BRIAN G. WOLF (BAR NO. 135257) ZEV F. RABEN (BAR NO. 297406) LAVELY & SINGER PROFESSIONAL CORPORATION 2049 Century Park East, Suite 2400 Los Angeles, California 90067-2906 : (310) 556-3501 (310) 556-3615 bwolf@lavelysinger.com zraben@avelysinger.com Attorneys for Plaintiffs BAKER ENTERTAINMENT, LLC and BAKER FILM FUND, LLC SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF LOS ANGELES, WEST JUDICIAL DISTRICT BAKER ENTERTAINMENT, LLC, a BAKER ENTERTAINMENT GROUP; BAKER FILM FUND, LLC, a Delaware limited liability company, Plaintifis, v. EMMETT FURLA OASIS FILMS, LLC, a California limited liabil EMMETT FURLA OASIS, ; GEORGIA FILM FUND TWENTY-NINE, LLC, a Delaware limited liability company; HIGROWTH (INCONCEIVABLE), LL Delaware limited liability company; DOES | through 20, inclusive, Defendants. CASE NO. SCloz97q COMPLAINT FOR: (1) BREACH OF CONTRACT; Q) BREACH OF CONTRACT @) FRAUDULENT INDUCEMENT; (4) FRAUDULENT CONCEALMENT; (5) BREACH OF FIDUCIARY DUTY (6) VIOLATION OF CAL. PENAL, CODE §496; AND (7) ACCOUNTING AND FOR JURY TRIAL Ps0.| “ey ‘COMPLAINT re10 u 12 13 4 15 16 17 18 19 20 2 2 23 4 25 26 28 Plaintiffs Baker Entertainment, LLC ffk/a Baker Entertainment Group, LLC, and d/b/a Baker Entertainment Group (“BEG”) and Baker Film Fund, LLC (“BFF”) (collectively “Plaintifis”) hereby allege as follows: SUMMARY OF THE A |ON 1. Defendants Emmett Furla Oasis Films, LLC, Georgia Film Fund Twenty-Nine, LLC, and Higrowth (Inconceivable), LLC have engaged in an egregious course of conduct to defraud Plaintiff and prevent them from receiving the benefits of the parties’ agreement to jointly fund, produce and own two theatrical motion pictures. ‘To induce Plaintiffs to agree to co-finance and co- produce the motion pictures, Defendants represented that Plaintiffs and Defendants would be partners in the production of two theatrical motion pictures, and would share the producing fees and profits generated from the motion pictures and jointly own the copyrights in and to the pictures. 2. Instead, Defendants structured and operated the production of the first motion picture to benefit themselves to the harm and detriment of Plaintiffs. Defendants misappropriated and embezzled production funds for their own personal gain and benefit, and fraudulently placed numerous persons and entities before Plaintiffs to be paid with proceeds from the first motion picture, In addition, Defendants fraudulently concealed Plaintiffs’ co-ownership in the copyright to the first motion picture, thereby materially damaging Plaintiffs’ standing and reputation, and diminishing the opportunity for Plaintiffs to co-produce and share in the profits of a second motion picture, As a direct result of Defendants’ fraudulent conduct and breach of their agreements with Plaintiffs, Plaintifis have suffered significant damages of not less than $4.5 Million. THE PARTIES 3. Plaintiff BEG is a Delaware limited liability company with its principal place of business in the County of Los Angeles, State of California. 4, Plaintiff BFF is a Delaware limited liability company with its principal place of business in the County of Los Angeles, State of California. 5. Plaintiffs are informed and believed and based thereon allege that Defendant Emmet Furla Oasis Films, LLC (*EFO”) is, and at all times relevant hereto was, a California limited liability 1 COMPLAINTSew rea company with its principal place of business located in the County of Los Angeles, State of California, Plaintiffs are informed and believe that EFO is, and at all times relevant hereto was, operating under the d/b/a Emmett Furla Oasis, LLC. 6. Plaintiffs are informed and believe and based thereon allege that Defendant Georgia Film Fund Twenty-Nine, LLC (“GFF”) is, and at all times relevant hereto was, a Delaware limited liability company with its principal place of business located in the County of Los Angeles, State of California. 7. Plaintiffs are informed and believe and based thereon allege that Defendant Higrowth (Inconceivable), LLC (“Higrowth”) is, and at all times relevant hereto was, a Delaware limited liability company with its principal place of business located in the County of Los Angeles, State of California. 8. Plaintiff are presently unaware of the true names and capacities of the Defendants sued herein as Does 1 through 20, inclusive, and therefore sues said Defendants by such fictitious {ffs will amend this Complaint to allege the true names and capacities of such names. Plai fictitiously named defendants when the same have been ascertained. Plaintiffs are informed and believe and based thereon allege that each of the fictitiously-named defendants is responsible in some manner for the occurrences, acts and omissions alleged herein and that the damages about which Plaintiff complains were proximately caused by their conduct. Hereinafter, all defendants (including the Doe defendants) will sometimes be referred to collectively as “Defendants.” 9, PlaintiffS are informed and believe and based thereon allege that at all relevant times each Defendant was and is the agent, employee, partner, joint venture, co-conspirator, owner, principal and employer of each of the remaining Defendants and at all times herein mentioned was acting within the course and scope of that agency, employment, partnership, conspiracy, ownership or joint venture, Plaintiffs are further informed and believe, and based thereon alleges, that the acts and conduct of each Defendant alleged herein were known to, and authorized or ratified by, the officers, directors and managing agents of each other Defendant. 2 ‘COMPLAINTAwe wn u 12 1B 14 15 16 7 18 19 20 21 22 23 24 25 26 27 28 10. Plaintiffs are informed and believe and thereupon allege that at all relevant times, Defendants acted in concert, conspired and agreed among themselves to commit the wrongful acts and practices alleged in this Complaint, and that such wrongful acts and practices were committed pursuant to and in furtherance of such conspiracy and agreement, and with the consent and approval of each of the Defendants. Plaintiffs are informed and believe, and thereupon allege, that each of the Defendants is liable as a direct participant, co-conspirator and/or aider and abettor of the wrongful acts and practices alleged herein. ALLEGATIONS COMMON TO ALL CAUSES OF ACTION 11, In or around February 2015, Randall Emmett on behalf of Defendants represented to Jonathan Baker (“Baker”) on behalf of Plaintiffs that, if Plaintiffs agreed to co-finance and produce Defendants’ theatrical motion picture Inconceivable, Defendants would thereafter co-finance and produce a motion picture selected by Baker. Emmett further represented that Defendant EFO and Plaintiff BEG would each be paid producer fees at the same time and on an equally favorable basis, and that if any of the Defendants received an increased producer fee, BEG would likewise receive an equal increased producer fee. Emmett further represented on behalf of each of the Defendants that if BFF contributed $1 Million in production funding to Defendants motion picture Inconceivable, the BFF financing would be the only equity in the picture and would be repaid on a priority basis above all non-equity investors. Based on the aforesaid warranties and representations of Emmett on behalf, of Defendants, on or about March 4, 2015, Plaintiff BEG, on the one hand, and Defendant EFO, on the other hand, entered into a written term sheet (the “Term Sheet”) relating to the financing, production and distribution of two theatrical motion pictures: “Inconceivable” (the “First Picture”), and “Fate” (the “Second Picture). 12. The Term Sheet provided that the parties would work together and created a joint venture relationship between the Plaintiffs and Defendants whereby they would associate and work together to co-finance and produce two motion picture projects. Plaintifis’ principal, Baker, would direct and produce the motion pictures with one or more principals of Defendants co-producing, and 3 COMPLAINTBFF co-financing the motion pictures with Defendants. It was anticipated that the parties would then share in the profits and benefits generated from the motion picture projects. 13. Among other provisions, the Term Sheet included the following terms: (a) BEG will contribute $1 Million in equity for the First Picture; (b) The BEG equity will be “first out” after any lending secured by foreign sales; (c) BEG will be the only equity investor; (4) BEG’s principal, Baker, will direct the First Picture for a fee of $125,000; and (c) After completion of the Fist Picture, the parties would undertake to produce the Second Picture. 14, The Term Sheet was subsequently amended, and, in relevant part, included the following additional terms: (a) BEG’s producing/overhead fees will be paid out of the budget of the First Picture of not less than $425,000; (b) EFO’s producing fees would not be less than $550,000; (6) Ifthe budget of the picture justifies higher fees for EFO and BEG, they will be increased equally; and (4) In return for guaranteeing EFO # $100,000 advance against its fees, the partners will co-own the copyright to the First Picture whereby BEG will own forty-nine percent (49%) of the copyright in the First Picture and Defendants will own 51% of the copyright. 15. Consistent with the terms of the Term Sheet, BFF and GFF entered into a further agreement (collectively the “Agreements”) that provided, amongst other things, that BFF, in exchange for its $1 Million investment in the First Picture, would receive $1.3 Million from the first adjusted gross receipts of the First Picture and a financing fee to be paid out of the budget for the First Picture, The only monies that would be paid prior to BFF were (a) the Collection Account Management Agreement fees and expenses; (b) the actual sales fee; (c) residuals; (4) actual out of pocket distribution and sales costs incurred by the production company; and (e) the repayment of production loans limited only to banks and/or financial institutions. This agreement also provided for various additional payments to individuals who were working on behalf of BFF, and for its benefit, 16. These terms, as well as the agreement to fund and produce the Second Picture were a key inducement to BFF making its $1 Million equity investment in the First Picture. 4 ‘COMPLAINT10 i 12 1B 14 15 16 7 18 19 20 21 2 23 24 25 26 27 28 DEFENDANTS’ MISCONDUCT, INCLUDING BREACHES OF THE AGREEMENTS 17. Pursuant to and in furtherance of the terms and conditions of the Agreements, Plaintiffs deposited $1 Million Dollars into an escrow account as equity towards the development of the First Picture, 18. Almost immediately following receipt of the funds from BFF, Defendants undertook their scheme to withdraw BFF’s funds to pay themselves exorbitant producer fees and purported production expenses, all the while demanding deferments by Plaintiffs of any monies owed, and pushing off any repayment to Plaintiffs until Defendants had repaid themselves, and other ‘unauthorized equity investors in the Picture. 19. Despite the agreement between the parties that, to the extent one party received an increased producer fee, the other party's producer fee would be increased by an equal amount, Defendants embezzled and misappropriated for themselves, approximately $650,000 more in producer fees than was provided in the Term Sheet. Defendants completely failed to disclose this, approximately $650,000 payment to themselves, and used those production funds for their personal gain and benefit. This fraud and embezzlement was only discovered after Plaintiffs demanded a cost run for the First Picture. 20. Based on Defendants $650,000 increase in producer fees, Plaintiffs should have received an identical increase in their producer fees, but instead of living up to the terms of the parties’ agreements, Defendants defrauded their business partner. 21. Defendants’ misconduct did not end there. Defendants also apparently accepted additional equity or financing from third parties, which was contrary to the parties’ Agreements, and this representation made by Defendants to induce Plaintiff to enter into the Agreements to c produce and co-finance the motion pictures. Further still, they breached by their obligs PlaintifiS by placing these additional parties, including themselves, related entities and the principal of Defendants, ahead of BEF in the repayment schedule for the First Picture. This unlawful conduct to pay the following entities ahead of BEF in the repayment schedule: River includes purpor Bay Films, LLC, $200,000 plus a 20% return, pursuant to the RBF Super Gap Loan Agreement; The 5 ‘COMPLAINToo) W 12 13 14 15 16 18 19 20 21 22 23 4 25 27 28 , $107,500 pursuant SFO, $75,000 in Fyzz, Facility, $165,000 pursuant to the TFF Super Gap Loan Agreement; E to the EFO Super Gap Loan Agreement; George Furla, individually, $200,000; and payment of a producer fee deferment. Only after each of the above-mentioned entities are paid, ‘would BFF be repaid the over one million dollars of equity it invested in the First Picture, 22. The payment schedule above is contrary to the express terms of the parties’ agreements, and represents a further breach by Defendants and a fraud upon the Plaintiffs. Further, Defendants failure to tum over administration of the collection account to an experienced motion picture collection agent (c.g. Fintage, Freeway), as contractually required, has allowed them to continue to defraud Plaintiffs and manipulate the funds associated with the First Picture for their ‘own benefit. 23. In addition, the Term Sheet entered into between BEG and EFO contemplated that two motion pictures would be developed and produced. The First Picture, Inconceivable, was a project developed by EFO, which Baker would direct. The Second Picture, Fate, was a project developed by BEG, which Baker would also direct. However, it is now clear that EFO, and the other Defendants fraudulently induced Plaintiffs to enter into the Term Sheet with the promise of making the Second Picture, but in fact, never intended to live up to their end the bargain, and only made those promises in order to get BEG to provide equity financing for the First Picture. 24, BFF has not been paid back one dollar of its equity investment in the First Picture or its financing fee, nor has BEG been paid for Baker’s director services, and BEG also has not been paid its entite producer fee, and has been forced to bring this lawsuit in order to prevent EFO and the other Defendants from depriving Plaintiffs from the money that is rightfully theirs. FIRST CAUSE OF ACTION (Breach of Contract — by BEG against EFO) 25, Plaintiffs repeat and reallege the allegations of paragraphs 1 through 24 above, and incorporate those allegations herein by reference. 26. BEG has performed all obligations, covenants, terms and conditions required on its part to be performed in accordance with the Term Sheet (as amended), except to the extent that such 6 ‘COMPLAINTawa performance has been excused or rendered impossible by the wrongful acts and/or omissions of EFO. 27. BFO has breached the Term Sheet with BEG, by among other things, paying itself approximately $650,000 in additional producer fees above and beyond the amounts set forth in the ‘Term Sheet, and failing to provide BEG with an equal increase in its producer fees as required under the parties agreement. 28. BFO has also breached the Term Sheet by failing to set up a proper collection account ‘management agreement administered by an experienced collection account manager, and failing and refuusing to provide BEG with all relevant production and financial documents pertaining to the First Picture, including the various budgets for the First Picture. This breach has allowed EFO to manipulate and misdirect the payment schedule of the waterfall for the profits of the First Picture for its own benefit, and to the detriment of BEG. Among other acts and omissions, Defendant EFO failed to maintain accurate books and records pertaining to the production of the First Picture, and manipulated the budget of the First Picture for its own benefit and gain (and for the benefit ofits affiliated persons and entities), and wrongfully demanded that BEG and Baker defer fees while, at the same time, EFO fraudulently and without notice to or approval of Plaintiffs, increased its own producer fees. 29. Finally, EFO has breached the Term Sheet by failing to provide first class produc services in connection with the Second Picture, which was a key element of the parties entering into the Term Sheet in the first place. 30. As a direct and proximate result of aforesaid material breaches of the Term Sheet, Plaintiffs have suffered and continue to suffer damages in an amount to be proven at trial, but scertained the full amount of its believed to be in excess of $4,500,000. When Plaintiffs have damages, they will seek leave of Court to amend this Complaint accordingly. SECOND CAUSE OF ACTION (Breach of Contract — by BFF against GFF) 31. Plaintiffs repeat and reallege the allegations of paragraphs 1 through 30 above, and incorporate those allegations herein by reference. 71 COMPLAINT10 u 12 B 14 15 16 7 18 19 20 2 22 23 24 25 26 27 28 32. BFF has performed all obligations, covenants, terms and conditions required on its part to be performed in accordance with the its contract with GFF, except to the extent that such performance has been excused or rendered impossible by the wrongful acts and/or omissions of, GFF. 33. GFF has breached the contract with BFF, by among other things, failing to repay the $1.3 Million owed under the loan agreement, and placing other entities ahead of BFF in the repayment schedule for the Picture. 34. GFF has further breached the loan agreement by failing to pay BFF the financing fee out of the budget for the First Picture. 35. GEF has also breached the loan agreement by failing to make other payments to BEF and its employees as contractually required. 36. Asa direct and proximate result of the aforesaid material breaches, Plaintiffs have suffered and continue to suffer damages in an amount to be proven at trial, but believed to be in excess of $4,500,000. When Plaintiffs have ascertained the full amount of its damages, they will seek leave of Court to amend this Complaint accordingly. (Fraudulent Inducement — by Plaintiffs against all Defendants) 37. Plaintiffs repeat and reallege the allegations of paragraphs 1 through 36 above, and incorporate those allegations herein by reference. 38. Prior to Plaintifis entering into the Term Sheet and agreeing to fund the equity for the First Picture, Defendants, falsely represented to Plaintiffs, among other misrepresentations, that: (i) in the event that EFO increased its producer fees that above the $550,000, then BEG’s producer fees would be increased equally; (ii) in exchange for Plaintiffs providing equity funding for the First Picture, Defendants would provide production services on the Second Picture; and (iii) that BFF would be repaid $1.3 Million based on its equity funding in a priority position 39. The foregoing representations made by and on behalf of Defendants were false, or made recklessly and without regard for the truth, Specifically, Plaintiffs are informed and believe 8 ‘COMPLAINTu 12 1B 15 16 7 18 19 20 a 22 23 24 25 26 27 28 and based thereon alleges that at the time Defendants made the foregoing representations, Defendants knew that they were false, but made the foregoing representations with the intention of ture so that Defendants inducing PlaintiffS to enter into the agreements and invest in the First could gain access to Plaintiffs’ capital for their own benefit. Plaintiffs did in fact reasonably and justifiably rely on the aforesaid representations to their detriment by investing $1 Million in equity into the First Picture on the aforesaid representations of Defendants. 40. Furthermore, as the parties entrusted with the use of the substantial monies contributed by Plaintiffs: toward development and production of the First Picture, Defendants had a duty to, among other things, disclose to Plaintiffs all material facts concerning the use of that money, ‘and to refrain from any conduct, misrepresentation, concealment, breach of contract or duty, threat or adverse pressure of any kind in connection with such use. Nevertheless, Defendants appear to have misappropriated and used, in part, the monies invested by Plaintiffs in the First Picture to lavish themselves with hundreds of thousands of dollars in excess producer fees. 41. The above acts were done with the knowledge, approval and ratification of each Defendant. Defendants each aided and abetted in the fraudulent representations because they were aware of and substantially assisted each other in carrying out the scheme. The other officers and ‘managing members of Defendants were aware of the aforesaid fraudulent representations made to PlaintiffS, and their representatives, and did nothing to protect Plaintiffs from the wrongful conduet. Plaintiffs are informed and believe that each of the Defendants directly participated in the fraud, knowingly benefitted from Plaintiffs’ investment in the First Picture, and/or ratified the fraudulent conduct. The Defendants are therefore each jointly and severally liable for the alleged conduct. 42. Asa direct and proximate result of the aforesaid fraudulent conduct, Plaintifs have suffered and continue to suffer damages in an amount to be proven at trial, but believed to be in excess of $4,500,000. When Plaintiffs have ascertained the full amount of their damages, they will seek leave of Court to amend this Complaint accordingly. 43, Plaintiffs are informed and believe, and based thereon allege, that Defendants, in doing the things herein alleged, acted willfully, maliciously, oppressively and despicably with the 9 COMPLAINTw 10 ul 12 1B 14 15 16 17 18 19 20 2 2 23 24 25 26 2 28 full knowledge of the adverse effect of their actions on Plaintiffs, and with willful and deliberate By disregard of the consequences to Plaintiffs such as to constitute oppression, fraud or malik reason thereof, Plaintiffs are entitled to recover punitive and exemplary damages from Defendants in an amount appropriate to punish or set an example of Defendants and to deter Defendants from engaging in such conduct in the future, "HLCAUSE OF A‘ (Fraudulent Concealment — by Plaintiffs against all Defendants) 44, Plaintiffs repeat and reallege the allegations of paragraphs 1 through 43 above, and incorporate those allegations herein by reference. 45. As alleged hereinabove, Defendants intentionally withheld and failed to disclose significant material information of and concerning the business operations of the production for the First Picture, including: (i) Defendants failure to disclosure hundreds of thousands of dollars in excess producer fees paid to themselves, without any notice or approval from Plaintiffs; (ii) the fact that Defendants unilaterally altered the repayment waterfall for the First Picture such that the repayment of BFF’s $1 Million in equity was placed behind repayment to other entities, including that the related entities of Defendants, and one of Defendants principals individually; and (i Defendants had no intention of providing production services in connection with the Second Picture. 46. Defendants withheld and failed to disclose these material facts to Plaintiffs, all of which were unknown to Plaintiffs, with the intent to induce Plaintiff to invest in the First Picture, and provide directorial services for the First Picture. 47. Defendants were aware of the material information relating their plan to pay themselves additional producer fees, their plans to alter the repayment waterfall, and that they had no intention of assisting in making the Second Picture, and knew that Plaintiff was unlikely to discover and did not have the reasonable means to discover that information, Defendants’ concealment of the aforesaid facts and information was intended to deceive Plaintiffs and induce Plaintiffs to invest in the First Picture, and provide directorial services. Under the circumstances, Defendants were under a duty to disclose these material facts to Plaintiffs. However, they failed to do so. 10 COMPLAINT48. Plaintiffs were unaware of the true material facts that were concealed by Defendants as alleged herein, Had Plaintiffs known such facts, they would not have invested $1 million dollars. in the First Picture, and provided directorial services for the First Picture. tion of each 49. The above acts were done with the knowledge, approval and rat Defendant. Defendants each aided and abetted in the fraudulent concealment of material information pertaining to their agreements in connection with the First Picture because they were aware of and substantially assisted the other Defendants in carrying out the scheme. The other officers and managing members of Defendants were aware of the aforesaid fraudulent representations made to PlaintiffS, and their representatives, and did nothing to protect Plaintiffs from the wrongful conduct. Plaintiffs are informed and believe that each of the Defendants directly participated in the fraud, knowingly benefitted from Plaintiffs’ investment in the First Picture, and/or ratified the fraudulent conduct. The Defendants are therefore each jointly and severally liable for the alleged conduct. 50. Asa direct and proximate result of the fraudulent concealment of material facts by Defendants, and providing Plaintiffs with false and misleading half-truths, Plaintiffs have suffered and continue to suffer damages in an amount to be proven at trial, but believed to be in excess of $4,500,000. When Plaintiff have ascertained the full amount of its damages, it will seek leave of Court to amend this Complaint accordingly. 51. Plaintiffs are informed and believe and based thereon allege that Defendants, in doing the things herein alleged, acted willfully, maliciously, oppressively and despicably with the full knowledge of the adverse effect of their actions on Plaintiffs, and with willful and deliberate disregard of the consequences to PlaintiffS such as to constitute oppression, fraud or malice. By reason thereof, Plaintiffs are entitled to recover punitive and exemplary damages from Defendants in an amount appropriate to punish or set an example of Defendants and to deter Defendants from engaging in such conduct in the future. i COMPLAINT