty or expense. 28 C.F.R. §36.304 56. If an individual with a disability is dissuaded from entering, or receiving services of a place of public accommodation, because of the existence of an architectural barrier, the landlord and tenant are subject to criminal liability for discrimination on the basis of disability. 57. The Defendants must remove all barriers, removal of which is readily achievable, that deny an individual with a disability the opportunity to participate in, or benefit from, services, or accommodations, on the basis of their disability, 28 C.F.R. §36.304. 58. Removal of the architectural barriers is readily achievable by the Defendants. The Plaintiff is informed and believes, and therefore alleges, that the Subject Facility has begun operations, and/or undergone substantial remodeling, repairs and/or alterations, since January 26, 1990, and/or has sufficient income to make readily achievable accessibility modifications. FACTUAL ALLEGATIONS AND FIRST CAUSE OF ACTION The Plaintiff’s Background 59. The Plaintiff, who was born in 1949, is an elderly man aged well beyond his years. He suffers from debilitating diseases and was diagnosed with a neurological condition that affects his walking. The Plaintiff’s treating neurologist determined that he has gait dysfunction, the causes of which include peripheral neuropathy due to diabetes mellitus, chronic right basilar ganglia lacunar infarct and cerebellar ataxia. The Plaintiff’s treating neurologist also determined that he has essential tremor. Furthermore, the Plaintiff has decreased vision due to glaucoma and is blind in the right eye. The Plaintiff’s gait is unsteady and he falls when he walks short distances. His treating neurologist prescribed him a wheelchair and an accessible parking placard. The Plaintiff obtained the wheelchair and uses it regularly. The New Jersey Motor Vehicle Commission issued him a disability parking placard together with a disability identification card. The disability placard can be used in any car, in which the Plaintiff is travelling. The Plaintiff relies on his wheelchair and parks appropriately in accessible parking spaces. He also needs appropriate and statutorily mandated access aisle next to that car, so that he may transfer from the car to the wheelchair. The Plaintiff is “disabled” under the statute, which in pertinent part states: Disability means, with respect to an individual, a physical or mental impairment that substantially limits one or more of the major life activities of such individual…. The phrase major life activities means functions such as caring for one’s self, performing manual tasks, walking, seeing, hearing, speaking, breathing, learning and working. 28 C.F.R. §36.104 (italics in original). 60. The Plaintiff must rely on his adult son for the management of his day-to-day care. The son helps the Plaintiff to get to places the Plaintiff wants to visit, such as medical facilities, doctors, pharmacies, stores, supermarkets, restaurants and parks near his home in New Jersey, and near his former home in New York, where he lived for decades, and where his son and friends still live. 61. The parking lot of the Subject Facility has 29 parking spaces. 62. The parking lot of the Subject Facility has two adjacent accessible parking spaces, which are so designated by blue marking lines on pavement. 63. In March 2020, the Plaintiff came to the Subject Facility by car with his son. 64. The Plaintiff and his son parked in one of the accessible parking spaces in its parking lot. 65. The designated accessible spaces at the parking lot of the Subject Facility had no access aisles next to them. 66. As a result, the Plaintiff’s son placed the wheelchair on the adjacent accessible parking space next to the parked car. 67. The wheelchair rolled down the steep slope of the adjacent parking space next to the parked car. 68. When the Plaintiff was transferring from the car to the wheelchair, he barely avoided falling on the steep surface of the accessible parking space next to the parked car. 69. The Plaintiff was then not able to move the wheelchair by rotating its wheels, because the parking space adjacent to the accessible parking space was too steep. 70. Consequently, the Plaintiff had to rely on his son’s assistance to prevent the wheelchair from rolling down the parking space of the Subject Facility. 71. The Plaintiff was then not able to open the restaurant’s entrance door by himself, because the tension of the door’s spring is too high. 72. As a result, the Plaintiff had to rely on his son’s assistance to open the restaurant’s door for him. 73. Inside of the restaurant, BURGER KING, when the Plaintiff was paying for the items he was purchasing at the register, he was not able to extend his knees and toes under the sales counter, because there was no space under it for his knees and toes. 74. As a result, the Plaintiff had to rely on his son’s assistance to hand his debit card to the cashier. 75. When the Plaintiff was exiting the restaurant, he was not able to open the door, because the spring’s tension is too high. 76. The Plaintiff had to rely on his son’s assistance to open the restaurant’s door for him. 77. On the way back, the Plaintiff was not able to roll the wheelchair to the car with his hands, by rotating its wheels, because the slope of the accessible parking space next to the accessible parking space, at which the car was parked, is impermissibly steep. 78. Consequently, the Plaintiff had to rely on his son’s assistance to ride to the car’s door. 79. When the Plaintiff was transferring from the wheelchair to the car, he barely avoided falling on the steep surface of the accessible parking space. 80. Frustrated, disappointed and humiliated, the Plaintiff left the Subject Facility’s parking lot. 81. The Subject Facility’s parking lot was designed by the Defendants, who did not have the Plaintiff and his needs, and needs of others similarly situated, in mind, to accommodate him and facilitate his access to the Subject Facility. 82. The parking lot of the Subject Facility was designed by the Defendants, who disregarded the accessibility requirements of the Plaintiff, and those similarly situated, by failing to accommodate him and facilitate his access to the restaurant, or worse, and much more likely, designed the parking lot of the Subject Facility with the aim of frustrating his efforts as much as possible by way of architectural barriers, making him understand and feel the futility of his exertion and patronage of the Subject Facility, and that his patronage of the restaurant is neither needed, desired, or welcomed by the Defendants. 83. The parking lot of the Subject Facility was not designed to accommodate the needs of the Plaintiff, and other similarly situated individuals. 84. The parking lot of the Subject Facility was not constructed to facilitate access to the restaurant by the Plaintiff and other similarly situated individuals. The Plaintiff Intends to Return to the Subject Facility 85. The Subject Facility is located near Crescent Beach Park on Staten Island, along the way from the Plaintiff’s home to his son’s home. The Plaintiff enjoys visiting that neighborhood and comes there often. 86. The Subject Facility is conveniently located. The Plaintiff intends to visit the Subject Facility, purchase items offered for sale in it, and enjoy its services, as soon as the architectural barriers are removed. Violations of Title III in the Subject Facility 87. The Plaintiff has difficulties gaining access to the Subject Facility, because of the unlawful architectural barriers, and therefore has suffered an injury in fact. 88. Since at least March 2020, the Defendants have engaged in unlawful practices in violation of the ADA, the New York State Civil laws, and the New York State and City Human Rights laws. 89. The Plaintiff has difficulties visiting the Subject Facility, continues to be discriminated against due to the architectural barriers, which remain at the Subject Facility, all in violation of the ADA, the New York State Civil Rights laws, and the New York State and New York City Human Rights laws. 90. The barriers to access the Subject Facility have effectively denied the Plaintiff ability to visit the property and have caused him personal injuries, including, but not limited to, pain of body and mind, emotional distress, embarrassment, humiliation and frustration. 91. Because the Subject Facility is a public accommodation, the Defendants are responsible for complying with ADA 28 C.F.R. §36.304. 92. The numerous architectural barriers to access the Subject Facility have endangered the Plaintiff’s safety. 93. The Subject Facility violates 42 U.S.C. §12181, §12182, §12183, §12204 of the ADA, 28 C.F.R. §36.302 and §36.304. 94. The Department of Justice (“DOJ”) published revised regulations for Title III of the ADA in the Federal Register on September 15, 2010. “These regulations adopted revised, enforceable accessibility standards called the 2010 ADA Standards for Accessible Design, ‘2010 Standards’”. (See, 2010 Standards, Overview) These standards “set minimum requirements – both scoping and technical – for newly designed and constructed, or altered … public accommodation, and commercial facilities to be readily accessible to and usable by individuals with disabilities.” Id. The DOJ provided that document in one publication and it includes the 2010 Standards for public accommodation and commercial facilities, which consist of the Title III regulations at 28 C.F.R. Part 36, subpart D, and the 2004 ADAAG at 36 C.F.R. Part 1191, appendices B and D. 95. The Defendants are discriminating against the Plaintiff, and others similarly situated, because at their Subject Facility they are denying him access to, as well as full and equal enjoyment of, the goods, services, facilities, privileges, advantages and/or accommodations of the building, and its parking lot, by means of the architectural barriers, the existence of which is in violation of the ADA, including, but not limited to, those listed below. 96. “Identification. Parking space identification signs shall include the International Symbol of Accessibility complying with 703.7.2.1. Signs identifying van parking spaces shall contain the designation “van accessible.” Signs shall be 60 inches (1525 mm) minimum above the finish floor or ground surface measured to the bottom of the sign.” See 2010 Standards §502.6. 97. The designated accessible parking spaces at the Subject Facility have two accessible parking identification signs. 98. The identification sign at the left accessible space, as the car drives in, is mounted 28 inches high, as measured from the ground to the bottom of the sign. 99. The identification sign at the right accessible space, as the car drives in, is mounted 27 inches high, as measured from the ground to the bottom of the sign. 100. “Van Parking Spaces. For every six or fraction of six parking spaces required by §208.2 to comply with §502, at least one shall be a van parking space complying with §502.” See 2010 Standards §208.2.4. 101. The Defendants have failed to designate a van-accessible parking space in the parking lot of the Subject Facility. 102. The Defendants have failed to place a van-accessible parking space in the parking lot of the Subject Facility. 103. “Vehicle Spaces. Car parking spaces shall be 96 inches (2440 mm) wide minimum and van parking spaces shall be 132 inches (3350 mm) wide minimum, shall be marked to define the width, and shall have an adjacent access aisle complying with §502.3. EXCEPTION: Van parking spaces shall be permitted to be 96 inches (2440 mm) wide minimum where the access aisle is 96 inches (2440 mm) wide minimum.” See 2010 Standards §502.2. 104. The left and right identifications of the designated parking spaces, below, are from the point of view of a person driving into them. 105. Each of the two designated accessible parking spaces at the Subject Facility is 105 inches wide. 106. The two parking spaces at the Subject Facility, designated as accessible parking spaces, do not comply with the minimum width requirements for an accessible parking space. 107. The parking lot of the Subject Facility has no van-accessible parking space. 108. “Floor or Ground Surfaces. Access aisles are required to be nearly level in all directions to provide a surface for wheelchair transfer to and from vehicles. The exception allows sufficient slope for drainage. Built-up curb ramps are not permitted to project into access aisles and parking spaces because they would create slopes greater than 1:48.” See 2010 Standards, §502.4 & Advisory. 109. “Floor or Ground Surfaces. Parking spaces and access aisles serving them shall comply with 302. Access aisles shall be at the same level as the parking spaces they serve. Changes in level are not permitted. EXCEPTION: Slopes not steeper than 1:48 shall be permitted.” See 2010 Standards §502.4. 110. Thus, maximum permissible slopes of accessible parking spaces and access aisles serving them must not be steeper than 2.08%. See 2010 Standards §502.4. 111. The Defendants grossly violated §502.4 of 2010 Standards. 112. The designated accessible parking space on the left has a slope of 9.5%, which is equivalent to the slope steepness of 1:10.53. 113. The designated accessible parking space on the left has a cross slope of 9.1%, which is equivalent to the slope steepness of 1:11. 114. The designated accessible parking space on the right has a slope of 8.3%, which is equivalent to the slope steepness of 1:12.05. 115. The designated accessible parking space on the right has a cross slope of 8.7%, which is equivalent to the slope steepness of 1:11.49. 116. “General. Floor and ground surfaces shall be stable, firm, and slip resistant and shall comply with 302.” See 2010 Standards §302.1. 117. In the Subject Facility’s parking lot, the ground surface of the designated accessible parking space on the right is cracked, damaged and uneven. 118. “Door and Gate Opening Force. Fire doors shall have a minimum opening force allowable by the appropriate administrative authority. The force for pushing or pulling open a door or gate other than fire doors shall be as follows: 1. Interior hinged doors and gates: 5 pounds (22.2 N) maximum.” See 2010 Standards §404.2.9. 119. 10 pounds of force are required for pushing or pulling open the right exterior hinged door at the Subject Facility, as one enters the restaurant. 120. The left exterior door displayed a sign “Please Use Other Door” with an arrow symbol and could not be opened. 121. “Forward Approach. A portion of the counter surface that is 30 inches (760 mm) long minimum and 36 inches (915 mm) high maximum shall be provided. Knee and toe space complying with 306 shall be provided under the counter. A clear floor or ground space complying with 305 shall be positioned for a forward approach to the counter.” See 2010 Standards §904.4.2. 122. Knee and toe spaces are not provided under the counter in the restaurant at the Subject Facility. 123. The individual Plaintiff, and all others similarly situated, will continue to suffer discrimination and injury without the immediate relief provided by the ADA, as requested herein. In order to remedy this discriminatory situation, the Plaintiff requires an inspection of the Subject Facility in order to measure and photograph architectural barriers that are in violation of the ADA to determine all of the areas of non-compliance with the law. 124. The Defendants have failed to remove architectural barriers to accessibility to the Subject Facility in violation of 42 U.S.C. §12182(b)(2)(A)(iv). 125. Upon information and belief, since 1992 the Defendants have altered the areas in their Subject Facility, which affect, or could affect, access to or usability of their place of public accommodation. 126. The Subject Facility has not been designed, constructed, altered, or maintained in compliance with the accessibility standards of Title III of the ADA. 127. The Defendants have violated their statutory obligation to ensure that their policies, practices and procedures address compliance with the 2010 Standards in that they did not make reasonable accommodations for the individual Plaintiff, and all others similarly situated, and also violated their obligation to remove architectural barriers in order to let disabled individuals enjoy goods and services provided by the public accommodation under their control, thus discriminating against them. 128. To date, the architectural barriers, the removal of which was, and is, readily achievable, and other violations of the ADA, still exist at the Subject Facility and have not been remedied, or altered, in such a way as to effectuate compliance with the provisions of the ADA. 129. Pursuant to the ADA, 42 U.S.C. §12101, §12182, and 28 C.F.R. §36.304, the Defendants were required to make their Subject Facility accessible to persons with disabilities, and should have removed architectural barriers by January 26, 1992. To date, the Defendants have failed to comply with that mandate. 130. The Defendants’ failure to remove the barriers to access constitutes a pattern and practice of intentional disability discrimination and is subject to enforcement under 42 U.S.C. §12188 and 28 C.F.R. §503. 131. It was not structurally impracticable for the Defendants to make the Subject Facility accessible. 132. Removal of all architectural barriers existing at the Subject Facility was, and is, readily achievable by the Defendants. 133. The Defendants may, should and are required to make reasonable accommodations at the Subject Facility and their making them would be readily achievable. 134. Accommodations to the Plaintiff, and other persons similarly situated, and removal of architectural barriers at the Subject Facility by the Defendants, are readily achievable, would not impose an undue hardship on them and would not fundamentally alter the nature of their program, activity, or nature of the business. 135. The Plaintiff has a realistic, credible, existing and continuing threat of discrimination from the Defendants’ non-compliance with the ADA in connection with the Subject Facility. 136. The Defendants’ failure to make their Subject Facility accessible denied the Plaintiff and others, similarly situated, an equal opportunity to participate in, or to benefit from, services, or accommodations, on the basis of their disability. 137. The effect of the practices complained of has been to deprive the Plaintiff, and all other similarly situated individuals, of the full and equal enjoyment of the Subject Facility and to otherwise adversely affect his status as a member of the public interested in accessing the place of public accommodation owned, leased, leased to, constructed, maintained, managed and/or operated by the Defendants. 138. The Subject Facility is not accessible to, or readily usable by, individuals with disabilities. 139. Pursuant to 42 U.S.C. §12188, this Court was vested with the authority to grant the Plaintiff injunctive relief, including an order to alter the Subject Facility, to make it accessible to, and useable by, the Plaintiff, and other similarly situated individuals with disabilities, to the extent required by the ADA, as well as close the Subject Facility until the required modifications are completed. 140. The Defendants’ flagrant disregard for the ADA, and the New York laws, which obligate them to make all readily achievable accommodations and modifications to remove architectural barriers to access and use of their Subject Facility is legally inexcusable. Allowing the Defendants to deleteriously detrimentally prolong their practices would encourage them to continue to blatantly disregard the ADA, the New York State Civil laws, and the New York State and City Human Rights laws, and discriminate against the Plaintiff, and other similarly situated individuals. 141. The inexcusability of the Defendants’ actions is exacerbated by the fact that over 25 years have passed since the effective date of Title III of the ADA. During that time period they operated at a profit, should have accumulated sufficient funds to make alterations and had numerous opportunities to remove the architectural barriers and end discrimination, but intentionally chose not to do so. By intentionally not removing the architectural barriers, which barred the Plaintiff’s access, inconvenienced and embarrassed him, humiliated him and caused him personal injuries, including emotional distress to him, and others similarly situated, the Defendants gave a crystal-clear message to disabled customers that their patronage is neither needed, desired, welcomed, or wanted. SECOND CAUSE OF ACTION Violations of the New York State Human Rights Laws 142. The Plaintiff re-alleges, and incorporates, by this reference, all the allegations set forth in this complaint, as if fully set forth herein. 143. The New York State Human Rights Law, in relevant part, provides the following: It shall be an unlawful discriminatory practice for any person, being the owner, lessee, proprietor, manager, superintendent, agent or employee of any place of public accommodation … because of the … disability … of any person, directly or indirectly, to refuse, withhold from or deny to such person any of the accommodations, advantages, facilities or privileges thereof … to the effect that any of the accommodations, advantages, facilities and privileges of any such place shall be refused, withheld from or denied to any person on account of … disability … . NYS Executive Law §296(2)(a) 144. The Subject Facility is a place of public accommodation, as defined in New York State Human Rights Law §292(9). 145. The Defendants have further violated the New York State Human Rights Law by being in violation of the rights provided under the ADA. 146. The Defendants are in violation of the New York State Human Rights Law by denying the Plaintiff, and others similarly situated, full and safe access to all of the benefits, accommodations and services of the Subject Facility. 147. The Defendants do not provide the Plaintiff, and others similarly situated, with equal opportunity to use their public accommodation. 148. The Defendants have failed to make all readily achievable accommodations and modifications to remove barriers to access in violation of Executive Law §296(2)(c)(iii). 149. As a direct and proximate result of the Defendants’ unlawful discrimination, which is in violation of the Executive Law, the Plaintiff has suffered, and continues to suffer, personal injuries, which include emotional distress, including, but not limited to, humiliation, embarrassment, stress and anxiety. 150. The Defendants have not provided the Plaintiff, and others similarly situated, with evenhanded treatment in violation of New York State Human Rights Law §296. 151. The Defendants’ direct, or indirect, unequal treatment of the Plaintiff, and others similarly situated, was demonstrated when he was discriminated against. 152. The Defendants have, because of the Plaintiff’s disability, directly, or indirectly, refused, withheld from, or denied him the accommodations, advantages, facilities, or privileges of their public accommodation. 153. The Defendants have demonstrated that the patronage, or custom, of the Plaintiff, and other similarly situated individuals, is unwelcome, unwanted, undesirable, unacceptable and objectionable. 154. In violation of the New York State Human Rights Law, the Defendants and their agents discriminated against the Plaintiff. 155. As a direct and proximate result of the Defendants’ unlawful discrimination, which was, and is, in violation of the New York State Human Rights Law, the Plaintiff has suffered, and continues to suffer, personal injuries, such as mental anguish and emotional distress, including, but not limited to, depression, humiliation, stress, embarrassment, anxiety, loss of self-esteem and self-confidence, together with emotional pain and suffering. 156. The Plaintiff requests compensatory damages from each Defendant in the amount of $1,000 under the New York State Human Rights Law, NY CLS Exec §297(9). THIRD CAUSE OF ACTION Violations of the New York State Civil Rights Laws 157. The Plaintiff re-alleges, and incorporates by this reference, all the allegations set forth in this complaint, as if fully set forth herein. 158. The Defendants have violated the Plaintiff’s civil rights on the basis of his disability. 159. Consequently, the Plaintiff is entitled to recover the penalty prescribed by New York State Civil Rights Law §40-c and §40-d, in the amount of $500 for each violation from each Defendant. 160. Pursuant to New York State Civil Rights Law §40-d, the Defendants are guilty of a class A misdemeanor. 161. Notice of this action is being served upon the attorney general, as required by New York Civil Rights Law, §40-d, in accordance with the statute. FOURTH CAUSE OF ACTION Violations of the New York City Human Rights Law 162. The Plaintiff re-alleges, and incorporates by this reference, all the allegations set forth in this complaint, as if fully set forth herein. 163. The New York City Human Rights Law, in relevant part, provides the below. It shall be an unlawful discriminatory practice for any person who is the owner, franchisor, franchisee, lessor, lessee, proprietor, manager, superintendent, agent or employee of any place or provider of public accommodation: 1. Because of any person’s actual or perceived … disability …, directly or indirectly: (a) to refuse, withhold from or deny to such person the full and equal enjoyment, on equal terms and conditions, of any of the accommodations, advantages, services, facilities or privileges of the place or provider of public accommodation; NYC Admin. Code §8-107(4) 164. The Defendants have not reasonably accommodated the Plaintiff, and other disabled individuals, in violation of New York City’s Administrative Code §8-102(4), (16), (17), (18), §8-107(4) and §8-107(15). 165. In violation of the New York City Administrative Code, the Defendants have unlawfully discriminated against the Plaintiff and all others similarly situated. 166. Reasonable accommodations and modifications are necessary to enable the Plaintiff, and all others similarly situated, the ability to enjoy non-restricted access and use of the Defendants’ Subject Facility. 167. In violation of the New York City Administrative Code the owners, operators, lessees, proprietors, managers, agents and/or employees of the Subject Facility have, because of the actual, or perceived, disability of the Plaintiff directly, or indirectly, refused, withheld from, and denied him the accommodations, advantages, facilities, or privileges thereof. 168. In violation of the New York City Administrative Code, on the basis of the Plaintiff’s disability, the Defendants have demonstrated that the patronage, or custom, of the Plaintiff, and all others similarly situated, is unwelcome, objectionable and not acceptable. 169. The Defendants are in violation of the New York City Human Rights Law by denying the Plaintiff full and safe access to all of the benefits, accommodations and services of the Subject Facility. 170. Pursuant to New York City Human Rights Law §8-502(c), notice of this action is being served upon the New York City Commission on Human Rights in accordance with the statute. 171. As a direct and proximate result of the Defendants’ disability discrimination, in violation of the New York City Human Rights Law, the Plaintiff has suffered, and continues to suffer, personal injuries, including mental anguish and emotional distress, including, but not limited to, depression, humiliation, stress, embarrassment, anxiety, loss of self-esteem and self-confidence, emotional pain and suffering. 172. The Plaintiff requests compensatory damages in the amount of $1,000 from each Defendant under the New York City Human Rights Law, NYC Admin. Code §8-125. ATTORNEY’S FEES AND COSTS 173. The Plaintiff had to retain the undersigned counsel for the filing and prosecution of this action. The Plaintiff is entitled to have his reasonable attorney’s fees, including litigation expenses, and costs, including expert fees, paid by the Defendants, pursuant to the ADA, 28 C.F.R. §36.505 and New York Executive Law §297(10). Furthermore, pursuant to the New York City Human Rights Law, the Court may award the prevailing party reasonable attorney’s fees. Under that law’s definition “prevailing” includes a Plaintiff, whose commencement of litigation has acted as a catalyst to effect policy change on the part of the defendant. NYCHRL, in pertinent part, states the below. In any civil action commenced pursuant to this section, the Court, in its discretion, may award the prevailing party reasonable attorney’s fees, expert fees and other costs. For the purposes of this subdivision, the term “prevailing” includes a Plaintiff whose commencement of litigation has acted as a catalyst to effect policy change on the part of the defendant, regardless of whether that change has been implemented voluntarily, as a result of a settlement or as a result of a judgment in such Plaintiff’s favor. The Court shall apply the hourly rate charged by attorneys of similar skill and experience litigating similar cases in New York County when it chooses to factor the hourly rate into the attorney’s fee award. NYC Admin. Code §8-502(g) COMPENSATORY AND STATUTORY MONETARY DAMAGES 174. The Plaintiff requests compensatory damages in the amount of $1,000 from each Defendant under the New York State Human Rights Law, NY CLS Exec §297(9) and the New York City Human Rights Law, NYC Admin. Code §8-125. In calculating compensatory damages under the NYSHRL and the NYCHRL, a Court in the Southern District of New York just a few months ago found relevant the fact that ‘[t]he New York City Human Rights Commission has deemed awards of $1,000 to be sufficient in cases where complainants did not establish any particular damage ‘other than what a decent and reasonable individual would suffer when faced with such ignorant behavior.’ Shalto v. Bay of Bengal Kabob Corp., 2013 WL 867429, (quoting and adapting Kreisler, 2012 WL 3961304, at *14) 175. The Plaintiff requests statutory monetary damages in the sum of $500 from each Defendant to compensate him for their violation of New York Civil Rights Law §40-c and §40-d. New York Civil Rights Law §40-c holds that any person [emphasis added] who shall violate any of the provisions of New York Civil Rights Law §40-d ‘shall for each and every violation thereof be liable to a penalty of not less than one hundred dollars nor more than five hundred dollars, to be recovered by the person aggrieved thereby in any Court of competent jurisdiction in the county in which the defendant shall reside. … [T]his Court has the authority to order Defendant to pay Plaintiff the $500 in statutory damages contemplated by the New York Civil Rights Law for the disability discrimination Plaintiff has suffered…. Shalto v. Bay of Bengal Kabob Corp., 2013 WL 867429 176. The reason the Plaintiff requests $500 from each Defendant, and not a lower amount envisioned by the statutes, is due to the high number and extent of the violations, which were alleged in detail in this complaint. Furthermore, the number of violations may be even greater, and they may be even more extensive, than those alleged here and it is likely that they will be revealed upon inspection of the Subject Facility by an expert. PUNITIVE DAMAGES 177. The Plaintiff requests punitive damages from each Defendant to compensate him for their violation of the New York City Human Rights Law. With respect to punitive damages, “the standard for determining damages under the NYCHRL is whether the wrongdoer has engaged in discrimination with willful or wanton negligence, or recklessness, or a ‘conscious disregard of the rights of others or conduct so reckless as to amount to such disregard.’” Chauca v. Abraham, 885 F.3d 122, 124 (2d Cir. 2018) (quoting Chauca v. Abraham, 30 N.Y.3d 325, 67 N.Y.S.3d 85, 89 N.E.3d 475, 481 (N.Y. 2017)). This standard requires “a lower degree of culpability” than is required for punitive damages under other statutes, as it “requires neither a showing of malice nor awareness of the violation of a protected right.” Id. (quoting Chauca, 89 N.E.3d at 481). Kreisler v. Humane Soc’y of N.Y., 2018 U.S. Dist. LEXIS 171147 INJUNCTIVE RELIEF 178. Pursuant to 42 U.S.C. §12188 this Court is vested with the authority to grant the Plaintiff injunctive relief, including an order to alter the Subject Facility to make it readily accessible to, and useable by, individuals with disabilities to the extent required by the ADA, the New York State Civil Rights Law, the New York State Human Rights Law, the New York City Human Rights Law and close the Subject Facility until the requisite modifications are completed. 179. The Plaintiff requests the Court to issue a permanent injunction enjoining the Defendants from disability discrimination. 180. The Plaintiff requests the Court to issue a permanent injunction and order the Defendants to alter their Subject Facility to make it readily accessible to and usable by individuals with disabilities. To achieve that, the Plaintiff requests the Court to adapt relief ordered in Shariff v. Alsaydi, 2013 WL 4432218. The Plaintiff requests the Court to order the Defendants to prepare architectural plans remedying the violations of the 2010 Standards and to provide the Plaintiff’s counsel with those plans for review within 60 days of the Court’s order. The Plaintiff also requests that the injunction provide him with 30 days to file a motion seeking relief should the Defendants’ proposed architectural plans be inadequate to remedy the 2010 Standards violations specified in this complaint. The Plaintiff further requests that the injunction requires the Defendants to implement the architectural plans and remedy the violations within 60 days of either the Plaintiff’s agreement, or a ruling by the Court stating that the plans are adequate. 181. The Plaintiff requests the Court to issue a permanent injunction requiring the Defendants to make all necessary modifications to the Defendants’ policies, practices and procedures, so that the Plaintiff, and other persons similarly situated, would not be subject to further unlawful discrimination. 182. Injunctive relief is also necessary to order the Defendants to provide auxiliary aid, or service, and/or alternative methods, to allow the Plaintiff, and others similarly situated, to use the place of public accommodation in accordance with Title III of the ADA, the New York State Civil Rights Laws, and the New York State and City Human Rights Laws. DECLARATORY RELIEF 183. The Plaintiff is entitled to declaratory relief for the violations committed by the Defendants, specifying the rights of the Plaintiff, and other persons similarly situated, as to the removal of the architectural barriers from the Subject Facility by the Defendants, and as to their policies, practices, procedures, facilities, goods and services. PRAYER FOR RELIEF WHEREFORE, the Plaintiff hereby respectfully demands judgment against the Defendants, jointly and severally, and requests that this Court: A. Certify this case as a class action; B. Grant a permanent injunction i.) Enjoining the Defendants, their officers, management personnel, employees, agents, successors and assigns from engaging in discrimination based on disability; ii.) Requiring the Defendants to alter their Subject Facility to make it readily accessible to, and usable for, individuals with disabilities; iii.) Compelling the Defendants to make all necessary modifications to their policies, practices and procedures, so that the Plaintiff would not be subject to further discrimination; iv.) Ordering the Defendants to provide auxiliary aids and services, as well as to modify their policies, or procedures, or provide an alternative method, so that the Plaintiff would be able to obtain the full and equal enjoyment of the Subject Facility owned, operated, maintained, or leased, by the Defendants, in accordance with Title III of the ADA, the New York State Civil Rights Laws, and the New York State and City Human Rights Laws; and v.) Ordering the Defendants to make the Subject Facility readily accessible to and usable by individuals with disabilities. C. Enter declaratory judgment specifying the Defendants’ violations of the ADA, the New York State Civil laws, the New York State and City Human Rights laws, and declare the rights of the Plaintiff, and other persons similarly situated, as to the Defendants’ policies, procedures, facilities, goods and services offered to the public; D. Enter declaratory judgment specifying that the Subject Facility owned, operated, leased, controlled, maintained and/or administered by the Defendants violates the ADA, the New York State Civil Rights Law, and the New York State and City Human Rights laws; E. Enter an order requiring the Defendants to alter their Subject Facility and amenities to make it accessible to, and usable by, individuals with disabilities to the full extent required by Title III of the ADA, the New York State Civil Rights Law, and the New York State and City Human Rights laws; F. Hold each of the Defendants liable for $500 in statutory monetary damages for each violation and awards that sum to the Plaintiff pursuant to the New York State Civil Rights Laws §40-c and §40-d; G. Hold each of the Defendants liable for compensatory damages in the amount of $1,000 under the New York State and City Human Rights laws. H. Hold each of the Defendants liable for punitive damages for their violation of the New York City Human Rights Law. I. Find the Defendants guilty of class A misdemeanor pursuant to New York State Civil Rights Law §40-d; J. Retain its jurisdiction over the Defendants until their unlawful practices, acts and omissions no longer exist; K. Find that the Plaintiff is a prevailing party in this litigation and award attorney’s fees, expert fees, costs and expenses, together with such other and further relief at law, or in equity, to which the Plaintiff, and other persons similarly situated, may be entitled; and L. Award such other and further relief as it deems necessary, just and proper. JURY DEMANDED The Plaintiff demands a trial by jury of all the issues of fact and damages. Signed: April 1, 2020 Michael Grinblat, Esq. (4159752) Law Offices of Michael Grinblat 817 Broadway, Fourth Floor New York, NY 10003 Tel: (347) 796-0712 Fax: (212) 202-5130 [email protected] Attorney for the Plaintiff

civil rights, immigration, family

bqI7CYcBD5gMZwczffnc

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION ) Tiffany Bromirski on behalf of herself ) and all others similarly situated, ) ) CASE NO. Plaintiff, ) ) v. ) JURY TRIAL DEMANDED ) International Follies, Inc. d/b/a ) The Cheetah and William Hagood, ) ) Defendants. ) COMPLAINT FOR VIOLATING THE FAIR LABOR STANDARDS ACT COMES NOW Tiffany Bromirski (hereinafter “Plaintiff”), on behalf of herself and all others similarly situated, and brings this collective action against International Follies doing business as the “Cheetah” and Mr. Willam Hagood (hereinafter “Defendants”) respectfully showing the Court as follows: INTRODUCTION 1. Defendants operate a strip club in Fulton county commonly known as the “Cheetah” that failed to pay Plaintiff and all others similarly situated the minimum wage and substantial overtime for hours worked. Indeed not only did they fail to pay a single penny in wages, they tricked the Plaintiff and all -1- others similarly situated into paying each of them to work at the Cheetah. Defendant’s failure to pay the minimum wage and overtime wages to Plaintiff and all others similarly situated violated 29 U.S.C. §§ 206 and 207 of the Fair Labor Standards Act, 29 U.S.C. § 201 et. seq. (“FLSA”) because the Plaintiff and all other similarly situated employees do not satisfy the requirements of any applicable exemption under the FLSA. 2. There are numerous similarly situated current and former employees of Defendants who were compensated improperly in violation of the FLSA and who would benefit from the issuance of a Court Supervised Notice of the instant lawsuit and the opportunity to join in the present lawsuit. Upon information and belief there are more than 100 potential Plaintiffs. More precise information on class size will be obtained during discovery. 3. Former and current similarly situated employees are known to Defendants, are readily identifiable by Defendants, and can be located through Defendant’s records. 4. Therefore, Named Plaintiff should be permitted to bring this action as a collective action for and on behalf of herself and those employees similarly -2- situated, pursuant to the “opt-in” provisions of the FLSA, 29 U.S.C. § 216(b). 5. As a result of Defendants violation of the FLSA, Plaintiff and all others similarly situated seek minimum and overtime wages, liquidated damages, interest, and attorneys’ fees and costs pursuant to 29 U.S.C. § 216 for the period commencing three (3) years prior to the filing of this Complaint. PARTIES AND SERVICE 6. Plaintiff is a current employee of Defendants. Plaintiff has been employed by Defendants since approximately October, 2009 and has been on leave since February 2013. Plaintiff is a resident within the Northern District of Georgia. 7. Defendant International Follies, Inc. is a Georgia for profit Corporation with its principal place of business located at 887 Spring St NW Atlanta, GA 30308. On information and belief Defendant International Follies is the legal owner of the Cheetah club. Defendant may be served with a copy of the summons and complaint by leaving a copy with its -3- registered agent for service Mr. William Hagood located at 887 Spring St NW Atlanta, GA 30308. 8. Defendant William Hagood is a natural person that exercises complete control over all the operations and procedures at the establishment known as the Cheetah located at 887 Spring St NW Atlanta, GA 30308. On information and belief Defendant Hagood is the beneficial owner of the Cheetah and is a resident within the Northern District of Georgia. Defendant Hagood may be served with a copy of the summons and complaint at the following address: 887 Spring St NW, Atlanta, GA 30308. JURISDICTION AND VENUE 9. This Court has subject matter jurisdiction over federal questions raised under the FLSA pursuant to 28 U.S.C.S. §§ 1331 and 1337. 10. Venue is proper in the Northern District of Georgia, under 28 U.S.C. §1391(b), since Defendant is a citizen in this judicial district. In addition, a substantial part of the events or omissions giving rise to the claims occurred in this judicial district at the address commonly known as 887 Spring St NW, Atlanta, GA 30308 located within the Northern District of Georgia. -4- FACTUAL ALLEGATIONS 11. Plaintiff, on behalf of herself and other similarly situated current and former employees, brings this Collective Action against Defendants under the Fair Labor Standards Act, 29 U.S.C. § 201, et. seq. (“FLSA”) for failure to pay minimum wage and overtime compensation. 12. At all times for the three years prior to the filing of the Complaint in this matter, Defendants have employed female entertainers at the Cheetah. 13. At all times for the three years prior to the filing of the instant complaint, Defendants have improperly categorized all entertainers working at the Cheetah as “independent contractors”. 14. At all times for the three years prior to the filing of the instant complaint, Defendants have not required entertainers to have any specialized training or background. Defendants have, however: established specific work schedules for entertainers; required entertainers to dance at specified times and in a specified manner on stage and for customers; regulated entertainers’ attire and interactions with customers; set the price entertainers -5- were allowed to charge for dances; required entertainers to attend meetings at Defendants’ business; financed all advertising and marketing efforts undertaken on behalf of the Cheetah; made capital investments in the facilities, maintenance, sound system, lights, food, beverage and inventory; and made all hiring decisions regarding waitstaff, security, entertainer, managerial and all other employees at the Cheetah. 15. Defendants have established a variety of written guidelines and policies which govern entertainers conduct at the Cheetah. 16. At all times for the three years prior to the filing of the instant complaint, Defendants have required entertainers, including Named Plaintiff and all others similarly situated, to pay a specific amount, often referred to as a “tip out” or a “bar fee” in order to work on any given shift. 17. The specific amount entertainers, including Named Plaintiff, were required to pay has varied over the last three years, but a single schedule has been in place for all entertainers at any given time. -6- 18. The required bar fee or tip out the Named Plaintiff has paid generally has been at least $100 per shift. 19. If entertainers are late for work, fail to appear for a scheduled shift, or are deemed to have violated any of the Cheetah’s rules, they are charged additional fees or fines. 20. Named Plaintiff has been subject to a variety of these fees and fines. 21. The fees described in ¶¶ 16-20 constitute unlawful “kickbacks” to the employer within the meaning of the Fair Labor Standards Act. 22. Named Plaintiff worked over forty hours in some weeks she worked for Defendants. 23. Named Plaintiff and all others similarly situated were also required to attend mandatory meetings at Defendants’ place of business, but were not paid for their attendance at those meetings. -7- 24. Defendants have never paid Plaintiff and all others similarly situated any amount as wages whatsoever. 25. Instead, the only source of work related income received by Plaintiff and all other similarly situated persons were gratuities they received from customers. 26. Because Defendants did not pay Plaintiff and all other similarly situated any wages whatsoever, Defendants did not pay Plaintiff and all other similarly situated one-and-a-half times their regular rate of pay when Plaintiff and others similarly situated worked over forty hours in a given workweek. 27. Defendants knew, or showed reckless disregard for the fact that they misclassified these individuals as independent contractors, and accordingly failed to pay these individuals the minimum wage and failed to pay overtime at the required rate under the FLSA. 28. Plaintiff and all others similarly situated were not subject to any -8- exemption under the FLSA. 29. On information and belief Defendants failed to maintain records of the number of hours worked by Plaintiff and others similarly situated. COUNT I DECLARATORY JUDGMENT 30. Plaintiff repeats and realleges the allegations in the preceding paragraphs of this Complaint, and incorporate the same herein by this specific reference as though set forth herein in full. 31. This claim is an action for Declaratory Judgment brought pursuant to the provisions of 28 U .S .C . § 2201 et seq. 32. An actual controversy exists between the parties in this case in regard to the employment status of the Plaintiff and all others similarly situated. 33. Plaintiff and all others similarly situated seek declaratory relief with respect to the legal relations of the parties arising from this controversy and -9- their respective rights and responsibilities under the FLSA, to wit: Plaintiff and all others similarly situated are or were the employees of Defendants. COUNT II OVERTIME CLAIMS (Violation of 29 U.S.C. § 207) 34. Plaintiff repeats and realleges the allegations in the preceding paragraphs of this Complaint, and incorporate the same herein by this specific reference as though set forth herein in full. 35. Defendants are the “employer” and employ Plaintiff and the Collective Action Members as “employees” within the meaning of the FLSA, 29 U.S.C. § 203(d). 36. Defendants are engaged in “commerce” and/or in the production of “goods” for “commerce.” 37. Defendants are an enterprise engaged in commerce within the meaning of the FLSA, 29 U.S.C. § 203(s)(1), because they have employees engaged in commerce, and because their annual gross volume of sales made is more than $500,000. -10- 38. Plaintiff consents to sue in this action pursuant to 29 U.S.C. § 216(b). A consent to sue executed by each Plaintiff is attached hereto and incorporated herein as Exhibit “A”. 39. Defendants misclassified Plaintiff and all others similarly situated as an independent contractor. 40. Defendants failed to pay Plaintiff and all others similarly situated wages at a rate of one and one-half (1 ½) times her regular rate, for hours worked in excess of forty (40) hours per week, in violation of 29 U.S.C. § 207. 41. Defendants knowingly, intentionally and willfully violated the FLSA. 42. Throughout the relevant period of this lawsuit, there is no evidence that Defendants’ conduct that gave rise to this action was in good faith and based on reasonable grounds for believing that their conduct did not violate the FLSA. -11- 43. Due to Defendants’ FLSA violations, Plaintiff and all others similarly situated are entitled to recover from Defendant, unpaid overtime compensation and an equal amount in the form of liquidated damages, as well as reasonable attorneys’ fees and costs of the action, including interest, pursuant to 29 U.S.C. § 216(b), all in an amount to be determined at trial. COUNT III MINIMUM WAGE CLAIM (Claims for Violation of 29 U.S.C. § 206) 44. Plaintiff repeats and realleges the allegations in the preceding paragraphs of this Complaint, and incorporate the same herein by this specific reference as though set forth herein in full. 45. Defendants are an “employer” and employ Plaintiff and all others similarly situated as “employees” within the meaning of the FLSA, 29 U.S.C. § 203(d). 46. Defendants are engaged in “commerce” and/or in the production of “goods” for “commerce.” 47. Defendant operates an enterprise engaged in commerce within the -12- meaning of the FLSA, 29 U.S.C. § 203(s)(1), because it has employees engaged in commerce, and because its annual gross volume of sales made is more than $500,000. 48. Plaintiff consents to sue in this action pursuant to 29 U.S.C. § 216(b). 49. A consent to sue executed by the Plaintiff is attached hereto and incorporated herein as Exhibit “A”. 50. Defendants misclassified Plaintiff and all others similarly situated as an independent contractor. 51. Defendants failed to pay Plaintiff and all others similarly situated the minimum wage in violation of 29 U.S.C. § 206. 52. Based upon the conduct alleged herein, Defendants knowingly, intentionally and willfully violated the FLSA by not paying Plaintiff and all others similarly situated the minimum wage under the FLSA 53. Throughout the relevant period of this lawsuit, there is no evidence -13- that Defendants’ conduct that gave rise to this action was in good faith and based on reasonable grounds for believing that their conduct did not violate the FLSA. 54. Due to Defendants’ FLSA violations, Plaintiff and all others similarly situated are entitled to recover from Defendants, minimum wage compensation and an equal amount in the form of liquidated damages, as well as reasonable attorneys’ fees and costs of the action, including interest, pursuant to 29 U.S.C. § 216(b), all in an amount to be determined at trial. DEMAND FOR JURY TRIAL 55. Plaintiff, on behalf of herself and all others similarly situated individuals, demand a trial by jury on all their claims so triable. WHEREFORE, Plaintiff respectfully prays that this Court grant relief as follows: a. As to Count I issue a declaratory judgment that (i) Plaintiff and all others similarly situated are employees and Defendants are their joint employer and (ii) the practices complained of herein are unlawful under the FLSA; -14- b. As to Count II award Plaintiff and all others similarly situated judgment for lost overtime compensation calculated at one and one-half times the regular rate that Plaintiff would have received but for Defendants unlawful conduct, as well as liquidated damages, interest and attorneys’ fees as provided for under the FLSA; c. As to Count III award Plaintiff and all others similarly situated judgment for wages at the minimum rate, as well as liquidated damages, interest and attorneys’ fees as provided for under the FLSA; d. Award Plaintiff and all others similarly situated costs of this action, including expert fees; e. Grant Plaintiff and all others similarly situated a jury trial on all issues so triable; -15- f. Grant leave to add additional plaintiffs by motion, the filing of written consent forms, or any other method approved by the Court; and g. Award Plaintiff and all others similarly situated such other and further relief as the Court may deem just and proper. /s/ Harlan S. Miller, III Harlan S. Miller, III, Esq. Of Counsel Parks, Chesin & Walbert, P.C. 75 14th Street, 26th Floor |Atlanta, Georgia 30309 (404) 873-8000 (404) 873-8050 [email protected] Attorney for Plaintiff /s/ Stephen L. Minsk Stephen L. Minsk, Esq. State Bar No. 511366 1451 Biltmore Drive N.E. Atlanta, GA 30329 770 -861-7201 Telephone Attorney for Plaintiff [email protected] -16- CERTIFICATE OF COMPLIANCE This is to certify that the foregoing has been prepared using Times New Roman 14 point font. This 11th day of October, 2013. /s/ Harlan S. Miller Harlan S. Miller, III, Esq. Of Counsel Parks, Chesin & Walbert, P.C. 75 14th Street, 26th Floor Atlanta, Georgia 30309 (404) 873-8000 (404) 873-8050 Attorney for Plaintiff -17-

employment & labor

BUdx_YgBF5pVm5zYO1ag

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK CIVIL DIVISION CHRISTOPHER A. YENTZER, } ON BEHALF OF HIMSELF AND } ALL OTHERS SIMILARLY SITUATED, } } Plaintiff, } Civil Action, File No. v } 7:17-cv-5362-CS } LINDA STRUMPF AND } U.S. EQUITIES CORP. } } Defendants. } AMENDED COMPLAINT DEMAND FOR TRIAL BY JURY Plaintiff, Christopher A. Yentzer [hereinafter “Yentzer”] on behalf of himself and all others similarly situated, by and through his attorney, Mitchell L. Pashkin, Esq., complains of Defendants, Linda Strumpf [hereinafter “Strumpf”] and U.S. Equities Corp. [hereinafter “US Equities”], and alleges as follows: 1. This court has jurisdiction of this case pursuant to 15 U.S.C. § 1692k(d), 28 USCS § 1331, and/or pursuant to 28 USCS § 1332 (d)(2)(A). 2. Venue in this district is proper based on each Defendant’s regular transaction of business within this district. Venue in this district also is proper based on US Equities possessing a license from the New York City Department of Consumer Affairs to operate as a “Debt Collection Agency” in New York City which includes this district. Each Defendant also derives substantial revenue from services rendered in this district. The aforementioned transaction of business and services includes but is not limited to the collection of debt from consumers who reside in this district. 3. Venue in this district also is proper in light of the occurrences which form the basis for this Complaint having occurred in whole or in part in this district. 4. Plaintiff demands a trial by jury pursuant to FRCP 38 (b). 5. Yentzer is a natural person who resides at 676 Beck Avenue, Henderson, NC 27536. 6. Yentzer is a “consumer” as defined by 15 U.S.C. § 1692(a)(3) of the FDCPA. 7. US Equities is a New York Domestic Business Corporation with a principal place of business located at 244 Colonial Road, New Canaan, CT 06840. 8. US Equities’ primary business consists of the purchases of defaulted debts due from consumers from entities which currently own the defaulted debts and then, via agents, attorneys, and/or third-party debt collectors, attempting to collect these defaulted debts from consumers. 9. The aforementioned consumers include New York City residents. 10. Per § 20-490 of the New York City Administrative Code, any business that seeks to collect personal or household debts from New York City residents must have a Debt Collection Agency License from the New York City Department of Consumer Affairs. 11. Pursuant to New York City Local Law No. 15, a Debt Collection Agency includes debt buyers but excludes creditors. Under Section 20-489 of the New York City Administrative Code, a “Debt Collection Agency” is defined as follows: “…shall also include a buyer of delinquent debt who seeks to collect such debt either directly or through the services of another by, including but not limited to, initiating or using legal processes or other means to collect or attempt to collect such debt.”. 12. US Equities possesses a license from the New York City Department of Consumer Affairs to operate as a “Debt Collection Agency”. 13. As revealed from a search of the New York State Unified Court System eCourts website (“eCourts”), on a consistent and regular basis over a period of numerous years through the present US Equities has been the plaintiff in numerous consumer debt collection lawsuits where the lawsuit alleged that US Equities become the owner of the debt from the original creditor. 14. Based upon the allegations in the above six paragraphs, the principal purpose of US Equities is the collection of debts using the instrumentalities of interstate commerce, including mails and telephone; and US Equities is a “debt collector” as defined by 15 U.S.C. § 1692a(6). 15. Strumpf is an attorney with a place of business in New York located at 69 Fox Run, South Salem, NY 10590 and with a principal place of business at 244 Colonial Road, New Canaan, CT 06840. 16. As revealed from a search of the New York State Unified Court System eCourts website (“eCourts”), on a consistent and regular basis over a period of numerous years through the present Strumpf was the plaintiff’s attorney in numerous consumer debt collection lawsuits. Also, on a consistent and regular basis over a period of numerous years through the present, Strumpf, without using the courts, has collected and attempted to collect debts from consumers on behalf of an owner of the debt. 17. Upon information and belief, based in part on the aforementioned eCourts search, Strumpf’s legal practice does not consist of any type of legal work other than debt collection or only a small or minimal portion of her legal work consists of legal work other than debt collection. 18. Based upon the allegations in the above paragraph, the principal purpose of Strumpf is the collection of debts using the instrumentalities of interstate commerce, including mails and telephone; and she regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due to another; and Strumpf is a “debt collector” as defined by 15 U.S.C. § 1692a(6) of the FDCPA. 19. Upon information and belief, US Equities issued work standards, directives, and/or guidelines to Strumpf which contained instructions, controls, and rules governing the steps Strumpf could and could not take to attempt to collect debts including the filing and prosecution of lawsuits, and obtaining and maintaining judgments. Upon information and belief, these instructions, controls, and rules included the types of account documents Strumpf could request or obtain at various stages of an attempt to collect a debt and at various stages of a debt collection lawsuit. Upon information and belief, these instructions, controls, and rules also included the steps, if any, which Strumpf was required to take to investigate the accuracy of the address which Strumpf had for a consumer before filing and/or serving a lawsuit against a consumer. Upon information and belief, these instructions, controls, and rules controlled and/or substantially effected all the actions Strumpf took regarding the State Court Action. 20. All the actions alleged in this Complaint taken by Strumpf were taken by Strumpf as the attorney and/or “debt collector” for the “debt collector” US Equities. 21. On October 6, 2003, Strumpf, as the attorney and “debt collector” for the “debt collector” US Equities, filed a lawsuit against Yentzer in the City Court of the City of Canandaigua, Ontario County under Index No. CV-000779-03/CA (“State Action”) to recover a debt owed to the “debt collector” US Equities. See Exhibit A. 22. Strumpf, as the attorney and “debt collector” for the “debt collector” US Equities, obtained a Judgment against Yentzer in the State Action. See Exhibit B. 23. On or about July 7, 2015, Strumpf, as the attorney and “debt collector” for the “debt collector” US Equities, served an Information Subpoena and/or Restraining Notice dated July 7, 2015 on RTP Federal Credit Union in an attempt to find assets of Yentzer which could be restrained and then levied in order to enforce the aforementioned Judgment. 24. As a result of the aforementioned Information Subpoena and/or Restraining Notice, on July 15, 2015, RTP Federal Credit Union restrained Yentzer’s account. See Exhibit C. 25. On or about July 15, 2015, Yentzer learned that RTP Federal Credit Union had restrained his account. See Exhibit D. Prior to Yentzer learning on or about July 15, 2015 that RTP Federal Credit Union had restrained his account, Yentzer had no knowledge of the State Action or the resulting Judgment. See Exhibit D. 26. Exhibit B was an attempt to enforce a Judgment obtained as a result of the State Action which, upon information and belief, was based upon the original creditor giving Plaintiff and/or his ex-wife, as individuals, a loan to purchase a vehicle for his and/or her individual use, and then, as individuals, failing to pay back this loan. 27. The State Action also was filed and the resulting Judgment obtained against Yentzer in his individual capacity. 28. Based on the above, the past due debt at issue arose out of a transaction used primarily for personal, family or household purposes, and is therefore a “debt” as that term is defined by 15 U.S.C. § 1692a(5). FIRST CAUSE OF ACTION-CLASS CLAIM 29. Plaintiff repeats and re-alleges the allegations contained in paragraphs 1-28 of this Complaint. 30. Per Exhibit B, Strumpf, as the attorney and “debt collector” for the “debt collector” US Equities, issued the aforementioned Information Subpoena and/or Restraining Notice to RTP Federal Credit Union pursuant to the authority of a New York court. 31. RTP Federal Credit Union is located only in North Carolina. 32. Upon information and belief, RTP Federal Credit Union does not conduct business in New York or does a minimal and/or sporadic amount of business in New York. 33. The New York court pursuant to whose authority the aforementioned Information Subpoena and/or Restraining Notice was issued had no general jurisdiction over RTP Federal Credit Union at the time of the issuance of the aforementioned Information Subpoena and/or Restraining Notice. 34. As regards the aforementioned Information Subpoena and/or Restraining Notice, the New York court pursuant to whose authority the aforementioned Information Subpoena and/or Restraining Notice was issued had no specific jurisdiction over RTP Federal Credit Union at the time of the issuance of the aforementioned Information Subpoena and/or Restraining Notice. 35. Since a New York court has no jurisdiction over RTP Federal Credit Union, Strumpf, as the attorney and “debt collector” for the “debt collector” US Equities, had no legal right to issue the aforementioned Information Subpoena and/or Restraining Notice pursuant to the authority of a New York court. 36. US Equities is vicariously liable for the actions of Strumpf Based on the allegations in paragraphs 19-20 of this Complaint, as a result of Strumpf being a “debt collector” and having taken all the actions alleged in this Complaint as the “debt collector” for the “debt collector” US Equities, via US Equities’ participation in the control and/or supervision of the actions of Strumpf as the “debt collector” for the “debt collector” US Equities, via Strumpf being an agent of US Equities, and/or via the attorney/client relationship between Strumpf and US Equities. 37. Based on the allegations set forth in this Cause of Action, Defendants violated 15 U.S.C. § 1692e, 15 U.S.C. § 1692e(2)(A), 15 U.S.C. § 1692e(5), 15 U.S.C. § 1692e(10), and 15 U.S.C. § 1692f as a result of Strumpf issuing the aforementioned Information Subpoena and/or Restraining Notice to RTP Federal Credit Union. SECOND CAUSE OF ACTION 38. Plaintiff repeats and re-alleges the allegations contained in paragraphs 1-28 of this Complaint. 39. Per Exhibit A, Strumpf, as the attorney and “debt collector” for the “debt collector” US Equities, filed the State Action against Yentzer in 2003. 40. Yentzer had resided in North Carolina since 1997, and resided in North Carolina at the time Strumpf, as the attorney and “debt collector” for the “debt collector” US Equities, filed the State Action against Yentzer. See Exhibit D. 41. Since Yentzer resided in North Carolina at the time Strumpf, as the attorney and “debt collector” for the “debt collector” US Equities, filed the State Action against Yentzer, the court that issued the Judgment never had jurisdiction over Plaintiff; and therefore the Judgment obtained as a result of the State Action was void. 42. Since the Judgment obtained as a result of the aforementioned lawsuit against Yentzer was void, Strumpf, as the attorney and/or “debt collector” for the “debt collector” US Equities, had no legal right to maintain the Judgment. 43. Since the Judgment obtained as a result of the aforementioned lawsuit against Yentzer was void, Strumpf, as the attorney and/or “debt collector” for the “debt collector” US Equities, had no legal right to issue aforementioned Information Subpoena and/or Restraining Notice to RTP Federal Credit Union in an attempt to enforce a Judgment obtained by Strumpf, as the attorney and/or “debt collector” for the “debt collector” US Equities. 44. US Equities is vicariously liable for the actions of Strumpf Based on the allegations in paragraphs 19-20 of this Complaint, as a result of Strumpf being a “debt collector” and having taken all the actions alleged in this Complaint as the “debt collector” for the “debt collector” US Equities, via US Equities’ participation in the control and/or supervision of the actions of Strumpf as the “debt collector” for the “debt collector” US Equities, via Strumpf being an agent of US Equities, and/or via the attorney/client relationship between Strumpf and US Equities. 45. Based on the allegations set forth in this Cause of Action, Defendants violated 15 U.S.C. § 1692e, 15 U.S.C. § 1692e(2)(A), 15 U.S.C. § 1692e(5), 15 U.S.C. § 1692e(10), and 15 U.S.C. § 1692f as a result of Strumpf maintain the Judgment and/or issuing the aforementioned Information Subpoena and/or Restraining Notice to RTP Federal Credit Union. THIRD CAUSE OF ACTION 46. Plaintiff repeats and re-alleges the allegations contained in paragraphs 1-28 of this Complaint. 47. New York state law common law, separate and apart from any New York statute, requires each assignor of a debt to notify the debtor of the assignment of the debt as a prerequisite to the legal right of an assignee of the debt to file a lawsuit against the debtor to attempt to collect the debt and/or as a prerequisite to the legal right of an assignee of the debt to obtain a judgment in any such lawsuit. 48. Yentzer never received any notification from each assignor of a debt of the assignment of the debt. 49. New York state law common law, separate and apart from any New York statute, requires a plaintiff, who is an assignee of a debt, in a lawsuit against a debtor to attempt to collect a debt to produce a compete chain of title as a prerequisite to the legal right of such plaintiff to file such a lawsuit and/or to obtain a judgment in any such lawsuit. 50. Upon information and belief, there never existed a compete chain of title. 51. Based on the above allegations, Strumpf, as the attorney and/or “debt collector” for the “debt collector” US Equities, filed a lawsuit against Yentzer on behalf of US Equities when US Equities had no standing or legal right to file the lawsuit or obtain a Judgment against Yentzer based on the lack of proper notice of assignments of the debt and/or an inability to produce a complete chain of title. 52. US Equities is vicariously liable for the actions of Strumpf Based on the allegations in paragraphs 19-20 of this Complaint, as a result of Strumpf being a “debt collector” and having taken all the actions alleged in this Complaint as the “debt collector” for the “debt collector” US Equities, via US Equities’ participation in the control and/or supervision of the actions of Strumpf as the “debt collector” for the “debt collector” US Equities, via Strumpf being an agent of US Equities, and/or via the attorney/client relationship between Strumpf and US Equities. 53. Based on the allegations set forth in this Cause of Action, Defendants violated 15 U.S.C. § 1692e, 15 U.S.C. § 1692e(2)(A), 15 U.S.C. § 1692e(5), 15 U.S.C. § 1692e(10), and 15 U.S.C. § 1692f by filing the State Court Action and/or obtaining the Judgment. FOURTH CAUSE OF ACTION 54. Plaintiff repeats and re-alleges the allegations contained in paragraphs 1-28 of this Complaint. 55. Based on her issuance of the aforementioned Information Subpoena and/or Restraining Notice to RTP Federal Credit Union in North Carolina, prior to the time Strumpf, as the attorney and/or “debt collector” for the “debt collector” US Equities, signed and issued the aforementioned Information Subpoena and/or Restraining Notice to RTP Federal Credit Union in an attempt to enforce a Judgment, Strumpf had information to indicate that Plaintiff did not reside in New York. 56. Upon information and belief, at all times prior or subsequent to the time that Strumpf filed the State Action, Strumpf was unable to obtain from Plaintiff any response to Strumpf’s efforts to contact Plaintiff. 57. Upon information and belief, the State Action was served on Plaintiff, if at all, via the “nail and mail” method per CPLR 308(4) rather than via personal delivery of the State Action to Plaintiff or a person authorized to accept service on his behalf. 58. Notwithstanding the above, upon information and belief, Strumpf, before signing and issuing the aforementioned Information Subpoena and/or Restraining Notice to RTP Federal Credit Union, did not review her file to ascertain whether there was an issue with the validity of the Judgment she obtained as a result of Plaintiff not residing in New York at the time she filed the State Action. 59. Based upon the above allegations, Strumpf, as the attorney and/or “debt collector” for the “debt collector” US Equities, did not fulfill her legal obligation to conduct a meaningful attorney review before she began to attempt to attempt to enforce the Judgment and did not fulfill her legal obligation to conduct a meaningful attorney review before signing and issuing the aforementioned Information Subpoena and/or Restraining Notice to RTP Federal Credit Union in an attempt to enforce a Judgment obtained by Strumpf, as the attorney and/or “debt collector” for the “debt collector” US Equities. 60. US Equities is vicariously liable for the actions of Strumpf Based on the allegations in paragraphs 19-20 of this Complaint, as a result of Strumpf being a “debt collector” and having taken all the actions alleged in this Complaint as the “debt collector” for the “debt collector” US Equities, via US Equities’ participation in the control and/or supervision of the actions of Strumpf as the “debt collector” for the “debt collector” US Equities, via Strumpf being an agent of US Equities, and/or via the attorney/client relationship between Strumpf and US Equities. 61. Based on the allegations set forth in this Cause of Action, Defendants violated 15 U.S.C. § 1692e, 15 U.S.C. § 1692e(3), and 15 U.S.C. § 1692f as a result of Strumpf issuing the aforementioned Information Subpoena and/or Restraining Notice to RTP Federal Credit Union. FIFTH CAUSE OF ACTION 62. Plaintiff repeats and re-alleges the allegations contained in paragraphs 1-28 of this Complaint. 63. Per Exhibit A, Strumpf, as the attorney and “debt collector” for the “debt collector” US Equities, filed the State Action against Yentzer in 2003. 64. Yentzer had resided in North Carolina since 1997, and resided in North Carolina at the time Strumpf, as the attorney and “debt collector” for the “debt collector” US Equities, filed the State Action against Yentzer. See Exhibit D. 65. In New York state city courts such as the one in the State Action, the term “judicial district” as set forth in 15 USC 1692i(a)(2) “extends no farther than the boundaries of the city containing that court and the towns within the same county that are contiguous by land thereto”. Hess v. Cohen & Slamowitz, 637 F.3d 117 (2d Cir. 2011). 66. Upon information and belief, the contract for the loan which, upon information and belief, was the subject of the debt in the State Action, was not signed by Plaintiff in the “judicial district” which contains the court in which the State Action was filed. 67. US Equities is vicariously liable for the actions of Strumpf Based on the allegations in paragraphs 19-20 of this Complaint, as a result of Strumpf being a “debt collector” and having taken all the actions alleged in this Complaint as the “debt collector” for the “debt collector” US Equities, via US Equities’ participation in the control and/or supervision of the actions of Strumpf as the “debt collector” for the “debt collector” US Equities, via Strumpf being an agent of US Equities, and/or via the attorney/client relationship between Strumpf and US Equities. 68. Based on the allegations set forth in this Cause of Action, Defendants violated 15 USC 1692i by filing the State Action against Yentzer. CLASS ALLEGATIONS 69. Plaintiff brings this action on behalf of a class pursuant to Fed. R. Civ. P. 23(a) and (b)(3). 70. The class consists of (a) all natural persons (b) who do not reside in New York (c) against whom Defendants within one year of the filing of this lawsuit attempted to enforce a Judgment obtained in a New York court by issuing an Information Subpoena or Restraining Notice to an entity located outside of New York. 71. The class members are so numerous that joinder is impracticable. On information and belief, there are more than 50 members. 72. There are questions of law and fact common to the class members, which common questions predominate over any questions that affect only individual class members. 73. The predominant common question is whether Defendant’s letters violate the FDCPA. 74. Plaintiff will fairly and adequately represent the interests of the class members. Plaintiff has retained counsel experienced in consumer credit and debt collection abuse cases and class actions. 75. A class action is the superior means of adjudicating this dispute. 76. Individual cases are not economically feasible. WHEREFORE, Plaintiff requests the following relief: 1. A Judgment against Defendants in favor of Plaintiff and the class members for statutory and actual damages in an amount to be determined at trial, and costs and attorney’s fees; and 2. Any and all other relief deemed just and warranted by this court. Dated: February 28, 2018 /s/____________________________ Mitchell L. Pashkin, Esq. (MLP-9016) Attorney For Plaintiff 775 Park Avenue, Suite 255 Huntington, NY 11743 (631) 629-7709

consumer fraud

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COMPLAINT CASE NO.: 20-cv-1641 JURY DEMANDED Michael Grinblat (4159752) Law Offices of Michael Grinblat 817 Broadway, Fourth Floor New York, NY 10003 Tel: (347) 796-0712 Fax: (212) 202-5130 [email protected] Attorney for the Plaintiff IN THE UNITED STATES DISTRICT COURT IN AND FOR THE EASTERN DISTRICT OF NEW YORK SEMYON GRINBLAT, individually and on behalf of all others similarly situated, Plaintiff, -against- HYLAN BACHE LLC, JOSEPH A. COSTA, LOUIS C. COSTA, ANTHONY R. COSTA, JOHN DOE 1-X, persons yet unknown, Limited Liability Companies, Partnerships, Corporations 1-X, entities yet unknown, Defendants. CIVIL COMPLAINT SEMYON GRINBLAT (the “Plaintiff”), as and for his complaint against HYLAN BACHE LLC, JOSEPH A. COSTA, LOUIS C. COSTA, and ANTHONY R. COSTA, JOHN DOE 1-X, persons yet unknown, Limited Liability Companies, Partnerships, Corporations 1-X, entities yet unknown (the “Defendants”), respectfully brings before the Court the below allegations. STATEMENT OF THE PLAINTIFF’S CLAIMS 1. This is an action under Title III of the Americans with Disabilities Act of 1990 (the “ADA”) to enjoin unlawful discrimination based on disability. The Plaintiff was discriminated against on the basis of disability and was denied full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of the place of public accommodation owned, leased, controlled, managed, or operated, by the Defendants. 2. The Plaintiff files this action for himself, and those similarly situated, complaining of the violations of Title III of the ADA. This action is brought under ADA 42 U.S.C. §12182, §12183 and §12188(a) – incorporating by reference the remedies and procedures found in 42 U.S.C. §2000a-3, §204 of the Civil Rights Act of 1964 – the ADA’s Accessibility Guidelines, 28 C.F.R. Part 36, subpart D, the 2004 ADA Accessibility Guidelines (“ADAAG”) at 36 C.F.R. Part 1191, appendices B and D, the 2010 ADA Standards for Accessible Design (“2010 Standards”), the Building Code of the State of New York, as well as New York State Civil Rights Law §40-c and §40-d, New York State Human Rights Law §296 and New York City Human Rights Law [Administrative Code] §8-107. JURISDICTION AND VENUE 3. This Court has jurisdiction over this action pursuant to 28 U.S.C. §451, §1331, §1337, §1343, §2201, §2202 and 42 U.S.C.A. §12181, et seq., as it involves federal questions regarding the deprivation of the Plaintiff’s rights under the ADA. 4. This Court has supplemental jurisdiction over the Plaintiff’s allegations arising from the Defendants’ state law violations pursuant to 28 U.S.C. §1367(a). 5. Venue is proper in this district pursuant to 28 U.S.C. §1391(b), because all events, or omissions, giving rise to this action, and alleged herein, occurred in this district. Venue is also proper in this district, because the Defendants’ property, a public accommodation, which is the subject of this action, is located in, and does business within, this judicial district. PARTIES 6. The Plaintiff is a resident of Monmouth County, New Jersey. 7. The Plaintiff has been a resident of Monmouth County, New Jersey, at all times material to this litigation. 8. The Plaintiff is a qualified individual with a disability within the meaning of 42 U.S.C. §12131, who is expressly authorized to bring this action under §308 of the ADA, 42 U.S.C. §12188(a) — incorporating by reference the remedies and procedures found in 42 U.S.C. §2000a-3, §204 of the Civil Rights Act of 1964. 9. The Defendants own, and/or lease (or lease to), and/or have control over, and/or manage, and/or maintain, and/or designed, and/or built, and/or constructed, and/or altered, and/or operate, and at all relevant times operated, the franchised restaurant Dunkin’ Donuts #300645 (“Dunkin’ Donuts”) and the parking lot adjacent to it, which is provided for the use of the restaurant’s customers. 10. The aforementioned restaurant, Dunkin’ Donuts, and the adjacent parking lot (collectively, the “Subject Facility”) are the subjects of this lawsuit. 11. The Subject Facility is located at 2425 Hylan Blvd, Staten Island, NY 10306. 12. Upon information and belief, HYLAN BACHE LLC owns, and/or leases, and/or manages, and/or maintains, and/or has control over, and/or designed, and/or built, and/or constructed, and/or altered, and/or marked, and/or placed signs on, and/or operates, and at all relevant times operated, the franchised restaurant under the name of Dunkin’ Donuts. 13. Upon information and belief, HYLAN BACHE LLC owns, and/or leases, and/or manages, and/or maintains, and/or has control over, and/or designed, and/or built, and/or constructed, and/or altered, and/or marked, and/or placed signs on, and/or operates, and at all relevant times operated, the parking lot adjacent to the franchised restaurant Dunkin’ Donuts, which is provided for the exclusive use of its customers. 14. HYLAN BACHE LLC is a domestic for-profit corporation organized under the laws of New York State. 15. HYLAN BACHE LLC is licensed to conduct business in New York State by the New York State Department of State (“NYS DOS”). 16. NYS DOS maintains entity information for HYLAN BACHE LLC in its Corporation and Business Entity Database. 17. The corporate record for HYLAN BACHE LLC shows no registered agent. 18. The address to which NYS DOS mails process, when accepted on behalf of HYLAN BACHE LLC, is Anton Nader, PO Box 560, Edison, NJ 08818. 19. The Office of the Richmond County Clerk maintains a deed record showing that the commercial lot, on which the Subject Facility is located, is owned by JOSEPH A. COSTA, LOUIS C. COSTA, and ANTHONY R. COSTA as tenants in common. 20. JOSEPH A. COSTA is an individual residing in the State of New York. 21. JOSEPH A. COSTA’s address is 35 Thollen Street, Staten Island, NY 10306. 22. Upon information and belief, JOSEPH A. COSTA owns the Subject Facility. 23. Upon information and belief, JOSEPH A. COSTA manages, and/or maintains, and/or has control over, and/or designed, and/or built, and/or constructed, and/or altered, and/or marked, and/or placed signs on, and/or operates, and at all relevant times operated, the parking lot adjacent to the restaurant Dunkin’ Donuts. 24. Upon information and belief, JOSEPH A. COSTA leases the Subject Facility to HYLAN BACHE LLC. 25. LOUIS C. COSTA is an individual residing in the State of New York. 26. LOUIS C. COSTA’s address is 2718 Avenue N, Brooklyn, NY 11210. 27. Upon information and belief, LOUIS C. COSTA owns, and/or leases, the parking lot of the Subject Facility. 28. Upon information and belief, LOUIS C. COSTA manages, and/or maintains, and/or has control over, and/or designed, and/or built, and/or constructed, and/or altered, and/or marked, and/or placed signs on, and/or operates, and at all relevant times operated, the parking lot adjacent to the restaurant Dunkin’ Donuts. 29. LOUIS C. COSTA, at all relevant times was, and currently is, either an owner, landlord, and/or lessor of the commercial lot, on which the Subject Facility is located. 30. Upon information and belief, LOUIS C. COSTA leases the Subject Facility to HYLAN BACHE LLC. 31. ANTHONY R. COSTA is an individual residing in the State of New York. 32. ANTHONY R. COSTA’s address is 46 Forest Road, Staten Island, NY 10304. 33. Upon information and belief, ANTHONY R. COSTA owns, and/or leases, the parking lot of the Subject Facility. 34. Upon information and belief, ANTHONY R. COSTA manages, and/or maintains, and/or has control over, and/or designed, and/or built, and/or constructed, and/or altered, and/or marked, and/or placed signs on, and/or operates, and at all relevant times operated, the parking lot adjacent to the restaurant Dunkin’ Donuts. 35. ANTHONY R. COSTA, at all relevant times was, and currently is, either an owner, landlord, and/or lessor of the commercial lot, on which the Subject Facility is located. 36. Upon information and belief, ANTHONY R. COSTA leases the Subject Facility to HYLAN BACHE LLC. 37. The Subject Facility is a public accommodation within the meaning of Title III of the ADA, 42 U.S.C. §12181(7)(B) and 28 C.F.R. §36.104 Place of public accommodation (2), the New York State Human Rights Law §292(9) and the New York City Human Rights Law, Admin. Code of the City of New York, §8-107(4). 38. Defendants JOHN DOE 1-X and Limited Liability Companies, Partnerships and Corporations 1-X are persons or entities yet unknown, but who or which might share liability as owners or tenants of the Subject Facility. At all relevant times they might have been, and currently might be, either owners, lessors, or operators of the commercial real estate lot in Richmond County, on which the Subject Facility is located, and of the building in which it operates. Either one or several of them might be a landlord and lease its/their building and land, on which the parking lot of the Subject Facility is located, to the defendant HYLAN BACHE LLC. 39. The Plaintiff reserves the right to amend this Complaint to add such persons or entities as Defendants when discovered during the course of this action. 40. Either one, or all, of the Defendants, jointly, or severally, simultaneously, or at different times, at all relevant times, was an owner, and/or landlord, and/or lessor, and/or lessee, and/or tenant, of the commercial lot in Richmond County, on which the Subject Facility is located, who jointly, or severally, owned, and/or leased, and/or managed, and/or had control over, and/or designed, and/or constructed, and/or built, and/or altered, and/or modified, and/or painted, and/or marked, and/or placed signs on, and/or operated, and/or maintained, the parking lot adjacent to the restaurant, Dunkin’ Donuts, which is provided for the purpose of enabling customers of the restaurant to park at and visit the Subject Facility. 41. Either one of the Defendants, or all of them, jointly or severally, simultaneously, or at different times, at all relevant times, was an owner, and/or landlord, and/or lessor, and/or lessee, and/or tenant, and/or managed, and/or had control over, and/or operated, and/or designed, and/or constructed, and/or built, and/or painted, and/or marked, and/or placed signs on, and/or maintained, and/or altered the building, and/or the restaurant, Dunkin’ Donuts, which is part of the Subject Facility. 42. The Defendants are jointly and severally liable for the design, construction, maintenance, management, control, alteration and/or operation of the parking lot, which is part of the Subject Facility. 43. The Defendants are jointly and severally liable for the design, construction, maintenance, management, control, alteration and/or operation of the restaurant, Dunkin' Donuts, which is part of the Subject Facility. CLASS ACTION 44. The Plaintiff brings this suit for declaratory and injunctive relief, and as a class action, on behalf of all those similarly situated, who, as persons who must use a wheelchair by reason of various disabilities, and who use or desire to use the services and accommodations offered to the public by the Defendants, are protected by, and are beneficiaries of, the ADA, the New York State Civil Rights Laws, and the New York State and City Human Rights Laws. 45. The Plaintiff, complaining for himself, and all other similarly situated disabled individuals in the City and State of New York, hereby alleges the following: a. The class is so numerous that joinder of all members, whether otherwise required or permitted, is impracticable; b. There are questions of law or fact common to the class, which predominate over any questions affecting only individual members; c. The claims or defenses of the representative party are typical of the claims or defenses of the class; d. The representative party will fairly and adequately protect the interests of the class; and e. A class action is superior to other available methods for the fair and efficient adjudication of the controversy. 46. The claims of the Plaintiff are typical of those of the class. The class, similarly to the Plaintiff, was also not able to have access to the Subject Facility because of the architectural barriers. 47. The Plaintiff will fairly and adequately represent and protect the interests of the members of the class, because, in accordance with Fed. R. Civ. P. 23(g), he has retained, and is represented by, an experienced counsel, who has done the work in identifying and investigating potential claims in the action, who knows the applicable law, who may commit resources to representing the class, who would represent the Plaintiff in complex class action litigation, and because the Plaintiff has no interests antagonistic to the members of the class. 48. A class action may be maintained under Fed. R. Civ. P. 23(a), which is satisfied, as prosecuting separate actions by, or against, individual class members would create a risk of adjudications with respect to them that, as a practical matter, would be dispositive of the interests of the other members, not parties to the individual adjudications, or would substantially impair, or impede, their ability to protect their interests. That risk includes, but is not limited to, the Defendants removing the architectural barriers without either compensating members of the class, or paying them compensatory, and/or statutory, and/or punitive damages, for discrimination, discomfort, personal injuries, pain of body and mind, emotional distress, inconvenience and humiliation, which the class members have suffered as a result of the Defendants’ actions, which violated the ADA, the New York State Civil Rights laws, the New York State Human Rights laws, and the New York City Human Rights laws. 49. Class certification of the claims is appropriate pursuant to Fed. R. Civ. P. 23(b)(2), because the Defendants had acted, or refused to act, on grounds that apply generally to the class, so that final injunctive relief, or corresponding declaratory relief, is appropriate respecting the class as a whole. 50. Alternatively, class certification is appropriate under Fed. R. Civ. P. 23(b)(3), because questions of law, or fact, common to class members, clearly predominate over any questions affecting only individual class members, and because a class action is superior to other available methods for the fair and efficient adjudication of this litigation. 51. Judicial economy would be served by allowing the matter to proceed as a class action in that it would likely avoid the burden that would be otherwise placed upon the judicial system by the filing numerous similar suits by people who use a wheelchair in the Eastern District of New York. 52. Clarity, consistency and uniformity in law would also be preserved, as maintenance of this lawsuit as a class action would likely eliminate the possibility of inconsistent verdicts, which may be issued, if plaintiffs were to initiate individual lawsuits against the Defendants. 53. References to the Plaintiff shall be deemed to include the named Plaintiff and each member of the class, unless otherwise indicated. STATUTORY SCHEME 54. On July 26, 1990, the United States Congress enacted the ADA, establishing important civil rights for individuals with disabilities, including the right to full and equal enjoyment of goods, services, facilities, privileges and access to places of public accommodation. 55. Congress made the following findings: a. Some 43,000,000 Americans have one or more physical or mental disabilities, and this number is increasing as the population as a whole is growing older; b. Historically, society has tended to isolate and segregate individuals with disabilities, and, despite some improvements, such forms of discrimination against individuals with disabilities continue to be a serious and pervasive social problem; c. Discrimination against individuals with disabilities persists in such critical areas as employment, housing, public accommodation, education, transportation, communication, recreation, institutionalization, health services, voting and access to public services; d. Individuals with disabilities continually encounter various forms of discrimination, including outright intentional exclusion, the discriminatory effects of architectural, transportation, and communication barriers, overprotective rules and policies, failure to make modifications to existing facilities and practices, exclusionary qualification standards and criteria, segregation, and regulation to lesser services, programs, activities, benefits, jobs or other opportunities; and e. The continuing existence of unfair and unnecessary discrimination and prejudice denies people with disabilities the opportunity to compete on an equal basis and to pursue those opportunities for which our free society is justifiably famous, and costs the United States billions of dollars in unnecessary expenses resulting from dependency and non-productivity. 42 U.S.C. §12101(a)(1)-(3), (5) and (8) 56. Furthermore, Congress also explicitly stated that the ADA had to: a. Provide a clear and comprehensive national mandate for the elimination of discrimination against individuals with disabilities; b. Provide clear, strong, consistent, enforceable standards addressing discrimination against individuals with disabilities; and c. Invoke the sweep of congressional authority, including the power to enforce the fourteenth amendment and to regulate commerce, in order to address the major areas of discrimination faced day-to-day by people with disabilities. 42 U.S.C. §12101(b)(1)(2) and (4) 57. Furthermore, pursuant to 42 U.S.C. §12182 and 28 C.F.R. §36.201(a), the congressional intent was to ensure that no place of public accommodation may discriminate against an individual on the basis of such individual’s disability, with regard to the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations at that place of public accommodation. 58. Congress provided commercial businesses at least 18 months from enactment to make their facilities compliant with the regulations in the ADA. The effective date of Title III of the ADA was January 26, 1992, or January 26, 1993, if a defendant has ten (10), or fewer, employees and gross receipts of $500,000, or less. 42 U.S.C. §12183; 28 C.F.R. §36.508(a). 59. The 2000 United States census indicates that in the civilian non-institutionalized population more than 49.7 million people in the United States have a disability. The census also indicates that more than 1.39 million New Yorkers have a mobility disability. 60. ADA 42 U.S.C. §12182(a), the New York State Civil Rights laws, the New York State Human Rights laws, and the New York City Human Rights laws recognize individuals with disabilities as a protected class. 61. It is unlawful for a private entity, which owns, leases, leases to, or operates a place of public accommodation, to discriminate against an individual with a disability. 42 U.S.C. §12182(b)(1)(A), 28 C.F.R. §36.201(a) and (b). 62. Pursuant to the mandates of 42 U.S.C. §12134(a), on July 26, 1991, the Department of Justice, Office of the Attorney General, promulgated Federal Regulations to implement the requirements of the ADA, known as the ADAAG, 28 C.F.R. §36, under which it may obtain civil penalties of up to $110,000 for the first violation and $150,000 for any subsequent violation. 63. The landlord, who owns the building that houses a place of public accommodation and the tenant, who owns, or operates the place of public accommodation, have a non-delegable duty to comply with the ADA, 28 C.F.R. §36.201(a) and (b), the New York State Civil Rights laws, and the New York State and City Human Rights laws. 64. The Subject Facility affects interstate commerce within the meaning of the ADA, 42 U.S.C. §12181(7)(B), and 28 C.F.R. §36.104 Place of public accommodation (2). 65. Regardless of any contractual provisions stating otherwise, the landlord and owner of the property, which houses the public accommodation, cannot escape liability for the tenant’s failure to comply with the ADA, 28 C.F.R. §36.201, the New York State Civil Rights laws, and the New York State and City Human Rights laws. 66. Discriminatory intent is not required to establish liability under the ADA, the New York State Civil Rights Laws, and the New York State and City Human Rights laws. 67. One type of disability discrimination is the failure of an owner, or an operator, of a public accommodation to remove those architectural barriers, removal of which is readily achievable. A public accommodation shall remove architectural barriers in existing facilities, including communication barriers that are structural in nature, where such removal is readily achievable, i.e., easily accomplishable and able to be carried out without much difficulty or expense. 28 C.F.R. §36.304 68. If an individual with a disability is dissuaded from entering, or receiving services of a place of public accommodation, because of the existence of an architectural barrier, the landlord and tenant are subject to criminal liability for discrimination on the basis of disability. 69. The Defendants must remove all barriers, removal of which is readily achievable, that deny an individual with a disability the opportunity to participate in, or benefit from, services, or accommodations, on the basis of their disability, 28 C.F.R. §36.304. 70. Removal of the architectural barriers is readily achievable by the Defendants. The Plaintiff is informed and believes, and therefore alleges, that the Subject Facility has begun operations, and/or undergone substantial remodeling, repairs and/or alterations, since January 26, 1990, and/or has sufficient income to make readily achievable accessibility modifications. FACTUAL ALLEGATIONS AND FIRST CAUSE OF ACTION The Plaintiff’s Background 71. The Plaintiff, who was born in 1949, is an elderly man aged well beyond his years. He suffers from debilitating diseases and was diagnosed with a neurological condition that affects his walking. The Plaintiff’s treating neurologist determined that he has gait dysfunction, the causes of which include peripheral neuropathy due to diabetes mellitus, chronic right basilar ganglia lacunar infarct and cerebellar ataxia. The Plaintiff’s treating neurologist also determined that he has essential tremor. Furthermore, the Plaintiff has decreased vision due to glaucoma and is blind in the right eye. The Plaintiff’s gait is unsteady and he falls when he walks short distances. His treating neurologist prescribed him a wheelchair and a handicapped parking placard. The Plaintiff obtained the wheelchair and uses it regularly. The New Jersey Motor Vehicle Commission issued him a disability parking placard together with a disability identification card. The disability placard can be used in any car, in which the Plaintiff is travelling. The Plaintiff relies on his wheelchair and parks appropriately in handicapped accessible parking spaces. He also needs appropriate and statutorily mandated access aisle next to that car, so that he may transfer from the car to the wheelchair. The Plaintiff is “disabled” under the statute, which in pertinent part states: Disability means, with respect to an individual, a physical or mental impairment that substantially limits one or more of the major life activities of such individual…. The phrase major life activities means functions such as caring for one’s self, performing manual tasks, walking, seeing, hearing, speaking, breathing, learning and working. 28 C.F.R. §36.104 (italics in original). 72. The Plaintiff must rely on his adult son for the management of his day-to-day care. The son helps the Plaintiff to get to places the Plaintiff wants to visit, such as medical facilities, doctors, pharmacies, stores, supermarkets, restaurants and parks near his home in New Jersey, and near his former home in New York, where he lived for decades, and where his son and friends still live. Insufficient Parking Access and/or No Area for Drop-Offs at the Subject Facility 73. The parking lot of the Subject Facility has 14 parking spaces. 74. The parking lot of the Subject Facility has one accessible parking space, which is so designated by blue marking lines on pavement, as well as by the handicapped symbol painted on the ground. 75. The parking lot of the Subject Facility has one access aisle. 76. The parking lot of the Subject Facility has no van-accessible parking space. 77. In March 2020, the Plaintiff came to the Defendants’ Subject Facility by car with his son. 78. The Plaintiff and his son parked in the handicapped parking space in its parking lot. 79. The Plaintiff’s son placed the wheelchair in the access aisle. 80. The wheelchair rolled down the steep slope of the access aisle. 81. When the Plaintiff was transferring from the car to the wheelchair, he barely avoided falling on the steep surface of the access aisle. 82. The Plaintiff was then not able to move the wheelchair by rotating its wheels, because the access aisle is too steep. 83. Consequently, the Plaintiff had to rely on his son’s assistance to push him, in his wheelchair, up the access aisle. 84. The Plaintiff was then not able to open the door of the restaurant, because the tension of the door’s spring is too high. 85. The Plaintiff had to rely on his son’s assistance to open the restaurant’s door for him. 86. Inside of the restaurant, Dunkin’ Donuts, when the Plaintiff was paying for the items he was purchasing at the register, he was not able to extend his knees and toes under the counter, because there was no space under it for his knees and toes. 87. As a result, the Plaintiff had to rely on his son’s assistance to hand his debit card to the cashier. 88. When the Plaintiff was exiting the restaurant, he was not able to push open the door, because the spring’s tension is too high. 89. The Plaintiff had to rely on his son’s assistance to open the restaurant’s door for him. 90. On the way back to the car, the Plaintiff was not able to control the wheelchair’s movement with his hands, by holding its wheels, because the slope of the access aisle is impermissibly steep. 91. Consequently, the Plaintiff had to rely on his son’s assistance to ride to the car’s door. 92. When the Plaintiff was transferring from the wheelchair to the car in the access aisle, he barely avoided falling on its steep surface. 93. Frustrated, disappointed and humiliated, the Plaintiff left the Subject Facility’s parking lot. 94. The parking lot of the Subject Facility was designed by the Defendants, who disregarded the accessibility requirements of the Plaintiff, and those similarly situated, by failing to accommodate him and facilitate his access to the store, or worse, and much more likely, designed the parking lot of the Subject Facility with the aim of frustrating his efforts as much as possible by way of architectural barriers, making him understand and feel the futility of his exertion and patronage of the Subject Facility, and that his patronage of the restaurant is neither needed, desired, or welcomed by the Defendants. 95. The parking lot of the Subject Facility was not designed to accommodate the needs of the Plaintiff, and other similarly situated individuals. 96. The parking lot of the Subject Facility was not constructed to facilitate access to the restaurant by the Plaintiff and other similarly situated individuals. The Plaintiff Intends to Return to the Subject Facility 97. The Subject Facility is located near Midland Beach on Staten Island, along the way from the Plaintiff’s home to his son’s home. The Plaintiff enjoys visiting that neighborhood and comes there often. 98. The Defendants’ Subject Facility is conveniently located. 99. The Plaintiff intends to visit the Subject Facility, purchase items offered for sale in it, and enjoy its services, as soon as the architectural barriers are removed. Violations of Title III in the Subject Facility 100. The Plaintiff has difficulties gaining access to the Subject Facility, because of the unlawful architectural barriers, and therefore has suffered an injury in fact. 101. Since at least March 2020, the Defendants have engaged in unlawful practices in violation of the ADA, the New York State Civil laws, and the New York State and City Human Rights laws. 102. The Plaintiff has difficulties visiting the Defendants’ Subject Facility, continues to be discriminated against due to the architectural barriers, which remain at the Subject Facility, all in violation of the ADA, the New York State Civil Rights laws, and the New York State and New York City Human Rights laws. 103. The barriers to access the Subject Facility have effectively denied the Plaintiff ability to visit the property and have caused him personal injuries, including, but not limited to, pain of body and mind, emotional distress, embarrassment, humiliation and frustration. 104. Because the Subject Facility is a public accommodation, the Defendants are responsible for complying with ADA 28 C.F.R. §36.304. 105. The numerous architectural barriers to access the Subject Facility have endangered the Plaintiff’s safety. 106. The Defendants’ Subject Facility violates 42 U.S.C. §12181, §12182, §12183, §12204 of the ADA, 28 C.F.R. §36.302 and §36.304. 107. The Department of Justice (“DOJ”) published revised regulations for Title III of the ADA in the Federal Register on September 15, 2010. “These regulations adopted revised, enforceable accessibility standards called the 2010 ADA Standards for Accessible Design, ‘2010 Standards’”. (See, 2010 Standards, Overview) These standards “set minimum requirements – both scoping and technical – for newly designed and constructed, or altered … public accommodation, and commercial facilities to be readily accessible to and usable by individuals with disabilities.” Id. The DOJ provided that document in one publication and it includes the 2010 Standards for public accommodation and commercial facilities, which consist of the Title III regulations at 28 C.F.R. Part 36, subpart D, and the 2004 ADAAG at 36 C.F.R. Part 1191, appendices B and D. 108. The Defendants are discriminating against the Plaintiff, and others similarly situated, because at their Subject Facility they are denying him access to, as well as full and equal enjoyment of, the goods, services, facilities, privileges, advantages and/or accommodations of the building, and its parking lot, by means of the architectural barriers, the existence of which is in violation of the ADA, including, but not limited to, those listed below. 109. “Identification. Parking space identification signs shall include the International Symbol of Accessibility complying with 703.7.2.1. Signs identifying van parking spaces shall contain the designation “van accessible.” Signs shall be 60 inches (1525 mm) minimum above the finish floor or ground surface measured to the bottom of the sign.” See 2010 Standards §502.6. 110. The handicapped parking space identification sign is located 52 inches above the ground surface, measured to the bottom of the sign. 111. “Van Parking Spaces. For every six or fraction of six parking spaces required by §208.2 to comply with §502, at least one shall be a van parking space complying with §502.” See 2010 Standards §208.2.4. 112. The Defendants failed to place a handicapped parking space for a van in the Subject Facility’s parking lot. 113. “Vehicle Spaces. Car parking spaces shall be 96 inches (2440 mm) wide minimum and van parking spaces shall be 132 inches (3350 mm) wide minimum, shall be marked to define the width, and shall have an adjacent access aisle complying with §502.3. EXCEPTION: Van parking spaces shall be permitted to be 96 inches (2440 mm) wide minimum where the access aisle is 96 inches (2440 mm) wide minimum.” See 2010 Standards §502.2. 114. The designated handicapped parking space at the Subject Facility is 107 inches wide. 115. The designated access aisle at the Subject Facility is 60 inches wide. 116. There is no handicapped parking space at the Subject Facility’s parking lot, which complies with the width requirements for a van handicapped parking space. 117. The designated accessible parking space, in combination with the access aisle, fail to comply with the minimum width requirements under §502.2 of the 2010 Standards. 118. There is no handicapped van parking space in the parking lot of the Defendants’ Subject Facility. 119. “Floor or Ground Surfaces. Access aisles are required to be nearly level in all directions to provide a surface for wheelchair transfer to and from vehicles. The exception allows sufficient slope for drainage. Built-up curb ramps are not permitted to project into access aisles and parking spaces because they would create slopes greater than 1:48.” See 2010 Standards, §502.4 & Advisory. 120. “Floor or Ground Surfaces. Parking spaces and access aisles serving them shall comply with 302. Access aisles shall be at the same level as the parking spaces they serve. Changes in level are not permitted. EXCEPTION: Slopes not steeper than 1:48 shall be permitted.” See 2010 Standards §502.4. 121. Thus, maximum permissible slopes of handicapped parking spaces and access aisles serving them must not be steeper than 2.08%. See 2010 Standards §502.4. 122. The Defendants grossly violated §502.4 of 2010 Standards. 123. The designated handicapped parking space has a slope of 7%, which is equivalent to the slope steepness of 1:14.29. 124. The designated handicapped access aisle has a slope of 5.8%, which is equivalent to the slope steepness of 1:17.24. 125. “Door and Gate Opening Force. Fire doors shall have a minimum opening force allowable by the appropriate administrative authority. The force for pushing or pulling open a door or gate other than fire doors shall be as follows: 1. Interior hinged doors and gates: 5 pounds (22.2 N) maximum.” See 2010 Standards §404.2.9. 126. 8 pounds of force are required for pushing or pulling open the main exterior hinged door at the Subject Facility, on the left side of the restaurant, as one enters the restaurant. 127. 12 pounds of force are required for pushing or pulling open the right exterior hinged door at the Subject Facility, on the right side of the restaurant, as one enters the restaurant. 128. “Forward Approach. A portion of the counter surface that is 30 inches (760 mm) long minimum and 36 inches (915 mm) high maximum shall be provided. Knee and toe space complying with 306 shall be provided under the counter. A clear floor or ground space complying with 305 shall be positioned for a forward approach to the counter.” See 2010 Standards §904.4.2. 129. Knee and toe spaces are not provided under the counter in the restaurant at the Subject Facility. 130. The individual Plaintiff, and all others similarly situated, will continue to suffer discrimination and injury without the immediate relief provided by the ADA, as requested herein. In order to remedy this discriminatory situation, the Plaintiff requires an inspection of the Defendants’ Subject Facility in order to measure and photograph architectural barriers that are in violation of the ADA to determine all of the areas of non-compliance with the law. 131. The Defendants have failed to remove architectural barriers to accessibility to the Subject Facility in violation of 42 U.S.C. §12182(b)(2)(A)(iv). 132. Upon information and belief, since 1992, the Defendants have altered the areas in their Subject Facility, which affect, or could affect, access to or usability of their place of public accommodation. 133. The Subject Facility has not been designed, constructed, altered, or maintained in compliance with the accessibility standards of Title III of the ADA. 134. The Defendants have violated their statutory obligation to ensure that their policies, practices and procedures address compliance with the 2010 Standards in that they did not make reasonable accommodations for the individual Plaintiff, and all others similarly situated, and also violated their obligation to remove architectural barriers in order to let disabled individuals enjoy goods and services provided by the public accommodation under their control, thus discriminating against them. 135. To date, the architectural barriers, the removal of which was, and is, readily achievable, and other violations of the ADA, still exist at the Subject Facility and have not been remedied, or altered, in such a way as to effectuate compliance with the provisions of the ADA. 136. Pursuant to the ADA, 42 U.S.C. §12101, §12182, and 28 C.F.R. §36.304, the Defendants were required to make their Subject Facility accessible to persons with disabilities, and should have removed architectural barriers by January 26, 1992. To date, the Defendants have failed to comply with that mandate. 137. The Defendants’ failure to remove the barriers to access constitutes a pattern and practice of intentional disability discrimination and is subject to enforcement under 42 U.S.C. §12188 and 28 C.F.R. §503. 138. It was not structurally impracticable for the Defendants to make the Subject Facility accessible. 139. Removal of all architectural barriers existing at the Subject Facility was, and is, readily achievable by the Defendants. 140. The Defendants may, should and are required to make reasonable accommodations at the Subject Facility and their making them would be readily achievable. 141. Accommodations to the Plaintiff, and other persons similarly situated, and removal of architectural barriers at the Subject Facility by the Defendants, are readily achievable, would not impose an undue hardship on them and would not fundamentally alter the nature of their program, activity, or nature of the business. 142. The Plaintiff has a realistic, credible, existing and continuing threat of discrimination from the Defendants’ non-compliance with the ADA in connection with the Subject Facility. 143. The Defendants’ failure to make their Subject Facility accessible denied the Plaintiff and others, similarly situated, an equal opportunity to participate in, or to benefit from, services, or accommodations, on the basis of their disability. 144. The effect of the practices complained of has been to deprive the Plaintiff, and all other similarly situated individuals, of the full and equal enjoyment of the Subject Facility and to otherwise adversely affect his status as a member of the public interested in accessing the place of public accommodation owned, leased, leased to, constructed, maintained, managed and/or operated by the Defendants. 145. The Defendants’ Subject Facility is not accessible to, or readily usable by, individuals with disabilities. 146. Pursuant to 42 U.S.C. §12188, this Court was vested with the authority to grant the Plaintiff injunctive relief, including an order to alter the Subject Facility, to make it accessible to, and useable by, the Plaintiff, and other similarly situated individuals with disabilities, to the extent required by the ADA, as well as close the Subject Facility until the required modifications are completed. 147. The Defendants’ flagrant disregard for the ADA, and the New York laws, which obligate them to make all readily achievable accommodations and modifications to remove architectural barriers to access and use of their Subject Facility is legally inexcusable. Allowing the Defendants to deleteriously detrimentally prolong their practices would encourage them to continue to blatantly disregard the ADA, the New York State Civil laws, and the New York State and City Human Rights laws, and discriminate against the Plaintiff, and other similarly situated individuals. 148. The inexcusability of the Defendants’ actions is exacerbated by the fact that over 25 years have passed since the effective date of Title III of the ADA. During that time period they operated at a profit, should have accumulated sufficient funds to make alterations and had numerous opportunities to remove the architectural barriers and end discrimination, but intentionally chose not to do so. By intentionally not removing the architectural barriers, which barred the Plaintiff’s access, inconvenienced and embarrassed him, humiliated him and caused him personal injuries, including emotional distress to him, and others similarly situated, the Defendants gave a crystal-clear message to disabled customers that their patronage is neither needed, desired, welcomed, or wanted. SECOND CAUSE OF ACTION Violations of the New York State Human Rights Laws 149. The Plaintiff re-alleges, and incorporates, by this reference, all the allegations set forth in this complaint, as if fully set forth herein. 150. The New York State Human Rights Law, in relevant part, provides the following: It shall be an unlawful discriminatory practice for any person, being the owner, lessee, proprietor, manager, superintendent, agent or employee of any place of public accommodation … because of the … disability … of any person, directly or indirectly, to refuse, withhold from or deny to such person any of the accommodations, advantages, facilities or privileges thereof … to the effect that any of the accommodations, advantages, facilities and privileges of any such place shall be refused, withheld from or denied to any person on account of … disability … . NYS Executive Law §296(2)(a) 151. The Defendants’ Subject Facility is a place of public accommodation, as defined in New York State Human Rights Law §292(9). 152. The Defendants have further violated the New York State Human Rights Law by being in violation of the rights provided under the ADA. 153. The Defendants are in violation of the New York State Human Rights Law by denying the Plaintiff, and others similarly situated, full and safe access to all of the benefits, accommodations and services of the Subject Facility. 154. The Defendants do not provide the Plaintiff, and others similarly situated, with equal opportunity to use their public accommodation. 155. The Defendants have failed to make all readily achievable accommodations and modifications to remove barriers to access in violation of Executive Law §296(2)(c)(iii). 156. As a direct and proximate result of the Defendants’ unlawful discrimination, which is in violation of the Executive Law, the Plaintiff has suffered, and continues to suffer, personal injuries, which include emotional distress, including, but not limited to, humiliation, embarrassment, stress and anxiety. 157. The Defendants have not provided the Plaintiff, and others similarly situated, with evenhanded treatment in violation of New York State Human Rights Law §296. 158. The Defendants’ direct, or indirect, unequal treatment of the Plaintiff, and others similarly situated, was demonstrated when he was discriminated against. 159. The Defendants have, because of the Plaintiff’s disability, directly, or indirectly, refused, withheld from, or denied him the accommodations, advantages, facilities, or privileges of their public accommodation. 160. The Defendants have demonstrated that the patronage, or custom, of the Plaintiff, and other similarly situated individuals, is unwelcome, unwanted, undesirable, unacceptable and objectionable. 161. In violation of the New York State Human Rights Law, the Defendants and their agents discriminated against the Plaintiff. 162. As a direct and proximate result of the Defendants’ unlawful discrimination, which was, and is, in violation of the New York State Human Rights Law, the Plaintiff has suffered, and continues to suffer, personal injuries, such as mental anguish and emotional distress, including, but not limited to, depression, humiliation, stress, embarrassment, anxiety, loss of self-esteem and self-confidence, together with emotional pain and suffering. 163. The Plaintiff requests compensatory damages from each Defendant in the amount of $1,000 under the New York State Human Rights Law, NY CLS Exec §297(9). THIRD CAUSE OF ACTION Violations of the New York State Civil Rights Laws 164. The Plaintiff re-alleges, and incorporates by this reference, all the allegations set forth in this complaint, as if fully set forth herein. 165. The Defendants have violated the Plaintiff’s civil rights on the basis of his disability. 166. Consequently, the Plaintiff is entitled to recover the penalty prescribed by New York State Civil Rights Law §40-c and §40-d, in the amount of $500 for each violation from each Defendant. 167. Pursuant to New York State Civil Rights Law §40-d, the Defendants are guilty of a class A misdemeanor. 168. Notice of this action is being served upon the attorney general, as required by New York Civil Rights Law, §40-d, in accordance with the statute. FOURTH CAUSE OF ACTION Violations of the New York City Human Rights Law 169. The Plaintiff re-alleges, and incorporates by this reference, all the allegations set forth in this complaint, as if fully set forth herein. 170. The New York City Human Rights Law, in relevant part, provides the below. It shall be an unlawful discriminatory practice for any person who is the owner, franchisor, franchisee, lessor, lessee, proprietor, manager, superintendent, agent or employee of any place or provider of public accommodation: 1. Because of any person’s actual or perceived … disability …, directly or indirectly: (a) to refuse, withhold from or deny to such person the full and equal enjoyment, on equal terms and conditions, of any of the accommodations, advantages, services, facilities or privileges of the place or provider of public accommodation; NYC Admin. Code §8-107(4) 171. The Defendants have not reasonably accommodated the Plaintiff, and other disabled individuals, in violation of New York City’s Administrative Code §8-102(4), (16), (17), (18), §8-107(4) and §8-107(15). 172. In violation of the New York City Administrative Code, the Defendants have unlawfully discriminated against the Plaintiff and all others similarly situated. 173. Reasonable accommodations and modifications are necessary to enable the Plaintiff, and all others similarly situated, the ability to enjoy non-restricted access and use of the Defendants’ Subject Facility. 174. In violation of the New York City Administrative Code the owners, operators, lessees, proprietors, managers, agents and/or employees of the Defendants’ Subject Facility have, because of the actual, or perceived, disability of the Plaintiff directly, or indirectly, refused, withheld from, and denied him the accommodations, advantages, facilities, or privileges thereof. 175. In violation of the New York City Administrative Code, on the basis of the Plaintiff’s disability, the Defendants have demonstrated that the patronage, or custom, of the Plaintiff, and all others similarly situated, is unwelcome, objectionable and not acceptable. 176. The Defendants are in violation of the New York City Human Rights Law by denying the Plaintiff full and safe access to all of the benefits, accommodations and services of the Subject Facility. 177. Pursuant to New York City Human Rights Law §8-502(c), notice of this action is being served upon the New York City Commission on Human Rights in accordance with the statute. 178. As a direct and proximate result of the Defendants’ disability discrimination, in violation of the New York City Human Rights Law, the Plaintiff has suffered, and continues to suffer, personal injuries, including mental anguish and emotional distress, including, but not limited to, depression, humiliation, stress, embarrassment, anxiety, loss of self-esteem and self-confidence, emotional pain and suffering. 179. The Plaintiff requests compensatory damages in the amount of $1,000 from each Defendant under the New York City Human Rights Law, NYC Admin. Code §8-125. ATTORNEY’S FEES AND COSTS 180. The Plaintiff had to retain the undersigned counsel for the filing and prosecution of this action. The Plaintiff is entitled to have his reasonable attorney’s fees, including litigation expenses, and costs, including expert fees, paid by the Defendants, pursuant to the ADA, 28 C.F.R. §36.505 and New York Executive Law §297(10). Furthermore, pursuant to the New York City Human Rights Law, the Court may award the prevailing party reasonable attorney’s fees. Under that law’s definition “prevailing” includes a Plaintiff, whose commencement of litigation has acted as a catalyst to effect policy change on the part of the defendant. NYCHRL, in pertinent part, states the below. In any civil action commenced pursuant to this section, the Court, in its discretion, may award the prevailing party reasonable attorney’s fees, expert fees and other costs. For the purposes of this subdivision, the term “prevailing” includes a Plaintiff whose commencement of litigation has acted as a catalyst to effect policy change on the part of the defendant, regardless of whether that change has been implemented voluntarily, as a result of a settlement or as a result of a judgment in such Plaintiff’s favor. The Court shall apply the hourly rate charged by attorneys of similar skill and experience litigating similar cases in New York County when it chooses to factor the hourly rate into the attorney’s fee award. NYC Admin. Code §8-502(g) COMPENSATORY AND STATUTORY MONETARY DAMAGES 181. The Plaintiff requests compensatory damages in the amount of $1,000 from each Defendant under the New York State Human Rights Law, NY CLS Exec §297(9) and the New York City Human Rights Law, NYC Admin. Code §8-125. In calculating compensatory damages under the NYSHRL and the NYCHRL, a Court in the Southern District of New York just a few months ago found relevant the fact that ‘[t]he New York City Human Rights Commission has deemed awards of $1,000 to be sufficient in cases where complainants did not establish any particular damage ‘other than what a decent and reasonable individual would suffer when faced with such ignorant behavior.’ Shalto v. Bay of Bengal Kabob Corp., 2013 WL 867429, (quoting and adapting Kreisler, 2012 WL 3961304, at *14) 182. The Plaintiff requests statutory monetary damages in the sum of $500 from each Defendant to compensate him for their violation of New York Civil Rights Law §40-c and §40-d. New York Civil Rights Law §40-c holds that any person [emphasis added] who shall violate any of the provisions of New York Civil Rights Law §40-d ‘shall for each and every violation thereof be liable to a penalty of not less than one hundred dollars nor more than five hundred dollars, to be recovered by the person aggrieved thereby in any Court of competent jurisdiction in the county in which the defendant shall reside. … [T]his Court has the authority to order Defendant to pay Plaintiff the $500 in statutory damages contemplated by the New York Civil Rights Law for the disability discrimination Plaintiff has suffered…. Shalto v. Bay of Bengal Kabob Corp., 2013 WL 867429 183. The reason the Plaintiff requests $500 from each Defendant, and not a lower amount envisioned by the statutes, is due to the high number and extent of the violations, which were alleged in detail in this complaint. Furthermore, the number of violations may be even greater, and they may be even more extensive, than those alleged here and it is likely that they will be revealed upon inspection of the Subject Facility by an expert. PUNITIVE DAMAGES 184. The Plaintiff requests punitive damages from each Defendant to compensate him for their violation of the New York City Human Rights Law. With respect to punitive damages, “the standard for determining damages under the NYCHRL is whether the wrongdoer has engaged in discrimination with willful or wanton negligence, or recklessness, or a ‘conscious disregard of the rights of others or conduct so reckless as to amount to such disregard.’” Chauca v. Abraham, 885 F.3d 122, 124 (2d Cir. 2018) (quoting Chauca v. Abraham, 30 N.Y.3d 325, 67 N.Y.S.3d 85, 89 N.E.3d 475, 481 (N.Y. 2017)). This standard requires “a lower degree of culpability” than is required for punitive damages under other statutes, as it “requires neither a showing of malice nor awareness of the violation of a protected right.” Id. (quoting Chauca, 89 N.E.3d at 481). Kreisler v. Humane Soc’y of N.Y., 2018 U.S. Dist. LEXIS 171147 INJUNCTIVE RELIEF 185. Pursuant to 42 U.S.C. §12188 this Court is vested with the authority to grant the Plaintiff injunctive relief, including an order to alter the Subject Facility to make it readily accessible to, and useable by, individuals with disabilities to the extent required by the ADA, the New York State Civil Rights Law, the New York State Human Rights Law, the New York City Human Rights Law and close the Subject Facility until the requisite modifications are completed. 186. The Plaintiff requests the Court to issue a permanent injunction enjoining the Defendants from disability discrimination. 187. The Plaintiff requests the Court to issue a permanent injunction and order the Defendants to alter their Subject Facility to make it readily accessible to and usable by individuals with disabilities. To achieve that, the Plaintiff requests the Court to adapt relief ordered in Shariff v. Alsaydi, 2013 WL 4432218. The Plaintiff requests the Court to order the Defendants to prepare architectural plans remedying the violations of the 2010 Standards and to provide the Plaintiff’s counsel with those plans for review within 60 days of the Court’s order. The Plaintiff also requests that the injunction provide him with 30 days to file a motion seeking relief should the Defendants’ proposed architectural plans be inadequate to remedy the 2010 Standards violations specified in this complaint. The Plaintiff further requests that the injunction requires the Defendants to implement the architectural plans and remedy the violations within 60 days of either the Plaintiff’s agreement, or a ruling by the Court stating that the plans are adequate. 188. The Plaintiff requests the Court to issue a permanent injunction requiring the Defendants to make all necessary modifications to the Defendants’ policies, practices and procedures, so that the Plaintiff, and other persons similarly situated, would not be subject to further unlawful discrimination. 189. Injunctive relief is also necessary to order the Defendants to provide auxiliary aid, or service, and/or alternative methods, to allow the Plaintiff, and others similarly situated, to use the place of public accommodation in accordance with Title III of the ADA, the New York State Civil Rights Laws, and the New York State and City Human Rights Laws. DECLARATORY RELIEF 190. The Plaintiff is entitled to declaratory relief for the violations committed by the Defendants, specifying the rights of the Plaintiff, and other persons similarly situated, as to the removal of the architectural barriers from the Subject Facility by the Defendants, and as to their policies, practices, procedures, facilities, goods and services. PRAYER FOR RELIEF WHEREFORE, the Plaintiff hereby respectfully demands judgment against the Defendants, jointly and severally, and requests that this Court: A. Certify this case as a class action; B. Grant a permanent injunction i.) Enjoining the Defendants, their officers, management personnel, employees, agents, successors and assigns from engaging in discrimination based on disability; ii.) Requiring the Defendants to alter their Subject Facility to make it readily accessible to, and usable for, individuals with disabilities; iii.) Compelling the Defendants to make all necessary modifications to their policies, practices and procedures, so that the Plaintiff would not be subject to further discrimination; iv.) Ordering the Defendants to provide auxiliary aids and services, as well as to modify their policies, or procedures, or provide an alternative method, so that the Plaintiff would be able to obtain the full and equal enjoyment of the Subject Facility owned, operated, maintained, or leased, by the Defendants, in accordance with Title III of the ADA, the New York State Civil Rights Laws, and the New York State and City Human Rights Laws; and v.) Ordering the Defendants to make the Subject Facility readily accessible to and usable by individuals with disabilities. C. Enter declaratory judgment specifying the Defendants’ violations of the ADA, the New York State Civil laws, the New York State and City Human Rights laws, and declare the rights of the Plaintiff, and other persons similarly situated, as to the Defendants’ policies, procedures, facilities, goods and services offered to the public; D. Enter declaratory judgment specifying that the Subject Facility owned, operated, leased, controlled, maintained and/or administered by the Defendants violates the ADA, the New York State Civil Rights Law, and the New York State and City Human Rights laws; E. Enter an order requiring the Defendants to alter their Subject Facility and amenities to make it accessible to, and usable by, individuals with disabilities to the full extent required by Title III of the ADA, the New York State Civil Rights Law, and the New York State and City Human Rights laws; F. Hold each of the Defendants liable for $500 in statutory monetary damages for each violation and awards that sum to the Plaintiff pursuant to the New York State Civil Rights Laws §40-c and §40-d; G. Hold each of the Defendants liable for compensatory damages in the amount of $1,000 under the New York State and City Human Rights laws. H. Hold each of the Defendants liable for punitive damages for their violation of the New York City Human Rights Law. I. Find the Defendants guilty of class A misdemeanor pursuant to New York State Civil Rights Law §40-d; J. Retain its jurisdiction over the Defendants until their unlawful practices, acts and omissions no longer exist; K. Find that the Plaintiff is a prevailing party in this litigation and award attorney’s fees, expert fees, costs and expenses, together with such other and further relief at law, or in equity, to which the Plaintiff, and other persons similarly situated, may be entitled; and L. Award such other and further relief as it deems necessary, just and proper. JURY DEMANDED The Plaintiff demands a trial by jury of all the issues of fact and damages. Signed: April 1, 2020 Michael Grinblat, Esq. (4159752) Law Offices of Michael Grinblat 817 Broadway, Fourth Floor New York, NY 10003 Tel: (347) 796-0712 Fax: (212) 202-5130 [email protected] Attorney for the Plaintiff

civil rights, immigration, family

Fs_NDocBD5gMZwczGdZ3

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA Civil Action No.: ~. ~ ALEXANDRE PELLETIER, Individually and on Behalf of All Others Similarly Situated, Plaintiff, v. CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS .JURY TRIAL DEMANDED ENDO INTERNATIONAL PLC, RAJIV KANISHKA LIY ANAARCHIE DESILVA, SUKETU P. UP AD HY A Y, and PAUL V. CAMPANELLI, ) ) ) ) ) ) ) ) ) ) ) ) Defendants. ~~~~~~~~~~~~~~~~~> Plaintiff Alexandre Pelletier ("Plaintiff'), individually and on behalf of all other persons similarly situated alleges the following based upon personal knowledge as to himself and his own acts, and information and belief as to all other matters, based upon inter alia the investigation conducted by his attorneys, which included a review of the Defendants' public documents, conference calls and announcements made by Defendants, United States Securities and Exchange Commission ("SEC") filings, wire and press releases published by and regarding Endo International plc ("Endo" or the "Company"), analysts' reports and advisories about the Company, and information readily obtainable on the Internet. Plaintiff believes that substantial evidentiary support will exist for the allegations set forth herein after a reasonable opportunity for discovery. NATURE OF THE ACTION 1. This is a federal securities class action on behalf of a class consisting of all persons other than Defendants who purchased or otherwise acquired Endo securities between September 28, 2015 and February 28, 2017, inclusive (the "Class Period"). The plaintiffs seek to recover damages caused by Defendants' violations of the federal securities laws and to pursue remedies under Sections lO(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule lOb-5 promulgated thereunder, against the Company and certain of its top officials. 2. Endo International plc provides specialty healthcare solutions. The Company develops, manufactures, markets, and distributes pharmaceutical products and generic drugs. Endo International offers its products to the medical and healthcare industries around the globe. 3. Endo commenced operations in 1997 by acquiring certain pharmaceutical products, related rights, and assets from The DuPont Merck Pharmaceutical Company. Endo is headquartered in Dublin, Ireland, and its Company's stock trades on the NASDAQ Global Select Market ("NASDAQ") under the ticker symbol "ENDP." 4. On September 28, 2015, Endo announced that it had completed its $8.05 billion acquisition of Par Pharmaceutical Holdings, Inc. ("Par Pharmaceutical") from the private investment firm TPG (the "Par Pharmaceutical Acquisition"). Par Pharmaceutical Companies Inc. is a manufacturer and distributor of generic drugs, and operates as a subsidiary of Par Pharmaceutical. 5. Throughout the Class Period, Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts, about the Company's business, operations, and prospects. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) Par Pharmaceutical had colluded with several of its industry peers to fix generic drug prices; (ii) the foregoing conduct constituted a violation of federal antitrust laws; (iii) the competitive advantages of the Par Pharmaceutical Acquisition, which Endo touted to its shareholders as, inter alia, "a compelling opportunity to drive future double- digit growth, serve our customers and build shareholder value," were in fact derived in part from Par Pharmaceutical's illegal conduct and thus unsustainable; (iv) for the same reasons, the "impressive track record of delivering strong operating results" that Endo attributed to Defendant Campanelli in announcing his promotion to Endo's CEO consisted in part of illegal conduct; (v) for the foregoing reasons, Endo' s revenues during the Class Period were in part the result of illegal conduct and likewise unsustainable; and (vi) as a result of the foregoing, Endo's public statements were materially false and misleading at all relevant times. 6. On November 3, 2016, media outlets reported that U.S. prosecutors were considering filing criminal charges by the end of 2016 against Par Pharmaceutical and several other pharmaceutical companies for unlawfully colluding to fix generic drug prices. In an article titled "U.S. Charges in Generic-Drug Probe to Be Filed by Year-End," Bloomberg reported, in relevant part: U.S. prosecutors are bearing down on generic pharmaceutical companies in a sweeping criminal investigation into suspected price collusion, a fresh challenge for an industry that's already reeling from public outrage over the spiraling costs of some medicines. The antitrust investigation by the Justice Department, begun about two years ago, now spans more than a dozen companies and about two dozen drugs, according to people familiar with the matter. The grand jury probe is examining whether some executives agreed with one another to raise prices, and the first charges could emerge by the end of the year, they said. Though individual companies have made various disclosures about the inquiry, they have identified only a handful of drugs under scrutiny, including a heart treatment and an antibiotic. Among the drugmakers to have received subpoenas are industry giants Mylan NV and Teva Pharmaceutical Industries Ltd. Other companies include Actavis, which Teva bought from Allergan Plc in August, Lannett Co., Impax Laboratories Inc., Covis Pharma Holdings Sarl, Sun Pharmaceutical Industries Ltd., Mayne Pharma Group Ltd., Endo International Pie's subsidiary Par Pharmaceutical Holdings and Taro Pharmaceutical Industries Ltd. All of the companies have said they are cooperating except Covis, which said last year it was unable to assess the outcome of the investigation. Allergan, Impax and Sun declined to comment beyond their filings. Representatives of Endo, Covis, Taro and Lannett didn't respond to requests for comment. A Justice Department spokesman declined to comment. (Emphasis added.) 7. On this news, Endo's share price fell $3.54, or 19.48%, to close at $14.63 on November 3, 2016. 8. On March 1, 2017, Endo filed an Annual Report on Form 10-K with the SEC, reporting in full the Company's financial and operating results for the quarter and year ended December 31, 2016. Reflecting the extent to which Par Pharmaceutical's unlawful conduct had previously inflated Endo's revenues, the Company reported a net loss of $3.35 billion, or $15.03 per diluted share, on revenue of $4.01 billion, citing, in part, a 27% increase in cost of revenues and a decrease iri gross margins from 36% in 2015 to 34% in 2016. 9. On this news, Endo's share price fell $0.83, or 6.08%, to close at $12.82 on March 1, 2017. 10. On October 31, 2017, attorneys general from 46 states and the District of Columbia amended their antitrust case on generic drug price-fixing conspiracy against the $75 billion generic drug industry to add 18 new companies, including Endo's wholly-owned subsidiary Par Pharmaceutical Companies, Inc. The states allege these companies violated antitrust laws to artificially inflate the prices of the drugs by agreeing to "collectively raise and/or maintain prices for a particular generic drug," and agreeing to divvy up the market for the drugs to reduce competition by "refusing to bid for particular customers or by providing a cover bid that they knew would not be successful." This in effect "avoided price erosion" and "increased pricing for targeted products without triggering a 'fight to the bottom' among existing competitors." 11. According to the amended complaint, these companies conspired to unreasonably restrain trade, artificially inflate and reduce competition in the generic pharmaceutical industry for the markets of fifteen generic drugs: Acetazolamide, Doxycycline Hyclate Delayed Release, Doxycycline Monohydrate, FosinoprilHydrochlorothiazide, Glipizide-Metformin, Glyburide, Glyburide-Metformin, Leflunomide, Meprobamate, Nimodipine, Nystatin, Paromomycin, Theophylline, Verapamil and Zoledronic Acid. As a result of the conspiracy, "[p]rices for dozens of generic drugs have risen - while some have skyrocketed, without explanation, sparking outrage from politicians, payers and consumers across the country whose costs have doubled, tripled, or even increased 1,000% or more." 12. As a result of Defendants' wrongful acts and om1ss10ns, and the precipitous decline in the market value of the Company's securities, Plaintiff and other Class members have suffered significant losses and damages. JURISDICTION AND VENUE 13. The claims asserted herein arise under Sections lO(b) and 20(a) of the Exchange Act (15 U.S.C. §§78j(b) and 78t(a)) and Rule lOb-5 promulgated thereunder by the SEC (17 C.F.R. § 240.lOb-5). 14. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. §1331 and Section 27 of the Exchange Act (15 U.~.C. §78aa). 15. Venue is proper in this Judicial District pursuant to 28 U.S.C. §1391(b) and Section 27 of the Exchange Act (15 U.S.C. §78aa(c)). The Company's U.S. headquarters are located within this Judicial District. 16. In connection with the acts, transactions, and conduct alleged herein, Defendants directly and indirectly used the means and instrumentalities of interstate commerce, including the United States mail, interstate telephone communications, and the facilities of a national securities exchange. PARTIES 17. Plaintiff, as set forth in the accompanying certification, incorporated by reference herein, purchased Endo common stock during the Class Period, and suffered damages as a result of the federal securities law violations and false and/or misleading statements and/or material omissions alleged herein. 18. Defendant Endo is incorporated under the laws of Ireland, with its principal executive offices located at First Floor, Minerva House, Simmonscourt Road, Ballsbridge, Dublin 4, Ireland. The Company's U.S. headquarters are located at 1400 Atwater Drive, Malvern, Pennsylvania. Endo's common stock trades on the NASDAQ under the ticker symbol "ENDP." 19. Defendant Rajiv Kanishka Liyanaarchchie De Silva ("Silva") served as Endo's Chief Executive Officer ("CEO") and President between March 2013 and September 2016. 20. Defendant Suketu P. Upadhyay ("Upadhyay") served as Chief Financial Officer and Executive Vice President from September 23, 2013 to November 22, 2016. 21. Defendant Paul V. Campanelli ("Campanelli") has served as Endo's CEO and President since September 2016. Prior to the Class Period, Campanelli served as CEO of Par Pharmaceutical from September 2012 until the Par Pharmaceutical Acquisition in September 2015. After the Par Pharmaceutical Acquisition, Campanelli served as the President of the Endo subsidiary Par Pharmaceutical Inc. from September 2015 until his promotion to CEO of Endo in September 2016. 22. The Defendants referenced in ilil 19-21 are sometimes collectively referred to herein as the "Individual Defendants." 23. The Individual Defendants possessed the power and authority to control the contents ofEndo's SEC filings, press releases, and other market communications. The Individual Defendants were provided with copies of the Company's SEC filings and press releases alleged herein to be misleading prior to or shortly after their issuance and had the ability and opportunity to prevent their issuance or to cause them to be corrected. Because of their positions with the Company, and their access to material information available to them but not to the public, the Individual Defendants knew that the adverse facts specified herein had not been disclosed to and were being concealed from the public, and that the positive representations being made were then materially false and misleading. The Individual Defendants are liable for the false statements and omissions pleaded herein. SUBSTANTIVE ALLEGATIONS Background 24. Endo International PLC provides specialty healthcare solutions. The Company develops, manufactures, markets, and distributes pharmaceutical products and generic drugs. Endo International offers its products to the medical and healthcare industries around the globe. Materially False and Misleading Statements Issued During the Class Period 25. The Class Period begins on September 28, 2015, when Endo issued a press release announcing the completion of its acquisition of Par Pharmaceutical. The press release stated, in part: Through this acquisition, Endo has further esta~lished its position as a leading global specialty pharmaceutical company with a fast growing generics business that is among the top five as measured by U.S. sales according to IMS. The acquisition also helps position Endo for long-term double-digit organic growth, enhanced cash flow generation and increased financial flexibility. Endo's generics portfolio now includes an extensive range of in market and R&D stage complex and competitively differentiated dosage forms and delivery systems, with a focus on higher barrier-to-entry and first-to-market products. Endo's combined U.S. Generics segment, which includes Par Pharmaceutical and Qualitest, will be named Par Pharmaceutical, an Endo International Company and will be led by Paul Campanelli, former Chief Executive Officer of Par Pharmaceutical, who will also join Endo's Executive Leadership Team. "We are pleased to announce the completion of this transformational acquisition that has strategically expanded our product portfolio, R&D pipeline, manufacturing and technology capacity and generics expertise for the benefit of patients, customers and shareholders," said Rajiv De Silva, President and CEO of Endo. "We are also pleased to welcome Paul Campanelli, former CEO of Par Pharmaceutical, as Group President, Par Pharmaceutical to the Endo Executive Leadership Team and are excited about his anticipated contributions to the organization. I would like to take the opportunity to thank the leadership team and the hard working employees at Qualitest for continuing to drive the business forward and deliver year-over-year double-digit growth during this period of transition. We look forward to the opportunities ahead for our combined generics business." "I am excited to be joining Endo along with key members of the Par team. We look forward to helping realize the full potential of this new - and highly specialized - generics business," said Mr. Campanelli. "Our combined portfolio now includes an industry-leading range of higher barrier-to-entry and first-to- market products, as well as an extensive and differentiated R&D pipeline. While already one of the fastest growing generics businesses, we see a compelling opportunity to drive future double-digit growth, serve our customers and build shareholder value. " (Emphases added.) 26. On November 9, 2015, Endo filed a Quarterly Report on Form 10-Q with the SEC announcing the Company's financial and operating results for the quarter ended September 30, 2015 (the "Q3 2015 10-Q"). For the quarter, Endo reported a net loss of $1.05 billion, or $5.02 per diluted share, on revenue of $745.73 million, compared to a net loss of $252.08 million, or $1.64 per diluted share, on revenue of $654.12 million for the same period in the prior year. For the Company's U.S. Generic Pharmaceuticals segment, Endo reported net income of $177.96 million on net revenues of $367.93 million for the quarter. 27. The Q3 2015 10-Q contained signed certifications pursuant to the Sarbanes-Oxley Act of 2002 ("SOX") by Defendants Silva and Upadhyay, stating that the financial information contained in the Q3 2015 10-Q was accurate and disclosed any material changes to the Company's internal control over financial reporting. 28. On February 29, 2016, Endo filed an Annual Report on Form 10-K with the SEC announcing the Company's financial and operating results for the quarter and year ended December 31, 2015 (the "2015 10-K"). For the quarter, Endo reported a net loss of $118.46 million, or $0.53 per diluted share, on revenue of$1.07 billion, compared to a net loss of $53.48 million, or $0.34 per diluted share, on revenue of $662.88 million for the same period in the prior year. For 2015, Endo reported a net loss of $1.50 billion, or $7.59 per diluted share, on revenue of $3.27 billion, compared to a net loss of $721.32 million, or $4.91 per diluted share, on revenue of $2.38 billion for 2014. For the Company's U.S. Generic Pharmaceuticals segment, Endo reported net revenues of $1. 6 7 billion for 2015. 29. In the 2015 10-K, Endo stated, in part: Focus on our generics business differentiated products. We develop high- barrier-to-entry generic products, including first-to-file or first-to-market opportunities that are difficult to formulate, difficult to manufacture or face complex legal and regulatory challenges. We believe products with these characteristics will face a lesser degree of competition and therefore provide longer product life cycles and higher profitability than commodity generic products. Our business model continues to focus on being the lowest-cost producer of products in categories with high barriers to entry and lower levels of competition by leveraging operational efficiency. Our U.S. Generic Pharmaceuticals segment is focused in categories where there are fewer challenges from low-cost operators. Through our acquisition of Par, we have strategically expanded our technology, manufacturing, handling and development capabilities to a diversified array of dosage forms. We believe our comprehensive suite of technology, manufacturing and development capabilities increases the likelihood of success in commercializing high-barrier-to-entry products and obtaining first-to-file and first-to-market status on future products, yielding more sustainable market share and profitability. We plan to optimize our generic products pipeline and portfolio as part of a strategic assessment of our generic business. We will retain only those marketed products that deliver acceptable returns on investment, thereby leveraging our existing platform to drive operational efficiency. *** Code of Ethics The information concerning our Code of Conduct is incorporated herein by reference from our 2016 Proxy Statement and can be viewed on our website, the internet address for which is http://www.endo.com. 30. In Endo's Code of Conduct, the Company stated, in part: Endo interacts with many types of individuals and entities including healthcare professionals, hospitals, governments, regulatory authorities, business partners, customers, suppliers and vendors. These interactions may arise in our sales and marketing, research and development, and manufacturing operations, as well as our import/export activities. In all business dealings, Endo will be fair and honest and will comply with applicable law and Company policies. The Endo Way • Adhere to competition and antitrust laws in the countries where we operate • Comply with anti-bribery laws and do not offer or make illegal payments to government officials or business partners either directly or indirectly through intermediaries • Provide transparent and accurate pricing information to governments, private payors and healthcare providers • Gather competitive intelligence in an ethical and lawful manner • Conduct political activity responsibly and in compliance with applicable law • Follow global trade laws (Emphasis added.) 3 1. In the 2015 10-K, Endo al so reported that the Company was the subject of various antitrust investigations and litigations, but merely recited that the Company was "unable to predict the outcome of these matters or the ultimate legal or financial liability, if any." 32. The 2015 10-K contained signed certifications pursuant to SOX by Defendants Defendants Silva and Upadhyay, stating that the financial information contained in the 2015 10- K was accurate and disclosed any material changes to the Company's internal control over financial reporting. 33. On May 6, 20I6, Endo filed a Quarterly Report on Form 10-Q with the SEC, announcing the Company's financial and operating results for the quarter ended March 3 I, 20I6 (the "QI 20I6 IO-Q"). For the quarter, Endo reported a net loss of $133.87 million, or $0.60 per diluted share, on revenue of $963.54 million, compared to a net loss of $75.72 million, or $0.45 per diluted share, on revenue of $7I4.13 million for the same period in the prior year. For the Company's U.S. Generic Pharmaceuticals segment, Endo reported net income of $211.77 million on net revenues of $583.39 million for the quarter. 34. The QI 20I6 IO-Q contained signed certifications pursuant to SOX by Defendants Silva and Upadhyay, stating that the financial information contained in the QI 20I6 10-Q was accurate and disclosed any material changes to the Company's internal control over financial reporting. 35. On August 9, 20I6, Endo filed a Quarterly Report on Form IO-Q with the SEC, announcing the Company's financial and operating results for the quarter ended June 30, 20I6 (the "Q2 20I6 IO-Q"). For the quarter, Endo reported net income of $343.58 million, or $1.54 per diluted share, on revenue of $920.89 million, compared to a net loss of $250.42 million, or $1.35 per diluted share, on revenue of $735.17 million for the same period in the prior year. For the Company's U.S. Generic Pharmaceuticals segment, Endo reported net income of $2I4.97 million on net revenues of $565.36 million for the quarter. 36. The Q2 20I6 10-Q contained signed certifications pursuant to SOX by Defendants Silva and Upadhyay, stating that the financial information contained in the Q2 20I6 I 0-Q was accurate and disclosed any material changes to the Company's internal control over financial reporting. 37. On September 23, 2016, Endo issued a press release entitled "Endo Names Paul Campanelli President and Chief Executive Officer,'' announcing extensive leadership and operation changes in the Company. The press release, stated in relevant part: DUBLIN - September 23, 2016 - Endo International pie (NASDAQ: ENDP) (TSX: ENL) today announced that its Board of Directors has named Paul V. Campanelli President and Chief Executive Officer, effective immediately. Mr. Campanelli currently serves as President of Endo' s Generic and OTC drugs business, Par Pharmaceutical, which accounts for approximately 60 percent of Endo's total revenues through the first half of 2016. Campanelli, who will also join Endo's Board of Directors, succeeds Rajiv De Silva, who has stepped down as President, CEO and a member of the Board. ' Campanelli, 54, joined Endo in 2015 following Endo's acquisition of Par Pharmaceutical, where he had served as Chief Executive Officer since 2012. While CEO of Par, Campanelli built a strong leadership team and an industry- leading generics business. Specifically, during his tenure, Par significantly increased total revenue, acquired HIP Pharmaceuticals and established a presence in the European generics market. Since joining Endo, Campanelli has overseen the Company's U.S. Generic Pharmaceuticals business. "Given the continued evolution of Endo's business and Paul's impressive track record of delivering strong operating results, the Board concluded that Paul is the right leader for Endo at this juncture as we focus on execution and increasing the value of our attractive U.S. Branded, U.S. Generic and International pharmaceutical assets," stated Roger H. Kimmel, Chairman of the Board of Endo. "Paul has spent a significant portion of his career leading and operating complex generics businesses and overseeing Par's branded business. The Board believes his experience positions him to drive a broad range of growth initiatives across Endo's entire portfolio, generating better health outcomes/or patients and creating value/or Endo's shareholders." "I am very excited to lead Endo at this important time and, together with a strong senior management team, address the challenges of today's healthcare environment,'' said Campanelli. "Endo has differentiated operating businesses that provide diverse products ranging from high-value branded pharmaceuticals to cost-effective generics and is powered by a dedicated global workforce. I look forward to working closely and collaboratively with our leadership team and Endo 's Board to build on our strengths and help position the Company to thrive over the long-term." (Emphases added.) 38. The statements referenced in ~~ 25-37 were materially false and misleading because Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company's business, operations, and prospects. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) Par Pharmaceutical had colluded with several of its industry peers to fix generic drug prices; (ii) the foregoing conduct constituted a violation of federal antitrust laws; (iii) the competitive advantages of the Par Pharmaceutical Acquisition, which Endo touted to its shareholders as, inter alia, "a compelling opportunity to drive future double-digit growth, serve our customers and build shareholder value," were in fact derived in part from Par Pharmaceutical' s illegal conduct and thus unsustainable; (iv) for the same reasons, the "impressive track record of delivering strong operating results" that Endo attributed to Defendant Campanelli in announcing his promotion to Endo's CEO consisted in part of illegal conduct; (v) for the foregoing reasons, Endo' s revenues during the Class Period were in part the result of illegal conduct and likewise unsustainable; and (vi) as a result of the foregoing, Endo's public statements were materially false and misleading at all relevant times. The Truth Begins to Emerge 39. On November 3, 2016, media outlets reported that U.S. prosecutors were considering filing charges by the end of 2016 against Par Pharmaceutical and several other pharmaceutical companies for unlawfully colluding to fix generic drug prices. In an article titled "U.S. Charges in Generic-Drug Probe to Be Filed by Year-End," Bloomberg reported, in relevant U.S. prosecutors are bearing down on generic pharmaceutical companies in a sweeping criminal investigation into suspected price collusion, a fresh challenge for an industry that's already reeling from public outrage over the spiraling costs of some medicines. The antitrust investigation by the Justice Department, begun about two years ago, now spans more than a dozen companies and about two dozen drugs, according to people familiar with the matter. The grand jury probe is examining whether some executives agreed with one another to raise prices, and the first charges could emerge by the end of the year, they said. Though individual companies have made various disclosures about the inquiry, they have identified only a handful of drugs under scrutiny, including a heart treatment and an antibiotic. Among the drugmakers to have received subpoenas are industry giants Mylan NV and Teva Pharmaceutical Industries Ltd. Other companies include Actavis, which Teva bought from Allergan Plc in August, Lannett Co., Impax Laboratories Inc., Covis Pharma Holdings Sarl, Sun Pharmaceutical Industries Ltd., Mayne Pharma Group Ltd., Endo International Pie's subsidiary Par Pharmaceutical Holdings and Taro Pharmaceutical Industries Ltd. All of the companies have said they are cooperating except Covis, which said last year it was unable to assess the outcome of the investigation. Allergan, Impax and Sun ,declined to comment beyond their filings. Representatives of Endo, Covis, Taro and Lannett didn't respond to requests for comment. A Justice Department spokesman declined to comment. (Emphasis added.) 40. On this news, Endo's share price fell $3.54, or 19.48%, to close at $14.63 on November 3, 2016. 41. On March 1, 2017, Endo filed an Annual Report on Form 10-K with the SEC, reporting in full the Company's financial and operating results for the quarter and year ended December 31, 2016. Reflecting the extent to which Par Pharmaceutical's unlawful conduct had previously inflated Endo's revenues, the Company reported a net loss of $3.35 billion, or $15.03 per diluted share, on revenue of $4.01 billion, citing, in part, a 27% increase in cost of revenues and a decrease in gross margins from 36% in 2015 to 34% in 2016. 42. On this news, Endo's share price fell $0.83, or 6.08%, to close at $12.82 on March 1, 2017. 43. On October 31, 2017, attorneys general from 46 states and the District of Columbia amended their antitrust case on generic drug price-fixing conspiracy against the $75 billion generic drug industry to add 18 new companies, including Endo's wholly-owned subsidiary Par Pharmaceutical Companies, Inc. The states allege these companies violated antitrust laws to artificially inflate the prices of the drugs by agreeing to "collectively raise and/or maintain prices for a particular generic drug," and agreeing to divvy up the market for the drugs to reduce competition by "refusing to bid for particular customers or by providing a cover bid that they knew would not be successful." This in effect "avoided price erosion" and "increased pricing for targeted products without triggering a 'fight to the bottom' among existing competitors." 44. According to the amended complaint, these companies conspired to unreasonably restrain trade, artificially inflate and reduce competition in the generic pharmaceutical industry for the markets of fifteen generic drugs: Acetazolamide, Doxycycline Hyclate Delayed Release, Doxycycline Monohydrate, FosinoprilHydrochlorothiazide, Glipizide-Metformin, Glyburide, Glyburide-Metformin, Leflunomide, Meprobamate, Nimodipine, Nystatin, Paromomycin, Theophylline, Verapamil and Zoledronic Acid. As a result of the conspiracy, "[p]rices for dozens of generic drugs have risen - while some have skyrocketed, without explanation, sparking outrage from politicians, payers and consumers across the country whose costs have doubled, tripled, or even increased 1,000% or more." 45. As a result of Defendants' wrongful acts and omissions, and the precipitous decline in the market value of the Company's securities, Plaintiff and other Class members have suffered significant losses and damages. PLAINTIFF'S CLASS ACTION ALLEGATIONS 46. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil Procedure 23(a) and (b )(3) on behalf of a Class, consisting of all those who purchased or otherwise acquired Endo securities during the Class Period (the "Class"); and were damaged upon the revelation of the alleged corrective disclosures. Excluded from the Class are Defendants herein, the officers and directors of the Company, at all relevant times, members of their immediate families and their legal representatives, heirs, successors or assigns and any entity in which Defendants have or had a controlling interest. 47. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, Endo securities were actively traded on the NASDAQ. While the exact number of Class members is unknown to Plaintiff at this time and can be ascertained only through appropriate discovery, Plaintiff believes that there are hundreds or thousands of members in the proposed Class. Record owners and other members of the Class may be identified from records maintained by Endo or its transfer agent and may be notified of the pendency of this action by mail, using the form of notice similar to that customarily used in securities class actions. 48. Plaintiffs claims are typical of the claims of the members of the Class as all members of the Class are similarly affected by Defendants' wrongful conduct in violation of federal law that is complained of herein. 49. Plaintiff will fairly and adequately protect the interests of the members of the Class and has retained counsel competent and experienced in class and securities litigation. Plaintiff has no interests antagonistic to or in conflict with those of the Class. 50. Common questions of law and fact exist as to all members of the Class and predominate over any questions solely affecting individual members of the Class. Among the questions of law and fact common to the Class are: • whether the federal securities laws were violated by Defendants' acts as alleged herein; • whether statements made by Defendants to the investing public during the Class Period misrepresented material facts about the business, operations and management of Endo; • whether the Individual Defendants caused Endo to issue false and misleading financial statements during the Class Period; • whether Defendants acted knowingly or recklessly in issuing false and misleading financial statements; • whether the prices of Endo securities during the Class Period were artificially inflated because of the Defendants' conduct complained of herein; and • whether the members of the Class have sustained damages and, if so, what is the proper measure of damages. 51. A class action is superior to all other available methods for the fair and efficient adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the damages suffered by individual Class members may be relatively small, the expense and burden of individual litigation make it impossible for members of the Class to individually redress the wrongs done to them. There will be no difficulty in the management of this action as a class action. 52. Plaintiff will rely, in part, upon the presumption of reliance established by the fraud-on-the-market doctrine in that: • Defendants made public misrepresentations or failed to disclose material facts during the Class Period; the omissions and misrepresentations were material; Endo securities are traded in an efficient market; • the Company's shares were liquid and traded with moderate to heavy volume during the Class Period; • the Company traded on the NASDAQ and was covered by multiple analysts; • the misrepresentations and omissions alleged would tend to induce a reasonable investor to misjudge the value of the Company's securities; and • Plaintiff and members of the Class purchased, acquired and/or sold Endo securities between the time the Defendants failed to disclose or misrepresented material facts and the time the true facts were disclosed, without knowledge of the omitted or misrepresented facts. 53. Based upon the foregoing, Plaintiff and the members of the Class are entitled to a presumption of reliance upon the integrity of the market. 54. Alternatively, Plaintiff and the members of the Class are entitled to the presumption of reliance established by the Supreme Court in Affiliated Ute Citizens of the State of Utah v. United States, 406 U.S. 128, 92 S. Ct. 2430 (1972), as Defendants omitted material information in their Class Period statements in violation of a duty to disclose such information, as detailed above. COUNT I (Against All Defendants For Violations of Section lO(b) And Rule lOb-5 Promulgated Thereunder) 55. Plaintiff repeats and realleges each and every allegation contained above as if fully set forth herein. 56. This Count is asserted against Defendants and is based upon Section 1 O(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule IOb-5 promulgated thereunder by the SEC. 57. During the Class Period, Defendants engaged in a plan, scheme, conspiracy and course of conduct, pursuant to which they knowingly or recklessly engaged in acts, transactions, practices and courses of business which operated as a fraud and deceit upon Plaintiff and the other members of the Class; made various untrue statements of material facts and omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and employed devices, schemes and artifices to defraud in connection with the purchase and sale of securities. Such scheme was intended to, and, throughout the Class Period, did: (i) deceive the investing public, including Plaintiff and other Class members, as alleged herein; (ii) art~ficially inflate and maintain the market price of Endo securities; and (iii) cause Plaintiff and other members of the Class to purchase or otherwise acquire Endo securities and options at artificially inflated prices. In furtherance of this unlawful scheme, plan and course of conduct, Defendants, and each of them, took the actions set forth 58. Pursuant to the above plan, scheme, conspiracy and course of conduct, each of the Defendants participated directly or indirectly in the preparation and/or issuance of the quarterly and annual reports, SEC filings, press releases and other statements and documents described above, including statements made to securities analysts and the media that were designed to influence the market for Endo securities. Such reports, filings, releases and statements were materially false and misleading in that they failed to disclose material adverse information and misrepresented the truth about Endo's finances and business prospects. 59. By virtue of their positions at Endo, Defendants had actual knowledge of the materially false and misleading statements and material omissions alleged herein and intended thereby to deceive Plaintiff and the other members of the Class, or, in the alternative, Defendants acted with reckless disregard for the truth in that they failed or refused to ascertain and disclose such facts as would reveal the materially false and misleading nature of the statements made, although such facts were readily available to Defendants. Said acts and omissions of Defendants were committed willfully or with reckless disregard for the truth. In addition, each Defendant knew or recklessly disregarded that material facts were being misrepresented or omitted as described above. 60. Information showing that Defendants acted knowingly or with reckless disregard for the truth is peculiarly within Defendants' knowledge and control. As the senior managers and/or directors of Endo, the Individual Defendants had knowledge of the details of Endo's internal affairs. 61. The Individual Defendants are liable both directly and indirectly for the wrongs complained of herein. Because of their positions of control and authority, the Individual Defendants were able to and did, directly or indirectly, control the content of the statements of Endo. As officers and/or directors of a publicly-held company, the Individual Defendants had a duty to disseminate timely, accurate, and truthful information with respect to Endo's businesses, operations, future financial condition and future prospects. As a result of the dissemination of the aforementioned false and misleading reports, releases and public statements, the market price of Endo securities was artificially inflated throughout the Class Period. In ignorance of the adverse facts concerning Endo' s business and financial condition which were concealed by Defendants, Plaintiff and the other members of the Class purchased or otherwise acquired Endo securities at artificially inflated prices and relied upon the price of the securities, the integrity of the market for the securities and/or upon statements disseminated by Defendants, and were damaged thereby. 62. During the Class Period, Endo securities were traded on an active and efficient market. Plaintiff and the other members of the Class, relying on the materially false and misleading statements described herein, which the Defendants made, issued or caused to be disseminated, or relying upon the integrity of the market, purchased or otherwise acquired shares of Endo securities at prices artificially inflated by Defendants' wrongful conduct. Had Plaintiff and the other members of the Class known the truth, they would not have purchased or otherwise acquired said securities, or would not have purchased or otherwise acquired them at the inflated prices that were paid. At the time of the purchases and/or acquisitions by Plaintiff and the Class, the true value of Endo securities was substantially lower than the prices paid by Plaintiff and the other members of the Class. The market price of Endo securities declined sharply upon public disclosure of the facts alleged herein to the injury of Plaintiff and Class members. 63. By reason of the conduct alleged herein, Defendants knowingly or recklessly, directly or indirectly, have violated Section IO(b) of the Exchange Act and Rule lOb-5 promulgated thereunder. 64. As a direct and proximate result of Defendants' wrongful conduct, Plaintiff and the other members of the Class suffered damages in connection with their respective purchases, acquisitions and sales of the Company's securities during the Class Period, upon the disclosure that the Company had been disseminating misrepresented financial statements to the investing COUNT II (Violations of Section 20(a) of the Exchange Act Against The Individual Defendants) 65. Plaintiff repeats and realleges each and every allegation contained m the foregoing paragraphs as if fully set forth herein. 66. During the Class Period, the Individual Defendants participated in the operation and management of Endo, and conducted and participated, directly and indirectly, in the conduct of Endo' s business affairs. Because of their senior positions, they knew the adverse non-public information about Endo' s misstatement of income and expenses and false financial statements. 67. As officers and/or directors of a publicly owned company, the Individual Defendants had a duty to disseminate accurate and truthful information with respect to Endo's financial condition and results of operations, and to correct promptly any public statements issued by Endo which had become materially false or misleading. 68. Because of their positions of control and authority as semor officers, the Individual Defendants were able to, and did, control the contents of the various reports, press releases and public filings which Endo disseminated in the marketplace during the Class Period concerning Endo's results of operations. Throughout the Class Period, the Individual Defendants exercised their power and authority to cause Endo to engage in the wrongful acts complained of herein. The Individual Defendants therefore, were "controlling persons" of Endo within the meaning of Section 20(a) of the Exchange Act. In this capacity, they participated in the unlawful conduct alleged which artificially inflated the market price of Endo securities. 69. Each of the Individual Defendants, therefore, acted as a controlling person of Endo. By reason of their senior management positions and/or being directors of Endo, each of the Individual Defendants had the power to direct the actions of, and exercised the same to cause, Endo to engage in the unlawful acts and conduct complained of herein. Each of the Individual Defendants exercised control over the general operations of Endo and possessed the power to control the specific activities which comprise the primary violations about which Plaintiff and the other members of the Class complain. 70. By reason of the above conduct, the Individual Defendants are liable pursuant to Section 20( a) of the Exchange Act for the violations committed by Endo. PRAYER FOR RELIEF WHEREFORE, Plaintiff demands judgment against Defendants as follows: A. Determining that the instant action may be maintained as a class action under Rule 23 of the Federal Rules of Civil Procedure, and certifying Plaintiff as the Class representative; B. Requiring Defendants to pay damages sustained by Plaintiff and the Class by reason of the acts and transactions alleged herein; C. Awarding Plaintiff and the other members of the Class prejudgment and post- judgment interest, as well as their reasonable attorneys' fees, expert fees and other costs; and D. Awarding such other and further relief as this Court may deem just and proper. DEMAND FOR TRIAL BY JURY Plaintiff hereby demands a trial by jury. Dated: November 13, 2017 PRIBANIC AND PRIB NIC, LLC Vincent A. Coppola 513 Court Place Pittsburgh, PA 15219 Telephone: (412) 281-8844 Facsimile: (412) 281-4740 Email: [email protected] POMERANTZ LLP Jeremy A. Lieberman J. Alexander Hood II 600 Third Avenue, 20th Floor New York, New York 10016 Telephone: (212) 661-1100 Facsimile: (212) 661-8665 Email: [email protected] [email protected] POMERANTZ LLP Patrick V. Dahlstrom 10 South La Salle Street, Suite 3505 Chicago, Illinois 60603 Telephone: (312) 377-1181 Facsimile: (312) 377-1184 Email: [email protected] Attorneys for Plaintiff

securities

Hc6oDocBD5gMZwczTq3p

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION Plaintiff, CASE NO. Jury Trial Demanded Defendant. / CLASS COMPLAINT Plaintiff, Linda Klewinowski ("Plaintiff"), by and through her undersigned counsel and on 1. This is a class action for damages for violations of the Fair Debt Collection Practices 2. The FDCPA was enacted "to eliminate abusive debt collection practices by debt PARTIES 3. Plaintiff is an individual residing in Pinellas County, Florida. 4. Plaintiff is a "consumer" within the meaning of the FDCPA, 15 U.S.C. § 1692a(3). -1- 5. Defendant is a Florida Corporation with its principal place of business located in 6. At all relevant times, Defendant has been and is engaged in the business of 7. Defendant is a "debt collector" within the meaning of 15 U.S.C. § 1692a(6) as its JURISDICTION AND VENUE 8. This Court has jurisdiction pursuant to 15 U.S.C. § 1692k(d) and 28 U.S.C. § 9. Venue is proper in the Middle District of Florida pursuant to 28 U.S.C. § 1391(b) GENERAL ALLEGATIONS 10. On February 22, 2013, the Defendant sent or caused to be sent to Plaintiff, via 11. The Debt Collection Letter is a "communication" pursuant to the FDCPA, 15 -2- 12. The Debt Collection Letter states, "[y]our past due account with YOUR 13. Nowhere in the Debt Collection Letter did Defendant identify specific "YOUR 14. The Debt Collection Letter was patently confusing and misleading on its face, 15. Further, as a result of Defendant's use of "YOUR CREDITORS" instead of 16. Additionally, Plaintiff or an unsophisticated consumer who complied with the 17. It was patently misleading, unfair, abusive and misrepresents the character of the -3- 18. It is Defendant's policy and practice to send confusing and misleading debt 19. All conditions precedent to the institution and maintenance of this action have CLASS ALLEGATIONS 20. The FDCPA Class is defined as: a. All natural persons with Florida addresses who received collection letters and/or notices from the Defendant that reference "YOUR CREDITORS" without identifying the specific person or entity on whose behalf Defendant was attempting to collect a debt or the original creditor; b. During the one year period prior to the filing of this action through class certification; C. In an attempt by Defendant to collect a debt incurred for personal, household or family purposes; and d. Such letter was not returned by the United States Postal Service. 21. Excluded from the FDCPA Class are all managers, directors and employees of 22. The identities of the members of the FDCPA Class are readily ascertainable from -4-23. The number of members of the FDCPA Class is believed to be at least in the 24. The FDCPA Class action poses questions of law and fact that are common to and 25. Such questions of law and fact common to the FDCPA Class include, but are not a. Whether Defendant's reference of "YOUR CREDITORS" without identifying the specific creditor(s) violates Sections 1692e(2)(A) and 1692e(10) of the FDCPA by using false representations or deceptive means to collect or attempt to collect any debt; and b. If Defendant violated the FDCPA, what is the proper measure and appropriate statutory formula to be applied in determining damages. 26. Based on the facts and circumstances set forth herein, Plaintiff's claims are 27. Plaintiff will fairly and adequately protect and represent the interests of each -5- 28. Plaintiff has been required to retain the undersigned attorneys. Plaintiff's 29. Prosecuting separate actions by individual members of the FDCPA Class would 30. Further, prosecuting separate actions by individual members of the FDCPA Class 31. Questions of law or fact common to the FDCPA Class predominate over any 32. Class treatment is superior to other available methods for fair and efficient COUNT I VIOLATION OF THE FAIR DEBT COLLECTION PRACTICES ACT 33. Plaintiff incorporates by reference paragraphs 1 through 32 of this Complaint as 34. The foregoing acts and omissions of Defendant violates 15 U.S.C. § § 1692e(2)(A) -6- 35. As a result of Defendant's violations of the FDCPA, pursuant to 15 U.S.C. § WHEREFORE, Plaintiff and the FDCPA Class request that the Court enter judgment in i. Certification of this matter to proceed as a class action; ii. Declaratory judgment that Defendant's practice of failing to identify the person or entity on whose behalf it is attempting to collect a debt violates the FDCPA; iii. The maximum amount of statutory damages pursuant to 15 U.S.C. § 1692k for each class member; iv. Attorneys' fees, litigation expenses and costs pursuant to 15 U.S.C. § 1692k(a)(3); and V. For such other and further relief as the Court deems just and proper. DEMAND FOR JURY TRIAL Plaintiff and the FDCPA Class demand a trial by jury for all issues SO triable. May 6, 2013 -7- /s/ Paul R. Fowkes Paul R. Fowkes, Esq. Fla. Bar No. 723886 [email protected] Ryan C. Hasanbasic, Esq. Fla. Bar No. 044119 [email protected] DISPARTI FOWKES & HASANBASIC, P.A. 2203 North Lois Avenue, Suite 830 Tampa, Florida 33607 (813) 221-0500 (813) 228-7077 (Facsimile) -and- /s/ Roger D. Mason Roger D. Mason, II, Esq. [email protected] Florida Bar No. 504793 Zachary A. Harrington, Esq. [email protected] Florida Bar No. 044104 ROGER D. MASON, II, P.A. 5135 West Cypress Street, Suite 102 Tampa, Florida 33607 Telephone: (813) 304-2131 -8-

consumer fraud

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Civil Action No. COMPLAINT and DEMAND FOR JURY TRIAL James E. Cecchi Lindsey H. Taylor CARELLA, BYRNE, CECCHI, OLSTEIN, BRODY & AGNELLO, P.C. 5 Becker Farm Road Roseland, NJ 07068 Counsel for Plaintiff and the Proposed Class [Additional counsel on signature page] UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY RAMCO COMMUNICATIONS, INC., individually and on behalf of all those similarly situated, Plaintiff, v. MOTOROLA SOLUTIONS, INC., Defendants. Plaintiff Ramco Communications, Inc. (“Plaintiff”), a corporation organized under the laws of the State of New York, with its principal place of business and headquarters located at 317 Onondaga Ave, Warren, PA 16365, files this civil action pursuant to Sections 1 and 2 of the Sherman Act, Section 4 of the Clayton Act, and Rule 23 of the Federal Rules of Civil Procedure, for damages, costs of suit, injunctive relief and other relief as may be just and proper, on behalf of itself and a class of those similarly situated (“Class” as defined below) against Motorola Solutions, Inc. (“MSI”), for its illegal monopolization of the domestic market for “LMR Solutions,” which includes hardware, software, and integration and maintenance services for two-way land-mobile radio communications. Based upon personal knowledge, information, belief, and investigation of counsel, Plaintiff specifically alleges as follows. 1. MSI has restricted competition in the sale of the digital hand-held and vehicular radio communications—known in the industry as land-mobile radios (“LMRs”)—to users in government, transportation, business and industry. LMRs are sophisticated digital two-way radios that operate over radio spectrum dedicated to the customer. 2. LMRs are used by what MSI calls mission-critical and business-critical communications customers. MSI’s two-way push-to-talk radios are “specifically tailored to meet the requirements of a mission-critical communications customer base that spans many layers of government, public safety, and first responders, as well as commercial and industrial customers in a number of key verticals.” These are MSI’s “core markets”—the markets MSI has monopolized, in which MSI reaps billions of dollars on sales at supracompetitive prices, in which its potential competitors are substantially foreclosed from competing with superior LMRs. INTRODUCTION 3. MSI is a monopolist that has leveraged its dominance with government and public safety users to dominate the broader LMR Solutions market. MSI uses that dominance to sell its products at inflated prices and excessive margins. MSI cannot maintain the same high prices in competitive markets outside the United States. MSI’s supracompetitive pricing comes at the expense of U.S. taxpayers, small businesses and consumers who are forced to pay a multiple of what they would pay in a competitive market. 4. MSI has a monopoly over LMR Solutions in all of the domestic markets in which MSI operates. An MSI board member has claimed that MSI controls 75% of LMR sales. MSI’s share of sales to business-critical LMR customers exceeds 80%. 5. MSI’s monopoly power is reflected in its supracompetitive pricing. MSI offers not only the most expensive products, but has been able to maintain and raise prices without regard for the prices of competing products. U.S. customers pay a multiple of what customers pay in competitive markets outside the United States for a comparable MSI product because in other countries, MSI faces price competition. It has been reported that MSI charges its customers in the United States more than five times what it charges customers in other countries for certain products that are used for the exact same purpose are otherwise substantially similar. 6. MSI profits in the United States are likewise greater than its profits in more competitive markets. MSI’s profit margins on sales to customers in the United States is reported to be 89%, compared to less than 10% for sales to customers in Europe, where MSI faces competition from at least 15 other LMR firms. 7. When faced with competition in the U.S., MSI responds by blocking its competitors’ access to the dealers who are critical to making sales to end-users. MSI threatens dealers who want to carry other product lines for their customers. The result is de facto exclusive relationships. 8. This exclusivity substantially forecloses competition in several ways. First, MSI uses a point system to induce exclusivity. A dealer that exclusively sells MSI products satisfies one of four factors required to achieve MSI’s “platinum” status, qualifying the dealer for important benefits that tie the dealer to MSI. Achieving exclusivity requires no direct investment on a dealer’s part. Second, MSI revokes, or threatens to revoke dealers’ rights as to Motorola’s lucrative service business from dealers who add competing product lines. Third, at a March 2017 industry conference, MSI gathered in one room the largest dealers in the industry and threatened them with retaliation for carrying competing products. Fourth, MSI has since issued a memorandum specifically threatening the termination of dealers who sell a leading competitor’s products. 9. Motorola’s conduct generally disadvantages all LMR dealers. MSI’s core public safety customers in the United States primarily purchase radios and radio systems that use the Project 25 (“P25”) technical standard. Those customers frequently require expensive and ongoing maintenance and service for these systems. That service and maintenance is largely performed by MSI dealers, and is necessary for many LMR dealers to maintain profitability. MSI has used maintenance and service contracts to force dealers to refrain from carrying competing product lines. 10. There is no legitimate, pro-competitive business justification for MSI’s actions. Independent dealers, such as Plaintiff, are not legal or financial affiliates of MSI; yet, MSI’s de facto exclusivity requirements effectively make them so. Dealers must compete with each other—and with MSI—for end-user sales, but may not offer those customers competing products. That is contrary to dealers’ independent interests. Faced with competition from other dealers and MSI, dealers require the ability to offer a range of products and services, at a range of prices. 11. MSI also abuses the judicial system and regulatory process in furtherance of its scheme. To that end, MSI filed multiple lawsuits against one of its leading competitors, Hytera, beginning concurrent with its threats to its dealership base in early 2017.1 1 “Hytera” encompasses Hytera Communications Corporation Ltd., Hytera America, Inc., Hytera Communications America (West), Inc., PowerTrunk, Inc., and Sepura Plc, plaintiffs in an action pending before this Court, who allege claims substantially similar to Plaintiff’s claims herein. See Hytera Comm’n Corp. v. Motorola Solutions, Inc., Civil Action No. 17-12445 (D.N.J.) (filed Dec. 4, 2017). 12. MSI filed sham litigation and Federal Communications Commission (“FCC”) complaints and continues to prosecute those actions as an anticompetitive weapon designed to harass Hytera and Hytera resellers. Those actions raise the cost of selling Hytera products and create fear and uncertainty in potential Hytera customers. 13. For example, MSI sued Hytera for purportedly infringing two patents that MSI previously agreed to license on fair, reasonable and non-discriminatory (“FRAND”) terms. MSI’s refusal to consider these patents standard-essential, and subject to a FRAND licensing obligation, and its pursuing litigation reflect MSI’s intent to use the judicial process as an anti- competitive weapon. 14. Instead of competing on price or quality, MSI warns customers to avoid doing business with a competitor it has charged with patent infringement. MSI has also induced dealers to spread false rumors questioning Hytera’s long-term viability based on those complaints, suggesting that the litigation will result in Hytera’s exit from the U.S. market. Those efforts have been effective despite the pendency of the litigation. MSI has discouraged potential dealers and customers from doing business with Hytera while the litigation remains unresolved. 15. The effect of MSI’s scheme on competition is clear. MSI has protected its monopoly in public safety by preventing competition from alternative technology standards with its P25 product line. Digital Mobile Radio (“DMR”) and Terrestrial Trunked Radio (“TETRA”) are used as alternative LMR standards for public safety customers outside the United States. Indeed, Motorola actively sells and promotes DMR and TETRA solutions to public safety customers in other countries. LMR products using the DMR and TETRA standards are also making inroads in the United States and thus pose a threat to MSI’s P25 business. MSI’s monopoly prevents rivals from taking additional sales and expanding the market with more cost-effective DMR and TETRA products. 16. MSI has fought the adoption of the TETRA standard in the United States, while promoting and selling TETRA products elsewhere, so as to preserve its P25 business and lucrative service contracts. The result is that MSI’s competitors are substantially foreclosed from competing for customers. By blocking competition from TETRA, MSI is able to charge supracompetitive prices for its P25 products that are a multiple of what customers pay for TETRA devices in foreign markets. 17. MSI’s scheme suppresses competition from products using DMR technology. Many public safety customers, such as those with a small systems, do not need P25 technology. DMR is more than sufficient and significantly more cost-effective for such customers. In addition, the vast majority of private sector customers do not need or want P25 technology. Hytera is MSI’s closest competitor for DMR-based sales in the United States. MSI has threatened dealers with termination for carrying Hytera products. MSI has previously done the same to block other rivals’ access to dealers, which are the critical point of distribution for customers in the private sector LMR market. Without access to dealers, rivals are foreclosed from this market. 18. End-users are harmed as a result. MSI is no more likely to compete on price for its DMR product than it does on its P25 product. MSI sells its DMR devices at prices well in excess of what Hytera charges for comparable products. 19. Nothing justifies MSI’s supracompetitive prices. For example, MSI’s XPR 3500 and Hytera’s PD562 offer many of the same specifications, but the Hytera product weighs less, has a longer battery life, and comes with a longer warranty. The Hytera model sells for a suggested resale price (“MSRP”) of $440. MSI’s model sells for an MSRP of over $675. A comparison of other Hytera and MSI products reveals a similar pattern: Hytera sells comparable or superior products for lower prices, while still earning a reasonable return for its dealers. 20. As many MSI customers are first responder emergency personnel, U.S. customers and taxpayers suffer the consequences of this scheme. U.S. buyers pay MSI’s monopoly prices and U.S. taxpayers subsidize MSI’s monopoly profits. 21. At all times relevant to this action, MSI has held and maintained an unlawful monopoly of the United States market for sales of LMR to public safety and government end users. Rather than compete against Hytera or other market participants, MSI has perpetrated a nearly decade long anticompetitive scheme to protect and maintain its traditional dominance in the U.S. market for sales of digital two-way radio systems to public safety and private sector customers. MSI has leveraged this dominance in the public safety and government markets to achieve dominance in the market for business and industry sales. 22. As a result of MSI’s anticompetitive practices, Plaintiff and Class Members seek damages, costs and attorneys’ fees pursuant to Sections 1 and 2 of the Sherman Act. JURISDICTION AND VENUE 23. This action arises under sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2, and section 4 of the Clayton Act, 15 U.S.C. § 15(a), and seeks to recover treble damages, costs of suit, injunctive relief, and reasonable attorneys’ fees for the injuries sustained by Plaintiff and members of the Class resulting from MSI’s successful efforts to restrain trade in the United States. The Court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 1331, 1337(a), 1407, and 15 U.S.C. § 15. 24. Venue is proper in this District pursuant to 15 U.S.C. §§ 15(a), 22 and 28 U.S.C. §§ 1391(b), (c), and (d) because, during the Class Period, MSI resided, transacted business, was found, or had agents in this District, and a substantial portion of its activity that affected the interstate trade and commerce discussed below has been carried out in this District. 25. During the Class Period, MSI sold and shipped LMRs and related products in a continuous and uninterrupted flow of interstate commerce, including in this District. MSI’s conduct had direct, substantial, and reasonably foreseeable effects on interstate commerce in the United States, including in this District. 26. This Court has in personam jurisdiction over MSI because it, either directly or through the ownership and/or control of its subsidiaries, inter alia: (a) transacted business throughout the United States, including in this District; (b) participated in the sale and distribution of LMRs and related products and services throughout the United States, including in this District; (c) had and maintained substantial aggregate contacts with the United States as a whole, including in this District; or (d) was engaged in an anti-competitive conduct that was directed at, and had a direct, substantial, reasonably foreseeable and intended effect of causing injury to, the business or property of persons and entities residing in, located in, or doing business throughout the United States, including in this District. MSI also conducts business throughout the United States, including in this District, and has purposefully availed itself of the laws of the United States. 27. By reason of the unlawful conduct alleged herein, MSI substantially affected commerce throughout the United States, causing injury to Plaintiff and members of the Class. MSI, directly and through its agents, engaged in activities affecting all states, to restrict output and fix, raise, maintain and/or stabilize prices in the United States for LMR Solutions, which unreasonably restrained trade and adversely affected the market for LMR Solutions. 28. MSI’s unlawful conduct described herein adversely affected persons and entities in the United States who directly purchased LMRs and related products manufactured by MSI, including Plaintiff and the members of the Class. PARTIES 29. Plaintiff Ramco Communications, Inc. (“Ramco”), is a family-owned LMR Solutions, dealer. Ramco is a New York corporation, with its principal place of business at 317 Onondaga Ave, Warren, PA 16365. Established in 1998, Ramco has purchased LMR Solutions directly from MSI at all relevant times. 30. Defendant MSI is a company organized and existing under the laws of Delaware with its principal place of business at 500 W. Monroe Street, Chicago, Illinois, 60661. MSI imports DMR and P25 two-way radios for sale in the United States. MSI also operates Vertex Standard LMR, a provider of digital and analog two-way radio solutions, including P25 solutions, as a wholly-owned but separately branded subsidiary. CLASS ALLEGATIONS 31. Plaintiff brings this action on behalf of itself and, pursuant to Federal Rules of Civil Procedure 23(a) and 23(b)(3), as representative of a class (the “Class”) defined as follows: All persons who or entities which purchased LMR Solutions directly from MSI, or any current or former subsidiary or affiliate thereof, or any co- conspirator, in the United States, during the period from and including December 22, 2013, through the present. Excluded from the Class are MSI and its officers, directors, management, employees, subsidiaries, or affiliates, and all governmental entities. 32. The Class Members are so numerous and geographically dispersed that joinder of all members is impracticable. 33. Plaintiff’s claims are typical of the claims of the other Class Members. Plaintiff and other Class members have all sustained damage in that, during the Class Period, they purchased LMR Solutions at artificially maintained, non-competitive prices, established by MSI’s actions in connection with the violations alleged herein. 34. Plaintiff will fairly and adequately protect the interests of all Class Members. Plaintiff has purchased LMR Solutions directly from MSI. Plaintiff has retained counsel competent and experienced in class action and antitrust litigation. Plaintiff’s interests are coincident with, and not antagonistic to, the interests of the other Class Members. 35. Common questions of law and fact exist with respect to all Class Members and predominate over any questions solely affecting individual members. The common legal and factual questions, which do not vary among Class Members include, but are not limited to, the following: a. whether MSI intentionally and unlawfully impaired or impeded competition in the LMR Solutions market; b. whether MSI maintained or enhanced monopoly power in the LMR Solutions market; c. whether MSI engaged in anticompetitive conduct in order to unlawfully disadvantage its competitors and maintain monopoly power in the LMR Solutions market; d. whether MSI had and has monopoly power with respect to LMR Solutions; e. whether MSI had procompetitive reasons for its conduct; f. the effects of MSI’s anticompetitive conduct on LMR Solutions prices; g. whether Plaintiff and other members of the Class have been overcharged and thus damaged by paying artificially inflated prices for LMR Solutions as a result of MSI’s unlawful conduct; and h. the proper measure of damages. 36. A class action is superior to any other method for the fair and efficient adjudication of these issues, as joinder of all members is impracticable. The damages suffered by many Class Members are small in relation to the expense and burden of individual litigation, and therefore, it is highly impractical for such Class Members to individually attempt to redress the wrongful anticompetitive conduct alleged herein. FACTUAL BACKGROUND 37. LMRs are commonplace across the nation. When first responders—local and state police, fire departments and emergency medical services (“EMS”)—communicate with each other or 911 dispatch centers, they use mission-critical two-way radios. They are routinely used in the operation of public transport, and by security and operational personnel in school districts, warehouses, manufacturing sites, hotels, shopping malls and entertainment venues. 38. LMRs are ubiquitous and unique as compared to other modes of communications because their users can push a single button to instantaneously talk to one another, or broadcast to other users over a dedicated communications network. There are no numbers to dial, no waiting for others to pick up their devices, and no dropped calls. 39. Modern public safety and professional LMR systems provide digital clarity, reduced radio interference, ruggedness, and functionality that is designed for public safety. The systems can be deployed for use at a single location (e.g., hotel, warehouse, sporting event venue) or over a wide geographic area or multi-site location (e.g., office park, campus, industrial site). The radio communications are not broadcast over public channels, but over a private radio network using spectrum licensed from the FCC for that purpose. Because LMR systems use licensed spectrum, as opposed to freely accessible public spectrum, they are sometimes called private mobile radio (“PMR”) systems. 40. In 2015 the LMR market in the United States, including terminal and system sales, was approximately $5 billion. The Land Mobile Radio System 41. LMR systems are a collection of digital handheld, vehicular, and stationary radio units designed to communicate voice and data through radio waves at specific frequencies and channels. 42. The typical components of an LMR network may include one or more of the following: a base station, a transmitter tower, a repeater tower, portable radios, and mobile radios generally mounted inside vehicles. Some systems do not include all these elements. For example, some systems do not require a separate transmission tower. 43. In a typical LMR network, a base station is located in a fixed position and the base station (usually a mobile radio connected to a power supply and connected to a fixed outdoor antenna) is often used for communication with any number of handheld radios and mobile radios. Commercial or large public entities often place base stations in dispatch centers to communicate with handheld radios or mobile radios that are part of the fleet. 44. Handheld radios have a more limited transmission range (compared to base stations or mobile radios) because they are battery powered, have lower transmission power and less efficient antennas and are carried by individuals. Mobile radios are often located inside a vehicle such as a police car or a delivery truck. Mobile radios use the vehicle’s power supply, which allows for higher power (generally 10 times that of a handheld radio), and a more efficient antenna, which in turn provides for greater transmission range. Within an LMR system, handheld and mobile radios are typically referred to as terminals. 45. Some LMR systems contain repeaters that facilitate long-distance communication by receiving and retransmitting radio signals. Repeaters may be added to expand the geographic area covered or to ensure radio coverage indoors. 46. The most basic LMR systems contain a base station and two handheld units. Complex systems contain multiple repeaters and hundreds of handheld and vehicular units. Such systems may include repeater sites with multiple frequencies, to facilitate a variety of communications within the system. 47. LMR systems often include multiple channels for communicating. A system that can automatically direct voice traffic to an unused or a dedicated channel (rather than requiring users to select a channel) is called a “trunked” system. A trunked system allows one speaker (e.g., a dispatcher) to communicate with another person or a group, and allows others on the network to communicate on a parallel channel without interrupting the other communication. For example, an event coordinator may want to have one channel reserved for catering staff and another channel for security. LMR Technology 48. LMR systems operate on a variety of standards, and a variety of radio frequencies. 49. FCC Spectrum. LMR systems operate on a private network that allows radio units to communicate with each other through a single frequency or through multiple frequencies, depending on the size of the system. The FCC has allocated certain spectrum to be used for public safety and/or business two-way radio communications. For example, the FCC has specified various portions of the spectrum for public safety use: portions of the UHF and VHF spectrums, as well on the 700MHz, 800 MHz, and 900MHz bands. 50. Analog/Digital. Analog systems were the dominant form of two-way radio communication until the last decade. 51. Mission-critical public safety and private sector customers in the United States are generally transitioning from analog to digital systems. Digital systems are superior to analog due to the former’s substantially greater quality and greater transmission capacity. For much of the industry, analog sales are limited primarily to “replacement sales,” such as for the replacement of damaged or lost handsets to customers with installed legacy analog systems. 52. Manufacturers generally seek to convert legacy analog customers to digital, in addition to competing for existing digital customers and new radio customers. MSI, for example, has told its shareholders that its business focus is “leading the ongoing global migration to digital products.” 53. Digital Technologies Used in the United States. Within the United States, customers have generally used one of two technologies for their mission-critical public safety or business-critical radio communications: P25 and DMR, respectively. 54. In addition, TETRA technology is widely used for public safety outside the United States. However, MSI has effectively blocked TETRA’s adoption in the United States (as described herein). As a result, P25 remains the overwhelmingly dominant technology standard for public safety customers in the United States. 55. Public safety customers are increasingly purchasing DMR products. Sales of DMR for public safety remain small relative to P25, but are an option for certain customers. 56. DMR is the dominant technology for private sector customers. 57. In addition dPMR/NXDN is a niche, narrow-band DMR technology that offers DMR customers who have very specific and, typically, limited frequency needs. Because dPMR/NXDN requires two times the infrastructure, it is much more costly, which further limits its adoption by commercial users. 58. MSI freely shares its view that customer demand is segmented between P25 and TETRA for government and public safety customers on the one hand, and DMR for commercial radio customers on the other. 59. P25. P25 is a digital two-way radio communication standard that generally operates between 12.5 kHz and 6.25 kHz bandwidth. P25 is commonly used by governmental public safety and law enforcement agencies in the United States. P25 was developed through the efforts of MSI, in conjunction with the Association of Public Safety Communications Officials (“APCO”) and the National Association of State Telecommunications Directors. The P25 standard was first adopted by the Telecommunications Industry Association (“TIA”) in 1989. P25 equipment must meet the APCO Project 25 standards to be classified as P25-compliant. 60. P25 Phase 1, still the most widely-used type of P25 technology, was designed and optimized for sparsely populated areas of the United States. P25 Phase 1 uses Frequency Division Multiple Access (“FDMA”) technology for channel selection and distribution. FDMA is a hold-over from analog communications, and functions by dividing user channels by frequency; i.e., if users want two channels, they must be allocated two frequencies. Having more users and channels requires more frequency bandwidth, additional infrastructure (repeaters, base stations, and power sources) and a separate spectrum license from the FCC. 61. On information and belief, MSI is one of the primary sponsors and funders of APCO functions, including the annual APCO meeting. MSI spends millions of dollars annually to fund all aspects of the APCO convention, including concessions, education programs, and social events. MSI sponsors APCO certification programs and has been involved in creating and/or setting APCO certification standards, further tying the public safety industry to MSI. MSI has at all relevant times maintained significant influence with APCO through these contributions. 62. MSI is the dominant supplier of P25 products in the United States. At all times relevant to this Complaint, MSI has maintained a share of at least 70% of sales of new terminals and systems to public safety customers. 63. TETRA. TETRA was developed in 1995 by the European Telecommunications Standards Institute (“ETSI”). 64. Like P25, TETRA is primarily used by government agencies and public safety organizations. Purchasers of TETRA two-way radios include military and law enforcement agencies, emergency service providers, and railroads. TETRA is used by public safety customers all over the world. 65. TETRA was designed and optimized for use in densely populated areas. ETSI also uses Time Division Multiple Access (“TDMA”) technology for channel selection and distribution. TDMA allows several users to share the same frequency channel by dividing the signal into different time slots. The users transmit in rapid succession, one after the other, each using its own time slot. This allows multiple stations to share the same transmission medium (e.g., radio frequency channel) while using only a part of its channel capacity. TETRA uses 25 kHz bandwidth, allowing for four 6.25 kHz channels. 66. Prior to 2013, TETRA was not approved by the FCC for use in the United States. As described in more detail below, on information and belief, MSI has engaged in a concerted effort to exclude TETRA from the U.S. market to preserve and protect its monopoly in the market for public safety products in the United States. After overcoming MSI’s efforts to prevent competition in the public safety market, PowerTrunk was the first company to sell TETRA products in the United States. 67. DMR. DMR is a fully public, open standard also developed within ETSI, and is backed by a variety of suppliers, including MSI and Hytera. DMR is a widely accepted standard worldwide. DMR operates within 12.5 kHz bandwidth. 68. The leading suppliers of DMR products to private sector customers in the United States are Hytera and MSI. Since its launch, through the present, MSI has dominated the sale of DMR products in the United States and currently sells more than 80% of new DMR terminals to the market on an annual basis. 69. The DMR standard developed by ETSI encompasses a diverse range of products aimed at the private sector, which requires a cost-effective LMR solution. The most common DMR System is an FCC-licensed system typically using a repeater, with features such as group calling and texting, which are common needs in the private sector. These systems are targeted at users that require efficiency, advanced voice features, and data services. The DMR standard allows DMR to offer trunking capabilities, which allows DMR to be developed and offered as a potential competitor to full, trunked systems, such as TETRA or P25, and as a more cost- effective option for private sector customers. 70. dPMR/NXDN. dPMR/NXDN, as explained above, is a niche digital technology within DMR, aimed at customers with specific channel and frequency spectrum needs. dPMR was developed by ETSI in parallel to the DMR standard for the private sector. dPMR is differentiated from DMR, as TETRA was from P25 Phase 1, due to the choice of channel selection protocols. dPMR/NXDN is an FDMA technology, while DMR is a TDMA technology, meaning the technologies are largely incompatible and cannot function on the same LMR System. (In the United States, this technology is often referred as just NXDN.) 71. dPMR/NXDN competes only for a limited segment because of cost and technological limitations. dPMR/NXDN is a FDMA-based solution that operates on a single, narrow 6.25 kHz band, meaning the principle selling point to customers is that in an area of congested spectrum (e.g., an urban area), a customer can more easily use that narrower spectrum band and operate one channel. However, as with all FDMA implementations, dPMR/NXDN suffers from a comparative lack of scalability (versus DMR, for instance) because adding each additional channel requires significant additional infrastructure in the way of additional repeaters, base stations, power supplies, etc. DMR, in contrast, while initially requiring a broader frequency band (12.5 kHz) can deliver two channels on each infrastructure system (versus one on a dPMR/NXDN system). For customers that are sensitive to fixed infrastructure costs or are in need of easy scalability, DMR is a preferred solution. 72. The providers of dPMR/NXDN products are limited to Kenwood and Icom. Hytera and MSI do not sell dPMR/NXDN products. The primary differentiator between DMR and dPMR/NXDN technologies is that because it uses TDMA technologies, DMR operates better in heavy load, professional settings, while FDMA products like dPMR and NXDN may suffer interference and lack of access. 73. Because of the cost advantage, broader frequency availability, and better reliability of DMR in heavy use scenarios, there is widespread adoption of DMR for commercial use. dPMR/NXDN is not a practical or an economic substitute for DMR. It is therefore impractical to expect customers to consider dPMR/NXDN a viable alternative. Customer Requirements 74. Use of the above technologies is driven by the key distinguishing characteristics of the customers and their communications requirements. The industry recognizes these differences. MSI and Hytera, for example, each compete in the design and development of LMR terminals and systems, to meet the differing requirements of their diverse customers. The LMR systems and terminals sold to public safety customers have unique characteristics, and are priced differently from systems sold to other customers. 75. Generally, public safety customers are described as purchasing “mission-critical” LMR solutions, a term used by MSI to describe its business to its shareholders and to the public, and a term adopted more broadly by the industry. For example, MSI has described itself to investors and regulators as selling radios “specifically tailored” to meet the requirements of a “mission-critical communications customer base that spans many layers of government, public safety, and first responders, as well as commercial and industrial customers in a number of key verticals.” The industry uses the term “business-critical” to identify the private sector customer who is not a “mission-critical” customer, but expects high quality, sophisticated and more cost- effective LMR solutions. These customers are described more fully below. 76. Mission-critical LMR Solutions. By far, the largest customer segment for LMRs in the United States is the “mission-critical” segment. Customers in this segment range from public safety organizations and first responders to certain (mostly larger) utility and transportation customers. Approximately 70% of all LMRs sold in North America are purchased by public safety customers, with an additional 10% purchased by utility and transport customers. This customer segment might include the following: • First Responders: police and sheriff’s departments, fire and emergency medical services, ambulances, and disaster recovery agencies. • Federal Government Agencies: federal law enforcement and emergency response entities. • Large Public Utility Companies: electricity, gas, water, and telephone. • Local Government Agencies: municipal office buildings and public works. • Public Transit: municipal or regional transit system, including buses and railways. 77. There are important distinctions within “mission-critical” customers, however. Public safety customers have specific requirements of their LMR systems, with a particular focus on reliability, longevity, scalability, and providing for interoperability among various public safety agencies. The radios must also be safe and functional in extreme environments, such as exposure to fire and submersion in water. Generally, public safety agencies expect these mission-critical communications products to have certain technical functionality, including encryption and redundancy that ensures the availability of their communications systems in all circumstances. The radios require interoperability across systems so that police may communicate, for example, with EMS and public transportation systems in emergencies. 78. A public safety contract will typically be awarded through a public bidding process. Many public safety entities use industry consultants to assist in drafting public bidding materials. These consulting firms often employ individuals with experience in the LMR industry, particularly former employees of MSI. 79. Public utility infrastructure and transportation customers have some of the same requirements of a public safety customer, but are not always in need of the scalability or other technological solutions (and costs) of a P25 or TETRA system. However, utility and transit customers also have to meet regulatory requirements for public purchasing and ensuring the safety and reliability of their LMR systems, while at the same time controlling costs. In the United States, utility and transport customers have chosen to utilize a range of technologies, including P25, TETRA, and DMR, as appropriate for their specific technological and regulatory 80. In addition to the sale of LMR hardware (handsets and accessories) and systems equipment (base stations, repeaters), providers of LMR solutions to “mission-critical” customers also often enter into critical service agreements with those customers. These services include integration services and management and support services. Integration services involve the integration and optimization of devices into existing networks, as well as handling software additions and upgrades to existing systems. Management and support services include repair, technical support, and hardware maintenance, as well as software related services, including network monitoring and cybersecurity issues. Due to the need for consistent uptime and reliable service, these service contracts are considered necessary and important parts of servicing the needs of any public safety customer. 81. Business-critical LMR Solutions. Sophisticated private sector customers ranging from the hospitality industry to the delivery service industry are also significant users of two-way radios. Approximately 20% of LMRs sold in North America are sold to the private sector. For these customers the products at issue in this Complaint are critical to their business operations and they are, thus, referred to by MSI and others in the industry as “business-critical” or “operations critical” two-way professional radios. Examples of private sector customers might include the following: • Construction Companies and Contractors: Commercial and residential builders; electrical excavating, plumbing and roofing companies. • Hospitality Industry: Casinos, hotels, resorts, tour companies. • Private Security: On-site security personnel, private home security. • Schools: From grade schools to universities, schools provide two-way radios to teachers and administrative staff. • Service Industry: Delivery companies, towing companies, landscaping companies, janitorial and building maintenances staff. • Transportation Companies: Taxis, limousines, buses, and semi-trailer trucks. 82. Customers for “business-critical” LMR solutions include a wide range of potential implementations, such as warehousing and distribution centers, large retail operations (e.g., a “big box” store), hotels and other large-scale hospitality providers, schools, and sports venues, among others. 83. The defining characteristic of private sector customers is their need for a more cost- optimized LMR solution compared to the technologies typically considered by public safety customers. In many cases, the redundancy, security, and interoperability capabilities of a technology like P25 may not be necessary for many such customers. In the United States, the business and industry segment of customers has primarily adopted DMR as the standard cost- efficient option. MSI’s EXCLUSIONARY CONDUCT 84. MSI has engaged in a multi-faceted scheme to substantially foreclose competition in the United States. MSI’s anti-competitive conduct includes, but is not limited to, the following: • Exclusive Dealing – MSI engages in de facto exclusive dealing with independent distributors through a potent “carrot and stick” combination of incentives for exclusivity and threats of termination for those who seek to promote competing products. This defeats the independence of the dealer and creates de facto exclusivity. • Tying/Leveraging – MSI ties lucrative P25 maintenance contracts for the public safety market to a dealer’s exclusively purchasing and reselling MSI’s DMR product. This strategy leverages MSI’s monopoly of public sector business to stifle competition in the more price-sensitive private sector. Again, this anticompetitive conduct gives the independent dealer no effective choice but to not carry Hytera’s competing DMR product for fear of losing access to MSI’s P25 service business, which MSI dominates in the United States. • Serial Abuse of Regulatory and Judicial Proceedings – MSI repeatedly and without regard to legal merit abuses regulatory and judicial systems to block, delay, and raise the cost of competition. MSI has engaged in repeated, serial sham activity before U.S. courts, U.S. agencies, and state bodies, together with serial litigation outside the United States, to raise Hytera’s costs. This serial abuse is the foundation of a misinformation campaign to destroy Hytera’s reputation with customers in the United States. MSI’s actions are individually and collectively baseless and brought with the objective of abusing the process and not for legitimate relief. • Abuse of the Standard Setting Process – MSI’s participation in standard setting itself raises significant antitrust issues. In the case of DMR standards, these concerns could only be overcome by MSI’s commitment to license any intellectual property claims it has over the DMR standard on FRAND terms. MSI has not done this. Instead, once it caused industry competitors and users to adopt MSI-promoted industry standards, MSI then engaged in licensing at unreasonable and discriminatory royalty terms to raise its rivals’ costs and deter competition. 85. MSI’s acts are designed to and have the effect of, eliminating effective competition for mission-critical radios sold to public safety customers and for business-critical professional radios sold to the private sector. This conduct results in less choice and higher costs for customers, destroys competition. Exclusive Dealing 86. In 2011, MSI implemented a program, under a new name, to entice independent dealers to resell and distribute MSI products in three different MSI business segments, including the radio, wireless, and enterprise solutions business segments. Renamed as the “PartnerEmpower Program,” MSI’s contractual relationship with independent dealers uses a system to award points to dealers based on their success in reaching metrics. A dealer’s success in MSI’s scheme is contingent on the dealer’s compliance with revenue thresholds, technical and sales training, percentage of MSI sales quotas obtained, commitment to the MSI brand and other criteria – notably exclusivity criteria – set by MSI. 87. Within each of the individual business segments (either in a particular technology or vertical market), PartnerEmpower dealers could be classified as “Authorized,” “Specialist,” or “Elite” based on the total points achieved in the criteria described above. In addition to these three classifications, a dealer could also attain a program level designation, which rewards dealers based on their performance across the variety of MSI business segments referenced above. The program level designations are “Silver,” “Gold,” and “Platinum,” with the Platinum level offering the most benefits for the dealer—or the channel partner, as MSI commonly refers to its dealers. The individual segment designations generally correspond to the program level designations, and thus Elite dealers are often Platinum dealers. While each program level receives certain benefits, Platinum and Elite partners are granted exclusive access to additional compensation benefits such as an annual rebate program, which can provide up to 2% in rebates to dealers. Platinum and Elite partners also receive more payouts from MSI’s Marketing Development Fund, which provides cash and other financial incentives for dealers to market MSI products. On information and belief, the dealers who generated the most MSI business received the most marketing funds. MSI also ensures that dealers who are close to finalizing deals with purchasers receive additional marketing funds. 88. The primary effect of MSI’s PartnerEmpower program agreements with its dealers is to incentivize dealers to only sell MSI products. The PartnerEmpower program mixes product exclusivity, which is within the dealer’s ability to control, and overall volume, which may not be entirely under the control of a dealer. For instance, a dealer’s overall sales volume may depend on a number of factors, including the dealers own efforts and sales tactics, but also the vagaries of customer demand and also competition with other MSI dealers (or with MSI itself) that may also be chasing the same business. By contrast, a dealer can agree to be exclusive to MSI, and thereby materially improve its ability to get the benefits of being a Platinum Dealer. MSI’s benefits are scaled to realize MSI sales exclusivity. Dealers that carry MSI products rely on these benefits in order to attract customers, remain competitive with other MSI dealers, and maintain profitability. 89. 2017 IWCE Meeting of MSI Dealers. The “stick” in MSI’s de facto exclusivity scheme is its threat to punish, including by way of termination any independent dealer that seeks to offer competitive products, i.e., act as an independent dealer. The threat was widely communicated to independent dealers in March 2017 at the International Wireless Communications Expo (“IWCE”) in Las Vegas, Nevada. 90. MSI held its 2017 Channel Partner Expo, a meeting of MSI dealers, at the same time as the 2017 IWCE in Las Vegas. At this meeting, MSI’s campaign to enforce its policy of exclusive relationships with dealers accelerated. 91. The IWCE is the premier trade show for the mobile radio industry and is organized annually. Representatives from across the industry attend IWCE, including representatives of all major manufacturers, as well as many dealers from around the country. 92. On information and belief, MSI held a meeting at the 2017 IWCE/Channel Partner Expo with independent dealers from across the United States. This dealer-only meeting was notable for its focus on Hytera. MSI CEO Greg Brown gave a speech to dealers from across the country indicating that MSI was upset about the competition from Hytera in the United States. These official comments and other MSI statements were orchestrated at IWCE and later with the goal of threatening the cancellation of dealerships for selling competing Hytera product lines. This was understood in the industry to be a threat to coerce independent dealers into de facto exclusivity with MSI. 93. Subsequent 2017 Threat to Terminate Non-Exclusive Dealers. On information and belief, MSI sent in the summer of 2017 a written memorandum to dealers in the United States threatening dealers with termination of their dealership with MSI if they carry competing Hytera product lines. 94. By means of these letters, threats, and the resulting dealer fear induced by this conduct, MSI hopes to enforce a de facto scheme of exclusive dealerships within the Relevant Markets. 95. Impact on Dealer Competition. MSI’s publicly stated policy of threatened termination of dealers selling products of a competitor has been given effect across the country in the last year. MSI’s ongoing policy has had the effect of excluding Hytera from competing for many current MSI dealers. The largest dealers operate in and across the United States and have access to a range of customers across all customer categories. This can be seen in a simple internet search for two-way radios – all of the major dealers advertise locally via the Internet and their websites exclusively market MSI. 96. These larger dealers are necessary and the most efficient agents to bidding on projects in the United States. These dealers in particular are subject to and restricted by MSI’s exclusive dealing, leveraging, and threats to terminate dealers if they choose to deal with Hytera. On information and belief, because of the anticompetitive acts of MSI, many of these large dealers act exclusively for MSI. Indeed, Hytera has lost or has been forced to forego numerous business propositions with these larger dealers as a result of MSI’s conduct threatening independent dealers to not deal with Hytera. 97. In addition to the largest dealers, MSI also has taken actions against the smaller independent dealers to prevent entry of competing manufacturers, including Hytera. 98. For instance, a current MSI dealer in Vermont was initially receptive to Hytera’s outreach to discuss the dealer carrying Hytera products. On information and belief, MSI responded to this outreach by threatening to terminate the dealer’s ongoing servicing and other business. MSI’s threat led that dealer to terminate discussions with Hytera, preventing Hytera from entering into any arrangement with the dealer. 99. Similarly, a representative of a South Carolina dealer informed Hytera that they were terminated by MSI as a service and maintenance partner and that the dealer believes that this action was taken, at least in part, as retaliation for the South Carolina dealer’s decision to sell Hytera products. The South Carolina dealer expects the next step may be that MSI will terminate their dealership relationship entirely because they were told by an MSI representative that MSI did not like the fact that the dealer was selling other manufacturers’ products, especially Hytera products. On information and belief, the South Carolina dealer understands that other MSI dealers have similarly been threatened with having their service partnership terminated if they chose to continue selling Hytera products. 100. As an additional example, a former MSI dealer in New York, was terminated as an MSI dealership because it chose to also sell Hytera products. Subsequent to its termination, this New York dealer informed Hytera that it learned that other MSI dealers that sold Hytera products had also been terminated. Those dealers were given the same reasoning as the New York dealer had been given: MSI was terminating its relationships with smaller dealers due to a change in market strategy. However, this statement was false and pre-textual: the New York dealer knows of other MSI dealers with a smaller volume of MSI products sold that were not terminated. The difference is that the New York dealer Hytera spoke to also decided to sell Hytera products. 101. A large dealer in California withdrew from negotiations to sell Hytera products and ceased communications with Hytera after the IWCE Conference in March 2017. Prior to the IWCE Conference, the owner of the dealership had met with Hytera multiple times and expressed interest in carrying and selling Hytera products. At the time of Hytera’s preliminary discussions with the dealer, Hytera learned that the dealer was almost exclusively selling MSI products, but the dealer expressed interest in switching to Hytera to replace his MSI Vertex LMR business. After the threats MSI made at the IWCE, the dealer renounced any ties to Hytera and stopped returning Hytera’s calls and emails. 102. Yet another dealer operating in California sought to add Hytera product in addition to MSI products that it already sold. When it did so, MSI terminated the dealer. Not content with terminating the dealer, MSI made the termination very public so as to magnify the effect – the termination served as a very public reminder to other dealers to not cross MSI and add a competing product line. 103. Another dealer in Colorado was threatened with withdrawal of all of MSI’s Vertex Standard products because the dealer was also carrying Hytera products. On information and belief, MSI’s Vertex Standard distributor told the dealer that if the dealer wanted to continue to do business with the distributor, the dealer could not advertise Hytera or the distributor would withdraw its sales to the dealer. 104. Further, MSI intimidated a Dallas area dealer of Hytera and MSI products into terminating its relationship with Hytera as an authorized repair center. The dealer is still a Hytera dealer, but it was asked by MSI representatives to terminate the service center relationship with Hytera in order to maintain its MSI distribution business, and the Dallas-area dealer did in fact terminate its service center relationship with Hytera as a result of this threat. In addition, that same dealer has been influenced not to advertise its relationship with Hytera or its sales of Hytera products. 105. MSI’s retaliation is not limited to occasions when dealers carry or sell only Hytera products. For instance, based on a discussion with a former MSI dealer in Atlanta, Georgia, Plaintiff understands that MSI terminated this dealer purportedly because MSI no longer felt they had a good partnership, even though the former dealer was meeting MSI’s sales numbers. MSI terminated the dealer around the time that the Atlanta-area dealer won a bid using Kenwood products in competition with another MSI dealer. The former MSI dealer understands that MSI terminated its dealership because the dealer also sells Kenwood products and was winning bids against MSI dealers. 106. Similarly, on information and belief, an MSI dealer in Western Massachusetts lost its manufacturer’s representative status, and thus its ability to provide service and maintenance to public safety customers, because the dealer was selling Kenwood products. 107. Plaintiff is aware of another large MSI dealer in the New York area that informed Hytera that it received MSI correspondence threatening parts of the dealership if the dealer were to sell products made by Harris, another MSI competitor. 108. On information and belief, a large MSI dealer located in New Jersey and New York, tried to sell Icom products to a New York housing authority and was punished by MSI for doing so. In that instance, MSI pulled service contracts estimated to range from hundreds of thousands of dollars to $1 million a year as punishment for selling the Icom product. A representative from this New Jersey-New York dealer informed Hytera that MSI uses its public safety related business, particularly the revenue streams from the public safety service and maintenance contracts that a dealer receives as an MSI Manufacturer’s Representative as leverage over its dealers. 109. On information and belief, these terminations become public knowledge because MSI publicizes the dealership terminations by word of mouth and directs its other dealers’ to actively target the former dealers’ customer accounts. In so doing, MSI seeks to enforce its anticompetitive efforts to maintain de facto exclusivity over any independent dealers that choose to carry MSI products, with the goal of foreclosing competition from competing suppliers such as Hytera. Leveraging of Public Sector Dominance 110. MSI’s Public Safety Dominance in the United States. The public safety sector, including emergency services, military, police, etc. is the largest sector of the LMR industry in the United States. As described above, the public safety sector is largely dominated by standardized technologies, with APCO’s P25 being the dominant standard in the United States (with MSI the dominant supplier). 111. On information and belief, the annual market for new hardware in public safety contracts in the United States is approximately $2 billion and, on information and belief, MSI has more than a 70% share of these sales of the terminals and systems used in the public safety sector. More importantly, MSI is the dominant provider of maintenance and service to public safety customers for their installed base of P25 systems. 112. MSI’s Actions to Maintain Public Sector Dominance: Exclusion of TETRA. MSI has monopolized the U.S. public safety market. This effort protects MSI’s position in not only public safety products but also in other markets where it competes. MSI relies on its dominance in the U.S. public safety sector to exert pressure on and demand exclusivity from its dealer channel partners in the United States. 113. As described above, TETRA is a leading LMR standard used by public safety users, and is the primary standard used outside of the United States. TETRA directly competes with APCO’s P25 standard, a technology advocated and dominated by MSI, which is the predominant standard used by the public safety sector in the United States. 114. In order to protect its dominant position in the public safety sector, from 2009 through at least 2016, MSI engaged in a coordinated scheme to retard the growth of TETRA in the United States. Initially, MSI acted to control and influence relevant trade associations and industry bodies in order to prevent the approval of TETRA by the FCC (despite MSI itself being an advocate of TETRA outside the United States). After TETRA was eventually approved for sale in the United States, MSI continued this scheme by challenging and protesting the award of any contracts to TETRA providers in an attempt to limit the availability of TETRA products in the United States. 115. MSI’s scheme included continuous opposition to the acceptance of TETRA by the FCC, including opposition to the TETRA Association’s initial request for a technical waiver from the FCC for TETRA technologies to operate within the United States. MSI engaged in this opposition, and coordinated the opposition of APCO and TIA, even as MSI is itself a major supplier and developer of TETRA products outside the United States. MSI opposed the adoption of TETRA in order to preserve its existing dominance in the market for mission-critical radios sold to public safety, transportation, and utility customers. 116. MSI’s opposition to TETRA in the United States has been acknowledged throughout the industry. For example, Urgent Communications, an industry publication, reported that MSI “holds the cards in terms of how the technology gets introduced into the U.S.” Given TETRA’s global success, sophisticated technology setting, and interoperable open platform, introducing new technologies with much more data communications capacity such as TETRA would have significantly impacted MSI’s existing business presence and market share in public safety, utilities, militaries, and transportation companies. 117. PowerTrunk has sought to overcome MSI’s opposition and sell its TETRA equipment and technology in the U.S. market. PowerTrunk’s efforts, however, have only resulted in increased MSI efforts to squelch TETRA-based competition. 118. For example, on March 14, 2012, the New Jersey Transit Authority awarded Alcatel- Lucent a contract for bus radios, using PowerTrunk as a subcontractor for the radios. This was the first major TETRA win in the United States. After this award, MSI petitioned the FCC to repeal its order authorizing TETRA’s operation in the United States. The FCC rejected that petition. 119. Despite MSI’s attempts to thwart PowerTrunk’s progress, on April 15, 2013, PowerTrunk obtained its first FCC certificate for TETRA equipment in the 700 MHz public safety spectrum. This equipment effectively mooted MSI’s purported interoperability objections before the FCC, as it allowed the same device to switch between TETRA and P25 operability. This multimode equipment was developed uniquely for the U.S. market, at significant research and development cost to PowerTrunk. 120. MSI continued to oppose PowerTrunk’s TETRA-based entry into the United States and PowerTrunk, in turn, persisted in competing in the face of MSI’s continued opposition. PowerTrunk won its largest contract on February 22, 2016, when the New York City MTA Bus Committee awarded Parsons Transportation Group of New York, Inc. and PowerTrunk (as a subcontractor) the contract for a new radio system. Despite its years-long campaign against TETRA, MSI itself submitted a bid to the NYC MTA that provided for a TETRA solution, which is not surprising since MSI has supplied TETRA systems and subscriber equipment to the British police and the London Underground at a fraction of the price of P25 radios in the U.S. However, the NYC MTA rejected MSI’s proposal because it lacked essential information and had significant weaknesses, including the lack of FCC type acceptance certificates for its proposed subscriber equipment (a mandatory RFP requirement by award time). MSI attempted to rely on the dual-band (TETRA/P25 interoperable) technology that it had spent years criticizing but had not yet fully developed. MSI lost and yet continued to petition to overturn that loss without any legitimate basis. 121. As described above, through repetitive and contradictory petitioning, MSI has consistently used its power to stall and distort PowerTrunk’s efforts to bring TETRA to the United States. This has had the effect of maintaining and expanding MSI’s dominance of the sale of LMRs to mission-critical customers – public safety, transportation, and utility customers. MSI’s Use of Public Sector Service Contracts to Require Exclusivity from Dealers. 122. When a dealer becomes an official Manufacturer’s Representative for MSI, the dealer receives a percentage of all MSI sales in the region in which they operate (not merely a percentage of store sales). Manufacturer’s Representatives for MSI are given exclusive responsibility for public sector accounts. MSI Manufacturer’s Representatives agree to register business opportunities with MSI, thereby effectively allowing MSI to redirect certain opportunities or business to other dealers at MSI’s discretion. 123. Dealers receive significant incentives from being a Manufacturer’s Representative. The most profitable element of this relationship comes from fulfilling the service and maintenance contracts for public safety, emergency responder, and some utility customers for MSI’s products, and not necessarily the commission. Many MSI dealers rely on this consistent service/maintenance income to support their businesses. For instance, take the example of a county sheriff’s office purchasing an MSI P25 system. This system might include $100,000 worth of equipment. The MSI Manufacturer’s Representative would only receive approximately 5-6% or $5,000-$6,000 in commission on that system. However, the public sector customer is also likely to pay MSI $100,000 per year to maintain that system, and MSI would in turn pay the manufacturer’s representative $50,000 per year to do the maintenance. The share of sales and maintenance contracts provided to MSI dealers, on a continuing basis, is a substantial value to MSI dealers. 124. If an MSI Manufacturer’s Representative chooses to carry competing products, MSI has the ability to, and does in fact, re-assign these lucrative service accounts away from dealers that choose to carry competing products. On information and belief, MSI has threatened numerous dealers with termination of their Manufacturer’s Representative status if they chose to carry competing Hytera products. 125. Most importantly, MSI is able to leverage these relationships with dealers to prevent dealers from selling competing products for any purpose, whether it is to public safety customers, private utilities, or commercial customers. Serial Sham Litigation and Petitioning 126. MSI has engaged in a series of legal proceedings against Hytera in the United States and around the world, primarily to raise Hytera’s cost of doing business. MSI’s litigation strategy has included the serial filing of claims in the United States, both in federal court and before the International Trade Commission (“ITC”), as well as before various courts in Australia and Germany. MSI has filed no fewer than six separate litigations against Hytera and its subsidiaries since March 2017, using the mere existence of the pending litigation to defame Hytera’s products and business prospects in the United States. Hytera also believes that MSI has filed a series of sham petitions with the FCC and the NYC MTA with the objective of undermining Hytera and its subsidiary PowerTrunk, in order to improperly limit competition from Hytera generally and, more specifically, limit the penetration of TETRA technologies in the United 127. In an industry defined by mission-criticality and business-criticality, an LMR vendor’s reputation takes on heightened importance and is a barrier to entry and expansion. Baseless allegations that call into doubt an LMR vendor’s regulatory compliance, product quality, and continuity of service serve no purpose other than dampening legitimate competition. The following chronology illustrates MSI’s efforts to that end. The biggest event of the year for the industry in the United States is the annual IWCE trade show, held this year in Las Vegas. LMR vendors use the IWCE event to garner attention for their companies and products. Most product launches occur at the IWCE. In March 2017, MSI instead used the IWCE event to attack the reputation of Hytera and sow fear, uncertainty, and doubt as to the viability of Hytera and its products. In conjunction with MSI’s CEO statements and other contemporaneous MSI statements threatening to penalize or terminate dealers that also carry Hytera, MSI launched a series of actions designed to undermine Hytera’s reputation and to further undermine and threaten Hytera dealers. 128. The 2017 IWCE event ran from March 27 through March 31. Two weeks before, MSI filed two separate actions, a trade secret theft complaint and a patent infringement complaint. Then as if that was not enough to generate attention, MSI launched a second patent infringement case smack in the middle of IWCE on March 29. Then, not content with the publicity generated from those actions, MSI continued its campaign and launched patent litigation in multiple foreign venues between April and July. Throughout this timeframe, MSI has been using the litigations as a sales weapon. On information and belief, at IWCE Las Vegas and since then, MSI has used the fact that it has sued Hytera as an anticompetitive weapon, telling dealers and customers, for example, that Hytera will exit the United States market within a year, and will not be able to serve customers as a result of its litigation tactics. MSI’s baseless claims have no legitimate purpose; MSI’s purpose is instead to spread disinformation in the market. 129. MSI’s current serial sham conduct is an anticompetitive weapon that MSI has used for years. The following are recent examples known to Hytera. 130. March 2016 - FCC Submission Regarding Award of Contract by New York City Metro Transit Authority. In March 2016, just days after the NYC MTA Bus Radio system contract was awarded to Parsons/PowerTrunk, MSI submitted a Petition for Clarification to the FCC. In the March 2016 Petition, MSI took the position that any product to be approved by the FCC for use on the 700 MHz public safety channels must be technically capable of operating on P25 channels before its approval by the FCC (i.e., not just being modifiable to operate on P25 channels). This position was directly in opposition to MSI’s position taken two years previously in a comment to the FCC, when MSI took the position that requiring technical compliance with P25 protocols prior to FCC equipment authorization would be “too burdensome” to the industry. MSI’s changed position, taken only after the award of a large TETRA contract, is indicative of MSI’s intent to delay the advancement of TETRA in the United States, and to drive up the costs and requirements of bringing lower-cost TETRA solutions to U.S. customers. 131. March 2016 – MSI Protest to New York City Metro Transit Authority. After the award of the NYC MTA Bus Radio system contract, MSI also submitted a misleading and inaccurate protest to the NYC MTA. Highlighting MSI’s tactics was its claim in the protest that the TETRA solution offered by Parsons/PowerTrunk was not approved to operate in the 700 MHz band used by the NYC MTA, despite MSI itself having offered a TETRA-based solution in response to the RFP. Among other inaccuracies, MSI also incorrectly claimed that the TETRA radios offered by PowerTrunk were not interoperable with P25 radios, despite PowerTrunk having specifically developed an interoperable dual-band product for the U.S. market. The MTA ultimately rejected each of these claims as unfounded. The NYC MTA’s complete denial of MSI’s protest highlights MSI’s purpose of delay and inflicting cost on PowerTrunk in an attempt to delay the implementation of the TETRA solution chosen by the NYC MTA. 132. March 2017 – Northern District of Illinois Trade Secret Litigation. (MSI Solutions, Inc. et al. v. Hytera Communications Corporation Ltd. et al., Case No. 1:17-cv-01973 (N.D. Ill. Mar. 14, 2017)). In considering Hytera’s motion to dismiss MSI’s complaint, the Court found that “[MSI]’s claims appear to be untimely based upon the representations made by Defendants.” On November 27, 2017, Hytera filed a motion for summary judgment before Judge Samuel Der-Yeghiayan of the Northern District of Illinois showing that MSI’s claims are time- barred, and that MSI knew they were time-barred at the time they were brought. 133. March 2017 – Northern District of Illinois Patent Infringement Litigation. (MSI Solutions, Inc. v. Hytera Communications Corporation Ltd. et al., Case No. 1:17-cv-01972 (N.D. Ill. Mar. 14, 2017)). This complaint, asserting claims for infringement of the same patents at issue in the ITC proceedings, is currently stayed until at least February 7, 2018, pending outcome of the ITC litigation described below. 134. March 2017 – ITC Investigation of Certain Two-Way Radio Equipment and Systems, Related Software and Components Thereof. MSI filed a Complaint with the ITC on March 29, 2017, and the Commission voted to proceed with the investigation approximately one month later. The products at issue in the investigation are generally Hytera’s LMRs and related support devices. MSI claims a violation of Section 337 of the Tariff Act of 1930, as amended, in the importation into the United States and requests that the ITC issue a limited exclusion order and cease and desist orders, which, if granted, would prohibit Hytera from importing the accused products into the United States. The patents asserted in the ITC proceeding are the same as those asserted in the N.D. Ill. Patent Infringement Litigation, including the ’869 and ’991 patents, which are standard essential patents. MSI, as a participant in collective industry standard setting, committed to license these patents and has instead used the patents as a weapon to try to block Hytera’s DMR product. MSI’s violation of its standard setting obligation is described in greater detail below. 135. March 2017 – FCC Certification Raid. Hytera believes MSI induced additional conduct at the IWCE in an attempt to sabotage Hytera’s access to customers and dealers. For an event like the IWCE where product demos will be given, manufacturers like Hytera will apply to the FCC to obtain a temporary frequency in order to demonstrate technology at the show. At the 2017 IWCE, the FCC came to investigate Hytera’s booth, a distraction and disruption during this key industry event, with harm to Hytera. The FCC investigation was targeted; Hytera understands that the FCC only visited Hytera’s booth at the show acting on a specific – and unfounded – allegation that Hytera was operating unlicensed radios. The FCC concluded there was no violation: the Hytera products were licensed. This coincided with the highly choreographed MSI actions during IWCE to target Hytera as described above. Hytera expects that discovery will confirm that MSI was the source of the FCC raid. Hytera is unaware of any other similar FCC raid on another vendor. 136. April 2017 – Patent Infringement Litigation in Regional Court of Düsseldorf, Germany. MSI has engaged in a series of litigations in Germany, the first of which was filed shortly after the beginning of the U.S. patent proceedings. MSI filed this litigation for the purpose of abuse and to inflict additional cost on Hytera in order to defend this matter in a third jurisdiction, without any regard to the merit of the litigation itself. In particular, the patent asserted in this litigation by MSI is the European registration of the ’991 patent, the same patent asserted in the ITC Proceeding and the Australian proceeding described below. MSI chose neither to issue a cease and desist letter or other warning nor to notify Hytera in Germany prior to commencing this legal action, suggesting that MSI was less interested in resolving any genuine dispute than raising Hytera’s costs. 137. July 2017 – Patent Infringement Litigation in Regional Court of Mannheim, Germany. In July 2017, MSI filed a separate litigation in the Regional Court of Mannheim regarding a unique patent not yet asserted in the U.S. proceedings. There was no jurisdictional reason for bringing this additional suit in a separate German venue than where they had sued just two months earlier. Instead, MSI filed this additional litigation in a separate venue for the purposes of inflicting additional cost and burden on Hytera. Further, MSI chose not to issue a cease and desist letter or other warning that is typical or to notify Hytera in Germany prior to commencing this legal action, showing that MSI was not interested in resolving any dispute with Hytera but simply in raising Hytera’s costs. 138. July 2017 – Patent Infringement Litigation in Federal Court of Australia. Later in July 2017, MSI asserted yet another patent infringement litigation in the Federal Court of Australia in New South Wales. Although MSI was required under Australian Federal Court rules to attempt to resolve the matter prior to filing, MSI made only a perfunctory attempt to notify Hytera of its potential claims and to seek a resolution, settlement, or license without commencing litigation. Hytera received initial notice of the suit in Australia four days before MSI filed its case, so Hytera was not even given a realistic opportunity to respond. MSI once again filed this litigation for the purpose of abuse and to inflict additional cost on Hytera in order to defend this matter in a third jurisdiction, without any regard to the merit of the litigation itself. In particular, the Australian patent litigation once again includes the Australian registrations of the ’869 and ’991 patents, which Hytera contends are standard essential patents to the Relevant DMR Standards. MSI and Hytera have entered into a license agreement covering standard essential patents for DMR technologies, but MSI has denied that these two patent families are standard essential and has failed to include them under the terms of the agreed license or otherwise make a FRAND licensing offer. 139. In short, as part of its overall scheme to drive up Hytera’s costs and inflict burden through the use of otherwise legal process, MSI has engaged in litigation in as many as six forums on top of multiple petition of U.S. government agencies, all within the last 18 months. Patent-Related Conduct 140. Standard Setting in the Digital Mobile Radio Industry. The adoption of industry- agreed standards is essential for the digital mobile radio industry to function effectively. In a given system, all of the system’s components (e.g., base stations and hand held units) must seamlessly interface with each other. This means that a hand unit from one manufacturer works with a base station manufactured by another company. In the digital mobile radio industry, this is particularly important where certain wireless radio networks are dedicated to emergency, first- responders. Several standards development organizations (“SDOs”) have been the forum for the development and adoption of standards related to digital mobile radio. Relevant to this Complaint, the European Telecommunications Standards Institute (“ETSI”) is an SDO through which MSI combined with competitors and other industry participants to set the DMR standard. MSI’s coordination with competitors within ETSI was legitimate only to the extent that it committed ex ante to license its intellectual property (“IP”) on FRAND terms to any and all potential users anywhere in the world of the resulting DMR standard. 141. The ownership of relevant IP and related IP licensing practices are critical issues in SDOs’ consideration of standards proposals. If the coordination by competitors on the implementation of a standard requires the use of particular IP, such as a patent, the IP owner may acquire the ability to prevent, delay, or distort the development of technology implementing that standard and thereby undermine the purpose of the SDO. 142. In order to reduce the likelihood that implementers of their standards will be subject to abusive practices by patent holders, SDOs have adopted rules, policies, and procedures that address the disclosure and licensing of patents that SDO participants may assert in relation to the practice of the standard under consideration. These rules, policies, and/or procedures are set out in the intellectual property rights policies (“IPR policies”) of the SDOs. 143. Many IPR policies – including those at issue in this litigation – encourage or require participants to disclose on a timely basis the IPR, such as patents or patent applications that they believe are sufficiently relevant to standards under consideration. These disclosures permit the SDOs and their members to evaluate technologies with full knowledge of disclosed IPR that may affect the costs of implementing the standard. 144. IPR policies – including those at issue in this litigation – require participants claiming to own relevant patents to negotiate licenses for those patents with any implementer of the standard on FRAND terms. As their inclusion in the IPR policies of various SDOs suggests, such commitments are crucial to the standards development process. They enable participants in standards development to craft technology standards with the expectation that an owner of any patented technology will be prevented from demanding unfair, unreasonable, or discriminatory licensing terms and thereby be prevented from keeping parties seeking to implement the standard from doing so or imposing undue costs or burdens on them. 145. Accordingly, SDOs typically require that their members declare whether they believe they hold patents necessary for compliance with a particular standard, and if so whether they are willing to license such patents on FRAND terms. Patents necessary to implement a particular standard are known as “essential patents” for the standard to which they relate. 146. ETSI Obligations Undertaken by MSI. MSI, through its subsidiary and/or affiliate Motorola Solutions (UK), is a current member of ETSI and, on information and belief, has been a member of ETSI at all times relevant to this Complaint. 147. MSI, through Motorola Solutions (UK), is and was a supporting ETSI member of the following ETSI standards related to DMR (collectively, the “Relevant DMR Standards”): • Electromagnetic compatibility and Radio spectrum Matters (ERM); Digital Mobile Radio (DMR) Systems; Part 1: DMR Air Interface (AI) protocol, ETSI TS 102 361-1 standard (“ETSI TS 102 361-1 standard”). • Electromagnetic compatibility and Radio spectrum Matters (ERM); Digital Mobile Radio (DMR) Systems; Part 2: DMR voice and generic services and facilities ETSI TS 102 361-2 standard (“ETSI TS 102 361-2 standard”). 148. Both the ETSI TS 102 361-1 and ETSI TS 102 361-2 standards have gone through numerous versions over the time of their development. ETSI TS 102 361-1 was first published as Version 1.1.1. in April 2005, and was most recently updated with its ninth version, version 2.4.1, in February 2016. ETSI TS 102 361-2 was first published as version 1.1.1. in April 2005, and was most recently updated with its seventh version, version 2.3.1, in February 2016. 149. At all times relevant to the revision and development of the Relevant DMR Standards, MSI was a member of ETSI and a contributing member and sponsor of the development of those standards. 150. Participants in the ETSI standard setting efforts, including MSI, in the course of the development of the above described DMR standards, are subject to the ETSI Intellectual Property Right Policy (“ETSI IPR Policy”). The ETSI IPR Policy (which has been revised slightly over the years) is presently contained at Annex 6 of the ETSI Rules of Procedures. Section 4.1 of the ETSI IPR Policy makes it clear that each participant in the ETSI standard setting process has a duty to use “reasonable endeavours” to disclose standard essential patents in connection with the development of any ETSI Standard: 4.1 Subject to Clause 4.2 below, each MEMBER shall use its reasonable endeavours, in particular during the development of a STANDARD or TECHNICAL SPECIFICATION where it participates, to inform ETSI of ESSENTIAL IPRs in a timely fashion. In particular, a MEMBER submitting a technical proposal for a STANDARD or TECHNICAL SPECIFICATION shall, on a bona fide basis, draw the attention of ETSI to any of that MEMBER's IPR which might be ESSENTIAL if that proposal is adopted. 151. Section 15.6 of the ETSI IPR Policy defines an “Essential IPR” as follows: “ESSENTIAL” as applied to IPR means that it is not possible on technical (but not commercial) grounds, taking into account normal technical practice and the state of the art generally available at the time of standardization, to make, sell, lease, otherwise dispose of, repair, use or operate EQUIPMENT or METHODS which comply with a STANDARD without infringing that IPR. For the avoidance of doubt in exceptional cases where a STANDARD can only be implemented by technical solutions, all of which are infringements of IPRs, all such IPRs shall be considered ESSENTIAL. 152. Section 6.1 of the ETSI IPR Policy contains the commitment of every participant in the ETSI standard setting practice, including MSI, to license any identified standard essential patent on FRAND terms: 6.1 When an ESSENTIAL IPR relating to a particular STANDARD or TECHNICAL SPECIFICATION is brought to the attention of ETSI, the Director-General of ETSI shall immediately request the owner to give within three months an irrevocable undertaking in writing that it is prepared to grant irrevocable licenses on fair, reasonable and non- discriminatory (“FRAND”) terms and conditions under such IPR to at least the following extent: MANUFACTURE, including the right to make or have made customized components and sub-systems to the licensee's own design for use in MANUFACTURE; sell, lease, or otherwise dispose of EQUIPMENT so MANUFACTURED; repair, use, or operate EQUIPMENT; and use METHODS. 153. MSI has agreed to the Essential IPR policy of ETSI and has agreed to license essential IPRs (patents) subject to the DMR standard (ETSI TS 102 361 standard) under FRAND terms, including in a standard essential patent license agreed to with Hytera. Indeed, on MSI’s “Standard-Based Licensing” website, MSI has publicly committed MSI to make its essential patents available to prospective licensees on a FRAND basis, including patents related to the ETSI DMR Standards. 154. MSI’s Failure to Disclose SEPs and Subsequent Patent Litigation. As described above, MSI has engaged in a global campaign of patent litigation against Hytera, including asserting claims for patent infringement based on at least two patents that are standard essential to the Relevant DMR Standards. These patents were not disclosed to ETSI in the course of MSI’s participation in the DMR standard setting process, nor did MSI ever make a FRAND offer to Hytera to license these patents or offer to include the two patents under the terms of the agreed license agreement between Hytera and MSI. The two patents that are Essential Patents to the Relevant DMR Standards are: • U.S. Patent 7,369,869, which was filed with the USPTO on July 26, 2004 and issued May 6, 2008. The ’869 patent was published as US2006/0018292 on January 26, 2006. • U.S. Patent 8,279,991, which was filed with the USPTO on December 9, 2008, issued October 2, 2012, and claims priority to a provisional application61/102,770 on October 3, 2008. The ’991 patent was published as US2010/0086092 on April 8, 2010. 155. As described above, the Relevant DMR Standards were in development as early as April 2005 and continued at least through 2016. On information and belief, MSI was aware of the pendency of its applications for the ’869 and ’991 patents throughout the development of the Relevant DMR Standards. Indeed, the ’869 and ’991 patents were issued during the pendency of both of the Relevant DMR Standards and MSI knew or reasonably should have known these patents should have been disclosed in the ETSI standard development process for the Relevant DMR Standards. 156. As of April 2017, MSI maintains a list of the patents that MSI considers Essential IPRs for the Relevant DMR Standard, a list which as of October 2017 includes four patent families. The ’869 and ’991 patents are not listed as essential IPRs to the Relevant DMR Standards. 157. MSI should have listed the ’869 and ’991 patents as essential patents to the Relevant DMR Standards. In the pending patent litigation filed by MSI against Hytera, MSI alleges that Hytera’s DMR products infringe both the ’869 and ’991 patents because the products use software and source code that implement one of the Relevant DMR Standards. In so doing, MSI has relied on portions of the Relevant DMR Standards as a basis for its claims of infringement for both the ’991 and ’869 patents. 158. Plaintiff’s understanding is that, under MSI’s interpretation of the relevant patent claims, to avoid infringement of the ’869 and ’991 patents would be to disable the accused features in the accused Hytera products, which would prevent Hytera from complying with the associated portion of the DMR standard. 159. At no time has MSI disclosed the ’869 and ’991 patents in connection with the ETSI Standard development process. In particular, MSI did not disclose either patent in connection with its participation in the development of the Relevant DMR Standards. 160. Refusal to License SEPs to Hytera and Patent Litigation. Because MSI failed to disclose the ’869 and ’991 patents in the course of the development of the Relevant DMR Standards, MSI breached its obligations under the ETSI IPR Policy to ETSI and Hytera as a participant in the ETSI standard development process. In particular, MSI failed to exercise its “reasonable endeavours” as required by the ETSI IPR policy to disclose the ’869 and ’991 patents as Essential IPR in the course of a standard’s development. 161. Moreover, at no time did MSI make or offer to Hytera a license offer regarding the ’869 and ’991 patents as Essential IPR to the Relevant DMR Standards. Because MSI has failed to make a FRAND license offer to Hytera for the ’869 and ’991 patents as Essential IPR to the Relevant DMR Standards, MSI has breached its obligation to ETSI and to Hytera under the ETSI IPR Policy. 162. Instead of making any licensing offer to Hytera, MSI has brought suits in the United States, Australia, and Germany alleging infringement of either or both the ’869 and ’991 patents or their foreign counterparts in the United States, Australia, and Germany, which violates MSI’s obligations under the ETSI IPR Policy. RELEVANT MARKETS Relevant Product Markets 163. Based on information available to date, there are two relevant product markets: (1) the market for Mission-critical LMR Solutions with distinct sub markets for (a) public safety and emergency responder customers, and (b) utility and transportation customers; and (2) the market for Business-critical LMR Solutions for the private sector. The relevant geographic market for all of the relevant product markets is the United States. As used in this Complaint, LMR Solutions include hardware, software, and if requested by the customer, integration and maintenance services for two-way land-mobile radio communications. 164. MSI and the industry recognize these relevant product markets. Indeed, MSI has stated in its annual report to investors and filed with regulators that it “compete[s]” in these two “core markets”: (1) a “mission-critical communications customer base that spans many layers of governments, public safety, and first responders,” and (2) “commercial and industrial customers in a number of key verticals.” MSI states that there are key traditional “public safety and commercial markets” that it sells into and that there are also other markets, which it describes as “verticals,” that include transportation and utilities. 165. MSI designs its products to address different customer requirements consistent with these markets. These differences include what MSI describes in its annual report to shareholders as “tailored form factors” and “unique feature sets.” Hytera and other manufacturers also sell products tailored to meet the requirements of different customers. 166. These MSI statements to shareholders of the markets in which it competes are helpful in framing the relevant markets at issue in this Complaint. 167. Mission-critical LMR Solutions. The first product market relevant to this case is the market for Mission-critical LMR Solutions. The characteristics of Mission-critical LMR Solutions are redundancy, cybersecurity, scalability, and interoperability with public safety networks. These systems must be designed to maintain viability in an emergency situation. Customers that demand these types of solutions have some common characteristics: they offer essential services (first responder, public safety, subway, power, water) that must continue to function through all emergency situations, and they need communications equipment that will allow them to reach that goal. They are also often subject to regulatory requirements (e.g., from the FCC) regarding data security, privacy, and interoperability. Further, because of the requirement for consistent operation, and viability within an emergency situation, most Mission- critical LMR Solutions include hardware (terminals, systems), accompanying software, as well as long-term maintenance and service contracts with the LMR provider. 168. Within the market for Mission-critical LMR Solutions, there are two separate and distinct submarkets: (1) public safety and emergency responder customers; and (2) utility and transportation customers. 169. Within the public safety and emergency responder submarket, LMR solutions that fail to offer the required level of redundancy, security, and interoperability between public safety agencies are not reasonable substitutes for LMR solutions that do provide for those requirements. Within the United States, other LMR solutions have not generally been considered by the industry or public safety customers to be within this relevant market. P25 is the dominant technology sold in the United States to public safety customers to satisfy these purposes. DMR and TETRA would be viable options in the absence of MSI’s conduct. 170. LMR solutions for public safety have specific spectrum on the 700MHz and 800 MHz band, as defined by the FCC. Equipment designed for public safety applications in the United States will be specified for 700/800MHz use. 171. Because of the specialized, mission-critical, nature of these LMR solutions, they are sometimes not bid through dealers, but directly from manufacturers so as to ensure an appropriate, customized solution is available. The accompanying service and maintenance work will also be bid directly by the LMR manufacturer, but will often be fulfilled or performed by an independent LMR dealer. 172. Industry participants and customer organizations recognize the unique benefits of Mission-critical LMR Solutions to operators in the public safety arena. Through P25, APCO is committed to supporting public safety organizations whose goal is to maintain mission-critical communications and interoperable LMR equipment and systems to better respond to the needs of their communities. According to APCO, “To accomplish the primary goal of having interoperable LMR equipment, users and manufacturers participating in the P25 process develop voluntary, consensus communications standards under the auspices of American National Standards Institute (ANSI)-accredited Telecommunications Industry Association (TIA).” According to MSI, “a P25 digital LMR system delivers the redundancy, reliability, and ‘always on’ availability” to better serve mission-critical communications. 173. The substantial price differences between Mission-critical LMR Solutions appropriate for public safety and emergency responder applications and those that are not reinforces the existence of a separate market for Mission-critical LMR Solutions. For example, in 2016, an average P25-compliant handset offered to a public safety customer in the United States cost approximately $5,000-6,000 (for an APX 6000 model), while the cost of typical, professional- tier digital/DMR handset cost approximately $1,000-1,200. 174. Given a small but substantial, non-transitory increase in the price of an appropriate Mission-critical LMR Solution for public safety and emergency responder customers within the relevant geographic market, actual, and prospective customers would not substitute to a different technology without the necessary characteristics. 175. Within the submarket for utility and transportation customers (sometimes referred to more broadly as infrastructure customers), Mission-critical LMR Solutions need to offer redundancy, security, and scalability, while the need for interoperability (for instance, with a local public safety agency) can vary from customer to customer. Customers in this submarket will include power, water, and electrical utilities, as well as a range of transportation customers managing bus systems, train and subway lines, and airport or other transit facilities. In general, while utility and transportation customers share a lot of similarities to public safety customers, they also have characteristics of private customers. That is, they have to take the day-to-day demands and cost-sensitivity of their customers into account and, generally, are considered to be more cost-conscious than a public safety or emergency response agency. 176. Because of the combination of needs particular to utility and transportation customers, the range of LMR technologies sold into this submarket can be varied. Utility and transportation customers would generally seek what are considered “high-end” technologies, but are more cost sensitive in their purchasing than public safety and emergency responder customers. The most commonly purchased technologies that meet these requirements would be DMR, TETRA, and for very limited applications, dPMR/NXDN. 177. Given a small but substantial, non-transitory increase in the price of an appropriate Mission-critical LMR Solution for utility and transportation customers within a relevant geographic market, actual and prospective customers would not substitute to a different technology without the necessary characteristics. 178. Business-critical LMR Solutions. The market relevant to this case is the market for Business-critical LMR Solutions for the private sector. These customers demand LMR solutions that offer a combination of scalability, cybersecurity, and customizability, without necessarily requiring or needing interoperability with existing public safety radio networks. An important characteristic of these business-critical customers is cost sensitivity compared to Mission-critical LMR Solutions; these are lower-cost radios sold for professional (not consumer) uses. A typical customer in this category might be an operations team at a commercial warehouse, a security or service team at a casino, or supervisors on a construction site. This market may also contain some smaller, cost-sensitive transportation, utility, or even public safety customers (e.g., a small rural police force with little need for P25 level costs or features). 179. The primary technology being utilized in this market will be DMR, with a niche of customers that need and demand dPMR/NXDN solutions. LMR solutions that fail to offer the appropriate combination of cost-effectiveness, reliability, scalability, and security necessary for the private sector are not reasonable substitutes for LMR solutions that do provide for those requirements. P25 would not be considered an appropriate technological solution for these customers. An increasing number of new users recognize the benefits of using LMR technologies in the private sector. 180. A sale to a typical Business-critical LMR Solution customer will be smaller in scale, in terms of handsets and system size, than a Mission-critical LMR Solution customer. It typically would not have the same type of lengthy, and costly, service contracts attendant to a sale made to a public safety or emergency responder customer. Most sales of Business-critical LMR Solutions will be made through independent dealer channels rather than direct sales. 181. Given a small but substantial, non-transitory increase in the price of an appropriate Business-critical LMR Solution for a commercial or industrial customer within a relevant geographic market, actual and prospective customers would not substitute to a different technology without the necessary characteristics. 182. The Relevant Markets Exclude Other Modes of Communications. As described extensively above, the customers purchasing LMR are have unique requirements. Other modes of communication are not alternatives for LMR products designed for and sold to public safety, infrastructure, and commercial customers. Landline phones, for example, do not provide mobility. Analogue radios lack the clarity of digital and are less efficient in their use of spectrum. Analogue is also distinct in that it does not offer text messaging and other applications and functionality that is possible with digital. Similarly cell phone service is not a substitute for the relevant products, as MSI has itself explained in its marketing material. 183. Similarly cell phone service is not a substitute for the relevant products. The differences noted above are well known in the industry. One important differences include safety. For example, one dealer that operates from California to Washington and that exclusively markets MSI product explains that it tested the use of two-way radios and cell phones and found that the former are safer to use while driving “due to the simple, one-button push operation of a radio.” These devices are intended to be used for many on-the-road situations; cell phones are not. Further, the Federal Motor Carrier Safety Administration in 2012 published rules restricting the use of mobile phones for voice communication, rules that do not apply to LMRs. According to other MSI dealers, key functionality found in LMR products that distinguishes two-way radios from cell phones include better network security, improved call coverage and quality, enhanced noise cancellation technology, materially greater durability, more practical user interface, easier one-to-many communication (e.g., talking to a group at the push of a button), tailoring for emergency situations (e.g., constant communication and man-down functionality), cost savings, tailoring for practical requirements of organizational communications, and a battery life that is twice as long as a cell phone. Relevant Geographic Market 184. The relevant geographic market is the United States. MSI substantially forecloses competition in the United States. MSI has erected and taken advantage of barriers to competition that are not present outside the United States. 185. MSI is able to charge monopoly prices in the United States unconstrained by competitive forces; in contrast, MSI’s pricing is competitively constrained outside the United States. MSI can charge U.S. LMR purchasers an unconstrained monopoly price because of differences in the geographic markets in which it sells its product. Competition outside the United States that might drive down pricing stops at the border due to jurisdiction-specific regulations, such as those enforced by the FCC. 186. U.S. customers pay a multiple of what customers outside the United States pay for what is essentially the same product. 187. For instance, MSI prices its handsets in the United Kingdom at a fraction of what MSI charges customers in the United States. The list price for an MSI P25-compliant radio sold last year to the City of Chandler, Arizona was $6,978.00. MSI offered the City of Chandler a “discounted” rate of $5,290. MSI’s list price is nearly seven (7) times the retail price for a comparable MSI TETRA product sold in the United Kingdom. Even after discounting its list price to $5,290, MSI charged the City of Chandler nearly five (5) times what a customer in the UK could pay at retail for a comparable product. For example, MSI offers a comparable product using TETRA – what MSI describes as “one of the most advanced TETRA portable radios in the world” that sells in the UK at retail for less than $1,100 in equivalent U.S. dollars. 188. Because retailers add a margin on top of the price charged to them by MSI, this price differential understates the amount that MSI is able to overcharge public safety customers in the United States, and ultimately the U.S. taxpayer. 189. Purchasers in the United States are harmed by MSI’s monopoly, with U.S. taxpayers and customers effectively subsidizing MSI’s $560 million in profits. The difference is sizable: MSI “handset sales in the U.S. carry an 83.6% gross margin;” MSI’s handset “device sales in Europe are at 9%,” according to an investment analyst. Given the examples above where MSI charges five-to-seven times within the United States what it can charge outside the United States, this analysis comes as no surprise. 190. The difference is competition. Customers in the United States are not paying an elevated price for any better product or service. Regulations, standards, patent laws, and the market structure all combine to make for a geographic market limited to the United States, one that MSI has successfully monopolized through the conduct described herein, preventing the competition that MSI customers outside the United States benefit from. 191. Regulatory requirements vary from country to country and each country adopts laws and rules that regulate the airwaves within its boundaries. The United States is no exception. The United States and Canada, for example, have chosen to allocate their radio spectrum differently from one another, as well as from other countries. 192. The FCC is delegated responsibility for regulating and enforcing the nation’s laws with respect to the use of radio spectrum over which two-way radios operate. The FCC, as noted above, has allocated certain spectrum for specific uses, such as spectrum on the 700MHz and 800 MHz bands to public safety. 193. FCC regulations also dictate what product standards or technologies can be used for a given spectrum. For example, the FCC has rules requiring analog interoperability in the NPSPAC 800 MHz spectrum (806-809/851-854 MHz) and P25 interoperability in the narrowband 700 MHz spectrum (764-804 MHz). 194. FCC requirements do not apply outside the United States. On information and belief, as described above, MSI has had a hand in defining these rules in order to protect its monopoly in this country. 195. A radio that is sold and operated in the United States must be designed to operate according to FCC requirements. A two-way radio that is designed to operate using spectrum permitted by another country for public safety or private sector use cannot be used in the United States if that spectrum has been allocated by the FCC for other purposes. A customer cannot use a radio outside the country of its purchase unless it conforms to U.S. and FCC-approved standards. The consequences of using a radio designed to operate on spectrum permitted in one country but not in the United States can result in an investigation or fines by the FCC. 196. The FCC also regulates other aspects of the radio. The power output, antenna size, and other technical characteristics of the system are regulated by FCC regulations that affect what may be sold and operated in the United States. Further, two-way radios must be certified by the FCC prior to their sale in the United States. Indeed, manufacturers of two-way radios must obtain an FCC Equipment Authorization prior to marketing or importing a product into the United States. A product’s compliance with one country’s certification requirements does not make the product compliant with U.S. regulatory requirements and the product may not be sold in the United States without undergoing separate compliance testing and certification by the FCC. A vendor may not even demonstrate product in the United States if it lacks appropriate FCC certifications. 197. Other considerations also affect competition in the sale of two-way radios, such that customers in the United States do not benefit from competition in the sale of products outside the United States. Customers in this country look to dealers and suppliers who are capable of supplying product and services, including maintenance and warranty repairs, locally. Consequently, MSI and Hytera, for example, both maintain offices and sales and back-office staff in the United States in order to support sales by customers in the United States. The independent dealers referred to in this Complaint all maintain offices and staff in the United States to support sales to U.S. customers. 198. The United States is also notable for the dominance of the P25 standard for public safety and first responder customers. Most countries in the world do not use P25, preferring instead the more efficient TETRA technology standard. P25 was promoted and adopted by APCO, an association of U.S. police and other first responders. As further described above, the P25 standard was designed for first responders in the United States. Even as MSI actively promoted and sold TETRA product outside the United States – becoming, in MSI’s words “the world’s largest supplier of TETRA solutions” – MSI has said that TETRA is not suitable for sale to public safety customers (or any entity using the public safety bands in the United States) because it lacks interoperability with P25. However, as described above, PowerTrunk has invested the time and money to develop a unique, dual-mode, P25 compatible product that moots any such concerns. 199. Today, MSI-lobbied-for rules and regulations still require the use of P25 for 700MHz. Thus, in order to sell a TETRA product capable of operating on this band, a manufacturer has to design a dual-mode device capable of operating both TETRA and P25. This requirement is unique to the United States. 200. Patent laws also limit the relevant market to the United States. U.S. patent laws provide for market exclusivity within the country’s borders. A patent holder may seek to block the importation and sale into the United States of product that infringes a valid patent. 201. MSI is no stranger to using the patent laws for the purpose of limiting competition to within the United States. MSI has taken various actions over time to block entry into the United 202. MSI has sought to block the importation of Hytera product through sham litigation in the ITC and federal court, as alleged herein. This sham conduct includes asserting patent protection from the importation of Hytera’s DMR products sold for private sector use. Because this functionality is essential to operating under the DMR standard specifications, United States patents that cover the DMR standard may preclude the importation and sale of all such radios, according to the position taken by MSI. 203. In sum, the relevant geographic market is limited to the United States and MSI’s actions would not be possible but for the fact that competition in the sale of two-way radios is limited by this nation’s boundaries. Relevant Market Participants 204. MSI’s 2016 annual report establishes the competition faced by MSI globally for LMR solutions: Hytera (and Sepura), Kenwood, Airbus, and Harris. MSI is the dominant provider of LMR solutions within the United States. Further, MSI announced its intent to acquire the LMR assets of Airbus. The status of that acquisition is unclear, but in any event, Airbus is not a competitor in the relevant markets here. MSI’s own statement of the competitive landscape is clear evidence of a highly concentrated market. When one considers that each of its competitors has a de minimis share of the relevant markets compared to MSI, the concentrated nature of the market and MSI’s monopoly power is even more compelling. MSI’s MONOPOLY POWER 205. By virtue of MSI’s high market share and barriers to entry in the relevant market and switching costs, MSI has, and at all relevant times had, monopoly power, i.e., the power to control prices and/or exclude competition. 206. MSI is the dominant provider of Mission-critical LMR Solutions in the United States. One industry analyst has described MSI’s public safety market position as a moat by which MSI is able to exclude competition, stating: Significant market share is a large competitive moat Since the inception of land mobile radio in the 1930s, MSI has built a business that is dominant in the government and public safety market. ValueAct estimates MSI has 75% of the land mobile radio market. Back in August 2011, Morgan Stanley analysts estimated MSI had a 75–85% share in North America and 35–40% internationally. This market position is large competitive moat for MSI and has effectively prevented competitors from gaining significant share for several reasons. This quote from 2013 remains particularly apt today in 2017. In the last four years, MSI’s market position remains the same; it is ever dominant and able to exclude competitors for public safety contracts. 207. By revenue, MSI controlled no less than 75% of the submarket for Mission-critical LMR Solutions sold to public safety and emergency responder customers. On information and belief, on any other measure (unit sales, profits, etc.) MSI would be equally dominant. MSI’s monopoly share is widely reported. For example, MSI’s board member Jeff Ubben reportedly “said the market share is about 75%.” 208. MSI is also the dominant provider of Mission-critical LMR Solutions to transportation and utility customers within the United States, with a market share of more than 65% by revenue. 209. MSI is the dominant provider of Business-critical LMR Solutions for the private sector in the United States. MSI controls more than 80% of the market by revenue for Business- critical LMR Solutions for the private sector. 210. However, on information and belief, MSI could also be shown to be dominant in all relevant markets by other measures, such as existing installed base or users or unit sales (including terminals, base stations and repeaters). 211. In addition to MSI’s high market share, the relevant markets are characterized by significant barriers to entry. Initially, developing a new LMR product solution requires millions of dollars in capital investment and research and development, in addition to significant regulatory expenditures. These sunk costs inhibit entry and expansion in the relevant markets. 212. Any new, non-certified LMR product to be imported or sold in the United States needs regulatory licensing from the FCC, as described above. 213. The relevant markets are also characterized by a significant barrier to entry in the form of switching costs. Sales of LMR solutions are particularly sticky, as once a customer makes a decision to install a certain technology, there is a system infrastructure installed that includes base stations and repeaters to connect user handsets. Switching is difficult for two reasons: (1) interoperability – if a customer wishes to switch to alternative handset technology but maintain its same installed infrastructure, there may be questions of interoperability or loss of functions from using a different handset; and (2) installation costs – once a customer installs an LMR system, it takes a significant improvement in price or quality to induce the customer to change its system to a competitor’s system. The result is that once a customer chooses a technological solution (and thus, a provider of those solutions) there is substantial “stickiness” in that choice. 214. Relatedly, the relevant markets are characterized by direct and indirect network effects, which can reinforce a customer’s “stickiness” to a technological solution because an individual customer’s use of that technology is attached to the use of another resulting service. For example, the network effects of LMR solutions include the growth of service providers, accessory providers, software providers, and other consultants specifically tailored to serve a dominant LMR solution, such as P25 for public safety customers. As an alternative technology seeks to enter one of the relevant markets – such as TETRA in the U.S. market for Mission- critical LMR Solutions for public safety – and consequently seeks to take advantage of any network effects of a predominant technology, it faces the daunting task of coordinating the behavior of large numbers of service providers or evolving into an interoperable or complementary technology. Therefore, even if a new LMR technology offers a superior alternative, the network effects inherent to an existing and adopted LMR network serve as a barrier to competition because of a customer’s reluctance to choose an incompatible technology with fewer supporting service providers available. As a result, the provider of an incumbent LMR technology is able to delay the emergence of any new technologies and insulate itself from competition. 215. This “stickiness” and these ties formed by network effects result in significant barriers to entry in the relevant markets and reinforce MSI’s monopoly power over its current customers. New entrants have to expend significant resources to overcome these barriers, underscoring the gravity of the effect of MSI’s exclusionary conduct. 216. Other barriers to entry include the role of dealers, reputation, and patents, as alleged above. Without access to dealers, for example, a new entrant is not able to effectively compete. 217. Direct evidence of MSI’s monopoly power includes its ability to control prices and raise prices above those that would be charged in a competitive market. 218. MSI’s monopoly power is durable. It has dominated the relevant markets for years. MSI’s market share in the relevant markets has been stable, as MSI has maintained monopoly power in the relevant markets for years. In particular, Plaintiff believes that MSI has held onto 80% or more of DMR-based LMR products in the United States for at least the past three years. MSI’s market position is unlikely to change as long as MSI persists in its scheme to maintain its monopoly. 219. Entry has not impacted MSI’s market position or affected how MSI competes. Hytera’s entry, for example, did not lead to competitive pricing by MSI. Competitors are not able to restrain MSI. To the contrary, competitors have exited and/or have reduced their investment in the face of MSI’s durable monopoly. The company Tait, for example, used to compete but has since exited the market as a direct competitor. On information and belief, Tait only participates indirectly in the U.S. by supplying product to Harris. Plaintiff believes that Kenwood makes some DMR product, but has redirected its investment to focus on non-DMR products. 220. The history of TETRA-based sales in the U.S. provides yet another example of MSI’s durable monopoly power. Plaintiff believes that only one company – Sepura and its PowerTrunk subsidiary – has ever been successful selling TETRA into the United States and then its competitive impact was severely limited as a result of MSI’s conduct. Ultimately, Sepura exited as an independent vendor and was acquired by Hytera. 221. Notably, MSI’s pricing is not and has not been restrained as a result of competition. MSI’s prices are well above the competition and have remained that way. Plaintiff understands, for example, that MSI’s list prices are well above Hytera’s list prices for like products. Plaintiff believes that the spread between what MSI charges the dealer and MSI’s suggested resale price (its published MSRP) has not changed in response to competition from Hytera. Dealers tell Hytera they prefer Hytera pricing but cannot afford to drop MSI in favor of Hytera because of MSI’s durable monopoly power over them. ANTITRUST INJURY 222. During the Class Period, Plaintiff and Class Members purchased LMR Solutions directly from MSI. As a result of MSI’s anticompetitive conduct, Plaintiff and Class Members paid more for LMR Solutions than they would have absent that conduct, and thus suffered substantial damages. This is a cognizable antitrust injury and constitutes harm to competition under the federal antitrust laws. 223. Because MSI’s unlawful conduct has successfully restrained competition in the market, Plaintiff and Class Members have sustained, and continue to sustain, significant losses in the form of artificially inflated prices paid to MSI. The full amount of such damages will be calculated after discovery and upon proof at trial. 224. MSI has a history of squelching competition. When other vendors in past years made an effort to aggressively compete head on with MSI, MSI responded with tactics similar to what MSI is using today against Hytera, as alleged above. MSI’s conduct then and now has succeeded in eliminating effective competition such that it continues to maintain a stranglehold on dealers and the ultimate user. 225. MSI sales agreements and service contracts effectively cover more than 75% of the market for Mission-critical LMR Solutions for public safety and emergency responder customers. As detailed above, through these public safety sector sales and service contracts as well as de facto exclusivity enforced through financial incentives and explicit threats of termination, MSI is able to exert pressure on dealers to effectively prevent dealers from doing business with MSI and from carrying competing products. The resulting pressure on nominally independent dealers has led to MSI’s sustained dominance in the market for Business-critical LMR Solutions for commercial and industrial customers, effectively foreclosing the 80% of that market held by MSI. 226. By foreclosing competitors, MSI has been able to keep the supply of Mission-critical LMR Solutions for public safety, emergency responder, utility, and transportation customers, as well as Business-critical LMR Solutions for commercial and industrial customers below competitive levels, thus reducing overall market output below what would have prevailed absent MSI’s anticompetitive agreements and conduct. By reducing overall market output and eliminating competitors, MSI has been able to keep its prices above levels that would have prevailed in a competitive market. 227. The American customer and taxpayer suffers from high prices that result from the elimination of competition, as described above, but also suffers from reduced innovation. 228. Innovation is stalled because competitors are unwilling to invest. A New York official famously testified to Congress that a kid on the streets of New York has more technology packed into his smartphone than can be found in a radio sold into the public safety market. As long as MSI continues to monopolize the relevant markets through a monopolistic scheme that locks up the market, competitors have little incentive to innovate as the mobile phone industry 229. No procompetitive justification or effects outweigh the anticompetitive effects of MSI’s agreements and exclusionary conduct, abusive serial petitioning and litigation, nor their unlawful patent-related conduct. For example, requiring dealers to refrain from doing business with competing LMR manufacturers does not serve any interest in protecting intellectual property or trade secrets: MSI’s demanding exclusivity from its dealers under threat of termination is unique within the industry, emphasizing the anticompetitive nature of its conduct. To Plaintiff’s knowledge, no other LMR manufacturer makes such demands of exclusivity of its independent dealers, showing that within the context of independent LMR dealers, there is no legitimate economic reason to require exclusivity. FIRST COUNT Violation of 15 U.S.C. § 2 Monopolization 230. Plaintiff re-alleges and incorporates by reference each of the allegations set forth 231. MSI has monopolized the relevant markets in violation of Section 2 of the Sherman 232. At all relevant times, MSI possessed monopoly power in the relevant markets, as demonstrated by MSI’s high market share, barriers to entry, MSI’s actual exclusion of competition, and its ability to charge supracompetitive prices in the relevant markets. 233. Through the scheme described above, and other conduct likely to be revealed in discovery, MSI has willfully and unlawfully maintained and enhanced its monopoly power. MSI’s scheme constitutes exclusionary conduct within the meaning of Section 2 of the Sherman 234. MSI’s scheme has suppressed competition and produced anticompetitive effects in the relevant market, including causing Plaintiff and Class Members antitrust injury and damages. 235. MSI’s conduct has no procompetitive benefit or justification. The anticompetitive effects of its behavior outweigh any alleged procompetitive justifications. 236. As a result of MSI’s conduct, and the harm to competition caused by that conduct, Plaintiff and Class Members have suffered substantial injuries to their business and property in an amount to be proven at trial and automatically trebled, as provided by 15 U.S.C. § 15. 237. Plaintiff and Class Members also entitled to recover from MSI the costs of suit, including reasonable attorneys’ fees, as provided by 15 U.S.C. § 15. SECOND COUNT Violation of 15 U.S.C. § 2 Attempted Monopolization 238. Plaintiff re-alleges and incorporates by reference each of the allegations set forth 239. As alleged above, MSI has attempted to monopolize the relevant markets in violation of Section 2 of the Sherman Act. 240. MSI possesses substantial market power in the relevant markets, as demonstrated by MSI’s high market share, MSI’s actual exclusion of competition, and its ability to charge supracompetitive prices in the relevant markets. 241. MSI has been implementing the anticompetitive scheme set forth above, and other conduct likely to be revealed in discovery, with the specific intent to monopolize the relevant markets. MSI’s scheme constitutes exclusionary conduct, within the meaning of Section 2 of the Sherman Act. 242. There is a dangerous probability that MSI will succeed in unlawfully extending its monopoly in the relevant markets through its anticompetitive scheme. 243. MSI’s scheme has suppressed competition and has produced anticompetitive effects in the relevant markets, including Plaintiff’s and Class Members’ antitrust injury and damages. 244. MSI’s conduct has no procompetitive benefit or justification. The anticompetitive effects of its behavior outweigh any alleged procompetitive justifications. 245. As a result of MSI’s conduct, and the harm to competition caused by that conduct, Plaintiff and Class Members have suffered substantial and continuing injuries to their business and property in an amount to be proven at trial and automatically trebled, as provided by 15 U.S.C. § 15. 246. Plaintiff and Class Members are also entitled to recover from MSI the costs of suit, including reasonable attorneys’ fees, as provided by 15 U.S.C. § 15. THIRD COUNT Violation of 15 U.S.C. § 1 Agreements in Restraint of Trade 247. Plaintiff re-alleges and incorporates by reference each of the allegations set forth 248. MSI possesses substantial market power in the relevant markets, as demonstrated by MSI’s high market share, barriers to entry, MSI’s actual exclusion of competition, and its ability to charge supracompetitive prices in the relevant markets described above. 249. As alleged above, MSI has entered into agreements with dealers with the purpose and effect of unreasonably restraining trade and commerce in the relevant markets. 250. MSI’s exclusionary contracts described above constitute unlawful agreements, contracts, and concerted activity that unreasonably restrain trade in the relevant markets in violation of Section 1 of the Sherman Act. 251. MSI’s exclusionary contracts have foreclosed a substantial share of competitors and had anticompetitive effects in the relevant markets. 252. MSI’s exclusionary contracts have no procompetitive benefit or justification. The anticompetitive effects of its exclusionary contracts outweigh any purported procompetitive justifications. 253. As a result of MSI’s exclusionary contracts, and the harm to competition caused by those contracts, Plaintiff and Class Members have suffered substantial injuries to its business and property in an amount to be proven at trial and automatically trebled, as provided by 15 U.S.C. § 254. Plaintiff and Class Members are also entitled to recover from MSI the costs of suit, including reasonable attorneys’ fees, as provided by 15 U.S.C. § 15. WHEREFORE, Plaintiff and Class Members demand judgment as follows: A. Certification of the action as a Class Action pursuant to Federal Rule of Civil Procedure 23, and appointment of Plaintiff as Class Representative and its counsel of record as Class Counsel; B. Permanent injunctive relief that enjoins MSI from violating the antitrust laws and requires MSI to take affirmative steps to dissipate the effects of its violations; C. That acts alleged herein be adjudged and decreed to be unlawful restraints of trade in violation of the Sherman Act, 15 U.S.C. § 1 et seq.; D. A judgment against MSI for the damages sustained by Plaintiff and the Class defined herein, and for any additional damages, penalties, and other monetary relief provided by applicable law, including treble damages; E. By awarding Plaintiff and Class Members pre-judgment and post-judgment interest as provided by law, and that such interest be awarded at the highest legal rate from and after the date of service of the Complaint in this action; F. The costs of this suit, including reasonable attorney fees; and G. Such other and further relief as the Court deems just and proper. JURY TRIAL DEMANDED Plaintiff, on behalf of itself and others similarly situated, hereby requests a jury trial, pursuant to Federal Rule of Civil Procedure 38, on any and all claims so triable. RULE 11.2 CERTIFICATION We hereby certify that, to the best of our knowledge, the matter in controversy is not the subject of any action pending in any court or of any arbitration or administrative proceeding. Dated: December 22, 2017 Respectfully submitted, /s/ James E. Cecchi . CARELLA, BYRNE, CECCHI, OLSTEIN, BRODY & AGNELLO, P.C. James E. Cecchi Lindsey H. Taylor 5 Becker Farm Road Roseland, NJ 07068 (973) 994-1700 [email protected] [email protected] Linda P. Nussbaum Bart D. Cohen NUSSBAUM LAW GROUP, P.C. 1211 Avenue of the Americas, 40th Floor New York, NY 10036-8718 (917) 438-9189 [email protected] [email protected] Arthur N. Bailey Marco Cercone RUPP BAASE PFALZGRAF CUNNINGHAM, LLC 1600 Liberty Building 424 Main Street Buffalo, New York 14202 (716) 664-2967 [email protected] [email protected] Counsel for Plaintiff and the Proposed Class

antitrust

VsRrDYcBD5gMZwczybH6

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF SOUTH CAROLINA CHARLESTON DIVISION 2:18-cv-03324-DCN TED SIGMON, individually and on behalf of all others similarly situated, Case No. Plaintiff, v. BRIDGESTONE AMERICAS, INC.; and BRIDGESTONE RETAIL OPERATIONS, LLC d/b/a FIRESTONE COMPLETE AUTO CARE, Defendants. CLASS ACTION COMPLAINT COMES NOW, Plaintiff Ted Sigmon, on behalf of himself and all others similarly situated, and alleges as follows: INTRODUCTION 1. Plaintiff brings this action individually and on behalf of all others similarly situated against Bridgestone Americas, Inc. and Bridgestone Retail Operations, LLC (doing business as Firestone Complete Auto Care) (“Defendants”), alleging violations of Title III of the Americans with Disabilities Act, 42 U.S.C. § 12101 et seq. (the “ADA”), and its implementing regulations, in connection with accessibility barriers in the parking lots and paths of travel at various public accommodations owned, operated, controlled, and/or leased by Defendants (“Defendants’ facilities”). 2. Plaintiff has a mobility disability and is limited in the major life activity of walking, which has caused him to be dependent upon a wheelchair for mobility. 3. Plaintiff has visited Defendants’ facilities and was denied full and equal access as a result of Defendants’ inaccessible parking lots and paths of travel. 4. Plaintiff’s experiences are not isolated—Defendants have systematically discriminated against individuals with mobility disabilities by implementing policies and practices that consistently violate the ADA’s accessibility guidelines and routinely result in access barriers at Defendants’ facilities. 5. In fact, numerous facilities owned, controlled, and/or operated by Defendants have parking lots and paths of travel that are inaccessible to individuals who rely on wheelchairs for mobility, demonstrating that the centralized decision making Defendants employ with regard to the design, construction, alteration, maintenance, and operation of its facilities causes access barriers and/or allows them to develop and persist at Defendants’ facilities. 6. Unless Defendants are required to remove the access barriers described below, and required to change their policies and practices so that access barriers do not reoccur at Defendants’ facilities, Plaintiff and the proposed Class will continue to be denied full and equal access to those facilities as described and will be deterred from fully using Defendants’ facilities. 7. The ADA expressly contemplates injunctive relief aimed at modification of a policy or practice that Plaintiff seeks in this action. In relevant part, the ADA states: [i]n the case of violations of . . . this title, injunctive relief shall include an order to alter facilities to make such facilities readily accessible to and usable by individuals with disabilities . . .. Where appropriate, injunctive relief shall also include requiring the . . . modification of a policy . . .. 42 U.S.C. § 12188(a)(2). 8. Consistent with 42 U.S.C. § 12188(a)(2), Plaintiff seeks a permanent injunction requiring that: a. Defendants remediate all parking and path of travel access barriers at Defendants’ facilities, consistent with the ADA; b. Defendants change their policies and practices so that the parking and path of travel access barriers at Defendants’ facilities do not reoccur; and 2 c. Plaintiff’s representatives shall monitor Defendants’ facilities to ensure that the injunctive relief ordered pursuant to Paragraph 8.a. and 8.b. has been implemented and will remain in place. 9. Plaintiff’s claims for permanent injunctive relief are asserted as class claims pursuant to Fed. R. Civ. P. 23(b)(2). Rule 23(b)(2) was specifically intended to be utilized in civil rights cases where the Plaintiff seeks injunctive relief for his or her own benefit and the benefit of a class of similarly situated individuals. To that end, the note to the 1996 amendment to Rule 23 Subdivision(b)(2). This subdivision is intended to reach situations where a party has taken action or refused to take action with respect to a class, and final relief of an injunctive nature or a corresponding declaratory nature, settling the legality of the behavior with respect to the class as a whole, is appropriate . . .. Illustrative are various actions in the civil rights field where a party is charged with discriminating unlawfully against a class, usually one whose members are incapable of specific enumeration. THE ADA AND ITS IMPLEMENTING REGULATIONS 10. The ADA was enacted over a quarter century ago and is intended to “provide a clear and comprehensive national mandate for the elimination of discrimination against individuals with disabilities.” 42 U.S.C. § 12101(b)(1). 11. The ADA broadly protects the rights of individuals with disabilities in employment, access to State and local government services, places of public accommodation, transportation, and other important areas of American life. 12. Title III of the ADA generally prohibits discrimination against individuals with disabilities in the full and equal enjoyment of public accommodations, 42 U.S.C. § 12182(a), and prohibits places of public accommodation, either directly or through contractual, licensing, or other arrangements, from outright denying individuals with disabilities the opportunity to participate in a place of public accommodation, 42 U.S.C. § 12182(b)(1)(A)(i), or denying individuals with 3 disabilities the opportunity to fully and equally participate in a place of public accommodation, 42 U.S.C. § 12182(b)(1)(A)(ii). 13. Title III further prohibits places of public accommodation from utilizing methods of administration that have the effect of discriminating on the basis of a disability. 42 U.S.C. § 12182(b)(1)(D). 14. Title III and its implementing regulations define discrimination to include the following: a. Failure to remove architectural barriers when such removal is readily achievable for places of public accommodation that existed prior to January 26, 1992, 28 C.F.R. § 36.304(a) and 42 U.S.C. § 12182(b)(2)(A)(iv); b. Failure to design and construct places of public accommodation for first occupancy after January 26, 1993, that are readily accessible to and usable by individuals with disabilities, 28 C.F.R. § 36.401 and 42 U.S.C. § 12183(a)(1); c. For alterations to public accommodations made after January 26, 1992, failure to make alterations so that the altered portions of the public accommodation are readily accessible to and usable by individuals with disabilities, 28 C.F.R. § 36.402 and 42 U.S.C. § 12183(a)(2); and d. Failure to maintain those features of public accommodations that are required to be readily accessible to and usable by persons with disabilities, 28 C.F.R. § 36.211. 15. The remedies and procedures set forth at 42 U.S.C. § 2000a-3(a) are provided to any person who is being subjected to discrimination on the basis of disability or who has reasonable grounds for believing that such person is about to be subjected to discrimination in violation of 42 U.S.C. § 12183. 42 U.S.C. 12188(a)(1). 16. The ADA also provides for specific injunctive relief, which includes the following: In the case of violations of sections 12182(b)(2)(A)(iv) and section 12183(a) of this title, injunctive relief shall include an order to alter facilities to make such facilities readily accessible to and usable by individuals with disabilities to the extent required by this 4 subchapter. Where appropriate, injunctive relief shall also include . . . modification of a policy . . . to the extent required by this subchapter. 42 U.S.C. § 12188(a)(2); 28 C.F.R. § 36.501(b). JURISDICTION AND VENUE 17. This Court has federal question jurisdiction pursuant to 28 U.S.C. § 1331 and 42 U.S.C. § 12188. 18. Plaintiff’s claims asserted herein arose in this judicial district, and Defendants do substantial business in this judicial district. 19. Venue in this judicial district is proper under 28 U.S.C. § 1391(b)(2) in that this is the judicial district in which a substantial part of the events and/or omissions at issue occurred. PARTIES 20. Plaintiff is, and at all times relevant hereto was, a resident of South Carolina. As described above, as a result of his disability, Plaintiff relies upon a wheelchair for mobility. He is therefore a member of a protected class under the ADA, 42 U.S.C. § 12102(2), and the regulations implementing the ADA set forth at 28 C.F.R. §§ 36.101 et seq. 21. Defendant Bridgestone Americas, Inc. is a Nevada corporation headquartered at 200 4th Avenue S, Suite 101, Nashville, TN 37201-2255. 22. Defendant Bridgestone Retail Operations, LLC is a Delaware limited liability company headquartered at 200 4th Avenue S, Suite 100, Nashville, TN 37201-2255. 23. On information and belief, Defendant Bridgestone Retail Operations, LLC is a direct subsidiary of Defendant Bridgestone Americas, Inc. 24. Defendants are a public accommodation pursuant to 42 U.S.C. §12181(7). 5 BRIDGESTONE-FIRESTONE ADA CONSENT DECREE 25. In 2002, Defendants1 were party to a class-wide consent decree that, among other things, obligated Defendants to evaluate and remediate parking facilities for non-conforming ADA features. See American Disability Ass’n, Inc. v. BFS Retail & Commercial Operations, LLC, No. 01-cv-6529, Dkt. No. 130 (final judgment approving class certification and proposed amended consent decree) (S.D. Fl. Oct. 30, 2002). In that matter, a disability rights organization brought a class action on behalf of a class of persons with mobility or dexterity disabilities who were denied full and equal access to Bridgestone-Firestone retail tire and service stores because of various violations under Title III of the ADA. See id. at Dkt. No. 100, pp. 2-3 (order granting preliminary approval of proposed amended consent decree). The consent decree applied to approximately 2,200 Bridgestone-Firestone retail properties throughout the United States owned, leased, operated or managed by BFRC. Id. at pp. 16-20. 26. Under the consent decree, BFRC was obligated, among other things, to survey all of its retail stores to determine what modifications or alterations may be needed for them to comply with the ADA and thereafter to complete any necessary accessibility enhancements in compliance with ADAAG specifications within a set time frame. More specifically, the consent decree provided for the evaluation and remediation of accessible routes and accessible parking, including but not limited to: a. Modification of existing paved areas to modify occasional vertical offsets along an accessible route; b. Modification of existing paved areas where slopes at curb ramps/ramps, accessible parking spaces, and aisles, or exterior entry doors do not conform to ADA requirements; 1 Defendant Bridgestone Retail Operations, LLC was formerly known as BFS Retail & Commercial Operations, LLC (“BFRC”) and changed its name to Bridgestone Retail Operations, LLC in 2009. 6 c. Providing conforming accessible parking spaces; d. Modifying the front/back slope of existing curb ramps and ramps which are part of a required accessible route if their slopes do not conform; and e. Modifying the cross slope of existing curb ramps and ramps which are part of a required accessible route if their slopes do not conform. Id. at pp. 79-80. BFRC was additionally required to distribute “ADA Policies regarding the provisions of Title III of the ADA and customer services to all Company Operated BFRC” retail stores. Id. at p. 28. 27. The term of the consent decree was approximately seven years from the date of final approval, which would have ended roughly in November 2010. Id. at p. 20. During that period, BFRC presumably implemented the remedial measures required under the decree as there were no further filings for enforcement or extensions of the decree following final judgment in the matter. Although the relief achieved by the consent decree was significant and impacted the entirety of BFRC’s network of retail stores, an apparent shortcoming was the lack of a provision for a continuing obligation to maintain ADA accessibility over time. As further explained below, Defendants’ ADA policies and practices permit, inter alia, unchecked access barriers to reoccur, resulting in parking lots and paths of travel that are inaccessible to individuals who rely on wheelchairs for mobility. FACTUAL ALLEGATIONS I. Plaintiff Has Been Denied Full and Equal Access to Defendants’ Facilities. 28. Plaintiff has visited Defendants’ facilities located at 852 Savannah Hwy Charleston, SC, including within the last year, where he experienced unnecessary difficulty and risk due to excessive slopes in a purportedly accessible parking space and other ADA accessibility violations as set forth in more detail below. 7 29. Despite this difficulty and risk, Plaintiff plans to return to Defendants’ facilities, as he lives nearby and regularly travels to where Defendants’ facilities are located, usually to have his car serviced nearby, and he wishes to access goods and services offered at Defendants’ facilities but would not feel comfortable returning because of the access barriers he encountered there. Furthermore, Plaintiff intends to return to Defendants’ facilities to ascertain whether those facilities remain in violation of the ADA. 30. As a result of Defendants’ non-compliance with the ADA, Plaintiff’s ability to access and safely use Defendants’ facilities has been significantly impeded. 31. Plaintiff will be deterred from returning to and fully and safely accessing Defendants’ facilities, however, so long as Defendants’ facilities remain non-compliant, and so long as Defendants continue to employ the same policies and practices that have led, and in the future will lead, to inaccessibility at Defendants’ facilities. 32. Without injunctive relief, Plaintiff will continue to be unable to fully and safely access Defendants’ facilities in violation of his rights under the ADA. 33. As an individual with a mobility disability who is dependent upon a wheelchair, Plaintiff is directly interested in whether public accommodations, like Defendants’ facilities, have architectural barriers that impede full accessibility to those accommodations by individuals with mobility-related disabilities. II. Defendants Repeatedly Deny Individuals With Disabilities Full and Equal Access to Defendants’ Facilities. 34. Defendants are engaged in the ownership, operation, management, and development of retail auto care properties throughout the United States. 8 35. Defendants “operate[] the largest network of company-owned automotive service providers in the world — nearly 2,200 tire and vehicle service centers across the United States”.2 36. As the owner and manager of their properties, Defendants employ centralized policies, practices, and procedures with regard to the design, construction, alteration, maintenance, and operation of their facilities. 37. To date, Defendants’ centralized design, construction, alteration, maintenance, and operational policies and practices have systematically and routinely violated the ADA by designing, constructing, and altering facilities so that they are not readily accessible and are usable, by failing to remove architectural barriers, and by failing to maintain and operate facilities so that the accessible features of Defendants’ facilities are maintained. 38. On Plaintiff’s behalf, investigators examined multiple locations owned, controlled, and/or operated by Defendants and found the following violations, which are illustrative of the fact that Defendants implement policies and practices that routinely result in accessibility violations: a. 852 Savannah Hwy. Charleston, SC i. The surfaces of one or more access aisles had slopes exceeding 2.1%. b. 1970 Sam Rittenberg Blvd., Charleston, SC i. The surfaces of one or more access aisles had slopes exceeding 2.1%. c. 3901 New Bern Ave., Raleigh, NC i. The surfaces of one or more purportedly accessible parking spaces had slopes exceeding 2.1%; and ii. The surfaces of one or more access aisles had slopes exceeding 2.1%. d. 3775 William Penn Hwy., Monroeville, PA 2 https://www.bridgestoneamericas.com/en/corporation/subsidiaries-and-business- units/bridgestone-retail-operations (available as of December 10, 2018). 9 i. The surfaces of one or more purportedly accessible parking spaces had slopes exceeding 2.1%; ii. The surfaces of one or more access aisles had slopes exceeding 2.1%; and iii. A portion of the route to the store entrance had a cross slope exceeding 2.1%. e. 10225 Perry Hwy., Wexford, PA i. The surfaces of one or more purportedly accessible parking spaces had slopes exceeding 2.1%; and ii. The surfaces of one or more access aisles had slopes exceeding 2.1%. f. 3715 Randall Drive, Colorado Springs, CO i. A curb ramp projected into an access aisle. g. 8949 Jennings Station Road, St. Louis, MO i. The surfaces of one or more purportedly accessible parking spaces had slopes exceeding 2.1%; and ii. The surfaces of one or more access aisles had slopes exceeding 2.1%. h. 10750 Saint Charles Rock Road, Saint Ann, MO i. The surfaces of one or more purportedly accessible parking spaces had slopes exceeding 2.1%; and ii. The surfaces of one or more access aisles had slopes exceeding 2.1%. i. 10160 Manchester Road, St. Louis, MO i. The surfaces of one or more purportedly accessible parking spaces had slopes exceeding 2.1%; and ii. The surfaces of one or more access aisles had slopes exceeding 2.1%. 39. The fact that individuals with mobility-related disabilities are denied full and equal access to numerous of Defendants’ facilities, and the fact that each of these facilities deny access by way of inaccessible parking facilities, is evidence that the inaccessibility Plaintiff experienced is not isolated, but rather, is caused by Defendants’ systemic disregard for the rights of individuals with disabilities. 10 40. Defendants’ systemic access violations demonstrate that Defendants either employ policies and practices that fail to design, construct, and alter their facilities so that they are readily accessible and usable and/or that Defendants employ maintenance and operational policies and practices that are unable to maintain accessibility. 41. As evidenced by the widespread inaccessibility of Defendants’ parking facilities, absent a change in Defendants’ corporate policies and practices, access barriers are likely to reoccur in Defendants’ facilities even after they have been remediated. 42. Accordingly, Plaintiff seeks an injunction to remove the barriers currently present at Defendants’ facilities and an injunction to modify the policies and practices that have created or allowed, and will create or allow, inaccessibility to affect Defendants’ network of facilities. CLASS ALLEGATIONS 43. Plaintiff brings this class action pursuant to Fed. R. Civ. P. 23(a) and 23(b)(2) on behalf of himself and the following nationwide class: All persons with qualified mobility disabilities who were denied the full and equal enjoyment of the goods, services, facilities, privileges, advantages or accommodations of any Firestone Complete Auto Care store location in the United States on the basis of disability because such persons encountered accessibility barriers due to Defendants’ failure to comply with the ADA’s accessible parking and path of travel requirements. 44. Numerosity: The class described above is so numerous that joinder of all individual members in one action would be impracticable. The disposition of the individual claims of the respective class members through this class action will benefit both the parties and this Court and will facilitate judicial economy. 45. Typicality: Plaintiff’s claims are typical of the claims of the members of the class. The claims of Plaintiff and members of the class are based on the same legal theories and arise from the same unlawful conduct. 11 46. Common Questions of Fact and Law: There is a well-defined community of interest and common questions of fact and law affecting members of the class in that they all have been and/or are being denied their civil rights to full and equal access to, and use and enjoyment of, Defendants’ facilities and/or services due to Defendants’ failure to make their facilities fully accessible and independently usable as above described. 47. Adequacy of Representation: Plaintiff is an adequate representative of the class because his interests do not conflict with the interests of the members of the class. Plaintiff will fairly, adequately, and vigorously represent and protect the interests of the members of the class, and he has no interests antagonistic to the members of the class. Plaintiff has retained counsel who are competent and experienced in the prosecution of class action litigation, generally, and who possess specific expertise in the context of class litigation under the ADA. 48. Class certification is appropriate pursuant to Fed. R. Civ. P. 23(b)(2) because Defendants have acted or refused to act on grounds generally applicable to the class, making appropriate both declaratory and injunctive relief with respect to Plaintiff and the class as a whole. SUBSTANTIVE VIOLATION 49. The allegations contained in the previous paragraphs are incorporated by reference. 50. Defendants’ facilities were altered, designed, or constructed after the effective date of the ADA. 51. Defendants’ facilities are required to be altered, designed, and constructed so that they are readily accessible to and usable by individuals who use wheelchairs. 42 U.S.C. § 12183(a). 52. Further, the accessible features of Defendants’ facilities, which include the parking lots and paths of travel, are required to be maintained so that they are readily accessible to and usable by individuals with mobility disabilities. 28 C.F.R. § 36.211. 12 53. The architectural barriers described above demonstrate that Defendants’ facilities were not altered, designed, or constructed in a manner that causes them to be readily accessible to and usable by individuals who use wheelchairs and/or that Defendants’ facilities were not maintained so as to ensure that they remained accessible to and usable by individuals who use wheelchairs. 54. Furthermore, the architectural barriers described above demonstrate that Defendants have failed to remove barriers as required by 42 U.S.C. § 12182(b)(2)(A)(iv). 55. Defendants’ repeated and systemic failures to design, construct, and alter their facilities so that they are readily accessible and usable, to remove architectural barriers, and to maintain the accessible features of their facilities constitute unlawful discrimination on the basis of a disability in violation of Title III of the ADA. 56. Defendants’ facilities are required to comply with the Department of Justice’s 2010 Standards for Accessible Design, or in some cases the 1991 Standards. 42 U.S.C. § 12183(a)(1); 28 C.F.R. § 36.406; 28 C.F.R., pt. 36, app. A. 57. Defendants are required to provide individuals who use wheelchairs full and equal enjoyment of their facilities. 42 U.S.C. § 12182(a). 58. Defendants have failed, and continue to fail, to provide individuals who use wheelchairs with full and equal enjoyment of their facilities. 59. Defendants have discriminated against Plaintiff and the class in that they have failed to make Defendants’ facilities fully accessible to, and independently usable by, individuals who use wheelchairs in violation of 42 U.S.C. § 12182(a) as described above. 60. Defendants’ conduct is ongoing and continuous, and Plaintiff has been harmed by Defendants’ conduct. 13 61. Unless Defendants are restrained from continuing their ongoing and continuous course of conduct, Defendants will continue to violate the ADA and will continue to inflict injury upon Plaintiff and the class. 62. Given that Defendants have not complied with the ADA’s requirements to make Defendants’ facilities fully accessible to, and independently usable by, individuals who use wheelchairs, Plaintiff invokes his statutory rights to declaratory and injunctive relief, as well as costs and attorneys’ fees. PRAYER FOR RELIEF WHEREFORE, Plaintiff, on behalf of himself and the members of the class, prays for: a. A declaratory judgment that Defendants are in violation of the specific requirements of Title III of the ADA described above, and the relevant implementing regulations of the ADA, in that Defendants’ facilities, as described above, are not fully accessible to, and independently usable by, individuals who use wheelchairs; b. A permanent injunction pursuant to 42 U.S.C. § 12188(a)(2) and 28 C.F.R. § 36.501(b) that: (i) directs Defendants to take all steps necessary to remove the architectural barriers described above and to bring their facilities into full compliance with the requirements set forth in the ADA, and its implementing regulations, so that the facilities are fully accessible to, and independently usable by, individuals who use wheelchairs; (ii) directs Defendants to change their policies and practices to prevent the reoccurrence of access barriers post- remediation; and (iii) directs that Plaintiff shall monitor Defendants’ facilities to ensure that the injunctive relief ordered above remains in place. c. An Order certifying the class proposed by Plaintiff, naming Plaintiff as class representative, and appointing his counsel as class counsel; d. Payment of costs of suit; e. Payment of reasonable attorneys’ fees pursuant to 42 U.S.C. § 12205 and 28 C.F.R. § 36.505; and f. The provision of whatever other relief the Court deems just, equitable, and appropriate. Dated: December 10, 2018 Respectfully Submitted, 14 s/ James L. Ward, Jr. James L. Ward, Jr. Fed. ID No. 6956 MCGOWAN HOOD & FELDER, LLC 321 Wingo Way, Suite 103 Mt. Pleasant, SC 29464 Phone: 843-388-7202 Fax: 843-388-3194 [email protected] 15 Gregory A. DeLuca Fed. ID No. 7748 DeLUCA MAUCHER, L.L.P. 113 Broughton Road Moncks Corner, SC 29461 Phone: 843-899-7877 Fax: 843-899-7687 [email protected] Benjamin J. Sweet* Kelly K. Iverson* Elizabeth L. Pollock-Avery* CARLSON LYNCH SWEET KILPELA & CARPENTER, LLP 1133 Penn Avenue, 5th Floor Pittsburgh, PA 15222 Phone: 412-322-9243 Fax: 412-231-0246 [email protected] Counsel for Plaintiff and the Class *pro hac vice application forthcoming 16

civil rights, immigration, family

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INDIA LIN BODIEN, ATTORNEY AT LA W 2522 North Proctor Street, #387 Tacoma, Washington 98406-5338 Telephone: (253) 212-7913 Fascimile: (253)276-0081 [email protected] Craig J. Ackermann, WSBA #53330 Brian Denlinger, WSBA #53177 ACKERMANN & TILAJEF, P.C. 2602 North Proctor Street, #205 Tacoma, Washington, 98406 Telephone: (310) 277-0614 Facsimile: (310) 277-0635 [email protected] [email protected] Attorneys for Plaintiff and the Putative Class UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WASHINGTON AT SPOKANE MYRRIAH RICHMOND, individually and on behalf of all others similarly situated, CASE NO: ___________________________ PLAINTIFF’S ANTITRUST CLASS ACTION COMPLAINT FOR: (1) VIOLATIONS OF SECTION 1 OF THE SHERMAN ACT [15 U.S.C. § 1, et. seq.]; and (2) UNFAIR COMPETITION Plaintiff, v. BERGEY PULLMAN, INC., a Washington Corporation, ARBY’S FRANCHISOR, LLC, a Delaware Limited Liability Company; and DOES 1 through 10, inclusive, [Washington Unfair Business Practices Act, RCW 19.86, et. seq.]; DEMAND FOR JURY TRIAL Defendants. Plaintiff MYRRIAH RICHMOND (“Plaintiff Richmond”), individually and on behalf of all those similarly situated, by and through her counsel, brings this Class Action Complaint (“Complaint”) against Defendants BERGEY PULLMAN, INC. (“Bergey”), ARBY’S FRANCHISOR, LLC (“Arby’s”); and Does 1 through 10 (who collectively shall be referred to hereinafter as “Defendants”), on personal knowledge with respect to herself and her own acts, and on information and belief as to other matters, alleges as follows: I. NATURE OF ACTION 1. Plaintiff Richmond, on behalf of herself, on behalf of the Washington general public, and as a class action on behalf of Defendants’ employees and workers from July 12, 2014 through the present (“Class Members”), seeks millions of dollars in lost wages, plus triple damages, and interest, caused by Defendants’ long-standing and illegal mutual non-solicitation agreements (i.e., agreements that Arby’s franchisees could not solicit for employment the employees of Arby’s and/or of other Arby’s franchisees) that were all entered into by Arby’s franchises throughout Washington State and that had the intended and actual effect of significantly reducing Class Members’ wages and salaries. The genesis of the non-solicitation agreements at issue were franchise agreements between Arby’s and its franchisees, and between its franchisees, including, upon information and belief, Bergey. 2. This illegal conspiracy among and between Defendants and other Arby’s franchisees to not solicit or attempt to solicit one another’s employees, in order to thereby suppress their wages, was not known, to Plaintiff and the Class Members until July 12, 2018, when the Washington State Attorney General (“AG”) revealed as part of its then-pending investigation into illegal behavior by some of the largest fast food franchises in Washington and the United States, including Arby’s, that Arby’s would no longer enforce provisions in its franchise agreements that prevented workers from being solicited by other Arby’s franchisees. In sum, Defendants engaged in per se violations of the Washington Unfair Competition Act and the Sherman Act by entering into non-solicitation agreements for the express purpose of depressing and/or reducing market-based wages and benefit increases for Class Members that are typically associated with the active solicitation of employees and workers in a competitive industry. While protecting and enhancing their profits, Defendants, through their non-solicitation agreements, robbed Class Members millions of dollars-worth of wages for which Plaintiff and the Class now seek relief. II. JURISDICTION AND VENUE 3. This Court has jurisdiction over the subject of this action pursuant to 15 U.S. C. §§ 4 and 16, as well as 28 U.S.C. §§ 1331 and 1337. This Court has supplemental jurisdiction over the claims brought under the laws of the State of Washington pursuant to 28 U.S.C. § 1367(a), since the matters at the heart of the Washington Unfair Competition Claims form part of the same case or controversy. 4. Venue as to each Defendant is proper in this judicial district, pursuant to 15 U.S.C. §§ 22 and 28 and 28 U.S. C. §1391(b)(1) and (2), because Defendants transact business and/or has transacted business during the relevant time period within the counties encompassed by the jurisdiction of the United States District Court for the Eastern District of Washington. Defendants do sufficient business in this District to be subject to personal jurisdiction herein, because a substantial part of the events or omissions giving rise to the claims occurred in this District. III. THE PARTIES 5. Plaintiff Myrriah Richmond, who at all relevant times was a resident of Washington, is a former employee of Defendant Bergey. Plaintiff Richmond worked as a crewmember at Bergey’s Pullman, Washington Arby’s store, from approximately April, 2017, to February, 2018. As a result, Plaintiff Richmond was subject to and victimized by the non- solicitation conspiracy between and among the Defendants, resulting in her having lost wages. 6. Defendant Bergey is a Washington corporation. Defendant Bergey does business in Washington State as Arby’s, with its principal place of business located at 1686 South Grand Avenue, Suite 5409 in Pullman, Washington. Upon information and belief, Defendant Bergey entered into a franchise agreement with Defendant Arby’s that contained non-solicitation provisions. 7. Defendant Arby’s is a Delaware limited liability company. Upon information and belief, Defendant Arby’s principal place of business is located at 1155 Perimeter Center West in Atlanta, Georgia. Defendant Arby’s is a franchisor. Defendant Arby’s is in the business of fast food sandwich stores, which it franchises throughout Washington and the United States. Upon information and belief, Defendant Arby’s entered into agreements with its franchisees, including Bergey, that contained non-solicitation provisions. 8. The true names and capacities, whether individual, corporate, associate, or otherwise, of Defendants sued herein as DOES 1 to 10, inclusive, are currently unknown to Plaintiff, who therefore sues Defendants by such fictitious names. Does 1 through 10 are the other largest franchisees of Arby’s in Washington State based on number of employees employed. Plaintiff is informed and believes, and based thereon alleges, that each of the Defendants designated herein as a Doe is legally responsible in some manner for the unlawful acts referred to herein in that they are additional co-conspirators. Plaintiff will seek leave of court to amend this Complaint to reflect the true names and capacities of the Defendants designated hereinafter as Does when such identities become known. Defendants and the Does 1- 10 shall collectively be referred to as “Defendants.” 9. Plaintiff is informed and believes, and based thereon alleges, that each Defendant acted in all respects pertinent to this action as the agent of the other Defendants, carried out a joint scheme, business plan or policy in all respects pertinent hereto, and the acts of each Defendant are legally attributable to the other Defendants. Furthermore, Defendants in all respects acted pursuant to the mutual non-solicitation agreements that were intended to suppress and had the effect of suppressing wages and salaries for the Class Members. IV. FACTS EVIDENCING THE CONSPIRACY 10. Defendants had a longstanding agreement to control their employees’ wages and mobility by agreeing not solicit each other’s employees. 11. The specific provisions of Defendants’ franchise agreements that violated federal and state antitrust laws are found at Section 13:1 (“Licensee convenants that, during the term of this License Agreement, and also for a period of twelve (12) months after termination of this License Agreement for any reason, neither Licensee, nor any Guarantor, nor any general partner of Licensee if Licensee is a partnership, nor any shareholder, limited partner, member or other equity owner holding at least fifteen percent (15.0%) interest in Licensee, shall…solicit or attempt to solicit any officer, employee or independent contractor of Arby’s or its affiliates or of any Arby’s licensee in the Arby’s system to terminate or reduce his or her employment or business relationship with Arby’s or its affiliates or with such Arby’s licensee and shall not assist any other person or entity in such a solicitation. In addition, Arby’s covenants that, during the term of this License Agreement, neither Arby’s nor any affiliates controlled by Arby’s will solicit or attempt to solicit any officer, employee, or independent contractor of Licensee or its affiliates to terminate or reduce his or her employment or business relationship with Licensee or its affiliates and shall not assist any other person or entity in such a solicitation”).1 12. The mutual non-solicitation agreement itself constituted a per se violation of the Sherman Antitrust Act and Washington’s Unfair Business Practices Act between Defendants from 2013 until it was brought to light by the AG’s investigation commencing in 2018 in the course of the AG’s investigation into similarly illegal mutual non-solicitation and anti-poach agreements entered into between several of the largest fast food franchisors operating in Washington and the United States. 13. Upon information and belief, Bergey and other franchisees, that own a total of approximately 57 Arby’s stores in Washington state, entered into franchisee agreements with the non-solicitation terms set forth above. 14. The AG investigated the non-solicitation agreement issued by Arby’s to its franchisees and found that Arby’s and its franchisees’ conduct constituted a contract, combination, or conspiracy in restraint of trade in violation of the Washington Unfair Business Practices Act – Consumer Protection Act, RCW 19.86.030. The AG concluded that “Since 2013, the franchise agreements entered into between Arby’s and its franchisees have provided that franchisees subject to such agreements may not solicit employees of Arby’s or of other Arby’s franchisees to terminate or reduce their employment with Arby’s or the other franchisees.”2 15. As set forth herein, upon information and belief, all of the Defendants entered into the mutual non-solicitation agreements with the common interest and intention to keep their employees’ wage costs down, so that profits continued to rise or at least not be undercut by rising 1 See In Re: Franchise No Poaching Provisions, Arby’s Franchisor, LLC Assurance of Discontinuance, Case No. 18-2-17225-0SEA, Exhibit B (Dkt. No. 1) (July 12, 2018) (hereinafter “Arby’s AOD”). 2 Arby’s AOD, § 2.2. salaries across the industry. As a result, Defendants engaged in anti-competitive behavior in advancement of a common and illegal goal of profiting at the expense of competitive market- based salaries. 16. Defendants agreements unreasonably restrained trade in violation of the Sherman Act 15 U.S.C. § 1, et seq., and constituted unfair competition and unfair practices in violation of Washington’s Unfair Business Practices law, 19.86, et seq. Plaintiff Myrriah Richmond, on behalf of herself and on behalf of the Class defined herein, seeks to recover the difference between the wages and salaries that Class Members were paid and what Class Members would have been paid in a competitive market, in the absence of Defendants’ unlawful agreements, treble damages, attorneys fees, and interest, allowed under the law. V. HARM TO COMPETITION AND ANTITRUST INJURY 17. Defendants are in the business of operating fast food sandwich stores where sandwiches and other fast food items are prepared and sold by crewmembers. In order to operate, Defendants owned other stores in Washington and hired crewmembers in their stores to make and sell their sandwiches and fast food items. 18. Non-solicitation agreements create downward pressure on fast food worker wages. Non-solicitation agreements restrict worker mobility, which prevents low-wage workers from being solicited and obtaining higher pay. This artificially suppresses fast food worker wages. In fact, fast food worker wages have remained stagnant. 19. Unrestricted competition and the Free Market are the foundations of the American economic system. That is because “[f]ree and open markets are the foundation of a vibrant economy. Just as competition among sellers in an open marketplace gives consumers the benefits of lower prices, higher quality products and services, more choices, and greater innovation, competition among employer helps actual and potential employees through higher wages, better benefits, or other terms of employment.” DOJ/FTC Antitrust Guidance for HR Professionals, Oct. 2016, at p. 2. 20. Upon information and belief, Defendants conspired not to actively solicit each other’s employees and workers as part of one overarching conspiracy to suppress the compensation of their employees and other Class Members. The desired effect was obtained. Defendants’ conspiracy suppressed Plaintiff’s and the Class’s compensation and restricted competition in the labor markets in which Plaintiff and the other members of the Class sold their services. It did so through an overarching agreement concerning mutual non-solicitation. 21. Concerning the non-solicitation agreements, active solicitations have a significant beneficial impact for individual employees’ compensation. As understood by Defendants, active recruitment by rival employers, here other franchisees doing business as Arby’s, often include enticing offers that exceed an employee’s wages, salary, and/or benefits, thereby incentivizing the employee to leave his or her current employment in order to receive greater compensation for his or her labor, or alternatively, allowing the employee to negotiate increased compensation from his or her current employer. Employees receiving active solicitation offers often inform other employees of the offer(s) they received, spreading information about higher wage and salary levels that can similarly lead to movement for the purposes of higher salary and wages and/or negotiation by those other employees with their current employer or others for greater compensation. 22. Active solicitation similarly affects compensation practices by employers. A franchisee that actively solicits other franchisees’ employees or other workers will learn whether their offered compensation is enough to attract their competitors’ employees, and may increase the offers to make their own company and its salaries more competitive in the marketplace. Similarly, companies losing or at risk of losing employees to competitors engaged in active recruitment of employees or workers associated with their competitors may preemptively increase their employees’ compensation in order to reduce their competitors’ appeal. 23. Defendants’ efforts to maintain internal equity coupled with their non-solicitation agreements ensured that their conspiracy caused the compensation of all their employees to be suppressed. VI. INTERSTATE COMMERCE 24. During the Class Period, Defendants employed Plaintiff and other Class Members in Washington and numerous other states. 25. States compete to attract low wage workers, including fast food workers, leading employment in the industry to cross state lines. 26. Both Defendants and Plaintiff and other Class Members view labor competition in the industry to be nationwide. Defendants considered each other’s wages to be competitively relevant regardless of location, and many Class Members moved between states to pursue opportunities at Defendants’ stores. 27. Defendants’ conduct substantially affected interstate commerce throughout the United States and caused antitrust injury throughout the United States. VII. CLASS ACTION ALLEGATIONS 28. Plaintiff brings this case as a class action pursuant to Federal Rule of Civil Procedure 23(b)(3) on behalf of a Class consisting of: All persons who were employed by Bergey Pullman, Inc., or Arby’s Franchisor, LLC, or any of the ten largest franchises of Arby’s in Washington State at any time from July 12, 2014 through the conclusion of this action (the “Class Period”).3 29. Plaintiff believes there are more than 500 current and former employees in the Class. Given Defendants’ systemic failure to comply with United States and Washington laws outlined in this case, the members of the Class are so numerous that joinder of all members is impractical. The Class is ascertainable from either Defendants’ employment and hiring records. 30. Plaintiff’s claims are typical of the claims of the members of the Class, because all Class Members are or were employees who sustained damages arising out of (a) Defendants’ illegal mutual non-solicitation arrangements in violation of Section 1 of the Sherman Act that resulted in wage suppression for all of the Class Members; and (b) Defendants’ unfair business practices in violation of Washington law. 31. Plaintiff will fairly and adequately represent the interests of the Class. Plaintiff has no conflict of interest with any member of the Class. Plaintiff has retained counsel competent and experienced in complex class action litigation with the resources and expertise necessary to litigate this case through to conclusion. 32. Common questions of law and fact exist as to all members of the Class, and predominate over any questions solely affecting individual members of the Class. Among the questions of law and fact common to Plaintiff and Class Members are: a. Whether Defendants agreed not to actively solicit each other’s employees in positions held by the Class Members; 3 Plaintiff reserves the right to modify the class definition at a later date to conform to new facts learned, including the properly named entity Defendant(s). b. Whether the mutual non-solicitation agreements between Defendants were per se violations of the Sherman Act, 15 U.S.C. § 1, et seq.; c. Whether Defendants violated the Sherman Act by agreeing to not actively solicit one another’s workers in positions held by Class Members; d. Whether Defendants violated RCW 19.86, et seq., by entering into agreements to not actively solicit each other’s workers in positions held by Class Members; e. whether and the extent to which Defendants’ conduct suppressed wages and salaries below competitive levels; f. whether Plaintiff and the other Class Members suffered injury as a result of Defendants’ agreements; g. whether any such injury constitutes antitrust injury; h. whether Class Members are entitled to treble damages; and i. the measure of damages suffered by Plaintiff and the Class. 33. Class action treatment is superior to any alternative to ensure the fair and efficient adjudication of the controversy alleged herein. Such treatment will permit a large number of similarly situated persons to prosecute their common claims in a single forum simultaneously, efficiently, and without duplication of effort and expense that numerous individuals would entail. No difficulties are likely to be encountered in the management of this class action that would preclude its maintenance as a class action, and no superior alternative exists for the fair and efficient adjudication of this controversy. The Class Members are readily identifiable from Defendants’ employee rosters, payroll records or other company records. 34. Defendants’ actions are generally applicable to the entire Class. Prosecution of separate actions by individual members of the Class creates the risk of inconsistent or varying adjudications of the issues presented herein, which, in turn, would establish incompatible standards of conduct for Defendants. 35. Because joinder of all members is impractical, a class action is superior to other available methods for the fair and efficient adjudication of this controversy. Furthermore, the amounts at stake for many members of the Class, while substantial, may not be sufficient to enable them to maintain separate suits against Defendants. VIII. STATUTE OF LIMITATIONS AND DEFENDANTS’ CONTINUING VIOLATION 36. Defendants’ conspiracy was a continuing violation in which Defendants repeatedly invaded Plaintiff’s and Class Members’ interests by adhering to, enforcing, and reaffirming the anticompetitive agreements described herein. 37. Before July 12, 2018, Plaintiff and the members of the Class had neither actual nor constructive knowledge of the pertinent facts constituting their claims for relief asserted herein. Plaintiff and members of the Class did not discover, and could not have discovered through the exercise of reasonable diligence, the existence of any conspiracy until at the earliest July 12, 2018 when the investigation by the AG into non-solicitation agreements among fast food franchisees/franchisors including Arby’s was first revealed publicly. This case is filed within four years of the moment when it was first revealed that the AG investigation had unearthed that Arby’s had engaged in mutual non-solicitation agreements with Bergey and other Arby’s franchisees. 38. Defendants engaged in a conspiracy that did not give rise to facts that would put Plaintiff or the Class on inquiry notice that there was a conspiracy among Arby’s and franchisees to restrict competition for Class Members’ services through non-solicitation agreements. IX. CAUSES OF ACTION FIRST CAUSE OF ACTION VIOLATION OF SECTION ONE OF SHERMAN ACT [15 U.S.C. § 1, et seq.] (On Behalf of Plaintiff and the Class) 39. Plaintiff incorporates by reference the allegations in the above paragraphs as if fully set forth herein. 40. Defendants, by and through their officers, directors, employees, agents or other representatives, have entered into an unlawful agreement, combination and conspiracy in restraint of trade, in violation of 15 U.S.C. § 1, et seq. Specifically, Defendants agreed to restrict competition for Class Members’ services through non-solicitation agreements, all with the purpose and effect of suppressing Class Members’ compensation and restraining competition in the market for Class Members’ services. 41. According to the Department of Justice (“DOJ”) and Federal Trade Commission (“FTC”), “…no-poaching agreements, among employers…are per se illegal under the antitrust laws.” DOJ/FTC Antitrust Guidance for HR Professionals, Oct. 2016, at p. 3. “It is unlawful for competitors to expressly or implicitly agree not to compete with one another, even if they are motivated by a desire to reduce costs.” Id. at p. 2. 42. Defendants’ conduct injured Class Members by lowering their compensation and depriving them of free and fair competition in the market for their services. 43. Defendants’ agreements are per se violations of the Sherman Act. 44. Plaintiff seeks the relief set forth below, including underpaid and treble damages. SECOND CAUSE OF ACTION UNFAIR COMPETITION AND UNLAWFUL BUSINESS PRACTICE [Washington Unfair Business Practices Act, 19.86 et seq.] 45. Plaintiff incorporates by reference the allegations in the above paragraphs as if fully set forth herein. 46. Revised Code of Washington Section 19.86, et seq., prohibits unfair or deceptive methods of competition or acts or practices. Specifically, RCW 19.86.030 prohibits contracts, combinations, or conspiracies that restrain trade or commerce. 47. As stated above, the Washington State Attorney General investigated Arby’s and determined that the non-solicitation provisions of its franchise agreements, by and between itself and its franchisees, constituted a contract, combination, or conspiracy in restraint of trade in violation of the Washington Unfair Business Practices Act – Consumer Protection Act, RCW 19.86.030. 48. Through its conspiracy and actions as alleged herein, Defendants’ efforts to restrain competition for and suppress compensation of their employees through their franchise agreements constitutes unfair competition and unlawful and unfair business practices in violation of the Washington Unfair Business Practices Act, RCW 19.86, et seq. Specifically, Defendants agreed to restrict competition for Class Members’ services through non-solicitation agreements, all with the purpose and effect of suppressing Class Members’ compensation and restraining competition in the market for Class Members’ services. Defendants’ illegal conspiracy was substantially injurious to Plaintiff and the Class Members. 49. Defendants’ acts were unfair, unlawful, and/or unconscionable, both in their own 50. Defendants’ conduct injured Plaintiff and other Class Members by lowering their compensation and depriving them of free and fair competition in the market for their services, allowing Defendants to unlawfully retain money that otherwise would have been paid to Plaintiff and other Class Members. Plaintiff and other Class Members are therefore persons who have suffered injury in fact and lost money or property as a result of the unfair competition under RCW 19.86.090. 51. The harm to Plaintiff and members of the Class in being denied payment for their services in the amount of higher wages and salaries that they would have received in the absence of the conspiracy outweighs the utility, if any, of Defendants’ illegal non-solicitation agreements and, therefore, Defendants’ actions described herein constitute an unfair business practice or act within the meaning of RCW 19.86, et seq. 52. Pursuant to RCW 19.86.090, any person who is injured by a violation of RCW 19.86.030 may bring a civil action to recover actual damages, treble damages, and attorneys’ fees and costs. 53. Plaintiff seeks the relief set forth below. X. JURY DEMAND AND DESIGNATION OF PLACE OF TRIAL Pursuant to Federal Rule of Civil Procedure 38(b), Plaintiff demands a trial by jury on all issues so triable. XI. PRAYER FOR RELIEF WHEREFORE, Plaintiff Myrriah Richmond, on behalf of herself and a class of all others similarly situated, requests that the Court enter an order or judgment against Defendants including the following: a. Certification of the class described herein pursuant to Rule 23 of the Federal Rules of Civil Procedure; b. Appointment of Plaintiff Myrriah Richmond as Class Representative and her counsel of record as Class Counsel; c. Compensatory damages in an amount to be proven at trial and trebled thereafter; d. Pre-judgment and post-judgment interest as provided for by law or allowed in equity; e. The costs of bringing this suit, including reasonable attorneys’ fees and costs; f. An incentive award to compensate Plaintiff Myrriah Richmond for her efforts in pursuit of this litigation; g. Interest under Washington law; and h. All other relief to which Plaintiff Myrriah Richmond and the Class may be entitled at law or in equity. Dated August 3, 2018. Respectfully submitted, India Lin Bodien, Attorney at Law Ackermann & Tilajef, P.C. _________________________________________ By: India Lin Bodien, WSBA #44898 INDIA LIN BODIEN, ATTORNEY AT LA W 2522 North Proctor Street, #387 Tacoma, Washington 98406-5338 Telephone: (253) 212-7913 Fascimile: (253)276-0081 [email protected] Craig J. Ackermann, WSBA #53330 Brian Denlinger, WSBA #53177 ACKERMANN & TILAJEF, P.C. 2602 North Proctor Street, #205 Tacoma, Washington, 98406 Telephone: (310) 277-0614 Facsimile: (310) 277-0635 [email protected] [email protected]

antitrust

Gq6yCocBD5gMZwczj8LV

Todd M. Friedman (SBN 216752) Adrian R. Bacon (SBN 280332) Meghan E. George (SBN 274525) LAW OFFICES OF TODD M. FRIEDMAN, P.C. 324 S. Beverly Dr., #725 Beverly Hills, CA 90212 Phone: 877-206-4741 Fax: 866-633-0228 [email protected] [email protected] [email protected] Attorneys for Plaintiff UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA REGINA SANCHEZ, individually and on behalf of all others similarly situated, Plaintiff, vs. DIVERSIFIED CONSULANTS, INC., and DOES 1 through 10, inclusive, and each of them, Defendants. Case No. CLASS ACTION COMPLAINT FOR VIOLATIONS OF: 1. NEGLIGENT VIOLATIONS OF THE TELEPHONE CONSUMER PROTECTION ACT [47 U.S.C. §227 ET SEQ.] 2. WILLFUL VIOLATIONS OF THE TELEPHONE CONSUMER PROTECTION ACT [47 U.S.C. §227 ET SEQ.] DEMAND FOR JURY TRIAL ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Plaintiff, REGINA SANCHEZ (“Plaintiff”), individually and on behalf of all others similarly situated, alleges the following upon information and belief based upon personal knowledge: NATURE OF THE CASE 1. Plaintiff brings this action individually and on behalf of all others similarly situated seeking damages and any other available legal or equitable remedies resulting from the illegal actions of Diversified Consultants, Inc. (“Defendant”), in negligently, knowingly, and/or willfully contacting Plaintiff on Plaintiff’s cellular telephone in violation of the Telephone Consumer Protection Act, 47. U.S.C. § 227 et seq. (“TCPA”), thereby invading Plaintiff’s privacy. JURISDICTION & VENUE 2. Jurisdiction is proper under 28 U.S.C. § 1332(d)(2) because Plaintiff, a resident of California, seeks relief on behalf of a Class, which will result in at least one class member belonging to a different state than that of Defendant, a company with its principal place of business in the state of Florida and incorporated in the state of Delaware. Plaintiff also seeks up to $1,500.00 in damages for each call in violation of the TCPA, which, when aggregated among a proposed class in the thousands, exceeds the $5,000,000.00 threshold for federal court jurisdiction. Therefore, both diversity jurisdiction and the damages threshold under the Class Action Fairness Act of 2005 (“CAFA”) are present, and this Court has jurisdiction. 3. Venue is proper in the United States District Court for the Central District of California pursuant to 18 U.S.C. 1391(b) and 18 U.S.C. § 1441(a) because Defendant does business within the state of California and the county of San Bernardino. PARTIES 4. Plaintiff, REGINA SANCHEZ (“Plaintiff”), is a natural person residing in Rancho Cucamonga, California and is a “person” as defined by 47 U.S.C. § 153 (39). 5. Defendant, DIVERSIFIED CONSULANTS, INC. (“Defendant”), is a leader in the purchasing consumer debts and collecting thereon from debtors, and is a “person” as defined by 47 U.S.C. § 153 (39). 6. The above named Defendant, and its subsidiaries and agents, are collectively referred to as “Defendants.” The true names and capacities of the Defendants sued herein as DOE DEFENDANTS 1 through 10, inclusive, are currently unknown to Plaintiff, who therefore sues such Defendants by fictitious names. Each of the Defendants designated herein as a DOE is legally responsible for the unlawful acts alleged herein. Plaintiff will seek leave of Court to amend the Complaint to reflect the true names and capacities of the DOE Defendants when such identities become known. 7. Plaintiff is informed and believes that at all relevant times, each and every Defendant was acting as an agent and/or employee of each of the other Defendants and was acting within the course and scope of said agency and/or employment with the full knowledge and consent of each of the other Defendants. Plaintiff is informed and believes that each of the acts and/or omissions complained of herein was made known to, and ratified by, each of the other Defendants. FACTUAL ALLEGATIONS 8. Beginning in or around January of 2016, Defendant contacted Plaintiff—calling from 909-927-4946, 909-315-5638, and 909-927-4957—on her cellular telephone, ending in -7951, in an attempt to collect an alleged outstanding debt owed by her husband, Ruben Sanchez. 9. Defendant placed multiple calls in a single day to Plaintiff’s cellular telephone seeking to collect the alleged debt owed by her husband. 10. Defendant used an “automatic telephone dialing system”, as defined by 47 U.S.C. § 227(a)(1) to place its daily calls to Plaintiff seeking to collect the debt allegedly owed by her husband. 11. Defendant’s calls constituted calls that were not for emergency purposes as defined by 47 U.S.C. § 227(b)(1)(A). 12. Defendant’s calls were placed to telephone number assigned to a cellular telephone service for which Plaintiff incurs a charge for incoming calls pursuant to 47 U.S.C. § 227(b)(1). 13. Plaintiff does not owe the alleged debt Defendant is calling her about and has never provided any personal information, including her cellular telephone number, to Defendant for any purpose whatsoever. Accordingly, Defendant never received Plaintiff’s “prior express consent” to receive calls using an automatic telephone dialing system or an artificial or prerecorded voice on her cellular telephone pursuant to 47 U.S.C. § 227(b)(1)(A). CLASS ALLEGATIONS 14. Plaintiff brings this action on behalf of herself and all others similarly situated, as a member of the proposed class (hereafter “The Class”) defined as follows: All persons within the United States who received any collection telephone calls from Defendant to said person’s cellular telephone made through the use of any automatic telephone dialing system and such person had not previously consented to receiving such calls within the four years prior to the filing of this Complaint 15. Plaintiff represents, and is a member of, The Class, consisting of All persons within the United States who received any collection telephone calls from Defendant to said person’s cellular telephone made through the use of any automatic telephone dialing system and such person had not previously not provided their cellular telephone number to Defendant within the four years prior to the filing of this Complaint. 16. Defendant, its employees and agents are excluded from The Class. Plaintiff does not know the number of members in The Class, but believes the Class members number in the thousands, if not more. Thus, this matter should be certified as a Class Action to assist in the expeditious litigation of the matter. 17. The Class is so numerous that the individual joinder of all of its members is impractical. While the exact number and identities of The Class members are unknown to Plaintiff at this time and can only be ascertained through appropriate discovery, Plaintiff is informed and believes and thereon alleges that The Class includes thousands of members. Plaintiff alleges that The Class members may be ascertained by the records maintained by Defendant. 18. Plaintiff and members of The Class were harmed by the acts of Defendant in at least the following ways: Defendant illegally contacted Plaintiff and Class members via their cellular telephones thereby causing Plaintiff and Class members to incur certain charges or reduced telephone time for which Plaintiff and Class members had previously paid by having to retrieve or administer messages left by Defendant during those illegal calls, and invading the privacy of said Plaintiff and Class members. 19. Common questions of fact and law exist as to all members of The Class which predominate over any questions affecting only individual members of The Class. These common legal and factual questions, which do not vary between Class members, and which may be determined without reference to the individual circumstances of any Class members, include, but are not limited to, the following: a. Whether, within the four years prior to the filing of this Complaint, Defendant made any collection call (other than a call made for emergency purposes or made with the prior express consent of the called party) to a Class member using any automatic telephone dialing system to any telephone number assigned to a cellular telephone service; b. Whether Plaintiff and the Class members were damages thereby, and the extent of damages for such violation; and c. Whether Defendant should be enjoined from engaging in such conduct in the future. 20. As a person that received numerous collection calls from Defendant using an automatic telephone dialing system, without Plaintiff’s prior express consent, Plaintiff is asserting claims that are typical of The Class. 21. Plaintiff will fairly and adequately protect the interests of the members of The Class. Plaintiff has retained attorneys experienced in the prosecution of class actions. 22. A class action is superior to other available methods of fair and efficient adjudication of this controversy, since individual litigation of the claims of all Class members is impracticable. Even if every Class member could afford individual litigation, the court system could not. It would be unduly burdensome to the courts in which individual litigation of numerous issues would proceed. Individualized litigation would also present the potential for varying, inconsistent, or contradictory judgments and would magnify the delay and expense to all parties and to the court system resulting from multiple trials of the same complex factual issues. By contrast, the conduct of this action as a class action presents fewer management difficulties, conserves the resources of the parties and of the court system, and protects the rights of each Class member. 23. The prosecution of separate actions by individual Class members would create a risk of adjudications with respect to them that would, as a practical matter, be dispositive of the interests of the other Class members not parties to such adjudications or that would substantially impair or impede the ability of such non-party Class members to protect their interests. 24. Defendant has acted or refused to act in respects generally applicable to The Class, thereby making appropriate final and injunctive relief with regard to the members of the California Class as a whole. FIRST CAUSE OF ACTION Negligent Violations of the Telephone Consumer Protection Act 47 U.S.C. §227 et seq. 25. Plaintiff repeats and incorporates by reference into this cause of action the allegations set forth above at Paragraphs 1-26. 26. The foregoing acts and omissions of Defendant constitute numerous and multiple negligent violations of the TCPA, including but not limited to each and every one of the above cited provisions of 47 U.S.C. § 227 et seq. 27. As a result of Defendant’s negligent violations of 47 U.S.C. § 227 et seq., Plaintiff and the Class Members are entitled an award of $500.00 in statutory damages, for each and every violation, pursuant to 47 U.S.C. § 227(b)(3)(B). 28. Plaintiff and the Class members are also entitled to and seek injunctive relief prohibiting such conduct in the future. SECOND CAUSE OF ACTION Knowing and/or Willful Violations of the Telephone Consumer Protection Act 47 U.S.C. §227 et seq. (Against All Defendants) 29. Plaintiff repeats and incorporates by reference into this cause of action the allegations set forth above at Paragraphs 1-30. 30. The foregoing acts and omissions of Defendant constitute numerous and multiple knowing and/or willful violations of the TCPA, including but not limited to each and every one of the above cited provisions of 47 U.S.C. § 227 et 31. As a result of Defendant’s knowing and/or willful violations of 47 U.S.C. § 227 et seq., Plaintiff and the Class members are entitled an award of $1,500.00 in statutory damages, for each and every violation, pursuant to 47 U.S.C. § 227(b)(3)(B) and 47 U.S.C. § 227(b)(3)(C). 32. Plaintiff and the Class members are also entitled to and seek injunctive relief prohibiting such conduct in the future. PRAYER FOR RELIEF WHEREFORE, Plaintiff requests judgment against Defendant for the following: FIRST CAUSE OF ACTION Negligent Violations of the Telephone Consumer Protection Act 47 U.S.C. §227 et seq.  As a result of Defendant’s negligent violations of 47 U.S.C. § 227(b)(1), Plaintiff and the Class members are entitled to and request $500 in statutory damages, for each and every violation, pursuant to 47 U.S.C. § 227(b)(3)(B).  Any and all other relief that the Court deems just and proper. SECOND CAUSE OF ACTION Knowing and/or Willful Violations of the Telephone Consumer Protection Act 47 U.S.C. §227 et seq.  As a result of Defendant’s willful and/or knowing violations of 47 U.S.C. § 227(b)(1), Plaintiff and the Class members are entitled to and request treble damages, as provided by statute, up to $1,500, for each and every violation, pursuant to 47 U.S.C. § 227(b)(3)(B) and 47 U.S.C. § 227(b)(3)(C).  Any and all other relief that the Court deems just and proper. 33. Pursuant to the Seventh Amendment to the Constitution of the United States of America, Plaintiff is entitled to, and demands, a trial by jury Respectfully Submitted this 26th Day of February, 2016. LAW OFFICES OF TODD M. FRIEDMAN, P.C. By: /s/ Todd M. Friedman Todd M. Friedman Law Offices of Todd M. Friedman Attorney for Plaintiff

privacy

U6tCCocBD5gMZwczXjt2

IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF FLORIDA ASHLEY M. EISENBAND, individually and on behalf of all others similarly situated, CLASS ACTION Plaintiff, JURY TRIAL DEMANDED vs. EVERALBUM, INC., a foreign corporation, Defendant. _____________________________________/ CLASS ACTION COMPLAINT Plaintiff, Ashley M. Eisenband, brings this class action against Defendant, Everalbum, Inc., and alleges as follows upon personal knowledge as to herself and her own acts and experiences, and, as to all other matters, upon information and belief, including investigation conducted by her attorneys. NATURE OF THE ACTION 1. This putative class action under the Telephone Consumer Protection Act, 47 U.S.C. § 227 et seq., (“TCPA”), stems from Defendant’s conduct of deceiving users of its mobile application, Ever, into providing Defendant with the contact numbers on their mobile devices. Once in possession of users’ contact numbers, Defendant, using an automatic telephone dialing system, transmits generic telemarketing text messages to the users’ contacts from spoofed1 telephone numbers. Defendant transmits its telemarketing texts without first obtaining the express consent of recipients. 1 “Spoofing occurs when a caller deliberately falsifies the information transmitted to your caller ID display to disguise their identity.” https://www.fcc.gov/consumers/guides/spoofing-and-caller-id; (last accessed on December 7, 2016). 1 2. Users of Defendant’s mobile application, and recipients of Defendant’s text messaging spam alike, have posted countless complaints on the Internet about Defendant’s deceptive practices and spam texts. 3. Through this action, Plaintiff seeks injunctive relief to halt Defendant’s illegal conduct which has resulted in the invasion of privacy, harassment, aggravation, and disruption of the daily life of thousands of individuals nationwide. Plaintiff also seeks statutory damages on behalf of herself and members of the class, and any other available legal or equitable remedies resulting from the illegal actions of Defendant. JURISDICTION AND VENUE 4. Jurisdiction is proper under 28 U.S.C. § 1331 as Plaintiff’s alleges violations of a federal statute. Jurisdiction is also proper under 28 U.S.C. § 1332(d)(2) because Plaintiff alleges a national class, which will result in at least one class member belonging to a different state than that of Defendant. Plaintiff seeks up to $1,500.00 (one-thousand-five-hundred dollars) in damages for each call in violation of the TCPA, which, when aggregated among a proposed class numbering in the tens of thousands, or more, exceeds the $5,000,000.00 (five-million dollars) threshold for federal court jurisdiction under the Class Action Fairness Act (“CAFA”). Therefore, both the elements of diversity jurisdiction and CAFA jurisdiction are present. 5. Venue is proper in the United States District Court for the Southern District of Florida pursuant to 28 U.S.C. § 1391(b) and (c) because Defendant is deemed to reside in any judicial district in which it is subject to the court’s personal jurisdiction, and because Defendant provides and markets its services within this district thereby establishing sufficient contacts to subject it to personal jurisdiction. Further, Defendant’s tortious conduct against Plaintiff occurred within the State of Florida and, on information and belief, Defendant has sent the same text 2 messages complained of by Plaintiff to other individuals within this judicial district, such that some of Defendant’s acts in making such calls have occurred within this district, subjecting Defendant to jurisdiction in the State of Florida. PARTIES 6. Plaintiff is a natural person and a citizen and resident of the State of Florida 7. Defendant is a Delaware corporation whose principal place of business is located at 1 Letterman Drive, Suite C3500, San Francisco, California, 94129. Defendant directs, markets, and provides its business activities throughout the United Stated, including the State of Florida. THE TCPA 8. The TCPA regulates and restricts the use of automatic telephone equipment. 9. The TCPA protects consumers from unwanted text messages that are made with autodialers. 10. The TCPA prohibits: (1) any person from calling a cellular telephone number; (2) using an automatic telephone dialing system or prerecorded message; (3) without the recipient’s prior express consent. 47 U.S.C. § 227(b)(1)(A). 11. The TCPA defines an "automatic telephone dialing system" (“ATDS”) as "equipment that has the capacity - (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers." 47 U.S.C. § 227(a)(1). 12. In an action under the TCPA, a plaintiff must only show that the defendant “called a number assigned to a cellular telephone service using an automatic dialing system or prerecorded voice.” Breslow v. Wells Fargo Bank, N.A., 857 F. Supp. 2d 1316, 1319 (S.D. Fla. 2012), aff'd, 755 F.3d 1265 (11th Cir. 2014). 3 13. The Federal Communications Commission is empowered to issue rules and regulations implementing the TCPA. In 2012, the FCC issued an order tightening the restrictions for automated telemarketing calls, requiring “prior express written consent” for such calls to wireless numbers. See In the Matter of Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 27 F.C.C.R. 1830, 1838 ¶ 20 (Feb. 15, 2012)(emphasis supplied). 14. On November 18, 2016, the FCC issued an Enforcement Advisory regarding text messages. In its advisory, the FCC warned mobile application providers like Defendant that their applications must comply with the TCPA and that they must obtain express consent before transmitting text messages to individuals: This includes text messages from text messaging apps and Internet- to-phone text messaging where the technology meets the statutory definition of an autodialer. The fact that a consumer’s wireless number is in the contact list of another person’s wireless phone does not, by itself, demonstrate consent to receive robotexts. FCC Enforcement Advisory No. 2016-06, November 18, 2016, ROBOTEXT CONSUMER PROTECTION, TEXT MESSAGE SENDERS MUST COMPLY WITH THE TELEPHONE CONSUMER PROTECTION ACT; (emphasis supplied). 15. To obtain express written consent for telemarketing calls, a defendant must establish that it secured the plaintiff’s signature in a form that gives the plaintiff a “‘clear and conspicuous disclosure’ of the consequences of providing the requested consent….and having received this information, agrees unambiguously to receive such calls at a telephone number the [plaintiff] designates.” In re Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 27 F.C.C.R. 1830, 1837 ¶ 18, 1838 ¶ 20, 1844 ¶ 33, 1857 ¶ 66, 1858 ¶ 71 (F.C.C. Feb. 15, 4 16. The TCPA regulations promulgated by the FCC define “telemarketing” as “the initiation of a telephone call or message for the purpose of encouraging the purchase or rental of, or investment in, property, goods, or services.” 47 C.F.R. § 64.1200(f)(12). In determining whether a communication constitutes telemarketing, a court must evaluate the ultimate purpose of the communication. See Golan v. Veritas Entm't, LLC, 788 F.3d 814, 820 (8th Cir. 2015). 17. “Neither the TCPA nor its implementing regulations ‘require an explicit mention of a good, product, or service’ where the implication of an improper purpose is ‘clear from the context.’” Id. (citing Chesbro v. Best Buy Stores, L.P., 705 F.3d 913, 918 (9th Cir. 2012)). 18. “‘Telemarketing’ occurs when the context of a call indicates that it was initiated and transmitted to a person for the purpose of promoting property, goods, or services.” Golan, 788 F.3d at 820 (citing 47 C.F.R. § 64.1200(a)(2)(iii); 47 C.F.R. § 64.1200(f)(12); In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, 18 F.C.C. Rcd at 14098 ¶ 141, 2003 WL 21517853, at *49). 19. The FCC has explained that calls motivated in part by the intent to sell property, goods, or services are considered telemarketing under the TCPA. See In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, 18 FCC Rcd. 14014, ¶¶ 139-142 (2003). This is true whether call recipients are encouraged to purchase, rent, or invest in property, goods, or services during the call or in the future. Id. 20. In other words, offers “that are part of an overall marketing campaign to sell property, goods, or services constitute” telemarketing under the TCPA. See In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, 18 FCC Rcd. 14014, ¶ 136 (2003). 5 21. If a call is not deemed telemarketing, a defendant must nevertheless demonstrate that it obtained the plaintiff’s prior express consent. See In the Matter of Rules and Regulaions Implementing the Tel. Consumer Prot. Act of 1991, 30 FCC Rcd. 7961, 7991-92 (2015) (requiring express consent “for non-telemarketing and non-advertising calls”). 22. Moreover, the FCC has issued rulings and clarified that consumers are entitled to the same consent-based protections for text messages as they are for calls to wireless numbers. See Satterfield v. Simon & Schuster, Inc., 569 F.3d 946, 952 (9th Cir. 2009) (The FCC has determined that a text message falls within the meaning of “to make any call” in 47 U.S.C. § 227(b)(1)(A)); Toney v. Quality Res., Inc., 2014 WL 6757978, at *3 (N.D. Ill. Dec. 1, 2014) (Defendant bears the burden of showing that it obtained Plaintiff's prior express consent before sending her the text message). (emphasis added). 23. According to the FCC’s findings, calls in violation of the TCPA are prohibited because, as Congress found, automated or prerecorded telephone calls are a greater nuisance and invasion of privacy than live solicitation calls, and such calls can be costly and inconvenient. The FCC also recognized that wireless customers are charged for incoming calls whether they pay in advance or after the minutes are used. Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, CG Docket No. 02-278, Report and Order, 18 FCC Rcd 14014 24. A violation of the statutorily-protected substantive right created by the TCPA “causes ‘real’ harm, as opposed to harm that is ‘hypothetical’ or ‘uncertain.’” JWD Auto., Inc. v. DJM Advisory Grp. LLC, No. 2:15-cv-793-FtM-29MRM, 2016 U.S. Dist. LEXIS 160869, *8 (M.D. Fla. Nov. 21, 2016)(citing Church v. Accretive Health, Inc., No. 15-15708, 2016 WL 3611543, at *3 & n.3 (11th Cir. July 6, 2016)(not receiving information to which one is statutorily 6 entitled is a “concrete” injury); Guarisma v. Microsoft Corp., No. 15-24326-CIV, 2016 WL 4017196, at *4 (S.D. Fla. July 26, 2016(plaintiff whose sales receipt showed more than last five credit-card digits alleged a concrete harm under the Fair and Accurate Credit Transactions Act (FACTA) since, “in enacting the FACTA, Congress created a substantive right for consumers to have their personal credit card information truncated on printed receipts,” not merely a “procedural requirement for credit card-using companies to follow”)). 25. Indeed, individuals, including Plaintiff and members of the Class, who receive text messages in violation of the TCPA suffer concrete injuries analogous to common law torts such as invasion of privacy, intrusion on seclusion, trespass to chattels and conversion. See Palm Beach Golf Center v. John G. Sarris, D.D.S., P.A., 781 F.3d 1245, 1250–51 (11th Cir. 2015) (owner of facsimile machine has Article III standing to sue where he loses use of that machine); Soppet v. Enhanced Recovery Co., LLC, 679 F.3d 637, 638 (7th Cir. 2012) (“An automated call to a landline phone can be an annoyance; an automated call to a cell phone adds expense to annoyance”); Bagg v. Ushealth Group, Inc., Case No. 6:15-cv-1666-Orl-37GJK, 2016 WL 1588666, at *3 (M.D. Fla. Apr. 20, 2016)(“‘Courts have consistently held that the TCPA protects a species of privacy interest in the sense of seclusion,’ and recognize that the sending of an unsolicited fax constitutes an invasion of privacy.”)(quoting Park Univ. Enters., Inc. v. Am. Cas. Co. of Reading, PA, 442 F.3d 1239, 1249 (10th Cir. 2006)); Jamison v. Esurance Insurance Services, Inc., Case No. 3:15-CV- 2484-B, 2016 WL 320646, at *3 (N.D. Tex. Jan. 27, 2016)(“From this, the Court concludes that an individual suffers an injury in fact from unauthorized telephone contact when it causes an incurrence of charges, a reduction in usable minutes, or occupation of the telephone line, making it unavailable for other use.”); Johnson v. Navient Solutions, Inc., Case No. 1:15-cv-00716-LJM- MJD, 2015 WL 8784150, at *2 (S.D. Ind. Dec. 15, 2015)(“Based on the allegations in the 7 Complaint and the TCPA’s protection of Johnson’s privacy rights, the Court concludes that Johnson has stated a claim for actual harm, upon which he may rely to provide standing.”)(citing Schumacher v. Credit Protection Ass’n, Cause No. 4:13–cv–00164–SEB–DML, 2015 WL 5786139, at *5 (S.D. In. Sept. 30, 2015)(“Here, [plaintiff’s] TCPA-created right to privacy was invaded by repeated automated calls from CPA.”); Weisberg v. Kensington Professional and Associates, LLC, Case No. 15-cv-08532, 2016 WL 1948785, at *3 (C.D. Cal. May 3, 2016)(“The invasion of privacy and the allegation that the illegal calls cost Plaintiff and the class money — financial harm — are not speculative future injuries or injuries based on the violation of rights provided in a statute. Thus...Plaintiff does allege actual monetary damages.”); Lathrop v. Uber Technologies, Inc., Case No. 14-cv-05678-JST, 2016 WL 97511, at *4 (N.D. Cal. Jan. 8, 2016)(“Plaintiffs allege they and members of the class ‘suffered damages in the form of text message, data, and other charges to their cellular telephone plans.’ Id. ¶ 116. Based on the allegations in the Second Amended Complaint, the Court concludes that Plaintiffs have sufficiently stated an injury in fact.”); Fini v. Dish Network, L.L.C., 955 F.Supp.2d 1288, 1296–97 (M.D. Fla. 2013) (plaintiff has standing to sue where she lost use of cellular service for which she previously had paid). DEFENDANT’S MOBILE APPLICATION AND TCPA VIOLATIONS 26. Defendant is a mobile application designer, developer, and operator. Defendant developed and operates “Ever,” a photo-sharing and backup service application for Apple and Android devices (the “Ever App”). The Ever App allows users to transfer photos from their mobile devices to Defendant’s cloud storage service, and share those photos with other users. The Ever App has been downloaded by millions of people throughout the United States. 8 27. An individual wishing to use Defendant’s service must first download the Ever App on his/her mobile device. 28. Once downloaded, the Ever App directs the user through a series of sign-up screens. During this process, Defendant offers the user extended storage in exchange for allowing the Ever App to gain access to all of the telephone numbers on the user’s contacts list. If the user permits the Ever App accesses to his/her contacts, the Ever App automatically pre-selects all of the user’s contacts. 29. The user is then shown a screen where all of the user’s contacts are pre-selected. At this time, it is not clearly or explicitly disclosed to the user that Defendant will cause an automatic text message to be sent to all of the user’s contacts. In fact, it is not until after Defendant automatically sends a text message to the user’s contacts that the user is told that text messages have been sent to all of his/her contacts. 30. If the user allows the Ever App to access his/her contacts list, the Ever App transmits the telephone numbers to Defendant’s automatic telephone dialing system and causes that system to transmit a generic text message to the user’s contacts. 31. Users of the Ever App do not send the text messages. Rather, they are deceived into providing Defendant with their contact lists. Once in possession of a user’s contact list, Defendant stores the numbers in its text messaging database and, subsequently, Defendant’s automatic telephone dialing system causes the text messages to be transmitted. The messages are transmitted automatically and without any type of human intervention before transmission. 32. On its website, Defendant admits that it is the sender of the text messages at issue in this case: When you invite others to join Ever by using our referral page, we send a one-time text message on your behalf to that referral. You 9 may share files or folders with friends from the Service by a variety of ways, including via text or email (sent by Ever...2 33. Notably, the text messages are sent from Defendant’s own telephone numbers, and not from the user’s telephone number. The numbers used by Defendant to transmit its text messages are “spoofed” and are not active telephone numbers. 34. The ultimate purpose of Defendant’s text messages is to invite others to download the Ever App and purchase Defendant’s services. Specifically, the text messages contain a link to Defendant’s website (www.ever.com), where Defendant promotes the Ever App and encourages individuals to subscribe to its services for a fee of $9.99/month. 35. At no point prior to sending its unsolicited text messages does Defendant obtain any type of consent from the recipients of the messages. 36. Further, the user of the Ever App is not given any type of control over the content of the texts or the timing of when those texts are sent. The user is never shown a sample of the text message before it is sent to his/her contacts and has no control over when the text messages are actually sent to his/her contacts. 37. Defendant, not the Ever App user, has sole control over the content of the invitational texts and sends the text messages at its own discretion. In all, Defendant sends the text messages at issue with little or no obvious control by the users of the Ever App. 38. As a result of Defendant’s deceptive practices, the Ever App users play no substantive role in deciding whether to send the invitational text messages at issue, and have no control over the content or timing of the messages. 39. Considering the goals and purposes of the TCPA, and the totality of the facts and circumstances surrounding the placing of the text messages at issue, Defendant is considered the 2 See www.ever.com/privacy-policy/; (last accessed on December 12, 2016) (emphasis supplied). 10 maker of the text messages because it was so involved in the placing of the text messages as to be deemed to have initiated the messages. 40. Defendant’s failure to disclose that it will cause unsolicited text messages to be sent to users’ contacts has resulted in numerous complaints being filed by users of the Ever App on Apple’s App Store and Google’s Android Play Store websites: - They steal your phones [sic] contact info, do viral marketing, by dishonest representation. They will text your contacts saying that you added their photo on the website (when you havent) [sic] with a link that “expires tomorrow ". Google them first and if you received a text put that number in one in Google and most likely you will see reviews of people that had their contact info stolen. - Is anyone else getting random fake invites to this app? I am and I'd like to know what's going on. - Do not use. Intrusive spam. Sends text to your contacts asking to check your photo to get them to install.3 - Scam don't download. This app steals your contact information and they will start to receive unauthorized text messages.4 41. Similarly, recipients of Defendant’s spam, aggravated by the nuisance, disruption, and invasion of privacy caused by Defendant’s texts, have voiced their complaints on various on- line forums: - j keith Reported: 2258004531. Shelia Cagle just recommended you check out your photos on Everalbum. Link expires tomorrow. http://app.everpics/UldkMkrrEEEss PS: I don't know Shelia Cagle!!!!!!!!!!!!!! - Everalbum. txting a contact of mine recommended me to checkout my photo's on Everalbum for one I never have heard about such a app/website much less store my photo's there & two 3 See https://play.google.com/store/apps/details?id=com.everalbum.everalbumapp&hl=en; (last accessed on December 7, 2016). 4 http://android-apk.net/app/ever-free-photo-storage/703177890/; (last accessed on December 7, 2016). 11 this particular contact they recommended is not a contact that I would have any connection with whatsoever involving pics that's what threw up a red flag with me - ever album scam. says friend recommend everalbum link http://app.ever.pics/Uldk/ySvxfyxOBw and expires tomorrow - Fake Everalbum. Uses a name stolen from your contacts earlier to lure you into clicking a link. Reads like this: "[person in your contacts] just recommended you check out your photos on Everalbum. Link expires tomorrow: [malicious link]" - App.ever.pics . They mentioned a personal friend of mine(they even gave the correct name) recommended for me to check out my personal photos on app.ever.pics and that the link expires tomorrow. I did not open it and called my friend he said he knew nobody from that number - Everalbum photos. scam says, "Your friend Wendy U just recommended you check out your photos on Everalbum. Link expires tomorrow: http://app.ever.pics/UldkuXC1AA3QDw - EverAlbum link. Your friend xxxxx xxxxx xxxx just recommended you check out your photos on Everalbum. Link expires tomorrow: http://app.ever.pics/Uldk/PdpFX2PLCw - Gabriella C******* just recommended you check out your photos on Ever. Link expires tomorrow:Then there was a second link to tap download the link. I've put asterisks in to not disclose the person's last name as I know it was not intentionally sent by this person - she's a friend's 10 year old daughter. 5 42. The sizeable number of complaints found on the Internet by recipients of Defendant’s unsolicited text messages establishes that at least several thousand consumers have received Defendant’s text messages. 5 See http://www.scamcallfighters.com/scam-call-13236724818-RECOMMENDED-YOU-CHECK- YOUR-PHOTOS-ON-EVERALBUM--LINK-EXPIRES-TOMORROW-Text-Message--SMS--Scam- 49718.html;(last accessed on December 7, 2016). 12 43. As demonstrated by the above complaints, Defendant typically uses the following generic format for its text messages: “Your friend [name] just recommended you check out your photos on Everalbum. Link expires tomorrow: [link].” 44. The impersonal and generic nature of Defendant’s text messages, combined with the large number of messages sent by Defendant, demonstrates that Defendant utilizes an ATDS in transmitting the messages. 45. Specifically, upon information and belief, Defendant utilizes a combination of hardware and software systems to send the text messages at issue in this case. The systems utilized by Defendant have the capacity to generate or store random or sequential numbers or to dial sequentially or randomly at the time the call is made, and to dial such numbers, en masse, in an automated fashion without human intervention. FACTS SPECIFIC TO PLAINTIFF 46. At all times relevant, Plaintiff was a citizen of the State of Florida. Plaintiff is, and at all times mentioned herein was, a “person” as defined by 47 U.S.C. § 153 (39). 47. On October 16, 2016, Defendant caused the following automated text message to be sent to Plaintiff’s cellular telephone number ending in 5368 (the “5368 Number”): 13 48. The text message received by Plaintiff originated from telephone number 267-613- 9146, which is owned and/or controlled by Defendant. Further, this is a “spoofed” number in that it is not active and states that it is disconnected if a call is attempted to the number. 49. The text message received by Plaintiff is identical to the generic messages received by thousands of other individuals as outlined above. This fact establishes that Defendant used an ATDS in transmitting the above text message to Plaintiff. 50. The link (http://app.ever.pics/Uldk/He9qv6ygwx) provided in the text message received by Plaintiff is a link to Defendant’s website (www.ever.com), where Plaintiff was encouraged to download the Ever App. Therefore, Defendant’s text message constitutes telemarketing because it encouraged the future purchase or investment in property, goods, or services – i.e. Defendant’s mobile application. 51. Plaintiff received the subject text within this judicial district and, therefore, Defendant’s violation of the TCPA occurred within this district. Upon information and belief, Defendant caused other text messages to be sent to individuals residing within this judicial district. 52. Plaintiff has never used Defendant’s application or services, has never downloaded the Ever App on her mobile device, and has never had any type of relationship with Defendant. 53. Plaintiff has never provided Defendant her telephone number, or provided any type of consent to receive automated text messages from Defendant. 54. Plaintiff is the subscriber and sole user of the 5368 Number, and is financially responsible for phone service to the 5368 Number. 55. Defendant’s unsolicited text message caused Plaintiff actual harm, including invasion of her privacy, aggravation, annoyance, intrusion on seclusion, trespass, and conversion. 14 56. Defendant’s text message also inconvenienced Plaintiff and caused a disruption to her life as a result of Defendant’s deceptive statement suggesting that photographs of Plaintiff were being displayed on Defendant’s platform without her permission (“…just recommended you check out your photos on Ever.”). CLASS ACTION ALLEGATIONS 57. Plaintiff brings this case as a class action pursuant to Fed. R. Civ. P. 23, on behalf of herself and all others similarly situated. 58. Plaintiff represents, and is a member of the following classes: All persons residing within the United States who received telephone calls and/or text messages from Defendant to their cellular telephone within the four years prior to the filing of the Complaint in this action, for the purpose of selling or attempting to sell Defendant’s goods and/or services using an automatic telephone dialing system, and who did not provide prior express consent for such call(s). Numerosity 59. Upon information and belief, based on the widespread Internet complaints about Defendant’s telemarketing text messages, the members of the class are believed to number in the thousands or millions such that joinder of all members is impracticable. 60. The exact number and identities of the Class members are unknown at this time and can only be ascertained through discovery. Identification of the Class members is a matter capable of ministerial determination from Defendant’s call records. 15 Common Questions of Law and Fact 61. There are numerous questions of law and fact common to the Class which predominate over any questions affecting only individual members of the Class. Among the questions of law and fact common to the Class are: a. Whether Defendant sent non-emergency text messages to Plaintiff’s and Class members’ cellular telephones using an autodialer and/or prerecorded message; b. Whether Defendant can meet its burden of showing that it obtained prior express consent to make such calls; c. Whether Defendant’s conduct was knowing and willful; d. Whether Defendant is liable for damages, and the amount of such damages; and e. Whether Defendant should be enjoined from such conduct in the future. 62. The common questions in this case are capable of having common answers. Defendant routinely places automated calls to telephone numbers assigned to cellular telephone thus, Plaintiff and the Class members will have identical claims capable of being efficiently adjudicated and administered in this case. Typicality 63. Plaintiff’s claims are typical of the claims of the Class members, as they are all based on the same factual and legal theories. Protecting the Interests of the Class Members 64. Plaintiff is a representative who will fully and adequately assert and protect the interests of the Class, and has retained counsel who is experienced in prosecuting class actions. Accordingly, Plaintiff is an adequate representative and will fairly and adequately protect the interests of the Class. 16 Proceeding Via Class Action is Superior and Advisable 65. A class action is superior to all other available methods for the fair and efficient adjudication of this lawsuit, because individual litigation of the claims of all members of the Classes are economically unfeasible and procedurally impracticable. While the aggregate damages sustained by the Classes are in the millions of dollars, the individual damages incurred by each member of the Class resulting from Defendant’s wrongful conduct are too small to warrant the expense of individual lawsuits. The likelihood of individual Class members prosecuting their own separate claims is remote, and, even if every member of the Class could afford individual litigation, the court system would be unduly burdened by individual litigation of such cases. 66. The prosecution of separate actions by members of the Class would create a risk of establishing inconsistent rulings and/or incompatible standards of conduct for Defendant. For example, one court might enjoin Defendant from performing the challenged acts, whereas another may not. Additionally, individual actions may be dispositive of the interests of the Class, although certain class members are not parties to such actions. COUNT I VIOLATION OF THE TCPA, 47 U.S.C. § 227(b) 67. Plaintiff re-alleges and incorporates the preceding paragraphs as if fully set forth 68. Defendant violated the TCPA by sending unsolicited text messages to Plaintiff and the Class members on their cellular phones without first obtaining their prior express consent and using equipment which constitutes an automatic telephone dialing system for the express purpose of marketing Defendant’s goods and/or services. 69. Defendant’s text messages caused Plaintiff and the Class members actual harm including, but not limited to, invasion of their personal privacy, aggravation, nuisance and 17 disruption in their daily lives, reduction in cellular telephone battery life, messaging charges, and loss of use of their cellular telephones. 70. As a result of the aforementioned violations of the TCPA, Plaintiff and the Class are entitled to an award of $500.00 in statutory damages for each call in negligent violation of the TCPA, or up to $1,500 in statutory damages for each call in willful violation of the TCPA, pursuant to 47 U.S.C. § 227(b)(3)(B). 71. Additionally, Plaintiff and the Class are entitled to and seek injunctive relief prohibiting such future conduct WHEREFORE, Plaintiff and members of the Class demand a jury trial on all claims so triable, and judgment against Defendant for the following: a. Injunctive relief prohibiting violations of the TCPA by Defendant in the future; b. Statutory damages of $500.00 for each and every text message made in negligent violation of the TCPA or $1,500 for each and every call made in willful violation of the TCPA; and c. Such other relief as this Court deems just and proper. 18 Dated: December 15, 2016 Respectfully submitted, HIRALDO P.A. 401 E. Las Olas Boulevard Suite 1400 Ft. Lauderdale, Florida 33301 /s/ Manuel S. Hiraldo Manuel S. Hiraldo Florida Bar No. 030380 Email: [email protected] Telephone: 954.400.4713 Counsel for Plaintiff and the Class 19

privacy

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TYCKO & ZAVAREEI LLP Annick M. Persinger (SBN 272996) Maren I. Christensen (SBN 320013) [email protected] [email protected] 1970 Broadway, Suite 1070 Oakland, CA 94612 Telephone (510) 254-6808 Facsimile (202) 973-0950 TYCKO & ZAVAREEI LLP Andrea R. Gold (pro hac vice) [email protected] 1828 L Street, NW, Suite 1000 Washington, DC 20036 Telephone (202) 973-0900 Facsimile (202) 973-0950 Attorneys for Plaintiffs (additional counsel on signature page) IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA Case No. 3:19-CV-01402-MMC TERESA HALE, VANESSA NG, on behalf of themselves and all others similarly situated, Plaintiff, FIRST AMENDED CLASS ACTION COMPLAINT v. JURY TRIAL DEMANDED NATERA, INC., Defendant. -1- FIRST AMENDED CLASS ACTION COMPLAINT Plaintiffs Teresa Hale and Vanessa Ng, through their undersigned attorneys, on behalf of themselves and all persons similarly situated, complain against Natera, Inc. (“Natera” or “Defendant”), as follows: INTRODUCTION 1. Defendant Natera provides numerous genetic tests to doctors with patients who are pregnant or wishing to become pregnant. But Plaintiffs Hale and Ng had neither sought health care in relation to getting pregnant nor ever sought genetic testing from Natera through a health care provider. In fact, neither Plaintiff Hale nor Plaintiff Ng ever had any contact with Natera. Nonetheless, each received form text messages related to testing being conducted by Natera. Not only did the text message invade Plaintiffs’ privacy, and subject them to aggravation, it alarmed them to receive text messages that appeared to relate to medical testing that they knew nothing about. 2. By sending unauthorized text messages to Plaintiffs and individuals throughout the nation, Natera violated federal law and caused them concrete harm.1 Specifically, by effectuating these unauthorized text messages, Natera has violated individuals’ statutory and privacy rights and has caused individuals actual harm, not only because individuals were subjected to the aggravation and invasion of privacy that necessarily accompanies wireless spam, but also because individuals frequently have to pay their cell phone service providers for the receipt of such wireless spam. 3. Accordingly, Plaintiffs bring this class action complaint for damages, injunctive relief, and any other available legal or equitable remedies, resulting from the illegal actions of Natera in sending text messages to Plaintiffs on their cellular telephones, in violation of the Telephone Consumer Protection Act, 47 U.S.C. § 227, et seq. (“TCPA”). 1 Text messages are “calls” within the meaning of the TCPA. Satterfield v. Simon & Schuster, Inc., 569 F.3d 946, 954 (9th Cir. 2009); Legg v. Voice Media Group, Inc., 990 F.Supp.2d 1351, 1354 (S.D. Fla. 2014) (“These provisions [of the TCPA] apply with equal force to conventional telephone calls and text messages, as a text message qualifies as a ‘call’ within the meaning of the TCPA.”). -2- FIRST AMENDED CLASS ACTION COMPLAINT JURISDICTION AND VENUE 4. This Court has original jurisdiction over this class action pursuant to 28 U.S.C. § 1332(d). Plaintiffs and Class Members have suffered aggregate damages exceeding $5,000,000, exclusive of interest and costs, and is a class action in which any Member of the Class of Plaintiffs is a citizen of a state different from any Defendant. 5. This Court also has federal question jurisdiction over this case pursuant to 28 U.S.C. § 1331, pursuant to Defendant’s violation of the TCPA. 6. Venue is proper in this District under 28 U.S.C. § 1391(b) because Natera is a resident of this District and significant events giving rise to this case took place in this District. PARTIES 7. Plaintiff Teresa Hale is a citizen residing in Kansas City, Missouri. 8. Plaintiff Vanessa Ng is a citizen residing in Houston, Texas. 9. Defendant Natera is a Delaware corporation with its principal place of business at 201 Industrial Road, Suite 410, San Carlos, CA 94070. COMMON ALLEGATIONS OF FACT I. The TCPA 10. The TCPA exists to prevent communications like the ones described within this complaint. “Voluminous consumer complaints about abuses of telephone technology—for example, computerized calls dispatched to private homes—prompted Congress to pass the TCPA.” Mims v. Arrow Fin. Servs., LLC, 132 S. Ct. 740, 744 (2012). 11. Congressional committees investigating the use of telecommunications technology found that legislation was necessary to prevent abusive telemarketing practices and protect consumers from invasions of privacy, harassment, and economic harm. The Senate Committee on Commerce, Science, and Transportation found that “the Federal Communications Commission (FCC) received over 2,300 complaints about telemarketing calls” in the year preceding the TCPA’s passage, stating inter alia that “unsolicited calls placed to . . . cellular . . . telephone numbers often impose a cost on -3-  FIRST AMENDED CLASS ACTION COMPLAINT the called party (. . . [where, e.g.] cellular users must pay for each incoming call . . .).” See S. Report No. 102-178, 1991 U.S.C.C.A.N. 1968, 1991 WL 211220 at *2 (Oct. 8, 1991). The House Committee on Energy and Commerce concurred, finding that “expert testimony, data, and legal analyses comprising the Committee’s record, and broad support of consumers, state regulators, and privacy advocates clearly evidence that unsolicited commercial telemarketing calls are a widespread problem and a federal regulatory solution is needed to protect residential telephone subscriber privacy rights.” H.R. Report No. 102-317, 1991 WL 245201 at *18 (Nov. 15, 1991). 12. When it passed the TCPA, Congress intended to provide consumers a choice as to how telemarketers may call them and found that “[t]echnologies that might allow consumers to avoid receiving such calls are not universally available, are costly, are unlikely to be enforced, or place an inordinate burden on the consumer.” Pub. L. No. 102–243, § 11. Congress also found that “[m]any consumers are outraged over the proliferation of intrusive, nuisance calls,” and that “the evidence presented to the Congress indicates that automated or prerecorded calls are a nuisance and an invasion of privacy . . . .” Id. at §§ 12-13. 13. The TCPA’s ban on telephone calls made using an automatic telephone dialing system (“ATDS” or “autodialer”), as defined by 47 U.S.C. § 227(a)(1), has been interpreted to extend to unsolicited autodialed text messages sent to cellular phones. E.g., FCC Declaratory Ruling, 27 F.C.C.R. 15391, 2012 WL 5986338 (Nov. 29, 2012); Gomez v. Campbell-Ewald Co., 768 F.3d 871, 876 (9th Cir. 2014); Gager v. Dell Fin. Servs., Inc., 727 F.3d 265, 269 n.2 (7th Cir. 2013). 14. As recently held by the United States Court of Appeals for the Ninth Circuit: “Unsolicited telemarketing phone calls or text messages, by their nature, invade the privacy and disturb the solitude of their recipients. A plaintiff alleging a violation under the TCPA ‘need not allege any additional harm beyond the one Congress has identified.’” Van Patten v. Vertical Fitness Grp., No. 14-55980, 2017 U.S. App. LEXIS 1591, at *12 (9th Cir. May 4, 2016) (quoting Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1549 (2016) (emphasis original)). -4-  FIRST AMENDED CLASS ACTION COMPLAINT II. Natera Sends Unsolicited Text Messages en Masse to Thousands of Cellular Phones 15. Natera specializes in analyzing prenatal genetic material sent to it by licensed physicians, usually via medical courier. Natera tests must be ordered through a physician. 16. Patients receive all health information related to any Natera genetic testing, including test results, directly from their health care providers. 17. After Natera receives test orders from physicians, Natera sends text messages to thousands of cellular phones urging the recipient to visit the “patient portal” on Natera’s website. 18. Natera sends these text messages without ever having any direct communications with the patients. 19. Natera also sends text messages to thousands of cellular phones regarding billing, even though Natera never has any direct communications with patients, and regardless of whether the individual has signed up for its patient portal. 20. Natera’s patient enrollment process does not include procedures necessary to confirm the accuracy of the information Natera receives from health care providers, including patients’ cellular telephone numbers. 21. As a result, Natera’s patient account creation and administration processes lack steps sufficient to confirm that the cellular telephone numbers Natera receives, and to which it then sends texts, actually belong to individuals who are undergoing genetic testing using Natera. 22. Since Natera has no direct contact with patients, and does not confirm that the cellular telephone numbers it indirectly receives are accurate, Natera routinely sends unsolicited text messages to individuals who are not seeking genetic testing through health care providers and who never provided consent to receive text messages from Natera. 23. Natera sends its text messages using short codes, including the short codes 447-79 and 584-37. A short code is a special number for text messages sent to cellular subscribers. Short codes are unique 5- or 6-digit numbers that are obtained from an independent agency that manages and -5-  FIRST AMENDED CLASS ACTION COMPLAINT assigns these number resources in the United States. Companies use short codes to communicate with large numbers of cellular subscribers. 24. These text messages come in the form of Short Message Services. The term “Short Message Service” or “SMS” describes a messaging system that allows cellular telephone subscribers to use their cellular telephones to send and receive short text messages, usually limited to 160 characters. 25. An “SMS message” is a text message directed to a wireless device through the use of the telephone number assigned to the device. When an SMS message is successfully made, the recipient’s cell phone rings, alerting him or her that a text message is being received. 26. Upon information and belief, Natera utilized a combination of hardware and software systems to send the text messages at issue in this case. The systems utilized by Natera have the current capacity or present ability to generate or store random or sequential numbers or to dial sequentially or randomly at the time the text message is sent, and to dial such numbers, en masse, in an automated fashion and without human intervention. 27. The systems utilized by Natera to transmit the subject text messages also stores numbers and dials them automatically to send text messages to a stored list of phone numbers as part of scheduled campaigns. See Marks v. Crunch San Diego, LLC, No. 14-56834, 2018 U.S. App. LEXIS 26883, at *27 (9th Cir. Sep. 20, 2018). 28. The impersonal and generic nature of Natera’s text message, see Exs. 1-3,2 demonstrates that Natera utilized an ATDS in transmitting the messages. See Kramer v. Autobytel, Inc., 759 F. Supp. 2d 1165, 1171 (N.D. Cal. 2010) (finding it “plausible” that defendants used an ATDS where messages were advertisements written in an impersonal manner and sent from short code); Robbins v. Coca-Cola Co., No. 13-CV-132-IEG NLS, 2013 U.S. Dist. LEXIS 72725, 2013 WL 2252646, at *3 (S.D. Cal. May 22, 2013) (observing that mass messaging would be impracticable without use of an ATDS)). 2 Attached hereto at Exhibits 1-4 are photograph of the text messages that Plaintiffs Hale and Ng received from Natera. -6-  FIRST AMENDED CLASS ACTION COMPLAINT 29. Natera sent the text messages via an ATDS or autodialer as defined by 47 U.S.C. § 227(a)(1). The ATDS has the capability to both (1) store or produce telephone numbers to be texted using a random or sequential number generator, and (2) automatically send text messages from a list or database of telephone numbers, without human intervention. 30. Natera has a corporate policy to use an ATDS to text individuals just as it did to Plaintiffs’ cellular telephones in this case. 31. Natera’s text messages were intentionally sent to Plaintiffs and the other Members of the Class defined below. On information and belief, Natera is well aware of the TCPA’s prohibitions against use of autodialers in calls and text messages to consumers, but made the business decision to send these text messages anyway. III. Plaintiff Teresa Hale Received Unsolicited Texts from Defendant 32. Plaintiff Hale, a 64-year-old woman, has never been a patient of Natera, otherwise used Natera, or sought out any prenatal genetic testing services. 33. On April 25, 2018, Plaintiff Hale’s cell phone rang, indicating that a text message was being received. The “from” field of the transmission was identified as “447-79” which, as described above, is a short code utilized by Natera and its agents for the transmission of text messages en masse. The body of the text message read: “Natera received a test order from your doctor! Track your test in our Patient Portal (https://my.natera.com/users/sign_up) using Case ID 1777499. Reply STOP to opt out.” See Ex. 1. 34. Prior to receiving this text message, Plaintiff Hale had no prior contact with Natera. 35. Plaintiff Hale replied STOP to the text message she received on April 25, 2018. In response, she received another text stating “Your number has been opted out of our list.” Nevertheless, one month after filing the Original Complaint in this lawsuit, on April 17, 2019, Plaintiff Hale received the following text message: Hello from Natera, the lab that performed your prenatal testing. Our records show that we have not received payment from you. We will honor our discounted prompt- pay price of $249/$349 if you call 1-877-869-3052 and complete payment within 48 hours. Reply STOP to opt out. -7- FIRST AMENDED CLASS ACTION COMPLAINT See Ex. 2. 36. The “from” field of the transmission Plaintiff Hale received on April 17, 2019, was identified as “584-37” which, again, is a short code utilizated by Natera and its agents for transmission of text messages en masse. 37. At no time did Plaintiff Hale provide consent, including any written consent, to receive the above-referenced text messages or any other such wireless spam from Natera, its agents, or partner entities. 38. The automated text messages that Natera sent to Plaintiff Hale were to a phone number for which Plaintiff Hale is charged for incoming calls and text messages pursuant to 47 U.S.C. § 227(b)(1)(A)(iii). The last four digits of Plaintiff Hale’s phone number are “3129.” 39. The text message originated from telephone numbers 447-79 and 584-37, numbers which upon information and belief are owned and operated by Natera. 40. These numbers are known as “short codes,” standard 5-digit codes that enable Natera to send SMS text messages en masse, while deceiving recipients into believing that the message was personalized and sent from a telephone number operated by an individual. 41. Plaintiff Hale alleges that the text messages she received from Natera violated 47 U.S.C. § 227(b)(1). IV. Plaintiff Vanessa Ng Received Unsolicited Texts from Defendant 42. Like Plaintiff Hale, Plaintiff Ng has never sought healthcare related to getting pregnant nor ever sought genetic testing from Natera through a health care provider. 43. On February 17, 2020, at 9:36 a.m., Plaintiff Ng’s cell phone rang, indicating that a text message was being received. The “from” field of the transmission was identified as “441-54” which, as described above, is a short code utilized by Natera and its agents for the transmission of text messages en masse. The body of the text message read: Natera received your sample and it’s processing in our lab. Create an online account to learn more about your test at https://my.natera.com. Reply STOP to opt out. See Ex. 3. -8-  FIRST AMENDED CLASS ACTION COMPLAINT 44. Plaintiff Ng then received the same text message, again, four minutes later at 9:40 a.m. 45. Prior to receiving these text messages, Plaintiff Ng had no prior contact with Natera. 46. On February 18, 2020, Plaintiff Ng replied STOP to the two text messages she received on February 17, 2020. In response, she received another text stating “AWS Global SMS Alerts. No more messages will be sent. Help at http://aws.amazon.com/contact-us. Message & Data Rates May Apply.” See Ex. 4. 47. At no time did Plaintiff Ng provide consent, including any written consent, to receive the above-referenced text messages or any other such wireless spam from Natera, its agents, or partner entities. 48. The automated text messages that Natera sent to Plaintiff Ng were to a phone number for which Plaintiff Ng is charged for incoming calls and text messages pursuant to 47 U.S.C. § 227(b)(1)(A)(iii). The last four digits of Plaintiff Ng’s telephone number are “6293.” 49. The text message originated from telephone number 441-54, a number which upon information and belief is owned and operated by Natera. 50. This number is known as a “short code,” a standard 5-digit code that enables Natera to send SMS text messages en masse, while deceiving recipients into believing that the message was personalized and sent from a telephone number operated by an individual. 51. Plaintiff Ng alleges that the text messages she received from Natera violated 47 U.S.C. § 227(b)(1). CLASS ACTION ALLEGATIONS 52. Plaintiffs proposes the following Class definition, subject to amendment as appropriate: All persons within the United States who, within the four years prior to the filing of this Complaint, were sent a text message through the use of any automatic telephone dialing system or an artificial or prerecorded voice, from Defendant or anyone on Defendant’s behalf, to said person’s cellular telephone number, without emergency purpose and without the recipient’s prior express consent. Defendant and its employees or agents are excluded from the Class. -9-  FIRST AMENDED CLASS ACTION COMPLAINT 53. Members of the Class are so numerous that joinder is impracticable. While the exact number of Class Members is unknown to Plaintiffs, it is believed that the Class is comprised of thousands of Members geographically disbursed throughout the United States. The Class is readily identifiable from information and records in the possession of Natera and third parties. 54. Common questions of law and fact exist as to all Members of the Class. These questions predominate over questions that may affect only individual Class Members because Defendant has acted on grounds generally applicable to the Class. Such common and legal factual questions include: a. Whether Defendant’s conduct violates the TCPA; b. Whether Defendant’s text messages were sent for an emergency purpose; c. Whether Defendant obtained valid express consent from the automated text message recipients; d. Whether Plaintiffs and Members of the Class are entitled to damages, costs, or attorneys’ fees from Defendant; e. Whether Defendant’s conduct caused Plaintiffs and Members of the Class inconvenience or annoyance; f. Whether Plaintiffs and Members of the Class are entitled to compensatory damages; g. Whether Plaintiffs and Members of the Class are entitled to treble damages based on the willfulness of Defendant’s conduct; h. Whether Plaintiffs and Members of the Class are entitled to a permanent injunction enjoining Defendant from continuing to engage in its unlawful conduct; 55. Plaintiffs’ claims are typical of the Members of the Class as all Members of the Class are similarly affected by Defendant’s actionable conduct. Defendant’s conduct that gave rise to the claims of Plaintiffs and Members of the Class (i.e. using an autodialer to send unsolicited text messages to cellular phones owned by Plaintiffs and Members of the Class) is the same for all Members of the Class. -10-  FIRST AMENDED CLASS ACTION COMPLAINT 56. Plaintiffs will fairly and adequately protect the interests of the Class because she has no interests antagonistic to, or in conflict with, the Class that Plaintiffs seek to represent. Furthermore, Plaintiffs have retained counsel experienced and competent in the prosecution of complex class action litigation. 57. Class action treatment is a superior method for the fair and efficient adjudication of this controversy, in that, among other things, such treatment will permit a large number of similarly situated persons or entities to prosecute their common claims in a single forum simultaneously, efficiently, and without the unnecessary duplication of evidence, effort, expense, or the possibility of inconsistent or contradictory judgments that numerous individual actions would engender. The benefits of the class mechanism, including providing injured persons or entities with a method for obtaining redress on claims that might not be practicable to pursue individually, substantially outweigh any difficulties that may arise in the management of this class action. 58. Plaintiffs know of no difficulty to be encountered in the maintenance of this action that would preclude its maintenance as a class action. 59. Defendant has acted or refused to act on grounds generally applicable to the Class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the Class as a whole. COUNT I Violation of the Telephone Consumer Protection Act (47 U.S.C. § 227 et seq.) 60. Plaintiffs incorporates by reference all above paragraphs as though fully repeated herein. 61. Plaintiffs and the members of the class are, and at all times mentioned herein were, “person(s)” as defined by 47 U.S.C. § 153(39). 62. The text messages that Natera sent were not for an emergency purpose as defined by 47 U.S.C. § 227(b)(1)(A)(i). -11- FIRST AMENDED CLASS ACTION COMPLAINT 63. The text messages from Natera also constitute artificial or prerecorded voice calls pursuant to 47 U.S.C. § 227(b)(1). 64. The TCPA prohibits the use of an ATDS or autodialer to make any call or send any text message to a wireless phone number without the prior express consent of the contacted party or in the absence of an emergency. 65. The foregoing acts and omissions of Natera constitute numerous and multiple violations of the TCPA, including but not limited to each and every one of the above-cited provisions of 47 U.S.C. § 227 et seq. 66. As a result of Natera’s violations of 47 U.S.C. § 227 et seq., Plaintiffs and Members of the Class are entitled to an award of $500.00 in statutory damages for each and every negligent violation, pursuant to 47 U.S.C. § 227(b)(3). 67. As a result of Natera’s violations of 47 U.S.C. § 227 et seq., Plaintiffs and Members of the Class are entitled to an award of $1,500.00 in statutory damages for each and every knowing and/or willful violation, pursuant to 47 U.S.C. § 227(b)(3). 68. As a result of Natera’s violations of 47 U.S.C. § 227 et seq., Plaintiffs and Members of the Class have been subjected to nuisance text messages, have been forced to waste time reviewing, deleting, and/or responding to Natera’s unsolicited automated text messages, and have suffered invasions of their privacy and unwanted use of data storage space on their cellular telephones. 69. Plaintiffs and Members of the Class also suffered damages in the form of text message, data, and other charges to their cellular telephone plans. 70. Plaintiffs and Members of the Class are also entitled to and seek injunctive relief prohibiting Natera’s illegal conduct in the future. PRAYER FOR RELIEF WHEREFORE, Plaintiffs and the Class demand a jury trial on all claims so triable and judgment as follows: -12- FIRST AMENDED CLASS ACTION COMPLAINT 1. Statutory damages of $500.00 for each negligent violation of the TCPA over the last four years; 2. Statutory damages of $1,500.00 for each knowing or willful violation of the TCPA over the last four years; 3. Actual and punitive damages arising from Defendant’s wrongful and illegal conduct; 4. A permanent injunction prohibiting Defendant from sending text messages via the use of an ATDS or autodialer without recipients’ prior express consent; 5. Attorney’s fees; 6. Litigation expenses and costs of the instant suit; and 7. Such other or further relief as the Court deems proper. JURY DEMAND Plaintiffs demand trial by jury on all counts for which a jury trial is permitted. Dated: April 23, 2020 Respectfully submitted, TYCKO & ZAVAREEI LLP /s/ Annick M. Persinger Annick M. Persinger (SBN 272996) Maren I. Christensen (SBN 320013) [email protected] [email protected] 1970 Broadway, Suite 1070 Oakland, CA 94612 Telephone (510) 254-6808 Facsimile (202) 973-0950 TYCKO & ZAVAREEI LLP Andrea R. Gold (pro hac vice) [email protected] 1828 L Street, NW, Suite 1000 Washington, DC 20036 Telephone (202) 973-0900 Facsimile (202) 973-0950 GREGORY COLEMAN LAW PC Gregory F. Coleman [email protected] Adam A. Edwards [email protected] -13- FIRST AMENDED CLASS ACTION COMPLAINT Rachel L. Soffin [email protected] Mark E. Silvey [email protected] Jonathan Betten Cohen [email protected] 800 S. Gay Street, Suite 1100 Knoxville, TN 37929 Telephone (865) 247-0080 Facsimile (865) 522-0049 -14-  FIRST AMENDED CLASS ACTION COMPLAINT EXHIBIT 1 EXHIBIT 2   EXHIBIT 3   EXHIBIT 4

privacy

ArjhC4cBD5gMZwczBUZh

AHMAD KHOLBEKOV, ADIL ERBABAEV, Index No. individually and on behalf of all others similarly situated, COMPLAINT Plaintiffs, - against - FLSA COLLECTIVE ACTION AND RULE 23 CLASS ACTION AT HOME SOLUTIONS, LLC. Defendant. Plaintiffs AHMAD KHOLBEKOV and ADIL ERBABAEV by and through their PRELIMINARY STATEMENT 1. Plaintiffs bring this action, on behalf of themselves and other employees 2. Plaintiffs also bring this action, on behalf of themselves and other 1 JURISDICTION AND VENUE 3. Jurisdiction of the Court over Plaintiffs' FLSA claims is invoked pursuant 4. Jurisdiction of this Court over Plaintiffs' NYLL claims is invoked pursuant 5. Venue is proper within this District pursuant to 28 U.S.C. § 1391 because a PARTIES 6. Plaintiff AHMAD KHOLBEKOV ("Kholbekov") resides in the County of 7. Plaintiff ADIL ERBABAEV ("Erbabaev") resides in the County of Kings 8. Plaintiffs' written consent to sue is attached hereto as Exhibit "A" 2 9. Defendant AT HOME SOLUTIONS, LLC., is a New York State domestic 10. Defendant grosses more than $500,000.00. 11. At all relevant times, Defendant has been, and continues to be an FACTUAL ALLEGATIONS 12. Defendant provides home health care to individuals who live in New York 13. At all times relevant hereto, Defendant employed Plaintiffs as a non-exempt 14. Plaintiffs were not paid an overtime premium for all hours worked in excess 15. At all times relevant hereto, Defendant employed the FLSA Collective 16. Defendant scheduled Kholbekov to work-and Kholbekov worked- varied 3 17. From, at least, in or around March 1st, 2015 through in or around July 1, 18. Defendant paid Plaintiffs $11.30 for hours worked up to 40 per work week, 19. Defendant scheduled the FLSA Collective Plaintiffs and the Class Members 20. Plaintiffs, the FLSA Collective Plaintiffs, and the Class Members regularly 21. Defendant failed to pay Plaintiffs and the FLSA Collective Plaintiffs the 22. Defendant failed to pay Plaintiffs and the Class Members the required 23. Defendant violated NYLL § 195(3) by failing to furnish Plaintiff and the 24. Defendant knew of, and/or showed reckless disregard for, the practices by 425. Defendant committed the foregoing acts knowingly, intentionally and COLLECTIVE ACTION ALLEGATIONS 26. Plaintiffs bring the First Claim for Relief as a collective action pursuant to 27. At all relevant times, Plaintiffs and the other FLSA Collective Plaintiffs are 28. Other home health aides currently or formerly employed by Defendant 5 29. The First Claim for Relief is properly brought under and maintained as an RULE 23 CLASS ALLEGATIONS - NEW YORK 30. Plaintiffs bring the Second and Third Claims for Relief pursuant to CPLR 31. The number, names and addresses of the Class Members are readily 32. The proposed Class is SO numerous that joinder of all Class Members is 6 33. Plaintiffs' claims are typical of the claims of the other Class Members, and 34. Plaintiffs and the other Class Members sustained similar losses, injuries and 35. Plaintiffs are able to fairly and adequately protect the interests of the Class 36. A class action is superior to other available methods for the fair and efficient 737. Upon information and belief, employees of the Defendant are often afraid 38. The questions of law and fact common to the Class predominate over any 8 39. Absent a class action, many of the Class Members likely will not obtain FIRST CLAIM FOR RELIEF (Failure to Pay Overtime Wages - FLSA, Brought by Plaintiff on Behalf of Themselves and the FLSA Collective Plaintiffs) 40. Plaintiffs, on behalf of themselves and the FLSA Collective Plaintiffs, 41. Throughout the statute of limitations period covered by these claims, 42. At all relevant times, Defendant willfully, regularly, repeatedly and 43. Plaintiffs, on behalf of themselves and the FLSA Collective Plaintiffs, seek 9 SECOND CLAIM FOR RELIEF (Failure to Pay Overtime Wages - NYLL, Brought by Plaintiff on Behalf of Themselves and the Class Members) 44. Plaintiffs, on behalf of themselves and the Class Members, reallege and 45. It is unlawful under New York law for an employer to suffer or permit a 46. Defendant willfully, regularly, repeatedly and knowingly failed to pay 47. As a direct and proximate result of Defendant's unlawful conduct, as set 48. Plaintiffs and the Class Members seek damages in the amount of their THIRD CLAIM FOR RELIEF (Wage Statement Violations - NYLL §195, Brought by Plaintiff on Behalf of Themselves and the Class Members) 49. Plaintiffs, on behalf of themselves and the Class Members, reallege and 1050. Defendant willfully failed to supply each Plaintiffs and the Class Members 51. Due to Defendant's violations of the NYLL, Plaintiffs and the Class PRAYER FOR RELIEF WHEREFORE, Plaintiffs, on behalf of themselves, the FLSA Collective (a) Designation of this action as a collective action on behalf of the FLSA Collective Plaintiffs and prompt issuance of notice pursuant to 29 U.S.C. § 216(b) to all similarly situated members of the FLSA opt-in class, apprising them of the pendency of this action, and permitting them to assert timely FLSA claims in this action by filing individual Consent to Sue forms pursuant to 29 U.S.C. § 216(b); (b) Certification of this action as a class action; 11 (c) Designation of the Named Plaintiffs as Representatives of the FLSA Collective Plaintiffs and Class Representatives of the Class; (d) An award of damages, according to proof, including FLSA and NYLL liquidated damages, and interest, to be paid by Defendant; (e) Costs of action incurred herein, including expert fees; (f) Attorneys' fees, including fees pursuant to 29 U.S.C. § 216, N.Y. Lab. L. §§ 663, 198 and other applicable statutes; (g) Pre-Judgment and post-judgment interest, as provided by law; and (h) Such other and further legal and equitable relief as this Court deems necessary, just and proper. Respectfully submitted, NAYDENSKIY LAW GROUP, P.C. Gennadiy Naydenskiy (GN5601) 1517 Voorhies Ave, 2nd fl. Brooklyn, NY 11235 (718) 808-2224 [email protected] Attorney for Plaintiffs, Proposed Collective Action Plaintiffs and Proposed Class Members 12 13 I hereby designate Naydenskiy Law Group, P.C. to represent me in this 12 , 2016. 2000 Signature Full Legal Name (print) I hereby designate Naydenskiy Law Group, P.C. to represent me in this , 2016. Hieve Signature Adil ERBABALL Full Legal Name (print)

employment & labor

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UNITED STATES DISTRICT COURT WESTERN DISTRICT OF TEXAS WACO DIVISION Matthew Lankford, individually and on behalf of all others similarly situated, Case No: 6:21-cv-1357 Plaintiff(s) -v.- CLASS ACTION COMPLAINT DEMAND FOR JURY TRIAL Convergent Outsourcing, Inc., and Velocity Investments, LLC, Defendant(s). Plaintiff Matthew Lankford (“Plaintiff”), brings this Class Action Complaint by and through his attorneys, Stein Saks, PLLC, against Defendants Convergent Outsourcing, Inc. (“Convergent”) and Velocity Investments, LLC (“Velocity”), individually and on behalf of a class of all others similarly situated, pursuant to Rule 23 of the Federal Rules of Civil Procedure, based upon information and belief of Plaintiff’s counsel, except for allegations specifically pertaining to Plaintiff, which are based upon Plaintiff's personal knowledge. INTRODUCTION/PRELIMINARY STATEMENT 1. The Fair Debt Collection Practices Act (“FDCPA” or “Act”) was enacted in response to the “abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors.” 15 U.S.C. §1692(a). The Act was promulgated because of the concern that “abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.” Id. It concluded that “existing laws…[we]re inadequate to protect consumers,” and that “the effective collection of debts” does not require “misrepresentation or other abusive debt collection practices.” 15 U.S.C. §§ 1692(b) & (c). 2. The purpose of the Act was not only to eliminate abusive debt collection practices, but also to ensure “that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged.” Id. § 1692(e). After determining that the existing consumer protection laws were inadequate, Id. § 1692(b), the Act gave consumers a private cause of action against debt collectors who fail to comply with the Act. Id. § 1692k. JURISDICTION AND VENUE 3. The Court has jurisdiction over this class action pursuant to 28 U.S.C. § 1331 and 15 U.S.C. § 1692 et. seq. The Court has pendent jurisdiction over state law claims, if any, in this action pursuant to 28 U.S.C. § 1367(a). 4. Venue is proper in this judicial district pursuant to 28 U.S.C. § 1391(b)(2), as the acts and transactions occurred here, Plaintiff resides here, and Defendants transact business here. NATURE OF THE ACTION 5. Plaintiff brings this class action on behalf of a class of consumers under Section 1692 et seq. of Title 15 of the United States Code, also known as the Fair Debt Collections Practices Act (“FDCPA”), and 6. Plaintiff is seeking damages and declaratory relief. PARTIES 7. Plaintiff is a resident of the State of Texas, County of Somervell. 8. Defendant Convergent is a “debt collector” as the phrase is defined in 15 U.S.C. § 1692(a)(6) and used in the FDCPA 9. Convergent has a service address at C T Corporation System, 1999 Bryan Street, Suite 900, Dallas, TX 75201. 10. Upon information and belief, Convergent is a company that uses the mail, telephone, and facsimile and regularly engages in business the principal purpose of which is attempting to collect debts. 11. Defendant Velocity is a “debt collector” as the phrase is defined in 15 U.S.C. § 1692(a)(6) and used in the FDCPA. 12. Velocity has a service address at Corporation Service Company d/b/a CSC – Lawyers Inc, 211 E. 7th Street, Suite 620, Austin, TX 78701. 13. Upon information and belief, Defendant Velocity is a company that uses the mail, telephone, and facsimile and regularly engages in business the principal purpose of which is attempting to collect debts. CLASS ALLEGATIONS 14. Plaintiff brings this claim on behalf of the following class, pursuant to Fed. R. Civ. P. 23(a) and 23(b)(3). 15. The Class consists of all individuals: a. with addresses in the State of Texas; b. to whom Convergent sent an initial letter; c. on behalf of Velocity; d. attempting to collect a consumer debt; e. which claimed the statute of limitations could be restarted, “if you take specific action such as making written promise to pay”; and f. which letter was sent on or after a date one (1) year prior to the filing of this action and on or before a date twenty-one (21) days after the filing of this action. 16. The identities of all class members are readily ascertainable from the records of Defendant and those companies and entities on whose behalf it attempts to collect and/or has purchased debts. 17. Excluded from the Plaintiff Class are the Defendant and all officers, members, partners, managers, directors and employees of the Defendant and their respective immediate families, and legal counsel for all parties to this action, and all members of their immediate families. 18. There are questions of law and fact common to the Plaintiff Class, which common issues predominate over any issues involving only individual class members. The principal issue is whether the Defendants’ written communications to consumers, in the form attached as Exhibit A, violate 15 U.S.C. §§ 1692d, 1692e and 1692f. 19. The Plaintiff’s claims are typical of the class members, as all are based upon the same facts and legal theories. The Plaintiff will fairly and adequately protect the interests of the Plaintiff Class defined in this complaint. The Plaintiff has retained counsel with experience in handling consumer lawsuits, complex legal issues, and class actions, and neither the Plaintiff nor his attorneys have any interests, which might cause them not to vigorously pursue this action. 20. This action has been brought, and may properly be maintained, as a class action pursuant to the provisions of Rule 23 of the Federal Rules of Civil Procedure because there is a well-defined community interest in the litigation: a. Numerosity: The Plaintiff is informed and believes, and on that basis alleges, that the Plaintiff Class defined above is so numerous that joinder of all members would be impractical. b. Common Questions Predominate: Common questions of law and fact exist as to all members of the Plaintiff Class and those questions predominate over any questions or issues involving only individual class members. The principal issue is whether the Defendants’ written communications to consumers, in the form attached as Exhibit A violate 15 U.S.C. §§ 1692d, 1692e and 1692f. c. Typicality: The Plaintiff’s claims are typical of the claims of the class members. The Plaintiff and all members of the Plaintiff Class have claims arising out of the Defendants’ common uniform course of conduct complained of herein. d. Adequacy: The Plaintiff will fairly and adequately protect the interests of the class members insofar as Plaintiff has no interests that are adverse to the absent class members. The Plaintiff is committed to vigorously litigating this matter. Plaintiff has also retained counsel experienced in handling consumer lawsuits, complex legal issues, and class actions. Neither the Plaintiff nor his counsel have any interests which might cause them not to vigorously pursue the instant class action lawsuit. e. Superiority: A class action is superior to the other available means for the fair and efficient adjudication of this controversy because individual joinder of all members would be impracticable. Class action treatment will permit a large number of similarly situated persons to prosecute their common claims in a single forum efficiently and without unnecessary duplication of effort and expense that individual actions would engender. 21. Certification of a class under Rule 23(b)(3) of the Federal Rules of Civil Procedure is also appropriate in that the questions of law and fact common to members of the Plaintiff Class predominate over any questions affecting an individual member, and a class action is superior to other available methods for the fair and efficient adjudication of the controversy. 22. Depending on the outcome of further investigation and discovery, Plaintiff may, at the time of class certification motion, seek to certify a class(es) only as to particular issues pursuant to Fed. R. Civ. P. 23(c)(4). FACTUAL ALLEGATIONS 23. Plaintiff repeats the above allegations as if set forth here. 24. Some time prior to September 11, 2021, Plaintiff allegedly incurred an obligation to non-party Lending Corp. as assignee of Webbank (“Lending Corp.”). 25. This alleged debt was incurred as a financial obligation that was primarily for personal, family or household purposes, specifically for personal credit. 26. The alleged Lending Corp. obligation is therefore a “debt” as that term is defined by 15 U.S.C. § 1692a (5). 27. Lending Corp is a “creditor” as defined by 15 U.S.C.§ 1692a (4). 28. According to Defendants’ letter the current creditor of the Lending Corp. debt is Velocity. 29. Defendant Velocity collects and attempts to collect debts incurred or alleged to have been incurred for personal, family or household purposes on behalf of itself or other creditors using the United States Postal Services, telephone and internet. 30. Velocity is a debt buyer. 31. Velocity purchases or otherwise acquires consumer debt from creditor(s). 32. Velocity then collects the consumer debt, hires a third party to collect the consumer debt, or hires an attorney to pursue collection litigation in connection with the consumer debt. 33. Convergent was collecting the Lending Club account on behalf of Velocity. 34. Velocity hired Convergent to collect this consumer debt. 35. Convergent collects and attempts to collect debts incurred or alleged to have been incurred for personal, family or household purposes on behalf of creditors using the United States Postal Services, telephone and internet Violation – September 11, 2021 Collection Letter 36. Defendants sent Plaintiff a collection letter on or about September 11, 2021 regarding the alleged debt originally owed to Lending Corp. See Letter attached as Exhibit A. 37. The letter states that the statute of limitations has expired on the alleged debt and Plaintiff could no longer be sued. 38. Its states that because of its age, Defendants “cannot sue you on this debt”. 39. The letter further states that “you can renew the debt and start the time period for the filing of a lawsuit against you if you take specific action such as making a written promise to pay.” 40. This statement is false. 41. Under applicable law, the statute of limitations on the alleged debt cannot be restarted by making a written promise to pay or payment at all. 42. See Tex. Fin. Code Ann. § 392.307(d). 43. This false threat prevented Plaintiff from entering into a settlement, or making a payment, for fear of a lawsuit potentially occurring in the future. 44. Plaintiff was misled as to his rights. 45. Plaintiff was misled into believing that making a partial payment or promise to pay could restart the statute of limitation. 46. Plaintiff could have made a partial payment to reduce the balance without fear that doing so would restart the statute of limitations. 47. Plaintiff was prevented from acting this way due to Defendants’ improper statements in the Letter. 48. Defendants’ actions were false, deceptive, and/or misleading. 49. Plaintiff would have pursued a different course of action were it not for Defendants’ violations. 50. Plaintiff was fearful, stressed, emotionally harmed, concerned, and confused by the 51. Plaintiff was therefore unable to evaluate his options of how to handle this debt. 52. Because of this, Plaintiff expended time, money, and effort in determining the proper course of action. 53. Plaintiff was hesitant to make a partial payment due in part to Defendants’ false claim that such a payment would restart the statute of limitation. 54. Plaintiff was therefore unable to make payment on the debt. 55. The funds Plaintiff would have used to pay some or all of this alleged debt were therefore spent elsewhere. 56. Plaintiff was therefore left with less funds with which to pay off this debt. 57. Defendants’ conduct prevented Plaintiff from acting in the ways he would have otherwise acted had Defendants’ letter not been improper. 58. Plaintiff was unable to properly respond as it would be foolhardy for Plaintiff to pay some of this debt when the Letter noted he could then be sued. 59. In addition, Plaintiff suffered emotional harm due to Defendants’ improper acts. 60. These violations by Defendants were knowing, willful, negligent and/or intentional, and the Defendants did not maintain procedures reasonably adapted to avoid any such violations. 61. Defendants’ collection efforts with respect to this alleged debt from Plaintiff caused Plaintiff to suffer concrete and particularized harm, inter alia, because the FDCPA provides Plaintiff with the legally protected right to be not to be misled or treated unfairly with respect to any action for the collection of any consumer debt. 62. Defendants’ deceptive, misleading and unfair representations with respect to its collection efforts were material misrepresentations that affected and frustrated Plaintiff's ability to intelligently respond to Defendants’ collection efforts because Plaintiff could not adequately respond to Defendants’ demand for payment of this debt. 63. Defendants’ actions created an appreciable risk to Plaintiff of being unable to properly respond or handle Defendants’ debt collection. 64. Plaintiff was confused and misled to his detriment by the statements in the dunning letter, and relied on the contents of the letter to his detriment. 65. Congress is empowered to pass laws and is well-positioned to create laws that will better society at large. 66. The harms caused by Defendants have a close relationship to harms traditionally recognized as providing a basis for a lawsuit in American courts. 67. As it relates to this case, the common-law analogue is to the traditional torts of misrepresentation, malicious prosecution, wrongful use of civil proceedings, abuse of process, and 68. The common-law torts of malicious prosecution, wrongful use of civil proceedings, and abuse of process cause harm as the individual is compelled to defend against an inaccurate claim which subjects him to the panoply of psychological pressure; a normal person subjected to this suffers at least some damages. 69. A party may pursue a wrongful civil litigation claim without showing any special kind of injury. 70. Conceptually, the tort of fraud is an interference with another’s interest in being able to make certain kinds of decisions in certain settings free of misinformation generated by others. 71. For purposes of this action, only a close relationship to common-law harm needed, not an exact duplicate. 72. Plaintiff is entitled to receive proper debt collection communications with proper notice of the details of the debt, and specifically not information that clouds, conceals, or misconstrues this, as required by the FDCPA. 73. Defendants failed to effectively inform Plaintiff of the relevant information, and in fact attempted to conceal and misconstrue it, in violation of the law. 74. The FDCPA ensures that debtors will use accurate, non-misleading information provided by debt collectors in choosing how to respond to collection attempts and how to manage and repay their debts. 75. As a result of Defendants’ deceptive, misleading and false debt collection practices, Plaintiff has been damaged. COUNT I VIOLATIONS OF THE FAIR DEBT COLLECTION PRACTICES ACT 15 U.S.C. §1692e et seq. 76. Plaintiff repeats the above allegations as if set forth here. 77. Defendants’ debt collection efforts attempted and/or directed towards the Plaintiff violated various provisions of the FDCPA, including but not limited to 15 U.S.C. § 1692e. 78. Pursuant to 15 U.S.C. §1692e, a debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. 79. Defendant violated said section by: a. falsely representing the character, amount or legal status of the debt in violation of §1692e (2); b. threatening to take an action that cannot lawfully be taken in violation of §1692e (5); and c. Using a false representation or deceptive means to collect or attempt to collect a debt in violation of §§ 1692e and 1692e (10). 80. By reason thereof, Defendants are liable to Plaintiff for judgment that Defendants’ conduct violated Section 1692e et seq. of the FDCPA, actual damages, statutory damages, costs and attorneys’ fees. COUNT II VIOLATIONS OF THE FAIR DEBT COLLECTION PRACTICES ACT 15 U.S.C. §1692f et seq. 81. Plaintiff repeats the above allegations as if set forth here. 82. Alternatively, Defendants’ debt collection efforts attempted and/or directed towards the Plaintiff violated various provisions of the FDCPA, including but not limited to 15 U.S.C. § 83. Pursuant to 15 U.S.C. §1692f, a debt collector may not use any unfair or unconscionable means in connection with the collection of any debt. 84. Defendant violated this section by a. Unfairly representing the character, amount or legal status of the debt; b. Using unfair representations or means to attempt to collect a debt. 85. By reason thereof, Defendants are liable to Plaintiff for judgment that Defendants’ conduct violated Section 1692f et seq. of the FDCPA, actual damages, statutory damages, costs and attorneys’ fees. COUNT III VIOLATIONS OF THE FAIR DEBT COLLECTION PRACTICES ACT 15 U.S.C. §1692d et seq. 86. Plaintiff repeats the above allegations as if set forth here. 87. Defendants’ debt collection efforts attempted and/or directed towards the Plaintiff violated various provisions of the FDCPA, including but not limited to 15 U.S.C. § 1692d. 88. Pursuant to 15 U.S.C. §1692d, a debt collector may not harass, oppress, or abuse any person in connection with the collection of a debt. 89. Pursuant to 15 U.S.C. §1692d (1), a debt collector may not use or threaten use of criminal means to harm the property of any person. 90. As described above, Defendants violated Sections 1692d and 1692d (2), inter alia, by threatening that an illegal lawsuit could be filed if Plaintiff made a written promise to pay. 91. By reason thereof, Defendants are liable to Plaintiff for judgment that Defendants’ conduct violated Section 1692d et seq. of the FDCPA, actual damages, statutory damages, costs and attorneys’ fees. DEMAND FOR TRIAL BY JURY 92. Pursuant to Rule 38 of the Federal Rules of Civil Procedure, Plaintiff hereby requests a trial by jury on all issues so triable. PRAYER FOR RELIEF WHEREFORE, Plaintiff Matthew Lankford, individually and on behalf of all others similarly situated, demands judgment from Defendant Convergent and Velocity, as follows: a) Declaring that this action is properly maintainable as a Class Action and certifying Plaintiff as Class representative, and Yaakov Saks, Esq., as Class Counsel; b) Awarding Plaintiff and the Class statutory damages; c) Awarding Plaintiff and the Class actual damages; d) Awarding Plaintiff costs of this Action, including reasonable attorneys’ fees and expenses; e) Awarding pre-judgment interest and post-judgment interest; and f) Awarding Plaintiff and the Class such other and further relief as this Court may deem just and proper. Dated: December 27, 2021 Respectfully submitted, Stein Saks, PLLC s/ Yaakov Saks By: Yaakov Saks, Esq. One University Plaza, Suite 620 Hackensack, NJ, 07601 P. (201) 282-6500 x101 F. (201) 282-6501 [email protected] Attorneys for Plaintiff

consumer fraud

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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA MIAMI DIVISION SHRINE WILLIAMS, individually and on behalf of all others similarly situated, Case No. _______________________ FLSA Collective Action FED. R. CIV. P. 23 v. SITEL GROUP and SYKES ENTERPRISES INCORPORATED PLAINTIFF’S ORIGINAL CLASS AND COLLECTIVE ACTION COMPLAINT SUMMARY Like many other companies across the United States, Sitel’s timekeeping and 1. payroll systems were affected by the hack of Kronos in 2021. That hack led to problems in timekeeping and payroll throughout Sitel’s 2. organization. As a result, Sitel’s workers who were not exempt from the overtime 3. requirements under federal and state law, were not paid for all hours worked or were not paid their proper overtime premium after the onset of the Kronos hack. Shrine Williams is one such Sitel worker. 4. Sitel could have easily implemented a system for recording hours and paying 5. wages to non-exempt employees until issues related to the hack were resolved. But it didn’t. Instead, Sitel used prior pay periods or reduced payroll estimates 6. to avoid paying wages and proper overtime to these non-exempt hourly and salaried employees. Sitel pushed the cost of the Kronos hack onto the most economically 7. vulnerable people in its workforce. The burden of the Kronos hack was made to fall on front-line workers— 8. average Americans—who rely on the full and timely paymet of their wages to make ends Sitel’s failure to pay wages, including proper overtime, for all hours worked 9. violates the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201, et seq., the Pennsylvania Minimum Wage Act (PMWA), 43 Pa. Stat. Ann. § 333.101, et seq., and the Pennsylvania Wage Payment and Collection Law (WPCL), 43 Pa. Stat. Ann. § 260.1, et seq. Williams brings this lawsuit to recover these unpaid overtime wages and other 10. damages owed by Sitel to her and the non-overtime-exempt workers like her, who were the ultimate victims of not just the Kronos hack, but also Sitel’s decision to make its front line workers bear the economic burden for the hack. This action seeks to recover the unpaid wages and other damages owed by 11. Sitel to all these workers, along with the penalties, interest, and other remedies provided by federal and Pennsylvania law. JURISDICTION & VENUE This Court has original subject matter jurisdiction pursuant to 28 U.S.C. § 12. 1331 because this action involves a federal question under the FLSA. 29 U.S.C. § 216(b). The Court has supplemental jurisdiction over any state law sub-classes 13. pursuant to 28 U.S.C. § 1367. Venue is proper in this Court pursuant to 28 U.S.C. § 1391(b)(1) because Sitel 14. is headquartered in this District. PARTIES Plaintiff Shrine Williams is a natural person. 15. Williams has been, at all relevant times, an employee of Sitel. 16. Williams has worked for Sitel since September 2021. 17. Williams’ written consent is attached as Exhibit 1. 18. Williams represents at least two groups of similarly situated Sitel workers. 19. Williams represents a collective of similarly situated workers under the FLSA 20. pursuant to 29 U.S.C. § 216(b). This “FLSA Collective” is defined as: All current or former hourly and salaried employees of Sitel, including its subsidiaries and alter egos such as Sykes (and its subsidiaries and alter egos), who were non-exempt under the FLSA and who worked for Sitel in the United States at any time since the onset of the Kronos ransomware attack, on or about December 11, 2021, to the present. Williams represents a class of similarly situated workers under Pennsylvania 21. law pursuant to Federal Rule of Civil Procedure 23. This “Pennsylvania Class” is defined All current or former hourly and salaried employees of Sitel, including its subsidiaries and alter egos such as Sykes (and its subsidiaries and alter egos), who were not exempt from overtime pay and who worked for Sitel in Pennsylvania at any time since the onset of the Kronos ransomware attack, on or about December 11, 2021, to the present. Together, throughout this Complaint, the FLSA Collective members and 22. Pennsylvania Class Members are referred to as the “Similarly Situated Workers.” Defendant Sitel Group maintains its headquarters and principal place of 23. business in this District. Sitel may be served by service upon any of its officers, managing agents, or 24. general agents at 600 Brickell Ave., Ste. 3200, Miami, FL 33131, or by any other method allowed by law. Defendant Sykes Enterprises Incorporated f/k/a Sykes Enterprises, Inc. 25. (“Sykes”) is a Florida corporation. Sykes maintains its headquarters and principal place of business in Florida. 26. Sykes may be served by service upon its registered agent, Corporation 27. Service Company, 1201 Hays St., Tallahassee, FL 32301, or by any other method allowed At all relevant times, Sitel exerted operational control over its subsidiaries and 28. alter egos. At all relevant times, Sitel substantially controlled the terms and conditions of 29. employment for workers of its subsidiaries and alter egos. At all relevant times, Sitel had a common control and management of labor 30. relations regarding employees of its subsidiaries and alter egos. Sitel’s subsidiaries and alter egos include Sykes. 31. Sitel employed and/or jointly employed, with its subsidiaries and alter egos, 32. Williams and the Similarly Situated Workers. Sitel and its subsidiaries and alter egos are joint employers for purposes of the 33. Sitel and its subsidiaries and alter egos are joint employers for purposes of 34. Pennsylvania law. Throughout this Complaint, Sitel, Sykes, and their subsidiaries and alter egos 35. are referred to jointly as “Sitel.” At all relevant times, Sykes exerted operational control over its subsidiaries 36. and alter egos. At all relevant times, Sykes substantially controlled the terms and conditions 37. of employment for workers of its subsidiaries and alter egos. At all relevant times, Sykes had a common control and management of labor 38. relations regarding employees of its subsidiaries and alter egos. Sykes’ subsidiaries and alter egos include Clearlink, Assistance Services 39. Group, Sykes Digital Servcies, XSell Technologies, and Portent. Sykes employed and/or jointly employed, with its subsidiaries and alter egos, 40. Williams and the Similarly Situated Workers. Sykes and its subsidiaries and alter egos are joint employers for purposes of 41. the FLSA. Sykes and its subsidiaries and alter egos are joint employers for purposes of 42. Pennsylvania law. Throughout this Complaint, Sykes and itssubsidiaries and alter egos are 43. referred to jointly as “Sykes.” COVERAGE UNDER THE FLSA At all relevant times, Sitel Group was an employer of Williams within the 44. meaning of Section 3(d) of the FLSA, 29 U.S.C. § 203(d). At all relevant times, Sitel Group was an employer of the FLSA Collective 45. Members within the meaning of Section 3(d) of the FLSA, 29 U.S.C. § 203(d). At all relevant times, Sitel Group has been part of an enterprise within the 46. meaning of Section 3(r) of the FLSA, 29 U.S.C. § 203(r). During at least the last three years, Sitel Group has had gross annual sales in 47. excess of $500,000. During at least the last three years, Sitel Group was and is part of an 48. enterprise engaged in commerce or in the production of goods for commerce within the meaning of the FLSA, 29 U.S.C. § 203(s)(1). Sitel Group employs many workers, including Williams, who are engaged in 49. commerce or in the production of goods for commerce and/or who handle, sell, or otherwise work on goods or materials that have been moved in or produced for commerce by any person. The goods and materials handled, sold, or otherwise worked on by Williams, 50. and other Sitel Group employees and that have been moved in interstate commerce include, but are not limited to, office and telecommunication equipment. At all relevant times, Sykes was an employer of Williams within the meaning 51. of Section 3(d) of the FLSA, 29 U.S.C. § 203(d). At all relevant times, Sykes was an employer of the FLSA Collective 52. Members within the meaning of Section 3(d) of the FLSA, 29 U.S.C. § 203(d). At all relevant times, Sykes has been part of an enterprise within the meaning 53. of Section 3(r) of the FLSA, 29 U.S.C. § 203(r). During at least the last three years, Sykes has had gross annual sales in excess 54. of $500,000. During at least the last three years, Sykes was and is part of an enterprise 55. engaged in commerce or in the production of goods for commerce within the meaning of the FLSA, 29 U.S.C. § 203(s)(1). Sykes employs many workers, including Williams, who are engaged in 56. commerce or in the production of goods for commerce and/or who handle, sell, or otherwise work on goods or materials that have been moved in or produced for commerce by any person. The goods and materials handled, sold, or otherwise worked on by Williams, 57. and other Sykes employees and that have been moved in interstate commerce include, but are not limited to, office and telecommunication equipment. FACTS Sitel provides customer engagement services to other businesses. See Sitel 58. Group, Our Mission, https://www.sitel.com/about/our-mission/ (last visited Apr. 3, 2022). Sitel calls its customer engagement ineractions “customer experience (CX).” 59. See Sitel Group, Our Mission, https://www.sitel.com/about/our-mission/ (last visited Apr. 3, 2022). Sitel delivers 8 milliion customer experiences, or brand experiences, ever day. 60. See Sitel Group, Our Mission, https://www.sitel.com/about/our-mission/ (last visited Apr. 3, 2022). To deliver these services, Sitel employs around, or more than, 160,000 61. employees. See Sitel Group, Our Mission, https://www.sitel.com/about/our-mission/ (last visited Apr. 3, 2022). Some of Sitel’s employees work through Sykes. 62. Sykes was acquired by Sitel in June 2021. Press Release, Sykes, Sykes 63. Enterprise, Inc. to be Acquired by Sitel Group [sic] (Jun. 18, 2021) https://www.sykes.com/company/news/sykes-enterprise-inc-to-be-acquired-by-sitel- group/. Sitel’s estimated 160,000, or more, employees include those working through 64. Sykes and its subsidiaries and alter egos. See Sitel Group, Our Mission, https://www.sitel.com/about/our-mission/ (last visited Apr. 3, 2022); Sykes, Sykes Enterprise, Inc. to be Acquired by Sitel Group [sic] (Jun. 18, 2021) https://www.sykes.com/company/news/sykes-enterprise-inc-to-be-acquired-by-sitel- group/. Many of Sitel’s employees are paid by the non-overitme-exempt hourly and 65. salaried workers. Since at least 2021, Sitel has used timekeeping software and hardware 66. operated and maintained by Kronos. On or about December 11, 2021, Kronos was hacked with ransomware. 67. The Kronos interfered with its clients, including Sitel’s, ability to use Kronos’s 68. software and hardware to track hours and pay employees. Since the onset of the Kronos hack, Sitel has not kept accurate track of the 69. hours that Williams and Similarly Situated Workers have worked. Instead, Sitel has used various methods to estimate the number of hours 70. Williams and Similarly Situated Workers work in each pay period. For example, Sitel issued paychecks based on the workers’ scheduled hours, or 71. simply duplicated paychecks from pay periods prior to the Kronos hack. This means that employees who were non-exempt and who worked overtime 72. were in many cases paid less than the hours they worked in the workweek, including overtime hours. Even if certain overtime hours were paid, the pay rate would be less than the 73. full overtime premium. Many employees were not even paid their non-overtime wages for hours 74. worked before 40 in a workweek. Williams is one such employee. 75. Instead of paying Williams for the hours she actually worked (including 76. overtime hours), Sitel simply paid based on estimates of time or pay, or based upon arbitrary calculations and considerations other than Williams’ actual hours worked and regular pay In some instances, Williams was paid portions of overtime hours worked, but 77. the overtime rate was not at the proper overtime premium of at least 1.5x the regular rate of pay, including required adjustments for shift differentials and non-discretionary bonsuses. In properly calculating and paying overtime to a non-exempt employee, the 78. only metrics that are needed are: (1) the number of hours worked in a day or week, and (2) the employee’s regular rate, taking into account shift differentials, non-discretionary bonuses, and other adjustments required by law. Sitel knows they have to pay proper overtime premiums to non-exempt hourly 79. and salaried employees. Sitel knows this because, prior to the Kronos hack, it routinely paid these 80. workers for all overtime hours at the proper overtime rates. Sitel knows it has to pay the wages it agreed to pay its employees. 81. Sitel knows this because, prior to the Kronos hack, it routinely paid these 82. workers for all hours worked at the rates it agreed to pay them. Sitel could have instituted any number of methods to accurately track and 83. timely pay its employees for all hours worked. Instead of accurately tracking hours and paying employees wages and 84. overtime, Sitel decided to arbitrarily pay these employees, without regard to the wages and overtime they were owed. It was feasible for Sitel to have its employees and managers report accurate 85. hours so its employees could be paid for the work they did for the company. But it didn’t do that. 86. In other words, Sitel pushed the effects of the Kronos hack onto the backs of 87. their most economically vulnerable workers, making sure that it kept the money owed to those employees in its own pockets, rather than take steps to make sure its employees were paid on time and in full for the work they did. Williams is one of Sitel’s employees who had to shoulder the burden of this 88. decision by Sitel. Williams was and is a non-exempt hourly employee of Sitel. 89. Williams regularly works over 40 hours per week for Sitel. 90. Williams’ normal, pre-Kronos hack hours are reflected in Sitel’s records. 91. Williams had a contractual agreement with Sitel to pay her for all hours 92. worked. Williams’ contractual agreement with Sitel required her to be paid for all 93. hours worked at an amount equal to his regular rate for hours up to 40 in a workweek, and at an overtime premium of no less than 1.5x his regular rate of pay for hours over 40 in a workweek. Since the Kronos hack, Sitel has not paid Williams for her actual hours 94. worked each week. Since the hack took place, Sitel has not been accurately recording the hours 95. worked by Williams and its other workers. Since the Kronos hack, Sitel has not paid Holdbert and its other workers 96. pursuant to its contractual agreement with them. Even though Sitel has had Williams record and submit her hours, Sitel have 97. not issued proper payment for all hours worked. Even when Sitel has issued payment to Williams for any overtime, the 98. overtime is not calculated based on Williams’ regular rates, as required by federal and Pennsylvania law. Sitel was aware of the overtime requirements of the FLSA. 99. Sitel nonetheless failed to pay the full overtime premium owed to certain non- 100. exempt hourly and salaried employees, such as Williams. Sitel’s failure to pay overtime to these non-exempt workers was, and is, a 101. willful violation of the FLSA. The full overtime wages owed to Williams and the Similarly Situated Workers 102. became “unpaid” when the work for Sitel was done—that is, on Williams and the Similarly Situated Workers’ regular paydays. E.g., Martin v. United States, 117 Fed. Cl. 611, 618 (2014); Biggs v. Wilson, 1 F.3d 1537, 1540 (9th Cir.1993); Cook v. United States, 855 F.2d 848, 851 (Fed. Cir. 1988); Olson v. Superior Pontiac–GMC, Inc., 765 F.2d 1570, 1579 (11th Cir.1985), modified, 776 F.2d 265 (11th Cir.1985); Atlantic Co. v. Broughton, 146 F.2d 480, 482 (5th Cir.1944); Birbalas v. Cuneo Printing Indus., 140 F.2d 826, 828 (7th Cir.1944). At the time Sitel failed to pay Williams and the Similarly Situated Workers in 103. full for their overtime hours by their regular paydays, Sitel became liable for all prejudgment interest, liquidated damages, penalties, and any other damages owed under federal law. In other words, there is no distinction between late payment and nonpayment 104. of wages under the law. Biggs v. Wilson, 1 F.3d 1537, 1540 (9th Cir.1993). Even if Sitel made any untimely payment of unpaid wages due and owing to 105. Williams or the Similarly Situated Workers, any alleged payment was not supervised by the Department of Labor or any court. The untimely payment of overtime wages, in itself, does not resolve a claim 106. for unpaid wages under the law. See, e.g., Seminiano v. Xyris Enterp., Inc., 602 Fed.Appx. 682, 683 (9th Cir. 2015); Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350, 1352-54 (11th Cir. Nor does the untimely payment of wages, if any, compensate workers for the 107. damages they incurred due to Sitel’s acts and omissions resulting in the unpaid wages in the first place. Williams and the Similarly Situtated Workers remain uncompensated for the 108. wages and other damages owed by Sitel under applicable law. COLLECTIVE ACTION ALLEGATIONS Williams incorporates all other allegations. 109. Numerous individuals were victimized by Sitel’s patterns, practices, and 110. policies, which are in willful violation of the FLSA. Based on her experiences and tenure with Sitel, Williams is aware that Sitel’s 111. illegal practices were imposed on the FLSA Collective. The FLSA Collective members were not paid their full overtime premiums for 112. all overtime hours worked. These employees are victims of Sitel’s unlawful compensation practices and 113. are similarly situated to Williams in terms of the pay provisions and employment practices at issue in this lawsuit. The workers in the FLSA Collective were similarly situated within the 114. meaning of the FLSA. Any differences in job duties do not detract from the fact that these FLSA 115. non-exempt workers were entitled to overtime pay. Sitel’s failure to pay overtime compensation at the rates required by the FLSA 116. result from generally applicable, systematic policies, and practices, which are not dependent on the personal circumstances of the FLSA Collective members. The FLSA Collective should be notified of this action and given the chance to 117. join pursuant to 29 U.S.C. § 216(b). CLASS ACTION ALLEGATIONS Williams incorporates all other allegations. 118. The illegal practices Sitel imposed on Williams were likewise imposed on the 119. Pennsylvania Class members. Numerous other individuals who worked for Sitel were were not properly 120. compensated for all hours worked, as required by Pennsylvania law. The Pennsylvania Class is so numerous that joinder of all members of the 121. class is impracticable. Sitel imposed uniform practices and policies on Williams and the 122. Pennsylvania Class members regardless of any individualized factors. Based on her experience and tenure with Sitel, as well as coverage of the 123. Kronos hack, Williams is aware that Sitel’s illegal practices were imposed on the Pennsylvania Class members. Pennsylvania Class members were all not paid proper overtime when they 124. worked in excess of 40 hours per week. Pennsylvania Class members were all not paid their contractually agreed 125. Sitel’s failure to pay wages and overtime compensation in accordance with 126. Pennsylvania law results from generally applicable, systematic policies, and practices which are not dependent on the personal circumstances of the Pennsylvania Class Members. Sitel’s failure to pay contractually agreed wages and overtime compensation 127. results from generally applicable, systematic policies, and practices which are not dependent on the personal circumstances of the Pennsylvania Class Members. Williams’ experiences are therefore typical of the experiences of the 128. Pennsylvania Class members. Williams has no interest contrary to, or in conflict with, the members of the 129. Pennsylvania Class. Like each member of the proposed class, Williams has an interest in obtaining the unpaid wages and other damages owed under the law. A class action, such as this one, is superior to other available means for fair 130. and efficient adjudication of the lawsuit. Absent this action, many Pennsylvania Class members likely will not obtain 131. redress of their injuries and Sitel will reap the unjust benefits of violating Pennsylvania law. Furthermore, even if some of the Pennsylvania Class members could afford 132. individual litigation against Sitel, it would be unduly burdensome to the judicial system. Concentrating the litigation in one forum will promote judicial economy and 133. parity among the claims of individual members of the classes and provide for judicial consistency. The questions of law and fact common to each of the Pennsylvania Class 134. members predominate over any questions affecting solely the individual members. Among the common questions of law and fact are: a. Whether the Pennsylvania Class members were not paid overtime at 1.5 times their regular rate of pay for hours worked in excess of 40 in a workweek; b. Whether Sitel’s failure to pay overtime at the rates required by law violated the PMWA; c. Whether Sitel failed to pay Pennsylvania Class members their contractually agreed wages; and d. Whether Sitel has any good faith defense to paying the contractually agreed wages. Williams’ claims are typical of the Pennsylvania Class members. Williams 135. and the Pennsylvania Class members have all sustained damages arising out of Sitel’s illegal and uniform employment policies. Williams knows of no difficulty that will be encountered in the management 136. of this litigation that would preclude its ability to go forward as a class or collective action. Although the issue of damages may be somewhat individual in character, 137. there is no detraction from the common nucleus of liability facts. Therefore, this issue does not preclude class or collective action treatment. FIRST CAUSE OF ACTION—VIOLATIONS OF THE FLSA AS TO WILLIAMS AND THE FLSA COLLECTIVE Williams incorporates each other allegation. 138. By failing to pay Williams and the FLSA Collective members overtime at 1.5 139. times their regular rates, Sitel violated the FLSA. 29 U.S.C. § 207(a). Sitel oweowes Williams and the FLSA Collective members overtime for all 140. hours worked in excess of 40 in a workweek, at a rate of at least 1.5 times their regular rates Sitel oweowes Williams and the FLSA Collective members the difference 141. between the rate actually paid for overtime, if any, and the proper overtime rate. Sitel knowingly, willfully, or in reckless disregard carried out this illegal 142. pattern and practice of failing to pay Williams and the FLSA Collective members overtime compensation. Because Sitel knew, or showed reckless disregard for whether, their pay 143. practices violated the FLSA, Sitel owe these wages for at least the past three years. Sitel’s failure to pay overtime compensation to these FLSA Collective 144. members was neither reasonable, nor was the decision not to pay overtime made in good Because Sitel’s decision not to pay overtime was not made in good faith, Sitel 145. also owes Williams and the FLSA Collective members an amount equal to the unpaid overtime wages as liquidated damages. Accordingly, Williams and the FLSA Collective members are entitled to 146. overtime wages under the FLSA in an amount equal to 1.5 times their regular rates of pay, plus liquidated damages, attorney’s fees, and costs. SECOND CAUSE OF ACTION—VIOLATIONS OF THE PMWA AS TO WILLIAMS AND THE PENNSYLVANIA CLASS Williams incorporates all other allegations. 147. The conduct alleged in this Complaint violates the PMWA. 148. Sitel was and is an “employer” within the meaning of the PMWA. 149. At all relevant times, Sitel employed Williams and the other Pennsylvania 150. Class members as “employees” within the meaning of the PMWA. The PMWA requires an employer like Sitel to pay overtime to all non-exempt 151. employees. Williams and the other Pennsylvania Class Members are non-exempt 152. employees who are entitled to be paid overtime for all overtime hours worked. Within the applicable limitations period, Sitel had a policy and practice of 153. failing to pay proper overtime to the Pennsylvania Class Members for their hours worked in excess of 40 hours per week. As a result of Sitel’s failure to pay proper overtime to Williams and the 154. Pennsylvania Class Members for work performed in excess of 40 hours in a workweek, Sitel violated the PMWA. Williams and the Pennsylvania Class Members are entitled to overtime wages 155. under the PMWA in an amount equal to 1.5 times their rates of pay, liquidated damages, attorney’s fees, costs, penalties, and all other legal and equitable relief provided under the PMWA. THIRD CAUSE OF ACTION—VIOLATIONS OF THE WPCL AS TO WILLIAMS AND THE PENNSYLVANIA CLASS Williams incorporates all other allegations. 156. The conduct alleged in this Complaint violates the WPCL. 157. Sitel was and is an “employer” within the meaning of the WPCL. 158. At all relevant times, Sitel employed Williams and the other Pennsylvania 159. Class Members as “employees” within the meaning of the WPCL. The WPCL requires an employer like Sitel to pay wages to its employees on 160. their regularly scheduled paydays. Williams and the Pennsylvania Class Members had oral or written contracts 161. with Sitel. Whether the contractual agreements of Williams and the Pennsylvania Class 162. Members were formal contracts, collective bargaining agreements, or oral, does not alter Sitel’s obligations under the WPCL. Williams and the Pennsylvania Class Members’ status as at-will employees or 163. otherwise is irrelevant to whether they had an enforceable contract for wages with Sitel under the WPCL. Williams and the Pennsylvania Class Members had regularly scheduled 164. paydays with Sitel. Sitel failed to pay Williams and the Pennsylvania Class Members their 165. contractually agreed wages on their regularly scheduled payday. Sitel had no good faith basis for its failure to pay contractually agreed wages 166. to Williams and the Pennsylvania Class Members. As a result of Sitel’s failure to pay agreed wages to Williams and the 167. Pennsylvania Class Members on their regularly scheduled paydays, Williams and the Pennsyvlania Class Members are entitled to recover unpaid wages and fringe benefits. WPCL, 43 Pa. Stat. Ann. § 260.10. Because Sitel failed to pay wages to Williams and the Pennsylvania Class 168. Membes without any good faith basis, Williams and the Pennsyvlania Class Members are entitled to recover liquidated damages as provided for by the WPCL. WPCL, 43 Pa. Stat. Ann. § 260.10. Williams and the Pennsylvania Class Members are also entitled to attorney’s 169. fees, costs, penalties, and all other legal and equitable relief provided under the WPCL. WPCL, 43 Pa. Stat. Ann. § 260.10. RELIEF SOUGHT Williams prays for judgment against Sitel as follows: a. For an order certifying a collective action for the FLSA claims; b. For an order certifying a class action for the Pennsylvania law claims; c. For an order finding Sitel liable for violations of state and federal wage laws with respect to Williams and all FLSA Collective and Pennsylvania Class members covered by this case; d. For a judgment awarding all unpaid wages, liquidated damages, and penalty damages, to Williams and all FLSA Collective members covered by this case; e. For a judgment awarding all unpaid wages, fringe benefits, liquidated damages, and penalties, to Williams and all Pennsylvania Class members covered by this case; f. For an equitable accounting and restitution of wages due to Williams and all FLSA Collective and Pennsylvania Class members members covered by this case; g. For a judgment awarding costs of this action to Williams and all FLSA Collective and Pennsylvania Class members covered by this case; h. For a judgment awarding attorneys’ fees to Williams and all FLSA Collective and Pennsylvania Class members covered by this case; i. For a judgment awarding pre- and post-judgment interest at the highest rates allowed by law to Williams and all FLSA Collective and Pennsylvania Class members covered by this case; and j. For all such other and further relief as may be necessary and appropriate. Respectfully submitted this 5th day of April, 2022. Respectfully submitted, /s/Andrew R. Frisch Andrew R. Frisch, Esq. FBN 27777 MORGAN & MORGAN, P.A. 8151 Peters Road 4th Floor Plantation, Florida 33324 Telephone: (954) WORKERS Facsimile: (954) 327-3013 Email: [email protected] Attorneys for Plaintiff ��������������� Print Name: _________________________________________ 1. I consent to join the collective action lawsuit filed against Sykes Enterprises, Inc., Sitel Group, and any affiliated persons or entities to pursue my claims of unpaid overtime and related damages during the time that I worked with them. 2. I understand that these claims are brought under the Fair Labor Standards Act and applicable federal and state law. 3. I consent to be bound by the Court’s decisions. 4. I designate the representative plaintiff named in the lawsuit and/or appointed by the Court as my agent to make decisions on my behalf regarding the lawsuit, including entering into settlement agreements, agreements with counsel, and all other matters related to the lawsuit. 5. I designate the law firm PARMET PC as my attorneys to prosecute my wage claims. 6. I understand and agree that my attorneys, the representative plaintiff, or the Court may in the future appoint other individuals to be representative plaintiff. I consent to the appointment and agree to be bound by the decisions made by the representative plaintiff regarding this matter. I understand that I may be selected or appointed to serve as a representative plaintiff. 7. If needed, I authorize this consent to be used to re-file my claim in a separate lawsuit or arbitration. ��������� __________________________________ __________________________________ Signature Date Ex. 1 ĺŻƿ�Ç»¼¼»½ÈÉ�¿Ê�½¼Ë Ļʿ¼�áÅÒâÀ�¿Ê�½¼Ë ¹º»¼½¾¿¼Àº»½Á�¹Ã JRL0(#!,�%� $#�%�S !�T !$�U"#!%% 0(#!,�%� $#�%�S !�T !$�V%#$"#! 57@>7A;89:8=G6G8AWB9:;9DD8>B676H 59:8=G6G8AWB9:;9DD8>B6768?:WXH YZ[\ IY�T]YV�0ZYV[^Y]IZY�0]
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UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY Civil Action No. COMPLAINT and DEMAND FOR JURY TRIAL UNIFORMED FIRE OFFICERS ASSOCIATION FAMILY PROTECTION PLAN LOCAL 854 and UNIFORMED FIRE OFFICERS ASSOCIATION FOR RETIRED FIRE OFFICERS FAMILY PROTECTION PLAN, on behalf of themselves and all others similarly situated, Plaintiffs, v. AMARIN PHARMA, INC., AMARIN PHARMACEUTICALS IRELAND LIMITED, AMARIN CORPORATION PLC, BASF AMERICAS CORPORATION, BASF CORPORATION, BASF PHARMA (CALLANISH) LTD, BASF USA HOLDING LLC, CHEMPORT, INC., NISSHIN PHARMA, INC., NOVASEP LLC, NOVASEP, INC., GROUPE NOVASEP SAS, AND FINORGA SAS, Defendants. Plaintiffs Uniformed Fire Officers Association Family Protection Plan Local 854 and the Uniformed Fire Officers Association for Retired Fire Officers Family Protection Plan (collectively “Plaintiffs” or “UFOA”) bring this action on behalf of themselves and all others similarly situated against Amarin Pharma, Inc., Amarin Pharmaceuticals Ireland Limited, Amarin Corporation PLC (collectively “Amarin”); BASF Americas Corporation, BASF Corporation, BASF Pharma (Callanish) Limited, BASF USA Holding LLC (collectively “BASF”); Chemport, Inc. (“Chemport”); Nisshin Pharma, Inc. (“Nisshin”); Novasep, LLC, Novasep, Inc., Groupe Novasep SAS, Finorga SAS (collectively “Novasep,” together with Amarin, BASF, Chemport, and Nisshin, “Defendants”). These allegations are based on investigations of counsel, publicly available materials and knowledge, information, and belief. INTRODUCTION 1. This case arises from Defendants’ illegal scheme to delay competition in the United States and its territories for Vascepa, a prescription medication approved by the U.S. Food and Drug Administration (“FDA”) to treat hyperglyceridemia in adults. Plaintiffs seek overcharge damages arising from Defendants’ unlawful scheme to prevent generic competition for Vascepa by hoarding the world’s supply of the active pharmaceutical ingredient needed to make the drug. 2. The active ingredient in Vascepa is icosapent ethyl (“IPE”), made from eicosapentaeonic acid (“EPA”), an omega-3 fatty acid found in fish oil. Vascepa has been shown both to lower triglycerides and to reduce the risk of cardiovascular events in patients who have high triglycerides (150 mg/dL or higher). In 2020, annual sales of Vascepa in the United States were over $600 million. 3. In September and October of 2016, four drug companies filed applications with the FDA to launch generic versions of Vascepa: Roxane Laboratories, Inc. and related entities, later acquired by Hikma Pharmaceuticals Plc (“Hikma”), Dr. Reddy’s Laboratories Inc. (“DRL”), Teva Pharmaceuticals USA, Inc. and related entities (“Teva”), and Apotex, Inc. (“Apotex”).1 Hikma, DRL, and Teva each contended that all of the asserted patent claims were either invalid or not infringed by their respective generic version of Vascepa. Amarin sued each of these generics in turn. Apotex contended that some of the asserted patent claims were either invalid or not infringed by Apotex’s generic version of Vascepa, but did not challenge all of the asserted patent claims. 1 Applications were previously filed with the FDA, but they were rejected after Amarin successfully extended its New Chemical Entity exclusivity period, rendering those earlier-filed applications premature. 4. Amarin settled with Teva in May 2018 and Apotex in June 2020. Pursuant to those agreements, Teva and Apotex have agreed to forego selling their respective generic versions of Vascepa in the United States until August 9, 2029, or earlier under certain circumstances. 5. Hikma and DRL, however, continued their patent fight and won at trial – on March 30, 2020, Judge M. Du Miranda, Federal District Court Judge for the District of Nevada, held that Amarin’s patents were invalid due to obviousness. 6. After its patent victory, DRL promptly began preparations to launch generic Vascepa, “only to discover that Amarin had foreclosed all the suppliers of the icosapent ethyl API who have sufficient capacity to support a commercial launch in a timely manner.”2 7. Hikma received FDA approval to launch its generic version of 1mg Vascepa on May 22, 2020.3 8. DRL received FDA approval to launch its generic version of 1mg Vascepa on August 7, 2020.4 As of that date, DRL had removed all legal and regulatory barriers to its entry into the market for 1mg Vascepa, but it has been entirely foreclosed from entering that market due to Amarin’s use of a series of exclusive contracts and other anticompetitive conduct to lock up the world’s supply of IPE, the active pharmaceutical ingredient in Vascepa. Amarin had secured a supply of several times Amarin’s own needs based on its anticipated sales. 2 Complaint, Doc. No. 1, Dr. Reddy’s Laboratories Inc. v. Amarin Pharma, Inc., Amarin Pharmaceuticals Ireland Limited, and Amarin Corporation PLC, No. 3:21-cv-10309-BRM-ZNQ (D.N.J. Apr. 27, 2021) (“DRL Complaint”), ¶ 3. 3 “Hikma receives FDA approval for its generic Vascepa,” PR Newswire (May 22, 2020), https://www.prnewswire.com/news-releases/hikma-receives-fda-approval-for-its-generic- vascepa-301064061.html (last accessed May 6, 2021). 4 Product Details for ANDA 209499, https://www.accessdata.fda.gov/scripts/cder/ob/results_product.cfm?Appl_Type=A&Appl_No=2 09499#312 (last accessed May 6, 2021). 9. Amarin lost its appeal of Judge Miranda’s March 30, 2020, invalidity order on September 3, 2020. 10. Hikma launched limited amounts of its 1mg generic Vascepa on November 5, 2020, hampered by Amarin’s anticompetitive capture of the world’s supply of IPE. 11. Amarin was able to prevent DRL’s generic Vascepa launch and limit Hikma’s launch by purposely contracting with at least four different API manufacturers5 – one or two is standard in the pharmaceutical industry – using agreements that prevent these suppliers from selling IPE API to any other manufacturer,6 and has otherwise foreclosed access to at least one other major supplier. 12. Amarin has no legitimate procompetive reason for entering into exclusive supply agreements with these four manufacturers. The total annual capacity of these suppliers has been more than triple Amarin’s requirements at relevant times in the past, and is at least double Amarin’s current requirements. 13. Notably, Amarin has repeatedly touted its anticompetitive scheme to investors, often coyly referring to “taking advantage of manufacturing barriers to entry,”7 but sometimes bluntly stating that the addition of a new supplier “fortifies Amarin’s efforts to shield its Vascepa patent beyond its scheduled 2030 expiration.”8 5 Nisshin Pharma Inc., Equatez Ltd., Chemport Inc., and Novasep. 6 See, e.g., Amarin Corp. plc, Quarterly Report (Form 10-Q), at 16 (Nov. 8, 2011) (“Following FDA approval of [Vascepa] both agreements [with Equateq and Chemport] include annual purchase levels enabling Amarin to maintain supply exclusivity with each respective supplier”) (emphasis added). 7 Amarin Corp. plc, Annual Report (Form 10-K), at 3 (Feb. 29, 2012). 8 Press Release, Amarin Corp. plc, “Amarin Announces Approval of Supplemental New Drug Application for Chemport as Additional Vascepa® Active Pharmaceutical Ingredient Supplier” (Apr. 18, 2013), https://investor.amarincorp.com/news-releases/news-release-details/amarin- announces-approval-supplemental-new-drug-application (last accessed May 6, 2021). 14. As a result of Amarin’s scheme, DRL’s launch of generic Vascepa has been delayed since August 2020, Hikma’s launch of generic Vascepa has been constrained by limited supply, and Plaintiffs and members of the class have been forced to pay anticompetitive prices for Vascepa and its generic equivalent. JURISDICTION AND VENUE 15. This Court has jurisdiction over this action pursuant to 28 U.S.C. § 1332(d) because this is a class action involving common questions of law or fact in which the aggregate amount in controversy exceeds $5,000,000, exclusive of interest and costs; there are more than one hundred members of each class; and at least one member of each of the putative classes is a citizen of a state different from that of one of the Defendants. 16. This Court also has supplemental jurisdiction over state law claims pursuant to 28 U.S.C. § 1367(a). 17. Venue is appropriate within this District under 28 U.S.C. § 1391. Defendants transact business within this District and/or have agents in and/or that can be found in this District, and a portion of the affected interstate trade and commerce discussed below was carried out in this District. At all relevant times, Amarin’s U.S. operations were headquartered in this District. 18. The Court has personal jurisdiction over each of the Defendants. Defendants have transacted business, maintained substantial contacts, and/or committed overt acts in furtherance of the illegal scheme throughout the United States, including in this District. The scheme has been directed at and has had the intended effect of causing injury to individuals and companies residing in or doing business throughout the United States, including in this District. Personal jurisdiction lies under Fed. R. Civ. P. 4(k)(2) over the foreign domiciliary defendants. THE PARTIES A. Plaintiffs 19. Plaintiff Uniformed Fire Officers Association Family Protection Plan Local 854 (“UFOAFPP”) is a health and welfare benefits plan headquartered and with a principal place of business in New New York, New York. UFOAFPP administers the assets of defined contribution plans formed to provide certain benefits including prescription drug benefits. UFOAFPP provides health and welfare benefits to members and participants who reside in numerous locations in the United States. UFOAFPP purchased and/or provided reimbursement for some or all of the purchase price for Vascepa other than for re-sale, in at least Connecticut, New York, and New Jersey at supracompetitive prices during the Class Period and has thereby been injured. In addition, there is a substantial probability that UFOAFPP will in the future purchase Vascepa manufactured by Amarin, and it has purchased and/or intends to purchase generic versions of Vascepa, other than for re-sale, once they become available. UFOAFPP paid and reimbursed more for these products than they would have absent Defendants’ anticompetitive conduct to fix, raise, maintain, and stabilize the prices and allocate markets for Vascepa. 20. Plaintiff Uniformed Fire Officers Association For Retired Fire Officers Family Protection Plan (“RFOFPP”) is a health and welfare benefits plan headquartered and with a principal place of business in New New York, New York. RFOFPP administers the assets of defined contribution plans formed to provide certain benefits including prescription drug benefits. RFOFPP provides health and welfare benefits to members and participants who reside in numerous locations in the United States. RFOFPP purchased and/or provided reimbursement for some or all of the purchase price for Vascepa other than for re-sale, in at least Connecticut, Delaware, Florida, New York, New Jersey, Pennsylvania, South Carolina, and Virginia at supracompetitive prices during the Class Period and has thereby been injured. In addition, there is a substantial probability that RFOFPP will in the future purchase Vascepa manufactured by Amarin, and it has purchased and/or intends to purchase generic versions of Vascepa, other than for re-sale, once they become available. RFOFPP paid and reimbursed more for these products than they would have absent Defendants’ anticompetitive conduct to fix, raise, maintain, and stabilize the prices and allocate markets for Vascepa. B. Defendants 21. Defendant Amarin Pharma, Inc. is a company organized and existing under the laws of Delaware with its principle place of business at 1430 Route 206, Bedminster, NJ 07921. 22. Defendant Amarin Pharmaceuticals Ireland Limited is a company incorporated under the laws of Ireland with registered offices at 88 Harcourt Street, Dublin 2, Dublin, Ireland. 23. Defendant Amarin Corporation plc is a company incorporated under the laws of England and Wales with principal executive offices at 77 Sir John Rogerson’s Quay, Block C, Gran Canal Docklands, Dublin 2, Ireland. Defendants Amarin Pharma, Inc., Amarin Pharmaceuticals Ireland Limited, and Amarin Corporation plc are collectively referred to herein as “Amarin.” 24. Defendant BASF Americas Corporation is a company organized and existing under the laws of Delaware with its principle place of business at 1105 North Market Street, Suite 1306, P.O. Box 8985, Wilmington, DE 19899. 25. Defendant BASF Corporation is a company organized and existing under the laws of Delaware with its principle place of business at 100 Park Avenue, Florham Park, NJ 07932. 26. Defendant BASF Pharma (Callanish) Limited is a company incorporated under the laws of England with registered offices at 2 Stockport Exchange, Railway Road, Stockport, SK1 3GG, United Kingdom. 27. Defendant BASF USA Holding LLC is a company organized and existing under the laws of Delaware with its principle place of business at 100 Park Avenue, Florham Park, NJ 07932. Defendants BASF Americas Corporation, BASF Corporation, BASF Pharma (Callanish) Limited, and BASF USA Holding LLC are collectively referred to herein as “BASF.” 28. Defendant Chemport Inc. is a company incorporated under the laws of the Republic of Korea with its principal place of business at 15-1, Dongsu-dong, Naju-si, Jeollanam-do 520- 330 Korea. 29. Defendant Nisshin Pharma, Inc. is a company incorporated under the laws of Japan with its principal place of business at 25, Kanda-Nishiki-cho 1-chome, Chiyoda-ku, Tokyo 101- 8441, Japan. 30. Defendant Novasep, LLC is a company organized and existing under the laws of New Jersey with its principal place of business at 23 Creek Circle, Boothwyn, PA 19061. 31. Defendant Novasep, Inc. is a company organized and existing under the laws of New Jersey with its principal place of business at 23 Creek Circle, Boothwyn, PA 19061. 32. Defendant Groupe Novasep SAS is a company incorporated under the laws of France with its principal place of business at 39, Rue Saint Jean De Dieu Lyon, 69007 France. 33. Defendant Finorga SAS is a company organized and existing under the laws of France with its principal place of business at Route De Givors Chasse Sur Rhone, 38670 France. Defendants Novasep, LLC, Novasep, Inc., Group Novasep SAS, and Finorga SAS are collectively referred to herein as “Novasep.” REGULATORY BACKGROUND A. Approval of a first entrant 34. Under the Federal Food, Drug, and Cosmetic Act (“FDCA”), 21 U.S.C. § 301 et seq., manufacturers that create a new drug must obtain approval from the FDA to sell the product by filing a New Drug Application (“NDA”).9 An NDA must include specific data concerning the safety and effectiveness of the drug, as well as any information on applicable patents.10 35. When the FDA approves a brand pharmaceutical manufacturer’s NDA, the manufacturer may list in Approved Drug Products with Therapeutic Equivalence Evaluations (the “Orange Book”) certain patents that the manufacturer asserts could reasonably be enforced against a manufacturer that makes, uses, or sells a generic version of the brand drug before the expiration of the listed patents. After the FDA approves the NDA, the brand manufacturer may list such patents in the Orange Book.11 36. When they do not face generic competition, brand manufacturers can usually sell the branded drug far above the marginal cost of production, generating profit margins well in excess of 70% while making hundreds of millions of dollars in sales. B. Approval of a generic drug 37. Once lawful periods of patent exclusivity expire on branded drug products, generic drug manufacturers can seek FDA approval to market and sell generic versions of the branded drug. Under the Drug Price Competition and Patent Term Restoration Act, Pub. L. No. 98-417, 98 Stat. 1585 (1984)—commonly known as “Hatch-Waxman”—competitors wishing to sell a generic equivalent of a branded drug may file an abbreviated new drug application (“ANDA”), which relies in substantial part on the scientific findings of safety and efficacy contained in the branded drug manufacturer’s NDA. The brand drug is called the reference listed drug (“RLD”). 9 21 U.S.C. §§ 301-392. 10 21 U.S.C. §§ 355(a), (b). 11 21 U.S.C. §§ 355(b)(1), (c)(2). 38. To gain FDA approval, generic drugs must be bioequivalent to their branded counterparts. Bioequivalence means that the active ingredient of the proposed generic would be present in the blood of a patient to the same extent and for the same amount of time as the active ingredient of the brand.12 Bioequivalent drug products containing identical amounts of the same active ingredients, having the same route of administration and dosage form, and meeting applicable standards of strength, quality, purity, and identity are therapeutically equivalent and may be substituted for one another. The FDA assigns an “AB” rating to generics that meet the necessary criteria in relation to their branded counterparts. 39. Because generic drugs are therapeutically equivalent to brand-name drugs, generic manufacturers compete by offering their drugs at low prices. Entry of a single generic can result in steep price reductions for purchasers. Entry of several generics tends to result in even steeper price reductions, driving price down close to marginal manufacturing costs. 40. To benefit from these low prices, every state has adopted substitution laws requiring or permitting pharmacies to substitute AB-rated generic equivalents when filling branded drug prescriptions, unless the prescribing physician specifically directs otherwise. Due in part to these substitution laws, the launch of AB-rated generics causes a rapid price decline and shift from branded to generic drug sales. A generic that is unconstrained by supply issues often captures 80% or more of the market within the first six months of entry, regardless of the number of generic entrants. The effects of generic entry are still more dramatic after a year. In a review of industry 12 21 U.S.C. § 355(j)(8)(B). data, the FTC found that on average, within a year of generic entry, generics had captured 90% of corresponding brand sales and prices had dropped 85% with multiple generics on the market.13 C. Regulatory exclusivities 41. A “new chemical entity” is a drug that contains an active moiety—the part of the drug responsible for the physiological or pharmacological action of the drug—that the FDA has not previously approved in another NDA.14 Approval of an NDA with a new chemical entity provides a five-year exclusivity (“NCE exclusivity”) during which the FDA cannot approve an ANDA for a drug containing the same active moiety as the new chemical entity.15 D. Supply and Use of API in Drug Products 42. Final drug products consumed by patients and the active pharmaceutical ingredients contained in those final drug products are frequently manufactured by different companies. In such cases the manufacturer of the final drug product, whether brand or generic, combines the API purchased from other sources with inactive ingredients to manufacture the final dosage form. Although a generic manufacturer’s process for manufacturing the final dosage form may be different from the manufacturer of the RLD, it is typical for the different manufacturers to use identical API. 43. As part of the process for obtaining regulatory approval to sell an active pharmaceutical ingredient in the United States, the API manufacturer ordinarily must file a Drug 13 See Federal Trade Commission, Pay-for-Delay: How Drug Company Pay-Offs Cost Consumers Billions 8 (2010), https://www.ftc.gov/sites/default/files/documents/reports/pay-delay-how-drug- company-payoffs-cost-consumers-billions-federal-trade-commission-staff- study/100112payfordelayrpt.pdf. 14 21 C.F.R. § 314.108(a). 15 21 C.F.R. § 314.108(b)(2). Master File (“DMF”) with the FDA. The DMF provides “confidential detailed information about facilities, processes, or articles used in the manufacturing, processing, packaging, and storing of” the API.16 The manufacturer of a final dosage form, in turn, references the DMF of each of its API suppliers in its New Drug Application (whether Abbreviated or full).17 The FDA then reviews the technical information contained in, and inspects the relevant facilities described in, each DMF referenced in the ANDA or NDA. A single DMF may be referenced by multiple manufacturers. 44. It takes significant time to develop a process for manufacturing an API and then prepare and file the necessary DMF. 45. If a manufacturer wants or needs to change its API supplier for a drug, it must file a supplement with the FDA referencing the new API supplier’s DMF and submit data for drug batches using the new supplier’s API. The manufacturer may only market its drug using the new supplier’s API if the FDA approves of the change. It is time consuming to prepare and file the necessary supplement and then obtain FDA approval of the change in API supplier. 46. If a current DMF holder is willing, a generic drug manufacturer may use API from an API supplier that already has a DMF on file and reference that DMF in their ANDAs. If, however, no current DMF holder is willing to supply the generic manufacturer with API, it must identify a new API supplier (who does not yet have a DMF on file) and work with that supplier to develop the API and submit a DMF. 47. Generally, because of the significant costs involved in qualifying an API supplier as well as the need to continue to ensure quality control by the API supplier, it is industry practice 16 Guidelines For Master Drug Files, § I, https://www.fda.gov/drugs/guidances-drugs/drug-master- files-guidelines (last accessed May 13, 2021). 17 21 CFR 314.420(b). for both brand and generic drug manufacturers to use only one or two API suppliers to support a drug application.18 FACTS A. Vascepa 48. Vascepa is the brand name for the icosapent ethyl drug product marketed by Amarin, manufactured using the active pharmaceutical ingredient IPE, which is derived from eicosapentaenoic acid (“EPA”), a type of omega-3 fatty acid derived from fish oil. 49. On July 26, 2012, Amarin received FDA approval to market Vascepa: “as an adjunct to diet to reduce triglyceride (TG) levels in adult patients with severe (≥500 mg/dL) hypertriglyceridemia.” Subsequently, the FDA determined that Vascepa was entitled to NCE exclusivity, see supra at paragraph 41, which ran from the NDA approval date to July 26, 2017. 50. On December 13, 2019, the FDA approved a new indication for Vascepa: “as an adjunct to maximally tolerated statin therapy to reduce the risk of myocardial infarction, stroke, coronary revascularization, and unstable angina requiring hospitalization in adult patients with elevated triglyceride (TG) levels (≥ 150 mg/dL) and . . . established cardiovascular disease or . . . diabetes mellitus and 2 or more additional risk factors for cardiovascular disease.” The new indication is entitled to data exclusivity, which is scheduled to expire on December 13, 2022. 51. Amarin currently markets Vascepa in the 1g and 500mg strengths. Amarin has raised the price of 1g Vascepa dramatically since its launch: the list price for the 1mg strength of Vascepa was 18 See, e.g., Mallu UR, Nair AK, Bapatu HR, Pavan Kumar M, Narla S, et al., “API Supplier Change or Addition of Alternate API Supplier in Generic Drug Products: Cost, Quality and Regulatory Factors” (Pharmaceutical Analytica Acta 2015) at 2 (“[T]wo suppliers shall be selected one as main and another one as alternative supplier for generic DP development.”). estimated to be $308.25 per month in 2019,19 $355 per month in 2020,20 and is currently estimated to be around $368.86.21 52. Vascepa is Amarin’s only product, with revenues of $607 million in 2020.22 B. Amarin set out to lock up the world’s supply of Vascepa API for the explicit purpose of preventing generic competition 53. As discussed above, the API for Vascepa is IPE, which is derived from fish oil. 54. For more than a decade, Amarin has set out to lock up the world’s supply of IPE for the explicit purpose of “protecting the potential commercial exclusivity” of Vascepa.23 55. From the beginning Amarin stated its intention to take advantage of manufacturing barriers to entry to prevent competition: “We will seek to protect the potential commercial exclusivity of [Vascepa] through a combination of obtaining and maintaining intellectual property rights and regulatory exclusivity, taking advantage of manufacturing barriers to entry and maintaining trade secrets.”24 19 “J&J’s Xarelto, Amarin’s Vascepa are cost-effective, not budget friendly,” EndpointsNews (Oct. 18, 2019), https://endpts.com/jjs-xarelto-amarins-vascepa-are-cost-effective-but-not-budget- friendly-icer/ (last accessed May 6, 2021). 20 “A cardiologist asks: How much is too much to pay for a promising drug?,” The Philadelphia Inquirer (Jan. 20, 2020), https://www.inquirer.com/health/expert-opinions/vascepa-price- cardiology-triglycerides-fish-oil-20200122.html (last accessed May 6, 2021). 21 “Vascepa Prices, Coupons, and Patient Assistant Programs,” https://www.drugs.com/price- guide/vascepa (last accessed May 6, 2021). 22 Amarin Corp. plc, Annual Report (Form 10-K), at F-5 (Feb. 25, 2021). 23 Amarin Corp. plc Annual Report (Form 10-K), at 3 (Feb. 20, 2012). 24 Id. (emphasis added); see also Amarin Corp. plc Annual Report (Form 10-K), at 21 (Feb. 27, 2014) (“FDA marketing exclusivity is separate from, and in addition to, patent protection, trade secrets and manufacturing barriers to entry which also help protect Vascepa against generic competition.”). 56. On April 18, 2013, Amarin announced that it had filed a supplemental New Drug Application (“sNDA”) to add Chemport Inc. (“Chemport”) as an API supplier.25 In that announcement Amarin confirmed that the “manufacturing barriers to entry” that it intended to take advantage of are the various exclusive contracts that it used to foreclose the supply of Vascepa API: “The addition of Chemport contributes to the planned expansion of the Vascepa manufacturing supply chain and is additional progress toward Amarin’s goal to protect the commercial potential of Vascepa to beyond 2030 through a combination of patent protection, regulatory exclusivity, trade secrets and by taking advantage of manufacturing barriers to entry.”26 57. Joseph Zakrewski, Amarin’s CEO, further confirmed that the key barrier to entry was the supply of API, stating that: “The move [to add Chemport as an API supplier] also fortifies Amarin’s efforts to shield its Vascepa patent beyond its scheduled 2030 expiration.”27 58. Amarin further explained its anticompetitive strategy in its 2014 Annual Report: “Certain of our agreements with our suppliers include minimum purchase obligations and limited exclusivity provisions based on such minimum purchase obligations. If we do not meet the respective minimum purchase obligations in our supply agreements, our suppliers, in certain cases, will be free to sell the active pharmaceutical ingredient of Vascepa to potential competitors . . . 25 Press Release, Amarin Corp. plc, “Amarin Announces Approval of Supplemental New Drug Application for Chemport as Additional Vascepa® Active Pharmaceutical Ingredient Supplier” (Apr. 18, 2013), https://investor.amarincorp.com/news-releases/news-release-details/amarin- announces-approval-supplemental-new-drug-application (last accessed May 6, 2021). 26 Id. (emphasis added). 27 “Amarin wins U.S. nod to add S. Korea supplier,” Hartford Business Journal (Apr. 19, 2013) (emphasis added), https://www.hartfordbusiness.com/article/amarin-wins-us-nod-to-add-s-korea- supplier (last accessed May 6, 2021). While we anticipate that intellectual property barriers and FDA regulatory exclusivity will be the primary means to protect the commercial potential of Vascepa, the availability of Vascepa active pharmaceutical ingredient from our suppliers to our potential competitors would make our competitors’ entry into the market easier and more attractive.”28 59. Amarin expected its scheme to work, and wanted the market to know that fact: “In April 2012, the FDA published draft guidance for companies that may seek to develop generic versions of Vascepa. If an application for a generic version of Vascepa were filed and if new chemical entity, or NCE exclusivity is not granted to Vascepa, the FDA may accept the filing for review and we would likely engage in costly litigation with the applicant to protect our patent rights. If the generic filer is ultimately successful in patent litigation against us, meets the requirements for a generic version of Vascepa to the satisfaction of the FDA (after any applicable regulatory exclusivity period and, typically, the litigation-related 30-month stay period expires), and is able to supply the product in significant commercial quantities, the generic company could, with the market introduction of a generic version of Vascepa, limit our U.S. sales, which would have an adverse impact on our business and results of operations.”29 60. Amarin further warned the market that failure of its anticompetitive scheme was a material investment risk: “Risks Related to our Reliance on Third Parties – We may not be able to maintain our exclusivity with our third-party Vascepa suppliers if we do not meet minimum purchase obligations due to lower than anticipated sales of Vascepa.”30 28 Amarin Corp. plc, Annual Report (Form 10-K), at 40 (March 3, 2015). 29 Amarin Corp. plc, Quarterly Report (Form 10-Q), at 31 (Aug. 8, 2013) (emphasis added). 30 Amarin Corp. plc, Quarterly Report (Form 10-Q), at 46 (Nov. 7, 2013); see also Amarin Corp. plc, Quarterly Report (Form 10-Q), at 59 (Aug. 7, 2014) (“Certain of our agreements with our suppliers include minimum purchase obligations and limited exclusivity provisions based on such minimum purchase obligations. If we do not meet the respective minimum purchase obligations C. Amarin has, in fact, locked up the world’s supply of Vascepa API 61. To effectuate its anticompetitive scheme, Amarin has entered into exclusive or de facto exclusive agreements with at least four of the largest suppliers for icosapent ethyl API, and has otherwise secured exclusive supply from yet another supplier. 62. In February 2009 Amarin entered into a supply agreement with Japan-based Nisshin Pharma Inc. (“Nisshin”) pursuant to which Nisshin agreed to supply Amarin with IPE (referred to as E-EPA in the agreement).31 Amarin paid Nisshin $500,000 when the agreement was signed, and agreed to pay Nisshin another $500,000 when Amarin obtained approval to market Vascepa either in the U.S. or the European Union.32 The agreement contained a minimum purchase commitment.33 63. Amarin believed that Nisshin was capable of producing sufficient quantities of API to support Amarin’s launch of Vascepa.34 Nonetheless, it continued to amass API supply and suppliers. in our supply agreements, our suppliers, in certain cases, will be free to sell the active pharmaceutical ingredient of Vascepa to potential competitors of Vascepa. Similarly if we terminate certain of our supply agreements, such suppliers may be free to sell the active pharmaceutical ingredient of Vascepa to potential competitors of Vascepa. While we anticipate that intellectual property barriers and FDA regulatory exclusivity will be the primary means to protect the commercial potential of Vascepa, the availability of Vascepa active pharmaceutical ingredient from our suppliers to our potential competitors would make our competitors’ entry into the market easier and more attractive.”). 31 Supply Agreement Between (1) Nisshin Pharma Inc. (“Nisshin”) and (2) Amarin Pharmaceuticals (Ireland) Ltd. (“Amarin”), dated February 23, 2009, https://www.sec.gov/Archives/edgar/data/897448/000095016209000453/ex4_86.htm (last accessed May 6, 2021). 32 Id. at 15. 34 Amarin Corp. plc, Annual Report (Form 10-K), at 10-11 (February 29, 2012); see also Press Release, Amarin Corp. plc, “Amarin Announces Additional Vascepa® (icosapent ethyl) Supplier” (Dec. 11, 2012) (“Amarin’s current plan is to launch Vascepa based on product produced by its 64. In June 2011, the BBC reported that Amarin had entered into a supply agreement with Scotland-based Equateq Ltd. (“Equateq”) pursuant to which Equateq agreed to supply Amarin with the API needed to manufacture Vascepa.35 Amarin again committed to significant, long-term purchases: “Under the terms of the contract, Amarin Corporation is committed to buying £6.1m worth of API concentrate from Equateq in year one, rising to £12.3m in year four.”36 In fact, although the CEO of Equateq refused to provide further specifics of the supply agreement, he claimed it was worth £100m over its life.37 Amarin revealed to investors in August 2011 that the minimum purchase commitment was intended to prevent Equateq from selling Vascepa API to any potential competitor of Amarin.38 Amarin also paid Equateq a $1m “commitment fee” in May 2011.39 Equateq was acquired by BASF in May 2012.40 existing API supplier, Nisshin Pharma”), https://www.globenewswire.com/en/news- release/2012/12/11/510754/18362/en/Amarin-Announces-Additional-Vascepa-R-icosapent- ethyl-Supplier.html (last accessed May 6, 2021) 35 “Drug firm Equateq secures big US order,” BBC News (July 4, 2011), https://www.bbc.com/news/uk-scotland-scotland-business-14013747 (last accessed May 6, 2021). 37 “Equateq nets £100m deal to supply fish oil for heart treatment,” The Scotsman (June 29, 2011), https://www.scotsman.com/business/equateq-nets-ps100m-deal-supply-fish-oil-heart-treatment- 1670500 (last accessed May 6, 2021). 38 Amarin Corp. plc Quarterly Report (Form 10-Q), at 9 (Aug. 9, 2011) (“Following FDA approvals of [Vascepa], both agreements [with Equateq and Chemport Inc. (see para. 53 below)] include annual purchase levels to enable Amarin to maintain exclusivity with each respective supplier, and to prevent potential termination of the agreements.”). 40 “BASF completes omega-3 portfolio with Equateq buy,” NUTRAingredients.com (May 8, 2012), https://www.nutraingredients.com/Article/2012/05/09/BASF-completes-omega-3- portfolio-with-Equateq-buy# (last accessed May 6, 2021). 65. Also in 2011, Amarin secured an exclusive supply contract with Korea-based Chemport Inc. (“Chemport”).41 This agreement also contains minimum purchase requirements to prevent Chemport from selling API to potential generic manufacturers,42 and Amarin is required to pay Chemport in cash for any shortfall in the minimum purchase obligations.43 As part of the agreement, Amarin agreed to pay Chemport $1.1m for the purchase of raw materials and to provide an additional $3.3m to Chemport as as equity investment.44 During the nine months ended September 30, 2013, the Company made payments of $4.8 million to Chemport.45 66. Equateq and Chemport were approved by the FDA to manufacture Vascepa API in April 2013.46 67. In December 2012, Amarin announced that it had entered into an additional exclusive agreement with a fourth supplier, an “exclusive consortium” of companies including Canada-based Slanmhor Pharmaceutical, Inc., Ocean Nutrition Canada, and Novasep (collectively referred to in this Complaint as “Novasep”).47 As part of the agreement, Amarin agreed to pay up to $2.3 million in development fees and a “commitment” of up to $15 million, credited against future API material purchase.48 The Company made payments of $3.9 million to Novasep in the 41 Amarin Corp. plc Quarterly Report (Form 10-Q), at 9 (Aug. 9, 2011). 42 Id. (“Following FDA approvals of [Vascepa], both agreements [with Equateq and Chemport] include annual purchase levels to enable Amarin to maintain exclusivity with each respective supplier, and to prevent potential termination of the agreements.”). 43 Amarin Corp. plc Annual Report (Form 10-K), at F-25 (Feb. 27, 2014). 45 Amarin Corp. plc Quarterly Report (Form 10-Q), at 15 (Nov. 7, 2013). 46 Amarin Corp. plc Quarterly Report (Form 10-Q), at 13 (May 9, 2013). 47 Press Release, Amarin Corp. plc, “Amarin Announces Additional Vascepa® (icosapent ethyl) Supplier” (Dec. 11, 2012). 48 Amarin Corp. plc Quarterly Report (Form 10-Q), at 13 (May 9, 2013). quarter in which the agreement was signed,49 and an additional $1.4 million in the following quarter.50 The Novasep agreement includes minimum purchase obligations, and Amarin is required to make cash payments to Novasep in the event of a shortfall.51 During the nine months ended September 30, 2013, the Company made payments of $6.1 million to Novasep.52 In July 2014 Amarin cancelled the agreement with the consortium and in July 2015 it entered a new agreement with Novasep in its own right.53 68. The Company purchased approximately $25.7 million worth of Vascepa API in 2013 from Nisshin and Chemport, and also paid $13.9 million to Novasep related to “commitments,” stability and technical batches, and advances on future API purchases.54 69. In October 2013, Amarin received bad news from the FDA which “was seen by most observers as the death blow for Amarin’s efforts to gain wider approval.”55 Although this was expected to result in less-than-hoped-for demand for Vascepa, Novasep and BASF planned to continue supplying Vascepa API at the agreed-upon pace.56 49 Id. 50 Amarin Corp. plc Quarterly Report (Form 10-Q), at 15 (Aug. 8, 2013). 52 Amarin Corp. plc Quarterly Report (Form 10-Q), at 15 (Nov. 7, 2013). 53 Amarin Corp. plc Annual Report (Form 10-K), at 14 (Feb. 25, 2016). 54 Amarin Corp. plc Quarterly Report (Form 10-Q), at 33 (Nov. 7, 2013). 55 “Novasep to keep supplying Amarin with Vascepa API,” Outsourcing-Pharma.com (Oct. 30, 2012), https://www.outsourcing-pharma.com/Article/2013/10/30/Novasep-to-keep-supplying- Amarin-with-Vascepa-API (last accessed May 6, 2021). 70. Finally, Amarin has secured significant additional supply from an another Japan- based supplier, Nippon Suisan, and that company’s supply is not available to any U.S. generic.57 71. The foregoing agreements between Amarin and the Vascepa API suppliers were intended to and have limited competition in the market for generic Vascepa. At bottom, the API suppliers took millions of dollars in payments from Amarin in exchange for an agreement not to sell the essential API, regardless of whether Amarin needed the API for its own production needs or whether there were other market opportunities for the sale of the API. By foreclosing API supply from generic competitors, Amarin has been able to capture supracompetitive profits from the inflated sales of Vascepa, and has shared those supracompetitive profits with the API suppliers to buy their complicity in the anticompetitive scheme. D. Amarin secured more than twice the API supply than it needs for legitimate business purposes 72. In February 2019, Amarin’s CEO John Thero stated that Amarin’s anticipated 2019 sales of Vascepa amounted to $350 million, but the company was purchasing API to support sales of more than $700 million.58 Thero was clear that Amarin was not raising its guidance or expecting to sell more than $700 million in Vascepa that year, but was merely purchasing excess supply.59 57 “Amarin: What The Street Hasn’t Factored In And Why Amarin Is Worth $80,” Seeking Alpha (Oct. 9, 2018) (“Nippon Suisan (1332 JT), or better known as “Nissui” in the Japanese stock market, has 420 tons worth of annual high-grade EPA supply, solely aimed for the further roll-out of Amarin’s Vascepa.”), https://seekingalpha.com/article/4210747-amarin-what-street-hasn’t- factored-in-and-why-amarin-is-worth-80 (last accessed May 6, 2021). 58 Amarin Corp. plc Earnings Call (Feb. 27, 2019), https://www.fool.com/earnings/call- transcripts/2019/02/27/amarin-corporation-plc-amrn-q4-2018-earnings-confe.aspx (last accessed May 6, 2021). 59 Id. (“Hey, we could be wrong on our guidance. Our guidance doesn’t assume any earlier approval from the FDA. And they had their mind to our product as four-year dating. Dating, one of the things we spent a lot of time in the development of this product was the stability of it and 73. At the same time that Amarin was purchasing more than twice its supply needs for 2019 from its existing suppliers, Amarin was in the process of locking up 420 tons worth of additional annual supply.60 For comparison, the entire U.S. market for Vascepa is estimated to require 450 tons per year. E. Amarin’s excess supply makes no economic sense absent anticompetitive advantages, and is contrary to industry practice 74. In Amarin’s own words: “The agreements with each of our API suppliers contemplate phased manufacturing capacity expansions designed to create sufficient manufacturing capacity to meet anticipated demand for API material for [Vascepa] following FDA approval. Accordingly, Nisshin and our other potential suppliers are currently working to expand and qualify their production capabilities to meet regulatory requirements to manufacture the API for [Vascepa]. These API suppliers are self-funding these expansion and qualification plans with contributions from Amarin.”61 75. Amarin provided further detail about the expenses necessary to develop and maintain so many API suppliers: “Among the conditions for FDA approval of a pharmaceutical product is the requirement that the manufacturer’s quality control and manufacturing procedures conform to current Good Manufacturing Practice, or cGMP, which must be followed at all times. The FDA typically inspects manufacturing facilities before regulatory approval of a product preventing oxidation, etc. So, it’s got a long shelf life. So, they figure that that’s the right investment to be made.”). 60 “Amarin: What The Street Hasn’t Factored In And Why Amarin Is Worth $80,” Seeking Alpha (Oct. 9, 2018), https://seekingalpha.com/article/4210747-amarin-what-street-hasnt-factored-in- and-why-amarin-is-worth-80 (“Nippon Suisan (1332 JT), or better known as “Nissui” in the Japanese stock market, has 420 tons worth of annual high-grade EPA supply, solely aimed for the further roll-out of Amarin’s Vascepa.”). 61 Amarin Corp. plc Annual Report (Form 10-K), at 11 (Feb. 20, 2012) (emphasis added). candidate, such as [Vascepa], and on an ongoing basis. In complying with cGMP regulations, pharmaceutical manufacturers must expend resources and time to ensure compliance with product specifications as well as production, record keeping, quality control, reporting, and other requirements. Our NDA filed with the FDA for [Vascepa] references one supplier of our API, Nisshin, with which we have had the longest relationship and which we believe is qualified to support our initial commercial launch of [Vascepa]. We have defined with the FDA our plan and specifications for qualifying the additional API suppliers. We intend to submit sNDAs62 for the use of these additional API suppliers after the suppliers successfully complete the specified process and facility qualifications and after the NDA for the MARINE indication is approved.”63 76. As these public statements confirm, it is expensive and time consuming for each new API supplier to develop, obtain regulatory approval for, and maintain quality control of its API manufacturing process, and Amarin bears a significant share of that burden. 77. On the other hand, it is possible64 and less expensive to scale up the supply from an existing manufacturer than it is to qualify additional suppliers. Consequently, standard industry practice is to have only one or two API suppliers. 78. In addition to saving initial setup costs, the benefits of scale result in volume 62 Defined in paragraph 68 above. 63 Id.; see also Amarin Corp. plc Quarterly Report, at 16 (Nov. 8, 2011) (“We anticipate incurring certain costs associated with the qualification of product produced by [Nishhin, Equateq, and Chemport].”). 64 Amarin Corp. plc Annual Report (Form 10-K), at 75 (Feb. 27, 2019) (“our current supply chain is scalable”); see also, Amarin Corp. plc Earnings Conference Call Transcript (Feb. 27, 2019) (“We have a supplier network that consists of over 20 independent companies. The API piece of that – we have multiple suppliers on. They’re competing with one another. And they’re interested in expanding capacity.”), https://www.fool.com/earnings/call-transcripts/2019/02/27/amarin- corporation-plc-amrn-q4-2018-earnings-confe.aspx (last accessed May 6, 2021). discounts,65 which Amarin foregoes by engaging additional suppliers with minimum purchase requirements. 79. Given these inefficiencies, the only economic advantages from having four API suppliers, and obtaining excess API inventory, results from the inability of generic competitors to obtain API supply. F. Amarin’s scheme succeeded in thwarting generic competition 80. DRL obtained final FDA approval on August 7, 2020,66 but has still been unable to secure a supply of API sufficient to support a launch of its generic Vascepa.67 81. Hikma, on the other hand, was able to launch on November 5, 2020,68 but was forced to release limited quantities due to supply constraints.69 65 Amarin Corp. plc Annual Report (Form 10-K), at 75 (Feb. 27, 2019) (“Certain of our API supply agreements contain provisions under which the cost of supply to us decreases as we purchase increased product volume.”). 66 Product Details for ANDA 209400, https://www.accessdata.fda.gov/scripts/cder/ob/results_product.cfm?Appl_Type=A&Appl_No=2 09499#312 (last accessed May 6, 2021). 67 DRL Complaint at ¶ 81 (“Nonetheless, despite DRL’s best efforts to launch in a timely manner, it is still unable to do so. The only reason why DRL still cannot launch is because Amarin contracted with suppliers of icosapent ethyl API not to sell to generic manufacturers including DRL, either through literal exclusive contract or through buying up all available supplies, such that DRL cannot acquire the necessary API to support a timely commercial launch.”) see also id. at ¶ 8 (“But for Amarin’s locking up of the icosapent ethyl API supply, DRL would have been ready, willing, and able to launch in August 2020, upon receiving regulatory approval.”). 68 Press Release, Hikma Pharmaceuticals plc, “Hikma launches Icosapent Ethyl Capsules” (Nov. 5, 2020), https://www.hikma.com/newsroom/article-i4928-hikma-launches-icosapent-ethyl- capsules/ (last accessed May 6, 2021). 69 “Amarin launches Vascepa in all-important Europe as it slowly bleeds share to U.S. generic,” Fierce Pharma (Apr. 6, 2021), https://www.fiercepharma.com/marketing/amarin-launches- vascepa-all-important-europe-as-blockbuster-to-be-heart-drug-slowly (last accessed May 6, 2021). 82. For its part, Amarin believes its scheme is working, and wants the market to know: “We have heard from various suppliers that they have been approached regarding supplying API for generic use. These suppliers informed us that they turned down such approaches for various reasons including that they don’t have excess capacity.”70 And in a press release discussing the Court of Appeals decision Amarin knowingly conveyed that generic manufacturers “are likely to have limited supply capacity.”71 CAUSATION 83. But for the anticompetitive conduct alleged above, generic icosapent ethyl would have entered the market as early as August 2020, the date of DRL’s final ANDA approval, because, absent Amarin’s anticompetitive conduct, there would have been sufficient supply of Vascepa API for DRL to do so. 84. Likewise, absent the Defendants’ anticompetitive conduct, Hikma would have launched its generic Vascepa at full supply because, absent Amarin’s anticompetitive conduct, there would have been sufficient supply of Vascepa API for Hikma to do so. 85. Instead, Defendants willfully and unlawfully maintained Amarin’s monopoly power in the relevant market by engaging in a conspiracy to exclude competition and maintain supracompetitive prices for Vascepa. Defendants implemented their conspiracy via their exclusive contracts and other conduct alleged herein. 70 Amarin Corp. plc Earnings Call Transcript (Apr. 13, 2020), https://www.fool.com/earnings/call- transcripts/2020/04/13/amarin-corporation-plc-amrn-q1-2020-earnings-call.aspx (last accessed May 6, 2021). 71 Press Release, Amarin Corp. plc, “Amarin Provides Update Following Ruling in Vascepa® ANDA Patent Litigation” (Sep. 3, 2020), https://investor.amarincorp.com/news-releases/news- release-details/amarin-provides- update-following-ruling-vascepar-anda-patent. 86. The only impediment to DRL’s generic icosapent ethyl entering the market is Defendants’ unlawful conduct. 87. Likewise, the only impediment to Hikma’s fully supplying demand for generic icosapent ethyl is Defendans’ unlawful conduct. 88. Defendants’ conspiracy had the purpose and effect of preventing competition to Vascepa, permitting Amarin to maintain supracompetitive prices for Vascepa, enabling Amarin to sell Vascepa without competition, and allowing Amarin to reap monopoly profits (and share those monopoly profits with the API-supplier defendants), to the detriment of purchasers. MARKET POWER AND DEFINITION 89. The pharmaceutical marketplace is characterized by a “disconnect” between product selection and the payment obligation. State laws prohibit pharmacists from dispensing many pharmaceutical products, including Vascepa, to patients without a prescription. The prohibition on dispensing certain products without a prescription creates this disconnect. The patient’s doctor chooses which product the patient will buy while the patient (and in most cases his or her insurer) has the obligation to pay for the product. 90. Brand manufacturers, including Amarin, exploit this price disconnect by employing large sales forces that visit doctors’ offices and persuade them to prescribe the brand manufacturers’ products. These sales representatives do not advise doctors of the cost of the branded products. Studies show that doctors typically are not aware of the relative costs of brand pharmaceuticals and, even when they are aware of the relative costs, they are largely insensitive to price differences because they do not pay for the products. The result is a marketplace in which price plays a comparatively unimportant role in product selection. 91. The relative unimportance of price in the pharmaceutical marketplace reduces what economists call the price elasticity of demand - the extent to which unit sales go down when price goes up. This lower price elasticity, in turn, gives brand manufacturers the ability to raise prices substantially above marginal cost without losing so many sales as to make the price increase unprofitable. The ability to profitably raise prices substantially above marginal costs is what economists and antitrust courts refer to as market power. The result of these pharmaceutical market imperfections and marketing practices is that brand manufacturers gain and maintain market power with respect to many branded prescription pharmaceuticals, including Vascepa. 92. Throughout the relevant time period, Amarin had monopoly power in the market for Vascepa because they had the power to exclude competition and/or raise or maintain the price of Vascepa and generic equivalents at supra-competitive levels without losing enough sales to make supra-competitive prices unprofitable. 93. A small but significant non-transitory increase to the price of brand Vascepa would not have caused a significant loss of sales sufficient to make the price increase unprofitable. 94. Brand Vascepa does not exhibit significant, positive cross-elasticity of demand with respect to price with any other product for the treatment of hypertriglyceridemia. 95. Brand Vascepa is differentiated from all other products currently on the market for treatment of hypertriglyceridemia. 96. Amarin needed to control only brand Vascepa and its AB-rated generic equivalents, and no other products, in order to maintain the price of icosapent ethyl profitably at supracompetitive prices. Only the market entry of competing, AB-rated generic versions of Vascepa unconstrained by supply issues would render Amarin unable to profitably maintain their prices for Vascepa without losing substantial sales. 97. Amarin had, and exercised, the power to exclude generic competition to brand Vascepa. 98. At all material times, high barriers to entry protected branded Vascepa from the forces of price competition. 99. There is direct evidence of market power and anticompetitive effects available in this case sufficient to show Amarin’s ability to control the price of Vascepa and generic Vascepa, and to exclude relevant competitors, without the need to show the relevant antitrust markets. The direct evidence consists of, inter alia, the following facts: (a) generic Vascepa would have entered the market at a substantial discount to brand Vascepa but for Defendants’ anticompetitive conduct; (b) Amarin’s gross margin on Vascepa at all relevant times was very high; and (c) Amarin never lowered the price of Vascepa to the competitive level in response to the pricing of other brand or generic drugs, and indeed enjoyed rising sales as it dramatically increased the price of Vascepa. 100. To the extent proof of monopoly power by defining a relevant product market is required, Plaintiffs allege that the relevant antitrust market is the market for Vascepa and its AB- rated generic equivalents. 101. The United States, the District of Columbia, and the U.S. territories constitute the relevant geographic market. 102. Amarin market share in the relevant market was 100% prior to Hikma’s constrained generic launch, implying substantial monopoly power. MARKET EFFECTS 103. Amarin willfully and unlawfully maintained their market power by engaging in an overarching scheme to exclude competition. Amarin designed a scheme to delay competition on the products’ merits to further Amarin’s anticompetitive purpose of forestalling generic competition against Vascepa. Amarin carried out the scheme with the anticompetitive intent and effect of maintaining supra-competitive prices for icosapent ethyl. 104. Defendants’ acts and practices had the purpose and effect of restraining competition unreasonably and injuring competition by protecting brand Vascepa from competition. These actions allowed Amarin to maintain a monopoly and exclude competition in the market for Vascepa and its AB-rated generic equivalents, to the detriment of Plaintiffs and all other members of the Classes. 105. Defendants’ exclusionary conduct delayed generic competition and unlawfully enabled Amarin to sell Vascepa without generic competition. Were it not for Defendants’ illegal conduct, one or more generic versions of Vascepa would have entered the market sooner. 106. Defendants’ exclusionary conduct also limited Hikma’s launch of generic Vascepa, enabling Amarin to sell Vascepa with reduced generic competition. 107. Competition among drug manufacturers enables all purchasers of the drug to buy drugs, including both the original drug and its subsequent competitors, at substantially lower prices. Consequently, drug manufacturers—and those that share in their profits—have a strong incentive to delay and limit competition, and purchasers experience substantial cost inflation from any such delay or limitation. 108. Defendants’ anticompetitive conduct caused Plaintiffs and all members of the Classes to pay more than they would have paid for Vascepa and generic equivalents absent their illegal conduct. 109. If generic competitors had not been unlawfully prevented from entering the market earlier and competing in the relevant markets, Plaintiffs and members of the Classes would have paid less for icosapent ethyl by (a) paying lower prices on their remaining brand purchases of Vascepa, and/or (b) substituting purchases of less-expensive generic Vascepa for their purchases of more-expensive brand Vascepa. 110. Thus, Defendants’ unlawful conduct deprived Plaintiffs and members of the Classes of the benefits from the competition that the antitrust laws are designed to ensure. ANTITRUST IMPACT 111. During the relevant time period, Plaintiffs and members of the Classes purchased substantial amounts of Vascepa indirectly from Amarin. As a result of Defendants’ illegal conduct, Plaintiffs and the members of the Classes were compelled to pay, and did pay, artificially inflated prices for Vascepa. Those prices were substantially greater than the prices that members of the Classes would have paid absent the illegal conduct alleged herein, because: (1) the price of brand- name Vascepa was artificially inflated by Defendants’ illegal conduct, and (2) members of the Classes have been deprived of the opportunity to purchase lower-priced generic versions of Vascepa. The supracompetitive prices were paid at the point of sale, which is where Plaintiffs and the Classes suffered antitrust impact. 112. As a consequence, Plaintiffs and members of the Classes have sustained substantial damages to their business and property in the form of overcharges. The full amount and form of such damages will be calculated after discovery and upon proof at trial. Commonly used and well- accepted economic models can be used to measure both the extent and the amount of the supracompetitive charge passed through the chain of distribution to Plaintiffs and the members of the Classes. 113. General economic theory recognizes that any overcharge at a higher level of distribution generally results in higher prices at every level below. See Hovenkamp, FEDERAL ANTITRUST POLICY, THE LAW OF COMPETITION AND ITS PRACTICE (1994) at 624. According to Professor Hovenkamp, “[e]very person at every stage in the chain will be poorer as a result of the monopoly price at the top.” 114. Further, the institutional structure of pricing and regulation in the pharmaceutical drug industry assures that overcharges at the higher level of distribution result in higher prices paid by members of the Classes. 115. Defendants’ anticompetitive actions enabled them to indirectly charge Plaintiffs and the Classes prices in excess of what they otherwise would have been able to charge absent their unlawful agreements described herein. 116. The prices were inflated as a direct and foreseeable result of Defendants’ anticompetitive conduct. 117. The inflated prices the Classes paid are traceable to, and the foreseeable result of, the overcharges by Amarin. INTERSTATE AND INTRASTATE COMMERCE 118. During the relevant time period, Defendants used various devices to effectuate the illegal acts alleged herein, including the United States mail, interstate and foreign travel, and interstate and foreign wire commerce. All Defendants engaged in illegal activities, as charged herein, within the flow of, and substantially affecting, interstate commerce. 119. During the relevant time period, branded Vascepa, manufactured and sold by Amarin, was shipped into each state and was sold to or paid for by Plaintiffs and members of the Classes. 120. During the relevant time period, in connection with the purchase and sale of branded Vascepa, money exchanged hands and business communications and transactions occurred in each state. 121. Defendants’ conduct as set forth in this complaint had substantial effects on interstate and intrastate commerce in that, inter alia, distributors and retailers within each state were foreclosed from offering cheaper Vascepa and generic icosapent ethyl to Plaintiffs and members of the Classes purchasing inside each state. Defendants’ conduct materially deprived the consuming public—including hundreds, if not thousands, of purchasers in each state—of choice to purchase more affordable versions of Vescepa. The absence of competition to Vascepa has, and continues to, directly and substantially affect and disrupt commerce within each state. Defendants’ unlawful anticompetitive agreement has thus affected commerce in each state. CLASS ACTION ALLEGATIONS 122. Plaintiffs bring this action on their own behalf and on behalf of all others similarly situated as a class action under Rules 23(a) and 23(b)(3) of the Federal Rules of Civil Procedure (“Damages Class”): All persons and entities who indirectly purchased, paid and/or provided reimbursement for some or all of the purchase price for Vascepa, other than for resale, in the States of Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming, the District of Columbia, and Puerto Rico, at any time during the period from August 7, 2020 through and until the anticompetitive effects of Defendants’ challenged conduct cease (the “Class Period”). 123. Plaintiffs bring this action on their own behalf and on behalf of all others similarly situated as a class action under Rules 23(a) and 23(b)(2) of the Federal Rules of Civil Procedure (“Injunctive Relief Class”) All persons and entities who purchased, paid and/or provided reimbursement for some or all of the purchase price for Vascepa, other than for resale, in the United States at any time during the period from August 7, 2020 through and until the anticompetitive effects of Defendants’ challenged conduct cease (the “Class Period”). 124. Excluded from the Classes are: a. Defendants and their counsel, officers, directors, management, employees, subsidiaries, and affiliates; b. all federal governmental entities; c. all persons or entities who purchased Vascepa for purposes of resale or directly from Amarin or their affiliates; d. fully insured health plans (i.e., health plans that purchased insurance from another third-party payer covering 100% of the plan’s reimbursement obligations to its members); e. any “flat co-pay” consumers whose purchases of Vascepa were paid in part by a third-party payer and whose co-payment was the same regardless of the retail purchase price; f. pharmacy benefit managers; g. all counsel of record; and g. all judges assigned to this case and any members of their immediate families. 125. Members of the Classes are so numerous that joinder is impracticable. Plaintiffs believe that there are hundreds of thousands of members of the Classes, in an amount to be determined in discovery and at trial. Further, the identities of class members will be readily ascertainable through business records kept in regular order. 126. Plaintiffs’ claims are typical of the claims of members of the Classes. Plaintiffs and all members of the Classes were damaged by the same wrongful conduct by Defendants, and all paid artificially inflated prices for Vascepa and were deprived of the benefits of competition from less expensive generic versions as a result of Defendants’ conduct. 127. Plaintiffs will fairly and adequately protect and represent the interests of the Classes. Plaintiffs’ interests are coincident with, and not antagonistic to, the Classes. 128. Plaintiffs are represented by counsel who are experienced and competent in the prosecution of class action litigation, and who have particular experience with class action litigation involving the pharmaceutical industry. 129. Questions of law and fact common to the Classes include: a. whether Amarin unlawfully maintained monopoly power through all or part of its overarching scheme; b. whether Defendants’ anticompetitive scheme suppressed generic competition to Vascepa; c. as to those parts of Defendants’ challenged conduct for which such justifications may be offered, whether there exist cognizable, non-pretextual procompetitive justifications, which Defendants’ challenged conduct was the least restrictive means of achieving, that offset the harm to competition in the markets in which Vascepa is sold; d. whether direct proof of Amarin’s monopoly power is available, and if available, whether it is sufficient to prove Amarin’s monopoly power without the need to also define a relevant market; e. to the extent a relevant market or markets must be defined, what that definition is, or those definitions are; f. determination of a reasonable estimate of the amount of delay Defendants’ unlawful monopolistic, unfair, and unjust conduct caused; g. whether Defendants’ scheme, in whole or in part, has substantially affected interstate commerce; h. whether Defendants’ scheme, in whole or in part, has substantially affected intrastate commerce; i. whether Defendants foreclosed the supply of icosapent ethyl API. j. whether Amarin possessed the ability to control prices and/or exclude competition for Vascepa during the Class Period; k. Whether Defendants’ unlawful monopolistic conduct was a substantial contributing factor in causing some amount of delay of the entry of AB- rated generic Vascepa; l. Whether Defendants’ unlawful monopolistic conduct was a substantial contribuiting factor in limiting the amount of generic Vascepa available upon the launch of the first generic icosapent ethyl product; m. whether Defendants’ scheme, in whole or in part, caused antitrust injury to the business or property of Plaintiffs and members of the Damages Class in the nature of overcharges; and n. the quantum of overcharges paid by the Damages Class in the aggregate. 130. Dendants acted or refused to act on grounds that apply generally to the Classes, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the Classes as a whole. 131. Questions of law and fact common to members of the Damages Class predominate over questions, if any, that may affect only individual Damages Class members, because Defendants have acted on grounds generally applicable to the entire Damages Class. Such generally applicable conduct is inherent in Defendants’ wrongful conduct. 132. Class action treatment is a superior method for the fair and efficient adjudication of this controversy. Among other things, class treatment will permit a large number of similarly situated persons to prosecute their common claims in a single forum simultaneously, efficiently, and without the unnecessary duplication of evidence, effort, and expense that numerous individual actions would engender. The benefits of proceeding through the class mechanism, including providing injured persons or entities with a method for obtaining redress on claims that might not be practicable to pursue individually, substantially outweigh any difficulties that may arise in management of this class action. 133. Plaintiffs know of no difficulty to be encountered in the maintenance of this action that would preclude its maintenance as a class action. CLAIMS FOR RELIEF FIRST CLAIM FOR RELEIF For Monopolization Under State Law (Against Amarin) 134. Plaintiffs incorporate by reference all of the allegations above as though fully set forth herein. 135. Plaintiffs bring this claim on behalf of the Damages Class. 136. The relevant market consists of Vascepa and its generic equivalents. 137. As described above, throughout the relevant time period Amarin possessed monopoly power nationwide and in each of the state and its territories in the market for Vascepa and its generic equivalents. 138. At all relevant times, Amarin possessed substantial market power (i.e., monopoly power) in the relevant market. Amarin possessed the power to control prices in, prevent prices from falling in, and exclude competitors from the relevant market. 139. Through their overarching anticompetitive scheme, as alleged above, Amarin willfully maintained their monopoly power in the relevant market using restrictive or exclusionary conduct, rather than by means of greater business acumen or a historic accident, and thereby injured Plaintiffs and the Classes. Amarin’s anticompetitive conduct was done with the specific intent to maintain its monopoly in the market for Vascepa in the United States. 140. Amarin knowingly and intentionally engaged in this anticompetitive scheme to monopolize the Vascepa market as described above. Amarin accomplished this scheme by, inter alia, (1) entering into exclusive supply agreements with at least four different icosapent ethyl API suppliers; (2) otherwise foreclosing the supply of icosapent ethyl API; and (3) raising and maintaining prices so that Plaintiffs and members of the Classes would pay for Vascepa at supracompetitive prices. 141. The goal, purpose, and effect of Amarin’s scheme was to prevent and delay the sale of generic Vascepa in the United States at prices significantly below Amarin’s prices for Vascepa, thereby effectively preventing the average market price of Vascepa and its generic equivalents from declining dramatically. 142. The goal, purpose and effect of Amarin’s scheme was also to maintain and extend its monopoly power with respect to Vascepa and its generic equivalents. Amarin’s illegal scheme allowed it to continue charging supracompetitive prices for Vascepa, without a substantial loss of sales, reaping substantial unlawful monopoly profits. 143. Plaintiffs and members of the Damages Class purchased substantial amounts of Vascepa indirectly from Amarin. 144. As a result of Amarin’s illegal conduct, Plaintiffs and members of the Damages Class were compelled to pay, and did pay, more than they would have paid for their requirements of Vascepa and its generic equivalents absent Amarin’s illegal conduct. But for Amarin’s illegal conduct, competitors would have begun selling generic Vascepa during the relevant period, and prices for Vascepa and its generic equivalents would have been lower, sooner. 145. Had manufacturers of generic Vascepa entered the market and lawfully competed with Amarin earlier, Plaintiffs and other members of the Damages Class would have substituted lower-priced generic Vascepa for the higher-priced brand-name Vascepa for some or all of their requirements of Vascepa and its generic equivalents, and/or would have paid lower net prices on their remaining Vascepa and/or AB-rated bioequivalent purchases. 146. By engaging in the foregoing conduct, Amarin violated the following state antitrust a. Arizona Rev. Stat. §§ 44-1403, et seq., with respect to purchases of Vascepa in Arizona by members of the Damages Class. b. Cal. Bus. & Prof. Code §§ 16700, with respect to purchases of Vascepa in California by members of the Damages Class. c. C.G.S.A. §§ 35-27, et seq., with respect to purchases of Vascepa in Connecticut by members of the Damages Class. d. D.C. Code §§ 28-4503, et seq., with respect to purchases of Vascepa in the District of Columbia by members of the Damages Class. e. Hawaii Rev. Stat. 480-1, et seq. with respect to purchases of Vascepa in Hawaii by members of the Damages Class. f. Illinois Antitrust Act, 740 Illinois Compiled Statutes 10/1, et seq., with respect to purchases of Vascepa in Illinois by members of the Damages Class. g. Iowa Code §§ 553.5 et seq., with respect to purchases of Vascepa and AB-rated bioequivalents in Iowa by members of the Damages Class. h. Kansas Stat. Ann. § 50-101 et seq., with respect to purchases of Vascepa and AB- rated bioequivalents in Kansas by members of the Damages Class. i. Me. Rev. Stat. Ann. 10, §§ 1102, et seq., with respect to purchases of Vascepa and AB-rated bioequivalents in Maine by consumer members of the Damages Class. j. Md. Com’l Law Code Ann. § 11-204(a), et seq., with respect to purchases of Vascepa and AB-rated bioequivalents in Maryland by members of the Damages Class. k. Mich. Comp. Laws Ann. §§ 445.773, et seq., with respect to purchases of Vascepa and AB-rated bioequivalents in Michigan by members of the Damages Class. l. Minn. Stat. §§ 325D.49, et seq., and Minn. Stat. § 8.31, et seq., with respect to purchases of Vascepa and AB-rated bioequivalents in Minnesota by members of the Damages Class. m. Miss. Code Ann. §§ 75-21-3, et seq., with respect to purchases of Vascepa and AB- rated bioequivalents in Mississippi by members of the Damages Class. n. Neb. Code Ann. §§ 59-802, et seq., with respect to purchases of Vascepa and AB- rated bioequivalents in Nebraska by members of the Damages Class. o. Nev. Rev. Stat. Ann. §§ 598A.060, et seq., with respect to purchases of Vascepa and AB-rated bioequivalents in Nevada by members of the Damages Class. p. N.H. Rev. Stat. Ann. §§ 356.11, et seq., with respect to purchases of Vascepa and AB-rated bioequivalents in New Hampshire by members of the Damages Class. q. N.M. Stat. Ann. §§ 57-1-2, et seq., with respect to purchases of Vascepa and AB- rated bioequivalents in New Mexico by members of the Damages Class. r. N.Y. Gen. Bus. Law § 340, et seq., with respect to purchases of Vascepa and AB- rated bioequivalents in New York by members of the Damages Class. s. N.C. Gen. Stat. §§ 75-2.1, et seq., with respect to purchases of Vascepa and AB- rated bioequivalents in North Carolina by members of the Damages Class. t. N.D. Cent. Code §§ 51-08.1-03, et seq., with respect to purchases of Vascepa and AB-rated bioequivalents in North Dakota by members of the Damages Class. u. Or. Rev. Stat. § 646.730, et seq., with respect to purchases of Vascepa and AB- rated bioequivalents in Oregon by members of the Damages Class. v. R.I. Gen. Laws §§ 6-36-5 et seq., with respect to purchases of Vascepa and AB- rated bioequivalents in Rhode Island by members of the Damages Class. w. S.D. Codified Laws §§ 37-1-3.2, et seq., with respect to purchases of Vascepa and AB-rated bioequivalents in South Dakota by members of the Damages Class. x. Tenn. Code Ann. §§ 47-25-101, et seq., with respect to purchases of Vascepa and AB-rated bioequivalents in Tennessee by members of the Damages Class. y. Utah Code Ann. §§ 76-10-911, et seq., with respect to purchases of Vascepa and AB-rated bioequivalents in Utah by members of the Damages Class. z. Vt. Stat. Ann. 9, §§ 2453, et seq., with respect to purchases of Vascepa and AB- rated bioequivalents in Vermont by consumer members of the Damages Class. aa. W.Va. Code §§ 47-18-4, et seq., with respect to purchases of Vascepa and AB-rated bioequivalents in West Virginia by members of the Damages Class. bb. Wis. Stat. §§ 133.03, et seq., with respect to purchases of Vascepa and AB-rated bioequivalents in Wisconsin by members of the Damages Class. 147. Plaintiffs and members of the Damages Class have been injured in their business or property by reason of Amarin’s antitrust violations alleged in this Claim. Their injuries consist of: (1) being denied the opportunity to purchase lower-priced generic Vascepa, and (2) paying higher prices for Vascepa and its generic equivalents than they would have paid in the absence of Amarin’s conduct. These injuries are of the type the antitrust laws were designed to prevent, and flow from that which makes Amarin’s conduct unlawful. 148. Plaintiffs and the Damages Class seek damages and multiple damages as permitted by law for their injuries by Amarin’s violations of the aforementioned statutes. SECOND CLAIM FOR RELIEF Conspiracy and Combination in Restraint of Trade Under State Law (Against All Defendants) 149. Plaintiffs incorporate by reference all of the allegations above as though fully set forth herein. 150. Plaintiffs bring this claim on behalf of the Damages Class. 151. Defendants violated the state laws identified below by entering into a series of exclusive contracts that were intended to and did lock up supply of Vascepa API, thereby constraining competition in the market for branded and generic Vascepa. 152. The agreements between Amarin and each of the API-supplier defendants substantially, unreasonable, and unduly restrained trade in the relevant market, the purpose and effect of which was to: a. prevent generic competitors from obtaining the API necessary to manufacture Vascepa; b. delay the entry of generic versions of Vascepa; c. hamper the ability of generic competitors to meet demand for their generic Vascepa product; and d. raise and maintain the prices that Plaintiffs and the Injunction Class members would pay for Vascepa to and at supra-competitive levels. 153. There is no legitimate, non-pretextual, procompetitive business justification for the exclusive contracts between Amarin and the API-supplier defendants. 154. The agreements between Amarin and each of the API-supplier defendants harmed competition in the relevant market. 155. Defendants’ conduct violated the following state antitrust laws: a. Arizona Rev. Stat. §§ 44-1403, et seq., with respect to purchases of Vascepa in Arizona by members of the Damages Class. b. Cal. Bus. & Prof. Code §§ 16700, with respect to purchases of Vascepa in California by members of the Damages Class. c. C.G.S.A. §§ 35-27, et seq., with respect to purchases of Vascepa in Connecticut by members of the Damages Class. d. D.C. Code §§ 28-4503, et seq., with respect to purchases of Vascepa in the District of Columbia by members of the Damages Class. e. Hawaii Rev. Stat. 480-1, et seq. with respect to purchases of Vascepa in Hawaii by members of the Damages Class. f. Illinois Antitrust Act, 740 Illinois Compiled Statutes 10/1, et seq., with respect to purchases of Vascepa in Illinois by members of the Damages Class. g. Iowa Code §§ 553.5 et seq., with respect to purchases of Vascepa and AB-rated bioequivalents in Iowa by members of the Damages Class. h. Kansas Stat. Ann. § 50-101 et seq., with respect to purchases of Vascepa and AB- rated bioequivalents in Kansas by members of the Damages Class. i. Me. Rev. Stat. Ann. 10, §§ 1102, et seq., with respect to purchases of Vascepa and AB-rated bioequivalents in Maine by consumer members of the Damages Class. j. Md. Com’l Law Code Ann. § 11-204(a), et seq., with respect to purchases of Vascepa and AB-rated bioequivalents in Maryland by members of the Damages Class. k. Mich. Comp. Laws Ann. §§ 445.773, et seq., with respect to purchases of Vascepa and AB-rated bioequivalents in Michigan by members of the Damages Class. l. Minn. Stat. §§ 325D.49, et seq., and Minn. Stat. § 8.31, et seq., with respect to purchases of Vascepa and AB-rated bioequivalents in Minnesota by members of the Damages Class. m. Miss. Code Ann. §§ 75-21-3, et seq., with respect to purchases of Vascepa and AB- rated bioequivalents in Mississippi by members of the Damages Class. n. Neb. Code Ann. §§ 59-802, et seq., with respect to purchases of Vascepa and AB- rated bioequivalents in Nebraska by members of the Damages Class. o. Nev. Rev. Stat. Ann. §§ 598A.060, et seq., with respect to purchases of Vascepa and AB-rated bioequivalents in Nevada by members of the Damages Class. p. N.H. Rev. Stat. Ann. §§ 356.11, et seq., with respect to purchases of Vascepa and AB-rated bioequivalents in New Hampshire by members of the Damages Class. q. N.M. Stat. Ann. §§ 57-1-2, et seq., with respect to purchases of Vascepa and AB- rated bioequivalents in New Mexico by members of the Damages Class. r. N.Y. Gen. Bus. Law § 340, et seq., with respect to purchases of Vascepa and AB- rated bioequivalents in New York by members of the Damages Class. s. N.C. Gen. Stat. §§ 75-2.1, et seq., with respect to purchases of Vascepa and AB- rated bioequivalents in North Carolina by members of the Damages Class. t. N.D. Cent. Code §§ 51-08.1-03, et seq., with respect to purchases of Vascepa and AB-rated bioequivalents in North Dakota by members of the Damages Class. u. Or. Rev. Stat. § 646.730, et seq., with respect to purchases of Vascepa and AB- rated bioequivalents in Oregon by members of the Damages Class. v. R.I. Gen. Laws §§ 6-36-5 et seq., with respect to purchases of Vascepa and AB- rated bioequivalents in Rhode Island by members of the Damages Class. w. S.D. Codified Laws §§ 37-1-3.2, et seq., with respect to purchases of Vascepa and AB-rated bioequivalents in South Dakota by members of the Damages Class. x. Tenn. Code Ann. §§ 47-25-101, et seq., with respect to purchases of Vascepa and AB-rated bioequivalents in Tennessee by members of the Damages Class. y. Utah Code Ann. §§ 76-10-911, et seq., with respect to purchases of Vascepa and AB-rated bioequivalents in Utah by members of the Damages Class. z. Vt. Stat. Ann. 9, §§ 2453, et seq., with respect to purchases of Vascepa and AB- rated bioequivalents in Vermont by consumer members of the Damages Class. aa. W.Va. Code §§ 47-18-4, et seq., with respect to purchases of Vascepa and AB-rated bioequivalents in West Virginia by members of the Damages Class. bb. Wis. Stat. §§ 133.03, et seq., with respect to purchases of Vascepa and AB-rated bioequivalents in Wisconsin by members of the Damages Class. 156. Plaintiffs and members of the Damages Class have been injured in their business or property by reason of Defendants’ antitrust violations alleged in this Claim. Their injuries consist of: (1) being denied the opportunity to purchase lower-priced generic Vascepa, and (2) paying higher prices for Vascepa and its generic equivalents than they would have paid in the absence of Defendants’ conduct. These injuries are of the type the antitrust laws were designed to prevent, and flow from that which makes Defendants’ conduct unlawful. 157. Plaintiffs and the Damages Class seek damages and multiple damages as permitted by law for their injuries by Defendants’ violations of the aforementioned statutes. THIRD CLAIM FOR RELIEF Unfair or Deceptive Trade Practices (Against All Defendants) 158. Plaintiffs incorporate by reference all of the allegations above as though fully set forth herein. 159. Plaintiffs bring this claim on behalf of the Damages Class. 160. Defendants engaged in unfair competition, and/or unfair/unconscionable, and/or deceptive acts or practices in violation of the state consumer protection statutes listed below. As a direct and proximate result of Defendants’ anticompetitive, deceptive, unfair and/or unconscionable acts or practices, Plaintiffs and Damages Class members were deprived of the opportunity to purchase a less expensive AB-rated bioequivalent of Vascepa and forced to pay higher prices in violation of the following consumer protection statutes: a. Alaska Stat. Ann. § 45.50.471, et seq., with respect to purchases in Alaska by members of the Damages Class. Defendants engaged in unfair methods of competition and unfair practices in the conduct of trade and commerce. b. Cal. Bus. & Prof. Code §§ 17200, et seq., with respect to purchases in California by members of the Damages Class. Defendants engaged in business practices that are unfair in that they are immoral, unethical, oppressive, unscrupulous, and substantially injurious to Damages Class members. There are no countervailing benefits to Damages Class members and any utility of defendants’ conduct is outweighed by the consequences to Damages Class members. c. Fla. Stat. §§ 501.201, et seq., with respect to purchases in Florida by members of the Damages Class. d. Mo. Rev. Stat. §§ 407.020 et seq., with respect to purchases in Missouri by consumer members of the Damages Class. e. Mont. Code Ann. §§ 30-14-101, et seq., with respect to purchases in Montana by consumer members of the Damages Class. Defendants engaged in unfair and deceptive acts and practices. f. S.C. Code Ann. §§ 39-5-20, et seq., with respect to purchases in South Carolina by Damages Class members. Defendants engaged in unfair methods of competition and unfair practices in the conduct of trade and commerce. Defendants’ conduct is offensive to public policy and immoral, unethical, and oppressive. g. Vt. Stat. Ann. 9, §§ 2453, et seq., with respect to purchases in Vermont by consumer members of the Damages Class. Defendants engaged in unfair methods of competition, unfair practices, and deceptive practices in the conduct of trade and commerce. 161. Plaintiffs and members of the Damages Class have been injured in their business and property by reason of Defendants’ anticompetitive, unfair/unconscionable, and/or deceptive acts or practices alleged in this Count. Their injury consists of paying higher prices for Vascepa and/or AB-rated generic bioequivalents than they would have paid in the absence of these violations. This injury is of the type the state consumer protection statutes were designed to prevent and directly results from Defendants’ unlawful conduct. FOURTH CLAIM FOR RELIEF Unjust Enrichment Under State Law (Against All Defendants) 162. Plaintiffs incorporate by reference all of the allegations above as though fully set forth herein. 163. Plaintiffs bring this claim on behalf of the Damages Class. 164. To the extent required, this claim is pleaded in the alternative to the other claims in this complaint. 165. As a result of their unlawful conduct described above, Defendants have and will continue to be unjustly enriched. Defendants have been unjustly enriched by the receipt of, at a minimum, unlawfully inflated prices and unlawful profits on Vascepa. 166. Defendants’ financial benefits are traceable to Plaintiffs’ and Damages Class members’ overpayments for Vascepa. 167. Plaintiffs and Damages Class members have conferred and continue to confer an economic benefit upon Defendants in the nature of profits resulting from the unlawful overcharges described herein, to the economic detriment of Plaintiffs and Damages Class members. 168. Defendants have benefited from their unlawful acts and it would be inequitable for Defendants to be permitted to retain any of the ill-gotten gains resulting from the overpayments made by Plaintiffs and the members of the Damages Class for Vascepa manufactured by Defendants during the Class Period. 169. It would be futile for Plaintiffs and Damages Class members to seek to exhaust any remedy against the immediate intermediary in the chain of distribution from which they indirectly purchased Vascepa, as those intermediaries are not liable and would not compensate Plaintiffs and Damages Class members for Defendants’ unlawful conduct. 170. The economic benefit Defendants derived from overcharging Plaintiffs and Damages Class members for Vascepa is a direct and proximate result of Defendants’ unlawful and anticompetitive practices. 171. The financial benefits Defendants derived are ill-gotten gains that rightfully belong to Plaintiffs and Damages Class members, who paid and continue to pay artificially inflated prices that inured to Defendants’ benefit. 172. It would be inequitable under unjust enrichment principles under the laws of the states described below for Defendants to retain any of the overcharges Plaintiffs and Damages Class members paid for Vascepa that were derived from Defendants’ unfair, anticompetitive, and unlawful methods, acts, and trade practices. 173. Defendants are aware of and appreciate the benefits that Plaintiffs and the Damages Class members have bestowed upon them. 174. Defendants should be ordered to disgorge all unlawful or inequitable proceeds they received in a common fund for the benefit of Plaintiffs and Damages Class members, who collectively have no adequate remedy at law. 175. A constructive trust should be imposed upon all unlawful or inequitable sums Defendants received, which arise from overpayments for branded and generic versions of Vascepa by Plaintiffs and the Damages Class members. 176. Plaintiffs and Damages Class members have no adequate remedy at law. 177. By engaging in the foregoing unlawful or inequitable conduct, which deprived Plaintiffs and the Damages Class members of the opportunity to purchase lower-priced generic versions of Vascepa and forced them to pay higher prices for branded and generic versions of Vascepa, Defendants have been unjustly enriched in violation of the common law of various states and commonwealths, as outlined below: Alabama 178. Defendants unlawfully overcharged end-payers who made purchases of or reimbursements for branded and generic versions of Vascepa in Alabama at prices that were more than they would have been but for Defendants’ actions. 179. Plaintiffs and Damages Class members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Damages Class members. 180. Defendants accepted and retained the benefits bestowed upon them under inequitable and unjust circumstances arising from unlawful overcharges to Plaintiffs and Damages Class members. 181. Defendants have benefitted at the expense of Plaintiffs and Damages Class members from revenue resulting from unlawful overcharges for branded and generic versions of Vascepa. Alaska 182. Defendants unlawfully overcharged end-payers who made purchases of or reimbursements for branded and generic versions of Vascepa in Alaska at prices that were more than they would have been but for Defendants’ actions. 183. Plaintiffs and Damages Class members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Damages Class members. 184. Defendants appreciated the benefits bestowed upon them by Plaintiffs and Damages Class members. 185. Defendants accepted and retained the benefits bestowed upon them under inequitable and unjust circumstances arising from unlawful overcharges to Plaintiffs and Damages Class members. 186. Under the circumstances, it would be inequitable for Defendants to retain such benefits without compensating Plaintiffs and Damages Class members. 187. Defendants have benefitted at the expense of Plaintiffs and Damages Class members from revenue resulting from unlawful overcharges for branded and generic versions of Vascepa. Arizona 188. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Arizona at prices that were more than they would have been but for Defendants’ actions. 189. Defendants have been enriched by revenue resulting from unlawful overcharges for branded and generic versions of Vascepa. 190. Plaintiffs have been impoverished by the overcharges for branded and generic versions of Vascepa resulting from Defendants’ unlawful conduct. 191. Defendants’ enrichment and Plaintiffs’ impoverishment are connected. Defendants have paid no consideration to any other person for any benefits they received from Plaintiffs and Damages Class Members. 192. There is no justification for Defendants’ receipt of the benefits causing their enrichment and Plaintiffs’ impoverishment, because Plaintiffs paid anticompetitive prices that inured to Defendants’ benefit, and it would be inequitable for Defendants to retain any revenue gained from their unlawful overcharges. 193. Plaintiffs and Damages Class members have no remedy at law. Arkansas 194. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Arkansas at prices that were more than they would have been but for Defendants’ actions. 195. Defendants received money from Plaintiffs and Damages Class members as a direct result of the unlawful overcharges and have retained this money. 196. Defendants have paid no consideration to any other person in exchange for this money. 197. Under the circumstances, it would be inequitable for Defendants to retain such benefits without compensating Plaintiffs and Damages Class members. California 198. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in California at prices that were more than they would have been but for Defendants’ actions. 199. Plaintiffs and Damages Class members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Class members. 200. Defendants retained the benefits bestowed upon them under inequitable and unjust circumstances at the expense of Plaintiffs and Damages Class members. Colorado 201. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Colorado at prices that were more than they would have been but for Defendants’ actions. 202. Defendants have received a benefit from Plaintiffs and Damages Class members in the nature of revenue resulting from the unlawful overcharges, which revenue resulted from anticompetitive prices that inured to the benefit of Defendants. 203. Defendants have benefitted at the expense of Plaintiffs and Damages Class members. 204. Under the circumstances, it would be inequitable for Defendants to retain such benefits without compensating Plaintiffs and Damages Class members. Connecticut 205. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Connecticut at prices that were more than they would have been but for Defendants’ actions. 206. Defendants were benefitted in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Damages Class members. 207. Defendants have paid no consideration to any other person in exchange for this benefit. 208. Defendants retained the benefits bestowed upon them under inequitable and unjust circumstances at the expense of Plaintiffs and Damages Class members. Delaware 209. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Delaware at prices that were more than they would have been but for Defendants’ actions. 210. Defendants have been enriched by revenue resulting from unlawful overcharges for branded and generic versions of Vascepa. 211. Plaintiffs and Damages Class members have been impoverished by the overcharges for branded and generic versions of Vascepa resulting from Defendants’ unlawful conduct. 212. Defendants’ enrichment and Plaintiffs’ impoverishment are connected. 213. There is no justification for Defendants’ receipt of the benefits causing their enrichment, because Plaintiffs and Damages Class members paid supracompetitive prices that inured to Defendants’ benefit, and it would be inequitable for Defendants to retain any revenue gained from their unlawful overcharges. 214. Plaintiffs and Damages Class members have no remedy at law. Florida 215. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Florida at prices that were more than they would have been but for Defendants’ actions. 216. Plaintiffs and the Damages Class Members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and the Damages Class members. 217. Defendants appreciated the benefits bestowed upon them by Plaintiffs and the Damages Class members. 218. It is inequitable for Defendants to accept and retain the benefits received without compensating Plaintiffs and the Damages Class members. Georgia 219. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Georgia at prices that were more than they would have been but for Defendants’ actions. 220. Plaintiffs and Damages Class members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Damages Class members. 221. Under the circumstances, it would be inequitable for Defendants to retain such benefits without compensating Plaintiffs and Damages Class members. Hawaii 222. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Hawaii at prices that were more than they would have been but for Defendants’ actions. 223. Plaintiffs and Damages Class members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Class members. 224. It is unjust for Defendants to retain the benefits received without compensating Plaintiffs and Damages Class members. 225. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Idaho at prices that were more than they would have been but for Defendants’ actions. 226. Plaintiffs and Damages Class members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Damages Class members. 227. Defendants appreciated the benefit conferred upon them by Plaintiffs and Damages Class members. 228. Under the circumstances, it would be inequitable for Defendants to retain such benefits without compensating Plaintiffs and Damages Class members. Illinois 229. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Illinois at prices that were more than they would have been but for Defendants’ actions. 230. Plaintiffs and Damages Class members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Damages Class members. 231. Defendants retained the benefits bestowed upon them under unjust circumstances arising from unlawful overcharges to Plaintiffs and Damages Class members. 232. It is unjust and inequitable for Defendants to retain the benefits received without compensating Plaintiffs and Damages Class members. 233. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Iowa at prices that were more than they would have been but for Defendants’ actions. 234. Defendants have been enriched by revenue resulting from unlawful overcharges for branded and generic versions of Vascepa, which revenue resulted from anticompetitive prices paid by Plaintiffs and the Damages Class members, which inured to Defendants’ benefit. 235. Defendants’ enrichment has occurred at the expense of Plaintiffs and Damages Class members. 236. It is against equity and good conscience for Defendants to be permitted to retain the revenue resulting from their unlawful overcharges. Kansas 237. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Kansas at prices that were more than they would have been but for Defendants’ actions. 238. Plaintiffs and Damages Class members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Damages Class members. 239. Defendants retained the benefits bestowed upon them under unjust circumstances arising from unlawful overcharges to Plaintiffs and Damages Class members. 240. Defendants were unjustly enriched at the expense of Plaintiffs and Damages Class members. Kentucky 241. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Kentucky at prices that were more than they would have been but for Defendants’ actions. 242. Plaintiffs and Damages Class members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Damages Class members. 243. Defendants appreciated the benefit conferred upon them by Plaintiffs and Damages Class members. 244. Under the circumstances, it would be inequitable for Defendants to retain such benefits without compensating Plaintifs and Damages Class members. Louisiana 245. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Louisiana at prices that were more than they would have been but for Defendants’ actions. 246. Defendants have been enriched by revenue resulting from unlawful overcharges for branded and generic versions of Vascepa. 247. Plaintiffs and Damages Class members have been impoverished by the overcharges for branded and generic versions of Vascepa resulting from Defendants’ unlawful conduct. 248. Defendants’ enrichment and Plaintiffs’ impoverishment are connected. 249. There is no justification for Defendants’ receipt of the benefits causing their enrichment, because Plaintiffs and Damages Class members paid supracompetitive prices that inured to Defendants’ benefit, and it would be inequitable for Defendants to retain any revenue gained from their unlawful overcharges. 250. Plaintiffs and Damages Class members have no other remedy at law. Maine 251. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Maine at prices that were more than they would have been but for Defendants’ actions. 252. Plaintiffs and Damages Class members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Damages Class members. 253. Defendants retained the benefits bestowed upon them under unjust circumstances arising from unlawful overcharges to Plaintiffs and Damages Class members. 254. Defendants were aware of and appreciated the benefit bestowed upon them by Plaintiffs and Damages Class members. 255. Defendants were unjustly enriched at the expense of Plaintiffs and Damages Class members. Maryland 256. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Maryland at prices that were more than they would have been but for Defendants’ actions. 257. Plaintiffs and Damages Class members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Damages Class members. 258. Defendants were aware of or appreciated the benefit bestowed upon them by Plaintiffs and Damages Class members. 259. Under the circumstances, it would be inequitable for Defendants to retain such benefits without compensating Plaintiffs and Damages Class members. Massachusetts 260. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Massachusetts at prices that were more than they would have been but for Defendants’ actions. 261. Plaintiffs and Damages Class members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Damages Class members. 262. Defendants were aware of or appreciated the benefit conferred upon them by Plaintiffs and Damages Class members. 263. Under the circumstances, it would be inequitable for Defendants to retain such benefits without compensating Plaintiffs and Damages Class members. Fairness and good conscience require that Defendants not be permitted to retain the revenue resulting from their unlawful overcharges at the expense of Plaintiffs and Damages Class members. Michigan 264. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Michigan at prices that were more than they would have been but for Defendants’ actions. 265. Plaintiffs and Damages Class members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Damages Class members. 266. Defendants retained the benefits bestowed upon them under unjust circumstances arising from unlawful overcharges to Plaintiffs and Damages Class members. 267. Defendants were unjustly enriched at the expense of Plaintiffs and Damages Class members. Minnesota 268. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Minnesota at prices that were more than they would have been but for Defendants’ actions. 269. Defendants appreciated and knowingly accepted the benefits bestowed upon them by Plaintiffs and Damages Class members. Defendants have paid no consideration to any other person for any of the benefits they have received from Plaintiffs and Damages Class members. 270. It is inequitable for Defendants to accept and retain the benefits received without compensating Plaintiffs and Damages Class members. Mississippi 271. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Mississippi at prices that were more than they would have been but for Defendants’ actions. 272. Defendants retain the benefit of overcharges received on the sales of branded and generic versions of Vascepa, which in equity and good conscience belong to Plaintiffs and Damages Class members on account of Defendants’ anticompetitive conduct. Missouri 273. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Missouri at prices that were more than they would have been but for Defendants’ actions. 274. Plaintiffs and Damages Class members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Damages Class members. 275. Defendants appreciated the benefit bestowed upon them by Plaintiffs and Damages Class members. 276. Defendants accepted and retained the benefit bestowed upon them under inequitable and unjust circumstances arising from unlawful overcharges to Plaintiffs and Damages Class members. Montana 277. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Montana at prices that were more than they would have been but for Defendants’ actions. 278. Plaintiffs and Damages Class members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Damages Class members. 279. Under the circumstances, it would be inequitable for Defendants to retain such benefits without compensating Plaintiffs and Damages Class members. Nebraska 280. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Nebraska at prices that were more than they would have been but for Defendants’ actions. 281. Defendants received money from Plaintiffs and Damages Class members as a direct result of the unlawful overcharges, and have retained this money. Defendants have paid no consideration to any other person in exchange for this money. 282. In justice and fairness, Defendants should disgorge such money and remit the overcharged payments back to Plaintiffs and Damages Class members. Nevada 283. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Nevada at prices that were more than they would have been but for Defendants’ actions. 284. Plaintiffs and Damages Class members have conferred an economic benefit upon Defendants in the nature of revenue resulting from unlawful overcharges for branded and generic versions of Vascepa. 285. Defendants appreciated the benefits bestowed upon them by Plaintiffs and Damages Class members, for which they have paid no consideration to any other person. 286. Defendants have knowingly accepted and retained the benefits bestowed upon them by Plaintiffs and Damages Class members. 287. The circumstances under which Defendants have accepted and retained the benefits bestowed upon them by Plaintiffs and Damages Class members are inequitable in that they result from Defendants’ unlawful overcharges for branded and generic versions of Vascepa. New Hampshire 288. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in New Hampshire at prices that were more than they would have been but for Defendants’ actions. 289. Defendants have received a benefit from Plaintiffs in the nature of revenue resulting from the unlawful overcharges, which revenue resulted from anticompetitive prices that inured to the benefit of Defendants. 290. Under the circumstances, it would be unconscionable for Defendants to retain such benefits. New Jersey 291. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in New Jersey at prices that were more than they would have been but for Defendants’ actions. 292. Defendants have received a benefit from Plaintiffs and Damages Class members in the nature of revenue resulting from the unlawful overcharges, which revenue resulted from anticompetitive prices that inured to the benefit of Defendants. 293. The benefits conferred upon Defendants were not gratuitous, in that they comprised revenue created by unlawful overcharges arising from arising from unlawful overcharges to Plaintiffs and Damages Class members. 294. Defendants have paid no consideration to any other person for any of the unlawful benefits they received from Plaintiffs and Damages Class members with respect to Defendants’ sales of branded and generic versions of Vascepa. 295. Under the circumstances, it would be unjust for Defendants to retain such benefits without compensating Plaintiffs and Damages Class members. New Mexico 296. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in New Mexico at prices that were more than they would have been but for Defendants’ actions. 297. Defendants have knowingly benefitted at the expense of Plaintiffs and Damages Class members from revenue resulting from unlawful overcharges for branded and generic versions of Vascepa. 298. To allow Defendants to retain the benefits would be unjust because the benefits resulted from anticompetitive pricing that inured to Defendants’ benefit and because Defendants have paid no consideration to any other person for any of the benefits they received. New York 299. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in New York at prices that were more than they would have been but for Defendants’ actions. 300. Defendants have been enriched by revenue resulting from unlawful overcharges for branded and generic versions of Vascepa, which revenue resulted from anticompetitive prices paid by Plaintiffs and Damages Class members, which inured to Defendants’ benefit. 301. Defendants’ enrichment has occurred at the expense of Plaintiffs and Damages Class members. 302. It is against equity and good conscience for Defendants to be permitted to retain the revenue resulting from their unlawful overcharges. North Carolina 303. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in North Carolina at prices that were more than they would have been but for Defendants’ actions. 304. Plaintiffs and Damages Class Members have conferred an economic benefit upon Defendants in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Damages Class members. 305. Plaintiffs did not interfere with Defendants’ affairs in any manner that conferred these benefits upon Defendants. 306. The benefits conferred upon Defendants were not gratuitous, in that they comprised revenue created by unlawful overcharges arising from Defendants’ actions to delay entry of generic versions of Vascepa to the market. 307. The benefits conferred upon Defendants are measurable, in that the revenue Defendants have earned due to unlawful overcharges are ascertainable by review of sales records and documents relating to Defendants’ anticompetitive conduct. 308. Defendants consciously accepted the benefits and continue to do so as of the date of this filing. North Dakota 309. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in North Dakota at prices that were more than they would have been but for Defendants’ actions. 310. Defendants have been enriched by revenue resulting from unlawful overcharges for branded and generic versions of Vascepa. 311. Plaintiffs have been impoverished by the overcharges for branded and generic versions of Vascepa resulting from Defendants’ unlawful conduct. 312. Defendants’ enrichment and Plaintiffs’ impoverishment are connected. Defendants have paid no consideration to any other person for any benefits they received directly or indirectly from Plaintiffs and Damages Class members. 313. There is no justification for Defendants’ receipt of the benefits causing their enrichment, because Plaintiffs paid anticompetitive prices that inured to Defendants’ benefit, and it would be inequitable for Defendants to retain any revenue gained from their unlawful overcharges. 314. Plaintiffs and Damages Class members have no remedy at law. Oklahoma 315. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Oklahoma at prices that were more than they would have been but for Defendants’ actions. 316. Defendants received money from Plaintiffs and Damages Class members as a direct result of the unlawful overcharges and have retained this money. 317. Defendants have paid no consideration to any other person in exchange for this money. 318. Plaintiffs and Damages Class members have no remedy at law. 319. It is against equity and good conscience for Defendants to be permitted to retain the revenue resulting from their unlawful overcharges. Oregon 320. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Oregon at prices that were more than they would have been but for Defendants’ actions. 321. Plaintiffs and Damages Class members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Damages Class members. 322. Defendants were aware of the benefit bestowed upon them by Plaintiffs and Damages Class members. 323. It would be inequitable and unjust for Defendants to retain any of the overcharges for Vascepa derived from Defendants’ unfair conduct without compensating Plaintiffs and Class members. Pennsylvania 324. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Pennsylvania at prices that were more than they would have been but for Defendants’ actions. 325. Plaintiffs and Damages Class members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Damages Class members. 326. Defendants appreciated the benefit bestowed upon them by Plaintiffs and Damages Class members. 327. Under the circumstances, it would be inequitable for Defendants to retain such benefits without compensating Plaintiffs and Damages Class members. Rhode Island 328. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Rhode Island at prices that were more than they would have been but for Defendants’ actions. 329. Plaintiffs and Damages Class members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Damages Class members. 330. Defendants were aware of and/or recognized the benefit bestowed upon them by Plaintiffs and the Damages Class members. 331. Under the circumstances, it would be inequitable for Defendants to retain such benefits without compensating Plaintiffs and Damages Class members. South Carolina 332. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in South Carolina at prices that were more than they would have been but for Defendants’ actions. 333. The benefits conferred upon Defendants were not gratuitous, in that they comprised revenue created by unlawful overcharges to Plaintiffs and Damages Class members. 334. Defendants realized value from the benefit bestowed upon them by Plaintiffs and Damages Class members. 335. Under the circumstances, it would be inequitable for Defendants to retain such benefits without compensating Plaintiffs and Damages Class members. South Dakota 336. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in South Dakota at prices that were more than they would have been but for Defendants’ actions. 337. Plaintiffs and Damages Class members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Damages Class members. 338. Defendants were aware of the benefit bestowed upon them by Plaintiffs and Damages Class members. 339. Under the circumstances, it would be inequitable and unjust for Defendants to retain such benefits without reimbursing Plaintiffs and Damages Class members. Tennessee 340. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Tennessee at prices that were more than they would have been but for Defendants’ actions. 341. Plaintiffs and Damages Class members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Damages Class members. 342. Defendants were aware of or appreciated the benefit bestowed upon them by Plaintiffs and Damages Class members. 343. Under the circumstances, it would be inequitable for Defendants to retain such benefits without compensating Plaintiffs and Damages Class members. 344. It would be futile for Plaintiffs and Damages Class members to exhaust all remedies against the entities with which Plaintiffs and Damages Class members have privity of contract because Plaintiffs and Damages Class members did not purchase branded or generic versions of Vascepa directly from any Defendant. 345. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Texas at prices that were more than they would have been but for Defendants’ actions. 346. Defendants have received a benefit from Plaintiffs and Damages Class members in the nature of revenue resulting from the unlawful overcharges, which revenue resulted from anticompetitive prices that inured to the benefit of Defendants. 347. Defendants were aware of or appreciated the benefit bestowed upon them by Plaintiffs and Damages Class members. 348. The circumstances under which Defendants have retained the benefits bestowed upon them by Plaintiffs and Damages Class members are inequitable in that they result from Defendants’ unlawful overcharges for branded and generic versions of Vascepa. 349. Plaintiffs and Damages Class members have no remedy at law 350. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Utah at prices that were more than they would have been but for Defendants’ actions. 351. Plaintiffs and Damages Class members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Damages Class members. 352. Defendants were aware of or appreciated the benefit bestowed upon them by Plaintiffs and Damages Class members. 353. Under the circumstances, it would be inequitable for Defendants to retain such benefits without compensating Plaintiffs and Damages Class members. Vermont 354. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Vermont at prices that were more than they would have been but for Defendants’ actions. 355. Plaintiffs and Damages Class members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Damages Class members. 356. Defendants accepted the benefit bestowed upon them by Plaintiffs and Damages Class members. 357. Under the circumstances, it would be inequitable for Defendants to retain such benefits without compensating Plaintiffs and Damages Class members. Virginia 358. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Virginia at prices that were more than they would have been but for Defendants’ actions. 359. Plaintiffs and Damages Class members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Damages Class members. 360. Defendants were aware of the benefit bestowed upon them. 361. Defendants should reasonably have expected to repay Plaintiffs and Damages Class members. 362. The benefits conferred upon Defendants were not gratuitous, in that they constituted revenue created by unlawful overcharges arising from Defendants’ illegal and unfair actions to inflate the prices of branded and generic versions of Vascepa. 363. Defendants have paid no consideration to any other person for any of the benefits they have received from Plaintiffs and Damages Class members. Washington 364. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Washington at prices that were more than they would have been but for Defendants’ actions. 365. Plaintiffs and the Damages Class members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Damages Class members. 366. Defendants were aware of or appreciated the benefit conferred upon them by Plaintiffs and Damages Class members. 367. Under the circumstances, it would be inequitable for Defendants to retain such benefits without compensating Plaintiffs and Damages Class members. West Virginia 368. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in West Virginia at prices that were more than they would have been but for Defendants’ actions. 369. Plaintiffs and Damages Class members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Damages Class members. 370. Defendants were aware of or appreciated the benefit bestowed upon them by Plaintiffs and Damages Class members. 371. Under the circumstances, it would be inequitable for Defendants to retain such benefits without compensating Plaintiffs and Damages Class members. Wisconsin 372. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Wisconsin at prices that were more than they would have been but for Defendants’ actions. 373. Plaintiffs and Damages Class members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Damages Class members. 374. Defendants appreciated the benefit bestowed upon them by Plaintiffs and Damages Class members. 375. Under the circumstances, it would be inequitable for Defendants to retain such benefits without compensating Plaintiffs and Damages Class members. Wyoming 376. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Wyoming at prices that were more than they would have been but for Defendants’ actions. 377. Plaintiffs and Damages Class members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Damages Class members. 378. Defendants accepted, used and enjoyed the benefits bestowed upon them by Plaintiffs and Damages Class members. 379. Under the circumstances, it would be inequitable for Defendants to retain such benefits without compensating Plaintiffs and Damages Class members. District of Columbia 380. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in the District of Columbia at prices that were more than they would have been but for Defendants’ actions. 381. Plaintiffs and Damages Class members have conferred an economic benefit upon Defendants, in the nature of revenue resulting from unlawful overcharges to the economic detriment of Plaintiffs and Damages Class members. 382. Defendants accepted and retained the benefit bestowed upon them under inequitable and unjust circumstances arising from unlawful overcharges to Plaintiffs and Damages Class members. 383. Under the circumstances, it would be inequitable and unjust for Defendants to retain such benefits. Puerto Rico 384. Defendants unlawfully overcharged end-payers, who made purchases of or reimbursements for branded and generic versions of Vascepa in Puerto Rico at prices that were more than they would have been but for Defendants’ actions. 385. Defendants have been enriched by revenue resulting from unlawful overcharges for branded and generic versions of Vascepa. 386. Plaintiffs have been impoverished by the overcharges for branded and generic versions of Vascepa resulting from Defendants’ unlawful conduct. 387. Defendants’ enrichment and Plaintiffs’ impoverishment are connected. 388. There is no justification for Defendants’ receipt of the benefits causing their enrichment and Plaintiffs’ impoverishment, because Plaintiffs paid anticompetitive prices that inured to Defendants’ benefit, and it would be inequitable for Defendants to retain any revenue gained from their unlawful overcharges. 389. Plaintiffs and Damages Class members have no remedy at law. FIFTH CLAIM FOR RELIEF Violation of Section 1 of the Sherman Act: Contract, Combination, and Conspiracy in Restraint of Trade (Against All Defendants) 390. Plaintiffs incorporate by reference all of the allegations above as though fully set forth herein. 391. Plaintiffs bring this claim on behalf of the Injunctive Relief Class. 392. Defendants violated 15 U.S.C. § 1 by entering into a series of exclusive contracts that were intended to and did lock up supply of Vascepa API, thereby constraining competition in the market for branded and generic Vascepa. 393. The agreements between Amarin and each of the API-supplier defendants substantially, unreasonable, and unduly restrained trade in the relevant market, the purpose and effect of which was to: a. prevent generic competitors from obtaining the API necessary to manufacture Vascepa; b. delay the entry of generic versions of Vascepa; c. hamper the ability of generic competitors to meet demand for their generic Vascepa product; and d. raise and maintain the prices that Plaintiffs and the Injunction Class members would pay for Vascepa to and at supra-competitive levels. 394. There is no legitimate, non-pretextual, procompetitive business justification for the exclusive contracts between Amarin and the API-supplier defendants. 395. The agreements between Amarin and each of the API-supplier defendants harmed competition in the relevant market. 396. As a direct and proximate result of Defendants’ violation of Sherman Act § 1, Plaintiffs and the Injunction Class have been injured in their business and property throughout the Class Period. 397. Plaintiffs and the Injunction Class are entitled to injunctive and other equitable relief, pursuant to 15 U.S.C. § 26. SIXTH CLAIM FOR RELIEF Violation of Section 2 of the Sherman Act: Monopolization (Against Amarin) 398. Plaintiffs incorporate by reference all of the allegations above as though fully set forth herein. 399. Plaintiffs bring this claim on behalf of the Injunctive Relief Class. 400. As described above, throughout the relevant time period Amarin possessed monopoly power nationwide and in each of the United States and its territories in the market for Vascepa. No other manufacturer sold a competing version of Vascepa during the relevant time 401. At all relevant times, Amarin possessed substantial market power (i.e., monopoly power) in the relevant market. Amarin possessed the power to control prices in, prevent prices from falling in, and exclude competitors from the relevant market. 402. Through their overarching anticompetitive scheme, as alleged above, Amarin willfully maintained their monopoly power in the relevant market using restrictive or exclusionary conduct, rather than by means of greater business acumen or a historic accident, and thereby injured Plaintiffs and the Injunctive Relief Class. Amarin’s anticompetitive conduct was done with the specific intent to maintain their monopoly in the market for Vascepa in the United States and its territories. 403. Amarin knowingly and intentionally engaged in this anticompetitive scheme to monopolize the market for Vascepa and its generic equivalents as described above. Amarin accomplished this scheme by, inter alia, (1) entering into exclusive supply agreements with at least four different icosapent ethyl API suppliers; (2) otherwise foreclosing the supply of icosapent ethyl API; and (3) raising and maintaining prices so that Plaintiffs and Class members would pay for Vascepa at supracompetitive prices. 404. The goal, purpose, and effect of Amarin’s scheme was to prevent, delay, and limit the sale of generic Vascepa in the United States at prices significantly below Amarin’s prices for Vascepa, thereby effectively preventing the average market price of Vascepa and its generic equivalents from declining dramatically while maintaining and extending its monopoly power with respect to Vascepa. 405. Plaintiffs and members of the Injunctive Relief Class purchased substantial amounts of Vascepa indirectly from Amarin. 406. As a result of Amarin’s illegal conduct, Plaintiffs and members of the Injunctive Relief Class were compelled to pay, and did pay, more than they would have paid for their requirements of Vascepa and its generic equivalents absent Amarin’s illegal conduct. But for Amarin’s illegal conduct, competitors would have begun selling generic Vascepa during the relevant period, and prices for Vascepa and its generic equivalents would have been lower, sooner. 407. Had manufacturers of generic Vascepa entered the market and lawfully competed with Amarin earlier, Plaintiffs and other members of the Injunctive Relief Class would have substituted lower-priced generic Vascepa for the higher-priced brand-name Vascepa for some or all of their requirements of Vascepa and its generic equivalents, and/or would have paid lower net prices on their remaining Vascepa and/or AB-rated bioequivalent purchases 408. Plaintiffs and members of the Injunctive Relief Class will continue to suffer injury, in the form of overcharges paid for Vascepa, if Amarin’s unlawful conduct is not enjoined. 409. Plaintiffs and the members of the Injunctive Relief Class therefore seek equitable and injunctive relief under Section 16 of the Clayton Act, 15 U.S.C. § 26, and other applicable laws, to correct for the anticompetitive market effects caused by Amarin’s unlawful conduct, and to assure that similar anticompetitive conduct and effects do not continue or reoccur in the future DEMAND FOR JUDGMENT WHEREFORE, Plaintiffs, on their own behalf and on behalf of the proposed Classes, prays for judgment against Defendants and that this Court: 1. Determine that this action may be maintained as a class action pursuant to Rules 23(a) and (b)(3) of the Federal Rules of Civil Procedure, and direct that reasonable notice of this action, as provided by Rule 23(c)(2), be given to the Classes, and appoint Plaintiffs as the named representative of the Classes; 2. Award Plaintiffs and the Damages Class treble damages (i.e., three times overcharges) in an amount to be determined at trial, plus interest in accordance with law; 3. Grant Plaintiffs and the Injunctive Relief Class equitable relief in the nature of disgorgement, restitution, and the creation of a constructive trust to remedy Defendants’ unjust enrichment; 4. Award Plaintiffs and the Classes their costs of suit, including reasonable attorneys’ fees as provided by law; 5. Permanently enjoin Defendants both from continuing the unlawful conduct alleged here, and from engaging in similar or related conduct in the future; and 6. Award such other and further relief as the Court deems just and proper. JURY DEMAND Pursuant to Rule 38 of the Federal Rules of Civil Procedure, Plaintiffs, on behalf of themselves and the proposed Classes, demand a trial by jury of all issues so triable. Dated: June 2, 2021 /s/ James E. Cecchi James E. Cecchi Lindsey H. Taylor CARELLA, BYRNE, CECCHI, OLSTEIN, BRODY & AGNELLO, P.C. 5 Becker Farm Road Roseland, NJ 07068 Telephone: (973) 994-1700 Fax: (973) 994-1744 [email protected] [email protected] Lee Albert Brian Murray Greg Linkh Brian Brooks GLANCY PRONGAY & MURRAY LLP 230 Park Avenue, Suite 358 New York, NY 10169 Telephone: (212) 682-5340 Facsimile: (212) 884-0988 [email protected] [email protected] [email protected] [email protected] Roberta D. Liebenberg Adam J. Pessin Fine, Kaplan and Black R.P.C. 1 S. Broad St., 23rd Floor Philadelphia, PA 19107 Telephone: (215) 567-6565 [email protected] [email protected] Joseph H. Meltzer Terence S. Ziegler Ethan J. Barlieb Lauren M. McGinley KESSLER TOPAZ MELTZER & CHECK, LLP 280 King of Prussia Road Radnor, PA 19087 Telephone: (610) 667-7706 [email protected] [email protected] [email protected] [email protected] Michael E. Criden Kevin B. Love Lindsey C. Grossman CRIDEN & LOVE, P.A. 7301 S.W. 57th Court, Suite 515 South Miami, Florida 33143 Telephone: (305) 357-9000 Fax: (305) 357-9050 [email protected] [email protected] [email protected] Counsel for Uniformed Fire Officers Association Family Protection Plan Local 854 and the Uniformed Fire Officers Association for Retired Fire Officers Family Protection Plan

antitrust

CqWMCYcBD5gMZwcz0Ya7

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x ECF CASE EVELINA CALCANO, ON BEHALF OF HERSELF AND ALL OTHER PERSONS SIMILARLY SITUATED​, 9607 No.: 1:20-cv- Plaintiffs, CLASS ACTION COMPLAINT v. JURY TRIAL DEMANDED THE ORNAMENT SHOP, INC., Defendant. : : : : : : : : : : : : - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x INTRODUCTION 1. Plaintiff, EVELINA CALCANO​, on behalf of herself and all other persons similarly situated, asserts the following claims against Defendant, THE ORNAMENT SHOP, INC., as follows. 2. Plaintiff is a visually-impaired and legally blind person who requires screen-reading software to read website content using her computer. Plaintiff uses the terms “blind” or “visually-impaired” to refer to all people with visual impairments who meet the legal definition of blindness in that they have a visual acuity with correction of less than or equal to 20 x 200. Some blind people who meet their definition have limited vision. Others have no vision. 3. In a September 25, 2018 letter to U.S. House of Representative Ted Budd, U.S. Department of Justice Assistant Attorney General Stephen E. Boyd confirmed that public accommodations must make the websites they own, operate, or control equally accessible to individuals with disabilities. Assistant Attorney General Boyd’s letter provides: The Department [of Justice] first articulated its interpretation that the ADA applies to public accommodations’ websites over 20 years ago. This interpretation is consistent with the ADA’s title III requirement that the goods, services, privileges, or activities provided by places of public accommodation be equally accessible to people with disabilities.​1 4. Based on a 2010 U.S. Census Bureau report, approximately 8.1 million people in the United States are visually-impaired, including 2.0 million who are blind, and according to the American Foundation for the Blind’s 2015 report, approximately 400,000 visually-impaired persons live in the State of New York. 5. Plaintiff brings her civil rights action against THE ORNAMENT SHOP, INC., (“Defendant” or “Ornament Shop”) for its failure to design, construct, maintain, and operate its website to be fully accessible to and independently usable by Plaintiff and other blind or visually-impaired people. Defendant’s denial of full and equal access to its website, and therefore denial of its products and services offered thereby, is a violation of Plaintiff’s rights under the Americans with Disabilities Act (“ADA”). 6. Because Defendant’s website, ​https://www.ornamentshop.com/​, (the “Website” or “Defendant’s website”), is not equally accessible to blind and visually-impaired consumers, it violates the ADA. Plaintiff seeks a permanent injunction to cause a change in Defendant’s corporate policies, practices, and procedures so that Defendant’s website will become and remain accessible to blind and visually-impaired consumers. 1 ​See​ Letter from Assistant Attorney General Stephen E. Boyd, U.S. Department of Justice, to Congressman Ted Budd, U.S. House of Representatives (Sept. 25, 2018) (available at https://images.cutimes.com/contrib/content/uploads/documents/413/152136/adaletter.pdf) (last accessed July 13, 2020). -2- 7. By failing to make its Website available in a manner compatible with computer screen reader programs, Defendant deprives blind and visually-impaired individuals the benefits of its online goods, content, and services—all benefits it affords nondisabled individuals—thereby increasing the sense of isolation and stigma among those persons that Title III was meant to redress. 8. This discrimination is particularly acute during the current COVID-19 global pandemic. According to the Centers for Disease Control and Prevention (“CDC”), Americans living with disabilities are at higher risk for severe illness from COVID-19 and, therefore, are recommended to shelter in place throughout the duration of the pandemic.​2 This underscores the importance of access to online retailers, such as Defendant, for this especially vulnerable population. 9. The COVID-19 pandemic is particularly dangerous for disabled individuals.​3 The overwhelming burden on hospitals is leading to a worry that the emergency services will ration treatment. Disabled individuals are in fear that their diminished capacity to communicate will affect their treatment.​4 Public health experts 2 See​ Centers for Disease Control and Prevention website, Coronavirus Disease 2019 (2019), available at https://www.cdc.gov/coronavirus/2019-ncov/need-extra-precautions/people-at-higher-risk.html?CDC_AA_ refVal=https%3A%2F%2Fwww.cdc.gov%2Fcoronavirus%2F2019-ncov%2Fspecific-groups%2Fhigh-risk- complications.html (last accessed July 13, 2020) (“Based on currently available information and clinical expertise, older adults and people of any age who have serious underlying medical conditions might be at higher risk for severe illness from COVID-19.”). 3 ​See​ The New York Times, ‘It’s Hit Our Front Door’: Homes for the Disabled See a Surge of Covid-19 (2020), available at https://www.nytimes.com/2020/04/08/nyregion/coronavirus-disabilities-group-homes.html?smid =fb-nytimes&smtyp=cur (last accessed July 13, 2020) (“As of Monday, 1,100 of the 140,000 developmentally disabled people monitored by the state had tested positive for the virus, state officials said. One hundred five had died — a rate far higher than in the general population”). 4 ​See ​The Atlantic, Americans With Disabilities Are Terrified (2020), available at https://www.theatlantic.com/politics/archive/2020/04/people-disabilities-worry-they-wont-get-tre atment/609355/ (last accessed July 13, 2020) (explaining that disabled individuals are inherently more susceptible to the virus, leading to complications in hospital in which the individuals are unable to effectively communicate with doctors while intubated). -3- expect social distancing to extend through 2022, and with uncertainty surrounding businesses transitioning back to normal operations, the importance of accessible online services has been heightened. During these unprecedented times, disabled individuals risk losing their jobs, experiencing difficulty acquiring goods and services like health care, and not having the information they need to stay safe.​5 JURISDICTION AND VENUE 10. The Court has subject-matter jurisdiction over this action under 28 U.S.C. § 1331 and 42 U.S.C. § 12181, as Plaintiff’s claims arise under Title III of the ADA, 42 U.S.C. § 12181, ​et seq​., and 28 U.S.C. § 1332. 11. The Court has supplemental jurisdiction under 28 U.S.C. § 1367 over Plaintiff’s New York State Human Rights Law, N.Y. Exec. Law Article 15, (“NYSHRL”) and New York City Human Rights Law, N.Y.C. Admin. Code § 8-101 ​et seq.​, (“NYCHRL”) claims. 12. Venue is proper in this district under 28 U.S.C. §1391(b)(1) and (2) because Defendant conducts and continues to conduct a substantial and significant amount of business in this District, Defendant is subject to personal jurisdiction in this District, and a substantial portion of the conduct complained of herein occurred in this District. 13. Defendant is subject to personal jurisdiction in this District. Defendant has been and is committing the acts or omissions alleged herein in the Southern District of New York that caused injury and violated rights the ADA prescribes to Plaintiff and to 5 ​See​ Slate, The Inaccessible Internet 2020, available at https://slate.com/technology/2020/05/disabled-digital-accessibility-pandemic.html (last accessed July 13, 2020). -4- other blind and other visually-impaired consumers. A substantial part of the acts and omissions giving rise to Plaintiff’s claims occurred in this District: on several separate occasions, Plaintiff has been denied the full use and enjoyment of the facilities, goods, and services of Defendant’s Website while attempting to access the website from her home in New York County. These access barriers that Plaintiff encountered have caused a denial of Plaintiff’s full and equal access multiple times in the past, and now deter Plaintiff on a regular basis from visiting Defendant’s Website. This includes, Plaintiff attempting to obtain information about Defendant’s online retail merchandise. 14. Defendant participates in New York’s economic life by clearly performing business over the Internet. Through its Website, Defendant entered into contracts for the sale of its products and services with residents of New York. These online sales contracts involve, and require, Defendant’s knowing and repeated transmission of computer files over the Internet. ​See Reed v. 1-800-Flowers.com, Inc.​, 327 F. Supp. 3d 539 (E.D.N.Y. 2018) (exercising personal jurisdiction over forum plaintiff’s website accessibility claims against out-of-forum website operator); ​Andrews v. Blick Art Materials​, LLC, 286 F. Supp. 3d 365 (E.D.N.Y. 2017). 15. The Court is empowered to issue a declaratory judgment under 28 U.S.C. §§ 2201 and 2202. THE PARTIES 16. Plaintiff, EVELINA CALCANO​, at all relevant times, is a resident of New York, New York. 17. Plaintiff is a blind, visually-impaired handicapped person and a member of member of a protected class of individuals under the ADA, under 42 U.S.C. § -5- 12102(1)-(2), and the regulations implementing the ADA set forth at 28 CFR §§ 36.101 et seq​., the NYSHRL and NYCHRL. 18. Defendant, THE ORNAMENT SHOP, INC., is and was, at all relevant times herein, a Ohio For Profit Corporation with its principal place of business located at 6820 Fairfield Business Park Drive, Fairfield, OH 45014. Defendant operates the Ornament Shop online retail store as well as the Ornament Shop website and advertises, markets, and operates in the State of New York and throughout the United States. 19. Defendant, THE ORNAMENT SHOP, INC., operates the Ornament Shop online retail store across the United States. This online retail store constitutes a place of public accommodation. Defendant’s Website provides consumers with access to an array of goods including information about purchasing specialty ornaments, decorations, gifts and other products available online for purchase, and to ascertain information relating to pricing, shipping, ordering merchandise and return and privacy policies. 20. Defendant’s online retail store is a place of public accommodation within the definition of Title III of the ADA, 42 U.S.C. § 12181(7). Defendant’s Website is a service, privilege, or advantage of Defendant’s online retail stores. NATURE OF ACTION 21. The Internet has become a significant source of information, a portal, and a tool for conducting business, doing everyday activities such as shopping, learning, banking, researching, as well as many other activities for sighted, blind and visually-impaired persons alike. 22. In today’s tech-savvy world, blind and visually-impaired people have the ability to access websites using keyboards in conjunction with screen access software that -6- vocalizes the visual information found on a computer screen or displays the content on a refreshable Braille display. This technology is known as screen-reading software. Screen-reading software is currently the only method a blind or visually-impaired person may independently utilize in order to access the internet. Unless websites are designed to be read by screen-reading software, blind and visually-impaired persons are unable to fully access websites, and the information, products, and services contained thereon. 23. Blind and visually-impaired users of Windows operating system-enabled computers and devices have several screen reading software programs available to them. Some of these programs are available for purchase and other programs are available without the user having to purchase the program separately. Job Access With Speech, otherwise known as “JAWS” is currently the most popular, separately purchased and downloaded screen-reading software program available for a Windows computer. 24. For screen-reading software to function, the information on a website must be capable of being rendered into text. If the website content is not capable of being rendered into text, the blind or visually-impaired user is unable to access the same content available to sighted users. 25. The international website standards organization, the World Wide Web Consortium, known throughout the world as W3C, has published version 2.0 of the Web Content Accessibility Guidelines (“WCAG 2.0”). WCAG 2.0 are well-established guidelines for making websites accessible to blind and visually-impaired persons. These guidelines are universally followed by most large business entities and government agencies to ensure their websites are accessible. -7- 26. Non-compliant websites pose common access barriers to blind and visually-impaired persons. Common barriers encountered by blind and visually-impaired persons include, but are not limited to, the following: a. A text equivalent for every non-text element is not provided; b. Title frames with text are not provided for identification and navigation; c. Equivalent text is not provided when using scripts; d. Forms with the same information and functionality as for sighted persons are not provided; e. Information about the meaning and structure of content is not conveyed by more than the visual presentation of content; f. Text cannot be resized without assistive technology up to 200% without losing content or functionality; g. If the content enforces a time limit, the user is not able to extend, adjust or disable it; h. Web pages do not have titles that describe the topic or purpose; i. The purpose of each link cannot be determined from the link text alone or from the link text and its programmatically determined link context; j. One or more keyboard operable user interface lacks a mode of operation where the keyboard focus indicator is discernible; k. The default human language of each web page cannot be programmatically determined; -8- l. When a component receives focus, it may initiate a change in context; m. Changing the setting of a user interface component may automatically cause a change of context where the user has not been advised before using the component; n. Labels or instructions are not provided when content requires user input, which include captcha prompts that require the user to verify that he or she is not a robot; o. In content which is implemented by using markup languages, elements do not have complete start and end tags, elements are not nested according to their specifications, elements may contain duplicate attributes and/or any IDs are not unique; p. Inaccessible Portable Document Format (PDFs); and, q. The name and role of all User Interface elements cannot be programmatically determined; items that can be set by the user cannot be programmatically set; and/or notification of changes to these items is not available to user agents, including assistive technology. STATEMENT OF FACTS Defendant’s Barriers on Its Website 27. Defendant offers the commercial website, https://www.ornamentshop.com/​, to the public. The website offers features which should allow all consumers to access the goods and services offered by the Defendant and which Defendant ensures delivery of such goods throughout the United States including New -9- York State. The goods and services offered by Defendant include, but are not limited to, the following, which allow consumers to: purchase specialty ornaments, decorations, gifts and other products available online for purchase, and to ascertain information relating to pricing, shipping, ordering merchandise and return and privacy policies. 28. It is, upon information and belief, Defendant’s policy and practice to deny Plaintiff, along with other blind or visually-impaired users, access to Defendant’s website, and to therefore specifically deny the goods and services that are offered thereby. Due to Defendant’s failure and refusal to remove access barriers to its website, Plaintiff and visually-impaired persons have been and are still being denied equal access to Defendant’s numerous goods, services and benefits offered to the public through the Website. 29. Plaintiff is a visually-impaired and legally blind person, who cannot use a computer without the assistance of screen-reading software. Plaintiff is, however, a proficient JAWS screen-reader user and uses it to access the Internet. Plaintiff has visited the Website on separate occasions using the JAWS screen-reader. 30. During Plaintiff’s visits to the Website, the last occurring in November, 2020, in an attempt to purchase a product from the Defendant, the Plaintiff encountered multiple access barriers that denied Plaintiff a shopping experience similar to that of a sighted person and full and equal access to the goods and services offered to the public and made available to the public; and that denied Plaintiff the full enjoyment of the goods, and services of the Website by being unable to purchase specialty ornaments, decorations, gifts and other products available online for purchase, and to ascertain -10- information relating to pricing, shipping, ordering merchandise and return and privacy policies. 31. While attempting to navigate the Website, Plaintiff encountered multiple accessibility barriers for blind or visually-impaired persons that include, but are not limited to, the following: a. Lack of Alternative Text (“alt-text”), or a text equivalent. Alt-text is an invisible code embedded beneath a graphical image on a website. Web accessibility requires that alt-text be coded with each picture so that screen-reading software can speak the alt-text where a sighted user sees pictures, which includes captcha prompts. Alt-text does not change the visual presentation, but instead a text box shows when the keyboard moves over the picture. The lack of alt-text on these graphics prevents screen readers from accurately vocalizing a description of the graphics. As a result, Defendant’s visually-impaired customers are unable to determine what is on the website, browse, or make any purchases; b. Empty Links That Contain No Text causing the function or purpose of the link to not be presented to the user. They can introduce confusion for keyboard and screen-reader users; c. Redundant Links where adjacent links go to the same URL address which results in additional navigation and repetition for keyboard and screen-reader users; and d. Linked Images Missing Alt-text, which causes problems if an image within a link contains no text and that image does not provide alt-text. A screen -11- reader then has no content to present the user as to the function of the link, including information contained in PDFs. 32. Many pages on the Website also contain the same title elements. This is a problem for the visually-impaired because the screen reader fails to distinguish one page from another. In order to fix this problem, Defendant must change the title elements for each page. 33. The Website also contained a host of broken links, which is a hyperlink to a non-existent or empty webpage. For the visually-impaired this is especially paralyzing due to the inability to navigate or otherwise determine where one is on the website once a broken link is encountered. For example, upon coming across a link of interest, Plaintiff was redirected to an error page. However, the screen-reader failed to communicate that the link was broken. As a result, Plaintiff could not get back to her original search. Defendant Must Remove Barriers To Its Website 34. Due to the inaccessibility of Defendant’s Website, blind and visually-impaired customers such as Plaintiff, who need screen-readers, cannot fully and equally use or enjoy the goods, and services Defendant offers to the public on its Website. The access barriers Plaintiff encountered have caused a denial of Plaintiff’s full and equal access in the past, and now deter Plaintiff on a regular basis from accessing the Website. 35. These access barriers on Defendant’s Website have deterred Plaintiff from visiting Defendant’s Website and enjoying it equal to sighted individuals because: Plaintiff was unable to use and enjoy the Website in the same manner as sighted -12- individuals do, preventing Plaintiff from using the Website to purchase items and to view the items. 36. If the Website was equally accessible to all, Plaintiff could independently navigate the Website and complete a desired transaction as sighted individuals do. 37. Through her attempts to use the Website, Plaintiff has actual knowledge of the access barriers that make these services inaccessible and independently unusable by blind and visually-impaired persons. 38. Because simple compliance with the WCAG 2.0 Guidelines would provide Plaintiff and other visually-impaired consumers with equal access to the Website, Plaintiff alleges that Defendant has engaged in acts of intentional discrimination, including but not limited to the following policies or practices: a. Constructing and maintaining a website that is inaccessible to visually-impaired individuals, including Plaintiff; b. Failure to construct and maintain a website that is not sufficiently intuitive so as to be equally accessible to visually-impaired individuals, including Plaintiff; and, c. Failing to take actions to correct these access barriers in the face of substantial harm and discrimination to blind and visually-impaired consumers, such as Plaintiff, as a member of a protected class. 39. Defendant therefore uses standards, criteria or methods of administration that have the effect of discriminating or perpetuating the discrimination of others, as alleged herein. -13- 40. The ADA expressly contemplates the injunctive relief that Plaintiff seeks in this action. In relevant part, the ADA requires: In the case of violations of . . . this title, injunctive relief shall include an order to alter facilities to make such facilities readily accessible to and usable by individuals with disabilities . . . Where appropriate, injunctive relief shall also include requiring the . . . modification of a policy . . . 42 U.S.C. § 12188(a)(2). 41. Because Defendant’s Website is not and has never been fully accessible, and because, upon information and belief, Defendant does not have, and has never had, adequate corporate policies that are reasonably calculated to cause its Website to become and remain accessible, Plaintiff invokes 42 U.S.C. § 12188(a)(2) and seek a permanent injunction requiring Defendant to: a) Retain a qualified consultant acceptable to Plaintiff (“Web Accessibility Consultant”) who shall assist in improving the accessibility of its Website, including all third-party content and plug-ins, so the goods and services on the Website may be equally accessed and enjoyed by visually-impaired persons; b) Work with the Web Accessibility Consultant to ensure all employees involved in Website and content development be given web accessibility training on a biennial basis, including onsite training to create accessible content at the design and development stages; c) Work with the Web Accessibility Consultant to perform an automated accessibility audit on a periodic basis to evaluate whether Defendant’s Website may be equally accessed and enjoyed by visually-impaired persons on an ongoing basis; d) Work with the Web Accessibility Consultant to perform end-user accessibility/usability testing on at least a quarterly basis with said testing to be performed by humans who are blind or have low vision, or who have training and experience in the manner in which persons who are blind use a screen reader to navigate, browse, and conduct business on websites, in addition to the testing, if applicable, that is performed using semi-automated tools; e) Incorporate all of the Web Accessibility Consultant’s recommendations within sixty (60) days of receiving the recommendations; -14- f) Work with the Web Accessibility Consultant to create a Web Accessibility Policy that will be posted on its Website, along with an e-mail address, instant messenger, and toll-free phone number to report accessibility-related problems; g) Directly link from the footer on each page of its Website, a statement that indicates that Defendant is making efforts to maintain and increase the accessibility of its Website to ensure that visually-impaired persons have full and equal enjoyment of the goods, services, facilities, privileges, advantages, and accommodations of the Defendant’s Website; h) Accompany the public policy statement with an accessible means of submitting accessibility questions and problems, including an accessible form to submit feedback or an email address to contact representatives knowledgeable about the Web Accessibility Policy; i) Provide a notice, prominently and directly linked from the footer on each page of its Website, soliciting feedback from visitors to the Website on how the accessibility of the Website can be improved. The link shall provide a method to provide feedback, including an accessible form to submit feedback or an email address to contact representatives knowledgeable about the Web Accessibility Policy; j) Provide a copy of the Web Accessibility Policy to all web content personnel, contractors responsible for web content, and Client Service Operations call center agents (“CSO Personnel”) for the Website; k) Train no fewer than three of its CSO Personnel to automatically escalate calls from users with disabilities who encounter difficulties using the Website. Defendant shall have trained no fewer than 3 of its CSO personnel to timely assist such users with disabilities within CSO published hours of operation. Defendant shall establish procedures for promptly directing requests for assistance to such personnel including notifying the public that customer assistance is available to users with disabilities and describing the process to obtain that assistance; l) Modify existing bug fix policies, practices, and procedures to include the elimination of bugs that cause the Website to be inaccessible to users of screen reader technology; and m) Plaintiff, her counsel, and their experts monitor the Website for up to two years after the Mutually Agreed Upon Consultant validates the Website are free of accessibility errors/violations to ensure Defendant has adopted and implemented adequate accessibility policies. To this end, Plaintiff, through her counsel and their experts, shall be entitled to consult with the Web Accessibility Consultant at their discretion, and to review any written material, including but not limited to any recommendations the Website Accessibility Consultant provides Defendant. -15- 42. Web-based technologies have features and content that are modified on a daily, and in some instances an hourly, basis, and a one time “fix” to an inaccessible website will not cause the website to remain accessible without a corresponding change in corporate policies related to those web-based technologies. To evaluate whether an inaccessible website has been rendered accessible, and whether corporate policies related to web-based technologies have been changed in a meaningful manner that will cause the website to remain accessible, the website must be reviewed on a periodic basis using both automated accessibility screening tools and end user testing by visually-impaired persons. 43. If the Website was accessible, Plaintiff and similarly situated blind and visually-impaired persons could independently shop for and otherwise research the Defendant’s products via the Website. 44. Although Defendant may currently have centralized policies regarding maintaining and operating its Website, Defendant lacks a plan and policy reasonably calculated to make them fully and equally accessible to, and independently usable by, blind and other visually-impaired consumers. 45. Defendant has, upon information and belief, invested substantial sums in developing and maintaining their Website and has generated significant revenue from the Website. These amounts are far greater than the associated cost of making their Website equally accessible to visually-impaired consumers. 46. Without injunctive relief, Plaintiff and other visually-impaired consumers will continue to be unable to independently use the Website, violating their rights. CLASS ACTION ALLEGATIONS -16- 47. Plaintiff, on behalf of herself and all others similarly situated, seeks to certify a nationwide class under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind individuals in the United States who have attempted to access Defendant’s Website and as a result have been denied access to the equal enjoyment of goods and services offered by Defendant’s Website, during the relevant statutory period. 48. Plaintiff, on behalf of herself and all others similarly situated, seeks to certify a New York State Sub-Class under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind individuals in the State of New York who have attempted to access Defendant’s Website and as a result have been denied access to the equal enjoyment of goods and services offered by Defendant’s Website, during the relevant statutory period. 49. Plaintiff, on behalf of herself and all others similarly situated, seeks to certify a New York City Sub-Class under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind individuals in the City of New York who have attempted to access Defendant’s Website and as a result have been denied access to the equal enjoyment of goods and services offered by Defendant’s Website, during the relevant statutory period. 50. Common questions of law and fact exist amongst the Class and Sub-Classes, including: a. Whether Defendant’s Website is a “public accommodation” under the ADA; b. Whether Defendant’s Website is a “place or provider of public accommodation” under the NYSHRL or NYCHRL; -17- c. Whether Defendant’s Website denies the full and equal enjoyment of its goods, services, facilities, privileges, advantages, or accommodations to visually-impaired persons, violating the ADA; and d. Whether Defendant’s Website denies the full and equal enjoyment of its goods, services, facilities, privileges, advantages, or accommodations to visually-impaired persons, violating the NYSHRL or NYCHRL. 51. Plaintiff’s claims are typical of the Class and Sub-Classes. The Class, and Sub-Classes, similarly to the Plaintiff, are severely visually-impaired or otherwise blind persons, and claim that Defendant has violated the ADA, NYSHRL or NYCHRL by failing to update or remove access barriers on its Website so it can be independently accessible to the Class and/or the Sub-Classes. 52. Plaintiff will fairly and adequately represent and protect the interests of the Class Members because Plaintiff has retained and is represented by counsel competent and experienced in complex class action litigation, including ADA litigation and because Plaintiff has no interests antagonistic to the Class Members. Class certification of the claims is appropriate under Fed. R. Civ. P. 23(b)(2) because Defendant has acted or refused to act on grounds generally applicable to the Class, making appropriate both declaratory and injunctive relief with respect to Plaintiff and the Class as a whole. 53. Alternatively, class certification is appropriate under Fed. R. Civ. P. 23(b)(3) because fact and legal questions are common to Class Members predominate over questions affecting only individual Class Members, and because a class action is -18- superior to other available methods for the fair and efficient adjudication of their litigation. 54. Judicial economy will be served by maintaining this lawsuit as a class action in that it is likely to avoid the burden that would be otherwise placed upon the judicial system by the filing of numerous similar suits by visually-impaired persons throughout the United States. FIRST CAUSE OF ACTION VIOLATIONS OF THE ADA, 42 U.S.C. § 12181 ​et seq. 55. Plaintiff, on behalf of herself and the Class Members, repeats and realleges every allegation of the preceding paragraphs as if fully set forth herein. 56. Section 302(a) of Title III of the ADA, 42 U.S.C. § 12101 et seq., provides: No individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation. 42 U.S.C. § 12182(a). 57. Defendant’s online retail store is a place of public accommodation within the definition of Title III of the ADA, 42 U.S.C. § 12181(7). Defendant’s Website is a service, privilege, or advantage of Defendant’s online retail store 58. Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to deny individuals with disabilities the opportunity to participate in or benefit from the goods, services, facilities, privileges, advantages, or accommodations of an entity. 42 U.S.C. § 12182(b)(1)(A)(i). -19- 59. Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to deny individuals with disabilities an opportunity to participate in or benefit from the goods, services, facilities, privileges, advantages, or accommodation, which is equal to the opportunities afforded to other individuals. 42 U.S.C. § 12182(b)(1)(A)(ii). 60. Under Section 302(b)(2) of Title III of the ADA, unlawful discrimination also includes, among other things: [A] failure to make reasonable modifications in policies, practices, or procedures, when such modifications are necessary to afford such goods, services, facilities, privileges, advantages, or accommodations to individuals with disabilities, unless the entity can demonstrate that making such modifications would fundamentally alter the nature of such goods, services, facilities, privileges, advantages or accommodations; and a failure to take such steps as may be necessary to ensure that no individual with a disability is excluded, denied services, segregated or otherwise treated differently than other individuals because of the absence of auxiliary aids and services, unless the entity can demonstrate that taking such steps would fundamentally alter the nature of the good, service, facility, privilege, advantage, or accommodation being offered or would result in an undue burden. 42 U.S.C. § 12182(b)(2)(A)(ii)-(iii). 61. The acts alleged herein constitute violations of Title III of the ADA, and the regulations promulgated thereunder. Plaintiff, who is a member of a protected class of persons under the ADA, has a physical disability that substantially limits the major life activity of sight within the meaning of 42 U.S.C. §§ 12102(1)(A)-(2)(A). Furthermore, Plaintiff has been denied full and equal access to the Website, has not been provided services that are provided to other patrons who are not disabled, and has been provided services that are inferior to the services provided to non-disabled persons. Defendant has failed to take any prompt and equitable steps to remedy its discriminatory conduct. These violations are ongoing. -20- 62. Under 42 U.S.C. § 12188 and the remedies, procedures, and rights set forth and incorporated therein, Plaintiff, requests relief as set forth below. SECOND CAUSE OF ACTION VIOLATIONS OF THE NYSHRL 63. Plaintiff, on behalf of herself and the New York State Sub-Class Members, repeats and realleges every allegation of the preceding paragraphs as if fully set forth herein. 64. N.Y. Exec. Law § 296(2)(a) provides that it is “an unlawful discriminatory practice for any person, being the owner, lessee, proprietor, manager, superintendent, agent or employee of any place of public accommodation . . . because of the . . . disability of any person, directly or indirectly, to refuse, withhold from or deny to such person any of the accommodations, advantages, facilities or privileges thereof.” 65. Defendant’s Website operates in the State of New York and constitutes an online sales establishment and a place of public accommodation within the definition of N.Y. Exec. Law § 292(9). Defendant’s Website is a service, privilege or advantage of Defendant’s online retail establishment. 66. Defendant is subject to New York Human Rights Law because it owns and/or operates its Website in the State of New York. Defendant is a person within the meaning of N.Y. Exec. Law § 292(1). 67. Defendant is violating N.Y. Exec. Law § 296(2)(a) in refusing to update or remove access barriers to its Website, causing its Website and the services integrated therewith to be completely inaccessible to the blind. Their inaccessibility denies blind patrons full and equal access to the facilities, goods and services that Defendant makes available to the non-disabled public. -21- 68. Under N.Y. Exec. Law § 296(2)(c)(i), unlawful discriminatory practice includes, among other things, “a refusal to make reasonable modifications in policies, practices, or procedures, when such modifications are necessary to afford facilities, privileges, advantages or accommodations to individuals with disabilities, unless such person can demonstrate that making such modifications would fundamentally alter the nature of such facilities, privileges, advantages or accommodations being offered or would result in an undue burden". 69. Under N.Y. Exec. Law § 296(2)(c)(ii), unlawful discriminatory practice also includes, “a refusal to take such steps as may be necessary to ensure that no individual with a disability is excluded or denied services because of the absence of auxiliary aids and services, unless such person can demonstrate that taking such steps would fundamentally alter the nature of the facility, privilege, advantage or accommodation being offered or would result in an undue burden.” 70. Readily available, well-established guidelines exist on the Internet for making websites accessible to the blind and visually-impaired. These guidelines have been followed by other large business entities and government agencies in making their website accessible, including but not limited to: adding alt-text to graphics and ensuring that all functions can be performed using a keyboard. Incorporating the basic components to make its Website accessible would neither fundamentally alter the nature of Defendant’s business nor result in an undue burden to Defendant. 71. Defendant’s actions constitute willful intentional discrimination against the class on the basis of a disability in violation of the NYSHRL, N.Y. Exec. Law § 296(2) in that Defendant has: -22- a. constructed and maintained a website that is inaccessible to blind class members with knowledge of the discrimination; and/or b. constructed and maintained a website that is not sufficiently intuitive and/or obvious that it is inaccessible to blind class members; and/or c. failed to take actions to correct these access barriers in the face of substantial harm and discrimination to blind class members. 72. Defendant has failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 73. Defendant discriminates, and will continue in the future to discriminate, against Plaintiff and New York State Sub-Class Members on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, accommodations and/or opportunities of Defendant’s Website under § 296(2) ​et seq. and/or its implementing regulations. Unless the Court enjoins Defendant from continuing to engage in these unlawful practices, Plaintiff and the Sub-Class Members will continue to suffer irreparable harm. 74. Defendant’s actions were and are in violation of New York State Human Rights Law and therefore Plaintiff invokes her right to injunctive relief to remedy the discrimination. 75. Plaintiff is also entitled to compensatory damages, as well as civil penalties and fines under N.Y. Exec. Law § 297(4)(c) ​et seq​. for each and every offense. 76. Plaintiff is also entitled to reasonable attorneys’ fees and costs. 77. Under N.Y. Exec. Law § 297 and the remedies, procedures and rights set forth and incorporated therein Plaintiff prays for judgment as set forth below. -23- THIRD CAUSE OF ACTION VIOLATIONS OF THE NYCHRL 78. Plaintiff, on behalf of herself and the New York City Sub-Class Members, repeats and realleges every allegation of the preceding paragraphs as if fully set forth herein. 79. N.Y.C. Administrative Code § 8-107(4)(a) provides that “It shall be an unlawful discriminatory practice for any person, being the owner, lessee, proprietor, manager, superintendent, agent or employee of any place or provider of public accommodation, because of . . . disability . . . directly or indirectly, to refuse, withhold from or deny to such person, any of the accommodations, advantages, facilities or privileges thereof.” 80. Defendant’s website is an online sales establishment and a place of public accommodation within the definition of N.Y.C. Admin. Code § 8-102(9), and its Website is a service that is integrated with its online sales establishment. 81. Defendant is subject to NYCHRL because it owns and/or operates its Website in the City of New York, making it a person within the meaning of N.Y.C. Admin. Code § 8-102(1). 82. Defendant is violating N.Y.C. Administrative Code § 8-107(4)(a) in refusing to update or remove access barriers to Website, causing its Website and the services integrated therewith to be completely inaccessible to the blind. The inaccessibility denies blind consumers full and equal access to the facilities, goods, and services that Defendant makes available to the non-disabled public. 83. Defendant is required to “make reasonable accommodation to the needs of persons with disabilities . . . any person prohibited by the provisions of [§ 8-107 ​et seq.​] -24- from discriminating on the basis of disability shall make reasonable accommodation to enable a person with a disability to . . . enjoy the right or rights in question provided that the disability is known or should have been known by the covered entity.” N.Y.C. Admin. Code § 8-107(15)(a). 84. Defendant’s actions constitute willful intentional discrimination against the Sub-Class on the basis of a disability in violation of the N.Y.C. Administrative Code § 8-107(4)(a) and § 8-107(15)(a) in that Defendant has: a. constructed and maintained a website that is inaccessible to blind class members with knowledge of the discrimination; and/or b. constructed and maintained a website that is not sufficiently intuitive and/or obvious that it is inaccessible to blind class members; and/or c. failed to take actions to correct these access barriers in the face of substantial harm and discrimination to blind class members. 85. Defendant has failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 86. As such, Defendant discriminates, and will continue in the future to discriminate, against Plaintiff and members of the proposed class and Sub-Class on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, accommodations and/or opportunities of its Website under § 8-107(4)(a) and/or its implementing regulations. Unless the Court enjoins Defendant from continuing to engage in these unlawful practices, Plaintiff and members of the Sub-Class will continue to suffer irreparable harm. -25- 87. Defendant’s actions were and are in violation of the NYCHRL and therefore Plaintiff invokes her right to injunctive relief to remedy the discrimination. 88. Plaintiff is also entitled to compensatory damages, as well as civil penalties and fines under N.Y.C. Administrative Code § 8-120(8) and § 8-126(a) for each offense as well as punitive damages pursuant to § 8-502. 89. Plaintiff is also entitled to reasonable attorneys’ fees and costs. 90. Under N.Y.C. Administrative Code § 8-120 and § 8-126 and the remedies, procedures and rights set forth and incorporated therein Plaintiff prays for judgment as set forth below. FOURTH CAUSE OF ACTION DECLARATORY RELIEF 91. Plaintiff, on behalf of herself and the Class and New York State and City Sub-Classes Members, repeats and realleges every allegation of the preceding paragraphs as if fully set forth herein. 92. An actual controversy has arisen and now exists between the parties in that Plaintiff contends, and is informed and believes that Defendant denies, that its Website contains access barriers denying blind customers the full and equal access to the goods and services of its Website, which Defendant owns, operates and controls, fails to comply with applicable laws including, but not limited to, Title III of the Americans with Disabilities Act, 42 U.S.C. §§ 12182, ​et seq.​, N.Y. Exec. Law § 296, ​et seq.​, and N.Y.C. Admin. Code § 8-107, ​et seq​. prohibiting discrimination against the blind. 93. A judicial declaration is necessary and appropriate at this time in order that each of the parties may know their respective rights and duties and act accordingly. PRAYER FOR RELIEF -26- WHEREFORE, Plaintiff respectfully requests the Court grant the following relief: a. A preliminary and permanent injunction to prohibit Defendant from violating the Americans with Disabilities Act, 42 U.S.C. §§ 12182, ​et seq., N.Y. Exec. Law § 296, ​et seq., N.Y.C. Administrative Code § 8-107, ​et seq​., and the laws of New York; b. A preliminary and permanent injunction requiring Defendant to take all the steps necessary to make its Website into full compliance with the requirements set forth in the ADA, and its implementing regulations, so that the Website is readily accessible to and usable by blind individuals; c. A declaration that Defendant owns, maintains and/or operates its Website in a manner that discriminates against the blind and which fails to provide access for persons with disabilities as required by Americans with Disabilities Act, 42 U.S.C. §§ 12182, ​et seq., N.Y. Exec. Law § 296, ​et seq​., N.Y.C. Administrative Code § 8-107, ​et seq​., and the laws of New York d. An order certifying the Class and Sub-Classes under Fed. R. Civ. P. 23(a) & (b)(2) and/or (b)(3), appointing Plaintiff as Class Representative, and her attorneys as Class Counsel; e. Compensatory damages in an amount to be determined by proof, including all applicable statutory and punitive damages and fines, to Plaintiff and the proposed class and Sub-Classes for violations of their civil rights under New York State Human Rights Law and City Law; f. Pre- and post-judgment interest; g. An award of costs and expenses of the action; and -27- h. Reasonable attorneys’ fees, pursuant to 42 U.S.C. § 12205 and 28 CFR § 36.505, including costs of monitoring Defendant’s compliance with the judgment (​see Gniewkowski v. Lettuce Entertain You Enterprises, Inc​., Case No. 2:16-cv-01898-AJS (W.D. Pa. Jan. 11, 2018) (ECF 191) (“Plaintiffs, as the prevailing party, may file a fee petition before the Court surrenders jurisdiction. ​See also, Pennsylvania v. Delaware Valley Citizens’ Council for Clean Air​, 478 U.S. 546, 559 (1986), supplemented, 483 U.S. 711 (1987); ​see also Access Now, Inc. v. Lax World, LLC​, No. 1:17-cv-10976-DJC (D. Mass. Apr. 17, 2018) (ECF 11); and i. Such other and further relief as this Court deems just and proper. DEMAND FOR TRIAL BY JURY Pursuant to Fed. R. Civ. P. 38(b), Plaintiff demands a trial by jury on all questions of fact the Complaint raises. Dated: New York, New York November 16, 2020 GOTTLIEB & ASSOCIATES /s/Michael A. LaBollita, Esq. Michael A. LaBollita (ML-9985) Jeffrey M. Gottlieb (JG-7905) Dana L. Gottlieb (DG-6151) GOTTLIEB & ASSOCIATES 150 East 18th Street, Suite PHR New York, New York 10003 Tel: 212.228.9795 Fax: 212.982.6284 [email protected] [email protected] [email protected] Attorneys for Plaintiffs -28-

civil rights, immigration, family

UhV_F4cBD5gMZwczf9Lo

UNITED STATES DISTRICT COURT Docket Number: 1:19-cv-9829 SOUTHERN DISTRICT OF NEW YORK - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x VALENTIN REID, on behalf of himself and all others similarly situated, CLASS ACTION COMPLAINT AND Plaintiffs, v. DEMAND FOR JURY TRIAL VWR INTERNATIONAL, LLC, Defendant. : : : : : : : : : : : : - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x INTRODUCTION 1. Plaintiff VALENTIN REID, on behalf of himself and others similarly situated, asserts the following claims against Defendant VWR INTERNATIONAL, LLC as follows. 2. Plaintiff is a visually-impaired and legally blind person who requires screen- reading software to read website content using his computer. Plaintiff uses the terms “blind” or “visually-impaired” to refer to all people with visual impairments who meet the legal definition of blindness in that they have a visual acuity with correction of less than or equal to 20 x 200. Some blind people who meet this definition have limited vision. Others have no vision. 3. Based on a 2010 U.S. Census Bureau report, approximately 8.1 million people in the United States are visually impaired, including 2.0 million who are blind, and according to the American Foundation for the Blind’s 2015 report, approximately 400,000 visually impaired persons live in the State of New York. 4. Plaintiff brings this civil rights action against Defendant for its failure to design, construct, maintain, and operate its website to be fully accessible to and independently usable by Plaintiff and other blind or visually-impaired people. Defendant’s denial of full and equal access to its website, and therefore denial of its goods and services offered thereby, is a violation of Plaintiff’s rights under the Americans with Disabilities Act (“ADA”). 5. Because Defendant’s website, us.vwr.com (the “Website”), is not equally accessible to blind and visually impaired consumers, it violates the ADA. Plaintiff seeks a permanent injunction to cause a change in Defendant’s corporate policies, practices, and procedures so that Defendant’s website will become and remain accessible to blind and visually-impaired consumers. JURISDICTION AND VENUE 6. This Court has subject-matter jurisdiction over this action under 28 U.S.C. § 1331 and 42 U.S.C. § 12181, as Plaintiff’s claims arise under Title III of the ADA, 42 U.S.C. § 12181, et seq., and 28 U.S.C. § 1332. 7. This Court has supplemental jurisdiction under 28 U.S.C. § 1367 over Plaintiff’s and New York City Human Rights Law, N.Y.C. Admin. Code § 8-101 et seq., (“NYCHRL”) claims. 8. Venue is proper in this district under 28 U.S.C. §1391(b)(1) and (2) because Defendant conducts and continues to conduct a substantial and significant amount of business in this District, and a substantial portion of the conduct complained of herein occurred in this District because Plaintiff attempted to utilize, on a number of occasions, the subject Website within this Judicial District. 9. Defendant is subject to personal jurisdiction in this District. Defendant has been and is committing the acts or omissions alleged herein in the Southern District of New York that caused injury and violated rights the ADA prescribes to Plaintiff and to other blind and other visually impaired-consumers. A substantial part of the acts and omissions giving rise to Plaintiff’s claims occurred in this District: on several separate occasions, Plaintiff has been denied the full use and enjoyment of the facilities, goods and services offered to the general public, on Defendant’s Website in New York County. These access barriers that Plaintiff encountered have caused a denial of Plaintiff’s full and equal access multiple times in the past, and now deter Plaintiff on a regular basis from accessing the Defendant’s Website in the future. 10. This Court is empowered to issue a declaratory judgment under 28 U.S.C. §§ 2201 and 2202. THE PARTIES 11. Plaintiff VALENTIN REID, at all relevant times, is and was a resident of Brooklyn, New York. 12. Plaintiff is a blind, visually-impaired handicapped person and a member of a protected class of individuals under the ADA, under 42 U.S.C. § 12102(1)-(2), and the regulations implementing the ADA set forth at 28 CFR §§ 36.101 et seq., NYCHRL. 13. Defendant is and was at all relevant times a California Limited Liability Company doing business in New York. 14. Defendant’s Website, and its goods, and services offered thereupon, is a public accommodation within the definition of Title III of the ADA, 42 U.S.C. § 12181(7). NATURE OF ACTION 15. The Internet has become a significant source of information, a portal, and a tool for conducting business, doing everyday activities such as shopping, learning, banking, researching, as well as many other activities for sighted, blind and visually- impaired persons alike. 16. In today’s tech-savvy world, blind and visually impaired people have the ability to access websites using keyboards in conjunction with screen access software that vocalizes the visual information found on a computer screen or displays the content on a refreshable Braille display. This technology is known as screen-reading software. Screen-reading software is currently the only method a blind or visually- impaired person may use to independently access the internet. Unless websites are designed to be read by screen-reading software, blind and visually-impaired persons are unable to fully access websites, and the information, products, goods and contained thereon. 17. Blind and visually-impaired users of Windows operating system-enabled computers and devices have several screen reading software programs available to them. Some of these programs are available for purchase and other programs are available without the user having to purchase the program separately. Job Access With Speech, otherwise known as “JAWS” is currently the most popular, separately purchased and downloaded screen-reading software program available for a Windows computer. Another popular screen-reading software program available for a Windows computer is NonVisual Desktop Access “NVDA”. 18. For screen-reading software to function, the information on a website must be capable of being rendered into text. If the website content is not capable of being rendered into text, the blind or visually-impaired user is unable to access the same content available to sighted users. 19. The international website standards organization, the World Wide Web Consortium, known throughout the world as W3C, has published version 2.1 of the Web Content Accessibility Guidelines (“WCAG 2.1”). WCAG 2.1 are well- established guidelines for making websites accessible to blind and visually- impaired people. These guidelines are universally followed by most large business entities and government agencies to ensure their websites are accessible. 20. Non-compliant websites pose common access barriers to blind and visually- impaired persons. Common barriers encountered by blind and visually impaired persons include, but are not limited to, the following: a. A text equivalent for every non-text element is not provided; b. Title frames with text are not provided for identification and navigation; c. Equivalent text is not provided when using scripts; d. Forms with the same information and functionality as for sighted persons are not provided; e. Information about the meaning and structure of content is not conveyed by more than the visual presentation of content; f. Text cannot be resized without assistive technology up to 200% without losing content or functionality; g. If the content enforces a time limit, the user is not able to extend, adjust or disable it; h. Web pages do not have titles that describe the topic or purpose; i. The purpose of each link cannot be determined from the link text alone or from the link text and its programmatically determined link context; j. One or more keyboard operable user interface lacks a mode of operation where the keyboard focus indicator is discernible; k. The default human language of each web page cannot be programmatically determined; l. When a component receives focus, it may initiate a change in context; m. Changing the setting of a user interface component may automatically cause a change of context where the user has not been advised before using the component; n. Labels or instructions are not provided when content requires user input, which include captcha prompts that require the user to verify that he or she is not a robot; o. In content which is implemented by using markup languages, elements do not have complete start and end tags, elements are not nested according to their specifications, elements may contain duplicate attributes, and/or any IDs are not unique; p. Inaccessible Portable Document Format (PDFs); and, q. The name and role of all User Interface elements cannot be programmatically determined; items that can be set by the user cannot be programmatically set; and/or notification of changes to these items is not available to user agents, including assistive technology. STATEMENT OF FACTS 21. Defendant is a laboratory and hygienic product retailer, marketing products such as disinfectants and protectants such as clothing aprons, that owns and operates us.vwr.com (its “Website”), offering features which should allow all consumers to access the goods and services and which Defendant ensures the delivery of such goods throughout the United States, including New York State. 22. Defendant’s Website offers products and services for online sale and general delivery to the public. The Website offers features which ought to allow users to browse for items, access navigation bar descriptions and prices, and avail consumers of the ability to peruse the numerous items offered for sale. 23. Plaintiff is a visually-impaired and legally blind person, who cannot use a computer without the assistance of screen-reading software. Plaintiff is, however, a proficient NVDA screen-reader user and uses it to access the Internet. Plaintiff has visited the Website on separate occasions using a screen-reader. 24. On multiple occasions, the last occurring in October of 2019, Plaintiff visited Defendant’s website, us.vwr.com. Despite his efforts, however, Plaintiff was denied a shopping experience similar to that of a sighted individual due to the website’s lack of a variety of features and accommodations. 25. Many features on the Website lacks alt. text, which is the invisible code embedded beneath a graphical image. As a result, Plaintiff was unable to differentiate what products were on the screen due to the failure of the Website to adequately describe its content. 26. Many features on the Website also fail to Add a label element or title attribute for each field. This is a problem for the visually impaired because the screen reader fails to communicate the purpose of the page element. It also leads to the user not being able to understand what he or she is expected to insert into the subject field. As a result, Plaintiff and similarly situated visually impaired users of Defendant’s Website are unable to enjoy the privileges and benefits of the Website equally to sighted users. 27. Many pages on the Website also contain the same title elements. This is a problem for the visually impaired because the screen reader fails to distinguish one page from another. In order to fix this problem, Defendant must change the title elements for each page. 28. The Website also contained a host of broken links, which is a hyperlink to a non- existent or empty webpage. For the visually impaired this is especially paralyzing due to the inability to navigate or otherwise determine where one is on the website once a broken link is encountered. For example, upon coming across a link of interest, the user is redirected to an error page. However, the screen-reader fails to communicate that the link is broken. As a result, a visually impaired user is not able to return to or continue his original search. 29. These access barriers effectively denied Plaintiff the ability to use and enjoy Defendant’s website the same way sighted individuals do. 30. It is, upon information and belief, Defendant’s policy and practice to deny Plaintiff, along with other blind or visually-impaired users, access to Defendant’s website, and to therefore specifically deny the goods and services that are offered to the general public. Due to Defendant’s failure and refusal to remove access barriers to its website, Plaintiff and visually-impaired persons have been and are still being denied equal access to Defendant’s Website, and the numerous goods and services and benefits offered to the public through the Website. 31. Due to the inaccessibility of Defendant’s Website, blind and visually-impaired customers such as Plaintiff, who need screen-readers, cannot fully and equally use or enjoy the facilities, products, and services Defendant offers to the public on its Website. The access barriers Plaintiff encountered have caused a denial of Plaintiff’s full and equal access in the past, and now deter Plaintiff on a regular basis from equal access to the Website. 32. If the Website were equally accessible to all, Plaintiff could independently navigate the Website and complete a desired transaction as sighted individuals do. 33. Through his attempts to use the Website, Plaintiff has actual knowledge of the access barriers that make these services inaccessible and independently unusable by blind and visually-impaired people. 34. Because simple compliance with the WCAG 2.1 Guidelines would provide Plaintiff and other visually-impaired consumers with equal access to the Website, Plaintiff alleges that Defendant has engaged in acts of intentional discrimination, including but not limited to the following policies or practices: a. Constructing and maintaining a website that is inaccessible to visually-impaired individuals, including Plaintiff; b. Failure to construct and maintain a website that is sufficiently intuitive so as to be equally accessible to visually impaired individuals, including Plaintiff; and, c. Failing to take actions to correct these access barriers in the face of substantial harm and discrimination to blind and visually-impaired consumers, such as Plaintiff, as a member of a protected class. 35. Defendant therefore uses standards, criteria or methods of administration that have the effect of discriminating or perpetuating the discrimination of others, as alleged herein. 36. The ADA expressly contemplates the injunctive relief that Plaintiff seeks in this action. In relevant part, the ADA requires: In the case of violations of . . . this title, injunctive relief shall include an order to alter facilities to make such facilities readily accessible to and usable by individuals with disabilities . . . Where appropriate, injunctive relief shall also include requiring the . . . modification of a policy . . . 42 U.S.C. § 12188(a)(2). 37. Because Defendant’s Website has never been equally accessible, and because Defendant lacks a corporate policy that is reasonably calculated to cause its Website to become and remain accessible, Plaintiff invokes 42 U.S.C. § 12188(a)(2) and seeks a permanent injunction requiring Defendant to retain a qualified consultant acceptable to Plaintiff (“Agreed Upon Consultant”) to assist Defendant to comply with WCAG 2.1 guidelines for Defendant’s Website. Plaintiff seeks that this permanent injunction requires Defendant to cooperate with the Agreed Upon Consultant to: a. Train Defendant’s employees and agents who develop the Website on accessibility compliance under the WCAG 2.1 guidelines; b. Regularly check the accessibility of the Website under the WCAG 2.1 guidelines; c. Regularly test user accessibility by blind or vision-impaired persons to ensure that Defendant’s Website complies under the WCAG 2.1 guidelines; and, d. Develop an accessibility policy that is clearly disclosed on Defendant’s Websites, with contact information for users to report accessibility-related problems. 38. Although Defendant may currently have centralized policies regarding maintaining and operating its Website, Defendant lacks a plan and policy reasonably calculated to make them fully and equally accessible to, and independently usable by, blind and other visually-impaired consumers. 39. Defendant has, upon information and belief, invested substantial sums in developing and maintaining their Website and has generated significant revenue from the Website. These amounts are far greater than the associated cost of making their Website equally accessible to visually impaired customers. 40. Without injunctive relief, Plaintiff and other visually-impaired consumers will continue to be unable to independently use the Website, violating their rights. CLASS ACTION ALLEGATIONS 41. Plaintiff, on behalf of himself and all others similarly situated, seeks to certify a nationwide class under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind individuals in the United States who have attempted to access Defendant’s Website and as a result have been denied access to the equal enjoyment of goods and services, during the relevant statutory period. 42. Plaintiff, on behalf of himself and all others similarly situated, seeks to certify a New York City subclass under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind individuals in the City of New York who have attempted to access Defendant’s Website and as a result have been denied access to the equal enjoyment of goods and services offered, during the relevant statutory period. 43. Common questions of law and fact exist amongst the Class, including: a. Whether Defendant’s Website is a “public accommodation” under the ADA; b. Whether Defendant’s Website is a “place or provider of public accommodation” under the NYCHRL; c. Whether Defendant’s Website denies the full and equal enjoyment of its products, services, facilities, privileges, advantages, or accommodations to people with visual disabilities, violating the ADA; and d. Whether Defendant’s Website denies the full and equal enjoyment of its products, services, facilities, privileges, advantages, or accommodations to people with visual disabilities, violating the NYCHRL. 44. Plaintiff’s claims are typical of the Class. The Class, similarly, to the Plaintiff, are severely visually impaired or otherwise blind, and claim that Defendant has violated the ADA or NYCHRL by failing to update or remove access barriers on its Website so either can be independently accessible to the Class. 45. Plaintiff will fairly and adequately represent and protect the interests of the Class Members because Plaintiff has retained and is represented by counsel competent and experienced in complex class action litigation, and because Plaintiff has no interests antagonistic to the Class Members. Class certification of the claims is appropriate under Fed. R. Civ. P. 23(b)(2) because Defendant has acted or refused to act on grounds generally applicable to the Class, making appropriate both declaratory and injunctive relief with respect to Plaintiff and the Class as a whole. 46. Alternatively, class certification is appropriate under Fed. R. Civ. P. 23(b)(3) because fact and legal questions common to Class Members predominate over questions affecting only individual Class Members, and because a class action is superior to other available methods for the fair and efficient adjudication of this litigation. 47. Judicial economy will be served by maintaining this lawsuit as a class action in that it is likely to avoid the burden that would be otherwise placed upon the judicial system by the filing of numerous similar suits by people with visual disabilities throughout the United States. FIRST CAUSE OF ACTION VIOLATIONS OF THE ADA, 42 U.S.C. § 12181 et seq. 48. Plaintiff, on behalf of himself and the Class Members, repeats and realleges every allegation of the preceding paragraphs as if fully set forth herein. 49. Section 302(a) of Title III of the ADA, 42 U.S.C. § 12101 et seq., provides: No individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation. 42 U.S.C. § 12182(a). 50. Defendant’s Website is a public accommodations within the definition of Title III of the ADA, 42 U.S.C. § 12181(7). The Website is a service that is offered to the general public, and as such, must be equally accessible to all potential consumers. 51. Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to deny individuals with disabilities the opportunity to participate in or benefit from the products, services, facilities, privileges, advantages, or accommodations of an entity. 42 U.S.C. § 12182(b)(1)(A)(i). 52. Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to deny individuals with disabilities an opportunity to participate in or benefit from the products, services, facilities, privileges, advantages, or accommodation, which is equal to the opportunities afforded to other individuals. 42 U.S.C. § 12182(b)(1)(A)(ii). 53. Under Section 302(b)(2) of Title III of the ADA, unlawful discrimination also includes, among other things: [A] failure to make reasonable modifications in policies, practices, or procedures, when such modifications are necessary to afford such goods, services, facilities, privileges, advantages, or accommodations to individuals with disabilities, unless the entity can demonstrate that making such modifications would fundamentally alter the nature of such goods, services, facilities, privileges, advantages or accommodations; and a failure to take such steps as may be necessary to ensure that no individual with a disability is excluded, denied services, segregated or otherwise treated differently than other individuals because of the absence of auxiliary aids and services, unless the entity can demonstrate that taking such steps would fundamentally alter the nature of the good, service, facility, privilege, advantage, or accommodation being offered or would result in an undue burden. 42 U.S.C. § 12182(b)(2)(A)(ii)-(iii). 54. The acts alleged herein constitute violations of Title III of the ADA, and the regulations promulgated thereunder. Plaintiff, who is a member of a protected class of persons under the ADA, has a physical disability that substantially limits the major life activity of sight within the meaning of 42 U.S.C. §§ 12102(1)(A)-(2)(A). Furthermore, Plaintiff has been denied full and equal access to the Website, has not been provided services that are provided to other patrons who are not disabled, and has been provided services that are inferior to the services provided to non-disabled persons. Defendant has failed to take any prompt and equitable steps to remedy its discriminatory conduct. These violations are ongoing. 55. Under 42 U.S.C. § 12188 and the remedies, procedures, and rights set forth and incorporated therein, Plaintiff, requests relief as set forth below. SECOND CAUSE OF ACTION VIOLATIONS OF THE NYCHRL 56. Plaintiff, on behalf of himself and the New York City Sub-Class Members, repeats and realleges every allegation of the preceding paragraphs as if fully set forth herein. 57. N.Y.C. Administrative Code § 8-107(4)(a) provides that “It shall be an unlawful discriminatory practice for any person, being the owner, lessee, proprietor, manager, superintendent, agent or employee of any place or provider of public accommodation, because of . . . disability . . . directly or indirectly, to refuse, withhold from or deny to such person, any of the accommodations, advantages, facilities or privileges thereof.” 58. Defendant’s Website is a sales establishment and public accommodations within the definition of N.Y.C. Admin. Code § 8-102(9). 59. Defendant is subject to NYCHRL because it owns and operates its Website, making it a person within the meaning of N.Y.C. Admin. Code § 8-102(1). 60. Defendant is violating N.Y.C. Administrative Code § 8-107(4)(a) in refusing to update or remove access barriers to Website, causing its Website and the services integrated with such Website to be completely inaccessible to the blind. This inaccessibility denies blind patrons full and equal access to the facilities, products, and services that Defendant makes available to the non-disabled public. 61. Defendant is required to “make reasonable accommodation to the needs of persons with disabilities . . . any person prohibited by the provisions of [§ 8-107 et seq.] from discriminating on the basis of disability shall make reasonable accommodation to enable a person with a disability to . . . enjoy the right or rights in question provided that the disability is known or should have been known by the covered entity.” N.Y.C. Admin. Code § 8-107(15)(a). 62. Defendant’s actions constitute willful intentional discrimination against the Sub- Class on the basis of a disability in violation of the N.Y.C. Administrative Code § 8-107(4)(a) and § 8-107(15)(a) in that Defendant has: a. constructed and maintained a website that is inaccessible to blind class members with knowledge of the discrimination; and/or b. constructed and maintained a website that is sufficiently intuitive and/or obvious that is inaccessible to blind class members; and/or c. failed to take actions to correct these access barriers in the face of substantial harm and discrimination to blind class members. 63. Defendant has failed to take any prompt and equitable steps to remedy their discriminatory conduct. These violations are ongoing. 64. As such, Defendant discriminates, and will continue in the future to discriminate against Plaintiff and members of the proposed class and subclass on the basis of disability in the full and equal enjoyment of the products, services, facilities, privileges, advantages, accommodations and/or opportunities of its Website under § 8-107(4)(a) and/or its implementing regulations. Unless the Court enjoins Defendant from continuing to engage in these unlawful practices, Plaintiff and members of the class will continue to suffer irreparable harm. 65. Defendant’s actions were and are in violation of the NYCHRL and therefore Plaintiff invokes his right to injunctive relief to remedy the discrimination. 66. Plaintiff is also entitled to compensatory damages, as well as civil penalties and fines under N.Y.C. Administrative Code § 8-120(8) and § 8-126(a) for each offense as well as punitive damages pursuant to § 8-502. 67. Plaintiff is also entitled to reasonable attorneys’ fees and costs. 68. Under N.Y.C. Administrative Code § 8-120 and § 8-126 and the remedies, procedures, and rights set forth and incorporated therein Plaintiff prays for judgment as set forth below. THIRD CAUSE OF ACTION DECLARATORY RELIEF 69. Plaintiff, on behalf of himself and the Class and New York City Sub-Classes Members, repeats and realleges every allegation of the preceding paragraphs as if fully set forth herein. 70. An actual controversy has arisen and now exists between the parties in that Plaintiff contends, and is informed and believes that Defendant denies, that its Website contains access barriers denying blind customers the full and equal access to the products, services and facilities of its Website, which Defendant owns, operates and controls, fails to comply with applicable laws including, but not limited to, Title III of the Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq., and N.Y.C. Admin. Code § 8-107, et seq. prohibiting discrimination against the blind. 71. A judicial declaration is necessary and appropriate at this time in order that each of the parties may know their respective rights and duties and act accordingly. PRAYER FOR RELIEF WHEREFORE, Plaintiff respectfully requests this Court grant the following relief: a. A preliminary and permanent injunction to prohibit Defendant from violating the Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y.C. Administrative Code § 8-107, et seq., and the laws of New York; b. A preliminary and permanent injunction requiring Defendant to take all the steps necessary to make its Website into full compliance with the requirements set forth in the ADA, and its implementing regulations, so that the Website is readily accessible to and usable by blind individuals; c. A declaration that Defendant owns, maintains and/or operates its Website in a manner that discriminates against the blind and which fails to provide access for persons with disabilities as required by Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y.C. Administrative Code § 8-107, et seq., and the laws of New York d. An order certifying the Class and Sub-Classes under Fed. R. Civ. P. 23(a) & (b)(2) and/or (b)(3), appointing Plaintiff as Class Representative, and his attorneys as Class Counsel; e. Compensatory damages in an amount to be determined by proof, including all applicable statutory and punitive damages and fines, to Plaintiff and the proposed class and subclasses for violations of their civil rights under New York City Human Rights Law and City Law; f. Pre- and post-judgment interest; g. An award of costs and expenses of this action together with reasonable attorneys’ and expert fees; and h. Such other and further relief as this Court deems just and proper. DEMAND FOR TRIAL BY JURY Pursuant to Fed. R. Civ. P. 38(b), Plaintiff demands a trial by jury on all questions of fact the Complaint raises. Dated: Hackensack, New Jersey October 24, 2019 STEIN SAKS, PLLC By: /s/ Russel Weinrib Russel Weinrib, Esq. [email protected] 285 Passaic Street Hackensack, NJ 07601 Tel: (201) 282-6500 Fax: (201) 282-6501 ATTORNEYS FOR PLAINTIFF

civil rights, immigration, family

gE_zA4kBRpLueGJZc4fP

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK RYAN BIBB, Individually and On Behalf of All Others Similarly Situated, Plaintiff, v. Case No. CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS JURY TRIAL DEMANDED SESEN BIO, INC., THOMAS R. CANNELL, and MONICA FORBES, Defendants. Plaintiff Ryan Bibb (“Plaintiff”), individually and on behalf of all others similarly situated, by and through his attorneys, alleges the following upon information and belief, except as to those allegations concerning Plaintiff, which are alleged upon personal knowledge. Plaintiff’s information and belief is based upon, among other things, his counsel’s investigation, which includes without limitation: (a) review and analysis of regulatory filings made by Sesen Bio, Inc. (“Sesen Bio” or the “Company”) with the United States (“U.S.”) Securities and Exchange Commission (“SEC”); (b) review and analysis of press releases and media reports issued by and disseminated by Sesen Bio; and (c) review of other publicly available information concerning Sesen Bio. NATURE OF THE ACTION AND OVERVIEW 1. This is a class action on behalf of persons and entities that purchased or otherwise acquired Sesen Bio securities between December 21, 2020 and August 17, 2021, inclusive (the “Class Period”). Plaintiff pursues claims against the Defendants under the Securities Exchange Act of 1934 (the “Exchange Act”). 2. Sesen Bio is a late-stage clinical company that purports to advance targeted fusion protein (“TFP”) therapeutics for cancer treatments. Its most advanced product candidate is Vicineum (VB4-845), a locally administered TFP developed as a treatment of bacillus Calmette- Guérin (“BCG”)-unresponsive non-muscle invasive bladder cancer (“NMIBC”). Sensen Bio reported preliminary efficacy data from its ongoing Phase 3 clinical trial for Vicineum, the VISTA trial, in August 2019. 3. On December 21, 2020, the Company announced that it had submitted its Biologics License Application (“BLA”) to the U.S. Food and Drug Administration (“FDA”) for Vicineum for the treatment of BCG-unresponsive NMIBC. 4. On August 13, 2021, Sesen Bio announced that the FDA declined to approve its BLA for Vicineum in its current form. The FDA provided certain “recommendations specific to additional clinical/statistical data and analyses in addition to Chemistry, Manufacturing and Controls (CMC) issues pertaining to a recent pre-approval inspection and product quality.” 5. On this news, the Company’s share price fell $2.80, or 57%, to close at $2.11 per share on August 13, 2021, on unusually heavy trading volume. 6. Then, on August 16, 2021, Sesen Bio further revealed that “it appears that [the Company] will need to do a clinical trial to provide the additional efficacy and safety data necessary for the FDA to assess the benefit-risk profile, which is the basis for approval.” As a result, the Company expected that it could not resubmit its BLA until 2023. 7. On this news, the Company’s share price fell $0.89, or 42%, to close at $1.22 per share on August 16, 2021, on unusually heavy trading volume. 8. Then, on August 18, 2021, before the market opened, the health and medicine news site STAT published an article entitled “Sesen Bio trial of cancer drug marked by misconduct and worrisome side effects, documents show.” Citing “hundreds of pages of internal documents” and “three people familiar with the matter,” the article detailed that the clinical trial for Vicineum was “marked by thousands of violations of study rules, damning investigator conduct, and worrying signs of toxicity the company did not publicly disclose.” 9. On this news, the Company’s share price fell $0.20, or 13%, to close at $1.31 per share on August 18, 2021, on unusually heavy trading volume. 10. Throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors: (1) that Sesen Bio’s clinical trial for Vicineum had more than 2,000 violations of trial protocol, including 215 classified as “major”; (2) that three of Sesen Bio’s clinical investigators were found guilty of “serious noncompliance,” including “back-dating data”; (3) that Sesen Bio had submitted the tainted data in connection with the BLA for Vicineum; (4) that Sesen Bio’s clinical trials showed that Vicineum leaked out into the body, leading to side effects including liver failure and liver toxicity, and increasing the risks for fatal, drug-induced liver injury; (5) that, as a result of the foregoing, the Company’s BLA for Vicineum was not likely to be approved; (6) that, as a result of the foregoing, there was a reasonable likelihood that Sesen Bio would be required to conduct additional trials to support the efficacy and safety of Vicineum; and (7) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis. 11. As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s securities, Plaintiff and other Class members have suffered significant losses and damages. JURISDICTION AND VENUE 12. The claims asserted herein arise under Sections 10(b) and 20(a) of the Exchange Act (15 U.S.C. §§ 78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder by the SEC (17 C.F.R. § 240.10b-5). 13. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. § 1331 and Section 27 of the Exchange Act (15 U.S.C. § 78aa). 14. Venue is proper in this Judicial District pursuant to 28 U.S.C. § 1391(b) and Section 27 of the Exchange Act (15 U.S.C. § 78aa(c)). Substantial acts in furtherance of the alleged fraud or the effects of the fraud have occurred in this Judicial District. Many of the acts charged herein, including the dissemination of materially false and/or misleading information, occurred in substantial part in this Judicial District. 15. In connection with the acts, transactions, and conduct alleged herein, Defendants directly and indirectly used the means and instrumentalities of interstate commerce, including the United States mail, interstate telephone communications, and the facilities of a national securities exchange. PARTIES 16. Plaintiff Ryan Bibb, as set forth in the accompanying certification, incorporated by reference herein, purchased Sesen Bio securities during the Class Period, and suffered damages as a result of the federal securities law violations and false and/or misleading statements and/or material omissions alleged herein. 17. Defendant Sesen Bio is incorporated under the laws of Delaware with its principal executive offices located in Cambridge, Massachusetts. Sesen Bio’s common stock trades on the NASDAQ under the symbol “SESN.” 18. Defendant Thomas R. Cannell (“Cannell”) was the Chief Executive Officer (“CEO”) of Sesen Bio at all relevant times. 19. Defendant Monica Forbes (“Forbes”) was the Chief Financial Officer (“CFO”) of Sesen Bio at all relevant times. 20. Defendants Cannell and Forbes (collectively the “Individual Defendants”), because of their positions with the Company, possessed the power and authority to control the contents of the Company’s reports to the SEC, press releases and presentations to securities analysts, money and portfolio managers and institutional investors, i.e., the market. The Individual Defendants were provided with copies of the Company’s reports and press releases alleged herein to be misleading prior to, or shortly after, their issuance and had the ability and opportunity to prevent their issuance or cause them to be corrected. Because of their positions and access to material non- public information available to them, the Individual Defendants knew that the adverse facts specified herein had not been disclosed to, and were being concealed from, the public, and that the positive representations which were being made were then materially false and/or misleading. The Individual Defendants are liable for the false statements pleaded herein. SUBSTANTIVE ALLEGATIONS Background 21. Sesen Bio is a late-stage clinical company that purports to advance TFP therapeutics for cancer treatments. Its most advanced product candidate is Vicineum (VB4-845), a locally administered TFP developed as a treatment of BCG-unresponsive NMIBC. Sensen Bio reported preliminary efficacy data from its ongoing Phase 3 clinical trial for Vicineum, the VISTA trial, in August 2019. Materially False and Misleading Statements Issued During the Class Period 22. The Class Period begins on December 21, 2020. On that day, Sesen Bio announced that it had submitted a “completed Biologics License Application” to the FDA for Vicineum. In a press release, the Company stated, in relevant part: Sesen Bio (Nasdaq: SESN), a late-stage clinical company developing targeted fusion protein therapeutics for the treatment of patients with cancer, today announced submission of the completed Biologics License Application (BLA) to the FDA for Vicineum for the treatment of high-risk, BCG-unresponsive non- muscle invasive bladder cancer (NMIBC) on December 18, 2020. Within 60 days after receipt of the completed application, the FDA will issue a decision to the Company on the acceptance of the filing, and whether the BLA has received Priority Review (six-month target PDUFA date) under its existing Fast Track designation. The BLA is supported by the pivotal Phase 3 VISTA trial, which the Company believes demonstrates a strong benefit-risk profile. The BLA also includes positive chemistry, manufacturing and controls (CMC) data that the Company believes validates the analytical comparability between clinical and commercial supply. “There remains a significant unmet need for high-risk NMIBC, and we believe the differentiated clinical profile of Vicineum will provide a best-in-class option for physicians and their patients,” said Dr. Thomas Cannell, president and chief executive officer of Sesen Bio. “Our strong non-clinical and clinical data, in addition to our positive comparability data, give us confidence in the regulatory path forward. I would like to thank the entire Sesen Bio team and our regulatory and manufacturing partners for their tireless dedication in helping us to complete the BLA submission. We look forward to continuing our regulatory progress by submitting a Marketing Authorization Application in Europe, which we anticipate in early 2021.” 23. On February 1, 2021, Sesen Bio announced that it had a “productive Application Orientation Meeting” with the FDA regarding the BLA for Vicineum. In a press release, the Company stated, in relevant part: Sesen Bio (Nasdaq: SESN), a late-stage clinical company developing targeted fusion protein therapeutics for the treatment of patients with cancer, today reported that on January 29, 2021 the Company participated in a productive Application Orientation Meeting with the FDA regarding its Biologic License Application (BLA) for Vicineum, for the treatment of BCG-unresponsive non-muscle invasive bladder cancer (NMIBC). After the Company submitted its BLA to the FDA in December 2020, Sesen Bio was invited to participate in an Application Orientation Meeting, which is available in certain Center for Drug Evaluation and Research (CDER) review divisions, at the review team’s discretion, for priority applications where early action is expected and/or desired. The objectives of an Application Orientation Meeting include familiarizing the FDA with application datasets, discussing scientific aspects including clinical risk-benefit, and establishing early communication between applicants and the FDA. “We are very pleased with the outcome of Friday’s 90-minute meeting with the FDA,” said Dr. Thomas Cannell, president and chief executive officer of Sesen Bio. “We continue to believe Vicineum has a favorable risk-benefit profile which positions it to be best-in-class, and we are encouraged by the high level of time and engagement the FDA has demonstrated toward our review. We look forward to continuing to work with the FDA to expeditiously bring Vicineum to the market.” 24. On February 16, 2021, Sesen Bio announced that the FDA had accepted the Company’s BLA for Vicineum and granted priority review. In a press release, the Company stated: Sesen Bio (Nasdaq: SESN), a late-stage clinical company developing targeted fusion protein therapeutics for the treatment of patients with cancer, announced today that the U.S. Food and Drug Administration (FDA) accepted for filing the Company’s Biologics License Application (BLA) for Vicineum for the treatment of high-risk, BCG-unresponsive non-muscle invasive bladder cancer (NMIBC), and granted the application Priority Review. In addition, the FDA stated that it is not currently planning to hold an advisory committee meeting to discuss the BLA for Vicineum. * * * With Priority Review, the anticipated target Prescription Drug User Fee Act (PDUFA) date for a decision on the BLA is August 18, 2021. “We have been meeting with the FDA regularly for the past two years on the application for Vicineum,” said Dr. Thomas Cannell, president and chief executive officer of Sesen Bio. “We understand the FDA’s position and guidance very clearly and have found the review process to be collaborative and engaging. With these critical FDA decisions, we have reached an inflection point for the Company. In addition to a clear regulatory path forward, we have continued to strengthen our balance sheet in preparation for the potential launch of a product we believe represents a significant advancement over available therapies. We remain focused on the patient and our mission to save and improve lives and expect to continue to make progress around the world in the coming months.” 25. On March 15, 2021, Sesen Bio announced its fourth quarter and full year 2020 financial results as well as “significant regulatory and commercial readiness progress” for Vicineum. In a press release, the Company stated: We continue to make tremendous progress on our regulatory path with potential US approval later this year,” said Dr. Thomas Cannell, president and chief executive officer of Sesen Bio. “Our talented and growing team is laser-focused on bringing a best-in-class treatment to the market that has the potential to improve patient outcomes while reducing healthcare costs. With a strong balance sheet and clear regulatory path forward in both the US and Europe, we are positioned to fully realize the potentially significant global opportunity for Vicineum. We expect 2021 to be a transformative year for Sesen Bio and the patients we serve.” US and European Regulatory Update US: • On February 12, 2021, Sesen Bio received notice from the FDA that the BLA for Vicineum for the treatment of BCG-unresponsive NMIBC was accepted for filing as of February 16th and granted Priority Review. The FDA set an accelerated 6-month target Prescription Drug User Fee Act (PDUFA) date of August 18, 2021 for a decision on the BLA. The FDA also stated that they are not currently planning to hold an advisory committee meeting to discuss the BLA for Vicineum. * * * Commercial Update • In October 2020, Sesen Bio entered into an exclusive agreement with Cardinal Health for third-party logistics (3PL) and specialty pharmacy distribution services for Vicineum for the treatment of BCG- unresponsive NMIBC in the US. As part of the agreement, Cardinal Health will provide comprehensive end-to-end 3PL, order-to-cash management and specialty pharmaceutical distribution services to Sesen Bio in support of commercialization in the US. In addition to Fujifilm and Baxter, the Cardinal Health relationship completes the selection of major supply chain partners in support of the commercial distribution of Vicineum, if approved. The Company believes that the supply chain will be ready to support the potential commercial launch of Vicineum with product supply available in Urology clinics by the fourth quarter of 2021. 26. Also on March 15, 2021, Sesen Bio filed its annual report on Form 10-K for the period ended December 31, 2020 (the “2020 10-K”), affirming the previously reported financial results. Regarding the safety and efficacy of Vicineum, the 2020 10-K purported to warn: If clinical trials of Vicineum for the treatment of BCG-unresponsive NMIBC fail to demonstrate safety and efficacy to the satisfaction of the FDA or other foreign regulatory authorities or do not otherwise produce favorable results, we may incur additional costs or experience delays in completing, or ultimately be delayed or unable to complete, the development and commercialization of Vicineum for the treatment of BCG-unresponsive NMIBC. Before obtaining marketing approval from regulatory authorities for the sale of Vicineum for the treatment of BCG-unresponsive NMIBC, we must complete pre- clinical development and conduct extensive clinical trials to demonstrate the safety and efficacy of Vicineum in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. The outcome of pre-clinical studies and early clinical trials may not be predictive of the success of later clinical trials, and preliminary results of a clinical trial do not necessarily predict final results. Moreover, pre-clinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in pre-clinical studies and clinical trials have nonetheless failed to obtain marketing approval of their product candidates. 27. The 2020 10-K further stated that Vicineum “may cause undesirable side effects” that could, among other things, prevent regulatory approval. Specifically, the 2020 10-K stated: Vicineum for the treatment of BCG-unresponsive NMIBC may cause undesirable side effects, serious adverse events or have other properties that could delay or halt clinical trials, delay or prevent its regulatory approval, limit the commercial profile of its labeling, if approved, or result in significant negative consequences following any marketing approval. Undesirable side effects or serious adverse events caused by Vicineum for the treatment of BCG-unresponsive NMIBC could cause us or regulatory authorities to interrupt, delay or halt respective clinical trials and could result in a restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign regulatory authorities. There were no Grade 4 or Grade 5 serious adverse events that were considered by the clinical investigators to be related to Vicineum during the Phase 1 and Phase 2 clinical trials of Vicineum for the treatment of NMIBC BCG failures. There was one Grade 5 serious adverse event, or death, which was determined by the clinical investigator to be unrelated to Vicineum. The most common reported treatment- related adverse events were an abnormally frequent passage of small amounts of urine, blood in the urine and painful urination, the majority of which were considered to be mild or moderate in severity. No patients discontinued treatment due to a Vicineum-related adverse event during the Phase 1 and Phase 2 clinical trials. As of the May 29, 2019 data cutoff date, in patients across all cohorts (n=133) of our Phase 3 VISTA Trial of Vicineum for the treatment of BCG-unresponsive NMIBC, 88% experienced at least one adverse event, with 95% of adverse events being Grade 1 or 2. The most commonly reported treatment-related adverse events were dysuria (14%), hematuria (13%) and urinary tract infection (12%) - all of which are consistent with the profile of bladder cancer patients and the use of catheterization for treatment delivery. These adverse events were determined by the clinical investigators to be manageable and reversible, and only four patients (3%) discontinued treatment due to an adverse event. Serious adverse events, regardless of treatment attribution, were reported in 14% of patients. There were four treatment-related serious adverse events reported in three patients including acute kidney injury (Grade 3), pyrexia (Grade 2), cholestatic hepatitis (Grade 4) and renal failure (Grade 5). There were no age-related increases in adverse events observed in the VISTA Trial. In addition, side effects and serious adverse events or further safety or toxicity issues that we may experience in our clinical trials or in post-marketing experience could lead to the FDA's or other comparable foreign regulatory authority's imposition of a REMS or other post-marketing obligations, which could hinder us from generating revenues or achieving profitability. Results of our clinical trials could reveal an unacceptably high severity and prevalence of side effects or serious adverse events. As a result, our clinical trials could be suspended or terminated and the FDA or comparable foreign regulatory authorities could order us to cease further development or deny approval of Vicineum for the treatment of BCG-unresponsive NMIBC. The related drug-side effects or serious adverse events in our clinical trials could affect clinical trial patient recruitment or the ability of enrolled patients to complete the clinical trial or result in potential product liability claims. 28. The 2020 10-K also contained certifications pursuant to the Sarbanes-Oxley Act of 2002 (“SOX”) signed by Defendants Cannell and Forbes attesting to, among other things, the disclosure of all material facts. 29. On May 4, 2021, Sesen Bio issued a press release entitled “Sesen Bio Announces Commercial Launch Readiness Progress as the Company Approaches the Potential Approval and Launch of Vicineum,” Sesen Bio (Nasdaq: SESN), a late-stage clinical company developing targeted fusion protein therapeutics for the treatment of patients with cancer, today announced the expansion of its leadership team with the appointment of experienced commercial industry leader, Lisa LaMond, as Vice President, Sales and Corporate Systems. The Company also announced its engagement of leading contract sales organization (CSO), Syneos Health, for field sales support and execution in the US for Vicineum. 30. On May 10, 2021, Sesen Bio announced its first quarter 2021 financial results and a commercial launch readiness update for Vicineum in a press release, stating in relevant part: US: • In February 2021, Sesen Bio received notice from the FDA that the BLA for Vicineum was accepted for filing. Along with the acceptance, the Company was granted Priority Review with a target PDUFA date of August 18, 2021 for a decision on the BLA. The FDA also stated that an advisory committee meeting was not currently planned to discuss the BLA. * * * Commercial Update • The Company continues to build its commercial organization with key leadership appointments and a partnership with a leading contract sales organization (CSO), Syneos Health, as it prepares for the anticipated commercial launch of Vicineum in the US in 3Q 2021. Sesen Bio has begun to hire key commercial roles and has entered into a partnership with Syneos Health who will provide speed and logistical support in the hiring and deployment of the sales force. The sales force will include 35 sales representatives across four regions to target approximately 2,000 high prescribers of BCG. 31. Also on May 10, 2021, Sesen Bio filed its quarterly report on Form 10-Q for the period ended March 31, 2021, affirming the previously reported financial results. The report incorporated by reference the risk factors included in the 2020 10-K and contained SOX certifications signed by Defendants Cannell and Forbes attesting to, among other things, the disclosure of all material facts. 32. On July 14, 2021, Sesen Bio announced that it had a “productive Late-Cycle Meeting” with the FDA. In a press release, the Company stated, in relevant part: Sesen Bio (Nasdaq: SESN), a late-stage clinical company developing targeted fusion protein therapeutics for the treatment of patients with cancer, today announced that on July 13, 2021, the Company participated in a productive Late- Cycle Meeting with the U.S. Food and Drug Administration (FDA) regarding the Company’s Biologics License Application (BLA) for Vicineum for the treatment of BCG-unresponsive non-muscle invasive bladder cancer (NMIBC) currently under Priority Review with a target Prescription Drug User Fee Act (PDUFA) date of August 18, 2021. The Late-Cycle Meeting is held late in the BLA review process between members of the FDA review team and the applicant to discuss the status of the review. The purpose of the meeting is to share information, discuss any substantive review items identified to date and to discuss the objectives for the remainder of the review. The meeting does not address the final regulatory decision for the application. “We are very pleased with the outcome of the Late-Cycle Meeting and continue to feel encouraged by the level of engagement from the FDA in our ongoing discussions regarding the BLA for Vicineum,” said Dr. Thomas Cannell, president and chief executive officer of Sesen Bio. “We understand the FDA’s position on the remaining review items and anticipate a successful resolution of these matters prior to the target PDUFA date. We remain focused on the patient and bringing a differentiated product to market that has the potential to improve patient outcomes while reducing overall healthcare costs.” Key Review Updates Include: • The Company and the FDA discussed remaining questions related to manufacturing facilities inspection, product quality information requests and additional information related to chemistry, manufacturing and controls (CMC), and agreed upon a timeline for supporting information to be submitted. • No Discipline Review letters have been issued to date. • The FDA confirmed that there is no Advisory Committee meeting planned at this time. • No issues related to risk management have been identified to date. • No post-marketing requirements, including a confirmatory trial, have been identified as necessary at this time. • The Company and the FDA discussed clinical trial and manufacturing post- marketing commitments required at this time. • The FDA’s review of the BLA is ongoing and the Company believes the BLA remains on track for an anticipated regulatory decision by August 18, 2021, the target PDUFA date. 33. On July 26, 2021, Sesen Bio announced “significant commercial progress” as it “approache[d] the potential approval and launch of Vicineum.” In a press release, the Company stated, in relevant part: “We are thrilled to have this experienced commercial team on board at Sesen Bio to build capabilities as we approach the potential commercial launch of Vicineum in the US market,” said Patricia Drake, chief commercial officer of Sesen Bio. “They have made incredible progress across the core functions of sales, marketing and market access. We also believe our network of Urology and Uro-oncology KOL speakers will play an integral role in allowing us to educate their peers about Vicineum, which we believe will be a new tool in their practices to serve a large unmet medical need in NMIBC.” The Company has completed the hiring of ~25 talented internal employees to support the Company cross-functionally, as well as the hiring of 34 of 35 sales representatives as part of the contract sales organization, which will be deployed across four customer-centric regions and will target approximately 2,000 high- prescribers of BCG to drive awareness, trial and adoption of Vicineum for the treatment of BCG-unresponsive NMIBC. If approved, promotional efforts will begin immediately, and the Company expects Vicineum product to be commercially available to physicians and patients in the fourth quarter of 2021. 34. On August 2, 2021, Sesen Bio announced that it had hired Amy Ponpipom as Vice President, Assistant General Counsel in anticipation of the approval of Vicineum. In a press release entitled “Sesen Bio Strengthens Leadership Team as the Company Approaches the Potential Approval and Launch of Vicineum,” the Company stated, in relevant part: Sesen Bio (Nasdaq:SESN), a late-stage clinical company developing targeted fusion protein therapeutics for the treatment of patients with cancer, today announced the expansion of its leadership team in support of the Company’s transformation into a commercial-stage company with the hiring of Amy Ponpipom as Vice President, Assistant General Counsel. The Company’s Biologics License Application (BLA) for Vicineum for the treatment of BCG-unresponsive non- muscle invasive bladder cancer (NMIBC), the Company’s lead program, is currently under Priority Review with the US Food and Drug Administration (FDA) with a target Prescription Drug User Fee Act (PDUFA) date of August 18, 2021. “I am delighted to have Amy join the team here at Sesen Bio,” said Dr. Thomas Cannell, president and chief executive officer of Sesen Bio. “Her strong industry experience and deep expertise in commercialization activities will be invaluable as we continue to work toward our PDUFA date and the potential launch of Vicineum in the US. I am confident that Amy’s knowledge and skills will enable us to execute a world-class launch in order to fulfill our mission to save and improve the lives of patients.” 35. On August 9, 2021, Sesen Bio announced its second quarter 2021 financial results and “significant global progress” for Vicineum in a press release, stating in relevant part: US: • On July 13, 2021, Sesen Bio participated in a productive Late-Cycle Meeting with the FDA regarding the BLA for Vicineum for the treatment of BCG-unresponsive NMIBC. In the meeting, the FDA confirmed that there is no Advisory Committee meeting planned at this time, and that no post-marketing requirements, including a confirmatory trial, have been identified at this time. Also in the meeting, the Company and the FDA discussed remaining questions related to manufacturing facility inspections, product quality information requests and additional information related to chemistry, manufacturing and controls (CMC), and a timeline to submit additional supporting information was agreed upon. The Company believes it remains on track for an FDA decision on its BLA for Vicineum by the target PDUFA date of August 18, 2021. 36. Also on August 9, 2021, Sesen Bio filed its quarterly report on Form 10-Q for the period ended June 30, 2021, affirming the previously reported financial results. The report incorporated by reference the risk factors included in the 2020 10-K and contained SOX certifications signed by Defendants Cannell and Forbes attesting to, among other things, the disclosure of all material facts. 37. On August 11, 2021, Sesen Bio announced that it had hired John Knighton as Vice President and Chief Compliance Officer in anticipation of the approval of Vicineum. In a press release entitled “Sesen Bio Strengthens Executive Leadership Team as the Company Approaches the Potential Approval and Commercial Launch of Vicineum,” the Company stated: Sesen Bio (Nasdaq: SESN), a late-stage clinical company developing targeted fusion protein therapeutics for the treatment of patients with cancer, today announced the expansion of its executive leadership team in support of the Company’s continued transformation into a commercial-stage company with the hiring of John Knighton as Vice President and Chief Compliance Officer, effective August 16, 2021. The Company’s Biologics License Application (BLA) for Vicineum for the treatment of BCG-unresponsive non-muscle invasive bladder cancer (NMIBC), the Company’s lead program, is currently under Priority Review with the US Food and Drug Administration (FDA) with a target Prescription Drug User Fee Act (PDUFA) date of August 18, 2021. “At Sesen Bio, we believe a strong culture of compliance is a source of competitive advantage, because a thorough understanding of laws and regulatory guidance allows us to fully explore innovative commercial models and strategies,” said Dr. Thomas Cannell, president and chief executive officer of Sesen Bio. “This enables us to do the right thing while maximizing launch uptake of Vicineum. As we near our PDUFA date, I am confident that John’s extensive experience in establishing compliance programs and enabling the implementation of innovative commercial model elements will further position us to execute a world-class launch.” 38. The above statements identified in ¶¶ 22-37 were materially false and/or misleading, and failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors: (1) that Sesen Bio’s clinical trial for Vicineum had more than 2,000 violations of trial protocol, including 215 classified as “major”; (2) that three of Sesen Bio’s clinical investigators were found guilty of “serious noncompliance,” including “back-dating data”; (3) that Sesen Bio had submitted the tainted data in connection with the BLA for Vicineum; (4) that Sesen Bio’s clinical trials showed that Vicineum leaked out into the body, leading to side effects including liver failure and liver toxicity, and increasing the risks for fatal, drug-induced liver injury; (5) that, as a result of the foregoing, the Company’s BLA for Vicineum was not likely to be approved; (6) that, as a result of the foregoing, there was a reasonable likelihood that Sesen Bio would be required to conduct additional trials to support the efficacy and safety of Vicineum; and (7) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis. The Truth Begins to Emerge 39. On August 13, 2021, Sesen Bio announced that the FDA declined to approve its BLA for Vicineum in its current form. The FDA provided certain “recommendations specific to additional clinical/statistical data and analyses in addition to Chemistry, Manufacturing and Controls (CMC) issues pertaining to a recent pre-approval inspection and product quality.” In a press release the Company stated: Sesen Bio (Nasdaq: SESN), a late-stage clinical company developing targeted fusion protein therapeutics for the treatment of patients with cancer, today announced that it received a Complete Response Letter (CRL) from the U.S. Food and Drug Administration (FDA) regarding its Biologics License Application (BLA) for Vicineum™ (oportuzumab monatox-qqrs) for the treatment of BCG- unresponsive non-muscle invasive bladder cancer (NMIBC). The FDA has determined that it cannot approve the BLA for Vicineum in its present form and has provided recommendations specific to additional clinical/statistical data and analyses in addition to Chemistry, Manufacturing and Controls (CMC) issues pertaining to a recent pre-approval inspection and product quality. “We are deeply disappointed by this unexpected result, and it is an unfortunate day for patients suffering from BCG-unresponsive NMIBC,” said Dr. Thomas Cannell, president, and chief executive officer of Sesen Bio. “We remain dedicated to our mission to save and improve the lives of patients by bringing new treatment options to patients, and we intend to work closely with the FDA to understand next steps.” The Company plans to request a Type A meeting as soon as possible with the FDA to discuss the next steps that are needed before the application may be approved. 40. On this news, the Company’s share price fell $2.80, or 57%, to close at $2.11 per share on August 13, 2021, on unusually heavy trading volume. 41. On August 16, 2021, Sesen Bio held a conference call to discuss the CRL with analysts and investors. During the call, Defendant Cannell revealed that “it appears that [Sesen Bio] will need to do a clinical trial to provide the additional efficacy and safety data necessary for the FDA to assess the benefit-risk profile, which is the basis for approval.” The Company would request a Type A meeting with the FDA to discuss the study design, including the primary endpoints and the sample size, to provide sufficient information to assess the benefit-risk profile of Vicineum. As a result, the Company expected that it could not resubmit its BLA until 2023. 42. On this news, the Company’s share price fell $0.89, or 42%, to close at $1.22 per share on August 16, 2021, on unusually heavy trading volume. 43. The above statements identified in ¶¶ 39 and 41 were materially false and/or misleading, and failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors: (1) that Sesen Bio’s clinical trial for Vicineum had more than 2,000 violations of trial protocol, including 215 classified as “major”; (2) that three of Sesen Bio’s clinical investigators were found guilty of “serious noncompliance,” including “back-dating data”; (3) that Sesen Bio had submitted the tainted data in connection with the BLA for Vicineum; (4) that Sesen Bio’s clinical trials showed that Vicineum leaked out into the body, leading to side effects including liver failure and liver toxicity, and increasing the risks for fatal, drug-induced liver injury; and (5) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis. The Truth Fully Emerges 44. On August 18, 2021, before the market opened, STAT published an article entitled “Sesen Bio trial of cancer drug marked by misconduct and worrisome side effects, documents show.” Citing “hundreds of pages of internal documents” and “three people familiar with the matter,” the article detailed that the clinical trial for Vicineum was “marked by thousands of violations of study rules, damning investigator conduct, and worrying signs of toxicity the company did not publicly disclose.” The article summarized: Sesen Bio, a small biotech company that developed the bladder cancer drug, spent all of this year telling investors that its treatment was on its way to approval. After the FDA rejected it, CEO Thomas Cannell, fielding analyst questions on a Monday morning conference call, deemed it “a very surprising turn of events.” But Sesen’s internal documents — which include safety reports, raw data, and communications between employees — suggest a seismic difference between the company’s public statements and the realities of the drug’s development. They also lift the curtain on revelations that might have played a role in the decision of regulators at the FDA, which, consistent with its practice in the case of rejected drugs, did not comment on its decision. According to the documents, Sesen’s drug, called Vicineum, has led to dangerous elevations in liver enzymes that are associated with organ failure and death, which the Cambridge, Mass., company did not mention in its filings with the Securities and Exchange Commission. The bladder cancer study, which enrolled about 130 patients, had more than 2,000 violations of trial protocol, including 215 classified as “major,” according to company documents. The study’s independent monitors reported three investigators to the FDA for particularly egregious violations, calling them issues of “serious noncompliance” that “placed subjects at risk of harm,” according to the documents. * * * In a statement to STAT provided a day before the rejection, Sesen did not deny the protocol violations, the investigator misconduct, or the omission of a drug-related death in its 2018 presentation. The company said Vicineum was not associated with life-threatening elevations in liver enzymes, a claim that contradicts multiple internal documents. “We are confident that we have fully disclosed all relevant data to the FDA,” Sesen said. “We stand by the safety and efficacy data of Vicineum,” the company said, and as to the accuracy of its public statements, “we stand by the integrity of our disclosures and affirm they are based on the best information we have at the time.” 45. The STAT article further stated that Vicineum had led to “worrisome side effects,” including “a serious risk for fatal, drug-induced liver injury.” Because that toxin, produced by the bacterium Pseudomonas aeruginosa, can be deadly if it reaches the liver, Vicineum has to be administered directly to the site of the cancer. But data from Sesen’s clinical trials suggested Vicineum was leaking out into the body, leading to worrisome side effects, according to internal company documents. In clinical trials testing Vicineum against head and neck cancer, one patient died of liver failure, according to the documents, and another matched the criteria for a clinical rule of thumb called Hy’s Law, meaning a patient is at serious risk for fatal, drug-induced liver injury. That risk is particularly serious in the eyes of the FDA, and it’s the most common reason drugs are pulled from the market over safety, according to an agency guidance. A similar pattern emerged in Sesen’s Phase 3 bladder cancer study, called VISTA. One patient met the criteria for Hy’s Law, suggesting Vicineum led to serious liver toxicity, according to the documents. Another patient was diagnosed with life- threatening, drug-induced liver failure, confirmed by biopsy, according to the documents. In its statement, Sesen said the company “ thoroughly reviewed” data from VISTA and “confirmed there were no cases of Hy’s Law based on the clinical criteria as stipulated by FDA guidance.” In the head and neck cancer study, “the data showed some elevated liver enzymes that have not been determined to be cases of Hy’s Law,” Sesen said. Both claims are contradicted by company documents, including a clinical report concluding one patient “met the criteria for Hy’s Law” and internal communications about a second patient in which one employee wrote “I agree this is a Hy’s Law case.” 46. The STAT article also revealed that the trials purportedly supporting the BLA were “plagued by serious investigator misconduct that threatened the integrity of the data.” VISTA was also plagued by serious investigator misconduct that threatened the integrity of the data, according to documents. In 2017 and 2018, Copernicus, a firm Sesen hired to monitor its trial, found three doctors in the study were guilty of “serious noncompliance,” “continued noncompliance,” and actions that “placed subjects at risk of harm,” according to reports sent to the FDA. Separately, one investigator had his clinic closed in 2017 after his hospital’s disciplinary committee concluded he had engaged in “disgraceful, dishonorable, or unprofessional” behavior. A second investigator was found to be back-dating data, according to internal Sesen documents, casting serious doubt on any information gathered from his clinic. In each case, the company was advised that “the data from these affected centers cannot be used in any data analysis” submitted to the FDA, according to the documents. Despite that, Sesen included results from both sites in its application for Vicineum’s approval, according to the documents. In its statement, Sesen did not deny any instances of investigator misconduct in VISTA and did not dispute that it submitted tainted data to the FDA. “We are confident that we have fully disclosed all relevant data to the FDA,” the company said, adding that “great care was taken every step of the way to ensure patient safety.” 47. On this news, the Company’s share price fell $0.20, or 13%, to close at $1.31 per share on August 18, 2021, on unusually heavy trading volume. CLASS ACTION ALLEGATIONS 48. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil Procedure 23(a) and (b)(3) on behalf of a class, consisting of all persons and entities that purchased or otherwise acquired Sesen Bio securities between December 21, 2020 and August 17, 2021, inclusive, and who were damaged thereby (the “Class”). Excluded from the Class are Defendants, the officers and directors of the Company, at all relevant times, members of their immediate families and their legal representatives, heirs, successors, or assigns, and any entity in which Defendants have or had a controlling interest. 49. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, Sesen Bio’s shares actively traded on the NASDAQ. While the exact number of Class members is unknown to Plaintiff at this time and can only be ascertained through appropriate discovery, Plaintiff believes that there are at least hundreds or thousands of members in the proposed Class. Millions of Sesen Bio shares were traded publicly during the Class Period on the NASDAQ. Record owners and other members of the Class may be identified from records maintained by Sesen Bio or its transfer agent and may be notified of the pendency of this action by mail, using the form of notice similar to that customarily used in securities class actions. 50. Plaintiff’s claims are typical of the claims of the members of the Class as all members of the Class are similarly affected by Defendants’ wrongful conduct in violation of federal law that is complained of herein. 51. Plaintiff will fairly and adequately protect the interests of the members of the Class and has retained counsel competent and experienced in class and securities litigation. 52. Common questions of law and fact exist as to all members of the Class and predominate over any questions solely affecting individual members of the Class. Among the questions of law and fact common to the Class are: (a) whether the federal securities laws were violated by Defendants’ acts as alleged herein; (b) whether statements made by Defendants to the investing public during the Class Period omitted and/or misrepresented material facts about the business, operations, and prospects of Sesen Bio; and (c) to what extent the members of the Class have sustained damages and the proper measure of damages. 53. A class action is superior to all other available methods for the fair and efficient adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the damages suffered by individual Class members may be relatively small, the expense and burden of individual litigation makes it impossible for members of the Class to individually redress the wrongs done to them. There will be no difficulty in the management of this action as a class action. UNDISCLOSED ADVERSE FACTS 54. The market for Sesen Bio’s securities was open, well-developed and efficient at all relevant times. As a result of these materially false and/or misleading statements, and/or failures to disclose, Sesen Bio’s securities traded at artificially inflated prices during the Class Period. Plaintiff and other members of the Class purchased or otherwise acquired Sesen Bio’s securities relying upon the integrity of the market price of the Company’s securities and market information relating to Sesen Bio, and have been damaged thereby. 55. During the Class Period, Defendants materially misled the investing public, thereby inflating the price of Sesen Bio’s securities, by publicly issuing false and/or misleading statements and/or omitting to disclose material facts necessary to make Defendants’ statements, as set forth herein, not false and/or misleading. The statements and omissions were materially false and/or misleading because they failed to disclose material adverse information and/or misrepresented the truth about Sesen Bio’s business, operations, and prospects as alleged herein. 56. At all relevant times, the material misrepresentations and omissions particularized in this Complaint directly or proximately caused or were a substantial contributing cause of the damages sustained by Plaintiff and other members of the Class. As described herein, during the Class Period, Defendants made or caused to be made a series of materially false and/or misleading statements about Sesen Bio’s financial well-being and prospects. These material misstatements and/or omissions had the cause and effect of creating in the market an unrealistically positive assessment of the Company and its financial well-being and prospects, thus causing the Company’s securities to be overvalued and artificially inflated at all relevant times. Defendants’ materially false and/or misleading statements during the Class Period resulted in Plaintiff and other members of the Class purchasing the Company’s securities at artificially inflated prices, thus causing the damages complained of herein when the truth was revealed. LOSS CAUSATION 57. Defendants’ wrongful conduct, as alleged herein, directly and proximately caused the economic loss suffered by Plaintiff and the Class. 58. During the Class Period, Plaintiff and the Class purchased Sesen Bio’s securities at artificially inflated prices and were damaged thereby. The price of the Company’s securities significantly declined when the misrepresentations made to the market, and/or the information alleged herein to have been concealed from the market, and/or the effects thereof, were revealed, causing investors’ losses. SCIENTER ALLEGATIONS 59. As alleged herein, Defendants acted with scienter since Defendants knew that the public documents and statements issued or disseminated in the name of the Company were materially false and/or misleading; knew that such statements or documents would be issued or disseminated to the investing public; and knowingly and substantially participated or acquiesced in the issuance or dissemination of such statements or documents as primary violations of the federal securities laws. As set forth elsewhere herein in detail, the Individual Defendants, by virtue of their receipt of information reflecting the true facts regarding Sesen Bio, their control over, and/or receipt and/or modification of Sesen Bio’s allegedly materially misleading misstatements and/or their associations with the Company which made them privy to confidential proprietary information concerning Sesen Bio, participated in the fraudulent scheme alleged herein. APPLICABILITY OF PRESUMPTION OF RELIANCE (FRAUD-ON-THE-MARKET DOCTRINE) 60. The market for Sesen Bio’s securities was open, well-developed and efficient at all relevant times. As a result of the materially false and/or misleading statements and/or failures to disclose, Sesen Bio’s securities traded at artificially inflated prices during the Class Period. On August 12, 2021, the Company’s share price closed at a Class Period high of $4.91 per share. Plaintiff and other members of the Class purchased or otherwise acquired the Company’s securities relying upon the integrity of the market price of Sesen Bio’s securities and market information relating to Sesen Bio, and have been damaged thereby. 61. During the Class Period, the artificial inflation of Sesen Bio’s shares was caused by the material misrepresentations and/or omissions particularized in this Complaint causing the damages sustained by Plaintiff and other members of the Class. As described herein, during the Class Period, Defendants made or caused to be made a series of materially false and/or misleading statements about Sesen Bio’s business, prospects, and operations. These material misstatements and/or omissions created an unrealistically positive assessment of Sesen Bio and its business, operations, and prospects, thus causing the price of the Company’s securities to be artificially inflated at all relevant times, and when disclosed, negatively affected the value of the Company shares. Defendants’ materially false and/or misleading statements during the Class Period resulted in Plaintiff and other members of the Class purchasing the Company’s securities at such artificially inflated prices, and each of them has been damaged as a result. 62. At all relevant times, the market for Sesen Bio’s securities was an efficient market for the following reasons, among others: (a) Sesen Bio shares met the requirements for listing, and was listed and actively traded on the NASDAQ, a highly efficient and automated market; (b) As a regulated issuer, Sesen Bio filed periodic public reports with the SEC and/or the NASDAQ; (c) Sesen Bio regularly communicated with public investors via established market communication mechanisms, including through regular dissemination of press releases on the national circuits of major newswire services and through other wide-ranging public disclosures, such as communications with the financial press and other similar reporting services; and/or (d) Sesen Bio was followed by securities analysts employed by brokerage firms who wrote reports about the Company, and these reports were distributed to the sales force and certain customers of their respective brokerage firms. Each of these reports was publicly available and entered the public marketplace. 63. As a result of the foregoing, the market for Sesen Bio’s securities promptly digested current information regarding Sesen Bio from all publicly available sources and reflected such information in Sesen Bio’s share price. Under these circumstances, all purchasers of Sesen Bio’s securities during the Class Period suffered similar injury through their purchase of Sesen Bio’s securities at artificially inflated prices and a presumption of reliance applies. 64. A Class-wide presumption of reliance is also appropriate in this action under the Supreme Court’s holding in Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128 (1972), because the Class’s claims are, in large part, grounded on Defendants’ material misstatements and/or omissions. Because this action involves Defendants’ failure to disclose material adverse information regarding the Company’s business operations and financial prospects—information that Defendants were obligated to disclose—positive proof of reliance is not a prerequisite to recovery. All that is necessary is that the facts withheld be material in the sense that a reasonable investor might have considered them important in making investment decisions. Given the importance of the Class Period material misstatements and omissions set forth above, that requirement is satisfied here. NO SAFE HARBOR 65. The statutory safe harbor provided for forward-looking statements under certain circumstances does not apply to any of the allegedly false statements pleaded in this Complaint. The statements alleged to be false and misleading herein all relate to then-existing facts and conditions. In addition, to the extent certain of the statements alleged to be false may be characterized as forward looking, they were not identified as “forward-looking statements” when made and there were no meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the purportedly forward-looking statements. In the alternative, to the extent that the statutory safe harbor is determined to apply to any forward- looking statements pleaded herein, Defendants are liable for those false forward-looking statements because at the time each of those forward-looking statements was made, the speaker had actual knowledge that the forward-looking statement was materially false or misleading, and/or the forward-looking statement was authorized or approved by an executive officer of Sesen Bio who knew that the statement was false when made. FIRST CLAIM Violation of Section 10(b) of The Exchange Act and Rule 10b-5 Promulgated Thereunder Against All Defendants 66. Plaintiff repeats and re-alleges each and every allegation contained above as if fully set forth herein. 67. During the Class Period, Defendants carried out a plan, scheme and course of conduct which was intended to and, throughout the Class Period, did: (i) deceive the investing public, including Plaintiff and other Class members, as alleged herein; and (ii) cause Plaintiff and other members of the Class to purchase Sesen Bio’s securities at artificially inflated prices. In furtherance of this unlawful scheme, plan and course of conduct, Defendants, and each defendant, took the actions set forth herein. 68. Defendants (i) employed devices, schemes, and artifices to defraud; (ii) made untrue statements of material fact and/or omitted to state material facts necessary to make the statements not misleading; and (iii) engaged in acts, practices, and a course of business which operated as a fraud and deceit upon the purchasers of the Company’s securities in an effort to maintain artificially high market prices for Sesen Bio’s securities in violation of Section 10(b) of the Exchange Act and Rule 10b-5. All Defendants are sued either as primary participants in the wrongful and illegal conduct charged herein or as controlling persons as alleged below. 69. Defendants, individually and in concert, directly and indirectly, by the use, means or instrumentalities of interstate commerce and/or of the mails, engaged and participated in a continuous course of conduct to conceal adverse material information about Sesen Bio’s financial well-being and prospects, as specified herein. 70. Defendants employed devices, schemes and artifices to defraud, while in possession of material adverse non-public information and engaged in acts, practices, and a course of conduct as alleged herein in an effort to assure investors of Sesen Bio’s value and performance and continued substantial growth, which included the making of, or the participation in the making of, untrue statements of material facts and/or omitting to state material facts necessary in order to make the statements made about Sesen Bio and its business operations and future prospects in light of the circumstances under which they were made, not misleading, as set forth more particularly herein, and engaged in transactions, practices and a course of business which operated as a fraud and deceit upon the purchasers of the Company’s securities during the Class Period. 71. Each of the Individual Defendants’ primary liability and controlling person liability arises from the following facts: (i) the Individual Defendants were high-level executives and/or directors at the Company during the Class Period and members of the Company’s management team or had control thereof; (ii) each of these defendants, by virtue of their responsibilities and activities as a senior officer and/or director of the Company, was privy to and participated in the creation, development and reporting of the Company’s internal budgets, plans, projections and/or reports; (iii) each of these defendants enjoyed significant personal contact and familiarity with the other defendants and was advised of, and had access to, other members of the Company’s management team, internal reports and other data and information about the Company’s finances, operations, and sales at all relevant times; and (iv) each of these defendants was aware of the Company’s dissemination of information to the investing public which they knew and/or recklessly disregarded was materially false and misleading. 72. Defendants had actual knowledge of the misrepresentations and/or omissions of material facts set forth herein, or acted with reckless disregard for the truth in that they failed to ascertain and to disclose such facts, even though such facts were available to them. Such defendants’ material misrepresentations and/or omissions were done knowingly or recklessly and for the purpose and effect of concealing Sesen Bio’s financial well-being and prospects from the investing public and supporting the artificially inflated price of its securities. As demonstrated by Defendants’ overstatements and/or misstatements of the Company’s business, operations, financial well-being, and prospects throughout the Class Period, Defendants, if they did not have actual knowledge of the misrepresentations and/or omissions alleged, were reckless in failing to obtain such knowledge by deliberately refraining from taking those steps necessary to discover whether those statements were false or misleading. 73. As a result of the dissemination of the materially false and/or misleading information and/or failure to disclose material facts, as set forth above, the market price of Sesen Bio’s securities was artificially inflated during the Class Period. In ignorance of the fact that market prices of the Company’s securities were artificially inflated, and relying directly or indirectly on the false and misleading statements made by Defendants, or upon the integrity of the market in which the securities trades, and/or in the absence of material adverse information that was known to or recklessly disregarded by Defendants, but not disclosed in public statements by Defendants during the Class Period, Plaintiff and the other members of the Class acquired Sesen Bio’s securities during the Class Period at artificially high prices and were damaged thereby. 74. At the time of said misrepresentations and/or omissions, Plaintiff and other members of the Class were ignorant of their falsity, and believed them to be true. Had Plaintiff and the other members of the Class and the marketplace known the truth regarding the problems that Sesen Bio was experiencing, which were not disclosed by Defendants, Plaintiff and other members of the Class would not have purchased or otherwise acquired their Sesen Bio securities, or, if they had acquired such securities during the Class Period, they would not have done so at the artificially inflated prices which they paid. 75. By virtue of the foregoing, Defendants violated Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder. 76. As a direct and proximate result of Defendants’ wrongful conduct, Plaintiff and the other members of the Class suffered damages in connection with their respective purchases and sales of the Company’s securities during the Class Period. SECOND CLAIM Violation of Section 20(a) of The Exchange Act Against the Individual Defendants 77. Plaintiff repeats and re-alleges each and every allegation contained above as if fully set forth herein. 78. Individual Defendants acted as controlling persons of Sesen Bio within the meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level positions and their ownership and contractual rights, participation in, and/or awareness of the Company’s operations and intimate knowledge of the false financial statements filed by the Company with the SEC and disseminated to the investing public, Individual Defendants had the power to influence and control and did influence and control, directly or indirectly, the decision-making of the Company, including the content and dissemination of the various statements which Plaintiff contends are false and misleading. Individual Defendants were provided with or had unlimited access to copies of the Company’s reports, press releases, public filings, and other statements alleged by Plaintiff to be misleading prior to and/or shortly after these statements were issued and had the ability to prevent the issuance of the statements or cause the statements to be corrected. 79. In particular, Individual Defendants had direct and supervisory involvement in the day-to-day operations of the Company and, therefore, had the power to control or influence the particular transactions giving rise to the securities violations as alleged herein, and exercised the 80. As set forth above, Sesen Bio and Individual Defendants each violated Section 10(b) and Rule 10b-5 by their acts and omissions as alleged in this Complaint. By virtue of their position as controlling persons, Individual Defendants are liable pursuant to Section 20(a) of the Exchange Act. As a direct and proximate result of Defendants’ wrongful conduct, Plaintiff and other members of the Class suffered damages in connection with their purchases of the Company’s securities during the Class Period. PRAYER FOR RELIEF WHEREFORE, Plaintiff prays for relief and judgment, as follows: (a) Determining that this action is a proper class action under Rule 23 of the Federal Rules of Civil Procedure; (b) Awarding compensatory damages in favor of Plaintiff and the other Class members against all defendants, jointly and severally, for all damages sustained as a result of Defendants’ wrongdoing, in an amount to be proven at trial, including interest thereon; (c) Awarding Plaintiff and the Class their reasonable costs and expenses incurred in this action, including counsel fees and expert fees; and (d) Such other and further relief as the Court may deem just and proper. JURY TRIAL DEMANDED Plaintiff hereby demands a trial by jury. Dated: August 19, 2021 By: /s/ Gregory B. Linkh GLANCY PRONGAY & MURRAY LLP Gregory B. Linkh (GL-0477) 230 Park Ave., Suite 358 New York, NY 10169 Telephone: (212) 682-5340 Facsimile: (212) 884-0988 [email protected] Robert V. Prongay Charles H. Linehan Pavithra Rajesh 1925 Century Park East, Suite 2100 Los Angeles, CA 90067 Telephone: (310) 201-9150 Facsimile: (310) 201-9160 THE LAW OFFICES OF FRANK R. CRUZ Frank R. Cruz 1999 Avenue of the Stars, Suite 1100 Los Angeles, CA 90067 Telephone: (310) 914-5007 Attorneys for Plaintiff Ryan Bibb SESEN BIO, INC. SECURITIES LITIGATION I, Ryan Bibb, certify that: 1. I have reviewed the Complaint, adopt its allegations, and authorize the filing of a Lead Plaintiff motion on my behalf. 2. I did not purchase the Sesen Bio, Inc. securities that are the subject of this action at the direction of plaintiff’s counsel or in order to participate in any private action arising under this title. 3. I am willing to serve as a representative party on behalf of a class and will testify at deposition and trial, if necessary. 4. My transactions in Sesen Bio, Inc. securities during the Class Period set forth in the Complaint are as follows: (See attached transactions) 5. I have not sought to serve, nor served, as a representative party on behalf of a class under this title during the last three years, except for the following: 6. I will not accept any payment for serving as a representative party, except to receive my pro rata share of any recovery or as ordered or approved by the court, including the award to a representative plaintiff of reasonable costs and expenses (including lost wages) directly relating to the representation of the class. I declare under penalty of perjury that the foregoing are true and correct statements. 8/18/2021 ________________ _________________________________________ Date Ryan Bibb Ryan Bibb's Transactions in Sesen Bio, Inc. (SESN) Date Transaction Type Quantity Unit Price 5/5/2021 Bought 319.3418 $2.87 5/5/2021 Bought 534.7594 $2.81 5/7/2021 Bought 37.7430 $2.65 5/7/2021 Bought 37.7615 $2.65 5/10/2021 Bought 203.2519 $2.46 5/12/2021 Bought 296.2963 $2.43 5/13/2021 Bought 113.8004 $2.36 5/20/2021 Bought 50.0000 $2.93 5/20/2021 Bought 8.0000 $2.93 5/25/2021 Bought 69.2064 $2.89 5/25/2021 Bought 72.6988 $2.91 5/26/2021 Bought 5.0000 $3.01 5/26/2021 Bought 2.0000 $2.97 5/26/2021 Bought 1.0000 $2.99 5/26/2021 Bought 1.0000 $2.98 5/26/2021 Bought 200.0000 $2.93 5/27/2021 Bought 20.1478 $2.98 5/27/2021 Bought 635.5954 $3.07 5/27/2021 Bought 136.9522 $3.07 5/27/2021 Bought 172.7534 $3.10 5/27/2021 Bought 380.9549 $3.15 5/27/2021 Bought 101.5873 $3.15 5/27/2021 Bought 1.0000 $3.15 6/1/2021 Bought 1.0000 $3.55 6/1/2021 Bought 1.0000 $3.51 6/1/2021 Bought 173.0475 $3.71 6/2/2021 Bought 90.8870 $3.70 6/2/2021 Bought 90.0000 $3.74 6/2/2021 Bought 1.0000 $3.70 6/3/2021 Bought 80.0000 $3.60 6/3/2021 Bought 1.0000 $3.61 6/3/2021 Bought 1.0000 $3.64 6/3/2021 Bought 80.0000 $3.65 6/3/2021 Bought 15.0000 $3.65 6/3/2021 Bought 50.0000 $3.66 6/3/2021 Bought 15.0000 $3.75 6/4/2021 Bought 200.0000 $3.70 6/4/2021 Bought 47.0000 $3.69 6/4/2021 Bought 50.0000 $3.66 6/4/2021 Bought 200.0000 $3.70 6/4/2021 Bought 50.0000 $3.72 6/4/2021 Bought 50.0000 $3.73 6/4/2021 Bought 50.0000 $3.74 6/4/2021 Bought 50.0000 $3.76 6/4/2021 Bought 50.0000 $3.75 6/7/2021 Bought 100.0000 $3.80 6/7/2021 Bought 20.0000 $3.95 6/7/2021 Bought 25.0000 $3.91 6/7/2021 Bought 100.0000 $3.99 6/7/2021 Bought 75.0000 $4.00 6/7/2021 Bought 20.0000 $3.94 6/8/2021 Bought 1.0000 $4.08 6/8/2021 Bought 4,000.0000 $4.05 6/8/2021 Bought 500.0000 $4.00 6/8/2021 Bought 12.0000 $4.02 6/9/2021 Bought 200.0000 $4.06 6/9/2021 Bought 100.0000 $4.04 6/9/2021 Bought 500.0000 $4.10 6/10/2021 Bought 94.0000 $4.05 6/15/2021 Bought 1,000.0000 $4.14 6/17/2021 Bought 7,646.0000 $4.57 6/17/2021 Bought 20.0000 $4.55 6/17/2021 Bought 50.0000 $4.50 6/17/2021 Bought 0.4449 $4.50 6/18/2021 Bought 828.0000 $4.44 6/21/2021 Bought 500.0000 $4.27 6/21/2021 Bought 500.0000 $4.25 6/21/2021 Bought 1,000.0000 $4.20 6/21/2021 Bought 200.0000 $4.26 6/21/2021 Bought 1,000.0000 $4.15 6/21/2021 Bought 500.0000 $4.23 6/21/2021 Bought 200.0000 $4.24 6/21/2021 Bought 1,000.0000 $4.21 6/21/2021 Bought 200.0000 $4.28 6/21/2021 Bought 200.0000 $4.27 6/21/2021 Bought 500.0000 $4.26 6/21/2021 Bought 25.0000 $4.35 6/21/2021 Bought 25.0000 $4.34 6/21/2021 Bought 25.0000 $4.33 6/21/2021 Bought 25.0000 $4.32 6/21/2021 Bought 50.0000 $4.30 6/21/2021 Bought 25.0000 $4.43 6/21/2021 Bought 25.0000 $4.40 6/21/2021 Bought 250.0000 $4.43 6/21/2021 Bought 25.0000 $4.42 6/21/2021 Bought 25.0000 $4.42 6/21/2021 Bought 25.0000 $4.43 6/21/2021 Bought 250.0000 $4.51 6/21/2021 Bought 75.0000 $4.52 6/21/2021 Bought 25.0000 $4.54 6/21/2021 Bought 25.0000 $4.54 6/21/2021 Bought 50.0000 $4.45 6/21/2021 Bought 25.0000 $4.46 6/21/2021 Bought 20.0000 $4.48 6/21/2021 Bought 35.0000 $4.40 6/21/2021 Bought 50.0000 $4.34 6/21/2021 Bought 20.0000 $4.35 6/21/2021 Bought 25.0000 $4.42 6/21/2021 Bought 20.0000 $4.36 6/21/2021 Bought 25.0000 $4.29 6/21/2021 Bought 20.0000 $4.34 6/21/2021 Bought 30.0000 $4.30 6/21/2021 Bought 35.0000 $4.29 6/21/2021 Bought 100.0000 $4.26 6/21/2021 Bought 15.0000 $4.33 6/21/2021 Bought 10.0000 $4.32 6/21/2021 Bought 50.0000 $4.27 6/21/2021 Bought 750.0000 $4.27 6/21/2021 Bought 1,000.0000 $4.23 6/21/2021 Bought 50.0000 $4.32 6/21/2021 Bought 50.0000 $4.29 6/21/2021 Bought 20.0000 $4.31 6/21/2021 Bought 50.0000 $4.28 6/21/2021 Bought 500.0000 $4.32 6/21/2021 Bought 250.0000 $4.35 6/21/2021 Bought 500.0000 $4.34 6/21/2021 Bought 25.0000 $4.34 6/21/2021 Bought 30.0000 $4.33 6/21/2021 Bought 50.0000 $4.26 6/21/2021 Bought 250.0000 $4.25 6/21/2021 Bought 100.0000 $4.26 6/21/2021 Bought 1,000.0000 $4.25 6/21/2021 Bought 500.0000 $4.22 6/21/2021 Bought 250.0000 $4.23 6/21/2021 Bought 250.0000 $4.24 6/21/2021 Bought 150.0000 $4.21 6/21/2021 Bought 500.0000 $4.20 6/21/2021 Bought 1,500.0000 $4.17 6/21/2021 Bought 1,000.0000 $4.22 6/21/2021 Bought 50.0000 $4.19 6/21/2021 Bought 200.0000 $4.22 6/21/2021 Bought 1,000.0000 $4.23 6/21/2021 Bought 500.0000 $4.23 6/21/2021 Bought 500.0000 $4.21 6/21/2021 Bought 250.0000 $4.14 6/21/2021 Bought 50.0000 $4.15 6/21/2021 Bought 125.0000 $4.08 6/21/2021 Bought 50.0000 $4.15 6/21/2021 Bought 100.0000 $4.10 6/21/2021 Bought 50.0000 $4.09 6/22/2021 Bought 25.0000 $4.08 6/22/2021 Bought 25.0000 $4.12 6/22/2021 Bought 50.0000 $4.10 6/22/2021 Bought 20.0000 $4.14 6/23/2021 Bought 1,000.0000 $4.07 6/23/2021 Bought 500.0000 $4.08 6/23/2021 Bought 250.0000 $4.10 6/23/2021 Bought 100.0000 $4.12 6/23/2021 Bought 500.0000 $4.15 6/23/2021 Bought 150.0000 $4.16 6/23/2021 Bought 200.0000 $4.20 6/23/2021 Bought 1,250.0000 $4.13 6/23/2021 Bought 100.0000 $4.17 6/23/2021 Bought 200.0000 $4.12 6/23/2021 Bought 1,000.0000 $4.07 6/25/2021 Bought 100.0000 $4.15 6/25/2021 Bought 100.0000 $4.17 6/28/2021 Bought 1,553.0000 $4.38 6/29/2021 Bought 200.0000 $4.67 6/30/2021 Bought 590.0000 $4.58 7/1/2021 Bought 1.0000 $4.61 7/1/2021 Bought 4.0000 $4.54 7/2/2021 Bought 100.0000 $4.38 7/2/2021 Bought 100.0000 $4.37 7/2/2021 Bought 100.0000 $4.36 7/2/2021 Bought 100.0000 $4.35 7/2/2021 Bought 100.0000 $4.43 7/2/2021 Bought 100.0000 $4.42 7/2/2021 Bought 500.0000 $4.44 7/2/2021 Bought 472.0000 $4.29 7/2/2021 Bought 23,752.5146 $4.28 7/2/2021 Bought 2,000.0000 $4.28 7/2/2021 Bought 500.0000 $4.29 7/2/2021 Bought 1,000.0000 $4.30 7/2/2021 Bought 2,000.0000 $4.30 7/2/2021 Bought 250.0000 $4.28 7/2/2021 Bought 500.0000 $4.24 7/2/2021 Bought 100.0000 $4.26 7/2/2021 Bought 500.0000 $4.27 7/2/2021 Bought 1,000.0000 $4.23 7/2/2021 Bought 100.0000 $4.28 7/2/2021 Bought 1,000.0000 $4.33 7/2/2021 Bought 500.0000 $4.32 7/2/2021 Bought 500.0000 $4.33 7/2/2021 Bought 500.0000 $4.35 7/2/2021 Bought 1,000.0000 $4.28 7/6/2021 Bought 50.0000 $4.31 7/6/2021 Bought 50.0000 $4.26 7/6/2021 Bought 50.0000 $4.27 7/6/2021 Bought 2,000.0000 $4.21 7/6/2021 Bought 300.0000 $4.16 7/6/2021 Bought 100.0000 $4.17 7/6/2021 Bought 400.0000 $4.11 7/6/2021 Bought 500.0000 $4.09 7/6/2021 Bought 150.0000 $4.15 7/6/2021 Bought 150.0000 $4.11 7/6/2021 Bought 400.0000 $4.06 7/6/2021 Bought 250.0000 $4.06 7/6/2021 Bought 150.0000 $4.08 7/6/2021 Bought 100.0000 $4.15 7/6/2021 Bought 5,000.0000 $4.07 7/6/2021 Bought 200.0000 $4.10 7/6/2021 Bought 1,000.0000 $4.09 7/6/2021 Bought 50.0000 $4.13 7/6/2021 Bought 1,000.0000 $4.05 7/6/2021 Bought 500.0000 $4.06 7/6/2021 Bought 250.0000 $4.07 7/6/2021 Bought 25.0000 $4.09 7/6/2021 Bought 500.0000 $4.14 7/6/2021 Bought 25.0000 $4.10 7/6/2021 Bought 25.0000 $4.14 7/6/2021 Bought 100.0000 $4.10 7/7/2021 Bought 25.0000 $4.04 7/7/2021 Bought 2,000.0000 $4.01 7/7/2021 Bought 200.0000 $4.04 7/7/2021 Bought 100.0000 $4.07 7/7/2021 Bought 150.0000 $4.02 7/7/2021 Bought 200.0000 $3.98 7/7/2021 Bought 200.0000 $3.95 7/7/2021 Bought 400.0000 $3.91 7/7/2021 Bought 25.0000 $3.93 7/7/2021 Bought 25.0000 $3.86 7/7/2021 Bought 25.0000 $3.89 7/7/2021 Bought 150.0000 $3.93 7/7/2021 Bought 1,000.0000 $3.81 7/7/2021 Bought 150.0000 $3.84 7/7/2021 Bought 1,000.0000 $3.86 7/7/2021 Bought 1,000.0000 $3.84 7/7/2021 Bought 25.0000 $3.78 7/8/2021 Bought 100.0000 $3.79 7/8/2021 Bought 25.0000 $3.80 7/8/2021 Bought 100.0000 $3.80 7/8/2021 Bought 1,000.0000 $3.86 7/8/2021 Bought 500.0000 $3.89 7/8/2021 Bought 500.0000 $3.89 7/8/2021 Bought 250.0000 $3.89 7/8/2021 Bought 250.0000 $3.88 7/8/2021 Bought 250.0000 $3.90 7/8/2021 Bought 100.0000 $3.94 7/8/2021 Bought 100.0000 $3.90 7/8/2021 Bought 100.0000 $3.90 7/8/2021 Bought 50.0000 $3.92 7/8/2021 Bought 50.0000 $3.93 7/9/2021 Bought 2,000.0000 $4.01 7/9/2021 Bought 50.0000 $3.94 7/9/2021 Bought 50.0000 $3.97 7/9/2021 Bought 75.0000 $3.96 7/9/2021 Bought 25.0000 $3.98 7/9/2021 Bought 500.0000 $4.00 7/9/2021 Bought 1,000.0000 $4.02 7/9/2021 Bought 500.0000 $4.01 7/9/2021 Bought 650.0000 $4.14 7/9/2021 Bought 1,130.0000 $4.03 7/9/2021 Bought 998.0000 $4.03 7/12/2021 Bought 1,070.0000 $4.02 7/12/2021 Bought 4.0000 $3.98 7/12/2021 Bought 400.0000 $3.88 7/12/2021 Bought 200.0000 $3.90 7/12/2021 Bought 200.0000 $3.89 7/12/2021 Bought 100.0000 $3.83 7/13/2021 Bought 100.0000 $3.85 7/14/2021 Bought 236.0000 $3.81 7/14/2021 Bought 745.0000 $3.94 7/14/2021 Bought 2.0000 $3.95 7/14/2021 Bought 7.0000 $3.93 7/16/2021 Bought 200.0000 $3.71 7/16/2021 Bought 200.0000 $3.71 7/19/2021 Bought 108.0000 $3.72 7/19/2021 Bought 50.0000 $3.85 7/19/2021 Bought 25.0000 $3.89 7/19/2021 Bought 50.0000 $3.90 7/19/2021 Bought 50.0000 $3.90 7/20/2021 Bought 100.0000 $3.84 7/20/2021 Bought 64.0000 $3.88 7/20/2021 Bought 379.0000 $3.86 7/20/2021 Bought 2.0000 $3.83 7/21/2021 Bought 10.0000 $3.99 7/23/2021 Bought 10.0000 $3.86 7/23/2021 Bought 10.0000 $3.85 7/26/2021 Bought 100.0000 $3.89 7/26/2021 Bought 500.0000 $3.93 7/26/2021 Bought 100.0000 $3.91 7/26/2021 Bought 100.0000 $3.89 7/26/2021 Bought 2,000.0000 $3.88 7/26/2021 Bought 940.0000 $3.85 7/26/2021 Bought 100.0000 $3.83 7/26/2021 Bought 200.0000 $3.87 7/26/2021 Bought 50.0000 $3.92 7/26/2021 Bought 50.0000 $3.89 7/26/2021 Bought 200.0000 $3.88 7/26/2021 Bought 200.0000 $3.89 7/26/2021 Bought 38.0000 $3.80 7/26/2021 Bought 11.0000 $3.79 7/27/2021 Bought 100.0000 $3.72 7/27/2021 Bought 25.0000 $3.70 7/27/2021 Bought 25.0000 $3.70 7/27/2021 Bought 25.0000 $3.68 7/27/2021 Bought 25.0000 $3.64 7/27/2021 Bought 25.0000 $3.65 7/27/2021 Bought 25.0000 $3.67 7/27/2021 Bought 25.0000 $3.59 7/27/2021 Bought 25.0000 $3.60 7/27/2021 Bought 25.0000 $3.60 7/27/2021 Bought 25.0000 $3.60 7/27/2021 Bought 25.0000 $3.69 7/27/2021 Bought 25.0000 $3.75 7/27/2021 Bought 25.0000 $3.94 7/28/2021 Bought 25.0000 $3.77 7/28/2021 Bought 25.0000 $3.82 7/28/2021 Bought 10.0000 $3.81 7/28/2021 Bought 15.0000 $3.80 7/28/2021 Bought 15.0000 $3.80 7/28/2021 Bought 90.0000 $3.78 7/28/2021 Bought 35.0000 $3.80 7/28/2021 Bought 25.0000 $3.77 7/28/2021 Bought 25.0000 $3.79 7/28/2021 Bought 25.0000 $3.78 7/28/2021 Bought 100.0000 $3.78 7/29/2021 Bought 25.0000 $3.73 7/29/2021 Bought 25.0000 $3.72 7/29/2021 Bought 25.0000 $3.70 7/29/2021 Bought 25.0000 $3.71 7/29/2021 Bought 50.0000 $3.71 7/29/2021 Bought 25.0000 $3.67 7/29/2021 Bought 25.0000 $3.68 7/29/2021 Bought 25.0000 $3.78 7/29/2021 Bought 50.0000 $3.78 7/30/2021 Bought 25.0000 $3.80 7/30/2021 Bought 75.0000 $3.80 7/30/2021 Bought 4.0000 $3.70 7/30/2021 Bought 25.0000 $3.69 7/30/2021 Bought 1.0000 $3.69 7/30/2021 Bought 200.0000 $3.70 7/30/2021 Bought 20.0000 $3.70 7/30/2021 Bought 50.0000 $3.69 7/30/2021 Bought 25.0000 $3.68 7/30/2021 Bought 100.0000 $3.67 7/30/2021 Bought 100.0000 $3.66 8/2/2021 Bought 22.0000 $3.76 8/3/2021 Bought 28.0000 $3.99 8/3/2021 Bought 9.0000 $3.97 8/5/2021 Bought 40.0000 $4.03 8/6/2021 Bought 100.0000 $4.15 8/6/2021 Bought 100.0000 $4.17 8/6/2021 Bought 100.0000 $4.13 8/11/2021 Bought 37.0000 $3.69 8/11/2021 Bought 59.0000 $3.74 8/13/2021 Bought 1,499.0000 $5.58 8/13/2021 Bought 501.0000 $5.48 Ryan Bibb's Transactions in Sesen Bio, Inc. Options Date Transaction Type Contract Type Exp / Strike Quantity Price 6/9/2021 Bought to Open Call 8/20/21 // $2 20 $2.40 6/9/2021 Bought to Open Call 8/20/21 // $2 2 $2.40 6/11/2021 Bought to Open Call 8/20/21 // $2 4 $2.35

securities